SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
July 10, 1996 (July 2, 1996)
Date of Report (Date of earliest event reported))
PHYSICIAN COMPUTER NETWORK, INC.
(Exact name of registrant as specified in charter)
New Jersey
(State or other jurisdiction of incorporation)
0-19666
(Commission File Number)
22-2485688
(IRS Employer Identification No.)
1200 The American Road
Morris Plains, New Jersey 07950
(Address of principal executive officers)
(201) 490-3100
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 2, 1996, PCN Services Corp. ("Services"), a
newly formed, wholly-owned subsidiary of Physician Computer
Network, Inc. (the "Corporation"), acquired substantially all of
the assets (the "Assets") of the Medical Business and the
Commercial Business (together, the "Business") of CUSA
Technologies, Inc. ("CTI") and certain of its subsidiaries
(together with CTI, "the "Sellers"), pursuant to an Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of
July 2, 1996 (the "Acquisition").
In consideration for the Assets, Services: (i) agreed
to pay the Sellers $10,100,000 in cash, subject to certain
conditions being met by the Sellers and subject to possible
adjustments in connection therewith (of which amount $6,000,000
(including the forgiveness by PCN of CTI's $1,500,000 principal
amount promissory note issued to PCN on June 13, 1996) was paid
on July 2, 1996); (ii) forgave certain trade payables from the
Sellers to PCN and its subsidiaries; and (iii) assumed certain
liabilities of the Sellers associated with the Business. The
source of the purchase price was cash held by the Corporation.
In the Asset Purchase Agreement, Services and the
Corporation, on the one hand, and each of the Sellers, on the
other hand, each made certain customary representations and
warranties and undertook certain customary indemnity obligations
with respect to the Acquisition. The Acquisition was an arm's-
length transaction and there was no relationship between the
Corporation and any of the Sellers or any of its officers and
directors.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
At the time of the filing of this Current Report on
Form 8-K, it was impracticable for the Corporation to provide the
required financial statements for the acquired business. The
Corporation will file such required financial statements under
cover of Form 8-K/A as soon as practicable, but not later than 60
days following the date of this Report.
(b) Pro Forma Financial Information.
At the time of the filing of this Current Report on
Form 8-K, it was impracticable for the Corporation to provide the
required pro forma financial statements relative to the acquired
business. The Corporation will file such required pro forma
financial statements under cover of Form 8-K/A as soon as
practicable, but not later than 60 days following the date of
this Report.
<PAGE>
(c) Exhibits.
Exhibit Materials to be Page
Number Filed as Exhibits Number
Exhibit 1 Asset Purchase Agreement,
dated as of July 2, 1996,
by and among, CUSA Technologies, Inc.
and certain of its subsidiaries,
Physician Computer Network, Inc. and PCN
Services Corp.
Exhibit 2 Press Release
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
PHYSICIAN COMPUTER NETWORK, INC.
By:
Thomas Wraback
Vice President
Date: July 9, 1996
AT THE COMPANY<PAGE>
AT THE FINANCIAL RELATIONS BOARD Jack Mortell
Executive Vice
President & COO
(201) 490-3111<PAGE>
Kerry Thalheim
or Joe Calabrese
675 Third Ave.
NY, NY 10017
(212) 661-8030<PAGE>
Analyst Contact
Regina Lenihan
(212) 661-8030<PAGE>
Media Contact
Judith Sylk-Siegel
(212) 661-8030
For Immediate Release
July 3, 1996
PHYSICIAN COMPUTER NETWORK, INC.
AND CUSA TECHNOLOGIES, INC.
COMPLETES TRANSACTION
Morris Plains, N.J. (July 3, 1996) - Physician computer Network, Inc. (Nasdaq:
PCNI) and CUSA Technologies, Inc. (OTCBB: CSAT) announced today that they
have closed the previously announced acquisition of the medical practice
management software business and certain other software business of CTI
by PCN. The aggregate purchase price for the businesses acquired was
$10,100,000 together with the assumption of certain liabilities and
the cancellation of debt owed to PCN. CTI will retain its credit union and
rental equipment software divisions.
CUSA Technologies Inc., headquarters in Salt Lake City, Utah, is a leading
developer of credit union software management systems and provides a full
range of support, training, statement processing and network services
with an installed base of over 1,200 credit unions in the United States
and Canada.
Physician Computer Network develops, markets and supports medical practice
management software designed to link its current installed base of approximately
80,000 office-based physicians with hospitals, clinical laboratories,
managed care providers, Blue Cross/Blue Shield plans and Medicare and
Medicaid intermediaries.
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:
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;
(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.
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;
(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.
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
required by the regulations under Section 1060 of the Internal Revenue
Code of 1986, as amended ("Code").
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;
(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;
(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.
(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.
(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.
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, com-
mitment 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, autho-
rization 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).
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.
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;
(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.
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.
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.
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.
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.
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.
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, authoriza-
tion 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.
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.
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.
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.
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.
(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.
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.
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.
(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.
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.
(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 judg-
ment, 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.
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.
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.
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:_____________________________
<PAGE>
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:_____________________________
TABLE OF CONTENTS
Page
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . 2
1.1. Sale of Assets.. . . . . . . . . . . . . . . . . . . 2
1.2. Retained Assets. . . . . . . . . . . . . . . . . . . 4
1.3. Instruments of Transfer. . . . . . . . . . . . . . . 5
1.4. Delivery of Possession.. . . . . . . . . . . . . . . 6
1.5. Consents to Assignment.. . . . . . . . . . . . . . . 6
1.6. Collection of Accounts Receivable;
Right of Endorsement.. . . . . . . . . . . . . . . . 7
2. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . 8
2.1. Consideration. . . . . . . . . . . . . . . . . . . . 9
2.2. Adjustment to the Third Cash Payment.. . . . . . . . 9
2.3. Allocations of Purchase Price. . . . . . . . . . . . 10
3. ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 10
3.1. Assumption.. . . . . . . . . . . . . . . . . . . . . 10
3.2. Limitations on Assumption. . . . . . . . . . . . . . 11
3.3. Right of Enforcement and Settlement. . . . . . . . . 13
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . . . 16
5.1. Existence and Authority. . . . . . . . . . . . . . . 16
5.2. Authorization of Agreement.. . . . . . . . . . . . . 17
5.3. Effect of Agreement, Etc.. . . . . . . . . . . . . . 17
5.4. Restrictions; Burdensome Agreements. . . . . . . . . 18
5.5. Governmental and Other Consents. . . . . . . . . . . 18
5.6. Financial Statements.. . . . . . . . . . . . . . . . 18
5.7. Absence of Certain Changes or Events.. . . . . . . . 19
5.8. Deferred Revenue Account.. . . . . . . . . . . . . . 20
5.9. Accounts Receivable. . . . . . . . . . . . . . . . . 20
5.10.Recent Payables. . . . . . . . . . . . . . . . . . . 21
5.11.Title to the Assets; Absence of Liens and
Encumbrances, Etc. . . . . . . . . . . . . . . . . . 21
5.12.Contracts. . . . . . . . . . . . . . . . . . . . . . 22
5.13.Patents, Trademarks, Copyrights, Etc.. . . . . . . . 27
5.14.Real Estate Leases . . . . . . . . . . . . . . . . . 27
5.15.Compliance With Laws.. . . . . . . . . . . . . . . . 29
5.16.Litigation.. . . . . . . . . . . . . . . . . . . . . 31
5.17.Customers and Suppliers. . . . . . . . . . . . . . . 31
5.18.Labor Matters. . . . . . . . . . . . . . . . . . . . 32
5.19.Books and Records. . . . . . . . . . . . . . . . . . 33
5.20.Powers of Attorney.. . . . . . . . . . . . . . . . . 33
5.21.Taxes. . . . . . . . . . . . . . . . . . . . . . . . 33
5.22.Entire Business. . . . . . . . . . . . . . . . . . . 33
5.23.Brokers. . . . . . . . . . . . . . . . . . . . . . . 34
5.24.Inventory and Equipment. . . . . . . . . . . . . . . 34
5.25.Disclosure.. . . . . . . . . . . . . . . . . . . . . 35
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . 34
6.1. Organization, Etc. . . . . . . . . . . . . . . . . . 34
6.2. Authorization of Agreement.. . . . . . . . . . . . . 35
6.3. Effect of Agreement, Etc.. . . . . . . . . . . . . . 35
6.4. Governmental and Other Consents. . . . . . . . . . . 36
6.5. Brokers. . . . . . . . . . . . . . . . . . . . . . . 36
6.6. Disclosure.. . . . . . . . . . . . . . . . . . . . . 36
7. POST-CLOSING COVENANTS. . . . . . . . . . . . . . . . . . 36
7.1. Further Assurances . . . . . . . . . . . . . . . . . 36
7.2. Audited Financial Statements . . . . . . . . . . . . 37
7.3. Accounts Receivable Report; Deferred Revenue Report. 37
7.4. Non-Competition; Non-Disclosure. . . . . . . . . . . 38
7.5. Enforcement of Rights. . . . . . . . . . . . . . . . 42
7.6. Employee Matters.. . . . . . . . . . . . . . . . . . 43
7.7. Software/Hardware Purchases. . . . . . . . . . . . . 44
7.8. Use of Name. . . . . . . . . . . . . . . . . . . . . 47
7.9. Termination of Reseller Agreements.. . . . . . . . . 47
7.10.Service Arrangements . . . . . . . . . . . . . . . . 48
7.10.1. Facilities . . . . . . . . . . . . . . . . . 48
7.10.2. Other Costs. . . . . . . . . . . . . . . . . 49
7.10.3. Other Services.. . . . . . . . . . . . . . . 49
7.11.DecisionOne. . . . . . . . . . . . . . . . . . . . . 49
7.12.Torrance Lease . . . . . . . . . . . . . . . . . . . 49
7.13.Software Development Agreement . . . . . . . . . . . 50
7.14.Systems Claim. . . . . . . . . . . . . . . . . . . . 51
7.15.Virginia Lease . . . . . . . . . . . . . . . . . . . 52
7.16.Automated Solutions of California. . . . . . . . . . 53
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 53
8.1. Indemnification of the Purchaser . . . . . . . . . . 53
8.2. Indemnification of the Sellers by PCN and the Purchaser 54
8.3. Limitations on Indemnity . . . . . . . . . . . . . . 55
8.4. Right to Defend, Etc.. . . . . . . . . . . . . . . . 57
8.5. Tax Effect . . . . . . . . . . . . . . . . . . . . . 58
9. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.1. Expenses, Etc. . . . . . . . . . . . . . . . . . . . 58
9.2. Survival of Representations and Warranties . . . . . 59
9.3. Waivers. . . . . . . . . . . . . . . . . . . . . . . 59
9.4. Definition of Knowledge. . . . . . . . . . . . . . . 59
9.5. Binding Effect; Benefits . . . . . . . . . . . . . . 59
9.6. Notices. . . . . . . . . . . . . . . . . . . . . . . 60
9.7. Records; Assistance. . . . . . . . . . . . . . . . . 61
9.8. Entire Agreement . . . . . . . . . . . . . . . . . . 61
9.9. Headings . . . . . . . . . . . . . . . . . . . . . . 61
9.10.Counterparts . . . . . . . . . . . . . . . . . . . . 62
9.11.Governing Law; Submission to Jurisdiction. . . . . . 62
9.12.Third Party Beneficiaries. . . . . . . . . . . . . . 62
9.13.Severability . . . . . . . . . . . . . . . . . . . . 62
9.14.Publicity. . . . . . . . . . . . . . . . . . . . . . 62
9.15.Amendments . . . . . . . . . . . . . . . . . . . . . 63
