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EXHIBIT 2.1
_______________________________________________________________________________
DRAFT DATED 9/24/96
AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 30th day of September, 1996
by and among
MEDICAL MANAGER CORPORATION
PPI ACQUISITION I CORP. (a subsidiary of
MEDICAL MANAGER CORPORATION)
PERSONALIZED PROGRAMMING, INC.
and
the STOCKHOLDER named herein
_______________________________________________________________________________
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Table of Contents
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1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1 Delivery and Filing of Articles of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 Certain Information With Respect to the Capital
Stock of the COMPANY, PC and NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Manner of Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. DELIVERY OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE
STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Transactions in Capital Stock, Reorganization
Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 No Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Predecessor Status; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 Spin-off by the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Accounts and Notes Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.12 Intellectual Property; Permits and Intangibles. . . . . . . . . . . . . . . . . . . . . . . . . 15
5.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.15 Significant Customers; Material Contracts and
Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.18 Compensation; Employment Agreements; Organized
Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.20 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.21 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.23 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.24 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.25 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.26 Deposit Accounts; Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.27 Relations with Governments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.28 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.29 Authority; Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.30 Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.31 No Intention to Dispose of COMPANY Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6. REPRESENTATIONS AND WARRANTIES OF PC and NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Capital Stock of the COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6 Liabilities and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 Conformity with Law; Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.9 Validity of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 PC Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 No Side Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Business; Real Property; Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7. COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.1 Access and Cooperation; Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 No Shop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.5 Notice to Bargaining Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.6 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.7 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.8 Amendment of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Cooperation in Preparation of Registration
Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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7.10 Final Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.11 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE COMPANY . . . . . . . . . . . . . . . . . . . 49
8.1 Representations and Warranties; Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.2 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.5 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.6 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.7 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.8 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.9 PC Stock to be Sold in the IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.10 Closing of IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.11 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.12 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.13 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PC AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.1 Representations and Warranties; Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.2 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.3 Secretary's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.5 STOCKHOLDER's Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.6 Satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.7 Termination of Related Party Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.9 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.10 Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.11 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.12 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.13 Closing of the IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.14 FIRPTA Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10. COVENANTS OF PC AFTER CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.1 Release From Guarantees; Repayment of Certain
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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10.2 Preservation of Tax and Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Preparation and Filing of Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.4 Real Property Gains and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.6 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.8 Indemnification of Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.1 General Indemnification by the STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Indemnification by PC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.3 Third Person Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.4 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.5 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.2 Liabilities in Event of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13. NONCOMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.1 Prohibited Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.3 Reasonable Restraint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.4 Severability; Reformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
13.5 Independent Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
13.6 Materiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.1 STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.2 PC AND NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
14.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14.4 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.1 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16. FEDERAL SECURITIES ACT REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
16.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
16.2 Economic Risk; Sophistication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
17. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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17.1 Piggyback Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
17.2(A) Demand Registration Rights of the STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . . 73
17.2(B) Demand Registration Rights of the STOCKHOLDER and the Stockholders of the Other Founding
Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
17.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
17.4 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
17.5 Availability of Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
18.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.5 Brokers and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
18.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
18.9 Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
18.10 Exercise of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
18.11 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
18.12 Reformation and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
18.13 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
18.14 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
18.15 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
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Annexes
Annex I - Form of Articles of Merger
Annex II - Form of Certificate of Incorporation and By-
laws of PC and NEWCO
Annex III - Consideration to be paid to the STOCKHOLDER
Annex IV - STOCKHOLDER and Stock Ownership of the
COMPANY
Annex V - STOCKHOLDER 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 STOCKHOLDER
Annex VIII - Form of Employment Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 30th day of September, 1996, by and among MEDICAL MANAGER
CORPORATION, a Delaware corporation ("PC"), PPI ACQUISITION I CORP., a Delaware
corporation ("NEWCO"), PERSONALIZED PROGRAMMING, INC., a Florida corporation
(the "COMPANY"), and XXXXXXX X. XXXXXX (the "STOCKHOLDER"). The STOCKHOLDER is
the sole stockholder 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
16, 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 Systems Plus, Inc., a California corporation, and Systems Plus
Distribution, Inc., a California corporation, and RTI Business Systems,
Inc., a New York corporation, and Systems Management, Inc., an Indiana
corporation, and National Medical Systems, Inc., a Florida corporation,
and their respective stockholders in order to acquire additional
medical software development and distribution companies (the COMPANY,
together with each of the entities with which PC has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
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WHEREAS, this Agreement, the Other Agreements and the IPO of PC
Stock (as each is hereinafter defined) constitute the "PC Plan of
Organization";
WHEREAS, the Boards of Directors of PC and each of the Founding
Companies have approved and adopted the PC Plan of Organization as an
integrated plan to transfer the capital stock of the Founding
Companies to PC and the cash raised in the IPO of PC Stock to PC as a
transfer of property under Section 351 of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of
the COMPANY has approved this Agreement as part of the PC Plan of
Organization in order to transfer the capital stock of the COMPANY to
PC;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes
of this Agreement:
"Acquired Party" has the meaning set forth in Section 5.22(i).
"Acquisition Companies" shall mean NEWCO and each of the other
Delaware companies wholly-owned by PC prior to the Funding and Consummation
Date.
"Articles of Merger" shall mean those Articles or Certificates of
Merger with respect to the Merger, substantially in the form of Annex I
attached hereto, or with such other changes therein as may be required by
applicable state laws.
"Balance Sheet Date" shall mean June 30, 1996.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this
Agreement.
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"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which the parties hereto contemplate to occur on the
Funding and Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Funding and Consummation Date" has the meaning set forth in Section
4.
"Intellectual Property" shall mean all trademarks, service marks,
trade dress, trade names, patents and copyrights and any registration or
application for any of the foregoing, and any trade secret, invention,
process, know-how, computer software, technology systems, product design or
product packaging.
"IPO" means the initial public offering of PC Stock pursuant to the
Registration Statement.
"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 this
Agreement.
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"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 representations, warranties and
covenants.
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"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDER" 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.
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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
Xxxxxxx X. Xxxxxx
Xxxxxxxxx X. Xxxx, Xx.
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, Xxxxxxxxx X. Xxxx,
Xx. shall be appointed as a vice president and as Secretary of the
Surviving Corporation, to serve, subject to the provisions of the
Certificate or Articles of Incorporation and By-laws of the Surviving
Corporation, until his 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:
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(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the COMPANY is as set forth on Schedule
1.4 hereto;
(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,
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shall not revert or be in any way impaired by reason of the Merger. Except as
otherwise provided herein, the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of the COMPANY
and NEWCO and any 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
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(iii) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of PC,
automatically be converted into one fully paid and non-assessable
share of common stock of the Surviving 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 STOCKHOLDER pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding PC
Stock by reason of the provisions of the Certificate of Incorporation of PC or
as otherwise provided by the Delaware GCL. All voting rights of such PC Stock
received by the STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and
the STOCKHOLDER shall not be deprived nor restricted in exercising those
rights. At the Effective Time of the 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 STOCKHOLDER shall, upon surrender of certificates
representing all outstanding shares of COMPANY Stock, receive (i) the
respective number of shares of PC Stock set forth on Annex III and (ii) the
amount of cash set forth on Annex III hereto, said cash to be payable by wire
transfer.
3.2 The STOCKHOLDER shall deliver to PC at the Closing the
certificates representing COMPANY Stock, duly endorsed in blank by the
STOCKHOLDER, or accompanied by duly executed stock powers, with, if required by
PC, signatures guaranteed by a national or state chartered bank or other
financial institution, and with all necessary Transfer Tax and other revenue
stamps, acquired at the STOCKHOLDER's expense, affixed and canceled. The
STOCKHOLDER agrees promptly to use reasonable best efforts to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
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4. CLOSING
At or prior to the Pricing, the parties shall use all reasonable best
efforts to take all actions necessary to prepare to (i) effect the 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
STOCKHOLDER 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
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consummate the IPO. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE STOCKHOLDER
(A) Representations and Warranties of COMPANY and the STOCKHOLDER.
Each of the COMPANY and the STOCKHOLDER jointly and severally
represent and warrant that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of the Closing and the Funding
and Consummation Date, and that such representations and warranties shall
survive the Funding and Consummation Date for a period of twelve (12) months
(the last day of such period being the "Expiration Date"), except that (i) the
representations and warranties set forth in Section 5.22 hereof shall survive
until such time as the statute of limitations period has run for all tax
periods (and any 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") of the COMPANY. Schedule 5.1 contains a list of all
jurisdictions in
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which the COMPANY is authorized or qualified to do business. True, complete
and correct copies of the Certificate or Articles of Incorporation and By-laws,
each as amended to date, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The minute books and stock records of the
COMPANY, as heretofore made available to PC, are 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 STOCKHOLDER
in the amounts set forth in Annex IV and further, except as set forth on
Schedule 5.3, are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of capital stock of the COMPANY
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by the STOCKHOLDER and were offered,
issued, sold and delivered by 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
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stock or its treasury stock; (ii) the COMPANY has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure
of the COMPANY nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the Merger.
Schedule 5.4 also includes complete and accurate copies of all stock option or
stock purchase plans, including a list of all outstanding options, warrants or
other rights to acquire shares of the COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of
the shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. The COMPANY has no subsidiaries. Except as set
forth on Schedule 5.6, the COMPANY does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity nor is the COMPANY, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a list of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise)
or from whom the COMPANY previously acquired material assets. Except as
disclosed on Schedule 5.7, the COMPANY has not been a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the COMPANY or any other person or entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are
copies of the following financial statements (the "COMPANY Financial
Statements") of the COMPANY: the COMPANY's audited
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Balance Sheet as of June 30, 1996 and December 31, 1995 and 1994 and 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 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 Statements of Income,
Cash Flows and Retained Earnings present fairly in all material respects the
results of operations and cash flows for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to PC an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet
Date of (i) all liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date and (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000
which are not reflected on the balance sheet as of the Balance Sheet Date) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements to which the COMPANY is a party.
Except as set forth on Schedule 5.10, since the Balance Sheet Date, the COMPANY
has not incurred any material liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary course of business.
The COMPANY has also set forth on Schedule 5.10, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or otherwise accrued or reserved, a good faith
and reasonable estimate of the maximum amount which may be payable. For each
such contingent liability or liability for which the amount is not fixed or is
contested, the COMPANY has provided to PC the following information:
(i) a summary description of the liability together with the
following:
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(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
STOCKHOLDER. Within ten (10) days prior to Closing, the COMPANY shall provide
PC with an accurate list of all receivables obtained subsequent to the Balance
Sheet Date that are outstanding as of the date of the delivery of such list.
For each of the aforementioned accounts and notes receivable reports, the
COMPANY shall provide PC with an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories. Except to the extent reflected
on Schedule 5.11, such accounts and notes are collectible in the amounts shown
on Schedule 5.11, and the COMPANY has not received any written notice of any
contest, claim or right of set-off with respect to the amount or validity of
any such account receivable and has no other reason to believe that such
amounts are not fully collectible.
5.12 INTELLECTUAL PROPERTY; PERMITS AND INTANGIBLES.
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(a) The COMPANY owns or licenses all Intellectual Property the
absence of any of which is reasonably likely to have a Material Adverse Effect
on its business (excluding any such property which is licensed,"the COMPANY
Property"), and the COMPANY has delivered to PC an accurate list (which is set
forth on Schedule 5.12) of all Intellectual Property (other than unregistered
copyrights or immaterial unregistered trademarks not presently used by the
COMPANY) owned or used by the COMPANY. Except as set forth on Schedule 5.12,
each item of COMPANY Property owned or used by the COMPANY is valid and in full
force and effect and each other item of Intellectual Property owned or used by
the COMPANY is, to the knowledge of the COMPANY, valid and in full force and
effect. Except as set forth on Schedule 5.12, each item of COMPANY Property is
not subject to any license, royalty arrangement or pending or threatened claim
or dispute and each other item of Intellectual Property owned or used by the
COMPANY, to the knowledge of the COMPANY, is not subject to any license,
royalty arrangement or pending or threatened claim or dispute. To the
knowledge of the COMPANY: (a) none of the Intellectual Property owned or
licensed by the COMPANY nor any product sold by the COMPANY infringes any
Intellectual Property right of any other entity and (b) 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
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such non-compliance or violation would not have a Material Adverse Effect on
the COMPANY.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied in all material respects with and is in compliance in
all material respects with all Federal, state, local and foreign statutes
(civil and criminal), laws, ordinances, regulations, rules, notices, permits,
judgments, orders and decrees applicable to it or any of its properties,
assets, operations and businesses relating to environmental protection
(collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law); (ii) there have been no Hazardous Substances treated, stored, disposed of
or otherwise handled at, and there have been no releases or threats of releases
(as defined in Environmental Laws) at, from, in or on, any property ever owned
or operated by the COMPANY during the pendency of the COMPANY's ownership or
operation of such property except as permitted by Environmental Laws; (iii) the
COMPANY knows of no treatment, storage, disposal, or other handling of
Hazardous Substances at, or release or threat of release at, from, in, or on,
any property owned or operated by the COMPANY during the period prior to or
after the COMPANY's ownership or operation of such property, 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 investigation which is reasonably
likely to 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
material 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
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"depreciable plant, property and equipment" (or similarly named line item)on
the balance sheet of the COMPANY as of the Balance Sheet Date, (y) all other
personal property owned by the COMPANY with a value individually in excess of
$10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance
Sheet Date and (z) all leases and agreements in respect of personal property,
including, in the case of each of (x), (y) and (z), (1) true, complete and
correct copies of all such leases, (2) a listing of the capital costs of all
such assets which are subject to capital leases and (3) an indication as to
which assets are currently owned, or, to the COMPANY's knowledge, were formerly
owned, by the STOCKHOLDER or affiliates of the COMPANY or the STOCKHOLDER.
Except as set forth on Schedule 5.14, (i) all personal property with a value
individually in excess of $10,000 used by 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 significant 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 significant 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
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bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor
organizations, strategic alliances, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, options to purchase land, liens, pledges or other
security agreements), other than agreements listed on Schedule 5.10, 5.14,
5.16, 5.18 or 5.19, (a) in existence as of the Balance Sheet Date and (b)
entered into since the Balance Sheet Date, and in each case has delivered true,
complete and correct copies of such agreements to PC. The COMPANY has 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 $100,000 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.
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Schedule 5.16 contains true, complete and correct copies of all title reports
and title insurance policies received or owned by the COMPANY with respect to
real property owned by the COMPANY.
Schedule 5.16 also contains an accurate list of, and true, complete
and correct copies of, all leases and agreements in respect of real property
leased by the COMPANY, which leases and agreements are attached to Schedule
5.16, and an indication as to which such properties, if any, are currently
owned, or, to the COMPANY's knowledge, were formerly owned, by the STOCKHOLDER
or affiliates of the COMPANY or the STOCKHOLDER. Except as set forth on
Schedule 5.16, all of such leases included on Schedule 5.16 are in full force
and effect and constitute valid and binding agreements of the COMPANY, 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 will not expire
and will not be canceled by the COMPANY prior to 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
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Schedule 5.18. Since the Balance Sheet Date, there have been no increases in
the compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union, (ii) no employees
of the COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the COMPANY's knowledge, 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,
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stock option, employee stock purchase or other employee benefit plan, employee
welfare benefit plan, or any other compensation or benefit arrangement, formal
or informal, with their respective employees, whether or not subject to ERISA.
Except as set forth on Schedule 5.20, (i) all Plans are in substantial
compliance with all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable laws, and have been
administered, operated and managed in all material respects in accordance with
the governing documents; (ii) all Plans that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code are so qualified and have
been determined by the Internal Revenue Service to be so qualified, and copies
of the current plan determination letters, 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 STOCKHOLDER, 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
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the COMPANY; (viii) neither the COMPANY nor any member of a "controlled group"
(as defined above) that includes the COMPANY currently has (or at the Funding
and Consummation Date will have) any obligation whatsoever to contribute to any
"single employer pension plan" (as defined in ERISA Section 4001(a)(15) or any
"multi-employer pension plan" (as defined in ERISA Section 4001(a)(3)), nor has
any withdrawal liability whatsoever (whether or not yet assessed) arising under
or capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan;
(ix) there have been no terminations or partial terminations of, or
discontinuance of contributions to, any Qualified Plan without notice to and
approval by the Internal Revenue Service; (x) no Plan that is subject to the
provisions of Title IV of ERISA has 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
STOCKHOLDER have complied (and on the Funding and Consummation Date will have
complied) in all material respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder as and
when applicable to such plans, and 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 STOCKHOLDER, at any time
prior to the Funding and Consummation Date, to comply with any such Federal or
state benefit continuation requirement, which is capable of being assessed or
asserted before or after the Funding and Consummation Date directly or
indirectly against the COMPANY or the STOCKHOLDER with respect to such group
health plans; and (xiii) other than claims in the ordinary course of business
there is no pending litigation, arbitration, or disputed claim, or proceeding,
and to the best of the COMPANY's and the STOCKHOLDER's knowledge, there is no
threatened litigation, arbitration or disputed claim,
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settlement or adjudication proceeding or any governmental or other proceeding
or investigation with respect to any Plan, or with respect to any fiduciary,
administrator or sponsor thereof (in their capacities as such), or any party in
interest thereof.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21, the COMPANY is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10, there are no claims, actions,
suits or proceedings, pending or, to the knowledge of the COMPANY or the
STOCKHOLDER, 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 that would have a Material Adverse Effect, and no written 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.
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(ii) To the knowledge of the COMPANY and the STOCKHOLDER, the
provisions for Taxes due by the COMPANY and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the COMPANY
Financial Statements are sufficient for all unpaid Taxes, being
current taxes not yet due and payable, of such Acquired Party.
(iii) No Acquired Party is a party to any agreement extending
the time within which to file any Return. No claim has ever been made
by any Taxing Authority in a jurisdiction in which an Acquired Party
does not file Returns that it is or may be subject to taxation by that
jurisdiction.
(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 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.
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(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(ix) None of the assets of any Acquired Party constitutes
tax-exempt bond financed property or tax-exempt use property, within
the meaning of Section 168 of the Code. No Acquired Party is a party
to any "safe harbor lease" that is subject to the provisions of
Section 168(f)(8) of the Internal Revenue Code as in effect prior to
the Tax Reform Act of 1986, or to any "long-term contract" within the
meaning of Section 460 of the Code.
(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.
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(xiv) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662(d) of the Code.
(xv) No Acquired Party has any liability for Taxes of any
person other than such Acquired Party (i) under Section 1.1502-6 of
the Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(xvi) The COMPANY is not an investment company as defined in
Section 351(e)(1) of the Code.
(xvii) 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.
(xviii) 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.
(xix) The COMPANY made a valid election to be an S Corporation,
as defined in Section 1361 of the Code, for Federal, state and local
tax purposes for its taxable year, beginning on January 1, 1989, and
has been taxed as an S Corporation for Federal, state and local tax
purposes for such taxable year and all subsequent years.
For purposes of this Section 5.22, the following definitions shall
apply:
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax with
any Taxing Authority or governmental agency.
"Tax" or "Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative
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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
STOCKHOLDER, any other party thereto, is in default under any lease,
instrument, agreement, license or permit set forth on Schedule 5.12, 5.14,
5.15, 5.16, 5.18 or 5.19 or any other material agreement to which it is a party
or by which its properties are bound (the "Material Documents") except for any
violation or default that would not result in a Material Adverse Effect; and,
except as set forth on Schedule 5.23, the execution of this Agreement and the
performance by the COMPANY and the STOCKHOLDER of their obligations hereunder
and the consummation by the COMPANY and the STOCKHOLDER of the transactions
contemplated hereby will not result in any material violation or breach of, or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents. Except as set forth on Schedule 5.23, none
of the Material Documents requires notice to, or the consent or approval of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.23, none of the Material Documents
expressly prohibits or materially restricts 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.
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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, employees, consultants, agents or the
STOCKHOLDER, except for ordinary and customary bonuses and salary
increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, materially adversely
affecting the business of 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 STOCKHOLDER and his 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 the STOCKHOLDER or any affiliate thereof;
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(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 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;
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(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from 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
STOCKHOLDER, 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 STOCKHOLDER acknowledge and agree (i)
that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or
occur at all; and (ii) that neither PC or any of its officers, directors,
agents or representatives shall have any liability to the COMPANY, the
STOCKHOLDER 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
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particular price or within a particular range of prices or to occur at all
provided that PC acts in good faith, and uses its best efforts to cause its
directors and officers to act in good faith, to consummate the transactions
contemplated herein.
(B) Representations and Warranties of the STOCKHOLDER
The STOCKHOLDER represents and warrants that the representations and
warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of the Closing and on
the Funding and Consummation Date, and that the representations and warranties
set forth in Sections 5.29 and 5.30 shall survive until the tenth anniversary
of the Funding and Consummation Date, which shall be deemed to the Expiration
Date for purposes of Sections 5.29 and 5.30.
5.29 AUTHORITY; OWNERSHIP. The STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. The STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by the STOCKHOLDER, and, except as set forth on the
Schedule 5.29, such COMPANY Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind.
5.30 PREEMPTIVE RIGHTS. As of the date hereof, the STOCKHOLDER does
not have any preemptive or other right to acquire shares of PC Stock (other
than rights of the STOCKHOLDER to acquire PC Stock pursuant to (i) this
Agreement or (ii) any option granted by PC) and the STOCKHOLDER does not have,
or hereby waives, any such preemptive or other right to acquire shares of
COMPANY Stock that the STOCKHOLDER has or may have had.
5.31 NO INTENTION TO DISPOSE OF COMPANY STOCK. There is no current
plan or intention by the STOCKHOLDER to sell, exchange or otherwise dispose of
shares of PC Stock received in the Merger.
6. REPRESENTATIONS AND WARRANTIES OF PC AND 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
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Section 7.8 hereof, shall be true at the time of the Closing and the Funding
and Consummation Date, and that such representations and warranties shall
survive the Funding and Consummation Date for a period of twelve (12) months
(the last day of such period being the "Expiration Date"), except that (i) the
warranties and representations set forth in Section 6.13 hereof shall survive
until such time as the limitations period has run for all tax periods (and any
portions thereof) ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 6.13 and (ii) solely for
purposes of Section 11.2(iv) hereof, and solely to the extent that in connection
with the IPO PC actually incurs liability under the 1933 Act, the 1934 Act or
any other Federal or state securities laws, the representations and warranties
set forth herein shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration Date for such
purposes.
6.1 DUE ORGANIZATION. PC and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and By-laws, each as amended to date, of PC and
NEWCO (the "PC Charter Documents") are all attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of PC and
NEWCO executing this Agreement have the authority to enter into and bind PC and
NEWCO to the terms of this Agreement and (ii) PC and NEWCO have the full
corporate right, power and authority to enter into this Agreement and the
Merger.
6.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of PC
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding 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
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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 herein or as set forth in the Registration
Statement.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements
and as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates PC or NEWCO to issue any
of its authorized but unissued capital stock or treasury stock; and (ii)
neither PC nor NEWCO has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof.
Schedule 6.4 also includes complete and accurate copies of all stock option or
stock purchase plans of PC and NEWCO, including a list, accurate as of the date
hereof, of all outstanding options, warrants or other rights to acquire shares
of their respective capital stock.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. PC has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither PC
nor NEWCO owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity nor is PC or
NEWCO, directly or indirectly, a 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 liabilities, contingent or otherwise, except as set
forth in or contemplated by this
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Agreement and the Other Agreements and except for fees and expenses incurred in
connection with the transactions contemplated hereby and thereby.
6.7 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 6.7, neither PC nor NEWCO is in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them, which violation would have a Material Adverse
Effect; and except to the extent set forth in Schedule 6.7, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
PC or NEWCO, threatened, against or affecting PC or NEWCO, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. PC and NEWCO have conducted and are
conducting their respective businesses in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
Federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing, which violation might have a Material Adverse Effect.
6.8 NO VIOLATIONS. Neither PC nor NEWCO is in violation of any PC
Charter Document. None of PC, NEWCO or, to the knowledge of PC and NEWCO, any
other party thereto is in default under any lease, instrument, agreement,
license or permit to which PC or NEWCO is a party, or by which PC or NEWCO, or
any of their respective properties, are bound (collectively, the "PC
Documents"); and (a) the rights and benefits of PC and NEWCO under the PC
Documents will not be adversely affected by the transactions contemplated
hereby; and (b) the execution of this Agreement and the performance of PC's and
NEWCO's obligations 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
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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 STOCKHOLDER pursuant to this Agreement will constitute valid
and legally issued shares of PC, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all respects to the PC Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
PC Stock to be issued to the STOCKHOLDER pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Section 17 hereof.
6.11 NO SIDE AGREEMENTS. Neither PC nor 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.
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.
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6.13 TAXES. NEWCO is a newly formed entity which has no tax or
operational history. Except as set forth on Schedule 6.13:
(i) All Returns required to have been filed by or with respect
to PC and any affiliated, combined, consolidated, unitary or similar
group of which PC is or was a member (a " PC Relevant Group") with any
Taxing Authority have been duly filed, and each such Return correctly
and completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes (whether or not shown on
any Return) owed by the PC Relevant Group have been paid.
(ii) The provisions for Taxes due by PC and any subsidiaries
(as opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the PC Financial
Statements are sufficient for all unpaid Taxes, being current taxes
not yet due and payable, of the PC Relevant Group.
(iii) No corporation in the PC Relevant Group is a party to any
agreement extending the time within which to file any Return. No
claim has ever been made by any Taxing Authority in a jurisdiction in
which a corporation in the PC Relevant Group does not file Returns
that it is or may be subject to taxation by that jurisdiction.
(iv) Each corporation in the PC Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(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,
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by application of similar principles, reasonably could be expected to
result in a proposed deficiency for any other period not so examined.
Schedule 6.13(v) attached hereto lists all federal, state, local and
foreign income Tax Returns filed by or with respect to any corporation
in the PC Relevant Group for all taxable periods, indicates those
Returns, if any, that have been audited, and indicates those Returns
that currently are the subject of audit. Each corporation in the PC
Relevant Group will make available to the STOCKHOLDER, at his request,
complete and correct copies of all federal, state, local and foreign
income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, PC.
(vi) No corporation in the PC Relevant Group has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(vii) No corporation in the PC Relevant Group has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G the Code.
(viii) No corporation in the PC Relevant Group is a party to any
Tax allocation or sharing agreement.
(ix) None of the assets of any corporation in the PC Relevant
Group constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. No
corporation in the PC Relevant Group is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code 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
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341(f) of the Code or comparable provisions of any state statutes.
(xi) No corporation in the PC Relevant Group is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any corporation in the PC
Relevant Group that could give rise to an adjustment under Section 481
of the Code for periods after the Funding and Consummation Date.
(xiii) No corporation in the PC Relevant Group has received any
written ruling of a Taxing Authority related to Taxes or entered into
any written and legally binding agreement with a Taxing Authority
relating to Taxes.
(xiv) Each corporation in the PC Relevant Group has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662(d) of the Code.
(xv) No corporation in the PC Relevant Group has any liability
for Taxes of any person other than such corporation in the PC Relevant
Group (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the 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
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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, the COMPANY will afford
to the officers and authorized representatives of PC and the Other Founding
Companies reasonable access upon reasonable notice during normal business hours
to all of the COMPANY's sites, properties, books and records and will furnish
PC with such additional financial and operating data and other information as
to the business and properties of the COMPANY as PC or the Other Founding
Companies may from time to time reasonably request. The COMPANY will cooperate
with PC and the Other Founding Companies, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with the transactions contemplated by this Agreement.
PC, NEWCO, the STOCKHOLDER 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, PC will afford to the officers and authorized
representatives of the COMPANY reasonable access upon reasonable notice during
normal business hours 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
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information as to the business and properties of PC and NEWCO as the
COMPANY may from time to time reasonably request. PC and NEWCO will
cooperate with the COMPANY, its representatives, auditors and counsel
in the preparation of any documents or other material which may be
required in connection with the transactions contemplated by this
Agreement. The COMPANY, PC and NEWCO will cause all information
obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the
provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as
set forth on Schedule 7.2:
(i) carry on its business in the ordinary course as conducted
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of its current obligations as required under
agreements relating to or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(v) use its reasonable best efforts to maintain and preserve
its business organization intact, retain its present key employees and
maintain its relationships with suppliers, customers and others having
material business relations with the COMPANY;
(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) use reasonable best efforts to maintain present debt and
lease instruments in accordance with their
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respective terms and not enter into new or amended debt or lease
instruments (except for leases not to exceed $7,500 for items of
personal property), without the knowledge and consent of PC (which
consent shall not be unreasonably withheld); and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents, except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Funding and Consummation Date, the COMPANY will
not, without the prior written consent of PC:
(i) make any change in its Articles or Certificate of
Incorporation or By-laws;
(ii) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its
securities of any kind other than in connection with the exercise of
options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock except for distributions to the STOCKHOLDER of his
Accumulated Adjustment Account;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is
in the ordinary course of business (consistent with past practice) and
involves an amount not in excess of $100,000;
(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
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aggregate cost not in excess of $50,000 necessary or desirable for the
conduct of the business of the COMPANY, (2) (A) liens for taxes either
not yet due or being contested in good faith and by appropriate
proceedings (and for which adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred
to herein as "Statutory Liens"), or (3) liens set forth on Schedule
5.10 or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business;
(vii) negotiate for the acquisition of any business or start-up
any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material right or claim of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed
to be included on Schedule 5.11 unless specifically listed thereon;
(x) breach or amend, other than an amendment in the ordinary
course of business, or terminate any material contract, agreement,
license, or permit to which the COMPANY is a party; or
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDER, 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:
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(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 STOCKHOLDER and the COMPANY shall terminate (i)
any stockholder agreements, voting agreements, voting trusts, options, warrants
and employment agreements between the COMPANY and any employee listed on
Schedule 9.12 hereto and (ii) any existing agreement between the COMPANY and
the STOCKHOLDER, at or prior to the Funding and Consummation Date. Copies of
such termination agreements are attached to Schedule 7.6 or will be furnished
to PC at or prior to such date.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDER and the 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 STOCKHOLDER 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 (ii) the occurrence or
non-occurrence of any event of which they have knowledge that would be likely
to cause any representation
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or warranty of any of the Other Founding Companies in any of the Other
Agreements to be untrue or inaccurate in any material respect at or prior to the
Closing and (iii) any material failure of PC or NEWCO to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 7.7 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Funding
and Consummation Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth
or described on the Schedules, provided, however, that supplements and
amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall only have to be
delivered at the Closing Date, unless such Schedule is to be amended to reflect
an event occurring other than in the ordinary course of business.
Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the COMPANY or the STOCKHOLDER that constitutes or
reflects an event or occurrence that would be reasonably likely to have a
Material Adverse Effect may be made unless PC and a majority of the Founding
Companies other than the 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 that 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,
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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 (A) 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, or (B) if a majority of the Founding Companies consent to an amendment or
supplement to a Schedule prepared by PC or NEWCO, as provided above, 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 STOCKHOLDER on the one hand, or PC or NEWCO on the other hand,
amends or supplements a Schedule which results in a termination of this
Agreement and such amendment or supplement arises out of or reflects facts or
circumstances which such party knew or should have known about at the time of
execution 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 STOCKHOLDER, as the case may be, for all of the legal, accounting and other
out of pocket costs reasonably incurred in connection with this Agreement and
the IPO as it relates to the COMPANY and the STOCKHOLDER.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT.
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The COMPANY and the STOCKHOLDER shall furnish or cause to be furnished
to PC and the Underwriters all of the information concerning the COMPANY and
the STOCKHOLDER reasonably requested by PC or the Underwriters for inclusion
in, and will cooperate with PC and the Underwriters in the preparation of, the
Registration Statement and the prospectus included therein (including audited
and unaudited financial statements, prepared in accordance with generally
accepted accounting principles, and in form otherwise reasonably requested by
PC or the Underwriters as suitable for inclusion in the Registration
Statement). PC and NEWCO agree to use their best efforts to provide to the
STOCKHOLDER 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 STOCKHOLDER and
the COMPANY sufficient time to review and comment upon such documents prior to
filing with the SEC. PC and NEWCO also agree to provide to counsel to the
STOCKHOLDER a copy of the Underwriting Agreement in respect of the IPO and to
give the STOCKHOLDER and the COMPANY sufficient time to review and comment upon
such agreement (including allowing the STOCKHOLDER to be present at the meeting
or meetings of PC's Pricing Committee with respect to the pricing of the IPO)
prior to its execution. The COMPANY and the STOCKHOLDER agree promptly to
advise PC if at any time during the 25 day period following the date of the
final prospectus with respect to the IPO (the "Final Prospectus") in which a
prospectus relating to the IPO is required to be delivered under the Securities
Act, any information contained in the prospectus concerning the COMPANY or the
STOCKHOLDER and which was provided in writing by or on behalf of the
STOCKHOLDER or the COMPANY or their respective agents or representatives for
inclusion in the Registration Statement, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and to provide the
information needed to correct such misstatement or omission. Insofar as the
information requested relates solely to the COMPANY or the STOCKHOLDER and was
provided in writing by the COMPANY or the STOCKHOLDER or their respective
agents or representatives for inclusion in the Registration Statement, each
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of the COMPANY and the STOCKHOLDER represents and warrants that the
Registration Statement at its effective date, at the date of the Final
Prospectus and each amendment to the Registration Statement or supplement to
the Final Prospectus, and at each closing 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 a reasonably
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 Effect with respect to the COMPANY. 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 in all
material respects the results of operations of the COMPANY for the periods
indicated thereon.
7.11 OTHER AGREEMENTS. PC has provided to the COMPANY and the
STOCKHOLDER true and complete copies of the Other Agreements substantially in
the form in which they will be executed, as well as all agreements contemplated
thereby or referred to therein that have been executed as of the date hereof.
PC agrees to provide to the COMPANY material drafts of all such agreements to
be entered into following the date hereof. Neither PC nor NEWCO will amend,
modify or waive any of the material provisions of any such executed Other
Agreements or any executed agreements contemplated thereby or referred to
therein, without the prior consent of the COMPANY and the STOCKHOLDER, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, the
procedure for amending the schedules to any Other Agreement will be governed by
Section 7.8.
7.12 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such
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further instruments or documents or take such other action as may be reasonably
necessary or convenient to carry out the transactions contemplated hereby.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE COMPANY
The obligations of the STOCKHOLDER 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 STOCKHOLDER unless such parties have notified PC
in writing to the contrary, except that no such waiver shall be deemed to
affect the survival of the representations and warranties of PC and NEWCO
contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of PC and NEWCO contained in Section 6 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 STOCKHOLDER.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall be satisfactory to the COMPANY and its
counsel. The STOCKHOLDER and the COMPANY shall be satisfied that the
Registration Statement and the prospectus forming a part thereof, including any
amendments thereof or supplement thereto, does not contain any untrue statement
of a material fact, or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading that
cannot be corrected in the
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final prospectus relating thereto, provided that the condition contained in
this sentence shall be deemed satisfied if the COMPANY or the STOCKHOLDER shall
have failed to inform PC in writing prior to the Funding and Consummation Date
of the existence of such 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, substantially 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 $14.00 per share, provided that, such price assumes a
sale of 5,750,000 shares of PC Stock to the public (including the shares
issuable in connection with the Underwriter's overallotment option) after which
there will be an aggregate of 18,575,000 shares of PC Stock outstanding.
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 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.
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8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to PC or NEWCO or any of the Other Founding Companies
which would constitute a Material Adverse Effect on PC, NEWCO and the Founding
Companies considered as a whole.
8.9 PC STOCK TO BE SOLD IN THE IPO. The aggregate number of shares
of PC Stock to be sold to the public (including the amount sold in connection
with the Underwriters' over-allotment option) shall be no more 28.75% of the
outstanding PC Stock after giving effect to the IPO and the exercise of the
Underwriters' over-allotment option.
8.10 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.
8.11 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.
8.12 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.
8.13 TAX TREATMENT. The COMPANY and the STOCKHOLDER shall be
reasonably satisfied that (i) none of PC, NEWCO or any Other Founding Company
(or any of their respective 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 STOCKHOLDER has occurred
between the date of this Agreement and the Funding and Consummation Date, in
each case so as to jeopardize the treatment of the transactions contemplated by
the PC Plan of Organization as a transfer of property described in Section 351
of the Code.
8.14 CLOSING OF THE OTHER AGREEMENTS. None of the Other Founding
Companies shall have failed to consummate the
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transactions contemplated by this Agreement and the Other Agreements.
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 STOCKHOLDER 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 STOCKHOLDER
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
the representations and warranties of the STOCKHOLDER 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 STOCKHOLDER 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
STOCKHOLDER shall have delivered to PC a certificate dated the Closing Date and
the Funding and Consummation Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened 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,
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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 STOCKHOLDER approving the COMPANY's entering into this
Agreement and the consummation of the transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect on PC, NEWCO and the Founding Companies considered as a whole.
9.5 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered to
PC an instrument dated the Closing Date releasing the COMPANY from (i) any and
all claims of the STOCKHOLDER against the COMPANY and (ii) any and all
obligations of the COMPANY to the STOCKHOLDER, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the STOCKHOLDER, (y) continuing obligations to the STOCKHOLDER
relating to his employment by 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 STOCKHOLDER shall have been canceled effective prior to or as
of the Funding and Consummation Date.
9.8 OPINION OF COUNSEL. PC shall have received an opinion from
counsel to the COMPANY and the STOCKHOLDER, dated the Closing Date, in the form
annexed hereto as Annex VII, which form shall be deemed to include any
additional opinions covering matters customary under the circumstances and
based upon reasonable requests by the Underwriters, which opinion may be relied
upon by counsel to PC in connection with any opinion requested of it by the
Underwriters.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have
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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 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. The STOCKHOLDER shall have delivered to PC a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF PC AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. PC
shall use its best efforts to have the STOCKHOLDER released from any and all
guarantees on any indebtedness that 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
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and, in the event that PC cannot obtain releases on or prior to the Funding and
Consummation Date, PC agrees to indemnify the STOCKHOLDER against any and all
claims made by lenders under such guarantees which arise as a result of PC's
failure to cause such guarantees to be released on or prior to the Funding and
Consummation Date.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, PC shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the reorganization, including:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the PC Stock issued in connection with the
transactions contemplated hereby;
(b) the entering into of financial arrangements for the
benefit of the STOCKHOLDER; and
(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 STOCKHOLDER, which consent shall
not be unreasonably withheld.
(ii) PC shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them
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reasonably may request in filing any Return, amended Return or claim for
refund, determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and relevant
work papers, relevant documents relating to rulings or other determinations by
Taxing Authorities and relevant records concerning the ownership and Tax basis
of property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Returns pursuant to this
Agreement shall bear all costs of filing such Returns.
(iv) Each 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 REAL PROPERTY GAINS AND TRANSFER TAXES. The STOCKHOLDER shall
pay any state or local real property transfer or real property gains taxes (and
any penalties and interest with respect to such taxes), arising out of or in
connection with the transactions effected pursuant to this Agreement.
10.5 DIRECTORS. The persons named in the Registration Statement,
including the STOCKHOLDER (whose initial term shall end at PC's annual meeting
in 1999) and one designee of the STOCKHOLDER, shall be appointed as directors of
PC not later than ten (10) days following the closing of the IPO. For so long
as the STOCKHOLDER beneficially owns an aggregate of at least 10% of the
outstanding PC Stock, the STOCKHOLDER shall have the right to designate (i) one
individual to serve as a director on the PC Board of Directors if the PC Board
of Directors consists of five or fewer members and (ii) two individuals to serve
as directors on the PC Board of Directors if the PC Board of Directors consists
of six or more members. PC shall use all reasonable best efforts to cause such
designees to be appointed directors.
10.6 EMPLOYEE BENEFITS. 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
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such plan with a plan that is applicable to the COMPANY, provided that the
employees of the COMPANY shall be entitled, in lieu of the COMPANY's existing
plans, to (i) benefits under a plan designed to be qualified under Section
401(k) of the Code (which is anticipated to be established by PC within one
year of the Funding and Consummation Date) and which may, at the discretion of
PC's Board of Directors, provide for matching contributions, and (ii)other
benefits which are substantially similar in the aggregate to benefits to which
such employees were entitled prior to the Funding and Consummation Date, and
(iii) additional benefits generally provided to employees of PC and its
subsidiaries following consummation of the transactions contemplated herein.
Notwithstanding the foregoing, commencing one year from the Funding and
Consummation Date the PC Board of Directors shall have the ability to amend or
terminate any PC plan.
10.7 EQUITY PLAN. Prior to the Funding and Consummation Date, PC shall
adopt an equity incentive plan which shall authorize PC to grant stock options,
restricted stock, stock appreciation rights and other equity based awards. The
terms of such plan shall limit the number of shares of stock subject to all
outstanding awards granted thereunder to 10% of the total number of shares of PC
Stock outstanding, subject to subsequent amendment thereof. No awards shall be
granted effective prior to the Closing Date. Upon the Funding and Consummation
Date, the following options to purchase an aggregate of 1,081,666 shares of PC
Stock shall be granted as follows: (1) 300,000 to the COMPANY for distribution
to the employees of the COMPANY; (2) 250,000 to Systems Plus, Inc. for
distribution to the employees thereof; 140,000 to Xxxxxxxxx X. Xxxx, Xx.; (4)
33,333 to Xxxx Xxxxxxxxxx; (5) 33,333 to Xxxxx Xxxxxxxx; (6) an aggregate of
75,000 shares to National Medical Systems, Inc., Systems Management, Inc. and
RTI Business Systems, Inc. for distribution to the employees of such companies;
and (7) 50,000 to Xxx Omron; and (8) an aggregate of 200,000 shares to the
COMPANY for distribution to the senior level programming staff of the COMPANY.
10.8 INDEMNIFICATION OF DIRECTORS AND OFFICERS. From and after the
Effective Time, PC will cause the Surviving Corporation
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to indemnify and hold all past and present officers and directors of the
COMPANY harmless against any and all claims, liabilities, losses or damages,
together with reasonable costs and expenses, including reasonable legal fees
("Losses"), arising out of or resulting from any action, suit or proceeding or
omissions or actions occurring on or prior to the Funding and Consummation Date
to the full extent permitted under the Articles of Incorporation and By-Laws of
the COMPANY in effect as of the date hereof; provided that the STOCKHOLDER
shall not be entitled to indemnification for Losses arising out of or resulting
from (i) any breach of the representations and warranties of the STOCKHOLDER
contained in this Agreement (ii) any breach by the STOCKHOLDER of any covenant
or agreement of the STOCKHOLDER contained in or arising out of this Agreement
or (iii) any other matter with respect to which the STOCKHOLDER is indemnifying
PC hereunder. PC will cause the Surviving Corporation to maintain for three
(3) years from the Closing the directors and officers insurance covering the
past and present officers and directors of the COMPANY at current levels and
limits. PC shall cause the Surviving Corporation to pay all expenses,
including reasonable attorneys' fees that may be incurred by such officers and
directors in enforcing the indemnity and other obligations provided for in this
Section 10.8.
11. INDEMNIFICATION
The STOCKHOLDER, PC and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER
covenants and agrees that he will indemnify, defend, protect and hold harmless
PC, 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 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 STOCKHOLDER or the COMPANY
set forth herein or on the Schedules or certificates delivered in connection
herewith, (ii) any nonfulfillment of any agreement on the part of the
STOCKHOLDER or the COMPANY under this Agreement,
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(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 STOCKHOLDER, and provided in writing to PC or its counsel by the
COMPANY or the STOCKHOLDER for inclusion in the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to the COMPANY or the STOCKHOLDER
required to be stated therein or necessary to make the statements therein not
misleading, (iv) any Tax imposed upon or relating to any third party for a
pre-Funding and Consummation Date period, including, in each case, any such Tax
for which an Acquired Party may be liable under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or foreign law),
as a transferee or successor, by contract or otherwise, or (v) the matters
described on Schedule 11.1(v), provided that any proposed amendment to schedule
11.1(v) made after the signing of this Agreement may only be made with consent
of the COMPANY and the STOCKHOLDER, 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
STOCKHOLDER provided, in writing, corrected information to PC's counsel and to
PC for inclusion in the final prospectus, and such information was not so
included or properly delivered.
11.2 INDEMNIFICATION BY PC. PC covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER at all times from
and after the date of this Agreement until the Expiration Date, from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) incurred
by the STOCKHOLDER as a result of or arising from (i) any breach by PC or 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 STOCKHOLDER may incur due to PC's or NEWCO's failure to be
responsible for the liabilities and obligations of the COMPANY
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as provided in Section 1 hereof (except to the extent that PC or NEWCO has
claims against the STOCKHOLDER by reason of such liabilities); (iv) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact 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
required to be stated therein or necessary to make the statements therein not
misleading (other than any such untrue statement or alleged untrue statement or
omission or alleged omission relating to the COMPANY or the STOCKHOLDER and
provided in writing to PC or its counsel by the COMPANY or the STOCKHOLDER (or
the respective agents thereof) for inclusion in the Registration Statement or
any Prospectus forming a part thereof or any amendment thereof or supplement
thereto), or (v) the matters described on Schedule 11.2(v).
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge
of any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being
made against any party obligated to provide indemnification pursuant to Section
11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the
Indemnifying Party written notice of such claim or the commencement of such
action or proceeding. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof, to the extent known.
The Indemnifying Party shall have the right to defend and settle, at its own
expense and by its own counsel, any such matter so long as the Indemnifying
Party pursues the same in good faith and diligently, provided that the
Indemnifying Party shall not settle any criminal proceeding without the written
consent of the Indemnified Party, such consent not to be unreasonably withheld
or delayed. If the Indemnifying Party undertakes to defend or settle, it shall
promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party shall cooperate with the Indemnifying Party and its counsel
in the defense thereof and in any settlement thereof. Such cooperation shall
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include, but shall not be limited to, furnishing the Indemnifying Party with
any books, records or information reasonably requested by the Indemnifying
Party that are in the Indemnified Party's possession or control. All
Indemnified Parties shall use the same counsel, which shall be the counsel
selected by Indemnifying Party, provided that if counsel to the Indemnifying
Party shall have a conflict of interest in the opinion of such counsel that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the expenses of its counsel. After the Indemnifying
Party has notified the Indemnified Party of its intention to undertake to
defend or settle any such asserted liability, and for so long as the
Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which
event the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any
such Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person and the Indemnified Party shall reimburse the
Indemnifying Party for any additional costs of defense which it subsequently
incurs with respect to such claim and all additional costs of settlement or
judgment. If the Indemnifying Party does not undertake to defend such matter
to which the Indemnified Party is entitled to indemnification hereunder, or
fails diligently to pursue such 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,
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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 STOCKHOLDER until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against the STOCKHOLDER shall exceed 1.0% of the sum of the cash paid to
STOCKHOLDER plus the value of the PC Stock delivered to STOCKHOLDER (for
purposes of calculating the value of the PC Stock, such PC Stock is to be
valued at its initial public offering price as set forth in the Registration
Statement) (the "Indemnification Threshold"), provided, however, that PC,
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 the STOCKHOLDER
exceeds the Indemnification Threshold, it being understood that the amount of
any such claim under Sections 11.1(iv) and (v) shall not be counted towards the
Indemnification Threshold. The STOCKHOLDER shall not assert any claim (other
than a Third Person claim) for indemnification hereunder against PC or NEWCO
until such time as, and solely to the extent that, the aggregate of all claims
which the STOCKHOLDER may have against PC or NEWCO shall exceed $100,000,
provided, however, that the STOCKHOLDER and the other persons or entities
indemnified pursuant to Section 11.1 or 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate
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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), the STOCKHOLDER shall not be liable under this Section 11
for an amount which exceeds $48,000,000, provided that the STOCKHOLDER's
indemnification obligations pursuant to Sections 11.1(iv) and (v) shall not be
limited.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of PC and the
COMPANY;
(ii) by the STOCKHOLDER 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 STOCKHOLDER 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;
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(iv) by the STOCKHOLDER or the COMPANY in the event that PC is
no longer pursuing the transactions contemplated by this Agreement;
(v) by the STOCKHOLDER or the COMPANY in the event that the
transactions contemplated by this Agreement are no longer economically
viable for any reason, including without limitation if any of the
following occurs:
(a) PC receives notice from the SEC that the
transactions contemplated herein will not
qualify for (1) tax-free treatment under
Section 351 of the Code or (2) reorganization
accounting treatment in the Registration
Statement;
(b) any material portion of the financing for the
transactions contemplated herein becomes
unavailable; or
(c) the transactions contemplated herein become
non-viable in the view of the principal
nationally recognized investment banking firm
advising the COMPANY or PC with respect to
such transactions.
(vi) pursuant to Section 7.8 hereof; or
(vii) 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; provided, however, that
the aggregate liability of any party arising out of this Section 12 shall not
be in excess of $500,000.
13. NONCOMPETITION
The STOCKHOLDER agrees not to compete with PC to the extent provided
in the Employment Agreement to be entered into between the STOCKHOLDER and PC
effective as of the Funding and Consummation Date.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he
has had in the past, currently has and in the future may have access to certain
confidential information relating to the 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 STOCKHOLDER agrees that he will not use or
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a) to
authorized representatives of the 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 STOCKHOLDER as is required in the course of performing his
duties for PC or the Surviving Corporation unless (i) such information becomes
known to the public generally through no breach by the STOCKHOLDER of this
covenant, (ii) disclosure is required by law or the order of any governmental
authority under color of law or is necessary in order to secure a consent or
approval to consummate the transactions contemplated hereby, provided, that
prior to disclosing any information pursuant to this clause (ii), the
STOCKHOLDER shall 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 the STOCKHOLDER or PC of the provisions of this Section, PC shall be
entitled to an injunction restraining the STOCKHOLDER from disclosing, in whole
or in part, such confidential information. Nothing herein shall be construed
as prohibiting PC from pursuing any other available remedy for
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such breach or threatened breach, including the recovery of damages.
14.2 PC AND NEWCO. PC and NEWCO recognize and acknowledge that they
had in the past and currently have access to certain confidential information
relating to the COMPANY, such as operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the COMPANY. PC and
NEWCO agree that, prior to the Closing, or if the Transactions contemplated by
this Agreement are not consummated, they will not use or disclose such
confidential information to their own benefit except in furtherance of the
Transactions contemplated by this Agreement or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to the STOCKHOLDER 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 STOCKHOLDER and provide the COMPANY and the STOCKHOLDER with
the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party and the same prior disclosure
set forth immediately above is given. In the event of a breach or threatened
breach by PC or NEWCO of the provisions of this Section, the COMPANY and the
STOCKHOLDER 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 STOCKHOLDER from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages. In the event that the transactions contemplated herein
are not consummated, PC and NEWCO shall
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return to the COMPANY within a reasonable time all documents (in both paper and
electronic form) containing confidential information about the COMPANY, and
shall use reasonable efforts to compel the Other Founding Companies to do the
same. In such instance, PC will also furnish to the COMPANY a written
statement certifying that all documents which contained confidential
information about the COMPANY and which had been in PC's possession had been
returned by PC to the COMPANY.
14.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 14.1 and 14.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by 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 (which shall be deemed to include step-siblings, step-children and
step-parents) who agree to be bound by the restrictions set forth in this
Section 15.1 (or trusts for the benefit of the STOCKHOLDER or such family
members, the trustees of which so agree) or transfers to a limited partnership
owned or controlled by the STOCKHOLDER (which entity agrees to be bound by the
restrictions set forth in this Section 15.1) or transfers to not more than five
(5) key employees of the COMPANY (it being understood that such employees also
will agree to be bound by the restrictions set forth in this Section 15.1 and
that the STOCKHOLDER will consult with PC prior to any such transfer to such
family members, trusts, limited partnership or employees and that such
transfers will only be permitted if they are, in the view of PC's counsel,
exempt from registration under the 1933 Act and will not jeopardize the tax
treatment of the transactions contemplated herein or the reorganization
accounting treatment in the Registration Statement), for a period of two years
from the Funding and Consummation Date, except pursuant to Section 17 hereof,
the STOCKHOLDER shall not (i) sell, assign, exchange,
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transfer, encumber, pledge, distribute, appoint or otherwise dispose of (a) any
shares of PC Stock received by the STOCKHOLDER in the Merger, or (b) any
interest (including, without limitation, an option to buy or sell) in any such
shares of PC Stock, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose; or (ii) engage in any transaction, whether
or not with respect to any shares of PC Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning the shares of PC Stock
acquired pursuant to Section 2 hereof (including, by way of example and not
limitation, engaging in put, call, short-sale, straddle or similar market
transactions). Notwithstanding the foregoing, (i) if the "holding period" for
restricted securities set forth in Rule 144(d) under the 1933 Act (or any
similar or successor provision) is reduced below two years, the two-year
restrictive period set forth in this Section 15.1 will be deemed to be
correspondingly reduced; and (ii) the STOCKHOLDER may encumber or pledge any of
such shares of PC Stock provided the pledgee or other beneficiary of such
encumbrance or pledge agrees to be bound by the provisions of this Section as if
the STOCKHOLDER and party hereto. The certificates evidencing the PC Stock
delivered to the STOCKHOLDER pursuant to Section 3 of this Agreement will bear a
legend substantially in the form set forth below and containing such other
information as PC may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [SECOND
ANNIVERSARY OF THE FUNDING AND CONSUMMATION DATE]. (PROVIDED,
HOWEVER, THAT (I) IF THE "HOLDING PERIOD" FOR RESTRICTED
SECURITIES SET FORTH IN RULE 144(D) UNDER THE SECURITIES ACT OF
1933, AS AMENDED (OR ANY SIMILAR OR SUCCESSOR PROVISION), IS
REDUCED BELOW TWO YEARS, THE RESTRICTIVE PERIOD SET FORTH HEREIN
SHALL BE CORRESPONDINGLY REDUCED, AS CALCULATED FROM THE DATE TWO
YEARS PRIOR TO THE DATE SET FORTH HEREIN AND (II) SUCH SHARES MAY
BE ENCUMBERED
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OR PLEDGED PROVIDED THE PLEDGEE OR OTHER BENEFICIARY OF SUCH
ENCUMBRANCE OR PLEDGE AGREES TO BE BOUND BY THE PROVISIONS OF
THESE RESTRICTIONS TO THE SAME EXTENT AS THE HOLDER HEREOF).
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE (AS IT MAY BE REDUCED AS PROVIDED HEREIN).
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The STOCKHOLDER acknowledges that the shares of PC Stock to be
delivered to the STOCKHOLDER pursuant to this Agreement have not been and will
not be registered under the 1933 Act and therefore may not be resold unless
registered under the 1933 Act or resold pursuant to an exemption from the
registration requirements of the 1933 Act. The PC Stock to be acquired by the
STOCKHOLDER pursuant to this Agreement is being acquired solely for his own
account, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution; provided, however, that this covenant shall not prohibit any
disposition in accordance with the securities laws and this Agreement.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDER covenants, warrants and
represents that none of the shares of PC Stock issued to the STOCKHOLDER will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC and this Agreement.
All the PC Stock shall bear the following legend in addition to the legend
required under Section 15 of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS AND, IF REQUIRED BY PC, AN OPINION OF COUNSEL TO PC
STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
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16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDER represents and
warrants that he is able to bear the economic risk of an investment in the PC
Stock acquired pursuant to this Agreement, can afford to sustain a total loss
of such investment and has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
proposed investment in the PC Stock. The STOCKHOLDER represents and warrants
that he has had an adequate opportunity to ask questions and receive answers
from the officers of PC concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of PC, the plans
for the operations of the business of PC, the business, operations and
financial condition of the Other Founding Companies, and any plans for
additional acquisitions and the like. The STOCKHOLDER has asked any and all
questions of the nature described in the preceding sentence, and all questions
have been answered to his satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Funding
and Consummation Date, whenever PC proposes to register any PC Stock for its
own or others' account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions
of additional businesses by PC, (ii) registrations relating to employee benefit
plans and (iii) registrations relating to rights offerings made to the
stockholders of PC, PC shall give the STOCKHOLDER prompt written notice of its
intent to do so. Upon the written request of the STOCKHOLDER given within 30
days after receipt of such notice, PC shall cause to be included in such
registration all of the PC Stock which the STOCKHOLDER requests, provided that
PC shall have the right to reduce the number of shares included in such
registration to the extent that inclusion of such shares would, in the opinion
of tax counsel to PC or its independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Registration Statement as a
tax-free reorganization. In addition, if PC is advised in writing in good
faith by any managing underwriter of an underwritten offering of the securities
being offered pursuant 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
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adversely affecting the offering, PC may reduce pro rata the number of shares
offered for the accounts of such persons (based upon the number of shares
proposed to be sold by each such person) to a number deemed satisfactory by
such managing underwriter, provided, that, for each such offering made by PC
after the IPO, such reduction shall be made first by reducing the number of
shares to be sold by persons other than PC, the STOCKHOLDER and the
stockholders of the Other Founding Companies (collectively, the STOCKHOLDER and
the stockholders of the other Founding Companies being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders.
17.2(A) DEMAND REGISTRATION RIGHTS OF THE STOCKHOLDER. At any time
after the date two years after the Funding and Consummation Date, the
STOCKHOLDER may, with respect to the shares of PC Stock that were issued to the
STOCKHOLDER pursuant to this Agreement 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, request in writing that PC
file a registration statement under the 1933 Act covering the registration of
shares of PC Stock (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 the
STOCKHOLDER (a "STOCKHOLDER Demand Registration"). Within 45 days after notice
from the STOCKHOLDER, PC shall file and use its best efforts to cause to become
effective a registration statement covering all such shares. PC shall be
obligated to effect only one STOCKHOLDER Demand Registration for the sole
benefit of the STOCKHOLDER pursuant to this Section 17.2(A) and will keep such
STOCKHOLDER 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.
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If at the time of the STOCKHOLDER's request for a STOCKHOLDER Demand
Registration, PC has plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the PC Stock held by the
STOCKHOLDER shall be initiated under this Section 17.2(A) 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
STOCKHOLDER the right to participate in such public offering pursuant to, and
subject to, Section 17.1 hereof.
17.2(B) DEMAND REGISTRATION RIGHTS OF THE STOCKHOLDER AND THE
STOCKHOLDERS OF THE OTHER FOUNDING COMPANIES. 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
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such public offering) may defer the filing of the registration statement for a
30 day period.
If at the time of any request by the stockholders of the Founding
Companies for a Demand Registration PC has plans to file within 60 days after
such request a registration statement covering the sale of any of its
securities in a public offering under the 1933 Act, no registration of the PC
Stock held by the stockholders of the Founding Companies shall be initiated
under this Section 17.2(B) 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(B) 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 of the PC Stock; and (iii) take such other actions as are
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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 STOCKHOLDER, 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 STOCKHOLDER.
18.3 ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire
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agreement and understanding among the STOCKHOLDER, 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 STOCKHOLDER, 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 prior to the Funding and Consummation Date 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 COMPANY also shall pay
prior to the Funding and Consummation Date 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 STOCKHOLDER in connection with the
transactions contemplated herein, whether or not such transactions are actually
consummated. The STOCKHOLDER further shall pay all sales, use,
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transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
Merger, other than Transfer Taxes, if any, imposed by the State of Delaware.
The STOCKHOLDER shall file all necessary documentation and Returns with respect
to such Transfer Taxes. In addition, the STOCKHOLDER acknowledges that he, 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 the STOCKHOLDER in connection with the transactions contemplated
hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to PC, or NEWCO, addressed to them at:
Medical Manager Corporation
0000 Xxxxx 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 STOCKHOLDER, addressed to him at his addresses
set forth on Annex IV, with copies to such counsel as is
set forth with respect to the STOCKHOLDER on such Annex
IV;
(c) If to the COMPANY, addressed to it at:
Personalized Programming, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
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Attn: Xxxxxxx X. Xxxxxx
and marked "Personal and Confidential"
with copies to:
Personalized Programming, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxx, Xx.
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.
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18.11 TIME. Time is of the essence with respect to this
Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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 STOCKHOLDER. Any
amendment or waiver effected in accordance with this Section 18.15 shall be
binding upon each of the parties hereto, any other person receiving PC Stock in
connection with the Merger and each future holder of such PC Stock.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MEDICAL MANAGER CORPORATION
By /s/ Xxxx X. Xxxx
---------------------------
Name: Xxxx X. Xxxx
Title: Chief Executive Officer
PPI ACQUISITION I CORP.
By /s/ Xxxxx Xxxxx
---------------------------
Name: Xxxxx Xxxxx
Title: President
PERSONALIZED PROGRAMING, INC.
By /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
STOCKHOLDER:
By /s/ Xxxxxxx X. Xxxxxx
---------------------------
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