SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
July 17, 1996
Commission File Number: 33-15370-D
CUSA Technologies, Inc.
___________________________________________________________
(Exact name of the small business as specified in charter)
Nevada 87-0439511
______________________ _________________________
State of Incorporation IRS Identification Number
986 West Atherton Drive, Salt Lake City, Utah 84123
___________________________________________________________
(Address of principle executive offices)
(801) 263-1840
__________________________________________
(Telephone of issuer including area code)
<PAGE>
______________________________________________________________
ITEM 2. DISPOSITION OF ASSETS
_______________________________________________________________
Pursuant to an Asset Purchase Agreement dated July 2, 1996 (the
"Agreement"), CUSA Technologies, Inc. and certain of its subsidiaries
(collectively the "Company") sold the assets (the "Disposed Assets") of
its medical practice management software and commercial software divisions
(the "Disposed Divisions") to Physicians Computer Network, Inc. ("PCN")
for $10,100,000 plus the assumption of certain liabilities. The amount of
consideration was determined after extensive arms' length negotiations.
The consideration paid for the Disposed Assets consisted of $4,500,000 cash at
closing, the forgiveness at closing of a $1,500,000 promissory note
executed by the Company on June 13, 1996, the foregiveness at closing of
approximately $1,500,000 of trade payables owed by the Company to PCN, the
assumption at closing of certain of certain liabilities of the Disposed
Divisions, $3,150,000 cash due five days following the receipt by PCN of the
audited financial statements for the Disposed Divisions, $200,000 due upon
the transfer of certain assets of one of the subsidiaries of the Company
which were subject to a court ordered receivership at the date of closing,
and $750,000 (the "Last Payment") due five days following the completion and
delivery of a report detailing the results of certain agreed upon procedures,
to be performed by the Company's independent auditors on the accounts
receivable and the deferred revenue of the Disposed Divisions (the "Setoff
Report"). The amount of the Last Payment is subject to certain setoff
rights depending on the results of the Setoff Report.
The Disposed Assets included the accounts receivable, goodwill, customer
lists, hardware and software maintenance agreements, workforce-in-place, and
intellectual property related to the Disposed Divisions. The net loss for the
Disposed Divisions was approximately $1,925,000 for the quarter ended
March 31, 1996 on revenues of $3,300,0000. The Company retained all of the
assets of its credit union software, credit union statement processing,
medical records software and rental equipment software businesses.
The Agreement contains certain non-compete and non-solicitation provisions
whereby the Company and its Affiliates are restricted from selling any product
to any of the end-users of the Disposed Divisions or participating in the
medical practice management software business for a period of 5 years, and
from selling its Carepoint for Clinics medical records package to any end user
who was a PCN customer as of the closing for a period of two years following
the closing. As part of the Agreement, PCN will become the Company's
exclusive provider of IBM hardware for the next five years.
Under such arrangement, the Company committed to purchase a minimum of
$2,000,000 of hardware each year at a discount from PCN's reseller prices under
favorable credit terms.
<PAGE>
_______________________________________________________
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
_______________________________________________________
The following Unaudited Pro forma Condensed Consolidated financial statements
are included as part of this report:
Unaudited Pro forma Condensed Consolidated Balance Sheet as of March 31, 1996
Unaudited Proforma Condensed Consolidated Statements of Operations for the
year ended June 30, 1995 and nine months ended March 31, 1996.
Notes to Unaudited Pro Forma Condensed Financial Statements
________________________________________________________________
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________
The following unaudited pro forma condensed consolidated balance sheet as of
March 31, 1996 and the related unaudited pro forma condensed consolidated
statements of operations for the nine months ending March 31, 1996 and the
year ending June 30, 1995 are based on the consolidated historical financial
statements of CUSA Technologies, Inc. (CTI) as previously reported on form
10-QSB for the nine months ended March 31, 1996 and on form 10-KSB for the
year ended June 30, 1995, adjusted to reflect the disposition of CTI's
Commercial and Medical Divisions as if such disposition occurred at the
beginning of the periods for the statements of operations and as of the end of
the period for the balance sheet.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the audited financial statements of CTI and its
subsidiaries, along with the related notes thereto. The pro forma adjustments
include certain assumptions as discussed in the accompanying notes and are
subject to change. Furthermore, the unaudited pro forma condensed consolidated
results of operations are not necessarily indicative of actual results which
might have occurred had the disposition occurred on the dates indicated or
of results that may be obtained in the future.
<PAGE>
<TABLE>
CUSA Technologies, Inc.
Unaudited Pro forma Condensed Consolidating Balance Sheet
March 31, 1996
<CAPTION>
Consolidated
Disposed Pro forma Pro forma
Historical Divisions Adjustments Balance
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 130,843 $ - $ 9,925,000(1) $10,055,843
Trade accounts receivable, net
allowance for doubtful accounts 7,175,262 2,627,212 4,548,050
Inventories 488,330 130,043 358,287
Prepaid expenses and other assets 507,475 116,389 391,086
__________ __________ __________ __________
Total current assets $ 8,301,910 $ 2,873,644 $ 9,925,000 $15,353,266
Property and equipment 6,914,130 1,578,585 5,335,545
Less accumulated depreciation 1,651,302 468,829 1,182,473
__________ __________ _________ __________
Net property and equipment 5,262,828 1,109,756 - 4,153,072
Receivables from related parties 452,225 - 452,225
Software development and acquisition
costs, net 4,418,464 1,438,408 2,980,056
Excess of purchase price over fair value of
net tangible and identifiable intangible
assets acquired 14,687,106 9,673,067 5,014,039
Deferred income tax assets 54,282 - (54,282)(2) -
Other assets 288,417 77,523 210,894
__________ _________ _________ __________
Total Assets $33,465,232 $15,172,398 $9,870,718 $28,163,552
__________ __________ _________ __________
__________ __________ _________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit with banks $ 1,342,088 $ - $ 1,342,088
Current installments of long-term debt 952,482 97,686 854,796
Current installments of obligations
under capital leases 169,604 - 169,604
Accounts payable 4,291,430 849,760 3,441,670
Accrued liabilities and deposits 3,834,925 461,781 3,373,144
Income taxes payable 79,048 - 931,703(2) 1,010,751
Notes payable to related parties 1,268,390 - (175,000)(1) 1,093,390
Deferred revenue 7,378,666 2,529,654 4,849,012
__________ _________ _________ _________
Total current liabilities 19,316,633 3,938,881 756,703 16,134,455
Long-term debt with related parties 2,445,000 - 2,445,000
Long-term debt, excluding current
installments 1,921,425 - 1,921,425
Obligations under capital leases,
excluding current installments 95,317 - 95,317
Deferred income taxes - - 2,259,044(2) 2,259,044
__________ _________ _________ __________
Total liabilities 23,778,375 3,938,881 3,015,747 22,855,241
Stockholders' Equity:
Series A convertible preferred stock,
$.001 par value; authorized 1,500,000
shares; issued 1,000,000 shares 1,000 1,000
Common stock, $.001 par value;
authorized 25,000,000 shares; issued
8,847,053 shares at March 31, 1996
and 8,509,516 shares at June 30, 1995 8,847 8,847
Additional paid in capital 10,380,378 - 10,380,378
Retained earnings (accumulated deficit) (703,368) (1,133,517)(1) (5,081,914)
(3,245,029)(2)
Division equity - 11,233,517 11,233,517 (1) -
__________ __________ __________ __________
Total stockholders' equity 9,686,857 11,233,517 6,854,971 5,308,311
__________ __________ __________ __________
$33,465,232 $15,172,398 $ 9,870,718 28,163,552
__________ __________ __________ __________
__________ __________ __________ __________
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CUSA Technologies, Inc.
Unaudited Pro forma Condensed Consolidated Statement of Operations
For the year ending June 30, 1995
<CAPTION>
Consolidated
Disposed Pro forma Pro forma
Historical Divisions Adjustments Balance
<S> <C> <C> <C> <C>
Net revenues $32,539,715 $ 8,420,333 $24,119,382
Cost of goods sold and other
direct costs 16,862,596 4,971,365 11,891,231
__________ __________ _________ __________
Gross profit 15,677,119 $ 3,448,968 0 12,228,151
Product development costs 1,790,823 748,827 1,041,996
Selling, general and administrative
expenses 12,016,136 3,814,470 8,201,666
__________ __________ _________ __________
Operating income (loss) 1,870,160 (1,114,329) 0 2,984,489
Other income (expense):
Interest expense (388,617) (136,069) (252,548)
Other, net 81,355 28,143 53,212
__________ __________ _________ __________
Earnings (loss) before income taxes 1,562,898 (1,222,255) 0 2,785,153
Income taxes (benefit) 786,872 (615,368) 1,402,240
__________ __________ _________ __________
Net earnings (loss) 776,026 (606,887) 0 1,382,913
__________ __________ _________ __________
__________ __________ _________ __________
Earnings (loss) per common and common
equivalent share
Primary .09 (0.08) 0.16
Fully diluted .08 (0.08) 0.16
Weighted average common and common
equivalent shares
Primary 7,655,280 7,185,371 7,655,280
Fully diluted 8,020,584 7,185,371 8,020,584
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CUSA Technologies, Inc.
Unaudited Pro forma Condensed Consolidating Statement of Operations
For the nine months ending March 31, 1996
<CAPTION>
Consolidated
Disposed Pro forma Pro forma
Historical Divisions Adjustments Balance
<S> <C> <C> <C> <C>
Net Revenues $35,031,945 $10,573,659 $24,458,286
Cost of goods sold and other direct costs 18,976,320 6,475,330 12,500,990
__________ __________ _________ __________
Gross profit 16,055,625 4,098,329 - 11,957,296
Product development costs 1,970,843 395,626 1,575,217
Selling, general and administrative
expense 15,320,599 6,856,946 8,463,653
__________ __________ _________ __________
Operating income (loss) (1,235,817) (3,154,243) - 1,918,426
Other income (expense):
Interest expense (437,308) (209,161) (228,147)
Other, net (37,729) 8,679 (46,408)
__________ _________ _________ __________
Income (loss) before income taxes (1,710,854) (3,354,725) - 1,643,870
Income taxes (benefit) (302,806) (1,086,470) 783,664
__________ _________ _________ _________
Net earnings (loss) $(1,408,048) (2,268,255) 860,206
__________ _________ _________ _________
__________ _________ _________ _________
Earnings (loss) per common and
common equivalent share
Primary $ (0.17) (0.26) 0.08
Fully diluted $ (0.17) (0.26) 0.08
Weighted average common and common
equivalent shares
Primary 8,653,093 8,653,093 9,602,252
Fully diluted 8,653,093 8,653,093 9,695,703
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
CUSA Technologies, Inc.
Notes to Pro Forma Condensed Consolidated Financial Statements
(1) General Assumptions
The accompanying unaudited pro forma condensed consolidated balance sheet as of
March 31, 1996 and the unaudited pro forma condensed consolidated statements of
operations for the nine months ended March 31, 1996 and the year ended June 30,
1995 were prepared based on the following assumptions:
The pro forma adjustments were made assuming the divisions were disposed as
of the beginning of the periods for the statements of operations and as of
the end of the period for the balance sheet.
(2) Pro Forma Adjustments
The adjustments to the unaudited accompanying condensed consolidated pro forma
balance sheet as of March 31, 1996 and the unaudited pro forma condensed
statements of operations for the nine months ended March 31, 1996 and the year
ended June 30, 1995 are as follows:
(1) Adjustment to record the disposition of the divisions.
(2) Adjustment to record income tax expense related to the disposition of
the divisions at the estimated effective rate of 38% of the gain on disposition,
exclusive of permanent tax differences related to the disposition of goodwill.
<PAGE>
Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document
______ ______ _________________________________
10.5 10 Asset Purchase Agreement between
Physician's Computer Network, Inc. and
CUSA Technologies, Inc. dated July 2, 1996
<PAGE>
_____________________________________________________
SIGNATURES
_____________________________________________________
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: July 17, 1996
CUSA TECHNOLOGIES, INC.
By: _/s/_________________________________
D. Jeff Peck, Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________
EXHIBITS
TO
FORM 8-K
DATED JULY 17, 1996
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
_________________________
CUSA TECHNOLOGIES, INC.
<PAGE>
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of July 2, 1996, by and among
CUSA Technologies, Inc., a Nevada corporation ("CTI"), the
corporations listed on Schedule A hereto, each of which is a
subsidiary of CTI (the "Subsidiaries," and, together
with CTI, the "Sellers"), Physician Computer Network,
Inc., a New Jersey corporation ("PCN"), and PCN Services Corp.,
a Delaware corporation and a wholly-owned subsidiary of PCN
(the "Purchaser").
BACKGROUND
The Sellers are engaged in the business of: (i)
providing physicians, hospitals, medical clinics and
other facilities providing medical services (collectively,
"Medical Providers") with practice management software
systems and providing maintenance and support for such
systems (such business, excluding the CarePoint Business
(as hereinafter defined), referred to herein as the
"Medical Business"); and (ii) selling or licensing software
packages which provide such applications as payroll,
accounts payable, general ledger, billing, accounts
receivable management, job scheduling, invoicing and
inventory management to the following industries:
construction, timber, fuel oil, building supply, materials
management and publishing, and providing maintenance and
support for such businesses (the "Commercial Business" and,
together with the Medical Business, the "Business"). The
Sellers desire to sell and the Purchaser desires to purchase
the assets of the Business as a going concern on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises
and the mutual agreements hereinafter set forth, the
parties hereto hereby agree as follows:
<PAGE>
1. PURCHASE AND SALE OF ASSETS
1.1. Sale of Assets. On the terms and subject to the
conditions set forth in this Agreement, the Sellers agree to
sell, convey, transfer, deliver and assign to the Purchaser, and
the Purchaser agrees to purchase, on the date hereof
("Closing Date"), all of the tang ible and intangible assets,
rights, interests and properties of every kind and nature,
wherever located and by whomever possessed, used, useable or
intended to be used by the Sellers (or any of them) in the
conduct of the Business (as currently or previously
conducted)(the "Assets") (other than Retained Assets (as defined
in Section 1.2 hereof)), including, without limitation,
all of the following as the same may exist on the Closing Date:
(a) the Business as a going concern and
the goodwill pertaining thereto;
(b) all customer lists utilized in the
Business;
(c) all rights of the Sellers (or any of them),
their successors and assigns under all contracts and
agreements to the extent relating to the Business,
including, without limitation, all service, development,
maintenance and support agreements and like agreements
between any one or more of the Sellers and any licensee,
sublicensee or user ("End-Users") of the products or
services of the Business (collectively, the "End-User
Agreements") and, to the extent transferable, all
confidentiality, secrecy, non-competition or similar
agreements between any one or more of the Sellers and any
person (including, without limitation, any employee of the
Sellers) to the extent relating to the Business or the Assets
(the "Confidentiality Agreements");
(d) all source-codes, object-codes, manuals and other documentation
and materials (whether or not in written form) and all versions
thereof, together with all other patents, licenses, trademarks,
service marks, tradenames (whether registered or
unregistered), copyrights, proprietary computer software,
proprietary inventions, proprietary technology,
technical information, discoveries, designs,
proprietary rights and non-public information, whether or
not patentable, in each case used or usable in the conduct of
the Business as now conducted by the Sellers (collectively, the
"Intellectual Property"), including, without limitation,
all Intellectual Property listed on Schedule 1.1.(d) hereto;
<PAGE>
(e) all accounts and other receivables of any one or more of the
Sellers related to the Business (the "Account Receivables");
(f) all items of inventory of the Sellers relating to the Business,
including, without limitation, all computer hardware products,
peripherals, supplies (including, without limitation,
packaging and shipping material) used in connection with the
Business, work-in- progress and finished goods and
(collectively, the "Inventory") including, without limitation,
the Inventory listed on the Schedule 1.1(f) hereto;
(g) all items of equipment, machinery, furniture or fixtures listed on
Schedule 1.1(g) hereto (the "Equipment");
(h) the Sellers' rights under the equipment leases described on
Schedule 1.1(h) hereto (the "Equipment Leases");
(i) copies of all books of account, records, files, invoices,
customer lists, supplier lists, designs, drawings, business records and
plans, computer print-outs and software, plans and
specifications, warranties, trade correspondence, sales or
promotional literature, operating data and other books
and records related to the Business, including, without
limitation, those required to be kept under applicable law, and
other data or information associated with, used or
employed in connection with the Business (all of which are
collectively referred to hereinafter as "Books and
Records");
(j) the right to receive mail and other communications regarding the
Business addressed to any of the Sellers (including, without
limitation, mail and communications from End-Users,
customers, suppliers, distributors, agents and
others);
(k) all creative materials (including, without limitation, films, art
work, color separations and the like), advertising and
promotional materials and all other printed or written
materials related primarily to the Business, its products or
services;
(l) all claims, refunds, causes of action, choses in action, rights
of recovery and rights of set-off of every kind and nature
related to the Business, except to the extent related to the
Retained Liabilities; and
(m) all other tangible or intangible, personal
or mixed property of any of the Sellers related primarily to the
Business or otherwise reasonably required for the operation of
the Business, in each case, to the extent it is not included in
the Retained Assets.
<PAGE>
For purposes of this Agreement, the term "Affili ate" shall mean any
entity that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common
control with any other entity or, in the case of an
individual, any spouse or child sharing the same residence. For
purposes of this definition, "control" of a person means the
power, directly or indirectly, to direct or cause the direction
of the management and policies of such person, whether by
contract or otherwise.
1.2. Retained Assets. Notwithstanding the foregoing, the following
properties, assets, rights and interests of any of the Sellers
(the "Retained Assets") are expressly excluded from the
purchase and sale contemplated hereby and, as such, are not
included in the Assets:
(a) the Sellers' rights under this Agreement;
(b) all assets of any of the Sellers relating to the "Credit Union
Business" (as described on Schedule 1.2(b)(i) hereto); "Rental
Business" (as described on Schedule 1.2(b)(ii) hereto); and
"CarePoint Business" (as described on Schedule
1.2(b)(iii) hereto) (collectively, the "Retained
Businesses"), in each case, to the extent not specifically
covered by Sections 1.1(c), (d), (e), (f), (g), (h) or (i) above;
(c) all cash, cash equivalents and marketable securities of the
Sellers; and
(d) all other assets described on Schedule 1.2(d) hereto.
1.3. Instruments of Transfer. On the Closing Date, the Sellers will
deliver to the Purchaser, or will cause to be delivered to the Purchaser,
duly executed instruments of transfer and assignment in form and
substance reasonably satisfactory to the Purchaser
and its counsel, sufficient to vest in the Purchaser good and
valid title to, and all of the Sellers' right, title and
interest in and to, the Assets, including, without limitation,
one or more of each of the following:
(a) a bill of sale;
(b) an instrument of transfer and assignment of the Intellectual
Property;
(c) assignments of all of the Sellers' rights under all
contracts, licenses, and similar instruments which are included
in the Assets, including, without limitation, the End-User
Agreements;
<PAGE>
(d) such other instruments of transfer and assignment as may be necessary
to transfer and assign the Assets to the Purchaser.
1.4. Delivery of Possession. At the Closing, the Sellers will deliver
possession to the Purchaser of the Assets, at the locations where, in the
ordinary course of business, such are usually and customarily
located, together with all the Books and Records.
1.5. Consents to Assignment. Any other provision of this Agreement
to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign or otherwise sell, convey or
transfer any concession, claim, contract, license, lease,
commitment, sales order, or purchase order, or any benefit
arising thereunder or resulting therefrom, if an attempted
assignment thereof, without the consent required or necessary
for such assignment, would constitute a breach thereof or
in any way adversely affect the rights of the Purchaser or the
Sellers thereunder. If such consent is not obtained, or if
an attempted assignment would be ineffective or would adversely
affect the Sellers' rights thereunder so that the Purchaser
would not in fact receive all such rights, the Sellers shall
cooperate in any arrangement the Purchaser may at its option
reasonably request in writing to provide for the Purchaser the
benefits under any such concession, claim, contract, li
cense, lease, commitment or order, including enforcement for
the benefit of the Purchaser of any and all rights of the
Sellers with respect to the Business against any other party
thereto arising out of the breach or cancellation thereof
by such party or otherwise; and any transfer or assignment of
any property, property right, contract or agreement which
shall require the consent or approval of any other party, and
the Purchaser's assumption of the Sellers' obligations
thereunder in accordance with Section 3.1 hereof, shall be
made subject to such consent or approval being obtained;
provided, however, that nothing contained in this Section 1.5
shall relieve the Sellers of any obligation provided for
elsewhere in this Agreement to obtain any such consents or
approvals or shall affect the liability, if any, of the
Sellers, and the rights, if any, of the Purchaser, pursuant to
this Agreement, for the failure of the Sellers to have disclosed
the need for, and failing to obtain, any such consents or
approvals.
1.6. Collection of Accounts Receivable; Right of Endorsement. From
and after the Closing Date, the Sellers shall each: (i) instruct all
account debtors of any Accounts Receivable or other accounts
receivable created by the Purchaser following the Closing
with respect to the Business (together with the Accounts
Receivable, the "Purchaser Receivables") to forward all
checks or other forms of payment on account of any Purchaser
Receivable (each a "Payment") directly to the Purchaser; and
(ii) shall promptly deliver to the Purchaser all Payments
received by any of the Sellers. After the Closing Date, at the
Purchaser's request, the Sellers shall endorse over to the
Purchaser, without recourse, any Payment (including, without
limitation, any check or other evidence of indebtedness)
received by the Purchaser or the Sellers on account of any Asset
transferred by the Sellers pursuant to the terms hereof,
which check or other evidence of indebtedness has the name of any
one or more of the Sellers as the payee thereof. PCN and the
Purchaser shall have the right and authority to endorse,
without recourse, any Payment received by PCN or the Purchaser
in account of any Purchaser Receivable. For the period of
180 days following the Closing Date, upon no less than two (2)
business days notice, PCN shall have the right to examine and
review all books and records of the Sellers which, prior to the
Closing, recorded accounts receivable of the Business, as
well as accounts receivable of the Retained Businesses, in
order to verify the collection of the Accounts Receivable.
<PAGE>
2. PURCHASE PRICE
2.1. Consideration. The aggregate purchase price to
be paid by the Purchaser in full consideration for the Assets
shall be as follows (collectively, the "Purchase
Price"):
(a) $4,500,000 in cash (the "First Cash Payment"), receipt of which is
hereby acknowledged by CTI;
(b) the forgiveness by PCN of all of CTI's obligations (including,
without limitation, all principal and interest) under
the promissory note in the principal amount of $1,500,000
issued by CTI to the PCN on June 13, 1996 (the "CTI Note"), which
obligations are hereby forgiven by PCN and receipt of the CTI
Note, marked canceled, is hereby acknowledged by CTI;
(c) $3,150,000 in cash (the "Second Cash Payment") payable by the
Purchaser within five (5) business days following the
receipt by PCN of the Audited Financial Statements (as defined
in Section 7.2 hereof);
(d) $750,000 in cash (the "Third Cash Payment") payable by the Purchaser
within five (5) business days following the later of: (x) the date on
which PCN receives the Audited Financial Statements; and (y)
the date on which the PCN receives the Accounts Receivable
Report and the Deferred Revenue Report (each as defined in
Section 7.3 below); provided, however, that the Third Cash
Payment shall be subject to adjustment as provided in
Section 2.2 below;
(e) the forgiveness by PCN and Versyss, Incorporated, a wholly-owned
subsidiary of PCN ("Versyss"), of: (x) all amounts due and
owing to PCN or Versyss by the Sellers (or any of their
Affiliates) through May 31, 1996 which are shown on Schedule
2.1(e)(i) hereto; and (y) all amounts due and owing to PCN or
Versyss by any of the Sellers in connection with software or
hardware purchased by any of the Sellers from PCN or Versyss
related to the Business from May 31, 1996 through the Closing
Date shown on Schedule 2.1(e)(ii) hereto (the "Recent
Payable");
(f) the assumption by the Purchaser at the Closing of the Assumed
Liabilities (as hereinafter defined) as provided in Section
3.1 hereto.
The First Cash Payment, the Second Cash Payment and the Third Cash Payment
shall be paid by the Purchaser to CTI on behalf of CTI and each
Subsidiary. CTI shall be responsible for distributing
such payment to the Subsidiaries as appropriate.
<PAGE>
2.2. Adjustment to the Third Cash Payment. (a) In the event that (i) the
Accounts Receivable Report (as defined in Section 7.3 below) indicates
that the amount of the Good Receivables (as defined in
Section 7.3 below), net of the reserve applied by the Auditors
(as defined in Section 7.2 below) in the Accounts
Receivable Report with respect to the collection of the
Accounts Receivable included therein, is less than (ii) the
amount of the Accounts Receivable shown on the Accounts
Receivable Schedule (as defined in Section 5.9 below), net of
the reserve shown in the Accounts Receivable Schedule
with respect to the collection of the Accounts Receivable shown
thereon (the amount, if any, by which the amount calculated in
accordance with clause (ii) exceeds the amount calculated in
accordance with clause (i) is referred to herein as the
"Accounts Receivable Adjustment"), the Purchaser may
deduct and withhold from the Third Cash Payment the amount of
the Accounts Receivable Adjustment.
(b) Without limiting and in addition to the adjustment provided for in
Section 2.2(a) above, in the event that the Deferred Revenue
Account (as defined in Section 3.1) listed on the
Closing Deferred Revenue Report (as defined in Section 7.3(b)
below) indicates that, on the Closing Date, the Deferred
Revenue Account was greater than $1,950,000, the Purchaser may
deduct and withhold from the Third Cash Payment the amount by
which the Closing Deferred Revenue Account (as defined in
Section 5.8 below) exceeded $1,950,000 (the "Deferred
Revenue Adjustment").
(c) Anything contained in this Agreement to the contrary notwithstanding,
within five (5) business days following the receipt by PCN of
the Account Receivable Report and the Deferred Revenue Report,
the Sellers shall pay to the Purchaser the amount, if any, by
which: (x) the sum of (A) the Accounts Receivable Adjustment
and (B) the Deferred Revenue Adjustment; exceeds (y)
$750,000.
2.3. Allocations of Purchase Price. The Purchase Price will be
allocated as set forth on Schedule 2.3 hereto.
Sellers and Purchaser shall use and cause to be used such
allocation for all federal, state and local income tax
purposes, including, without limitation, the preparation and
filing of their respective counterparts of Form 8594 (or
any other form hereafter mandated by the Internal Revenue
Service ("IRS")) as required by the regulations under Section
1060 of the Internal Revenue Code of 1986, as amended
("Code").
<PAGE>
3. ASSUMPTION OF LIABILITIES
3.1. Assumption. Upon transfer of the Assets on the Closing Date,
and subject to Section 3.2 hereof, the Purchaser will assume (and
hereby does assume) and thereafter pay, perform and
discharge, when due, to the extent not paid, performed or
discharged by the Sellers on or before the Closing Date, the
Assumed Liabilities. As used herein, the term "Assumed
Liabilities" shall mean, collectively: (i) all of the
liabilities and obligations of the Sellers (or any of them)
arising in the ordinary course of business related to or
arising under the End-User Agreements listed on Schedule
3.1(i) hereto from and after the Closing Date for which deferred
maintenance liability has been properly recorded on the
Sellers' books (the "Deferred Revenue Account") or for which a
Deferred Revenue Account Adjustment is made pursuant to
Section 2.2 above; (ii) the obligations of Benchmark Systems
of VA, Inc. ("Benchmark") arising from and after the
Closing Date under the real property lease for the premises
located in Mechanicsville, Virginia (the "Virginia
Lease")(subject to Section 7.15 below); (iii) the Sellers'
obligations for severance pay, accrued vacation and/or sick
time of any employee of the Sellers who is offered
employment by, and accepts employment with, the Purchaser
or PCN, within five (5) business days following the Closing; and
(iv) the Sellers' obligations arising from and after the
Closing Date under the Equipment Leases.
Nothing contained in this Section 3.1 is intended to,
or shall be construed so as to create any third party
beneficiaries of this Agreement or otherwise confer any rights
upon any person, firm or corporation that is not a party
hereto, including, without limitation, any employee of any
of the Sellers. Without in any way limiting the foregoing, it
is not the intention of either the Purchaser or the Sellers
that the assumption by the Purchaser of the Assumed
Liabilities shall in any way enlarge the rights of third
parties under contracts or arrangements with the Purchaser
or the Sellers. Nothing contained herein shall prevent
the Purchaser from contesting in good faith any of the Assumed
Liabilities with any third party.
3.2. Limitations on Assumption. Any other provision of this Agreement
to the contrary notwithstanding, none of PCN, the Purchaser or any of
their respective Affiliates will or does assume any liability or
obligation of the Sellers not expressly assumed pursuant to
Section 3.1 hereto (all liabilities and obligations not
so assumed collectively referred to hereinafter as the "Retained
Liabilities"). Without limiting the generality of the foregoing,
Retained Liabilities shall include, without limitation, the
following:
(a) liabilities of or claims against any one or more of the
Sellers arising out of any action, suit, proceeding,
arbitration, investigation, or hearing or notice of hearing
arising out of, or relating to, in any manner, the business or
operations of any one or more of the Sellers, the Business or the
Assets before the Closing Date;
<PAGE>
(b) liabilities or obligations arising from any breach, or from
any fact or transaction involving a breach, of a
covenant, agreement, representation or warranty
contained herein or arising from, out of, or in connection
with, the transactions pursuant to this Agreement;
(c) liabilities or obligations arising from any breach
occurring before the Closing of a covenant, agreement,
representation or warranty contained in any End-User
Agreement (including, without limitation, the failure of any
of the Sellers to provide any services called for thereunder);
(d) liabilities or obligations arising from or related to any
breach by any one or more of the Sellers occurring on, before or
after the Closing, or from any fact or transaction involving a
breach occurring on, before or after the Closing, of a
covenant, agreement, representation or warranty
contained in any agreement which is (x) related to the Business
but is not an End-User Agreement, an Equipment Lease or
the Virginia Lease or (y) not related to the Business;
(e) liabilities or obligations arising from or related to the
failure of any one or more of the Sellers to obtain any
consent or provide any notice required for or in connection
with the transfer and assignment by any one or more of the
Sellers to the Purchaser of the Sellers' rights under or the
assumption by Purchaser of any of the obligations of Sellers
under any contract or agreement included in the Assets,
including, without limitation, any End-User Agreement and the
Virginia Lease;
(f) liabilities or obligations incurred as a result of
activities of any of the Sellers after the Closing Date;
(g) liabilities or obligations of any of the Sellers not
related to the Business;
(h) liabilities or obligations in respect of or arising out of:
(i) services performed or rendered (or services which any
of the Sellers agreed to perform or render but which it failed to
perform or render in a timely fashion) by any of the Sellers
or any Affiliate of any of the Sellers; or (ii) reliance upon
any express or implied representation or warranty made
with respect thereto;
<PAGE>
(i) liabilities or obligations involving the payment of any
domestic (federal, state or local) or foreign taxes, which
are due or shall become due as a result of the operation of the
Business through the Closing Date; or
(j) liabilities or obligations of any one or more of the
Sellers arising under any employment agreement between any
employee and any one or more of the Sellers, including, without
limitation, any severance payment payable by any Seller
thereunder (which obligation shall, notwithstanding Section
3.1(iii) above, constitute a Retained Liability whether or
not any such employee accepts employment with PCN or the
Purchaser at or following the Closing); or
(k) liabilities or obligations of any of the Sellers to any of
its employees or former employees, including, without
limitation, with respect to any accrued compensation, benefits,
severance, vacations and/or sick days, except as specifically
provided in Section 3.1(iii) above.
3.3. Right of Enforcement and Settlement. (a) From and after the
Closing Date, the Purchaser will have complete control over the payment,
settlement or other disposition of the Assumed Liabilities and
the right to commence, conduct and control all negotiations and
proceedings with respect thereto. The Sellers will
notify the Purchaser promptly of any claim made with respect to
any such Assumed Liabilities and will not, except with the
Purchaser's prior written consent, volun tarily make any
payment of, settle or offer to settle, or consent to any
compromise or admit liability with respect to any such Assumed
Liabilities. The Sellers will cooperate with the Purchaser in
any reasonable manner requested by the Purchaser in connection
with any negotiations or proceedings involving any
Assumed Liabilities. Without in any way limiting the Purchaser's
rights under this Agreement, in the event that the Sellers shall
pay, settle or offer to settle, or consent to any compromise or
admit liability with respect to any Assumed Liability in
violation of this Section 3.3, the Purchaser may, at its
option, return such liability to the Sellers.
<PAGE>
(b) Without limiting anything contained in Section 8.1 hereof, in
the event that PCN or the Purchaser, on the one hand, or any of the
Sellers, on the other hand, become aware of any claim by any
End User made with respect to any Retained Liability, each
party shall promptly notify the other party. PCN and the
Purchaser shall cooperate with the Sellers in any reasonable
manner (in each case consistent with PCN's business practices
with respect to End-Users and subject to PCN's available
resources) requested by the Sellers in connection with any
negotiations or proceedings involving any such claim.
Without limiting the foregoing, with respect to (A) any such
claim relating to (x) a breach or alleged breach occurring
before the Closing of any obligation of any of the Sellers
under an End User Agreement or (y) liabilities or obligations
in respect of any services performed or rendered (or
services which any of the Sellers agreed (or allegedly
agreed) to perform or rendered but which it failed (or
allegedly failed) to perform or render in a timely fashion) by
any one or more of the Sellers or any express or implied
warranty with respect thereto (each an "Asserted End User
Claim") or (B) any obligation to any End-User constituting a
Retained Liability to the extent such liability relates to an
End-User Agreement but is not included in the Deferred Revenue
Account ("Retainer Services"). PCN or the Purchaser, as the
case may be, shall, on behalf of the Sellers, provide such
services (including providing additional or alternate hardware
or software) to the End User asserting the Asserted End User
Claim or the End-User with respect to which the Retained
Services relate, in each case, as may be reasonably requested
by the Sellers (in each case consistent with PCN's customary
business practices with respect to End Users and subject to
PCN's available resources) in order to remedy and settle such
Asserted End User Claim ("Requested Remedial Services");
provided, however, that, without the prior consent of PCN,
neither PCN nor any of its Affiliates shall be required to
provide any End User with an alternate practice management
product. For any Requested Remedial Services, the Sellers
shall pay to PCN an amount equal to (A) all actual costs incurred
by any one or more of PCN and its Affiliates in providing the
such services (including, without limitation, (x) the cost
to PCN of any equipment, supplies or other items
(including the costs of the shipping and handling thereof)
provided by PCN to the End User in connection therewith (y)
travel costs incurred by PCN in connection therewith and (z) to
the extent PCN utilizes third party contractors to perform any
of the services, the amounts payable by PCN to third party
contractors for providing such services) and (B) the amount
reasonably necessary to reimburse PCN for the amount of
time devoted by PCN employees to performing such services, which
amount referred to in this clause (B) shall be calculated
at a rate equal to 70% of PCN's then published hourly rates for
software support and service, hardware support and service,
training, programming and the like (the amounts referred to in
clauses (A) and (B) above are referred collectively
hereinafter as the "Remedial Costs").
(c) In the event that, in the exercise of its
reasonable business judgement, PCN determines that certain
services (including providing additional or alternate hardware
or software) should be provided to an End User in order to
remedy or settle an Asserted End User Claim ("Suggested Remedial
Services"), PCN shall provide CTI with written notice thereof.
In the event that, within ten (10) business days following
receipt of such notice CTI has not responded to PCN's
suggestions contained therein, CTI shall be deemed to have
consented to PCN providing the End User in question with the
Suggested Remedial Services for which the Sellers shall pay to
PCN any amount equal to the Remedial Costs therefor.
<PAGE>
(d) Anything contained in this Section 3 to the contrary notwithstanding,
the Purchaser shall assume and take full responsibility for
performing and satisfying any Asserted End User Claim, and
shall not look to the Sellers for reimbursement of any
Remedial Costs incurred by PCN or the Purchaser in connection
therewith, so long as such Asserted End User Claim (x) is
asserted by the applicable End User on or after January 1,
1998, and (y) does not relate, in whole or in part, to any
Asserted End User Claim asserted prior to such date.
4. CLOSING
The closing of the transactions to be effected hereunder (the "Closing")
will be held at the offices of Prince, Yeates & Geldzahler, 175
East Fourth South, Salt Lake City, Utah 84111, on the date of
this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
CTI and each Subsidiary hereby jointly and severally represent and
warrant to and agree with PCN and the Purchaser as follows:
5.1. Existence and Authority. CTI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada and each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
state of incorporation listed next to each Subsidiary's name
on Schedule A hereto. CTI and each Subsidiary is authorized or
licensed to do business in each jurisdiction in which the
character and location of its assets or the nature of its
business makes such qualification necessary, except
to the extent that the failure to so qualify would not have a
material adverse effect on CTI, any one or more of the
Subsidiaries or the Business. CTI and each Subsidiary has all
requisite power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated
hereby and has all requisite power and authority, licenses,
permits and franchises to own or lease and operate its properties
and carry on its business as it is presently being conducted.
Since its formation, except as set forth on Schedule 5.1
hereto, the name of CTI has been "CUSA Technologies, Inc." and it
has neither used nor done business under any other name in
any jurisdiction. Except as set forth on Schedule 5.1, each of
the Subsidiaries is a wholly-owned subsidiary of CTI.
5.2. Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Ancillary Documents (as
hereinafter defined) by each of the Sellers, and the consummation
of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action.
This Agreement and the applicable Ancillary Documents
have been duly and validly executed and delivered by each
of the Sellers. This Agreement and the applicable Ancillary
Documents constitute valid and binding obligations of each of
the Sellers, each enforceable in accordance with its terms.
<PAGE>
5.3. Effect of Agreement, Etc. Except as set
forth on Schedule 5.3 hereto, the execution, delivery and
performance of this Agreement and the applicable Ancillary
Documents by each of the Sellers and consummation by each of the
Sellers of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice and the lapse
of time, or both: (a) violate any provision of law, statute,
rule, regulation or executive order to which any of the
Sellers, the Business or the Assets is subject; (b) violate
any judgment, order, writ or decree of any court to which any
of the Sellers, the Business or the Assets is subject; or (c)
result in the breach of or conflict with any material term,
covenant, condition or provision of, result in or permit any
other party to cause the modification or termination of,
constitute a default under, or result in the creation or
imposition of any lien, security interest, charge or encumbrance
upon any of the Assets pursuant to any partnership agreement,
corporate charter or by-laws, commitment, lease, mortgage,
contract or other agreement or instrument (including, without
limitation, any of the End-User Agreements) to which any of the
Sellers is a party or by which any of the Assets are bound or
affected or from which the Business derives benefit.
5.4. Restrictions; Burdensome Agreements. Except as set forth on
Schedule 5.4 hereto, no Seller is a party to any contract, commitment
or agreement, nor are any of the Sellers or any of the Assets
subject to, or bound by, any order, judgment, decree, law,
statute, ordi nance, rule, regulation or other restriction
of any kind or character, which: (a) would prevent any of the
Sellers from entering into this Agreement or from consummating
the transactions contemplated hereby; or (b) would materially
and adversely, or, to the Sellers' knowledge, in the
future may materially and adversely, affect the Business
or Assets.
5.5. Governmental and Other Consents. No consent, authorization or
approval of, or exemption by or filing with, any foreign or domestic
governmental, public or self-regulatory body or authority is
required in connection with the execution, delivery and
performance by any of the Sellers of this Agreement or the
applicable Ancillary Documents or the taking of any action
herein or therein contemplated.
5.6. Financial Statements. The Sellers have delivered to the Purchaser,
and included as Schedule 5.6 hereto is a true, copy of: (i) the
unaudited balance sheet of the Business dated as of March 31,
1996 and the related unaudited statement of operations of the
Business for the nine-month period ended March 31, 1996 (the
"Unaudited Financial Statement"); and (ii) monthly
statements of the Business' revenues for each of April and
May 1996. The Unaudited Financial Statements: (x) are in
accordance with the books and records of the Sellers, fairly
present the financial condition of the Business for the periods
indicated and were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
("GAAP"); and (y) will be consistent in all material
respects with the Audited Financial Statements delivered
to PCN pursuant to Section 7.2 hereof (subject to customary
audit adjustments).
<PAGE>
5.7. Absence of Certain Changes or Events. Except as set forth on
Schedule 5.7 hereto, since March 31, 1996 the Sellers have not:
(i) suffered any material adverse change in, or the
occurrence of any events which, individually or in the
aggregate, have had, or might reasonably be expected to have,
a material adverse effect on the Business' condition (financial
or otherwise), results of operations, properties or
business; (provided, however, that PCN and the Purchaser
acknowledge that the Business has been operating at a loss);
(ii) incurred damage to or destruction of any of the Assets
by casualty, whether or not covered by insurance, or
suffered or became subject to any pending or threatened
condemnation of property; (iii) incurred any material
obligations or liabilities (fixed or contingent) with
respect to the Business except (A) in the ordinary course of
business, none of which were entered into for an inadequate
consideration, (B) obligations and liabilities under the
Commitments (as hereinafter defined) to the extent required
thereby, and (C) obligations and liabilities under this
Agreement; (iv) made any change in the nature of the Business;
(vi) mortgaged, pledged, assigned, hypothecated or
subjected to lien or any other encumbrance any of the Assets;
(vii) sold, transferred or leased any of the Assets,
except in each case in the ordinary course of busi ness and
consistent with past practice; (viii) sold, assigned, trans
ferred, or granted any rights under or with respect to, any of
its licenses, agreements, patents, inventions, trademarks,
trade names, copy rights or formulae or with respect to
know-how or any other intangible asset in each case to the extent
related to the Business and, in each case, other than in the
ordinary course of business consistent with past practice;
(ix) amended or terminated any of its contracts, agreements,
leases or arrangements relating to the Business other than in
the ordinary course of business consistent with past practice;
(x) waived or released any other rights with respect to the
Business having a value in excess of $15,000 in the
aggregate; (xi) had work performed which could give rise
to mechanics liens with respect to any of the Assets which has
not been paid or which payment has not been provided for; or
(xii) entered into any other transaction with respect to the
Business not in the ordinary course of business.
5.8. Deferred Revenue Account. Set forth on Schedule
5.8(a) hereto is a true and correct schedule and calculation
of the amount of the Deferred Revenue Account as of the date
hereof (the "Closing Deferred Revenue Account"). Except as
described on Schedule 5.8(a), the only obligations of the
Sellers included in the calculation of the Deferred
Revenue Account are those related to the liabilities or
obligations of one or more of the Sellers to, from and after
the Closing Date, pursuant to the terms of the End- User
Agreements, provide maintenance and support to End-Users of
practice management software or hardware products provided by
any one or more of the Sellers to such End-Users in connection
with the Business. The Deferred Revenue Account has been
calculated in accordance with the procedures set forth on
Schedule 5.8(b) hereto.
<PAGE>
5.9. Accounts Receivable. Set forth on Schedule 5.9 hereto is a true,
correct and complete schedule (the "Account Receivable
Schedule") setting forth: (i) all of the Accounts Receivable
as of June 30, 1996; (ii) the aging thereof; and (iii) a
description of the reserve booked by the Sellers with
respect to the collections of such Accounts Receivable. The
Accounts Receivable listed on the Accounts Receivable Schedule
have arisen only from bona fide transactions in the ordinary
course of business, are properly recorded in the Sellers' books
and records. The Sellers have no knowledge and have no reason
to believe that, subject to the reserve reflected the Account
Receivable Schedule, any of the Accounts Receivable listed on
the Account Receivable Schedule are not collectable in the
ordinary course of business, consistent with the Sellers'
past collection practice.
5.10. Recent Payables. Attached hereto as Schedule
2.1(e)(ii), is a true, complete and correct description of each
Recent Payable. Each Recent Payable: (i) relates to
software or hardware purchased by one or more of the Sellers
from PCN or Versyss for use in the Business since May 31, 1996;
and (ii) in the ordinary course of the Business, the applicable
Seller has licensed or sold such software or hardware to an End-
User and has appropriately booked an Account Receivable
with respect to such license or sale.
5.11. Title to the Assets; Absence of Liens and Encumbrances, Etc.
Except as set forth on Schedule 5.11 hereto: (a) the Sellers have
good and valid title to, and own outright, the Assets (including,
without limitation, the Intellectual Property) owned by
each of them, respectively, free and clear of all mortgages,
claims, liens, charges, leases, subleases, encumbrances,
security interests, restrictions on use or transfer or other
defects of any nature, whether or not recorded; and (b) the
sale and delivery of the Assets pursuant hereto will vest in the
Purchaser good and valid title to the Assets free and clear of
all mortgages, claims, liens, charges, encumbrances, leases,
subleases, security interests, restrictions on use or transfer,
or other defects of any nature. Except as set forth on Schedule
5.11 hereto, all of the leases and other agreements or
instruments included as part of the Assets are assignable to the
Purchaser without the consent of any third party and shall be
assigned by the Sellers to the Purchaser at Closing.
5.12. Contracts.
5.12.1. Except as set forth on Schedule 5.12 hereto, no Seller,
with respect to the Business, is a party to, and none of the
Assets are bound by, any:
(a) lease agreement (whether as lessor or lessee) relating to real or
personal property requiring payments of more than $25,000 on
an annualized basis;
(b) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) relating to trademarks, trade
names, patents, or copyrights (or applications therefor),
software, unpatented designs or processes, formulae, know-how or
technical assistance, or other proprietary rights, including,
without limitation, the Intellectual Property (other
than standard licenses of the Business's software products
entered into in the ordinary course of business);
(c) employment, consulting agreement, severance agreements,
other agreement regarding employees, directors or agents,
including, without limitation, any (x) agreement with any
officer or other employee of any one or more of the Sellers, the
benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a
transaction involving the Sellers of the nature
contemplated by this Agreement or (y) agreement or plan, any of
the benefits of or rights under which will be increased, or the
vesting or payment of the benefits of or rights under
which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, in each case
other than agreements entered into at the request of PCN;
<PAGE>
(d) non-competition, non-disclosure, secrecy or confidentiality
agreement or similar agreement, including, without limitation,
any such agreement with any employee of any one or more of
the Sellers;
(e) agreement or other arrangement pursuant to which any of the Sellers
act as a remarketer or reseller of goods or services for another
person or entity;
(f) agreement with any value-added reseller, business partner, distributor,
dealer, sales agent or representative with respect to
the sale or licensing of the Business' products or services;
(g) agreement with any manufacturer, supplier or customer with respect to
discounts or allowances or extended payment terms either related to the
Assumed Liabilities or more than $20,000 on an annualized basis;
(h) any original equipment manufacture agreement;
(i) joint venture or partnership agreement with any other person;
(j) agreement for the borrowing or lending of money;
(k) agreement guaranteeing, indemnifying or otherwise becoming liable for
the obligations or liabilities of another related to the
Assumed Liabilities or for an amount of $20,000 or more;
(l) agreement with any bank, financing company or similar organization which
acquires accounts receivable or contracts for the sale of
merchandise on credit;
(m) agreement granting to any person a lien, security interest or mortgage
on any asset of any one or more of the Sellers, including, without
limitation, any factoring agreement or agreement for the
assignment of accounts receivable or inventory;
(n) agreement for the construction or modification of any building or
structure or for the incurrence of any other capital
expenditures in excess of $30,000;
(o) advertising agreement requiring payments of $30,000 or
more on an annualized basis;
(p) agreement which restricts any one or more of the Sellers from conducting
the Business anywhere in the world;
(q) long-term sale or private brand agreement;
(r) claims clearing agreement, electronic data interchange agreement,
clinical laboratory link or other agreement which permits or
relates to the linkage of any of the Business's software products
with any other software product or service;
(s) source-code escrow agreements;
(t) agreement regarding any acquisition or disposition of any assets used
in the Business by or from any one or more of the Sellers other
than in the ordinary course of business containing any
currently operative provisions;
(u) currently operative agreement regarding the settlement of any
litigation; or
(v) other material agreement affecting any one or more of the Sellers or
their assets entered into out of the ordinary course of business
which are for an amount in excess of $30,000 on an
annualized basis or which have a remaining term of one year or
more.
<PAGE>
Correct and complete copies of all such agreements, license, leases,
contracts, arrangements and other instruments and written
amendments thereto (or, where they are oral, true and complete
written summaries thereof) required to be shown on Schedule
5.12 (together with each End-User Agreement, collectively
referred to herein as the "Commitments"), have been
delivered to the Purchaser on or prior to the date hereof.
5.12.2. Except as set forth on Schedule 5.12.2 hereto, each of the
Commitments is valid, in full force and effect and enforceable by the
Seller which is a party thereto in accordance with its terms.
5.12.3. Except as set forth on Schedule 5.12.3, the Sellers have fulfilled,
or have taken all action reasonably necessary to have been taken to
date to enable each of them to fulfill when due, all of their
respective obligations under the Commitments (including, without
limitations, the End-User Agreements). Except as
indicated on Schedule 5.12.3, there has not occurred any
default by any of the Sellers or any event which, with the giving
of notice or the lapse of time or both, and/or the election of
any person other than the Sellers will become a default,
nor, to the knowledge of the Sellers, has there occurred any
default by others or any event which, with the lapse of time
and/or the election of any of the Sellers, will become a
default under any of the Commitments (including, without
limitations, the End-User Agreements). Neither the
Sellers (or any one of them) nor any other party is in arrears in
respect of the performance or satisfaction of any material
term or condition to be performed or satisfied by it
under any of the Commitments, and, to the best knowledge of
the Sellers, no waiver or indulgence has been granted by
any of the parties thereto.
5.12.4. Except as set forth on Schedule 5.12.4, each of the Commitments
included in the Assets is assignable by the Sellers to the Purchaser
without the consent of the other parties thereto.
5.12.5. Attached hereto as Schedule 5.12.5(a) are true and
correct copies of the Sellers' standard forms of End-User
Agreements (the "Standard Agreements"). Except as
provided in the Standard Agreements or as described on
Schedule 5.12.5(b) hereto, none of the End- User Agreements
contain any term or provision which: (i) restricts the Sellers
or the Purchaser from assigning its rights and obligations under
such agreements; (ii) requires any of the Sellers or the
Purchaser to deliver the source-code for any software product
with any third party (other than source-code escrow
arrangements); (iii) requires any of the Sellers or the
Purchaser to provide maintenance, support or other
services to any End-User free of charge for any period of time
(other than for a period not to exceed 180 days following the
installation of a system); (iv) requires any of the Sellers or
the Purchaser to provide services for more than a one
year period (other than (x) those agreements included in the
Due Diligence Binders (as hereinafter defined), (y)
pursuant to the Sellers' "Technology Leap Lease Program"
or (z) pursuant to an aggregate of 10 additional agreements);
(v) guarantees or provides a warranty with respect to the
delivery of any service (other than as required under
applicable law) or as required under standard service
agreements (except for the agreements set forth in the Due
Diligence Binders or to the extent that such guarantees and
warranties will not result in costs to PCN or the Purchaser of
$50,000 or more in the aggregate); (vi) provides for a
guaranty by any of the Sellers of any obligation of any End-
User to a third party (including without limitation, under any
equipment or system lease); (vii) except for agreements set
forth in the Due Diligence Binders, requires any Seller or
the Purchaser to deliver any materially modification to or
materially enhanced functionality for any software
product (other than updates and bug-fixes; (viii) requires any
of the Sellers or the Purchaser to deliver a new or next
generation product (other than updates); (ix) requires any of
the Sellers or the Purchaser to provide future discounts or
fixed rates on future hardware and/or software purchases by the
End- User (except for the agreements included in the Due
Diligence Binders or to the extent such discounts or rates
will not result in a costs or lost profits to PCN or the
Purchaser of $50,000 or more in the aggregate); and (x) prevents
or restricts any Seller or the Purchaser from ceasing to
provide support for any product after the end of the then
current term of the End-User Agreement.
<PAGE>
As used herein, the "Due Diligence Binders" shall mean
the velo- bound binders delivered by the Seller to PCN
prior to the Closing containing copies of relevant End-Use
Agreements and related documents, each of which binders
has been initialed by PCN and CTI at the Closing as being the
binders in question.
5.12.6. The End-User Agreements listed on Schedule 3.1(i) hereto
constitute all of the End-User Agreements to which any of the
Sellers are a party.
5.13. Patents, Trademarks, Copyrights, Etc. Schedule 1.1(d) hereto
sets forth a true and correct description of all of the
Intellectual Property used in the Business (other than off-
the-shelf software products that can be purchased for $10,000 or
less). Except as set forth on Schedule 5.13, the Sellers have
sole title to and ownership of or full, exclusive right to use,
for the life of the proprietary right, all Intellectual
Property. The use of the Intellectual Property by the
Sellers in the operation of the Business does not violate or
infringe on the rights of any other person. The Sellers have
not received any notice of or alleging any violation of the
asserted rights of others with respect to the Intellectual
Property. The Sellers are not aware of any third party that is
infringing or violating any of the rights of the Sellers with
respect to the Intellectual Property.
5.14. Real Estate Leases. (a) The leasehold estates listed in
Schedule 5.14(a) are all of the leasehold estates under which any
of the Sellers is a lessee or sublessee of any real property or interest
therein used in connection with the operation of the Business or
where any of the Assets are located (collectively, the "Real
Property Leases"). Set forth on Schedule 5.14(a) is a true and
correct summary of: (i) the location of the premises demised
under the applicable Real Property Lease; (ii) the square
footage of each such premises; (iii) the term of the Real
Property Lease; and (iv) the rent and other amounts payable
by the applicable Seller under the Real Property Lease.
(b) No proceeding is pending or, to the best knowledge of the Sellers,
threatened, for the taking or condemnation of all or any
portion of the premises demised under the Virginia Lease (the
"Virginia Leasehold"). Except as disclosed on Schedule 5.14
(b), Benchmark holds valid title to the Virginia Leasehold and
the Virginia Lease free and clear of any encroachment,
sublease, right of occupancy or use of any third party,
mortgage, pledge, lien, security interest, encumbrance, claim,
charge, covenant, conditional limitation or other restriction
of any kind, except for: (i) real property taxes not yet due
and payable or for which adequate provision has been
made; (ii) landlord's liens, encumbrances, and other
restrictions set forth in the Real Property Leases or related
documents or imposed by applicable law; (iii) easements,
rights-of-way, restrictions, minor defects or irregularities
in title, and other encumbrances not interfering in any material
respect with the ordinary conduct of the business of
Benchmark of Virginia. Except as set forth on Schedule
5.14(b), there is no brokerage commission or finder's fee due
from any of the Sellers unpaid with regard to the Virginia
Lease, or which will become due any time in the future with
regard to the Virginia Lease. All amounts due and payable by
any of the Sellers under or with respect to the Virginia Lease
through the Closing Date, including, without limitation,
all rent payable thereunder, has been paid.
(c) Except as set forth in Schedule 5.14(c), to the knowledge of the
Sellers, there are no: (i) unrecorded agreements; (ii) rights of
occupancy; or (iii) mortgages, pledges, liens, security
interests, encumbrances, claims, charges which materially
encumber the Virginia Leasehold or the Virginia Lease.
(d) Except as set forth on Schedule 5.14(d), to the best of Sellers'
knowledge, there are no easements, rights of way or
licenses necessary for the operations of the Virginia
Leasehold which are not in full force and effect.
(e) Except as set forth on Schedule 5.14(e), the Virginia Leasehold
and the building systems such as heating, plumbing, ventilation, air
conditioning and electric used in the operation of the Virginia Leasehold
are adequate in all material respects for the current operations of the
Business and such building systems now being used by any of
the Sellers in their business and operations, whether leased
or owned, are in working order, repair and operating condition
(normal wear and tear excepted), and are, to the knowledge of the
Sellers, without any material structural defects.
(f) None of the Sellers is in material or monetary default or has received
any notice of any material or monetary default, or failed to
take any action that could result in a material or monetary
default, under the Virginia Lease. To the Sellers'
knowledge, no other party to any such lease is in material or
monetary default thereunder.
<PAGE>
5.15. Compliance With Laws. (a) Except as disclosed
in Schedule 5.15 hereto, each of the Sellers has complied and is
in compliance with all applicable laws and rules and
regulations of foreign, federal, state and local governments and
all agencies thereof and other regulatory bodies which affect
the Business or the Assets the failure to comply with which has
or would result in liability to the Sellers of $2,500 or more
with respect to each such failure (a "Section 5.15(a)
Occurrence"), and there are no pending claims which have been
filed against the Sellers or any Affiliate (relating to the
operation of the Business or the ownership of the Assets)
alleging a violation of any such law or regulation. No notice
has been received by any of the Sellers with respect to any such
violation of any such legal requirements.
(b) Without limiting Section 5.15(a) above, the Virginia Leasehold
has not been used at any time during which any of the Sellers or
their immediate predecessors (the "Predecessors") has been in
possession thereof: (i) as a site for the storage or disposal
of waste (including, without limitation, as that term is used
in the Resource Conservation Recovery Act (the "Conservation
Act") (42 U.S.C. 901 et seq.)), or (ii) so as to cause a
violation of or give rise to a removal or restoration
obligation or liability for the costs of removal or restoration
by others, or liability for damages to others, under any
environmental statute, ordinance, order decree, or
under the environmental common law of any state, federal,
municipal or other governmental entity, body or agency having
jurisdiction over the Virginia Leasehold, including, without
limitation, the Comprehensive Environmental Response
Compensation Liability Act, as amended ("CERCLA") (42 U.S.C.
9601 et seq.) or any similar environmental law, rule,
regulation, order, judgment or decree, nor has any such
violation, obligation or liability referred to above in
this clause (ii) been created by the removal of any waste from
the Virginia Leasehold, the disposition of such removed
waste or the discontinuance of operations of any business
conducted at the Virginia Leasehold. With respect to the
Virginia Leasehold, the Sellers and the Predecessors have
complied with, and have not violated any, environmental
laws, ordinances, orders, decrees, or laws of any state,
federal, municipal or other governmental entity, body or
agency in connection with the acquisition, storage,
transportation or disposal of any goods or materials with
respect to the Virginia Leasehold the non-compliance
with which or the violation of which has had or would result in
liability to the Sellers (each a "Section 5.15(b) Occurrence") or
$2,500 or more with respect to each Section 5.15(b) Occurrence.
(c) All Section 5.15(a) Occurrences and Section 5.15(b) Occurrence,
whether or not any such occurrence, individually,
results in liability to the Sellers of $2,500 or less,
collectively, will not result in liability until such time as the
amount of all Section 5.15(a) Occurrences and Section 5.15(b)
Occurrences shall exceed $20,000 in the aggregate.
5.16. Litigation. Except as set forth on Schedule
5.16 hereto, there are no claims, actions, suits,
proceedings, arbitrations, investigations or hearings or
notices of hearing pending or, to the best knowledge of any of
the Sellers, threatened, before any court or govern mental or
administrative authority or private arbitration tribunal
against or relating to either: (i) the transactions
contemplated hereby; or (ii) any of the Sellers with respect to
the Business or any of the Assets (including, without
limitation, any End-User Agreement), nor, to the best
knowledge of the Sellers, which are reasonably likely to give
rise to any such claim, action, suit, proceeding, arbitration,
investigation or hearing. Except as set forth on Schedule
5.16 hereto, there is no continuing order, injunction,
suspension, exclusion or decree of any court, arbitrator or
governmental or administrative authority (domestic or foreign)
which relates to the operation of the Business or the ownership
or use of the Assets.
<PAGE>
5.17. Customers and Suppliers. Attached hereto as
Schedule 5.17(a) hereto, is a correct and complete list of the
name and locations of each of the customers and End-Users of
the products or services of the Business (the "Customers").
Schedule 5.17(b) hereto contains a correct and complete list of
the names and locations of each of the suppliers of any of the
Sellers who supplied goods and/or services (other than
utilities) to any of the Sellers with respect to the Business in
an aggregate amount of $10,000 or more during the twelve month
period immediately preceding the Closing Date and the amount and
type of supplies furnished by such suppliers during such
period. Except as set forth on Schedule 5.17(c) the Sellers
have not received any notifications (whether written
or verbal) that any of such Customers or suppliers will or
may cease to continue such relationship with the applicable
Sellers, or will or may substantially reduce the extent
of such relationship, at any time prior to or after the
Closing Date. The Sellers have no knowledge of any other
material modification or change in the Business' business
relationship with such Customers or suppliers. Set forth on
Schedule 5.17(d) is a true and correct description of: (i) all
unresolved written complaints made by any Customer with
respect to any obligations of any Seller arising under any
End-User Agreement; and (ii) to the best knowledge of the
Sellers, other material, non-written complaints made by any
customer with respect to any obligations of any Seller
arising under any End-User Agreement.
5.18. Labor Matters. (a) Schedule 5.18(a) hereto contains a true and
correct schedule of: (i) the names, job descriptions, benefits (and a
description thereof) and current annual salary rates of all
present officers, employees and agents of any of the Sellers
with respect to the Business; (ii) the amount of severance
payable to each such employee (assuming for such purpose that
the Closing Date was the date on which such person's employment
with the applicable Seller terminated) and a description of
the manner in which such amount was calculated; (iii) the dollar
value of all accrued vacation and sick days of each such
employee and a description of the manner in which such amount
was calculated; and (iv) all written and oral employment or
compensation agreements with each employee of any of the
Sellers with respect to the Business. The employees listed
on Schedule 5.18(a) constitute all of the employees of any of
the Sellers who principally perform services with respect to
the Business.
(b) No employee of any of the Sellers is represented by any union or
collective bargaining agent, and, to the best knowledge of
the Sellers, there has been no union organizational efforts in
respect of the employees of any of the Sellers. There are no
pending or, to the best knowledge of the Sellers,
threatened lawsuits, administrative proceedings,
reviews or investigations by any person or governmental authority
against the Sellers with respect to any violation of any
applicable federal, state or local laws, rules or
regulations: (i) prohibiting discrimination on any basis,
including, without limitation, on the basis of race, color,
religion, sex, disability, national origin, or age; or (ii)
relating to employment or labor, including, without limitation,
those related to immigration, wages or hours.
(c) On or prior to the Closing Date, the Sellers have provided to each
of the employees listed on Schedule 5.18(c) hereto a letter in the
form attached hereto as part of said Schedule 5.18(c).
5.19. Books and Records. The books of account and other financial and
corporate records of the Sellers with respect to the Business are
in all material respects complete, correct and up to date
and are maintained in accordance with good business practices.
<PAGE>
5.20. Powers of Attorney. Except as set forth on Schedule 5.20 hereto, no
person has any power of attorney to act on behalf of any of the
Sellers with respect to the Business or the Assets other
than such powers so to act as normally pertain to the officers
of the Sellers.
5.21. Taxes. Except as set forth on Schedule 5.21 hereto, each of
the Sellers have filed all tax and information returns and reports
relating to the Business and the Assets required to be filed, and all
taxes, fees, assessments or other governmental charges,
withholdings of any nature, including franchise taxes, use
and occupancy taxes and sales taxes, have been paid (except
those being contested in good faith), or adequate provision
for the payment thereof has been made, in each case as of the
date hereof, in all taxing jurisdictions in which the
conduct of the Business or the ownership of the Assets subjects
the Sellers to any taxes, fees, assessments or other
governmental charges.
5.22. Entire Business. No portion of the Business is
conducted by any person or entity other than the Sellers.
Except as set forth on Schedule 5.22 hereto, the Assets
constitute all of the assets necessary to, immediately
following the Closing, operate the Business in a manner
consistent with past practice, assuming for such purposes only,
that, immediately following the Closing, the Purchaser, itself,
was to: (i) employ all of the employees (including management
personnel) currently employed by the Sellers immediately prior to
the Closing; and (ii) assume all liabilities with respect to the
Facilities (as defined in Section 7.10 hereto) and all
equipment leases used in such Facilities to the same extent
currently used by the Sellers in the operation of the Business.
5.23. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangement made by or on behalf of the Sellers.
5.24. Inventory and Equipment. Schedule 5.24(a) hereto sets forth a
true and correct description of: (i) all items of Inventory and
Equipment on June 28, 1996; (ii) the quantity of each such item held
by the Sellers on June 28, 1996; and (iii) the book value
categorized by location.
5.25. Disclosure. No representation or warranty of the Sellers contained
in this Agreement or in any Ancillary Document, when taken as a whole
with all such representations and warranties by the Sellers
herein or therein, contains any untrue statement of a material
fact or omits to state a material fact necessary to make
the statements made herein and therein, in light of the
circumstances in which they were made, not misleading.
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
PCN and the Purchaser hereby, jointly and severally,
represent and warrant to and agrees with the Sellers as
follows:
6.1. Organization, Etc. PCN is a corporation duly organized, validly
existing and in good standing under the laws of the state of New Jersey.
The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each
of PCN and the Purchaser has all requisite power and authority to
execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby.
6.2. Authorization of Agreement. The execution, delivery and performance
of this Agreement and the Ancillary Documents by PCN and the
Purchaser and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by
all necessary corporate action, including approval by each of
PCN's and the Purchaser's Boards of Directors. This Agreement
and the applicable Ancillary Documents have been duly and
validly executed and delivered by PCN and the Purchaser. This
Agreement and the applicable Ancillary Documents constitute
valid and binding obligations of PCN and the Purchaser, each
enforceable in accordance with its terms.
6.3. Effect of Agreement, Etc. The execution, delivery and performance
of this Agreement by PCN and the Purchaser and consummation by
PCN and the Purchaser of the transactions contemplated
hereby, will not, with or without the giving of notice and
the lapse of time, or both: (a) violate any provision of law,
statute, rule, regulation or executive order to which PCN or
the Purchaser is subject; (b) violate any judgment, order,
writ or decree of any court to which PCN or the Purchaser is
subject; (c) result in the breach or conflict with any
term, covenant, condition or provision, result in or permit
any other party to cause the modifications or terminations
of, constitute a default under, or result in the creation or
imposition of any lien, security interest, charge or encumbrance
upon any of PCN's or the Purchaser's assets pursuant to
any partnership agreement, corporate charter or by-laws, or
any commitments, contract or other agreement or instrument to
which PCN or the Purchaser is bound.
6.4. Governmental and Other Consents. No consent, authorization or
approval of, or exemption by or filing with, any governmental, public
or self-regulatory body or authority is required in connection with the
execution, delivery and performance by PCN or the Purchaser of this
Agreement or any of the instruments or agreements herein
referred to, or the taking of any action herein contemplated.
6.5. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon any
arrangement made by and on behalf of PCN or the Purchaser.
6.6. Disclosure. No representation or warranty of PCN or the Purchaser
contained in this Agreement or in any Ancillary Document, when taken
as a whole with all such representations and warranties
of PCN or the Purchaser herein or therein, contains any untrue
statement of material fact or omits to state a material fact
necessary to make the statement made herein and therein, in
light of the circumstances in which they were made, not
misleading.
<PAGE>
7. POST-CLOSING COVENANTS
7.1. Further Assurances. After the Closing, at the request of PCN
or the Purchaser, the Sellers shall execute, acknowledge and deliver
to PCN and/or the Purchaser, without further consideration,
all such further assignments, conveyances, endorsements,
deeds, powers of attorney, consents and other documents
(together with the instruments referred to in Section 1.3,
referred to herein collectively as the "Ancillary Documents")
and take such other action as PCN and/or the Purchaser may
reasonably request (a) to transfer to and vest in the Pur
chaser, and protect the Purchaser's right, title and
interest in, all of the Assets and the Sellers' rights with
respect to the Assumed Liabilities and (b) otherwise to
consummate the transactions contemplated by this Agreement.
7.2. Audited Financial Statements. The Sellers agree to use their best
efforts to cause to be delivered to PCN as soon as possible
following the Closing Date, a copy of the balance sheet of the
Business as of March 31, 1996, and the related statement of
operations for the nine month period ended March 31, 1996,
together with an audit report thereon by KPMG Peat Marwick LLC
(the "Auditors"), to the Sellers' independent auditors
(collectively, the "Audited Financial Statements").
7.3. Accounts Receivable Report; Deferred Revenue Report. (a) Promptly
following the Closing, the Sellers shall use their best
efforts to cause and permit the Auditors to, as promptly as
practicably following the Closing, conduct a review of the
Accounts Receivable as of the Closing Date, including, without
limitation, those Accounts Receivable shown on the Accounts
Receivable Schedule, utilizing the procedures described on
Schedule 7.3(a)(i) hereto and such other procedures reasonably
acceptable to the PCN and CTI, in order to determine, among
other things, whether or not such Accounts Receivable arose
in the ordinary course of business, are properly recorded
in the Sellers' books and records in accordance with GAAP,
and, in the ordinary course of business, subject to an
applicable reserve, should be collectable ("Good
Receivables"). Following completion of such review, the
Auditors shall provide to the Sellers and to PCN (together
with the Deferred Revenue Report (as defined in Section 7.3(b)
below)) a report regarding the results of their review (the
"Accounts Receivable Report") and the Sellers shall provide
PCN with an opportunity to review and discuss with the
Auditors the results contained in such report. The conclusions
rendered by the Auditors in the Accounts Receivable Report shall
be final and binding on the parties.
(b) Promptly following the Closing, the Sellers shall use their best
efforts to cause and permit the Auditors to, as promptly as
practicable following the Closing, conduct a review of the
Deferred Revenue Account in order to verify the amount of
the Deferred Revenue Account on the Closing Date using the
procedures set forth on Schedule 7.3(b) hereto. Following
completion of such review, the Auditors shall provide to the
Sellers and to PCN (together with the Account Receivable
Report) a report of the results of such verification (the
"Deferred Revenue Report") and the Sellers shall provide PCN
with an opportunity to review and discuss with the Auditors
the results contained in such report.
7.4. Non-Competition; Non-Disclosure.
7.4.1. As a significant inducement to PCN and the Purchaser to enter
into and perform its obligations under this Agreement, the
Sellers, jointly and severally, agree that for a period of five
(5) years from and after the Closing Date, none of the
Sellers nor any of their respective Affiliates shall,
directly or indirectly (including, without limitation,
by selling, licensing or providing any product to any
third party), either for itself or any other person, firm,
partnership, corporation or other business venture: (a)
own, manage, operate, control, participate in, permit its name
to be used by, consult with, be employed by, render services for
or otherwise assist in any manner any entity to the extent
that it is engaged in, the Business or in the Practice
Management Software Business (as hereinafter defined); or (b)
sell, license or otherwise provide any product used in or
service provided by the CarePoint Business, or other
medical or clinical patient records products, as servicer
(collectively with CarePoint products or services, "Medical
Records Products") to any End-Users; provided, however, that
nothing contained in this Section 7.4.1 will limit or
restrict any of the Sellers from: (i) providing statement
processing services ("Processing Services") to the End-Users
listed on Schedule 7.4(a) hereto (the "Processing End-Users");
(ii) providing maintenance and support services for CarePoint
products ("CarePoint Services") to the End-Users listed on
Schedule 7.4(b) hereto ("CarePoint End-Users"); (iii)
providing maintenance and support services for Lotus Notes
("Lotus Notes Services") to the End-Users listed on Schedule
7.4(c) hereto (the "Lotus Notes End-Users"); and (v) entering
into any reseller or distribution arrangement or any
partnership, joint venture or similar arrangement with any
third party so long as such arrangement does not relate to
privileges or services which are competitive with the Business or
the Practice Management Business. Nothing contained in
this Section 7.4 shall prohibit any of the Sellers or their
respective Affiliates from being a passive owner of not more than
5% of the equity or debt securities of any such firm,
partnership, corporation or other venture, so long as such
Sellers or Affiliates, as the case may be, have no active
participation in the business of such entity.
<PAGE>
As used in this Section 7.4, "Practice Management Software Business"
means: (i) the business of providing Medical Providers,
directly or through vendors, MSO's or service bureaus, with
other management systems designed to, among other things,
computerize patient registration and to generate patient billing,
patient scheduling, insurance claims, managed care risk
management assessments, billing and other financial and clinical
reports; (ii) the business of providing Medical Providers with
claims clearing, billing, statement processing and similar
services; and (iii) the Commercial Business.
7.4.2. As a further inducement to the Purchaser to enter into and
perform its obligations under this Agreement, the Sellers,
jointly and severally, agree that, for a period of two (2)
years from and after the Closing Date, none of the Sellers nor
any of their respective Affiliates shall, directly or
indirectly, (including, without limitation, by selling,
licensing or providing any product to any third party)
either for itself or any other person, firm, partnership,
corporation or other business venture, sell, license or
otherwise provide any Medical Records product to any current
end-user or other customer of PCN or any of its Affiliates
(including without limitation, for purposes of this Section
7.4.2, Wismer-Martin, Inc.), other than in connection with
providing Processing Services to the Processing End-Users,
providing CarePoint Services to CarePoint End-Users or providing
Lotus Notes Services to Lotus Notes End-Users. Promptly
following the Closing, PCN shall provide to CTI, on behalf of all
of the Sellers, a list of all practice management software
products currently sold, licensed and/or supported by PCN
or any of its Affiliates, which are published by any one or more
of PCN and its Affiliates or otherwise sold, licensed or
supplied by one or more of PCN, its Affiliates and its
independent resellers on an exclusive basis (the "Designated
PCN Products"). Upon contacting any potential customer or end-
user with respect to providing any Medical Records product
(which contact shall not constitute a breach of this
Section 7.4.2) the Sellers shall determine which practice
management software product is used by that potential customer
or end-user, and in the event that such product is a
Designated PCN Product, the date on which such potential customer
or end-user acquired such product. In the event that the
practice management product so used is a Designated PCN Product
acquired by the potential end-user or customer on or prior to
the Closing Date the applicable Seller shall cease all efforts
to sell, license or otherwise provide any Medical Records
products to such potential customer or end-user.
Notwithstanding the foregoing, the restrictions contained in
this Section 7.4.2 shall not apply to the sale, licensing or
provision of any Medical Records product by the Sellers to any
managed care organization merely because a physician associated
with such managed care organization uses a Designated
PCN Product so long as such managed care organization (x) is
not itself the user of a Designated PCN Product and (y)
does not exclusively require its associated physicians to use or,
upon the purchase of a new practice management system,
purchase or license Designated PCN Products.
The provisions of Section 7.4.1(b) and Section 7.4.2, as they relate to the
CarePoint product, shall apply to any person or entity which
acquires all or any portion of the CarePoint Business from the
Sellers.
7.4.3. The Sellers, jointly and severally, agree that for a period
of five (5) years from and after the Closing Date, none of the
Sellers nor any of their respective Affiliates will,
directly or indirectly (including, without limitation,
by selling, licensing or providing any product to any
third party), individually or on behalf of other persons,
endeavor to solicit the business or sell, license or provide any
products or services to any of the End-Users, other than
providing Processing Services to Processing End-Users, CarePoint
Services to CarePoint End-Users or Lotus Notes Services to Lotus
Notes End-Users; provided, however, that the restrictions
contained in this Section 7.4.3 shall not apply to (x) general
advertisements not specifically directed to End-Users or to the
users of the practice management software products used by them
or (y) the licensing or sale of software products done over the
Internet which are not directed to the End-Users or to any
particular class of users of which the End-Users constitute a
significant part.
<PAGE>
7.4.4. The Sellers, jointly and severally, agree that all information
pertaining to the Business and the Assets and to the prior,
current or contemplated operation or use thereof
(excluding (i) publicly available information (in
substantially the form in which it is publicly available) unless
such information is publicly available by reason of
unauthorized disclosure and (ii) information of a general nature
not pertaining exclusively to the Business or the Assets which
is generally available) are valuable and confidential assets
of the Business. Such information shall include,
without limitation, information relating to the Intellectual
Property, trade secrets, customer lists, vendor lists,
bidding procedures, financing techniques and services and
financial information concerning the Business and its customers.
The Sellers agree that, from and after the Closing Date, neither
the Sellers, any Affiliate of the Sellers or any current or
officer, director, of any of them, will disclose or use, and
the Sellers shall use their best efforts to prevent any employee,
agent, former officer or director from disclosing, any
such information for other than the Purchaser's business.
7.4.5. The parties hereto acknowledge that it is impossible to
measure in money the damages that will accrue to PCN and/or the
Purchaser in the event that any of the Sellers or their
Affiliates breach any of the covenants in Section 7.4.1,
7.4.2, 7.4.3 or 7.4.4 and, if PCN or the Purchaser shall
institute any action or proceeding to enforce those
covenants, the Sellers hereby waive and agree not to assert
the claim or defense that PCN or the Purchaser has an adequate
remedy at law or for damages.
The foregoing shall not prejudice PCN's right to seek
money damages from any one or more of the Sellers with respect
to any such breach.
7.4.6. If, at the time of enforcement of this Section 7.4, a court
shall hold that the duration, scope or area restriction or any other
provision hereof is unreasonable under circumstances now or then
existing, the parties hereto agree that the maximum duration,
scope or area reasonable under the circumstances shall be
substituted for the stated duration, scope or area.
7.4.7 PCN and the Purchaser hereby grant to CTI a royalty free,
non-exclusive, non-transferable license to use the "Mends" software product
solely for the purpose of providing interfaces between the
CarePoint Product and the Mends product to CarePoint End-Users
and to provide maintenance and support to the CarePoint End-
Users in connection therewith. The use by CTI of the license
granted by PCN is this Section 7.4.7 in accordance with the
provisions of this Section 7.4.7 shall not constitute a breach by
CTI of the provisions of this Section 7.4.
7.5. Enforcement of Rights. Without in any way limiting anything
contained in Section 7.4, the Sellers agree to enforce, and to take all
actions reasonably necessary to enforce (including, without
limitation, instituting legal proceedings against any
breaching party), all provisions of any Confidentiality Agreement
between any one or more of the Sellers and any of their
current, former or future employees, agents or consultants
with respect to any Confidential Information, to the fullest
extent available under applicable law. Notwithstanding
the foregoing, in the event that PCN or the Purchaser reasonably
and in good faith believes that any current, former or future
employee, agent or consultant of any one or more of the Sellers
have breached any provision of any Confidentiality Agreement
with respect to any Confidential Information, PCN or the
Purchaser may so notify CTI and request that the Sellers take
all actions reasonably available to the Sellers to enforce the
Sellers' rights with respect to such breach; provided, however,
that in the event that, within thirty (30) days following
receipt by CTI of such notice, such breach has not been
remedied and the Sellers have not instituted legal proceedings
against the breaching party with respect to such breach, the
Sellers shall be deemed to have assigned to PCN and the
Purchaser all of the Sellers' rights under any Confidentiality
Agreement as such agreement relates to Confidential
Information and PCN and/or the Purchaser may, in the
Purchaser's name, institute and prosecute any and all claims
under such Confidentiality Agreement with respect to any
such breach, to the fullest extent available under
applicable law, which action by PCN and/or the Purchaser shall
in no way be deemed to limit, restrict or prejudice any right
PCN and/or the Purchaser may have against the Sellers
pursuant to Section 7.4 hereof. In the event PCN and/or the
Purchaser prevails in any lawsuit brought by PCN and/or
the Purchaser in connection with any such breach, the Sellers
shall reimburse PCN and/or the Purchaser for all expenses
(including, without limitation, reasonable fees and
disbursements of counsel) incurred by the Purchaser in
connection with such lawsuit.
<PAGE>
7.6. Employee Matters. (a) The Sellers agree that following the
Closing, PCN or the Purchaser may offer employment to the employees
listed on Schedule 5.18(a) hereto (the "Designated
Employees").
(b) From and after the Closing, to the extent reasonably requested by
PCN or the Purchaser, the Sellers shall use their best efforts to assist
PCN and/or the Purchaser in securing the employment any one
or more Designated Employees identified by PCN in its sole
discretion.
(c) PCN and the Purchaser agree that, in the event that, within 90 days
following the Closing Date, either PCN or the Purchaser hire
any Designated Employee who (x) did not receive or did not
accept an offer of employment from PCN or the Purchaser
immediately following the Closing and (y) within such 90
day period, was severed by the Sellers, PCN and the Purchaser
shall, with respect to each such employee, pay to CTI an amount
equal to the actual, documented amount paid by any one or more
of the Sellers to such employee as severance and with respect to
accrued and unused vacation and sick-days at the time such
employee's employment with Sellers was terminated
(collectively, a "CTI Severance Payment"), provided, however,
that: (i) the amount payable by PCN and the Purchaser under this
Section 7.6(c) with respect to any Designated Employee shall
not exceed the amount of severance and accrued vacation
and sick days shown with respect to such Designated Employee on
Schedule 5.18(a); and (ii) neither PCN nor the Purchaser
shall have any obligation under this Section 7.6(c) with respect
to (x) any amount paid by any Seller to any Designated
Employee prior to the end of the fifth business day following the
Closing Date or (y) arising under, or required by, any
employment agreement between any Seller and any Designated
Employee.
7.7. Software/Hardware Purchases. (a) The Sellers hereby, jointly and
severally, agree to, for a period of five (5) years following the Closing
Date (the "Purchase Period"), purchase exclusively from PCN or
any one or more Affiliates of PCN designated by PCN, all
hardware and software products ("IBM Products") offered for
general distribution by International Business Machines
Corp. ("IBM") needed by any one or more of the Sellers (or any
entity acquired by any of the Sellers following the Closing,
except to the extent any such acquired entity had a binding
purchase agreement with any party prior to such acquisition)
in connection with any such entities' business operations
during the Purchase Period.
(b) Without PCN's prior written consent, none of the Sellers shall
purchase any IBM Products from PCN or its Affiliates in
accordance with Section 7.7(a) above for resale to any third
party reseller or vendor of computer hardware or software
products (other than resellers of CTI's software products).
(c) With respect to all IBM Products purchased by any Seller in
accordance with Section 7.7(a) above as well as other products
purchased by the Sellers from PCN during the Purchase Period,
PCN or its designee shall charge the Seller an amount equal to
92% of PCN's then standard reseller or distributor price
(as published by PCN in its then current price book), for such
products. Unless otherwise agreed to by PCN and CTI, all
payments by the Sellers to PCN or its designee for IBM Products
purchased by any Seller from PCN or its designee in accordance
with this Section 7.7 shall be made within 60 days following
receipt by such Seller of an invoice thereof.
<PAGE>
(d) PCN agrees that, during the Purchase Period: (A) PCN or its designee
will provide to the Sellers the Sellers' requirements regarding
IBM Products provided that: (x) in accordance with the
procedures described on Schedule 7.7(d) hereto, the
Sellers provide the Purchaser a 90 day rolling forecast of the
Sellers' IBM Product needs; and (y) such IBM Product is offered
for sale by IBM to PCN; (B) the Purchaser shall deliver or cause
to be delivered to the Sellers ordering such IBM Products, all
IBM Products ordered by such Sellers in accordance with
clause (A) above within five (5) business days of IBM's then
current lead time for the applicable IBM Products; (C) PCN
shall use its reasonable commercial efforts to cause CTI
to be permitted to participate in product briefings regarding
the IBM Products (or, in the event CTI is not permitted to
participate in such briefings, provide CTI with a quarterly
briefing regarding the IBM Product line); and (D) PCN shall
use its reasonable commercial efforts to provide CTI with (x)
all information available for general distribution regarding
the IBM Product line and (y) electronic configuration
software as provided to PCN by IBM.
(e) The Sellers agree to purchase from PCN or its designees not less
than $2.0 million (the "Annual Purchase Obligations) of
hardware and software products during each twelve month period
commencing on July 1 of each calendar year during the
Purchase Period (each an "Annual Purchase Period"), up to an
aggregate of $10 million (the "Aggregate Purchase
Obligation"). Any purchases by the Sellers which exceed $2.0
million during any Annual Purchase Period will be credited
to the Sellers' Annual Purchaser Obligation for the next Annual
Purchase Period's Purchase Obligation. In connection with
each Annual Purchase Obligation, if, by the last day (June 30) of
such Annual Purchase Period, the Sellers have not purchased all
such $2.0 million of such hardware and software products
from PCN or its designees, on the last day (June 30) of such
Annual Purchase Period, the Sellers shall pay to PCN or its
designee the remaining balance of such purchase order, which
amount shall be credited as an advance against future purchases
(but which amount shall not reduce next year's Annual
Purchase Obligations). Notwithstanding the foregoing,
in the event that PCN or its designee is unable to provide
the Sellers with the requested IBM Products in accordance with
Section 7.7(a) above, so long as such product is listed as being
available from IBM on IBM's then current products offering
schedule, the Sellers may purchase such IBM Products from
a third party and reduce its Aggregate Purchase Obligation
under this paragraph (e) by the actual amount paid by the
Sellers for such IBM Product. In addition, in the event that
neither PCN or, its designee nor any third party can provide the
Sellers with the requested IBM Product and such product is
listed as being available from IBM on IBM's then current
product offering schedule, the Sellers may request that PCN or
its designees provide to the Sellers an equivalent non-IBM
product (an "Alternate Product") on the same terms as provided on
this Section 7.7, and such purchase shall be credited
against the Sellers' Aggregate Purchase Obligation. In the
event that PCN and its designee are unable to provide the
Sellers with the Alternate Product in accordance with the
immediately preceding sentence, the Sellers may purchase the
Alternate Product from a third party and reduce its Aggregate
Purchase Obligation under this paragraph (e) by the actual
amount paid by the Sellers for such Alternate Product.
(f) The parties hereto agree that, in the event that CTI sells all or
substantially all of its assets, the Sellers may, at their
option: (i) with the PCN's prior written consent, which
consent shall not be unreasonably withheld, assign
its obligations under paragraphs (a), (b), (c) and (e) above to
the purchaser thereof, provided that, such purchaser agrees, in
writing for PCN's benefit, to assume such obligations; or (ii)
terminate such obligations by paying to PCN an amount equal to
20% of the Sellers' remaining Aggregate Purchase Obligation.
7.8. Use of Name. The Sellers hereby grant to the Purchaser a
non-exclusive license to use the name "CTI", or "CUSA Technologies, Inc."
or any variation thereof, for a period of six (6) months
following the Closing Date, to the extent that any such name
appears on any written or printed document or instruments
or as a part of any software used in or included as part of
the Assets, for the limited purpose of using the Business'
existing supply of such document, instrument or
software; provided that the Purchaser may not alter, modify
or revise any such document, instrument or software in any
way other than to the extent necessary to remove Sellers'
name therefrom.
7.9. Termination of Reseller Agreements. The Sellers, PCN and the
Purchaser agree that, effective on the Closing Date, all reseller,
business partner, distribution and similar agreements between
CTI and any Subsidiary, on the one hand, and Versyss, on the
other hand, shall be terminated, null and void and of no further
force and effect, including, without limitation, all
obligations of the parties, all payment obligations of each
party to the other, whether or not currently outstanding.
<PAGE>
7.10. Service Arrangements.
7.10.1. Facilities. Set forth on Schedule 7.10(a) is a list of
each facility utilized by the Sellers in connection with the
operation of the Business in which PCN wishes to locate
employees of the Business following the Closing (each a
"Facility" and, together, the "Facilities"). The Sellers
agree that, with respect to each Facility, during the period
commencing on the date hereof and, with respect to that
Facility, ending on the first to occur of (x) the date on which
the Purchaser moves all of its employees out of the Facility
(each a "Facility Termination Date") and (y) the date
indicated as the "End Date" opposite the name of the
Facility on Schedule 7.10(a) (with respect to each Facility,
a "Transition Period"), the Sellers shall, without PCN's
prior written consent, which consent shall not be
unreasonably withheld, maintain, and during such period
shall not modify or alter, the Facility or any of the computer
hardware and other equipment and telephone lines, numbers and
service (including toll free telephone lines, numbers and
service) used or usable in the Business (and not included in as
part of the Equipment or Inventory), in each case,
whether owned or leased by the Sellers (collectively, "Facility
Equipment"), in substantially the same manner and condition as
each such Facility and the Facility Equipment located
therein was maintained by the Sellers in the ordinary course
of business prior to the Closing. During the Transition
Period for a Facility, the Sellers shall permit the
Purchaser to utilize the applicable Facility and the
Facility Equipment located therein in connection with the
Purchaser's operation of the Business during such period to
the same extent the Sellers utilized such Facility and the
Facility Equipment located therein, and in each case
consistent with the Sellers' utilization of the Facility and
the Facility Equipment Located therein, in connection with the
Sellers' operation of the Business prior to the Closing.
In consideration for providing the Purchaser with the use of
the Facilities, during the applicable Transition Period
with respect to each Facility and the Facility Equipment
located therein, the Purchaser shall pay to the Sellers the
facilities fees calculated in accordance with the schedule of
fees for that Facility set forth on Schedule 7.10(a) hereto, or a
proportionate amount thereof. Anything contained in this
Section 7.10(a) to the contrary notwithstanding, the Purchaser
shall provide the Sellers with at least thirty (30) days notice
prior to any Facility Termination Date.
7.10.2. Other Costs. The Sellers shall invoice the Purchaser monthly
for all out-of-pocket costs and expenses incurred by the Sellers
on behalf of PCN or the Purchaser in connection with the
Purchaser's operation of the Business at a Facility during
the Transition Period (such as telephone bills, copying charges
and the like (but not including electric bills and the like
which are covered by the Facility Fee)) to the extent
such costs and expenses are not covered by the fee provided for
in Section 7.10.1 hereto, which invoices shall be accompanied by
appropriate back-up documentation with respect to
such costs and expenses. The Purchaser shall pay the Sellers
for such invoiced amounts by wire transfer within ten (10)
business days following the Purchaser's receipt of such
invoice.
7.10.3. Other Services. In addition to the use of the Facilities, for a
period of 90 days following the Closing Date, at no additional
charge to PCN or the Purchaser, the Sellers shall provide the
Purchaser and PCN with the services of the Sellers
management information systems and accounting systems to the
extent reasonably required by PCN and the Purchaser in order
to permit them to collect Purchaser Receivables and
maintain continuity of service for the End Users. Without
limiting the foregoing, the Sellers shall provide the
Purchaser with a tape for the electronic conversion of data
from the Sellers' systems to PCN's.
<PAGE>
7.11. DecisionOne. The Sellers agree, at the request of PCN the
Purchaser, to assist PCN or the Purchaser in negotiating or modifying the
hardware support arrangement with DecisionOne.
7.12. Torrance Lease. The Sellers and Purchaser agree to, following the
Closing, amend the terms of the sublease between Versyss Data Systems,
Inc. ("VDS") and Versyss regarding the premises located
in Torrance, California in order to (x) reduce by half the total
space sublet by VDS thereunder, (y) reduce by half the rent
payable by VDS thereunder and (z) permit VDS to sublet the
remaining portion of such space.
7.13. Software Development Agreement.
(a) The Software Development Agreement dated November 1, 1995, between
CTI and Versyss (the "Software Development Agreement") is
hereby terminated and all obligations of the parties
thereunder (including, without limitation, all payment
obligations of each party to the other, whether or not currently
outstanding) are terminated and shall be null and void.
(b) With respect to the software contemplated by the Software
Development Agreement ("XRTS"), CTI shall, at CTI's sole cost
and expense: (x) by July 30, 1996, complete the tasks
referred to on Schedule 7.13(b) hereto to the reasonable
satisfaction of PCN; and (y) thereafter provide repairs for
all priority 1 defects (e.g. defects which prevent a customer
from continuing their daily operation such as, by way of
example, being unable to boot or back-up the system as data
corruption) through the Beta test period not to exceed 45
days from the date of technology handoff.
(c) XRTS will be owned jointly by CTI and Versyss; provided, however, that
(x) None of PCN, the Purchaser, Versyss, their Affiliates and
their respective successors and assigns will use XRTS in the
Retained Businesses, (y) none of the Sellers, their Affiliates or
their respective successors and assigns will use XRTS in the
Business or the Practice Management Business and (z) the
parties will only license, sell or otherwise provide XRTS to
third parties who agree to be bound by the restrictions
contained in clauses (x) or (y), as applicable.
(d) Upon completion of the tasks referred to in Section 7.13(b) above,
each of Versyss or CTI will receive a copy of the source-
code for the XRTS.
(e) The Sellers, jointly and severally, hereby covenant and agree to
indemnify and hold harmless PCN, Versyss and the Purchaser, their
Affiliates and their respective successors and assigns from,
against and in respect of any and all costs, losses, claims,
liabilities, fines, penalties, damages and expenses (including
court costs and reasonable fees and disbursements of counsel)
resulting from or arising out of any infringement resulting from
the use of XRTS by any Seller, or their respective Affiliates
or customer, in the Retained Businesses.
(f) PCN, Versyss and the Purchaser, jointly and severally, hereby
covenant and agree to indemnify and hold harmless the Sellers,
their Affiliates and their respective successors and
assigns and hold them harmless from, against and in respect of
any and all costs, losses, claims, liabilities, fines,
penalties, damages and expenses (including court costs and
reasonable fees and disbursements of counsel)
resulting from or arising out of any infringement resulting from
the use of XRTS by any of PCN, Versyss, the Purchaser or their
respective Affiliates or customers in the Business or the
Practice Management Software Business.
7.14. Systems Claim.
(a) The Sellers agree to use their best efforts to cause: the
claim (the "Systems Claim") of Automated Systems, Inc. ("ASI"),
Howard Jones, Gina Jones and Thomas Jordan against Versyss
contained in the lawsuit (the "Lawsuit") commenced by Versyss
Southwest, Inc. in Maricopa County Superior Court (Case No.
CV93-26289) to be dismissed with prejudice.
<PAGE>
(b) Versyss agrees to use its best effort to cause the crossclaim (the
"Versyss Claim") of Versyss against ASI, Howard Jones, Gina
Jones, Thomas Jordan contained in the Lawsuit to be dismissed
with prejudice.
(c) Except for the obligation of CTI and ASI set forth in Section 7.4(d)
below, each of the Sellers (including, without limitation,
CTI and ASI), on the one hand, and each of PCN, Versyss and the
Purchaser, on the other hand, hereby release the other from
any and all liabilities and obligations with respect to the
Lawsuit.
(d) ASI and CTI shall: (i) use their best efforts to obtain the
release of Versyss by Howard Jones, Gina Jones and Thomas Jordan; and
(ii) to take all such other steps reasonably requested by
PCN or Versyss to cause all claims of Mr. Jones, Ms. Jones
and Mr. Jordan against Versyss to be dismissed and released.
7.15. Virginia Lease. Notwithstanding Section 3.1(ii) above, neither
PCN nor the Purchaser shall have any obligation to assume, and
neither PCN nor the Purchaser shall assume, any of the
obligations of Benchmark under the Virginia Lease unless and
until the lessor under the Virginia Lease (the "Lessor")
shall have: (i) consented to the assignment of the Virginia Lease
by Benchmark to the Purchaser; and (ii) agreed to permit the
Purchaser to sublease all or a portion of the premises to a
third party during the remaining term of the Virginia Lease
(together, the matters referred to in clause (i) and (ii) are
referred to hereinafter as the "Lessor's Consent"). In the
event that at the Closing the Lessor's Consent has not been
obtained, so long as the Sellers provide, and continue to
provide, to the Purchaser the full benefits of the Sellers'
rights under the Virginia Lease, as if the Lessor's Consent had
been obtained (other than the right to sublease the premises),
the Purchaser shall, during the Negotiation Period (as defined
below), reimburse to the Sellers the Sellers' rental payments
under the Virginia Lease (but shall not assume any liability
under or relating to the Virginia Lease, including,
without limitation, any liability arising as a result of
the failure of the Sellers to obtain the Lessor's Consent).
As used herein, the "Negotiation Period" shall mean the period
commencing on the Closing Date and ending on the first to occur
of: (i) the date on which the Lessor's Consent is obtained;
and (ii) the 180th day following the Closing Date.
7.16. Automated Solutions of California.
(a) Sellers agree to use their best efforts to cause the end-user
agreements held by Automated Solutions of California ("ASC")
to be transferred to the Purchaser as soon as possible
following the Closing, free and clear of all claims, liens,
charges, encumbrances, security interests, restrictions on use
or transfer or other defects of any nature.
(b) Purchaser agrees to service and treat such end-user agreements, for
purposes of the Agreement, as if such agreements are End- User
Agreements.
(c) Sellers agree, jointly and severally to indemnify PCN, the Purchaser,
their Affiliates and their respective directors and
officers, and each of their successors and assigns and hold
them harmless from, against and in respect of any and all costs,
losses, claims, liabilities, fines, penalties, damages and
expenses arising in connection with such end-user agreements or
related to ASC.
<PAGE>
8. INDEMNIFICATION
8.1. Indemnification of the Purchaser. The Sellers hereby, jointly and
severally, covenant and agree with PCN and the Purchaser that the Sellers
shall, jointly and severally, indemnify PCN, the Purchaser,
their Affiliates and their respective directors and
officers, and each of their successors and assigns
(individually a "Purchaser Indemnified Party") and hold
them harmless from, against and in respect of any and all costs,
losses, claims, liabilities, fines, penalties, damages and
expenses (including court costs and reasonable fees and
disbursements of counsel) (collectively "Losses")
resulting from or arising out of:
(a) all liabilities, debts, obligations
and commitments of any nature, whether accrued, absolute,
contingent or otherwise, (whether known or unknown to the
Sellers, PCN or the Purchaser), which are Retained Liabilities
and any claim or demand by a third party (whether or not
successful) to cause or require a Purchaser Indemnified Party to
pay or discharge any debt, obligation, liability or
commitment referred to in this clause (a);
(b) any breach of any of the representations, warranties, covenants or
agreements made by any one or more of the Sellers in this
Agreement or any Ancillary Document; or
(c) any action, suit, proceeding, compromise, settlement,
assessment or judgment arising out of or incident to any of the
matters indemnified against in this Section 8.1. If, by reason
of the claim of any third party relating to any of the matters
subject to such indemnification, a lien, attachment, garnishment
or execution is placed upon any of the properties or assets of
any Purchaser Indemnified Party under this Section 8.1, the
Sellers shall also furnish an indemnity bond satisfactory to
PCN, to obtain the prompt release of such lien,
attachment, garnishment or execution.
8.2. Indemnification of the Sellers by PCN and the
Purchaser. PCN and the Purchaser hereby, jointly and
severally, covenant and agree with the Sellers that the
Purchaser shall, jointly and severally, indemnify the
Sellers, their Affiliates and their respective directors and
officers, and each of their successors and assigns
(individually a "Seller Indemnified Party") and hold
them harmless from, against and in respect of any and all Losses
resulting from or arising out of:
(a) The Assumed Liabilities, and any claim or demand by a third party
(whether or not successful) to cause or require a Seller
Indemnified Party to pay or discharge any debt, obligation,
liability or commitment referred to in this clause (a);
(b) any breach of any of the representations, warranties, covenants or
agreements made by PCN and/or the Purchaser in this Agreement
or any Ancillary Document; or
(c) any action, suit, proceeding, compromise, settlement, assessment or
judgment arising out of or incident to any of the matters indemnified
against in this Section 8.2. If, by reason of the claim of any third party
relating to any of the matters subject to such indemnification,
a lien, attachment, garnishment or execution is placed upon any
of the properties or assets of any the Seller Indemnified Party
under this Section 8.2, PCN shall also furnish an indemnity
bond satisfactory to the Sellers to obtain the prompt release of
such lien, attachment, garnishment or execution.
8.3. Limitations on Indemnity
(a) Subject to 8.3(b) hereof, on and after the Closing: (i) the
Sellers shall be liable to the Purchaser Indemnified Parties, and the
Purchaser Indemnified Parties shall only be entitled to
indemnification from the Sellers, for the matters covered
by Sections 8.1(b) hereof and Section 8.1(c) hereof (to the
extent it applies to Section 8.1(b)); and (ii) PCN and the
Purchaser shall only be liable to the Seller Indemnified
Parties, and the Seller Indemnified Parties shall only
be entitled to indemnification from the Purchaser, for the
matters covered by Section 8.2(b) hereof and Section 8.2(c)
hereof (to the extent it applies to Section 8.2(b)),
respectively, to the extent, and only to the extent, the
aggregate amount of Losses suffer by Purchaser Indemnified
Parties or suffered by Seller Indemnified Parties, as the case
may be (without regard to the limitation on liability set
forth in this Section 8.3(a)), exceeds $100,000 (the "Minimum
Indemnity Amount"), in which event each such Indemnified
Party (as hereinafter defined) shall thereafter be entitled,
from time to time, to seek indemnification in respect to
all Losses in respect of which it is entitled to be indemnified
pursuant to such provisions of Section 8.1 and 8.2, as the case
may be, in excess of the Minimum Indemnity Amount. The foregoing
limitations shall not affect the right of the Indemnified Party
to make a claim for indemnification, and shall not
alter or negate the procedures with respect to the timely
notice and disposition of such claim provided for in Section
8.4 hereof, in order to enable the Indemnified Party to obtain
credit against the $100,000 limitation contained in the
preceding sentence hereof for indemnification which would
otherwise be due but for such limitation.
<PAGE>
(b) Anything contained in this Section 8.3 to the contrary notwithstanding,
the limitation on indemnity contained in Section 8.3(a)
shall not apply to any Loss: (i) incurred by any Purchaser
Indemnified Party as a result of a breach by the Sellers of the
representations and warranties contained in Sections 5.1, 5.2,
5.10, 5.11, 5.18 (to the extent it relates to severance
obligations and accrued vacation and sick days) or 5.21 hereto;
(ii) incurred by any Purchaser Indemnified Party as a result of
a breach by any of the Sellers of the covenants or agreements
of any such Seller contained in this Agreement or in any
Ancillary Document; (iii) incurred by any Seller
Indemnified Party as a result of a breach by PCN or the Purchaser
of any of the representations and warranties contained in
Sections 6.1 or 6.2, hereto; or (iv) incurred by any Seller
Indemnified Party as a result of a breach by PCN or the Purchaser
of any of the covenants or agreements of PCN or the
Purchaser contained in this Agreement or in any Ancillary
Document;
(c) On and after the Closing Date, the Sellers shall not be liable to
the Purchaser Indemnified Parties, and the Purchaser
Indemnified Parties shall not be entitled to indemnification from
the Sellers, under Section 8.1(b) hereof and
Section 8.1(c) (to the extent it applies to Section 8.1(b)) for
any Loss arising from a breach by any one or more of the
Sellers of the representations and warranties contained in
Sections 5.8 and 5.9 hereof to the extent that the Loss so
incurred by the Purchaser Indemnified Party with respect
thereto was accounted for under Section 2.2 above.
8.4. Right to Defend, Etc. If the facts giving rise to any such
indemnification pursuant to this Article 8 shall involve any actual claim or
demand by any third party against a Purchaser Indemnified
Party or a Seller Indemnified Party, as the case may be (an
"Indemnified Party") the party required to indemnify such
Indemnified Party pursuant to Sections 8.1 or 8.2, as the case
may be (the "Indemnifying Party") shall be entitled to
notice of and entitled (without prejudice to the right of any
Indemnified Party to participate at its expense through counsel
of its own choosing) to defend or prosecute such claim at its
expense and through counsel of its own choosing if it gives
written notice of its intention to do so no later than the 15th
day following receipt of such notice; provided, however, that
if the defendants in any action shall include both a
Indemnifying Party and an Indemnified Party and the
Indemnified Party shall have been advised by its counsel that
the counsel selected by the Indemnifying Party has a
conflict of interest because of the availability of different or
additional defenses to the Indemnified Party, the
Indemnified Party shall have the right to select separate counsel
to participate in the defense of such action on its behalf, at
the expense of the Indemnifying Party. The failure so to notify
an Indemnifying Party shall not relieve it of any liability
which it may have to any Indemnified Party. The
Indemnified Party shall cooperate fully in the defense
of such claim and shall make available to the Indemnifying
Party pertinent information under its control relating
thereto, but shall be entitled to be reimbursed, as provided in
this Article 8, for all out-of-pocket costs and expenses
payable to third parties incurred by it in connection
therewith. If any Indemnifying Party assumes the defense of any
such claims, the Indemnifying Party will hold the Indemnified
Party harmless from and against any and all damages arising out
of any settlement approved by such Indemnifying Party or any
judgment in connection with such claim or litigation. Payment by
an Indemnifying Party to an Indemnified Party shall be made
within 10 days after demand, unless there is a claim or
demand by a third party in which event payment shall be made
within 10 days after final judgment, settlement or comprise, as
the case may be.
8.5. Tax Effect. The amount of any indemnification
due to an Indemnified Party pursuant to Section 8.1 or 8.2,
as the case may be, shall be calculated after taking into
account the amount of all insurance, cash or other direct
financial benefits payable to such Indemnified Party
(including any such benefits payable by third parties) and
after taking into account the United States federal, state and
local and foreign national, provincial and local tax
benefits or detriments to the Indemnified Party, as the case
may be, calculated assuming the Indemnified Party were a
taxpayer subject to tax at the highest marginal rate in effect
when the payment is made, of the payments made in respect of such
loss, claim, demand, cost or expense giving rise to the
indemnification and the payments, including
indemnification payments made in respect thereto.
<PAGE>
9. GENERAL
9.1. Expenses, Etc. The parties hereto shall pay their own respective taxes,
expenses, costs and fees, including, without limitation,
the fees and expenses of their respective counsel and ac
countants and other experts.
9.2. Survival of Representations and Warranties. All of the
representations and warranties, and the indemnities in connection therewith
contained in this Agreement and in any Ancillary Document shall
survive the Closing for a period of twelve (12) months from the
Closing Date; provided, however, that the representations and
warranties contained in Section 5.1, 5.2, 5.11, 5.15(b)
and 5.21 shall survive indefinitely. Any claim made in
reasonable detail and specificity by written notice to
an Indemnified Party prior to the expiration of the survival
period of any representation and warranty shall survive the
expiration of such survival period.
9.3. Waivers. Any breach of any obligation, covenant, agreement or
condition contained herein shall be deemed waived by the non-breaching
party only by a writing, setting forth with particularity the
breach being waived and the scope of the waiver, but such
waiver shall not operate as a waiver of, or estoppel with
respect to, any subsequent or breach. No waiver shall be
implied from any conduct or action of the non-breaching
party. No failure or delay by any party in exercising any
right, power or privilege hereunder or under any Ancillary
Document, and no course of dealing by any party, shall
operate as a waiver of any right, power or privilege
hereunder or under any Ancillary Document, nor shall any single
or partial exercise of any other right, power or privilege.
9.4. Definition of Knowledge. As used in this Agreement, the term
"knowledge" means knowledge which supervisory, managerial, and
executive employees have or should have after making due
inquiry and exercising due diligence with respect thereto.
9.5. Binding Effect; Benefits. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their
respective successors and permitted assigns. This
Agreement may not be assigned by any party hereto without the
prior written consent of the other parties hereto (except as
provided in Section 7.7(f) hereof) except that no such
consent shall be required for assignment to a party acquiring
all or substantially all of either party's stock or assets
provided that such party assumes all of the seller's obligations
hereunder. Except as otherwise set forth herein, nothing in
this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their
respective successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason
of this Agreement.
<PAGE>
9.6. Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered in person, or transmitted by telecopy, or upon
receipt after dispatch by certified or registered first
class mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made, at the following
addresses or telecopy numbers (or such others as shall be
provided in writing hereinafter):
If to the Purchaser, to:
Physician Computer Network,Inc.
1200 The American Road
Morris Plains, NJ 07950
Attention: President
Telecopy No.: (908) 290-7751
With copies to:
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Jonathan Klein, Esq.
Telecopy No.: (212) 626-0799
If to the Sellers, to:
CUSA Technologies, Inc.
986 West Atherton Drive
Salt Lake City, UT 84123
Attention: President
With copies to:
Prince, Yeates & Geldzahler
City Centre I, Suite 900
175 East Fourth South
Salt Lake City, UT 84111
Attention: David K. Broadbent, Esq.
9.7. Records; Assistance. Each party hereto shall, on the request of
the other party, make available to such other party from time to
time on a reasonable basis records and other documents
relating to the Business and to periods prior to the Closing
Date. Such records and other documents shall be held by the
party in possession of such documents for a period not less
than the applicable statutes of limitation for tax purposes, but
in no event less than 5 years, after the Closing Date and
copies shall be delivered to the other party upon such other
party's request at any time and at such other party's expense.
If at the end of such period the party in possession wishes to
dispose of such documents, such party shall offer the other
party such documents at such other party's expense.
9.8. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the Ancillary Documents constitute
the entire agreement and supersede all prior agreements
and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof,
including, without limitation, the Letter of Intent, dated June
13, 1996, between the Purchaser and CTI.
9.9. Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of
this Agreement.
9.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be
one and the same instrument.
9.11. Governing Law; Submission to Jurisdiction. This Agreement shall be
construed as to both validity and performance and enforced in
accordance with and governed by the laws of the State of New
York, without giving effect to the conflicts of law principles
thereof.
9.12. Third Party Beneficiaries. Nothing in this Agreement or any Ancillary
Document is intended to, or shall be construed so as to
create any third party beneficiary to this Agreement or
otherwise confer any rights upon any person, firm or corporation
that is not a party hereto.
<PAGE>
9.13. Severability. If any term or provision of this Agreement shall to any
extent be invalid or unenforceable, the remainder of this Agreement
shall not be affected thereby, and each term and provision of
the Agreement shall be valid and enforced to the fullest extent
permitted by law.
9.14. Publicity.
9.14.1. Except as otherwise agreed to by the parties hereto in
writing, the parties hereto each agree to hold all information
heretofore or hereafter obtained from the others or such party's
advisers about the others in confidence and to use the
information so obtained only for the purpose of effectuating the
transactions contemplated hereby, except as may be
otherwise required by law. Notwithstanding the foregoing,
the Sellers acknowledge that the Purchaser is a public company
and, as such, is required to make certain public disclosure,
including, without limitation, the filing of reports with the
Securities and Exchange Commission and the issuance of a
press release with respect to the execution by the parties
hereto of this Agreement. Notwithstanding the foregoing,
the Purchaser acknowledge that CTI is a public company and, as
such, is required to make certain public disclosure,
including, without limitation, the filing of reports with the
Securities and Exchange Commission and the issuance of a
press release with respect to the execution by the parties
hereto of this Agreement.
9.14.2. After execution of this Agreement, the Purchaser with the
consent of the Sellers, which consent shall not be unreasonably withheld,
may, at its election, send a letter to the customers,
suppliers, distributors and others who have a business
relationship with the Sellers in connection with the Business
inform ing them, among other things, of such execution, and
if the Purchaser so requests, the Sellers will cooperate with
the Purchaser in connection therewith.
9.15. Amendments. This Agreement may not be modified or changed except
by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment
is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed in their respective names by an officer thereunto duly
authorized on the date first above written.
PHYSICIAN COMPUTER NETWORK, INC.
By:_____________________________
PCN SERVICES CORP.
By:_____________________________
CUSA TECHNOLOGIES, INC.
By:_____________________________
CUSA TECHNOLOGIES, INC.
By:_____________________________
RK & DR CONCEPTS, INC.
A/K/A VERSYSS DATA SYSTEMS
By:_____________________________
NEW BENCHMARK COMPUTER SYSTEMS,
INC.
By:_____________________________
BENCHMARK SYSTEMS MIDWEST, INC.
By:_____________________________
BENCHMARK COMPUTER SYSTEMS OF
SPRINGFIELD, INC.
By:_____________________________
MEDICAL COMPUTER MANAGEMENT,
INC.
By:_____________________________
HEALTHCARE BUSINESS SOLUTIONS,
INC.
By:_____________________________
HEALTHCARE BUSINESS SOLUTIONS OF
ARIZONA, INC.
By:_____________________________
NEW BENCHMARK COMPUTER SYSTEMS,
INC.
By:_____________________________
NEW BENCHMARK COMPUTER SYSTEMS
OF VA, INC.
By:_____________________________
PREFERRED HEALTH SYSTEMS, INC.
By:_____________________________
NEW ADVANCED SOLUTIONS OF
NEVADA, INC.
By:_____________________________
NEW SOURCE COMPUTING, INC.
By:_____________________________
NEW MEDICAL CLEARING CORPORATION
By:_____________________________
With Respect to Sections 7.13
and Section 7.14 only:
VERSYSS INCORPORATED
By:_____________________________
