Registration No. 333-
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Securities and Exchange Commission
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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PHYSICIAN COMPUTER NETWORK, INC.
(Exact name of registrant as specified in its charter)
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New Jersey 7373 22-2485688
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation or organization) Code Number) Number)
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John F. Mortell
Executive Vice President &
Chief Operating Officer
Physician Computer Network, Inc.
1200 The American Road 1200 The American Road
Morris Plains, New Jersey 07950, Morris Plains, New Jersey 07950,
(201) 490-3100 (201) 490-3100
(Address, including zip code, (Name, address, including zip code,
and telephone number, including and telephone number, including
area code, of Registrant's area code, of agent for service)
principal executive offices)
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Copies to:
Jonathan Klein, Esq. Lawrence R. Small, Esq.
Gordon Altman Butowsky Paine, Hamblen, Coffin,
Weitzen Shalov & Wein Brooke & Miller
114 West 47th Street 717 W. Sprague Avenue, Suite 1200
New York, New York 10036, Spokane, Washington 99204,
(212) 626-0800 (509) 455-6000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement and the
effective time of the merger (the "Merger") of Northwest Acquisition Corp., a
wholly-owned subsidiary of Physician Computer Network, Inc. ("PCN" or the
"Registrant"), with and into Wismer-Martin, Inc. ("Wismer-Martin"), as described
in the Agreement and Plan of Merger, dated June 20, 1996, attached as Annex A to
the Proxy Statement and Prospectus forming a part of this Registration
Statement.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock,
par value $.01 ............ 1,450,000(1) N.A. $6,498,492(2) $2,241(3)
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(1) The amount to be registered hereunder has been determined based on the
maximum number of shares of PCN Common Stock, par value $.01 ("Common
Stock") issuable in the Merger, assuming for purposes of this Registration
Statement only, the exercise in full of certain options to purchase or
acquire Wismer-Martin Common Stock, par value $.01 ("Wismer-Martin Common
Stock"). The exchange ratio of .0562 was calculated by dividing (x) 935,000
by (y) 16,624,495, the number of shares of Wismer-Martin Common Stock,
outstanding on August 7, 1996, assuming the exercise in full of certain
currently outstanding options to purchase Wismer-Martin Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rules 457(f)(1) and (3) under
the Securities Act, by subtracting (i) $1,980,000 (the amount of cash to be
paid by the Registrant in connection with the Merger) from (ii) the product
of (a) $0.51 (the average of the bid and asked prices of Wismer-Martin
Common Stock on the Spokane Quotation System, Inc. to be cancelled in the
Merger on August 7, 1996) and (b) 16,624,495 the number of shares of
Wismer-Martin Common Stock outstanding on August 7, 1996, assuming the
exercise in full of certain currently outstanding options to purchase
Wismer-Martin Common Stock.
(3) Pursuant to Rule 457(b) of the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, the
total registration fee of $2,241 is offset by the filing fee of $2,071 paid
on June 26, 1996, in connection with the filing of the preliminary proxy
materials by Wismer-Martin on such date. Accordingly, an additional fee of
$170 is required to be (and has been) paid with the filing of this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
Cross Reference Sheet Pursuant to Item 501(b)
of Regulation S-K Showing the Location in the Prospectus
of the Information Required by Part I of Form S-4
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<CAPTION>
Item of Location or Caption in
Form S-4 Proxy Statement and Prospectus
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<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus................. Facing Page of the Registration Statement; Outside Front Cover
of Proxy Statement and Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................................... Available Information; Incorporation of Certain Documents By
Reference; Table of Contents
3. Summary Information, Risk Factors, Ratio of Earnings
to Fixed Charges and Other Information................. Summary; Selected Historical and Unaudited Pro Forma Financial
Information; Comparison of Shareholder Rights; Comparative
Market Price Data
4. Terms of the Transaction................................. Summary; The Merger; The Merger Agreement; Comparison of
Shareholder Rights
5. Pro Forma Financial Information.......................... Physician Computer Network, Inc. and Wismer-Martin, Inc.
Unaudited Pro Forma Condensed Consolidated Financial
Statements
6. Material Contacts with the Company Being Acquired........ The Merger-Background of the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters.......... Not Applicable
8. Interests of Named Experts and Counsel................... Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities......................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.............. Available Information; Incorporation of Certain Documents by
Reference
11. Incorporation of Certain Information by Reference........ Available Information; Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3 Registrants....... Not Applicable
13. Incorporation of Certain Information by Reference........ Not Applicable
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants...................... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies................ Not Applicable
16. Information with Respect to S-2 or S-3 Companies......... Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies........................ Available Information; Information Concerning Wismer-Martin.
</TABLE>
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<TABLE>
<CAPTION>
Item of Location or Caption in
Form S-4 Proxy Statement and Prospectus
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<S> <C>
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited..................... Outside Front Cover of Proxy Statement and Prospectus; Available
Information; Incorporation of Certain Documents by Reference;
Special Meeting; Security Ownership of Certain Persons and
Option and Voting Agreements; The Merger -Interests of Certain
Persons in the Merger;-- Dissenters' Rights; Information
Concerning PCN; Information Concerning Wismer-Martin;
Solicitation of Proxies.
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................................ Not Applicable
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<PAGE>
WISMER-MARTIN, INC.
12828 N. Newport Highway
Mead, Washington 99021
August 12, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Wismer-Martin, Inc. ("Wismer-Martin") which will be held at 9:00 a.m., local
time, on September 9, 1996, at Wismer-Martin's executive offices, located at
12828 N. Newport Highway, Mead, Washington 99021.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger dated June 20, 1996 (the
"Merger Agreement"), by and among Wismer-Martin, Physician Computer Network,
Inc. ("PCN") and a wholly-owned subsidiary of PCN ("Merger Sub"). Subject to the
provisions of the Merger Agreement, Merger Sub will be merged with and into
Wismer-Martin (the "Merger"), which will result in Wismer-Martin becoming a
wholly-owned subsidiary of PCN.
The effect of your approval of the Merger Agreement will be to enable
Wismer-Martin to complete the Merger with PCN. The Merger is described in the
accompanying Proxy Statement and Prospectus, which includes a summary of the
terms of the merger and certain other information relating to the proposed
transaction.
WISMER-MARTIN'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF WISMER-MARTIN AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
A Notice of the Special Meeting and a Proxy Statement and Prospectus
containing detailed information concerning the merger and related transactions
accompany this letter. I urge you to read this material carefully.
Your vote is very important. Please sign, date and mail the enclosed proxy
promptly to ensure that your shares will be represented.
We look forward to seeing you at the meeting.
Sincerely,
RONALD HOLDEN
Chairman and Chief Executive Officer
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WISMER-MARTIN, INC.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held September 9, 1996
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TO THE SHAREHOLDERS OF
WISMER-MARTIN, INC.:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Wismer-Martin, Inc., a Washington corporation
("Wismer-Martin"), which will be held at the executive offices of Wismer-Martin,
Inc., 12828 N. Newport Highway, Mead, Washington 99021, on September 9, 1996, at
9:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve a Plan of Merger
pursuant to an Agreement and Plan of Merger, dated June 20, 1996 (the
"Merger Agreement"), by and among Physician Computer Network, Inc., a New
Jersey corporation ("PCN"), Northwest Acquisition Corp., a wholly-owned
subsidiary of PCN ("Merger Sub"), and Wismer-Martin, pursuant to which: (a)
Merger Sub will merge with and into Wismer-Martin and Wismer-Martin will be
the surviving corporation and become a wholly-owned subsidiary of PCN (the
"Merger") and (b) each share of Wismer-Martin Common Stock, par value $.001
per share ("Wismer-Martin Common Stock"), issued and outstanding
immediately prior to the effective time of the Merger shall be converted
into the right to receive a specified amount of cash and a specified number
of shares of PCN's Common Stock, par value $.01 per share, as more fully
described in the accompanying Proxy Statement and Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on August 1, 1996, will be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.
Shareholders as of the record date are entitled to dissent from the Merger
and to receive payment of the "fair value" of their shares if they comply with
certain procedures specified in Chapter 23B.13 of the Washington Business
Corporation Act ("WBCA"). For a more complete discussion thereof, see "The
Merger -- Dissenters' Rights" and the full text of Chapter 23B.13 of the WBCA
which is attached to the Proxy Statement and Prospectus as Annex B and
incorporated therein by reference.
By Order of the Board of Directors
Mehdi Moussavi
Secretary
Dated: August 12, 1996
Mead, Washington
The affirmative vote by the holders of two-thirds of the votes represented
by the outstanding shares of Wismer-Martin Common Stock at the Special Meeting
is necessary for the approval of the matters to be voted on at the Special
Meeting. It is important that your shares be represented at the meeting. We hope
you will attend, but whether or not you intend to be present in person, please
mark, sign, date and return the accompanying proxy promptly. A stamped reply
envelope is enclosed for that purpose.
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PHYSICIAN COMPUTER NETWORK, INC.
WISMER-MARTIN, INC.
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PROXY STATEMENT AND PROSPECTUS
This Proxy Statement and Prospectus ("Proxy Statement and Prospectus") is
being furnished to holders of shares of the common stock, par value $.001 per
share ("Wismer-Martin Common Stock"), of Wismer-Martin, Inc., a Washington
corporation ("Wismer-Martin"), in connection with the solicitation of proxies by
the Board of Directors of Wismer-Martin (the "Wismer-Martin Board") for use at a
special meeting of shareholders of Wismer-Martin to be held at the executive
offices of Wismer-Martin, Inc., 12828 N. Newport Highway, Mead, Washington
99021, on September 9, 1996, at 9:00 a.m., local time, and at any adjournments
thereof (the "Special Meeting"). At the Special Meeting, holders of record as of
August 1, 1996, of Wismer-Martin Common Stock will be requested to consider and
vote upon a proposal to approve a Plan of Merger (the "Plan of Merger") pursuant
to an Agreement and Plan of Merger, dated June 20, 1996, among Physician
Computer Network, Inc., a New Jersey corporation ("PCN"), Northwest Acquisition
Corp., a Washington corporation and a wholly-owned subsidiary of PCN ("Merger
Sub"), and Wismer-Martin (the "Merger Agreement").
Pursuant to the Merger Agreement, Merger Sub will merge with and into
Wismer-Martin, the separate existence of Merger Sub will cease, and
Wismer-Martin will be the surviving corporation and become a wholly-owned
subsidiary of PCN (the "Merger"). At the effective time of the Merger (the
"Effective Time"), each share of Wismer-Martin Common Stock issued and
outstanding immediately prior to Effective Time, except those held by
shareholders who validly perfect dissenters' rights under the WBCA, will be
converted into the right to receive (the "Merger Consideration"): (i) an amount
in cash (the "Cash Consideration") equal to the quotient obtained by dividing
(x) $1,980,000 by (y) the number of shares of Wismer-Martin Common Stock
outstanding immediately prior to the Effective Time (the "Common Share Number")
and (ii) subject to the adjustments described below, that number (the "Stock
Consideration") of shares of PCN's Common Stock, par value $.01 per share ("PCN
Common Stock"), equal to the quotient obtained by dividing (x) 935,000 by (y)
the Common Share Number. Assuming that there are no adjustments to the Merger
Consideration, as described below, and assuming the exercise in full of 300,000
currently outstanding options to purchase Wismer-Martin Common Stock, each share
of Wismer-Martin Common Stock will be convertible into $0.1191 in cash and .0562
shares of PCN Common Stock. No assurances can be made that there will not be any
changes in the foregoing amount of cash or number of shares of PCN Common Stock
as a result of any one or more of the adjustments described below. In
particular, and in addition to the adjustments described in the following
paragraph, in the event that the Market Price (as defined below) of PCN Common
Stock on the third business day prior to the Effective Time is less than or
equal to $9.00 per share, then, at PCN's option, in lieu of the Cash
Consideration and Stock Consideration described above, the "Merger
Consideration" shall be an amount in cash equal to (the "Cash Option") (x)
$14,000,000 divided by (y) the Common Share Number, or $0.8421 in cash per
share, assuming the exercise of 300,000 currently outstanding options to
purchase Wismer-Martin Common Stock and that the Market Price of PCN Common
Stock was $9.00 per share or less.
The Merger Agreement provides that the Stock Consideration (described
above) will be adjusted under the following circumstances: (i) if the aggregate
Market Price of the Stock Consideration is less than $9,350,000 ($10.00 per
share) on the third business day immediately preceding the Effective Time, then
the Stock Consideration shall be increased to equal such number of shares of PCN
Common Stock as has an aggregate market value of $9,350,000 and (ii) if the
aggregate Market Price of the Stock Consideration is greater than $11,453,750
($12.25 per share) on the third business day immediately preceding the Effective
Time, then the Stock Consideration shall be decreased to equal such number of
shares of PCN Common Stock as has an aggregate market value of $11,453,750. The
Merger Agreement contains an additional provision intended to preserve the
tax-free reorganization treatment of the Merger (so long as the Cash Option is
not exercised), such that the receipt of the Stock Consideration by
Wismer-Martin shareholders would be on a tax-free basis, by, based upon certain
assumptions, limiting the aggregate amount of cash to be received by both the
dissenting and non-dissenting shareholders of Wismer-Martin to 20% or less of
the
<PAGE>
aggregate value of the consideration (both cash and shares of PCN Common Stock)
to be received by both the dissenting and the non-dissenting shareholders of
Wismer-Martin. This provision may result in adjustments decreasing the aggregate
amount of cash and increasing the aggregate number of shares of PCN Common Stock
to be received by the non-dissenting shareholders of Wismer-Martin in the
Merger. This adjustment would be expected to occur only if a significant number
of shareholders exercise dissenters' rights. See "The Merger -- Dissenters'
Rights." No assurances can be given that such adjustment will enable the Merger
to qualify as a tax-free reorganization. See "The Merger -- Certain Federal
Income Tax Consequences of the Merger." As used herein, "Market Price" means the
average of the closing price of a share of PCN Common Stock as reported on the
NASDAQ Stock Market during the fifteen (15) trading days immediately preceding
the date of determination.
This document also includes and constitutes the Prospectus of PCN filed as
part of its Registration Statement on Form S-4 (together with all amendments
thereto, the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the shares of PCN Common Stock to be issued in
the Merger.
This Proxy Statement and Prospectus and the accompanying form of proxy are
first being mailed to shareholders of record of Wismer-Martin on or about August
12, 1996.
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THE SECURITIES TO WHICH THIS PROXY STATEMENT AND PROSPECTUS RELATE HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this Proxy Statement and Prospectus is August 12, 1996.
ii
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No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Proxy Statement and Prospectus, and if given or made, such information or
representations should not be relied upon as having been authorized. This Proxy
Statement and Prospectus does not constitute an offer to sell, or a solicitation
of a proxy, in any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or proxy solicitation in
such jurisdiction. Neither the delivery of this Proxy Statement and Prospectus
nor any distribution of securities pursuant to this Proxy Statement and
Prospectus shall, under any circumstances, create any implication that there has
been no change in the information set forth or incorporated herein by reference
or in the affairs of PCN or Wismer-Martin since the date of this Proxy Statement
and Prospectus. All information regarding PCN or Merger Sub in this Proxy
Statement and Prospectus has been supplied by PCN, and all information regarding
Wismer-Martin has been supplied by Wismer-Martin.
AVAILABLE INFORMATION
PCN and Wismer-Martin are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, are required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
Regional Offices of the SEC: Midwest Regional Office, Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661; and Northeastern
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
PCN Common Stock is listed on the NASDAQ National Market. Reports, proxy
statements and other information concerning PCN may be inspected at the offices
of the National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006. If the Merger is consummated, PCN will continue to file
periodic reports, proxy statements and other information with the SEC pursuant
to the Exchange Act and Wismer-Martin no longer will be subject to the
informational and certain other requirements of the Exchange Act.
PCN has filed with the SEC a registration statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") under the Securities
Act, with respect to the shares of PCN Common Stock to be issued pursuant to the
Merger Agreement. This Proxy Statement and Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. Such
additional information may be obtained from the SEC's principal office in
Washington, D.C.
iii
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement and Prospectus incorporates certain documents by
reference which are not presented herein or delivered herewith. These documents
are available upon request from, in the case of PCN, John F. Mortell, Secretary,
Physician Computer Network, Inc., 1200 The American Road, Morris Plains, New
Jersey 07950, telephone number (201) 490-3100 and in the case of Wismer-Martin,
Mehdi Moussavi, Secretary, Wismer-Martin, Inc., 12828 N. Newport Highway, Mead,
Washington 99021, telephone number (509) 466-0396. In order to ensure timely
delivery of these documents, any request should be made by August 30, 1996.
PCN and Wismer-Martin hereby undertake to provide without charge to any
beneficial owner of Wismer- Martin Common Stock to whom a copy of this Proxy
Statement and Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any and all of the documents referred to below which
have been or may be incorporated herein by reference, other than exhibits to
such documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph. The following documents, which
have been filed with the SEC pursuant to the Exchange Act, are hereby
incorporated herein by reference:
(a) PCN's Annual Report on Form 10-K for the year ended December 31, 1995;
(b) PCN's Quarterly Report on Form 10-Q for the period ended March 31,
1996;
(c) PCN's Current Reports on Form 8-K dated June 25, 1996 and July 10,
1996;
(d) PCN's Current Report on Form 8-K/A dated August 7, 1996;
(e) Wismer-Martin's Annual Report on Form 10-KSB for the year ended June
30, 1995; and
(f) Wismer-Martin's Quarterly Reports on Form 10-QSB for the periods ended
September 30, 1995, December 31, 1995 and March 31, 1996.
All documents filed by PCN or Wismer-Martin pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
date of the Special Meeting (as such term is defined herein under the caption of
the same name) shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing of such documents. All information
appearing in this Proxy Statement and Prospectus or in any document incorporated
herein by reference is not necessarily complete and is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference and should be read together
with such information and documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Proxy Statement and Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement and Prospectus.
iv
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TABLE OF CONTENTS
AVAILABLE INFORMATION................................................... iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... iv
SUMMARY ................................................................ 1
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION....... 7
COMPARATIVE MARKET PRICE DATA........................................... 12
RISK FACTORS REGARDING PCN.............................................. 13
PROXY STATEMENT AND PROSPECTUS.......................................... 17
SPECIAL MEETING......................................................... 17
Purpose of the Meeting............................................. 17
Date, Time and Place; Record Date.................................. 17
Voting Rights...................................................... 17
SECURITY OWNERSHIP OF CERTAIN PERSONS AND VOTING AGREEMENTS............. 18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........ 19
THE MERGER.............................................................. 27
Background of the Merger........................................... 27
Recommendations of the Boards of Directors;
Effects of and Reasons for the Merger............................ 28
General Description of the Merger.................................. 28
Closing; Effective Time............................................ 29
Exchange of Stock Certificates..................................... 29
No Fractional Shares............................................... 30
Interests of Certain Persons in the Merger......................... 30
Certain Federal Income Tax Consequences of the Merger.............. 30
Federal Securities Law Matters..................................... 32
Accounting Treatment............................................... 32
Listing on NASDAQ Stock Market..................................... 33
Dissenters' Rights................................................. 33
THE MERGER AGREEMENT.................................................... 36
The Merger......................................................... 36
Representations and Warranties..................................... 37
Certain Covenants.................................................. 37
Certain Additional Agreements...................................... 37
No Solicitation of Other Transactions.............................. 38
Expenses........................................................... 38
Conditions to the Merger........................................... 38
Wismer-Martin Stock Options........................................ 39
Termination........................................................ 39
Amendment and Waiver............................................... 40
INFORMATION CONCERNING PCN.............................................. 40
INFORMATION CONCERNING WISMER-MARTIN.................................... 41
Legal Proceedings.................................................. 46
Security Ownership of Certain Beneficial Owners and Management..... 46
Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................ 47
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Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................. 51
COMPARISON OF SHAREHOLDER RIGHTS........................................ 52
General Shareholder Vote Requirements.............................. 52
Size and Classification of the Board of Directors.................. 52
Election of Directors and Director Nomination Procedures........... 52
Removal of Directors............................................... 52
Vacancies on the Board of Directors................................ 53
Special Meetings of Shareholders................................... 53
Shareholder Approval of Mergers and Sales of Assets................ 53
Amendment of Articles and By-Laws.................................. 54
Preemptive Rights.................................................. 54
Payment of Dividends............................................... 54
Inspection of Books and Records.................................... 54
Indemnification and Limitation of Liability of Officers
and Directors.................................................... 55
LEGAL OPINION........................................................... 55
EXPERTS................................................................. 55
SOLICITATION OF PROXIES................................................. 55
ANNEX A -- Agreement and Plan of Merger................................. A-1
ANNEX B -- Chapter 23B.13 of the Washington Business Corporation Act.... B-1
vi
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the detailed information appearing elsewhere in
this Proxy Statement and Prospectus or incorporated herein by reference.
Capitalized terms used and not otherwise defined in this summary have the
meanings given to them elsewhere herein. Shareholders are urged to read this
Proxy Statement and Prospectus in its entirety. Certain of the information
contained in this summary and elsewhere in this Proxy Statement and Prospectus
or incorporated herein by reference are forward-looking statements. For a
discussion of important factors that could cause actual results to differ
materially from such forward-looking statements, see "Risk Factors Regarding
PCN."
The Merger ......................... This Proxy Statement and Prospectus is
being furnished to holders of shares of
the common stock, par value $.001 per
share, of Wismer-Martin, Inc., a
Washington corporation, in connection
with the solicitation of proxies by the
Board of Directors of Wismer-Martin for
use at a special meeting of
shareholders of Wismer-Martin to be
held at the executive offices of
Wismer-Martin, 12828 N. Newport
Highway, Mead, Washington 99021, on
September 9, 1996, at 9:00 a.m., local
time and at any adjournments thereof.
At the Special Meeting, holders of
record as of August 1, 1996, of
Wismer-Martin Common Stock will be
requested to consider and vote upon a
proposal to approve a Plan of Merger
pursuant to an Agreement and Plan of
Merger dated June 20, 1996, among
Physician Computer Network, Inc., a New
Jersey corporation, Northwest
Acquisition Corp., a Washington
corporation and a wholly-owned
subsidiary of PCN, and Wismer-Martin.
Pursuant to the Merger Agreement,
Merger Sub will merge with and into
Wismer-Martin, the separate existence
of Merger Sub will cease, and
Wismer-Martin will be the surviving
corporation and become a wholly-owned
subsidiary of PCN (the "Merger"). At
the effective time of the Merger (the
"Effective Time"), each share of
Wismer-Martin Common Stock issued and
outstanding immediately prior to
Effective Time, except those held by
shareholders who validly perfect
dissenters' rights under the WBCA, will
be converted into the right to receive
(the "Merger Consideration"): (i) an
amount in cash (the "Cash
Consideration") equal to the quotient
obtained by dividing (x) $1,980,000 by
(y) the number of shares of
Wismer-Martin Common Stock outstanding
immediately prior to the Effective Time
(the "Common Share Number") and (ii)
subject to the adjustments described
below, that number (the "Stock
Consideration") of shares of PCN's
Common Stock, par value $.01 per share
("PCN Common Stock"), equal to the
quotient obtained by dividing (x)
935,000 by (y) the Common Share Number.
Assuming that there are no adjustments
to the Merger Consideration, as
described below, and assuming the
exercise in full of 300,000 currently
outstanding options to purchase
Wismer-Martin Common Stock, each share
of Wismer-Martin Common Stock will be
convertible into $0.1191 in cash and
.0562 shares of PCN Common Stock. No
assurances can be made that there will
not be any changes in the foregoing
amount of cash or number of shares of
PCN Common Stock as a result of any one
or more of the adjustments described
below. In particular, and in addition
to the adjustments described in the
following paragraph, in the event that
the Market Price (as defined below) of
PCN Common Stock on the third business
day prior to the Effective Time is less
than or equal to $9.00 per share, then,
at PCN's option, in lieu of the Cash
Consideration and Stock Consideration
described above, the "Merger
Consideration" shall be an amount in
cash equal to (the "Cash Option") (x)
$14,000,000 divided by (y) the Common
Share Number, or $0.8421 in cash per
share, assuming the exercise in full of
300,000 currently outstanding options
to purchase Wismer-Martin Common Stock
and that the Market Price of PCN Common
Stock was $9.00 per share or less.
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1
<PAGE>
- --------------------------------------------------------------------------------
The Merger Agreement provides that the
Stock Consideration (described above)
will be adjusted under the following
circumstances: (i) if the aggregate
Market Price of the Stock Consideration
is less than $9,350,000 ($10.00 per
share) on the third business day
immediately preceding the Effective
Time, then the Stock Consideration
shall be increased to equal such number
of shares of PCN Common Stock as has an
aggregate market value of $9,350,000
and (ii) if the aggregate Market Price
of the Stock Consideration is greater
than $11,453,750 ($12.25 per share) on
the third business day immediately
preceding the Effective Time, then the
Stock Consideration shall be decreased
to equal such number of shares of PCN
Common Stock as has an aggregate market
value of $11,453,750. The Merger
Agreement contains an additional
provision intended to preserve the
tax-free reorganization treatment of
the Merger (so long as the Cash Option
is not exercised), such that the
receipt of the Stock Consideration by
Wismer-Martin shareholders would be on
a tax-free basis, by, based upon
certain assumptions, limiting the
aggregate amount of cash to be received
by both the dissenting and
non-dissenting shareholders of
Wismer-Martin to 20% or less of the
aggregate value of the consideration
(both cash and shares of PCN Common
Stock) to be received by both the
dissenting and the non-dissenting
shareholders of Wismer-Martin. This
provision may result in adjustments
decreasing the aggregate amount of cash
and increasing the aggregate number of
shares of PCN Common Stock to be
received by the non-dissenting
shareholders of Wismer-Martin in the
Merger. This adjustment would be
expected to occur only if a significant
number of shareholders exercise
dissenters' rights. See "The Merger
--Dissenters' Rights." No assurances
can be given that such adjustment will
enable the Merger to qualify as a
tax-free reorganization. See "The
Merger -- Certain Federal Income Tax
Consequences of the Merger." As used
herein, "Market Price" means the
average of the closing price of a share
of PCN Common Stock as reported on the
NASDAQ Stock Market during the fifteen
(15) trading days immediately preceding
the date of determination.
See "The Merger -- General Description
of the Merger; -- Dissenters' Rights;
-- Certain Federal Income Tax
Consequences of the Merger."
Parties to the Merger
PCN .............................. PCN is a leader in developing,
marketing and supporting practice
management software products for
physician practices. PCN's objective is
to establish a large installed base of
physician practice customers who use
PCN's most advanced practice management
software product, the PCN Health
Network Information System, thereby
becoming an important link for the
electronic exchange of information
between physician practices and other
health care providers and
organizations. In furtherance of this
objective, since September 1993, PCN
has acquired seven practice management
software businesses, increasing the
number of physicians associated with
sites which have purchased PCN's
practice management software products
from approximately 2,000 to
approximately 85,000, making PCN one of
the largest providers of practice
management software products in the
United States. PCN plans to migrate
substantially all of its customers to
the PCN Health Network Information
System during the next several years.
In order to rapidly and
cost-effectively supplement its
practice management software product
offerings with knowledge-based clinical
products and services, in January 1996,
PCN formed a joint venture with Glaxo
Wellcome, Inc. ("Glaxo Wellcome"). The
joint venture partnership, HealthPoint
G.P. ("HealthPoint"), will develop and
market clinical information technology
products and services that will provide
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
the clinical information needed at the
point of patient care to enable
physicians and other health care
providers to practice medicine more
efficiently. In March 1996, HealthPoint
introduced its first product,
HealthPoint ACS, a product developed
for medical offices to enable
physicians to, among other things,
manage the clinical information
required for treatment at the point of
care. HealthPoint ACS is expected to be
made commercially available during the
second half of 1996.
PCN's practice management software
products, which, among other things,
automate physician scheduling and
generate patient billings, insurance
claims billings and other financial
reports, include interactive
communication software that links
physician practices with hospitals,
Medicare/Medicaid carriers, commercial
insurance carriers, claims
clearinghouses, clinical laboratories,
pharmacies, HMOs and other health care
organizations who have established
electronic communication links under
agreements with PCN. The PCN Health
Network Information System is designed
to become the common practice
management software platform used by
substantially all of PCN's physician
practice customers and, as an
integrated unit with HealthPoint's
products, is expected to provide
physicians with comprehensive
financial, administrative and clinical
applications. The PCN Health Network
Information System will primarily
manage the business elements of the
physician's practice and HealthPoint's
software products and services will
primarily provide physicians with
clinical applications and functionality
intended to assist physicians in the
clinical aspects of their practices.
See "Incorporation of Certain Documents
By Reference," "Selected Historical and
Unaudited Pro Forma Financial
Information" and "Unaudited Pro Forma
Condensed Consolidated Financial
Statements."
Wismer-Martin .................... Wismer-Martin was formed to develop,
market, install and support
microcomputer practice management
systems and related services designed
for the medical and dental professions.
Wismer-Martin was founded as a sole
proprietorship in February of 1980 and
was incorporated on November 29, 1982
under the laws of the State of
Washington as Professional Software
Associates, Inc. The company changed
its name to Wismer-Martin, Inc.
effective August 1, 1985. In February
1994, Wismer-Martin acquired Integrated
Health Systems, Inc. ("IHS"), a company
that develops and licenses software
programs for hospitals and related
entities. Wismer-Martin's principal
executive offices are located at 12828
N. Newport Highway, Mead, Washington
99021.
Wismer-Martin derives revenue from
systems sales and maintenance, forms
and other services. Systems sales
include sales of physician practice
management systems, health information
networks, and hospital information
systems to new customers and sales of
system upgrades and add-ons to existing
customers. Systems sales to new
customers include software licensing,
hardware, installation, training, and
support contracts for software and
hardware maintenance. System upgrades
include hardware, installation,
software licensing and training. System
add-ons include additional peripheral
hardware and installation and software
licensing.
Merger Sub ....................... Merger Sub, a wholly-owned subsidiary
of PCN, was formed to facilitate the
Merger and has engaged in no activities
other than activities incidental to the
Merger.
Special Meeting .................... At the Special Meeting, the
shareholders of Wismer-Martin will be
asked to consider and vote upon (i) a
proposal to approve the Plan of Merger
and (ii) such other matters as may
properly come before the Special
Meeting. The Wismer-Martin Board has
fixed the close of business on August
1,
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
1996, as the record date for the
determination of holders of
Wismer-Martin Common Stock entitled to
notice of and to vote at the Special
Meeting. See "Special Meeting."
The Wismer-Martin Board approved the
Plan of Merger and the transactions
contemplated thereby by the unanimous
vote of its directors and recommends
that Wismer-Martin shareholders vote
"FOR" approval of the Plan of Merger.
See "The Merger -- Background of the
Merger; --Recommendations of the Boards
of Directors; Effects of and Reasons
for the Merger."
Required Vote ...................... The affirmative vote of the holders of
at least two-thirds of the outstanding
shares of Wismer-Martin Common Stock
entitled to vote thereon is required to
approve the Plan of Merger. See
"Special Meeting-- Voting Rights."
Certain shareholders of Wismer-Martin
Common Stock (collectively, the
"Majority Shareholders"), who
beneficially own an aggregate number of
shares with votes sufficient to approve
the Plan of Merger and all other
matters to be voted upon at the
Wismer-Martin Special Meeting, have
each entered into an Option and Voting
Agreement with PCN (the "Option and
Voting Agreements") pursuant to which,
among other things, they each have
agreed to vote their shares of
Wismer-Martin Common Stock in favor of
the Plan of Merger. Accordingly, the
approval of the Plan of Merger by the
holders of Common Stock is assured
without the vote of any other
shareholder. See "Security Ownership of
Certain Persons and Option and Voting
Agreements" and "The Merger-- Interests
of Certain Persons in the Merger--
Option and Voting Agreements."
If a shareholder returns a signed proxy
card, but does not indicate how his or
her shares are to be voted, the shares
represented by the proxy card will be
voted "FOR" the Plan of Merger.
Recommendations of the
Wismer-Martin Board of
Directors; Effects of
and Reasons for the Merger ......... The Wismer-Martin Board believes that
the terms of the Merger are fair to,
and in the best interests of,
Wismer-Martin and its shareholders.
Accordingly, the Wismer-Martin Board
has unanimously approved the Plan of
Merger and the transactions
contemplated thereby and recommends
approval of the Plan of Merger by
Wismer-Martin shareholders. The
recommendation to Wismer-Martin's
shareholders that they approve the Plan
of Merger is the result of the
extensive process of exploring
strategic alternatives for
Wismer-Martin. As a result of that
process, the Wismer-Martin Board
believes that the Merger is an
excellent opportunity for
Wismer-Martin's shareholders. The
Wismer-Martin Board believes that the
Merger offers Wismer-Martin's
shareholders the opportunity to
participate in an enterprise with the
financial strength and technical
support necessary to capitalize on the
opportunities in the changing and
increasingly competitive practice
management software industry and that,
without the Merger or a similar
strategic transaction, Wismer-Martin
may lack the financial and other
resources necessary to maximize its
competitive potential beyond the near
term.
See "The Merger -- Background of the
Merger; -- Recommendations of the
Wismer-Martin Board of Directors;
Effects of and Reasons for the Merger
and "Management Discussion and Analysis
--Liquidity and Capital Resources."
Risk Factors ....................... In connection with the proposed Merger,
holders of shares of Wismer-Martin
Common Stock should consider certain
risk factors relevant to the business
of PCN. Such risk factors include,
among others, (i) PCN's strategy of
acquiring established practice
management software businesses and the
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
impact of such strategy on future
operating results, (ii) uncertainty of
the acceptance of products and
migration of existing customers to a
common practice management software
platform, (iii) PCN's ability to keep
pace with rapidly changing technology,
and (iv) the highly competitive nature
of the practice management software
industry. See "Risk Factors Regarding
PCN."
Security Ownership of Certain
Persons and Option and
Voting Agreements .................. As of July 31, 1996, Wismer-Martin's
directors, executive officers and their
affiliates and associates, as a group,
may be deemed to own beneficially
approximately 53.1% of the outstanding
shares of Wismer-Martin Common Stock
(assuming exercise of options held by
directors and executive officers). Each
of the directors and officers of
Wismer-Martin has advised Wismer-Martin
that he or she intends to vote or
direct the vote of all the outstanding
shares of Wismer-Martin Common Stock
over which he or she has voting control
in favor of the Plan of Merger. The
Majority Shareholders, consisting of
Ronald and Linda Holden, Stanley T. and
Beverly J. Hatch, Georgia L. Knapp,
Gertrude L. Holden, John F. Perez,
Ivory & Sime Enterprise Capital PLC,
Glen E. and Judith L. Martin, Thomas E.
and Maureen T. Holden, Harry D. Holden,
and James F. Etter, beneficially own an
aggregate of approximately 71% of the
outstanding shares of Wismer-Martin
Common Stock representing a number of
votes sufficient to approve the Plan of
Merger. The Majority Shareholders have
each agreed in a separate option and
voting agreement with PCN to, among
other things, vote their shares of
Wismer-Martin Common Stock entitled to
vote at the Special Meeting in favor of
approval of the Plan of Merger.
Further, each Option and Voting
Agreement provides that, under certain
circumstances, PCN may purchase the
Majority Shareholder's shares of
Wismer-Martin Common Stock.
See "Security Ownership of Certain
Persons and Option and Voting
Agreements" and "The Merger --Interests
of Certain Persons in the Merger --
Option and Voting Agreements."
Accounting Treatment ............... It is the intention of PCN and
Wismer-Martin that the Merger will be
accounted for by the purchase method of
accounting for accounting and financial
reporting purposes.
See "The Merger -- Accounting
Treatment."
Conditions to the Merger;
Termination of the Merger
Agreement .......................... In addition to the approval of the Plan
of Merger by the shareholders of
Wismer-Martin, the consummation of the
Merger is subject to the satisfaction
or waiver of certain other conditions,
including among others, (i) listing on
the NASDAQ Stock Market of PCN Common
Stock issuable to Wismer-Martin
shareholders in the Merger, (ii)
effectiveness of the Registration
Statement, (iii) there being in effect
no injunction or other order, legal
constraint or prohibition preventing
the consummation of the Merger, and
(iv) shareholders holding no more than
5% of any class of the capital stock of
Wismer-Martin having demanded
dissenters' rights under the Washington
Business Corporation Act (the "WBCA").
The Merger Agreement may be terminated
upon the occurrence of certain events,
including, by either PCN or
Wismer-Martin if the Merger shall not
have been consummated by October 15,
1996.
See "The Merger Agreement -- Conditions
to the Merger; - Termination."
Interests of Certain Persons
in the Merger ...................... In considering the recommendation of
the Wismer-Martin Board with respect to
the Plan of Merger, Wismer-Martin's
shareholders should be aware
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
that certain members of Wismer-Martin's
senior management and the Wismer-Martin
Board have certain interests in the
Merger that are in addition to the
interests of shareholders of
Wismer-Martin generally. The
Wismer-Martin Board was aware of these
interests and considered them, among
other matters, in approving the Merger
Agreement and the transactions
contemplated thereby.
On June 20, 1996, PCN entered into a
two-year consultation agreement with
Ronald Holden, the current Chairman of
the Wismer-Martin Board and Chief
Executive Officer of Wismer-Martin.
See "The Merger -- Interests of Certain
Persons in the Merger -- Consultation
Agreement."
The Majority Shareholders have each
agreed in separate Option and Voting
Agreements with PCN to, among other
things, vote their shares of
Wismer-Martin Common Stock entitled to
vote at the Special Meeting in favor of
approval of the Plan of Merger.
Further, each Option and Voting
Agreement provides that, under certain
circumstances, PCN may purchase the
Majority Shareholder's shares of
Wismer-Martin Common Stock.
See "Security Ownership of Certain
Persons and Option and Voting
Agreements" and "The Merger --Interests
of Certain Persons in the Merger --
Option and Voting Agreements."
Comparison of Shareholder
Rights ............................. The rights of Wismer-Martin's
shareholders are governed by the WBCA,
Wismer-Martin's Articles of
Incorporation, as amended (the
"Wismer-Martin Articles") and
Wismer-Martin's By-Laws (the
"Wismer-Martin By-Laws"). As of the
Effective Time, shareholders of
Wismer-Martin will become shareholders
of PCN. As such, their rights will
thereafter be governed by the New
Jersey Business Corporation Act (the
"NJBCA"), the PCN Amended and Restated
Certificate of Incorporation (the "PCN
Certificate") and PCN's By-Laws (the
"PCN By-Laws").
See "Comparison of Shareholder Rights"
for a summary of the material
differences between the rights of
holders of PCN Common Stock and the
rights of holders of Wismer-Martin
Common Stock.
Dissenters' Rights ................. Because consummation of the Plan of
Merger requires the approval of
Wismer-Martin's shareholders, holders
of Wismer-Martin Common Stock are
entitled to dissent with respect to
their shares of Wismer-Martin Common
Stock in connection with the Merger and
thereby receive in cash the "fair
value" of their shares in lieu of the
consideration provided for in the
Merger Agreement, as more fully
described hereafter. In order to
properly perfect such dissenters'
rights, holders of Wismer-Martin Common
Stock must comply with the procedural
requirements of the WBCA, including,
without limitation, not voting in favor
of the Plan of Merger and making a
written demand for payment before the
date of the Special Meeting. See "The
Merger -- Dissenters' Rights" and Annex
B hereto.
Certain Federal Income
Tax Consequences of the
Merger ............................. See "The Merger-- Certain Federal
Income Tax Consequences of the Merger"
for a discussion of the treatment of
the Merger for federal income tax
purposes.
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6
<PAGE>
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
The following selected financial data are derived from the historical
consolidated financial statements of PCN and Wismer-Martin and should be read in
conjunction with such statements and the related notes. The selected financial
data presented for PCN for the years ended December 31, 1995, 1994, 1993, 1992
and 1991 are audited and, with respect to the years ended December 31, 1995,
1994 and 1993, are incorporated herein by reference from PCN's Annual Report on
Form 10-K for the year ended December 31, 1995. The PCN financial data presented
for the three months ended March 31, 1996 and 1995 are unaudited and are derived
from PCN's unaudited Consolidated Financial Statements which are incorporated by
reference herein from PCN's Quarterly Report on Form 10-Q for the period ended
March 31, 1996. The selected financial data presented for Wismer-Martin for the
years ended June 30, 1995, 1994, 1993, 1992 and 1991 are audited and, with
respect to the years ended June 30, 1995 and 1994, are incorporated herein by
reference from Wismer-Martin's Annual Report on Form 10-KSB for the year ended
June 30, 1995. The Wismer-Martin financial data presented for the nine months
ended March 31, 1996 and 1995 are unaudited and are derived from Wismer-Martin's
unaudited Consolidated Financial Statements which are incorporated by reference
herein from the Quarterly Report on Form 10-QSB for the period ended March 31,
1996. The unaudited Consolidated Financial Statements for the periods ending
March 31, 1996 and 1995 for both PCN and Wismer-Martin include all adjustments,
consisting of normal accruals which, in the opinion of management, are necessary
for a fair presentation of PCN's financial position and the results of
operations for these periods. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the entire year.
(Tables follow)
- --------------------------------------------------------------------------------
7
<PAGE>
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<TABLE>
<CAPTION>
PCN CONSOLIDATED SELECTED FINANCIAL DATA AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
(in thousands, except per share data)
Three Months Ended March 31, Year Ended December 31,
------------------------------------ ---------------------------------------
Pro Forma Actual Pro Forma Actual
As Adjusted ---------------------- As Adjusted --------------------------
1996(1) 1996 1995 1995(1) 1995(2) 1994(3)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................... $ 26,323 $ 21,027 $ 6,458 $ 109,092 $ 41,805 $ 20,504
--------- --------- --------- --------- --------- ---------
Costs and expenses:
Cost of revenues ......................... 11,313 8,795 1,346 52,026 16,289 6,076
Research and development ................. 1,771 1,111 439 6,511 2,219 1,839
Selling and marketing .................... 2,935 1,705 287 12,589 3,038 2,145
General and administrative ............... 6,864 4,085 2,722 35,668 13,238 7,386
Acquired technology in process ........... -- -- -- -- 14,516 --
Restructuring ............................ -- -- -- 3,072 3,072 --
Write-down of assets and other charges ... -- -- -- 1,477 1,477 --
Interest expense, net of interest income . 487 635 366 3,738 875 1,709
Gain on retirement of software ........... -- -- -- -- -- --
Charge related to issuance of warrants ... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense
(benefit), loss on equity investment
and extraordinary items .................. 2,953 4,696 1,298 (5,989) (12,919) 1,349
Income tax expense (benefit) ............... 986 986 27 (1,237) (1,419) 102
--------- --------- --------- --------- --------- ---------
Income (loss) before loss on equity
investment and extraordinary items ....... 1,967 3,710 1,271 (4,752) (11,500) 1,247
Loss on equity investment, net of taxes .... (395) (395) -- -- -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary items ... 1,572 3,315 1,271 (4,752) (11,500) 1,247
Extraordinary items:
Excess carrying value of preferred stock
over liability discharged .............. -- -- -- -- -- --
Gain (loss) from the extinguishment of
capital lease obligations and debt ..... -- -- (180) -- (180) --
--------- --------- --------- --------- --------- ---------
Net income (loss) .......................... 1,572 3,315 1,091 (4,752) (11,680) 1,247
Forfeited (accrued) dividends on
preferred stock .......................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) available to common
shareholders ............................. $ 1,572 $ 3,315 $ 1,091 $ (4,752) $ (11,680)(4) $ 1,247
========= ========= ========= ========= ========= =========
</TABLE>
PCN CONSOLIDATED SELECTED FINANCIAL DATA
AND UNAUDITED PRO FORMA FINANCIAL INFORMATION (Continued)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
Actual
-----------------------------------
1993(3) 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................... $ 6,109 $ 3,124 $ 2,101
--------- --------- ---------
Costs and expenses:
Cost of revenues ......................... 10,255 7,850 9,209
Research and development ................. 898 678 561
Selling and marketing .................... 1,717 1,441 910
General and administrative ............... 6,454 7,877 5,571
Acquired technology in process ........... 10,872 -- --
Restructuring ............................ 3,165 -- --
Write-down of assets and other charges ... 3,300 -- --
Interest expense, net of interest income . 942 1,242 4,909
Gain on retirement of software ........... -- -- (123)
Charge related to issuance of warrants ... -- -- 2,491
--------- --------- ---------
Income (loss) before income tax expense
(benefit), loss on equity investment
and extraordinary items .................. (31,494) (15,964) (21,427)
Income tax expense (benefit) ............... -- -- --
--------- --------- ---------
Income (loss) before loss on equity
investment and extraordinary items ....... (31,494) (15,964) (21,427)
Loss on equity investment, net of taxes .... -- -- --
--------- --------- ---------
Income (loss) before extraordinary items ... (31,494) (15,964) (21,427)
Extraordinary items:
Excess carrying value of preferred stock
over liability discharged .............. -- -- (2,987)
Gain (loss) from the extinguishment of
capital lease obligations and debt ..... 8,498 -- --
--------- --------- ---------
Net income (loss) .......................... (22,996) (15,964) (24,414)
Forfeited (accrued) dividends on
preferred stock .......................... 2,957 (2,896) (250)
--------- --------- ---------
Net income (loss) available to common
shareholders ............................. $ (20,039) $ (18,860) $ (24,664)
========= ========= =========
</TABLE>
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8
<PAGE>
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PCN CONSOLIDATED SELECTED FINANCIAL DATA
AND UNAUDITED PRO FORMA FINANCIAL INFORMATION (Continued)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31, Year Ended December 31,
--------------------------------- ----------------------
Pro Forma Actual Pro Forma
As Adjusted ------------------- As Adjusted Actual
1996(1) 1996 1995 1995(1) 1995(2)
-------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
SHARE INFORMATION:
Primary and Fully-diluted
Earnings (loss) per common share:
Before extraordinary items .............. $ 0.03 $ 0.07 $ 0.03 $ (0.09) $ (0.29)
Extraordinary items ..................... -- -- -- -- --
------- ------- ------- -------- --------
Earnings (loss) ......................... $ 0.03 $ 0.07 $ 0.03 $ (0.09) $ (0.29)
======= ======= ======= ======== ========
Primary weighted average number of
common shares outstanding (5).......... 57,239 49,864 39,358 50,066 40,068
Fully-diluted weighted average number
of common shares outstanding (5)....... 57,477 50,102 40,319 50,066 40,068
Book value............................... $1.83 $0.76 $2.04 $0.68
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Actual
-----------------------------------------------
1994(3) 1993(3) 1992 1991
------- -------- -------- --------
<S> <C> <C> <C> <C>
SHARE INFORMATION (Continued):
Primary and Fully-diluted
Earnings (loss) per common share:
Before extraordinary items .............. $ 0.04 $ (1.38) $ (2.19) $ (3.77)
Extraordinary items ..................... -- 0.41 -- (0.52)
------- -------- -------- --------
Earnings (loss) ......................... $ 0.04 $ (0.97) $ (2.19) $ (4.29)
======= ======== ======== ========
Primary weighted average number of
common shares outstanding (5).......... 35,634 20,688 8,601 5,746
Fully-diluted weighted average number
of common shares outstanding (5)....... 35,634 20,688 8,601 5,746
Book value...............................
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1996
------------------------- At December 31,
Pro Forma ------------------------------------------------------
As Adjusted (1) Actual 1995 1994 1993 1992 1991
------------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............... $ 40,177 $ 9,815 $ 15,517 $ 2,512 $ 9,671 $ 1,472 $18,270
Working capital (deficit) ............... 19,679 (6,938) (9,006) (3,971) (2,675) (790) 11,452
Current assets .......................... 72,721 39,162 42,326 8,731 11,890 4,141 19,637
Intangible assets, net .................. 75,571 52,741 53,701 8,342 6,707 1,612 2,040
Total assets ............................ 161,956 102,910 100,260 18,233 20,504 15,604 31,807
Current liabilities ..................... 53,042 46,100 51,332 12,702 14,565 4,931 8,185
Long-term liabilities ................... 13,651 22,799 19,730 14,105 15,807 16,204 10,297
Shareholders' equity (deficiency) ....... 95,263 34,011 29,198 (8,574) (9,868) (5,531) 13,325
</TABLE>
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9
<PAGE>
- --------------------------------------------------------------------------------
WISMER-MARTIN CONSOLIDATED SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
----------------- ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ........................................ $7,668 $ 7,830 $10,482 $14,397 $13,085 $12,880 $8,676
------ ------- ------- ------- ------- ------- ------
Costs and expenses:
Cost of revenues .............................. 2,855 4,058 5,140 7,075 7,615 4,412 3,197
Research and development ...................... 596 600 577 252 27 189 71
Selling and marketing ......................... 1,016 1,896 2,334 1,994 1,196 2,786 1,963
General and administrative .................... 1,978 2,819 3,780 3,921 5,325 5,542 3,328
Interest expense, net of interest income ...... 110 282 370 164 184 114 186
------ ------- ------- ------- ------- ------- ------
Income (loss) before income tax expense (loss) .. 1,113 (1,825) (1,719) 991 (1,262) (163) (67)
Income tax expense (benefit) .................. -- (343) (342) 265 12 (356) --
------ ------- ------- ------- ------- ------- ------
Income (loss) before cumulative effect of
change in accounting principle................. 1,113 (1,482) (1,377) 726 (1,274) 193 (67)
Cumulative effect on change in
accounting principle........................... -- -- -- 28 -- -- --
Net income (loss) available to
common shareholders ........................... $1,113 $ (1,482) $ (1,377) $ 698 $ (1,274) $ 193 $ (67)
====== ======= ======= ======= ======= ======= ======
SHARE INFORMATION:
Actual:
Primary and fully-diluted earnings (loss)
per common share ............................ $0.07 $(0.15) $(0.14) $0.07 $(0.14) $0.02 $(0.01)
Weighted average number of common
shares outstanding .......................... 14,880 9,686 9,726 9,797 9,198 9,104 8,939
Book value .................................... $0.18 $(0.18)
Pro Forma -- Equivalent combined per
Wismer-Martin share:
Primary and fully-diluted earnings (loss)
per common share ............................ $-- (6) $-- (6)
Book value .................................... $0.10 $ 0.11
</TABLE>
<TABLE>
<CAPTION>
At June 30,
At March 31, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................................. $ 540 $ 91 $ 588 $ 203 $ 386 $ 148
Working capital (deficit) ................................. (918) (2,691) 117 (763) 786 1
Current assets ............................................ 1,613 1,316 4,386 4,263 6,203 3,712
Intangible assets, net .................................... 3,430 3,129 1,881 1,327 806 895
Total assets .............................................. 6,386 6,247 8,478 7,228 8,824 6,497
Current liabilities ....................................... 2,531 4,007 4,269 5,026 5,417 3,711
Long-term liabilities ..................................... 852 4,034 4,748 1,031 1,497 1,096
Shareholders' equity (deficiency) ......................... 3,003 (1,794) (539) 1,171 1,910 1,690
(Notes on following page)
</TABLE>
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10
<PAGE>
- --------------------------------------------------------------------------------
(footnotes for preceding page)
- ----------
(1) Pro forma as adjusted gives effect to (i) the proposed acquisition by PCN
of Wismer-Martin, (ii) the acquisition by PCN of certain assets related to
the practice management software and other software businesses of CUSA
Technologies, Inc. (the "CTI Business"), and (iii) the completion by PCN on
May 10, 1996 of the public offering of 6,440,000 shares of its Common Stock
at $10.00 per share (the "1996 Offering"), of which 1,932,217 shares were
issued by PCN to Equifax, Inc. ("Equifax") upon the conversion in full of
the five year, $10,000,000 principal amount convertible subordinated
promissory note issued to Equifax on February 15, 1995 (the "Equifax
Note"). In addition to the above, pro forma as adjusted for the
Consolidated Statement of Operations Data for the year ended December 31,
1995 also gives effect to PCN's February 1995 public offering of PCN Common
Stock, October 1995 Regulation S offering of PCN Common Stock and
convertible preferred stock and the acquisition of Versyss and the PMS
Business and the related financings.
(2) Includes the operations of the Practice Management Systems Corp. business
(the "PMS Business") from April 24, 1995 and Versyss Incorporated
("Versyss") from October 27, 1995.
(3) The year ended December 31, 1994 includes the operations of Wallaby
Software Corporation ("Wallaby") and Calyx Corporation ("Calyx") for the
full year, the operations of the DOM/2 business from March 11, 1994 and the
operations of the Acclaim business from November 15, 1994. The year ended
December 31, 1993 includes the operations of Calyx from September 23, 1993.
(4) The year ended December 31, 1995 includes charges of $14,516 related to
acquired technology in process and $5,579 principally related to provisions
for restructuring and the write-down of assets and other charges. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and PCN's Consolidated Financial Statements included
elsewhere in this report.
(5) Primary and fully diluted earnings per common share are the same, as the
assumed exercise of outstanding stock options and warrants would not cause
a material dilutive effect on the earnings per common share for the year
ended December 31, 1994 and would be anti-dilutive in the calculation of
the loss per common share for December 31, 1995, 1993, 1992 and 1991. As of
December 31, 1995, warrants and options to purchase 10,244,280 shares of
Common Stock were outstanding, of which warrants and options to purchase
3,249,106 shares were exercisable on such date.
(6) Less than $0.01 income (loss) per share for the respective period.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
COMPARATIVE MARKET PRICE DATA
The PCN Common Stock is traded in the over-the-counter market ("OTC") and
is quoted on the NASDAQ National Market under the symbol "PCNI." The
Wismer-Martin Common Stock is traded in the OTC and is quoted on the Spokane
Quotation System, Inc. ("SQSI") under the symbol "WSMM."
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the PCN Common Stock on the NASDAQ National
Market and of the high and low bid prices of Wismer-Martin Common Stock on the
SQSI, in each case based on published financial sources.
PCN Wismer-Martin
Common Stock Common Stock*
--------------- ------------------
High Low High Low
------ ------ ------ ------
Calendar 1994
First Quarter.................. $5.88 $3.63 $0.50 $0.32
Second Quarter................. 4.88 3.38 2.00 1.50
Third Quarter.................. 6.38 3.38 3.25 2.50
Fourth Quarter................. 6.50 4.25 2.25 1.75
Calendar 1995
First Quarter.................. 5.75 3.63 2.25 1.50
Second Quarter................. 5.13 3.69 2.50 1.50
Third Quarter.................. 6.75 3.75 2.25 0.75
Fourth Quarter................. 9.13 5.13 1.00 0.50
Calendar 1996
First Quarter.................. 14.88 8.50 0.56 0.25
Second Quarter................. 14.88 8.63 0.75 0.62
Third Quarter
(through August 7, 1996)..... 11.88 6.88 0.62 0.40
- ----------
* The prices reported reflect inter-dealer prices, without regard to retail
mark-ups, mark-downs or commissions, and do not necessarily represent actual
transactions.
Neither PCN nor Wismer-Martin has ever declared a cash dividend on their
common stock. Both PCN and Wismer-Martin currently intend to retain any future
earnings to finance growth and development of their respective businesses and,
therefore, do not anticipate paying cash dividends on their common stock in the
foreseeable future.
As of August 7, 1996, there were approximately 509 and 384 holders of
record of PCN Common Stock and Wismer-Martin Common Stock, respectively.
Wismer-Martin shareholders are urged to obtain current market quotations
for the PCN Common Stock and the Wismer-Martin Common Stock before deciding how
to vote.
The Merger was publicly announced at the commencement of trading on June
20, 1996. The closing sale price of a share of PCN Common Stock on the NASDAQ
National Market on June 20, 1996, was $10.63, and, although there were no actual
sales on such date, the bid and asked price of a share of Wismer-Martin Common
Stock on the SQSI on such date was $0.63 and $0.81, respectively.
On August 7, 1996 (the last practicable date prior to the mailing of this
Proxy Statement and Prospectus), the closing sale price of a share of PCN Common
Stock on the NASDAQ National Market was $10.75, and the bid and asked price of a
share of Wismer-Martin Common Stock on the SQSI was $0.40 and $0.62,
respectively.
- --------------------------------------------------------------------------------
12
<PAGE>
RISK FACTORS REGARDING PCN
In addition to the other information in this Proxy Statement and
Prospectus, holders of Wismer-Martin Common Stock should carefully consider the
factors set forth below before voting with respect to the Merger.
Acquisition Strategy and Impact on Future Operating Results. A key element
of PCN's strategy is to acquire established practice management software
businesses in order to increase PCN's installed base of physician practice
customers. There is significant competition for acquisitions of practice
management software businesses and PCN is in competition with companies that may
have significantly greater financial resources. Further, as competition
intensifies due to ongoing consolidation in the practice management software
industry, the costs of capitalizing on such opportunities may increase. As a
result, although PCN is actively pursuing potential acquisitions, there can be
no assurance that any potential acquisitions will be consummated. Expansion and
growth of PCN's business as a result of acquisitions may also place significant
demands on PCN's financial and management resources. If PCN is unable to manage
its growth effectively, the quality of its services, its ability to recruit and
retain key personnel or physician practice customers and its results of
operations could be materially and adversely affected. In addition, the ability
of PCN to meet its objectives will depend on its ability to effectively
integrate any additional acquisitions into PCN's existing corporate structure.
No assurance can be given that PCN will be able to operate or successfully
integrate the acquired businesses profitably or otherwise successfully implement
its expansion strategy. PCN may finance any future acquisitions through
borrowings or the issuance of debt or equity securities. Any issuance of equity
securities could have a dilutive effect on the holders of PCN Common Stock. In
addition, in connection with acquisitions, PCN may acquire intangible assets,
including goodwill. When factors indicate that these intangible assets should be
evaluated for possible impairment, PCN may be required to reduce the carrying
value of its intangible assets, which could have a material adverse effect on
the results of operations of PCN during the periods in which such reduction is
recognized. In addition, in connection with certain of its past acquisitions,
PCN acquired technology in process that had not achieved technological
feasibility at the date of acquisition and had no alternative future uses. As a
result, PCN has, and to the extent any such acquired technology in process is
acquired as part of future acquisitions may, charge the fair value of such
acquired technology in process against operations at the time of acquisition.
Any such future charges could have a material adverse effect on the results of
operations of PCN during the period in which such charges are taken.
Uncertainty of Acceptance of Product and Migration Strategy. In September
1994, PCN introduced its most advanced practice management software product, the
PCN Health Network Information System. This product is designed to become the
common practice management software platform used by substantially all of PCN's
physician practice customers and to provide enhanced communication link
capabilities. PCN's future growth and profitability will be effected by its
ability to migrate its customers, including customers acquired through
acquisitions, to the PCN Health Network Information System. While to date
migrations have generally proceeded in accordance with management's plan, no
assurance can be given that such migrations will continue. In the event PCN is
unable to migrate its customers, PCN may be required to incur the additional
expense of maintaining and supporting a number of different practice management
software products simultaneously and PCN's ability to connect new Connecting
Service Providers may be adversely affected. There can be no assurance that
PCN's efforts to migrate its customers, particularly customers acquired through
acquisitions, to the PCN Health Network Information System will be successful.
History of Significant Losses. Although for the year ended December 31,
1994, PCN generated net income of $1,247,219, for the year ended December 31,
1995 and the three year period ended December 31, 1993, PCN sustained a net loss
of $11,680,187 and $63,563,000, respectively. The net loss in 1995 was the
result of charges taken by PCN for acquired technology in process, provisions
for restructuring, the write-down of assets and other charges and the
extinguishment of debt. PCN's net losses prior to 1994 resulted principally from
the development of its software and communication link products, as well as the
capital intensive nature of PCN's prior direct sales expansion strategy. There
can be no assurance that PCN will generate net income in the future.
Acceptance of HealthPoint Products; Control of Joint Venture and Allocation
of Profits and Losses. In January 1996, PCN and Glaxo Wellcome formed
HealthPoint, a joint venture general partnership owned equally by wholly-owned
subsidiaries of PCN and Glaxo Wellcome (the "Company Partner" and the "Glaxo
Wellcome Partner," respectively), to develop and market clinical information
technology products and services to health care customers. PCN's practice
management software products are expected to continue to focus on the business
aspects of physician customers' practices and HealthPoint's software products
and services are expected to provide physician customers with clinical
applications and functionality. PCN has agreed that HealthPoint's products and
services will, generally,
13
<PAGE>
be the exclusive clinical information technology products and services offered
by PCN to its customers. As a result, PCN's future growth and profitability will
depend in part upon future acceptance of HealthPoint's products and services. In
March 1996, HealthPoint introduced its first product, HealthPoint ACS, which is
expected to be commercially available during the second half of 1996. There can
be no assurance that HealthPoint's products will be successful.
A management committee comprised of two Glaxo Wellcome Partner
representatives, two Company Partner representatives and one representative from
HealthPoint's management will oversee the venture's operations. Accordingly, PCN
does not have unilateral control over the strategic direction and operations of
HealthPoint. Glaxo Wellcome may at any time have economic, business or legal
interests or goals that are inconsistent with those of HealthPoint or PCN. As a
result, no assurance can be given that HealthPoint will not establish objectives
or operate its business in a manner which diverges from or is inconsistent or
competitive with the strategy and objectives of PCN. In addition, losses
incurred by Healthpoint will generally be allocated between the Glaxo Wellcome
Partner and PCN Partner in proportion to their respective cash contributions
(approximately 85% to the Glaxo Wellcome Partner and 15% to PCN Partner), while
any profits will generally be allocated equally between the partners. The
HealthPoint partners have agreed to contribute an aggregate of $50 million ($43
million to be contributed by the Glaxo Wellcome Partner and $7 million to be
contributed by PCN Partner) to fund HealthPoint's initial operating expenses. As
a result, PCN expects to incur losses during the startup phase of HealthPoint's
business.
Uncertainty of Data Product Business; Regulatory Authority For and
Potential Liability Associated with Data Product Business. PCN expects that an
important aspect of HealthPoint's strategy will be to utilize anonymous
aggregate clinical data generated by, including data electronically accessed
from, the databases of its physician practice customers to develop and market
clinical and analytical information products and services, including those
related to the development and support of the disease management efforts of
health care suppliers, including potential pharmaceutical company customers of
the venture. Neither HealthPoint nor PCN has marketed any such products or
services. HealthPoint has not determined the nature of the products and services
to be developed or established a marketing strategy with respect to any such
products and services. There can be no assurance that any such products or
services can be successfully marketed and sold. In addition, HealthPoint's
ability to obtain a commercially significant pool of data is dependent on
HealthPoint creating an installed base of HealthPoint ACS customers. No
assurance can be given that a sufficient base of HealthPoint ACS customers will
be established or that such customers will utilize the system in a manner which
will render the pool of available data commercially significant. Further, no
assurance can be given that customers will not prohibit such access.
There are a number of legal and regulatory issues relating to the
utilization and sharing of anonymous aggregate clinical data that PCN and
HealthPoint are currently evaluating. There can be no assurance that future
interpretations by regulatory authorities of existing laws and regulations or
future laws and regulations will not directly or indirectly restrict the
collection or dissemination of information derived from patient records. The
American Medical Association (the "AMA") has issued a Current Opinion to the
effect that a physician that does not obtain a patient's consent to disclosure
of patient information, including anonymous disclosure, violates the AMA's
ethical standards with respect to patient confidentiality. While the AMA's
Current Opinions are not law, they may influence physicians' willingness to
obtain patient consents or agree to permit HealthPoint to access clinical data
in their systems without such consents. Any such restrictions could have a
material adverse effect on HealthPoint's ability to market certain clinical and
analytical products and services. Although HealthPoint intends to safeguard
patient privacy when clinical data is accessed, if a patient's privacy is
violated, HealthPoint could be liable for damages incurred by such patients and
customers.
Uncertain Availability of Additional Funding. PCN expects that its
operating cash flow will be sufficient to fund PCN's working capital
requirements (including research and development) at least through December
1997, and enable it to continue its acquisition strategy. PCN's ability to
satisfy its working capital obligations will, however, be dependent upon its
future performance, which is subject to general economic conditions and to
financial, business and other factors, including factors beyond PCN's control.
PCN's ability to continue its acquisition strategy will be affected by the
extent and pace at which PCN utilizes its available resources for acquisitions.
Accordingly, PCN may in the future be required to seek additional sources of
financing, including borrowing and/or the sale of equity securities. PCN has not
sought and does not currently have a revolving credit facility and, if a
shortfall occurs, alternative sources of financing would be necessary in order
for PCN to meet its liquidity requirements. There can be no assurance that any
additional financing would be available on acceptable terms or at all. If
additional funds are raised by issuing equity securities, further dilution to
shareholders may result.
14
<PAGE>
Technological Changes. The market for physician practice management systems
is characterized by continual change and improvement in computer hardware and
software technology, as well as in services. The PCN Health Network Information
System is a UNIX-based system which was first introduced in September 1994. In
March 1996, HealthPoint introduced its first product, HealthPoint ACS, which is
expected to be commercially available during the second half of 1996. Although
PCN believes that its products and services continue to be competitive in the
marketplace, PCN intends to continue to upgrade and enhance the functionality
and capabilities of its products and services and expects that HealthPoint will
do the same. PCN's success will depend considerably upon PCN's and HealthPoint's
ability to enhance its current products and services, to introduce new products
and services which keep pace with technological and market developments and to
address the increasingly sophisticated needs of its customers. There can be no
assurance that either PCN or HealthPoint will be successful in developing and
marketing, on a timely basis, product or service enhancements or new products or
services that respond to advances by others, or that its new products or
services will adequately address the needs of, or be accepted by, the market.
Reliance on Independent Resellers. PCN relies heavily on independent
resellers for the sale and distribution of its products, with software and
hardware sales by such resellers accounting for approximately 63% of PCN's total
software and hardware sales during the year ended December 31, 1995. Although
PCN is not dependent on one or a small number of resellers for a significant
percentage of its total revenues, the loss of a significant number of resellers
during a short period of time could have a material adverse effect on PCN's
results of operations and the migration of its physician practice customers from
their current practice management software products to the PCN Health Network
Information System.
Dependence on Proprietary Technology. PCN relies on a combination of trade
secrets, copy right and trademark laws, technology and nondisclosure and other
contractual provisions to protect its proprietary rights in its products. There
can be no assurance that these protections will be adequate or that PCN's
competitors will not independently develop technologies that are substantially
equivalent or superior to PCN's technology. Although PCN believes that its
products, trademarks and other proprietary rights do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against PCN in the future, that any
such assertion of infringement will not result in litigation, or that PCN would
prevail in such litigation or be able to license any valid or infringed
products, trademarks or other proprietary rights from third parties on
commercially reasonable terms. Further, litigation, regardless of its outcome,
could result in substantial cost to PCN and may divert management's efforts from
operating the business.
Government Regulation. PCN's business is not directly subject to government
regulation. However, the health care industry is subject to extensive Federal,
state and local regulation governing reimbursements for services rendered and
conduct of operations at health care facilities. The effect of future
legislation and regulation on current and prospective customers may, in certain
circumstances, have an adverse effect upon PCN's business. However, PCN cannot
predict the impact, if any, of future legislation and regulation on its
business. Further, certain clinical diagnostic applications of HealthPoint's
computer-assisted services may be subject to regulation by the Federal Food and
Drug Administration (the "FDA") as medical devices, which could create delays in
the marketing of HealthPoint's products and services. In addition, HealthPoint's
use of clinical data may also be affected by existing or future laws and
regulations.
Highly Competitive Market. The practice management software industry is
highly competitive and fragmented. PCN believes that in 1994 the industry
included approximately 1,100 competitors of varying sizes. PCN's principal
competitors includes other physician practice management software companies,
software distributors which sell off-the-shelf programs and compatible hardware
to smaller practices where competition is based primarily on price, certain
national and regional companies which offer information systems to health care
providers, and data processing organizations which provide computerized billing
and record management services to medical offices. In addition, certain claims
processing organizations, hospitals, third-party administrators, insurers and
other health care organizations now provide computer and/or other electronic
data transmission systems, which sometimes include practice management software,
to physicians for a direct communications link between the physician and the
organization. Similarly, a number of other companies have developed clinical
information products, some of which are commercially available. As the market
for PCN's products develop, additional competitors may enter the market and
competition may intensify. Certain of PCN's and HealthPoint's competitors have
greater financial, development, technical, marketing and sales resources than
PCN and HealthPoint and no assurance can be given that PCN or HealthPoint will
be able to compete with its competitors in the future. During the twelve month
period ended December 31, 1995 and 1994, approximately 32% and 13%,
respectively, of PCN's revenues were derived
15
<PAGE>
from sales of hardware and hardware maintenance. The computer hardware business
is extremely competitive and there can be no assurance that PCN will be able to
continue to derive substantial operating revenues therefrom.
Concentration of Stock Ownership. Mr. Jeffry M. Picower (the "Investor")
beneficially owned approximately 44% of the outstanding PCN Common Stock. In
addition, the Investor owns a warrant to purchase 5,000,000 shares of PCN Common
Stock at an aggregate exercise price of $25,000,000; however, such warrant is
not exercisable until September 1997. As a result, the Investor is able to exert
significant influence over PCN's affairs and business.
Possible Volatility of Stock Price. Since the PCN Common Stock has been
publicly traded, the market price of the PCN Common Stock has fluctuated over a
wide range and may continue to do so in the future. See "Summary -- Comparative
Market Price Data." Factors such as announcements of acquisitions, technological
innovations or new products by PCN or its competitors, as well as market
conditions in the computer software or hardware industries, may have a
significant impact on the market price of the PCN Common Stock.
Future Sales of PCN Common Stock. Upon consummation of the Merger,
approximately 27,536,457 outstanding shares of PCN Common Stock will be subject
to the restrictions of Rule 144 under the Securities Act, and, under certain
circumstances, may be sold without registration pursuant to Rule 144. In
addition, 1,000 shares of PCN's Series A Convertible Preferred Stock ("PCN
Convertible Preferred Stock") were outstanding as of June 30, 1996. Each share
of PCN Convertible Preferred Stock is convertible into between 142 and 333
shares of PCN Common Stock, depending upon the market price of the PCN Common
Stock on the date of conversion. Any shares of PCN Convertible Preferred Stock
not converted by October 20, 1997 will automatically be converted on such date.
Further, certain shareholders have registration rights with respect to their
restricted shares. In addition, PCN intends to file a registration statement to
register up to a total of 3,500,000 shares of PCN Common Stock issuable upon
exercise of options available to be granted under PCN's Value Added Reseller
Stock Option Plan to PCN's independent resellers. Upon effectiveness of such
registration statement, shares of PCN Common Stock issuable upon exercise of
vested options will be eligible for sale in the public markets. As of July 31,
1996, vested options to purchase 199,925 shares at an exercise price of $57/8
were outstanding under that Plan. The public sale of restricted securities
pursuant to Rule 144, an effective registration statement, or otherwise, or the
perception that such sales could occur, may have an adverse effect on the market
price of the PCN Common Stock and on PCN's ability to raise funds through the
sale of additional equity securities.
No Dividends. PCN has never declared or paid any dividends on PCN Common
Stock, and it is not anticipated that any dividends will be paid in the
foreseeable future.
Anti-Takeover Provisions; Possible Issuance of Preferred Stock. PCN's Board
of Directors has the authority to issue up to 1,000,000 shares of PCN's
preferred stock, of which 1,000 shares were outstanding as PCN Convertible
Preferred Stock as of July 31, 1996, without further shareholder approval and
upon such terms and conditions, having such rights, privileges and preferences,
as the Board of Directors may determine. The rights of the holders of PCN Common
Stock will be subject to, and may be adversely affected by, the rights of any
holders of preferred stock that may be issued in the future. The issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of the outstanding voting stock of PCN.
16
<PAGE>
PHYSICIAN COMPUTER NETWORK, INC.
WISMER-MARTIN, INC.
PROXY STATEMENT AND PROSPECTUS
--------------
This Proxy Statement and Prospectus is being furnished to holders of shares
of the common stock, par value $.001 per share, of Wismer-Martin, Inc., a
Washington corporation, in connection with the solicitation of proxies by the
Wismer-Martin Board for use at a special meeting of shareholders of
Wismer-Martin to be held at the executive offices of Wismer-Martin, 12828 N.
Newport Highway, Mead, Washington 99021, on September 9, 1996, at 9:00 a.m.,
local time, and at any adjournments thereof. At the Special Meeting, holders of
record as of August 1, 1996, of Wismer-Martin Common Stock will be requested to
consider and vote upon a proposal to approve a Plan of Merger pursuant to an
Agreement and Plan of Merger dated June 20, 1996, among Physician Computer
Network, Inc., a New Jersey corporation, Northwest Acquisition Corp., a
Washington corporation and a wholly-owned subsidiary of PCN, and Wismer-Martin.
In addition, this Proxy Statement and Prospectus serves as the prospectus
of PCN under the Securities Act of 1933, as amended, for the issuance of up to
1,450,000 shares of PCN Common Stock to be issued pursuant to the Merger
Agreement.
SPECIAL MEETING
Purpose of the Meeting
At the Special Meeting, the holders of Wismer-Martin Common Stock, will be
asked to consider and vote upon (i) a proposal to approve the Plan of Merger and
(ii) such other matters as may properly be brought before the Special Meeting.
The Wismer-Martin Board has approved the Plan of Merger and the
transactions contemplated thereby and unanimously recommends that shareholders
of Wismer-Martin vote "FOR" approval of the Plan of Merger.
See "The Merger -- Background of the Merger; -- Recommendations of the
Wismer-Martin Board of Directors; Effects of and Reasons for the Merger."
Date, Time and Place; Record Date
The Special Meeting is scheduled to be held at 9:00 a.m., local time, on
September 9, 1996, at the executive offices of Wismer-Martin, 12828 N. Newport
Highway, Mead, Washington 99021. The Wismer-Martin Board has fixed the close of
business on August 1, 1996, as the record date (the "Record Date") for the
determination of holders of Wismer-Martin Common Stock entitled to notice of and
to vote at the Special Meeting. As of August 1, 1996, there were 16,324,495
shares of Wismer-Martin Common Stock issued and outstanding. Each share of
Wismer-Martin Common Stock is entitled to one vote.
Voting Rights
The affirmative vote by the holders of two-thirds of the outstanding shares
of Wismer-Martin Common Stock entitled to vote thereon is required to approve
the Plan of Merger. Abstentions on a specific proposal will be considered as
present but will not be counted as voting in favor of such proposal. However,
because the proposal to approve the Plan of Merger requires the affirmative vote
of a specified percentage of outstanding shares, the nonvoting of shares or
abstentions with regard to this proposal will have the same effect as votes
against the proposal. Holders of record of Wismer-Martin Common Stock on the
Record Date are entitled to one vote per share on each proposal to be presented
to shareholders at the Special Meeting.
Certain shareholders of Wismer-Martin Common Stock (collectively, the
"Majority Shareholders"), who beneficially own an aggregate number of votes
sufficient to approve the Plan of Merger and all other matters to be voted upon
at the Wismer-Martin Special Meeting, have each entered into an Option and
Voting Agreement with PCN (the "Option and Voting Agreements") pursuant to
which, among other things, they each have agreed to vote
17
<PAGE>
their shares of Wismer-Martin Common Stock in favor of the Plan of Merger.
Accordingly, approval of the Plan of Merger by the holders of Wismer-Martin
Common Stock is assured without the vote of any other shareholder. See "Security
Ownership of Certain Persons and Option and Voting Agreements" and "The Merger
- -- Interests of Certain Persons in the Merger."
If a shareholder attends the Special Meeting, he or she may vote by ballot.
When a proxy card is returned, properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a shareholder does not return a signed proxy card, his or her shares will not be
voted and thus will have the effect of a vote against the Plan of Merger.
Shareholders are urged to mark the box on the proxy card to indicate how their
shares are to be voted. If a shareholder returns a signed proxy card but does
not indicate how his or her shares are to be voted, the shares represented by
the proxy card will be voted "FOR" approval of the Plan of Merger. The proxy
card also confers discretionary authority on the individuals appointed by the
Wismer-Martin Board and named on the proxy card to vote the shares represented
thereby on any other matter that is properly presented for action at the Special
Meeting.
Any Wismer-Martin shareholder who executes and returns a proxy card may
revoke such proxy at any time before it is voted by (i) notifying in writing
Mehdi Moussavi, Secretary, Wismer-Martin, Inc., 12828 N. Newport Highway, Mead,
Washington 99021, (ii) granting a subsequent proxy, or (iii) appearing in person
and voting at the Special Meeting. Attendance at the Special Meeting will not in
and of itself constitute revocation of a proxy.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF WISMER-MARTIN. SHAREHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT AND
PROSPECTUS AND TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
SECURITY OWNERSHIP OF CERTAIN PERSONS AND VOTING AGREEMENTS
As of July 31, 1996, Wismer-Martin's directors, executive officers and
their affiliates and associates, as a group, may be deemed to own beneficially
approximately 53.1% of the outstanding shares of Wismer-Martin Common Stock
(assuming exercise of options held by directors and executive officers). Each of
the directors and executive officers of Wismer-Martin has advised Wismer-Martin
that he or she intends to vote or direct the vote of all the outstanding shares
of Wismer-Martin Common Stock over which he or she has voting control in favor
of the Plan of Merger. Each share of Wismer-Martin Common Stock is entitled to
one vote.
The Majority Shareholders, consisting of Ronald and Linda Holden, Stanley
T. and Beverly J. Hatch, Georgia L. Knapp, Gertrude L. Holden, John F. Perez,
Ivory & Sime Enterprise Capital, Glen E. and Judith L. Martin, Thomas E. and
Maureen T. Holden, Harry D. Holden, and James F. Etter, beneficially own an
aggregate of approximately 71% of the outstanding shares of Wismer-Martin Common
Stock representing a number of shares with votes sufficient to approve the Plan
of Merger. The Majority Shareholders have each agreed in separate Option and
Voting Agreements with PCN (i) to vote the shares of Wismer-Martin Common Stock
which he or she is entitled to vote, in person or by proxy, at the Special
Meeting, in favor of the Plan of Merger and (ii) not to sell, transfer, tender,
assign, pledge or otherwise dispose of, or grant any proxies with respect to,
such shares of Wismer-Martin Common Stock, or enter into any contract, option or
other arrangement or understanding with respect to the sale, assignment, pledge,
voting or other disposition of such shares of Wismer-Martin Common Stock.
Further, each Option and Voting Agreement provides that, under certain
circumstances, including, without limitation, the material breach by
Wismer-Martin of any representation, warranty, covenant or agreement contained
in the Merger Agreement or the failure of Wismer-Martin at the Special Meeting
to obtain the vote of the holders of two-thirds of the outstanding shares of
Wismer-Martin Common Stock, PCN may purchase the Majority Shareholders' shares
of Wismer-Martin Common Stock for a purchase price per share equal to the Merger
Consideration, assuming for such purpose only that the Effective Time of the
Merger is the date on which such option is exercised.
18
<PAGE>
PHYSICIAN COMPUTER NETWORK, INC. AND WISMER-MARTIN, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Statements of Operations and
Unaudited Pro Forma Condensed Consolidated Balance Sheet give effect to (i) the
proposed acquisition by PCN of Wismer-Martin, (ii) the acquisition by PCN of
certain assets related to the practice management software and other software
businesses of CUSA Technologies, Inc. (the "CTI Business"), and (iii) the
completion by PCN on May 10, 1996 of the public offering of 6,440,000 shares of
its Common Stock at $10.00 per share (the "1996 Offering"), of which 1,932,217
shares were issued by PCN to Equifax, Inc. ("Equifax") upon the conversion in
full of the five year, $10,000,000 principal amount convertible subordinated
promissory note issued to Equifax on February 15, 1995 (the "Equifax Note"). In
addition to the above, the Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the year ended December 31, 1995 also gives effect to PCN's
February 1995 public offering of PCN Common Stock and October 1995 Regulation S
offering of PCN Common Stock and convertible preferred stock, as well as the
acquisitions of Versyss and the PMS Business and the related financing.
These statements have been prepared from the historical consolidated
financial statements of PCN, the CTI Business and Wismer-Martin and should be
read in conjunction with such statements and the related notes. Historical
Consolidated Financial Statements of PCN are incorporated herein by reference
from PCN's Annual report on Form 10-K for the year ended December 31, 1995 and
PCN's Quarterly Report on Form 10-Q for the period ended March 31, 1996.
Historical financial statements of the CTI Business are incorporated by
reference from PCN's Current Report on Form 8-K/A dated August 7, 1996.
Historical financial statements of Wismer-Martin are incorporated by reference
from the Wismer-Martin Annual Report on Form 10-KSB for the year ended June 30,
1995 and Wismer-Martin's Quarterly Report on Form 10-QSB for the period ended
March 31, 1996. The unaudited pro forma information assumes that the
transactions for which pro forma effects are shown occurred on January 1, 1995
for the Unaudited Pro Forma Condensed Consolidated Statements of Operations and
on March 31, 1996 for the Unaudited Pro Forma Condensed Consolidated Balance
Sheet. Such pro forma information is not necessarily indicative of the results
which would actually have occurred had the transactions been in effect for the
period or on the date indicated or which may occur in the future.
19
<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet -- March 31, 1996
ASSETS
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
------------------------------------------------------
PCN CTI 1996
Historical Wismer-Martin(j) Business(k) Offering
----------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents .......... $ 9,814,855 $ 540,404 $ -- $41,902,164(q)
Accounts receivable, net ........... 21,466,925 904,814 1,951,810
Inventories ........................ 4,622,647 130,869 130,043
Prepaid expenses and other ......... 1,607,176 36,786 42,860
Deferred tax asset ................. 1,650,000
----------- --------- ---------- ----------
Total current assets ........... 39,161,603 1,612,873 2,124,713 41,902,164
Intangible assets, net ............. 52,741,240 3,367,911 10,380,467
....................................
Property and equipment, net ........ 3,976,749 1,343,068 735,707
Investment in joint venture ........ 3,009,082
Other assets ....................... 4,020,991 62,437 65,637
----------- --------- ---------- ----------
Total Assets ................... $102,909,665 $6,386,289 $13,306,524 $41,902,164
=========== ========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable ...................... $ 9,513,571 $ -- $ 97,686 $ --
Current portion of long-term debt .. 40,486 34,937
Current portion of obligation
under capital leases ............. 77,164 36,097
Accounts payable ................... 4,600,581 344,776 849,760
Accrued expenses and other liabilities 14,163,270 384,045 183,654
Customer deposits .................. 3,086,807 278,126
Unearned income .................... 14,617,925 1,731,334 2,601,404
----------- --------- ---------- ----------
Total current liabilities ...... 46,099,804 2,531,189 4,010,630
Long-term debt, net of current portion:
Other .............................. 22,470,636 786,456
Obligations under capital
leases, net of current portion ... 327,985 65,455
----------- --------- ---------- ----------
Total liabilities .............. 68,898,425 3,383,100 4,010,630
Shareholders' Equity:
Preferred stock .................... 64
Common stock ....................... 447,952 16,321 45,078(q)
....................................
Additional paid-in capital ......... 131,209,375 4,881,193 41,857,086(q)
....................................
Excess purchase price of acquired
subsidiary ....................... (2,533,308)
Retained earnings (Accumulated deficit) (97,646,151) 638,983 9,295,894
----------- --------- ---------- ----------
Shareholders' equity ............... 34,011,240 3,003,189 9,295,894 41,902,164
----------- --------- ---------- ----------
Total liabilities and
shareholders' equity ......... $102,909,665 $6,386,289 $13,306,524 $41,902,164
=========== ========= ========== ==========
</TABLE>
Unaudited Pro Forma Condensed Consolidated
Balance Sheet -- March 31, 1996 (Continued)
ASSETS
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
------------------------------------------------
Wismer-Martin CTI Business
Equifax Acquisition Acquisition
Conversion Adjustments Adjustments Pro Forma
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents .......... $ -- $ (1,980,000)(j) $(10,100,000)(k) $ 40,177,423
Accounts receivable, net ........... 24,323,549
Inventories ........................ 4,883,559
Prepaid expenses and other ......... 1,686,822
Deferred tax asset ................. 1,650,000
---------- ---------- ---------- -----------
Total current assets ........... (1,980,000) (10,100,000) 72,721,353
Intangible assets, net ............. 11,494,722(j) 11,334,573(k)
.................................... (3,367,911)(r) (10,380,467)(r) 75,570,535
Property and equipment, net ........ 450,000(s) 6,505,524
Investment in joint venture ........ 3,009,082
Other assets ....................... 4,149,065
---------- ---------- ---------- -----------
Total Assets ................... $ -- $ 6,596,811 $ (9,145,894) $161,955,559
========== ========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable ...................... $ -- $ -- $ -- $ 9,611,257
Current portion of long-term debt .. 75,423
Current portion of obligation
under capital leases ............. 113,261
Accounts payable ................... 5,795,117
Accrued expenses and other liabilities 250,000(j) 150,000(k) 15,130,969
Customer deposits .................. 3,364,933
Unearned income .................... 18,950,663
---------- ---------- ---------- -----------
Total current liabilities ...... 250,000 150,000 53,041,623
Long-term debt, net of current portion:
Other .............................. (10,000,000)(q) 13,257,092
Obligations under capital
leases, net of current portion ... 393,440
---------- ---------- ---------- -----------
Total liabilities .............. (10,000,000) 250,000 150,000 66,692,155
Shareholders' Equity:
Preferred stock .................... 64
Common stock ....................... 19,322(q) (16,321)(t)
.................................... 9,350(m) 521,702
Additional paid-in capital ......... 9,980,678(q) (4,881,193)(t)
.................................... 9,340,650(m) 192,387,789
Excess purchase price of acquired
subsidiary ....................... 2,533,308(t) --
Retained earnings (Accumulated deficit) (638,983)(t) (9,295,894)(t) (97,646,151)
---------- ---------- ---------- -----------
Shareholders' equity ............... 10,000,000 6,346,811 (9,295,894) 95,263,404
---------- ---------- ---------- -----------
Total liabilities and
shareholders' equity ......... $ -- $ 6,596,811 $(9,145,894) $161,955,559
========== ========== ========== ===========
</TABLE>
- ----------
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
20
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
---------------------------------------------------------------------
PCN CTI 1996
Historical Wismer-Martin(j) Business(k) Offering
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues .............................. $ 21,026,948 $ 2,282,639 $ 3,013,872 $ --
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of revenues ...................... 8,794,892 1,018,914 1,499,315
Research and development .............. 1,111,487 140,291 519,186
Selling and marketing ................. 1,704,769 351,035 879,798
General and administrative ............ 4,084,531 660,710 1,801,893
. .....................................
------------ ------------ ------------ ------------
. ..................................... 15,695,679 2,170,950 4,700,192 247,708
Interest (income) expense:
Interest income ..................... (59,508) (22,931) (82,439)
Interest expense .................... 695,118 24,309 (150,000)(i) 569,427
------------ ------------ ------------ ------------
. ..................................... 635,610 1,378 (150,000) 486,988
Income (loss) before income tax expense
and loss on equity investment ....... 4,695,659 110,311 (1,686,320) 150,000
Income tax expense ....................
------------ ------------ ------------ ------------
Income before loss on equity investment 3,709,659 110,311 (1,686,320) 150,000
Loss on equity investment, net of taxes (395,000) (395,000)
------------ ------------ ------------ ------------
Net income (loss) ..................... $ 3,314,659 $ 110,311 $ (1,686,320) $ --
============ ============ ============ ============
Primary and Fully Diluted earnings
(loss) per Common Share:
Earnings (loss) per Common Share ...... $ 0.07
============
Primary weighted average number
of common shares outstanding ........ 49,864,464 4,507,783(h)
============ ============
Fully Diluted weighted average number
of common shares outstanding ........ 50,102,434 4,507,783(h)
============ ============
</TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS (Continued)
Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
---------------------------------------------------------------
Wismer-Martin CTI Business
Equifax Acquisition Acquisition
Conversion Adjustments Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues .............................. $ -- $ -- $ -- $ 26,323,459
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of revenues ...................... 11,313,121
Research and development .............. 1,770,964
Selling and marketing ................. 2,935,602
General and administrative ............ 247,708(l) 214,580(l)
. ..................................... (145,975)(o) 6,863,447
------------ ------------ ------------ ------------
. ..................................... 68,605 22,883,134
Interest (income) expense:
Interest income ..................... (82,439)
Interest expense .................... (150,000)(i) 569,427
------------ ------------ ------------ ------------
. ..................................... (150,000) 486,988
Income (loss) before income tax expense
and loss on equity investment ....... 150,000 (247,708) (68,605) 2,953,337
Income tax expense .................... 986,0000 986,000
------------ ------------ ------------ ------------
Income before loss on equity investment 150,000 (247,708) (68,605) 1,967,337
Loss on equity investment, net of taxes (395,000)
------------ ------------ ------------ ------------
Net income (loss) ..................... $ 150,000 $ (247,708) $ (68,605) $ 1,572,337
============ ============ ============ ============
Primary and Fully Diluted earnings
(loss) per Common Share:
Earnings (loss) per Common Share ...... $ 0.03(p)
============
Primary weighted average number
of common shares outstanding ........ 1,932,217(i) 935,000(m) 57,239,464
============ ============ ============
Fully Diluted weighted average number
of common shares outstanding ........ 1,932,217(i) 935,000(m) 57,477,434
============ ============ ============
</TABLE>
- ------------
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
21
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
---------------------------------------------------------------------------------------
Versyss/PMS
PCN PMS Versyss Acquisition 1996 Equifax
Historical(a) Acquisition(b) Acquisition(c) Adjustments Offering Conversion
----------- --------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues ............... $ 41,805,342 $3,067,872 $44,398,000 $ -- $ -- $ --
----------- --------- ---------- ----------- ---------- ---------
Costs and Expenses:
Cost of revenues ....... 16,288,953 1,341,797 27,532,000
Research and development 2,219,223 563,221 1,806,000
Selling and marketing .. 3,038,069 371,739 5,340,000
General and administrative 13,238,269 1,187,924 8,690,000 3,864,532(d)
........................
Acquired technology
in process ........... 14,516,000 (14,516,000)(e)
Restructuring .......... 3,072,450
Write-down of assets and
other charges......... 1,477,000
----------- --------- ---------- ----------- ---------- ---------
53,849,964 3,464,681 43,368,000 (10,651,468)
Interest (income) expense:
Interest income ...... (577,039) (12,615)
Interest expense ..... 1,451,604 2,183,000 901,903(f) (525,000)
----------- --------- ---------- ----------- ---------- ---------
874,565 (12,615) 2,183,000 901,903 (525,000)
Income (loss) before income
tax expense (benefit) and
extraordinary item.... (12,919,187) (384,194) (1,153,000) 9,749,565 525,000
Income tax expense (benefit) (1,419,000) 13,145 168,000
----------- --------- ---------- ----------- ---------- ---------
Income (loss) available to
common shareholders
before extraordinary item $(11,500,187) $ (397,339) $(1,321,000) $ 9,749,565 $ -- $ 525,000
=========== ========= ========== =========== ========== =========
Earnings (loss) per
Common Share:
Before extraordinary item $(0.29)
===========
Weighted average number of
common shares outstanding 40,068,406 2,622,781(g) 4,507,783(h) 1,932,217(i)
=========== =========== =+======== =========
</TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS (Continued)
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Adjustments Increase/(Decrease) Giving Effect to
-------------------------------------------------------------------------------
Wismer-Martin CTI Business
Wismer-Martin Acquisition CTI Business Acquisition
Acquisition(j) Adjustments Acquisition(k) Adjustments Pro Forma
-------------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues ............... $10,021,490 $ -- $12,467,346 $(2,667,432)(n) $109,092,618
---------- ---------- ---------- ---------- -----------
Costs and Expenses:
Cost of revenues ....... 4,103,747 4,880,221 (2,120,608)(n) 52,026,110
Research and development 545,608 1,377,086 6,511,138
Selling and marketing .. 1,714,104 2,125,033 12,588,945
General and administrative 3,057,950 1,075,831(l) 4,172,287 965,322(l)
........................ (583,900)(o) 35,668,215
Acquired technology
in process ........... --
Restructuring .......... 3,072,450
Write-down of assets and
other charges......... 1,477,000
---------- ---------- ---------- ---------- -----------
9,421,409 1,075,831 12,554,627 (1,739,186) 111,343,858
Interest (income) expense:
Interest income ...... (27,514) (617,168)
Interest expense ..... 343,319 4,354,826
---------- ---------- ---------- ---------- -----------
315,805 3,737,658
Income (loss) before income
tax expense (benefit) and
extraordinary item.... 284,276 (1,075,831) (87,281) (928,246) (5,988,898)
Income tax expense (benefit) 1,021 (1,236,834)
---------- ---------- ---------- ---------- -----------
Income (loss) available to
common shareholders
before extraordinary item $ 283,255 $(1,075,831) $ (87,281) $ (928,246) $ (4,752,064)
========== ========== ========== ========== ===========
Earnings (loss) per
Common Share:
Before extraordinary item $(0.09)(p)
===========
Weighted average number of
common shares outstanding 935,000(m) 50,066,187
========== ===========
</TABLE>
- ----------
See accompanying notes to the unaudited pro forma condensed consolidated
financial statements.
22
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) Includes the operations of the PMS Business from April 24, 1995, the date
of acquisition (see note (b) below) and the operations of Versyss from
October 27, 1995, the date of acquisition (see note (c) below).
(b) Reflects the operations of the PMS Business from January 1, 1995 to April
24, 1995. On April 24, 1995, a wholly-owned subsidiary of PCN acquired
substantially all of the assets of the PMS Business for $4,861,000, of
which $2,861,000 was paid in cash and $2,000,000 was paid in the form of a
one year 10% interest bearing note (which note was paid in full on April
24, 1996). In addition, PCN assumed $3,009,000 of certain liabilities of
the PMS Business, primarily related to software support and hardware
maintenance agreements.
(c) Reflects the operations of Versyss from January 1, 1995 to October 27,
1995. On October 27, 1995, PCN acquired all of the issued and outstanding
capital stock of Versyss, pursuant to a merger agreement, for $12,333,000
in cash and $11,750,000 in the form of a two year, 11% interest bearing
note.
(d) Reflects the prorated amortization of the PMS Business and Versyss acquired
intangible assets, with the exception of Acquired technology in process,
based on the estimated useful lives established in the table in Note 3 to
the Consolidated Financial Statements of PCN as previously disclosed in
PCN's Annual Report on Form 10-K for the year ended December 31, 1995,
which are incorporated herein by reference. Included within PCN Historical
is $421,365 of PMS Business-related amortization expense for the period of
April 24, 1995 to December 31, 1995, and $722,735 of Versyss-related
amortization expense for the period of October 27, 1995 to December 31,
1995. The pro forma acquisition amortization adjustment therefore consists
of the following:
<TABLE>
<S> <C>
Amortization of PMS acquired intangible assets (Jan. 1 to April 24, 1995)........ $ 210,692
Amortization of Versyss acquired intangible assets (Jan. 1 to October 27, 1995).. 3,653,840
-----------
Total adjustment.................................................................. $ 3,864,532
===========
</TABLE>
(e) With the help of an appraiser, PCN allocated $14,516,000 of the purchase
price of the Versyss acquisition to Acquired technology in process which
was recorded as an expense in the year ended December 31, 1995. This charge
is non-recurring and unusual and, as it relates directly to the
acquisition, is excluded from the unaudited pro forma consolidated
statement of operations.
(f) Reflects accrued interest expense on the following acquisition-related
indebtedness:
<TABLE>
<S> <C>
10% Interest on $2,000,000 note issued in connection with the
acquisition of the PMS Business (Jan 1 to April 24, 1995)......................... $ 66,667
11% Interest on $11,750,000 note issued in connection with the
Versyss acquisition (Jan. 1 to Oct. 27, 1995).................................... 1,077,083
-----------
Subtotal.......................................................................... $ 1,143,750
Less: Interest paid to Mr. Jeffry M. Picower (the "Investor")
which would have been avoided if the February 1995 Offering had
occurred on January 1, 1995....................................................... (241,847)
-----------
Total adjustment to interest expense related to
the acquisitions of Versyss and the PMS Business.................................. $ 901,903
===========
</TABLE>
(g) Reflects the increase in the weighted average number of shares of PCN
Common Stock outstanding after giving effect to (i) the issuance of
6,250,000 shares of PCN Common Stock pursuant to PCN's February 1995 public
offering and (ii) the issuance of 1,902,748 shares of PCN Common Stock
pursuant to the October 1995 Regulation S offering.
23
<PAGE>
(h) Reflects the increase in the weighted average number of shares of PCN
Common Stock outstanding after giving effect to the issuance of the
4,507,783 shares of PCN Common Stock sold by PCN pursuant to the 1996
Offering.
(i) Reflects the reversal of interest expense incurred on the Equifax Note and
an increase in the weighted average number of shares of PCN Common Stock
outstanding after giving effect to the conversion of the Equifax Note into
1,932,217 shares of PCN Common Stock.
(j) Reflects the operations of Wismer-Martin for the year ended December 31,
1995 and the three months ended March 31, 1996 and the balance sheet of
Wismer-Martin as of March 31, 1996. On June 20, 1996, PCN and Wismer-Martin
signed a definitive agreement whereby PCN will acquire all of the issued
and outstanding capital stock of Wismer-Martin for $1,980,000 in cash and
935,000 shares of Common Stock of PCN. The number of shares is subject to
adjustment depending on variations in the Market Price of PCN Common Stock
on the third business day immediately preceding the transaction. If the
aggregate Market Price of the Stock Consideration is less than $9,350,000
($10.00 per share) on the third business day immediately preceding the
Effective Time, then the Stock Consideration shall be increased to equal
such number of shares of PCN Common Stock as has an aggregate market value
of $9,350,000. Likewise, if the aggregate Market Price of the Stock
Consideration is greater than $11,453,750 ($12.25 per share) on the third
business day immediately preceding the Effective Time, then the Stock
Consideration shall be decreased to equal such number of shares of PCN
Common Stock as has an aggregate market value of $11,453,750. In addition,
if the Market Price of PCN Common Stock on the third business day
immediately preceding the Effective Time is less than or equal to $9.00 per
share, then, at PCN's option, in lieu of the Cash Consideration and the
Stock Consideration, the "Merger Consideration" shall be an amount equal to
the Cash Option of $14,000,000.
Assuming the Cash Option is not exercised, the purchase price is allocated
as follows (assuming a $10.00 price per share of PCN Common Stock):
<TABLE>
<S> <C> <C>
Consideration (including liabilities assumed):
Cash................................................................ $ 1,980,000
PCN Common Stock issued............................................. 9,350,000
Liabilities assumed................................................. 3,383,100
Accounting and legal costs.......................................... 250,000
----------
Total Purchase Price............................................ $ 14,963,100
============
Allocation of Purchase Price:
Accounts Receivable and Inventory................................... $1,035,683
Property, equipment and other assets, including cash................ 2,432,695
Intangible assets:
Profit on support and update agreements (1 year life)............. 85,000
Profit on future support and update agreements (4 year life)...... 537,000
Acquired software products (3 year life).......................... 494,000
Other intangible assets (includes customer list,
and goodwill) (15 year life)..................................... 10,378,722
----------
Total Intangible assets......................................... 11,494,722
-----------
$ 14,963,100
============
</TABLE>
(k) Reflects the operations of the CTI Business for the year ended December 31,
1995 and the three months ended March 31, 1996 and the balance sheet of the
CTI Business as of March 31, 1996. On July 3, 1996, PCN purchased
substantially all of the assets of the medical practice management software
business and certain other software businesses of CUSA Technologies, Inc.
for $10,100,000 in cash. The purchase price is allocated as follows:
24
<PAGE>
<TABLE>
<S> <C> <C>
Consideration (including liabilities assumed):
Cash................................................................ $ 10,100,000
Liabilities assumed................................................. 4,010,630
Accounting and legal costs.......................................... 150,000
-----------
Total Purchase Price............................................ $ 14,260,630
===========
Allocation of Purchase Price:
Accounts Receivable and Inventory................................... $ 2,081,853
Equipment and other assets, including cash.......................... 844,204
Intangible assets:
Profit on support and update agreements (1 year life)............. 107,000
Profit on future support and update agreements (4 year life)...... 599,000
Other intangible assets (includes customer list,
and goodwill) (15 year life)..................................... 10,628,573
-----------
Total Intangible assets......................................... 11,334,573
-----------
$ 14,260,630
===========
</TABLE>
(l) Reflects the prorated amortization of the acquired intangible assets of
Wismer-Martin and the CTI Business, based on the useful lives established
in notes (j) and (k) above.
(m) Reflects the increase in the weighted average number of shares of Common
Stock outstanding after giving effect to the issuance of 935,000 shares of
PCN Common Stock, valued at $10.00 per share, pursuant to the acquisition
of Wismer-Martin by PCN. If the Market Price of PCN Common Stock on the
third business day immediately preceding the Effective Time was $9.00 per
share, then the Stock Consideration would be increased to 1,038,889 shares.
The resulting increase of 103,889 shares of PCN Common Stock would not
change pro forma earnings per share for the three months ended March 31,
1996 and would not change the pro forma loss per share for the year ended
December 31, 1995. If the Market Price of PCN Common Stock on the third
business day immediately preceding the Effective Time is less than or equal
to $9.00 per share, then, at PCN's option, in lieu of the Cash
Consideration and the Stock Consideration, the "Merger Consideration" shall
be an amount equal to the Cash Option of $14,000,000 and, therefore, no
shares of PCN Common Stock would be issued. If this situation should occur,
and PCN exercised its option to pay $14,000,000 in cash in lieu of the Cash
Consideration and Stock Consideration, the resulting decrease of 935,000
shares of PCN Common Stock would not change pro forma earnings per share
for the three months ended March 31, 1996 and would not change the pro
forma loss per share for the year ended December 31, 1995.
(n) Represents the elimination of revenue and cost of sales related to sales
transactions between Versyss and the CTI Business prior to the acquisition
of Versyss by PCN.
(o) Reflects the elimination of the amortization of intangible assets recorded
in the historical results of operations of the CTI Business.
(p) For the year ended December 31, 1995, the assumed exercise of certain
outstanding options and warrants have not been included in the calculation
of unaudited pro forma loss per common share as they are anti-dilutive,
thus making unaudited pro forma primary and fully diluted loss per common
share the same. For the three months ended March 31, 1996, the assumed
exercise of dilutive options and warrants and the assumed conversion of
outstanding shares of PCN's Series A convertible non dividend-paying
preferred stock has been included in the calculation of the primary and
fully-diluted weighted average number of common shares outstanding.
(q) The following table details the net proceeds from the 1996 Offering and its
effect on the Unaudited Pro Forma Condensed Consolidated Balance Sheet at
March 31, 1996:
25
<PAGE>
<TABLE>
<CAPTION>
Long-term
debt, net of Common Paid-In
Cash current portion Stock Capital
---------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Gross Proceeds from the issuance
of 4,507,783 shares of Common
Stock at $10.00 per share........... $45,077,830 $45,078 $45,032,752
1996 Offering Expenses, including
underwriting discounts
and commissions..................... (3,175,666) (3,175,666)
Conversion of $10,000,000 Equifax
Note into Common Stock.............. $(10,000,000) 19,322 9,980,678
---------- ----------- ------- ----------
Total pro forma adjustment............ $41,902,164 $(10,000,000) $64,400 $51,837,764
========== =========== ======= ==========
</TABLE>
(r) Represents the elimination of intangible assets related to capitalized
proprietary software costs recorded by both Wismer-Martin and the CTI
Business which has no continuing fair market value to PCN.
(s) Represents the estimated fair value adjustment to the net book value of the
Wismer-Martin land and building assets.
(t) Reflects the elimination of the prior ownership of Wismer-Martin and the
CTI Business.
26
<PAGE>
THE MERGER
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is attached to this Proxy Statement and
Prospectus as Annex A and is incorporated herein by reference.
Background of the Merger
In the process of formulating its business and financial plans, the
Wismer-Martin Board and its senior management regularly examine the company's
long-term prospects in light of general economic and business conditions and
management's forecasts for the company's business.
During the early part of 1995, in the course of its planning, the
Wismer-Martin Board and senior management observed the growing influence of
larger, better financed companies in the practice management and health care
information services business. As a result, the Wismer-Martin Board and senior
management came to believe that, given Wismer-Martin's financial position, as
well as its relative size and market penetration in the practice management and
health care information services market, in order to obtain the resources to
expand its business base, Wismer-Martin should seek to position itself with a
strong strategic partner which could provide Wismer-Martin with the resources
necessary to compete with its larger, better financed competitors. Accordingly,
during the early part of 1995, Wismer-Martin management held discussions with a
number of larger, well financed companies having greater presence than
Wismer-Martin in the health care information system marketplace. As a result of
such discussions, marketing relationships were established with several
companies, including IBM and Digital Equipment Corp. In addition, information
was exchanged with GTE regarding the possibility of establishing a partnership
or other strategic alliance with Wismer-Martin.
By the latter part of 1995, the Wismer-Martin Board and its senior
management had concluded that the company's efforts to establish a strategic
partnership or alliance had not significantly expanded Wismer-Martin's business
base. To address this situation, Wismer-Martin's senior management began to
consider and discuss with the Wismer-Martin Board potential strategic
alternatives, including the possible sale of the Company. During this time,
senior management of PCN contacted Ronald Holden, Chairman of the Board and
Chief Executive Officer of Wismer-Martin, to express interest in exploring a
possible acquisition of Wismer-Martin by PCN. Mr. Holden disclosed this contact
to the Wismer-Martin Board at its regular meeting on November 7, 1995.
In February 1996, Mr. Holden met with Henry Green, President and Chief
Executive Officer of PCN, to discuss the potential interests of both parties in
a possible acquisition of Wismer-Martin by PCN. The discussions at the meeting
centered mainly on growth and expansion potential, business philosophy, and the
integration of different corporate cultures. As a result of that meeting, the
parties signed a confidentiality agreement, to permit additional discussions and
the provision to PCN by Wismer-Martin of non-pubic information concerning
Wismer-Martin.
In March 1996, Mr. Holden again met with Mr. Green to discuss further the
possibility of an acquisition. As part of this meeting, certain financial
information of Wismer-Martin was reviewed.
During the next few weeks, telephone calls among management of PCN and
management of Wismer-Martin took place on a frequent basis to discuss the terms
on which PCN and Wismer-Martin might be willing to consummate an acquisition. In
addition, the companies conducted due diligence regarding one another. On May
20, 1996, PCN forwarded to Mr. Holden, on behalf of Wismer-Martin, a draft of a
letter of intent describing the terms on which PCN would be willing to acquire
Wismer-Martin. During the course of the next week, the terms of such letter of
intent were discussed and refined by the management of PCN and Wismer-Martin.
On May 23, 1996, Wismer-Martin held a telephonic meeting of its board of
directors to consider and discuss the terms and provisions of the proposed
letter of intent, including the description contained therein regarding the
terms of a definitive merger agreement. As part of those discussions, the
Wismer-Martin Board considered a number of factors affecting the Company's
future business prospects, including, among others, the increasing competition
in the physician and hospital information system market place and the size and
financial resources of Wismer-Martin's competitors. In addition, the
Wismer-Martin Board was advised and considered the fact that the proposed letter
of intent would place certain binding obligations on Wismer-Martin substantially
equivalent to those contained in a definitive merger agreement. Accordingly, the
Wismer-Martin Board considered the proposed letter of intent to the same extent
as they would have in reviewing and considering the terms and conditions of a
definitive merger agreement. Following a discussion among the members of the
board, the Wismer-Martin Board
27
<PAGE>
unanimously voted to authorize management to execute the letter agreement and
enter into a definitive merger agreement on terms consistent with those
contained in the letter of intent, with such changes and additions as senior
management and legal counsel to Wismer-Martin deemed appropriate. The definitive
Merger Agreement was executed by the parties on June 20, 1996.
Recommendations of the Boards of Directors;
Effects of and Reasons for the Merger
The Wismer-Martin Board believes that the terms of the Merger are fair to,
and in the best interest of, Wismer-Martin and its shareholders. Accordingly,
the Wismer-Martin Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby by the unanimous vote of those present at a
meeting held for such purpose and recommends approval of the Plan of Merger by
Wismer-Martin shareholders.
This recommendation is the result of the extensive process of exploring
strategic alternatives for Wismer-Martin described above under "-- Background of
the Merger." As a result of that process, the Wismer-Martin Board believes that
the Merger is the best available alternative for Wismer-Martin shareholders.
The Wismer-Martin Board believes that the Merger offers Wismer-Martin
shareholders the opportunity to participate in an enterprise with the financial
strength and geographic and market diversity necessary to capitalize on the
opportunities in the changing and increasingly competitive practice management
and healthcare information software business and that, without the Merger or a
similar transaction, Wismer-Martin would lack the financial and other resources
to maximize its competitive potential. Further, the Wismer-Martin Board believes
that, in the event that the Cash Option is exercised by PCN, the Merger
Consideration to be paid in connection therewith represents fair consideration
to the Wismer-Martin shareholders.
In reaching its conclusions, the Wismer-Martin Board considered, among
other things, (i) the Merger Agreement, the Plan of Merger and the proposed
specific terms of the Merger, (ii) information concerning the financial
performance, condition, business operations and prospects of each of PCN and
Wismer-Martin, (iii) historical market prices and trading information with
respect to Wismer-Martin Common Stock and PCN Common Stock and (iv) the
potential efficiencies, economies of scale and synergies that may be realized as
a result of the combination of Wismer-Martin's and PCN's business. In addition,
the members of the Wismer-Martin Board reviewed with senior management their
views on Wismer-Martin's potential as an independent company, and in particular
Wismer-Martin's ability to compete with larger, national practice management
software and health care information service companies. The Wismer-Martin Board
again concluded that Wismer-Martin by itself lacked the financial and other
resources to maximize its competitive potential.
The Wismer-Martin Board unanimously approved the Plan of Merger and the
transactions contemplated thereby, and recommends that shareholders of
Wismer-Martin vote "FOR" approval of the Plan of Merger.
General Description of the Merger
Pursuant to the Merger Agreement, Merger Sub will merge with and into
Wismer-Martin, the separate existence of Merger Sub will cease, and
Wismer-Martin will be the surviving corporation and become a wholly-owned
subsidiary of PCN (the "Merger"). At the effective time of the Merger (the
"Effective Time"), each share of Wismer-Martin Common Stock issued and
outstanding immediately prior to Effective Time, except those held by
shareholders who validly perfect dissenters' rights under the WBCA, will be
converted into the right to receive (the "Merger Consideration"): (i) an amount
in cash (the "Cash Consideration") equal to the quotient obtained by dividing
(x) $1,980,000 by (y) the number of shares of Wismer-Martin Common Stock
outstanding immediately prior to the Effective Time (the "Common Share Number")
and (ii) subject to the adjustments described below, that number (the "Stock
Consideration") of shares of PCN's Common Stock, par value $.01 per share ("PCN
Common Stock"), equal to the quotient obtained by dividing (x) 935,000 by (y)
the Common Share Number. In particular, and in addition to the adjustments
described in the following paragraph, in the event that the Market Price (as
defined below) of PCN Common Stock on the third business day prior to the
Effective Time is less than or equal to $9.00 per share, then, at PCN's option,
in lieu of the Cash Consideration and Stock Consideration described above, the
"Merger Consideration" shall be an amount in cash equal to (the "Cash Option")
(x) $14,000,000 divided by (y) the Common Share Number.
The Merger Agreement provides that the Stock Consideration (described
above) will be adjusted under the following circumstances: (i) if the aggregate
Market Price of the Stock Consideration is less than $9,350,000 ($10.00
28
<PAGE>
per share) on the third business day immediately preceding the Effective Time,
then the Stock Consideration shall be increased to equal such number of shares
of PCN Common Stock as has an aggregate market value of $9,350,000 and (ii) if
the aggregate Market Price of the Stock Consideration is greater than
$11,453,750 ($12.25 per share) on the third business day immediately preceding
the Effective Time, then the Stock Consideration shall be decreased to equal
such number of shares of PCN Common Stock as has an aggregate market value of
$11,453,750. The Merger Agreement contains an additional provision intended to
preserve the tax-free reorganization treatment of the Merger (so long as the
Cash Option is not exercised), such that the receipt of the Stock Consideration
by Wismer-Martin shareholders would be on a tax-free basis, by, based upon
certain assumptions, limiting the aggregate amount of cash to be received by
both the dissenting and non-dissenting shareholders of Wismer-Martin to 20% or
less of the aggregate value of the consideration (both cash and shares of PCN
Common Stock) to be received by both the dissenting and the non-dissenting
shareholders of Wismer-Martin. This provision may result in adjustments
decreasing the aggregate amount of cash and increasing the aggregate number of
shares of PCN Common Stock to be received by the non-dissenting shareholders of
Wismer-Martin in the Merger. This adjustment would be expected to occur only if
a significant number of shareholders exercise dissenters' rights. See "The
Merger -- Dissenters' Rights." No assurances can be given that such adjustment
will ensure the Merger to qualify as a tax-free reorganization. See "The Merger
- -- Certain Federal Income Tax Consequences of the Merger." As used herein,
"Market Price" means the average of the closing price of a share of PCN Common
Stock as reported on the NASDAQ Stock Market during the fifteen (15) trading
days immediately preceding the date of determination.
See "Comparison of Shareholder Rights" for a description of certain
material differences between the rights of holders of PCN Common Stock and the
rights of holders of Wismer-Martin Common Stock.
Closing; Effective Time
The closing of the transactions contemplated by the Merger Agreement will
take place, on a date to be specified by the parties, which shall be no later
than the second business day immediately following the date on which the last of
the conditions set forth in the Merger Agreement is satisfied or waived, or at
such other time as PCN and Wismer-Martin agree. The Merger will become effective
upon the issuance of a certificate of merger by the Secretary of State of the
State of Washington pursuant to the WBCA.
Exchange of Stock Certificates
As soon as reasonably practicable after the Effective Time, American Stock
Transfer & Trust Company, which has been designated as the exchange agent (the
"Exchange Agent"), will mail transmittal instructions and a letter of
transmittal to each holder of Wismer-Martin Common Stock. The transmittal
instructions will describe the procedures for surrendering certificates that
prior to the Merger represented Wismer-Martin Common Stock (the "Certificates")
in exchange for cash and certificates representing PCN Common Stock (the "PCN
Certificates"). WISMER-MARTIN SHAREHOLDERS SHOULD NOT SUBMIT THEIR CERTIFICATES
FOR EXCHANGE UNLESS AND UNTIL THEY HAVE RECEIVED THE TRANSMITTAL INSTRUCTIONS
AND LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
When a Wismer-Martin shareholder delivers his or her Certificates to the
Exchange Agent along with a properly executed letter of transmittal and any
other required documents, such Certificates will be canceled and the
Wismer-Martin shareholder will receive payment of an amount in cash (which
amount shall include payment in cash in lieu of any fractional shares of PCN
Common Stock) and PCN Certificates representing the number of shares of PCN
Common Stock to which the Wismer-Martin shareholder is entitled under the Merger
Agreement. If any cash or PCN Certificate is to be issued to or in a name other
than that in which the corresponding Certificate is registered, it is a
condition to the exchange of the Certificate that the Wismer-Martin shareholder
comply with applicable transfer requirements and pay any applicable transfer or
other taxes. See "The Merger -- General Description of Merger."
Wismer-Martin shareholders will not be entitled to receive any dividends or
other distributions on the PCN Common Stock until the Merger has been
consummated and they have exchanged their Certificates for PCN Certificates.
Subject to applicable law, such dividends and distributions which have a record
date after the Effective Time, if any, will be accumulated and, at the time a
Wismer-Martin shareholder surrenders his or her Certificates to the Exchange
Agent, all accrued and unpaid dividends and distributions, together with any
cash payments in lieu of fractional shares of PCN Common Stock, will be paid
without interest. PCN does not anticipate declaring any dividends or making any
other distributions prior to the Effective Time.
29
<PAGE>
The Cash Consideration and Stock Consideration issuable in exchange for
outstanding shares of Wismer-Martin Common Stock, together with dividends and
cash in lieu of fractional shares, which remain undistributed for 180 days after
the Effective Time, shall be delivered by the Exchange Agent to PCN, upon
demand, and any holders of the Certificates who have not surrendered their
Certificates shall thereafter look only to PCN for delivery of PCN Certificates,
Cash Consideration and any cash in lieu of fractional shares and any dividends
or distributions with respect to PCN Common Stock.
No Fractional Shares
No certificates or scrip representing fractional shares of PCN Common Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of PCN. Each holder of shares of Wismer-Martin Common
Stock exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of PCN Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of PCN
Common Stock multiplied by the average closing price of PCN Common Stock on the
NASDAQ Stock Market during the fifteen trading days immediately prior to the
Effective Time.
Interests of Certain Persons in the Merger
In considering the recommendation of the Wismer-Martin Board with respect
to the Plan of Merger, Wismer-Martin's shareholders should be aware that certain
members of Wismer-Martin's senior management and the Wismer-Martin Board have
certain interests in the Merger, as described below, that are in addition to the
interests of shareholders of Wismer-Martin generally. The Wismer-Martin Board
was aware of these interests and considered them, among other matters, in
approving the Plan of Merger and the transactions contemplated thereby.
Consultation Agreement. PCN has entered into a consultation agreement with
Ronald Holden, the current Chairman of the Board and Chief Executive Officer of
Wismer-Martin, which becomes effective at the Effective Time. The consultation
agreement provides that Mr. Holden shall act as a consultant to PCN for a period
of two years following the Effective Time (the "Term"). During the Term, he
shall receive an annual consultation fee of $120,000. In addition, the
consultation agreement generally provides that during the Term and the one year
period thereafter, Mr. Holden shall not directly or indirectly own, manage,
operate, control, invest or have an interest in, be employed by or participate
in, any business which is competitive with any business conducted by PCN or any
of its affiliates during the Term.
Option and Voting Agreements. The Majority Shareholders have each agreed in
separate Option and Voting Agreements with PCN to, among other things, vote
their shares of Wismer-Martin Common Stock entitled to vote at the Special
Meeting in favor of approval of the Plan of Merger. Further, each Option and
Voting Agreement provides that, under certain circumstances, PCN may purchase
the Majority Shareholder's shares of Wismer-Martin Common Stock. See "Security
Ownership of Certain Persons and Option and Voting Agreements."
Certain Federal Income Tax Consequences of the Merger
Unless PCN exercises the Cash Option, the Merger is intended to qualify as
a reorganization for federal income tax purposes under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, as a
consequence of the Merger (subject to the qualifications discussed below, and so
long as the Cash Option is not exercised):
(a) none of PCN, Wismer-Martin or Merger Sub will recognize any gain or
loss as a result of the Merger;
(b) except for any Cash Consideration received and cash received in lieu
of fractional share interests, a holder of shares of Wismer-Martin
Common Stock who exchanges such shares for shares of PCN Common Stock
will not recognize any gain or loss upon such exchange;
(c) a holder who receives Cash Consideration in the Merger will recognize
gain equal to the lesser of (x) the excess (if any) of (1) the Market
Price of the PCN Common Stock plus the amount of Cash Consideration
received by such holder in the Merger, over (2) such holder's tax
basis in the shares of the Wismer-Martin Common Stock tendered
therefor, and (y) the amount of Cash Consideration received by the
holder in the Merger. Such gain will be long-term capital gain
provided that the holder has held the Wismer-Martin
30
<PAGE>
Common Stock as a capital asset as of the Effective Time and for more
than one year. No loss shall be recognized by any holder as a result
of such receipt of Cash Consideration in the Merger.
(d) the aggregate adjusted tax basis of the shares of PCN Common Stock
received in such exchange will be equal to a holder's aggregate
adjusted tax basis in the shares of Wismer-Martin Common Stock
surrendered therefor (i) decreased by the amount of Cash Consideration
received by such holder in the Merger and (ii) increased by the amount
of gain recognized by such holder in the Merger;
(e) if the shares of Wismer-Martin Common Stock were held as a capital
asset at the Effective Time, the holding period of the shares of PCN
Common Stock received in the Merger will include the holding period of
the shares of Wismer-Martin Common Stock exchanged therefor; and
(f) a holder of shares of Wismer-Martin Common Stock who receives cash in
the Merger in lieu of a fractional share interest of PCN Common Stock
will be treated as if such fractional share interest of PCN Common
Stock was distributed to such holder and then redeemed by PCN for
cash. The deemed redemption will be treated as a distribution in full
payment in exchange for the fractional share interest of the PCN
Common Stock deemed received by the holder under Section 302(a) of the
Code. Accordingly, such holder will recognize a gain or loss equal to
the difference between the amount of cash received and the portion of
such holder's adjusted tax basis in the shares of Wismer-Martin Common
Stock allocable to the fractional share interest of PCN Common Stock.
The gain or loss will be long-term capital gain or loss provided that
the shares of Wismer-Martin Common Stock deemed surrendered for such
fractional share interest of PCN Common Stock were held as a capital
asset at the Effective Time and for more than one year.
Paine, Hamblen, Coffin, Brooke & Miller LLP ("Paine Hamblen"), counsel to
Wismer-Martin, has rendered an opinion to Wismer-Martin dated August 7, 1996, to
the effect that: (i) if the Cash Option is not exercised; (ii) if the number of
shares of Wismer-Martin Common Stock for which dissenters' rights are exercised,
in the aggregate, do not exceed 2.5% of the outstanding Wismer-Martin Common
Stock and if the amount received by Wismer-Martin shareholders exercising their
dissenters' rights does not exceed the aggregate Merger Consideration that such
shareholders would have been entitled to receive had they not exercised their
dissenters' rights; and (iii) if the Merger is carried out in accordance with
the other representations, assumptions and qualifications contained in such
opinion, the Merger will constitute a reorganization for federal income tax
purposes as defined by Section 368(a) of the Code, that Wismer-Martin, PCN and
Merger Sub will each be a party to the reorganization as defined by Section
368(b) of the Code and the federal income tax consequences listed in paragraphs
(a) through (f) above will result from the Merger. Such opinion does not address
any federal income tax consequences applicable to Wismer-Martin shareholders who
exercise dissenters' rights. Such opinion is based on current law,
representations by PCN, Merger Sub, Wismer-Martin and Ronald Holden and various
other qualifications and assumptions as set forth in the copy of such opinion
filed as an exhibit to the Registration Statement of which this Proxy Statement
and Prospectus forms a part. Without limiting the generality of the foregoing
limits on such opinion, Paine Hamblen expresses no opinion as to the federal
income tax consequences of the Merger in circumstances other than the ones
referred to in clauses (i) through (iii) above. It is a condition to the
consummation of the Merger that Paine Hamblen shall have rendered an opinion to
Wismer-Martin dated as of the Effective Time to the same effect.
None of Wismer-Martin, Merger Sub or PCN have requested a ruling from the
Internal Revenue Service in connection with the Merger. The opinion of counsel
referred to in the preceding paragraph is neither binding upon the Internal
Revenue Service nor would it preclude the Internal Revenue Service from adoption
of a contrary position. There is no assurance that the Internal Revenue Service
will not successfully contest some or all of the conclusions contained in such
opinion of counsel.
In order to qualify as a reorganization under 368(a) of the Code, among
other requirements, at least 80% of the outstanding Wismer-Martin Common Stock,
in the aggregate, must be exchanged for PCN Common Stock in the Merger. Unless
the Cash Option is exercised, except under the circumstances described in the
next sentence, at least 80% of the Merger Consideration would always consist of
PCN Common Stock. However, the satisfaction of this 80% requirement could be
affected by the number of holders of Wismer-Martin Common Stock who exercise
their dissenters' rights. Accordingly, in the event that holders of more than
approximately 2.5% of the Wismer-Martin Common Stock exercise their dissenters
rights (See "-- Dissenters' Rights") and/or, in certain circumstances, if the
amount received by shareholders exercising their dissenters' rights exceeds the
value of the Merger Consideration (in any such case, the "Dissenter Trigger
Events"), it is possible that less than 80% of the total consideration paid by
PCN in connection with the Merger would be in the form of PCN Common Stock. In
order to address this possibility, the Merger Agreement contains a provision
(the "Tax Adjustment") which ensures that 80% of the total Merger
31
<PAGE>
Consideration will be in the form of PCN Common Stock even if a number of
shareholders (not exceeding holders of 20% of the Wismer-Martin Common Stock)
exercise their dissenters' rights. However, since, among other things, neither
PCN nor Wismer-Martin controls the amount determined by a court to be the
appraised value of the Wismer-Martin Common Stock held by dissenting
shareholders, no assurances can be give that, if a Dissenters Trigger Event
occurs, the Tax Adjustment will, under all possible circumstances, ensure that
the Merger qualifies as a reorganization under Section 368(a) of the Code.
As a result, if PCN exercises the Cash Option or if a Dissenter Trigger
Event occurs and results in the Merger not qualifying as an reorganization,
then, as a result of the Merger, the Wismer-Martin shareholders will be treated
as having sold their Wismer-Martin Common Stock to PCN. Accordingly, each
Wismer-Martin shareholder will recognize gain or loss equal to the difference
between the amount of cash and/or fair market value of the PCN Common Stock, as
the case may be, received by such shareholder in the Merger and the
shareholder's tax basis in the Wismer-Martin Common Stock exchanged therefor.
Such gain or loss will be long-term capital gain or loss provided that, as of
the Effective Time, the shareholder had held the Wismer-Martin Common Stock as a
capital asset and for more than one year.
THE DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER SET
FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON CURRENT
LAW. THE FOREGOING DISCUSSION DOES NOT ADDRESS ANY FEDERAL INCOME TAX
CONSEQUENCES APPLICABLE TO WISMER-MARTIN SHAREHOLDERS WHO EXERCISE DISSENTERS'
RIGHTS. IN ADDITION, THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER MAY BE
DIFFERENT FOR PARTICULAR TYPES OF WISMER-MARTIN SHAREHOLDERS OR IN LIGHT OF EACH
WISMER-MARTIN SHAREHOLDER'S PERSONAL CIRCUMSTANCES. FOR THAT REASON,
WISMER-MARTIN SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO THEM IN
CONNECTION WITH THE MERGER, AS WELL AS THE APPLICATION TO THEM OF ANY STATE,
LOCAL, FOREIGN, OR OTHER TAX LAWS. THE FOREGOING DISCUSSION IS NOT INTENDED
NECESSARILY TO APPLY TO WISMER-MARTIN SHAREHOLDERS WHO HOLD SHARES OF
WISMER-MARTIN COMMON STOCK BY VIRTUE OF BEING CURRENT OR FORMER EMPLOYEES OF
WISMER-MARTIN AND/OR HOLDERS OF WISMER-MARTIN OPTIONS, TO DEALERS IN SECURITIES,
OR TO OTHER CATEGORIES OF SHAREHOLDERS WHO MAY BE SUBJECT TO SPECIAL RULES.
Federal Securities Law Matters
The issuance of the PCN Common Stock pursuant to the Merger Agreement has
been registered under the Securities Act. The PCN Common Stock will be available
for resale without restriction (i) immediately and without any limitation,
except for shares issued to any person who may be deemed to be an "Affiliate"
(as such term is defined for purposes of Rule 145 under the Securities Act) of
Wismer-Martin at the time of the Special Meeting and (ii) by Affiliates of
Wismer-Martin who comply with the requirements of Rule 145(d)(1) in effecting
such resales. Persons who may be deemed Affiliates of Wismer-Martin generally
include individuals or entities that control, are controlled by, or are under
common control with, Wismer-Martin, and may include certain officers and
directors, as well as principal shareholders, of Wismer-Martin.
If the Merger is consummated, the Wismer-Martin Common Stock will no longer
be quoted on the SQSI and will be deregistered under the Exchange Act. PCN will
be subject to certain reporting obligations under the Exchange Act with respect
to the PCN Common Stock.
Accounting Treatment
PCN intends to treat the Merger as a "purchase," as such term is used under
generally accepted accounting principles, for accounting and financial reporting
purposes. Under the purchase method of accounting, assets and liabilities of
Wismer-Martin would be recorded at their fair value at the Effective Time, with
the excess consideration to be paid by PCN pursuant to the Merger over
Wismer-Martin's net tangible and identifiable assets being recorded as goodwill.
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Listing on NASDAQ Stock Market
PCN has agreed to use its reasonable best efforts to cause the shares of
PCN Common Stock to be issued pursuant to the Merger Agreement to be listed on
the NASDAQ Stock Market.
See "The Merger Agreement -- Conditions to the Merger."
Dissenters' Rights
THE FOLLOWING SUMMARY OF THE AVAILABILITY OF DISSENTERS' RIGHTS FOR HOLDERS
OF WISMER-MARTIN COMMON STOCK DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO CHAPTER 23B.13 OF THE WBCA, WHICH IS ATTACHED TO
THIS PROXY STATEMENT AND PROSPECTUS AS ANNEX B AND IS INCORPORATED HEREIN BY
REFERENCE.
ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF DISSENTERS' RIGHTS IS URGED
TO REVIEW THE FULL TEXT OF CHAPTER 23B.13 OF THE WBCA WHICH IS SET FORTH IN
ANNEX B HERETO. FAILURE TO FOLLOW ANY OF THE STATUTORY PROCEDURES PRECISELY MAY
RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS. IN VIEW OF THE
COMPLEXITY OF THESE PROVISIONS OF WASHINGTON LAW, ANY WISMER-MARTIN SHAREHOLDER
WHO IS CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT A LEGAL ADVISOR.
A holder of Wismer-Martin Common Stock who properly follows the procedure
for dissenting and demanding payment for such holder's shares pursuant to
Chapter 23B.13 (as summarized below) may be entitled to receive in cash the
"fair value" of such holder's shares in lieu of the consideration provided for
in the Merger Agreement. The "fair value" of a dissenter's shares will be the
value of such shares immediately prior to the Effective Time of the Merger,
excluding any appreciation or depreciation in anticipation of the Merger unless
exclusion would be inequitable. The "fair value" could be more than, equal to,
or less than the value of the consideration the shareholder would receive
pursuant to the Merger Agreement if the shareholder did not dissent. In the
event the dissenting shareholder and Wismer-Martin cannot agree on a "fair
value" of the dissenter's shares, "fair value" may ultimately be determined by a
court in an appraisal proceeding.
To properly exercise dissenters' rights with respect to the Merger and be
entitled to compensation, a holder of Wismer-Martin Common Stock must, among
other things, (i) prior to the Wismer-Martin Special Meeting, deliver written
notice of such holder's intent to demand payment for such holder's shares if the
Merger is effected, (ii) not vote such holder's shares in favor of the Merger
and (iii) timely deliver a demand for payment, certify whether such holder
acquired beneficial ownership before the date of first announcement to news
media or to shareholders of the terms of the Merger, and deposit such holder's
stock certificates. Thus, any holder of Wismer-Martin Common Stock who wishes to
dissent and who returns a proxy on one of the accompanying forms must mark it
with voting instructions (a) that such holder's shares are to be voted against
the Merger or (b) that such holder's shares are to abstain from voting on the
Merger. If the shareholder returns a proxy (x) marked with instructions that
such holder's shares are to be voted in favor of the Merger or (y) without
marking voting instructions, such holder's shares will be voted in favor of the
Merger and such holder will lose any dissenters' rights.
Within ten days after the Effective Time of the Merger, Wismer-Martin will
send a written dissenters' notice to each shareholder who satisfied the
requirements of (i) and (ii) above, indicating where the payment demand must be
sent and where and when stock certificates must be deposited. Such notice will
include, among other things, a form of payment demand, and will set the date by
which Wismer-Martin must receive the payment demand, which date may not be less
than 30 nor more than 60 days after the dissenters' notice is delivered.
Shareholders who fail to timely deliver written notice of their intent to
demand payment or who vote in favor of the Merger will not be entitled to
receive this notice and will be bound by the terms of the Merger Agreement.
Written notice of intent to demand payment (and other communications regarding
dissenters' rights) should be addressed to Secretary, Wismer-Martin, Inc., 12828
N. Newport Highway, Mead, Washington 99201. Such written notice of intent to
demand payment must be received by Wismer-Martin prior to the Special Meeting.
A beneficial shareholder may assert dissenters' rights as to shares held on
the beneficial shareholder's behalf only if (a) the beneficial shareholder
submits to Wismer-Martin the record shareholder's written consent to the dissent
not later than the time the beneficial shareholder asserts dissenters' rights
and (b) the beneficial shareholder
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does so with respect to all shares of which such shareholder is the beneficial
shareholder or over which such shareholder has power to direct the vote.
Within 30 days after the later of the Effective Time of the Merger or the
date the payment demand is received, Wismer-Martin will pay each dissenter who
complied with the conditions above, the amount that Wismer-Martin estimates to
be the fair value of such holder's shares, plus accrued interest. The payment
must be accompanied by, among other things, (a) Wismer-Martin's balance sheet as
of the end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim financial
statements, if any, and (b) an explanation of how Wismer-Martin estimated the
fair value of the shares and how the interest was calculated. Notwithstanding
the foregoing, with respect to shares acquired after the date of the first
announcement to news media or to shareholders of the terms of the Merger (June
20, 1996), Wismer-Martin may elect to withhold payment of the fair value of
dissenters' shares plus accrued interest and, in such event, after the Effective
Time, Wismer-Martin will estimate the fair value of the shares, plus accrued
interest, and will offer to pay this amount to each dissenter who agrees to
accept it in full satisfaction of the dissenter's demand.
A dissenter may (i) notify Wismer-Martin in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest due,
and (ii)(a) demand payment of the dissenter's estimate, less any payment made,
or (b) with respect to after-acquired shares for which Wismer-Martin elected to
withhold payment, reject Wismer-Martin's offer of its estimate of the fair value
of such shares and amount of interest due and demand payment of the dissenter's
estimate of the fair value of the dissenter's shares and amount of interest due,
if:
(x) The dissenter believes that the amount paid or offered is less
than the fair value of the dissenter's shares or that the interest due is
incorrectly calculated;
(y) Wismer-Martin fails to make payment within 60 days after the date
set for demanding payment; or
(z) Wismer-Martin does not effect the Merger and does not return the
deposited stock certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.
A dissenter will be deemed to have waived the right to demand payment of
the dissenter's estimate unless the dissenter notifies Wismer-Martin of such
payment demand in writing within 30 days after Wismer-Martin makes or offers
payment for the dissenter's shares.
If a demand for payment of the dissenter's estimate remains unsettled,
Wismer-Martin will commence a proceeding in the Superior Court of Spokane
County, Washington within 60 days after receiving such payment demand and
petition the court to determine the fair value of the shares and accrued
interest and, if Wismer-Martin does not commence such proceeding within the
60-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded. Wismer-Martin will make all dissenters whose demands remain
unsettled, whether or not residents of Washington, parties to the proceeding as
in an action against their shares and all parties must be served with a copy of
the petition. Wismer-Martin may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of
Wismer-Martin, complied with the provisions of Chapter 23B.13. If the court
determines that such shareholder has not complied with the provisions of Chapter
23B.13, the shareholder shall be dismissed as a party. Each dissenter made a
party to the proceeding will be entitled to judgment (a) for the amount, if any,
by which the court finds the fair value of the shares, plus interest, exceeds
the amount paid by Wismer-Martin, or (b) for the fair value, plus accrued
interest, of the dissenter's after-acquired shares for which Wismer-Martin
elected to withhold payment.
If Wismer-Martin does not effect the Merger within 60 days after the date
set for demanding payment and depositing stock certificates, Wismer-Martin shall
return the deposited stock certificates and release any transfer restrictions
imposed on uncertificated shares.
The right of a dissenting shareholder to obtain payment of the fair value
of such shareholder's shares will terminate upon the occurrence of any of the
following events:
(a) The merger is abandoned or rescinded;
(b) A court permanently enjoins or sets aside the Merger; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of Wismer-Martin.
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The Merger Agreement contains certain provisions which may be affected by
the number of Wismer-Martin shareholders exercising dissenters' rights. First,
one of the conditions to the obligations of PCN to effect the Merger is that the
holders of not more than 5% of Wismer-Martin Common Stock shall have demanded
their dissenters' rights under the WBCA. See "The Merger Agreement -- Conditions
to the Merger." If the holders of more than 5% of Wismer-Martin Common Stock
exercise their dissenters' rights, this condition will not be satisfied.
Second, in the event that a large number of holders of Wismer-Martin Common
Stock exercise their dissenters' rights, it could prevent the Merger from being
treated as a reorganization under Section 368(a) of the Code for income tax
purposes. Accordingly, the Merger Agreement contains an additional provision
intended to preserve the tax-free reorganization treatment of the Merger (so
long as the Cash Option is not exercised), such that the receipt of the Stock
Consideration by Wismer-Martin shareholders would be on a tax-free basis, by,
based upon certain assumptions, limiting the aggregate amount of cash to be
received by both the dissenting and non-dissenting shareholders of Wismer-Martin
to 20% or less of the aggregate value of the consideration (both cash and shares
of PCN Common Stock) to be received by both the dissenting and the
non-dissenting shareholders of Wismer-Martin. No assurances can be given that
such adjustment will enable the Merger to qualify as a tax-free reorganization.
See "The Merger Agreement"; "-- Certain Federal Income Tax Consequences of the
Merger."
Pursuant to the Merger Agreement, PCN shall have the opportunity to direct
all negotiations and proceedings with respect to dissenting shareholders.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is attached to this Proxy
Statement and Prospectus as Annex A and is incorporated herein by reference.
The Merger
Pursuant to the Merger Agreement, Merger Sub will merge with and into
Wismer-Martin, the separate existence of Merger Sub will cease, and
Wismer-Martin will be the surviving corporation and become a wholly-owned
subsidiary of PCN (the "Merger"). At the effective time of the Merger (the
"Effective Time"), each share of Wismer-Martin Common Stock issued and
outstanding immediately prior to Effective Time, except those held by
shareholders who validly perfect dissenters' rights under the WBCA, will be
converted into the right to receive (the "Merger Consideration"): (i) an amount
in cash (the "Cash Consideration") equal to the quotient obtained by dividing
(x) $1,980,000 by (y) the number of shares of Wismer-Martin Common Stock
outstanding immediately prior to the Effective Time (the "Common Share Number")
and (ii) subject to the adjustments described below, that number (the "Stock
Consideration") of shares of PCN's Common Stock, par value $.01 per share ("PCN
Common Stock"), equal to the quotient obtained by dividing (x) 935,000 by (y)
the Common Share Number. Assuming that there are no adjustments to the Merger
Consideration, as described below, and assuming the exercise in full of 300,000
currently outstanding options to purchase Wismer-Martin Common Stock, each share
of Wismer-Martin Common Stock will be convertible into $0.1191 in cash and .0562
shares of PCN Common Stock. No assurances can be made that there will not be any
changes in the foregoing amount of cash or number of shares of PCN Common Stock
as a result of any one or more of the adjustments described below. In
particular, and in addition to the adjustments described in the following
paragraph, in the event that the Market Price (as defined below) of PCN Common
Stock on the third business day prior to the Effective Time is less than or
equal to $9.00 per share, then, at PCN's option, in lieu of the Cash
Consideration and Stock Consideration described above, the "Merger
Consideration" shall be an amount in cash equal to (the "Cash Option") (x)
$14,000,000 divided by (y) the Common Share Number, or $0.8421 in cash per
share, assuming the exercise of 300,000 currently outstanding options to
purchase Wismer-Martin Common Stock and that the Market Price of PCN Common
Stock was $9.00 per share or less.
The Merger Agreement provides that the Stock Consideration (described
above) will be adjusted under the following circumstances: (i) if the aggregate
Market Price of the Stock Consideration is less than $9,350,000 ($10.00 per
share) on the third business day immediately preceding the Effective Time, then
the Stock Consideration shall be increased to equal such number of shares of PCN
Common Stock as has an aggregate market value of $9,350,000 and (ii) if the
aggregate Market Price of the Stock Consideration is greater than $11,453,750
($12.25 per share) on the third business day immediately preceding the Effective
Time, then the Stock Consideration shall be decreased to equal such number of
shares of PCN Common Stock as has an aggregate market value of $11,453,750. The
Merger Agreement contains an additional provision intended to preserve the
tax-free reorganization treatment of the Merger (so long as the Cash Option is
not exercised), such that the receipt of the Stock Consideration by
Wismer-Martin shareholders would be on a tax-free basis, by, based upon certain
assumptions, limiting the aggregate amount of cash to be received by both the
dissenting and non-dissenting shareholders of Wismer-Martin to 20% or less of
the aggregate value of the consideration (both cash and shares of PCN Common
Stock) to be received by both the dissenting and the non-dissenting shareholders
of Wismer-Martin. This provision may result in adjustments decreasing the
aggregate amount of cash and increasing the aggregate number of shares of PCN
Common Stock to be received by the non-dissenting shareholders of Wismer-Martin
in the Merger. This adjustment would be expected to occur only if a significant
number of shareholders exercise dissenters' rights. See "The Merger --
Dissenters' Rights." No assurances can be given that such adjustment will enable
the Merger to qualify as a tax-free reorganization. See "The Merger -- Certain
Federal Income Tax Consequences of the Merger." As used herein, "Market Price"
means the average of the closing price of a share of PCN Common Stock as
reported on the NASDAQ Stock Market during the fifteen (15) trading days
immediately preceding the date of determination.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail transmittal instructions and a form of letter of transmittal to
each Wismer-Martin shareholder to be used in forwarding his or her Certificates
for surrender and exchange for the Cash Consideration, including cash in lieu of
a fractional share of PCN Common Stock, and Stock Consideration. After receipt
of such transmittal instructions and form of letter of transmittal, each
Wismer-Martin shareholder should surrender his or her Certificates to the
Exchange Agent in accordance with the transmittal instructions, and each such
holder will receive in exchange therefor an amount in cash equal to the Cash
Consideration and number of PCN Common Stock Certificates equal to the Stock
Consideration representing whole
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shares of PCN Common Stock, and any cash that may be payable in lieu of a
fractional share of PCN Common Stock. See "The Merger -- Exchange of Stock
Certificates; -- No Fractional Shares."
Representations and Warranties
The Merger Agreement contains various representations and warranties by
each of PCN and Wismer-Martin relating to, among other things, (i) each of their
organizations, and in the case of Wismer-Martin, its subsidiaries'
organizations, and similar corporate matters, (ii) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters, (iii) the absence of conflicts under the PCN Certificate, PCN By-Laws,
Wismer-Martin Certificate or Wismer-Martin By-Laws or violations of any
instruments or laws, and any required consents or approvals, (iv) the documents
and reports filed by each of them with the SEC and the accuracy of the
information contained therein, (v) the absence of any broker, finder or
investment banker fee being payable as a result of the consummation of the
Merger, (vi) the accuracy of the information provided by each of them with
respect to the Registration Statement and the Proxy Statement and Prospectus,
(vii) the absence of certain events, changes or effects and (viii) the absence
of undisclosed material liabilities. PCN has made representations and warranties
relating to the operations of Merger Sub. Wismer-Martin has made representations
and warranties relating to (i) its capital structure, (ii) property owned or
leased, (iii) authority to use all patents and trademarks, (iv) litigation, (v)
compliance with environmental laws, (vi) effectiveness and validity of permits,
licenses and related authorization necessary to conduct its operations and the
operations of its subsidiaries, (vii) taxes, (viii) certain accounting matters,
(ix) retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974, as amended, (x) employee representation
by labor unions or employee involvement in any other organizational activity,
(xi) a list of certain contracts relating to certain employment, consulting and
benefit matters, (xii) maintenance of insurance, (xiii) listing and
collectibility of accounts receivable, (xiv) effectiveness of material
contracts, (xv) no material related party transactions other than as previously
disclosed, (xvi) the shareholder vote required to approve the Plan of Merger,
(xvii) a list of customers and suppliers and no material disputes with any
client of Wismer-Martin, (xviii) a list of bank accounts and (xix) no unlawful
payment problems.
Certain Covenants
Pursuant to the Merger Agreement, during the period from the date of the
Merger Agreement until the Effective Time, Wismer-Martin has agreed, as to
itself and its subsidiaries (except as permitted by the Merger Agreement or as
consented to in writing by PCN), to, among other things, (i) conduct the
businesses of Wismer-Martin and its subsidiaries only in the ordinary course and
in a manner consistent with past practice, (ii) use commercial reasonable
efforts to preserve the business organization, services of officers, employees
and consultants and relationships with customers, (iii) not amend or propose to
amend its certificate of incorporation or by-laws, (iv) not issue, deliver or
sell capital stock, rights, warrants, options for convertible or similar
securities, subject to certain exceptions, (v) not declare or pay any dividend
or make other distributions, (vi) not reclassify, combine, split or subdivide,
any of its capital stock or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock, (vii) not effect any material acquisitions
of any business or assets other than in the ordinary course of business, (viii)
not sell, lease, encumber or otherwise dispose of any material portion of its
assets, (ix) not incur any indebtedness for borrowed money (or guarantees
thereof), (x) not increase the compensation payable to officers and employees
(subject to certain exceptions) or grant any severance pay to any such persons
or enter into or enter into any collective bargaining agreement or establish or
amend any employee benefit or fringe benefit plans or arrangements for the
benefit of any director, officer or employee, (xi) not adopt a plan of complete
or partial liquidation or dissolution, (xii) not enter any settlement agreement
with respect to any to any pending litigation, grievances and the like, subject
to certain exceptions, (xiii) not terminate or amend any material contract and
(xiv) file all tax returns required to be filed by them and pay all taxes due
prior to the Effective Time.
Certain Additional Agreements
Pursuant to the Merger Agreement, PCN and Wismer-Martin have agreed that
(i) they will each afford to the other access to their respective officers,
properties, offices, plants and information as the other party may reasonably
request, (ii) they will abide by the terms of the Confidentiality Agreement
between PCN and Wismer-Martin, (iii) they will comply with all legal
requirements imposed on each other with respect to the Merger and furnish
information to the other party in connection with such legal requirements and
(iv) they will advise each other of any subsequent event that would have been
required to be disclosed in the Merger Agreement or any change or event which
has or could have a material adverse effect on PCN or Wismer-Martin, as the case
may be. The Merger Agreement provides that, PCN shall use all reasonable efforts
to permit it to issue the shares of PCN Common Stock to be issued in the Merger.
The Merger Agreement
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provides that, Wismer-Martin shall (i) promptly take all actions necessary under
its organizational documents and the WBCA to convene the Special Meeting, (ii)
use its reasonable best efforts to cause all options to purchase Wismer-Martin
Common Stock, whether or not vested, whose purchase price per share is less than
or equal to the Merger Consideration ("In-the-Money Options") to be exercised or
canceled prior to the Effective Time, (iii) cause its counsel to issue to
Wismer-Martin a tax opinion to the effect that, among other things, the Merger
will be treated for federal income tax purposes as a tax-free reorganization and
(iv) deliver to PCN a description of certain property no later than the third
day prior to the Effective Time.
No Solicitation of Other Transactions
The Merger Agreement provides that Wismer-Martin and its subsidiaries will
not (i) initiate contact with, solicit or otherwise encourage any inquiries or
the making of any proposal or offer for a merger or other business combination
involving Wismer-Martin or any proposal or offer to acquire or dispose of or
exchange an equity interest in, or a material portion of the assets of,
Wismer-Martin (an "Acquisition Proposal") or (ii) negotiate or discuss with, or
provide any non-public information to, any person relating to any Acquisition
Proposal. Wismer-Martin also has agreed not to authorize or permit its officers,
directors or employees, or any investment banker, financial advisor, attorney,
accountant or representative retained by it, to engage in such activities on
Wismer-Martin's behalf. Wismer-Martin must immediately notify PCN of any
negotiations, requests for non-public information or discussions with respect to
an Acquisition Proposal, and keep PCN fully informed of the status and details
of any such Acquisition Proposal or request.
Expenses
Except as set forth below, the Merger Agreement provides that, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such expenses.
The Merger Agreement also provides that if the Merger Agreement is
terminated under certain circumstances, the non-terminating party shall pay the
terminating party its damages, losses, costs and expenses, (including, without
limitation, reasonable fees and disbursements of attorneys, financial commitment
and financial advisory fees) incurred by the terminating party in connection
with the transactions contemplated by the Merger Agreement and as a result of
such termination.
Conditions to the Merger
The respective obligations of PCN and Wismer-Martin to effect the Merger
are subject to a number of conditions, including among others (i) the Merger
Agreement shall have been approved and adopted by the requisite vote of
shareholders of Wismer-Martin, (ii) all authorizations, consents, orders and
approvals (including "blue sky" approvals) or declarations or filings with, or
expirations of waiting periods imposed by, any governmental entity, the failure
of which to obtain or file would have a Material Adverse Effect (as defined
below), shall have been filed, occurred or been obtained, (iii) effectiveness of
the Registration Statement, and (iv) no injunction or other order, legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect. The obligations of PCN and Merger Sub to effect the Merger are also
subject to the conditions that (i) the representations and warranties of
Wismer-Martin set forth in the Merger Agreement shall have been true and
correct, individually and in the aggregate, in all material respects as if made
on and as of the Closing, except that any such representation or warranties made
as of a specified date shall have been true on and as of such date, (ii)
Wismer-Martin shall have performed or complied in all material respects with all
of its agreements and covenants contained in the Merger Agreement, (iii) there
shall have been no change in the business, results of operations, properties
(including intangible properties), financial condition, assets or liabilities of
Wismer-Martin since the date of the Merger Agreement, which, individually or in
the aggregate, has a Material Adverse Effect, (iv) Wismer-Martin shall have
received certain consents and approvals necessary for Wismer-Martin to
consummate the Merger, including, without limitation, consents from certain of
Wismer-Martin's lenders, (v) shareholders of no more than 5% of the outstanding
Wismer-Martin Common Stock shall have demanded their dissenter's rights under
the WBCA, (vi) all In-the-Money Options shall have been exercised or canceled,
(vii) PCN shall have received an opinion of outside counsel to Wismer-Martin in
form and substance reasonably satisfactory to PCN, (viii) Wismer-Martin shall
have delivered a compliance certificate to PCN on the Closing Date and (ix) all
corporate proceedings taken by Wismer-Martin in connection with the
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transactions contemplated by the Merger Agreement and all documents incident
thereto shall be reasonably satisfactory in all material respects to PCN and
PCN's counsel. The obligation of Wismer-Martin to effect the Merger is also
subject to (i) the representations and warranties of PCN and Merger Sub set
forth in the Merger Agreement shall have been true and correct, individually and
in the aggregate, in all material respects as if made on and as of the Closing,
except that any such representation or warranties made as of a specified date
shall have been true on and as of such date, (ii) PCN and Merger Sub shall have
performed or complied in all material respects with all of its agreements and
covenants contained in the Merger Agreement, (iii) there shall have been no
change in the business, results of operations, properties (including intangible
properties), financial condition, assets or liabilities of PCN since the date of
the Merger Agreement, which, individually or in the aggregate, has a Material
Adverse Effect, (iv) Wismer-Martin shall have received an opinion of outside
counsel to PCN in form and substance reasonably satisfactory to Wismer-Martin,
(v) PCN shall have delivered a compliance certificate to Wismer-Martin on the
Closing Date and (vi) all corporate proceedings taken by PCN in connection with
the transactions contemplated by the Merger Agreement and all documents incident
thereto shall be reasonably satisfactory in all material respects to
Wismer-Martin and Wismer-Martin's counsel. For the purposes of the Merger
Agreement, the term "Material Adverse Effect" means with respect to PCN or
Wismer-Martin, as the case may be, any effect on the business of PCN or
Wismer-Martin, as the case may be, or any of its subsidiaries that is, or a
reasonable person would believe would be materially adverse to the business,
results of operations, properties (including intangible properties), financial
condition, assets or liabilities of PCN or Wismer-Martin, as the case may be,
and its subsidiaries, taken as a whole.
Wismer-Martin Stock Options
Pursuant to the Merger Agreement, after the Effective Time, any outstanding
option to purchase Wismer-Martin Common Stock, whether vested or unvested
("Stock Option"), shall be automatically be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Stock
Option, the number of shares of PCN Common Stock as such Option would have
entitled the holder thereof to receive if such Stock Option had been exercised
in full immediately prior to the Effective Time; provided, however, that the
number of shares of PCN Common Stock that may be purchased upon exercise of a
Stock Option shall not include any fractional share and, upon exercise of such
Stock Option, a cash payment shall be made for any fractional share based upon
the closing price of a share of PCN Common Stock on the NASDAQ Stock Market on
the trading day immediately preceding the date of exercise.
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of Wismer-Martin, (i)
by mutual consent of the Boards of Directors of PCN and Wismer-Martin, (ii) by
either PCN or Wismer-Martin, if the Merger shall not have been consummated by
October 15, 1996 (provided that such right to terminate the Merger Agreement
will not be available to any party whose failure to fulfill any obligation
thereunder has been the cause of or resulted in the failure of the Merger to
occur on or before such date), (iii) by either PCN or Wismer-Martin, if there
has been a material breach of any representation or warranty by the other party,
which breach has not been cured within fifteen (15) business days following
receipt by the breaching party of notice of such breach, (iv) by either PCN or
Wismer-Martin, if any order, decree or ruling of a court or other competent
authority preventing the consummation of the Merger shall have become final and
nonappealable, (v) by either PCN or Wismer-Martin, if the required approval of
Wismer-Martin shareholders is not obtained upon a vote held at the Special
Meeting and (vi) by PCN, if any Majority Shareholder breaches any of the
material terms of an Option and Voting Agreement or is such Option and Voting is
not enforceable in all material respects against the Majority Shareholder
executing such agreement.
In the event of termination of the Merger Agreement by either PCN or
Wismer-Martin as described above, the Merger Agreement shall become void and
there will be no liability or obligation on the part of either PCN,
Wismer-Martin, Merger Sub or their respective officers or directors pursuant to
the Merger Agreement, except as set forth in certain provisions of the Merger
Agreement, including the payment of the expenses described under "-- Expenses"
and unless such termination arises from a willful breach of the Merger
Agreement.
39
<PAGE>
Amendment and Waiver
The Merger Agreement may be amended by action taken by or on behalf of the
respective boards of directors of PCN and Wismer-Martin; provided that, after
approval of the Merger Agreement by the shareholders of Wismer-Martin, no
amendment may be made that would require further approval by such shareholders
without such further approval. The Merger Agreement may not be amended except by
an instrument in writing signed on behalf of PCN, Merger Sub and Wismer-Martin.
At any time prior to the Effective Time, either PCN and Wismer-Martin may,
by action taken or authorized by their respective boards of directors (i) extend
the time for the performance of any of the obligations to be performed by the
other party, (ii) waive any inaccuracies in the representations and warranties
by the other party contained in the Merger Agreement or in any document
delivered pursuant to the Merger Agreement, or (iii) waive compliance with any
of the agreements of the other party or conditions contained in the Merger
Agreement. Any such extension or waiver will only be valid if set forth in a
writing signed by the party to be bound thereby.
INFORMATION CONCERNING PCN
PCN is a leader in developing, marketing and supporting practice management
software products for physician practices. PCN's objective is to establish a
large installed base of physician practice customers who use PCN's most advanced
practice management software product, the PCN Health Network Information System,
thereby becoming an important link for the electronic exchange of information
between physician practices and other health care providers and organizations.
In furtherance of this objective, since September 1993, PCN has acquired seven
practice management software businesses, increasing the number of physicians
associated with sites which have purchased PCN's practice management software
products from approximately 2,000 to approximately 85,000, making PCN one of the
largest providers of practice management software products in the United States.
PCN plans to migrate substantially all of its customers to the PCN Health
Network Information System during the next several years. In order to rapidly
and cost-effectively supplement its practice management software product
offerings with knowledge-based clinical products and services, in January 1996,
PCN formed a joint venture with Glaxo Wellcome. The joint venture partnership,
HealthPoint, will develop and market clinical information technology products
and services that will provide the clinical information needed at the point of
patient care to enable physicians and other health care providers to practice
medicine more efficiently. In March 1996, HealthPoint introduced its first
product, HealthPoint ACS, a product developed for medical offices to enable
physicians to, among other things, manage the clinical information required for
treatment at the point of care. HealthPoint ACS is expected to be made
commercially available during the second half of 1996.
PCN's practice management software products, which, among other things,
automate physician scheduling and generate patient billings, insurance claims
billings and other financial reports, include interactive communication software
that links physician practices with hospitals, Medicare/Medicaid carriers,
commercial insurance carriers, claims clearinghouses, clinical laboratories,
pharmacies, HMOs and other health care organizations who have established
electronic communication links under agreements with PCN. The PCN Health Network
Information System is designed to become the common practice management software
platform used by substantially all of PCN's physician practice customers and, as
an integrated unit with HealthPoint's products, is expected to provide
physicians with comprehensive financial, administrative and clinical
applications. The PCN Health Network Information System will primarily manage
the business elements of the physician's practice and HealthPoint's software
products and services will primarily provide physicians with clinical
applications and functionality intended to assist physicians in the clinical
aspects of their practices.
Additional information concerning PCN and its subsidiaries is contained in
PCN's Annual Report on Form 10-K for the year ended December 31, 1995, its
Quarterly Report on Form 10-Q for the period ended March 31, 1996, its Current
Reports on Form 8-K dated June 25, 1996 and July 10, 1996, its Current Report on
Form 8-K/A dated August 7, 1996 and its other public filings. See "Available
Information" and "Incorporation of Certain Documents by Reference."
Recent Developments
On July 30, 1996, PCN reported its results for its second quarter ended
June 30, 1996. For that quarter, revenues increased 159% to $21,868,260 from
$8,454,243 for the same period in 1995. Net income was $3,667,907 or $0.07 per
share for the second quarter compared to $1,287,332 or $0.03 per share for the
same period in 1995.
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<PAGE>
For the first six months of 1996, revenues rose 188% to $42,895,208 from
$14,912,105 for the comparable period in 1995. Net income for the first six
months of 1996 was $6,982,566 or $0.14 per share, versus $2,377,987 or $0.06 per
share for the comparable period in 1995.
INFORMATION CONCERNING WISMER-MARTIN
Description of Business
Overview. Wismer-Martin was formed to develop, market, install and support
microcomputer practice management systems and related services designed for the
medical and dental professions. Wismer-Martin was founded as a sole
proprietorship in February of 1980 and was incorporated on November 29, 1982
under the laws of the State of Washington as Professional Software Associates,
Inc. The company changed its name to Wismer-Martin, Inc. effective August 1,
1985. In February 1994, Wismer-Martin acquired Intergrated Health Systems, Inc.
("IHS"), a company that develops and licenses software programs for hospitals
and related entities. Wismer-Martin's principal executive offices are located at
12828 N. Newport Highway, Mead, Washington 99021.
Wismer-Martin derives revenue from systems sales and maintenance, forms and
other services. Systems sales include sales of physician practice management
systems, health information networks, and hospital information systems to new
customers and sales of system upgrades and add-ons to existing customers.
Systems sales to new customers include software licensing, hardware,
installation, training, and support contracts for software and hardware
maintenance. System upgrades include hardware, installation, software licensing
and training. System add-ons include additional peripheral hardware and
installation and software licensing.
Maintenance, forms and other services revenues include software and
hardware maintenance contracts and sales of forms and supplies. Other services
revenues include sales of Wismer-Martin's Electronic Data Interchange ("EDI")
services which are processed through Equifax Healthcare EDI Services, Inc. and
installation, training and support not otherwise covered under maintenance
contracts. Software maintenance represents revenues derived from maintenance
agreements providing customers with updates and enhancements developed by
Wismer-Martin and access to Wismer-Martin's toll-free telephone support service.
Hardware maintenance represents revenues derived from maintenance agreements
serviced by Digital Equipment Corp. for repairs and preventative maintenance to
the hardware. Both hardware and software maintenance are optional to the
customer. Wismer-Martin provides software maintenance to more than 90% of its
customers and hardware maintenance to more than 20% of its customers under
software and hardware contracts. In 1994, system upgrades, add-on software,
software and hardware maintenance, forms and supplies and other services
accounted for approximately 40% of total net revenues.
Products and Services
Practice Management Systems
SM*RT(R) Practice System
Historically, Wismer-Martin's core product has been its practice management
software product, SM*RT Practice System. The SM*RT Practice System includes
software applications which automate the financial, administrative, practice
management, and clinical information requirements of medical group practices.
The System is modular to facilitate the addition of new applications. The SM*RT
Practice System modules are designed to collect, process, report and
electronically transmit data. To meet the needs of different size practices, the
SM*RT Practice System operates on Novell PC-based Local Area Networks which
support the latest in Intel Dual Pentium file servers capable of serving up to
hundreds of physicians in a single group practice.
Management believes the SM*RT Practice System meets the information
requirements of the vast majority of all medical specialties and practices in
the United States. The price of the SM*RT Practice System depends upon a number
of factors, including size of physician practice and number of system users, and
ranges from approximately $12,000 to $500,000. The SM*RT Practice System
includes a software license, hardware, installation and training, and a limited
warranty on hardware through the manufacturer's warranty and a one year free
on-site maintenance included in the price of the hardware.
The SM*RT Practice software includes basic business applications modules as
standard features, as well as advanced application modules for an additional
fee. The modules include:
41
<PAGE>
SM*RT Practice Modules Capabilities
- ------------------------ --------------
Financial Applications
Insurance Billing ................. Processes and prints insurance claim
forms. Tracks aging of all claims and
provides re-bill options for
delinquent claims. Coordinates
billings for supplemental carriers.
Patient Billing .................... Processes and prints patient
statements. Supports true cycle
billing, family, individual patient,
and open item statement billing.
Managed Care Tracking .............. Tracks expected reimbursement and risk
pools; provides the information to
evaluate profitability of managed
care contracts.
Collections ........................ Allows for automated collections,
letters, statement dunning messages,
and full range of collection reports
and audits.
PlanForm ........................... Enables custom designing of statements,
labels and specialty forms.
Administrative Applications
Word Processing Integration ........ Provides linkage to industry standard
word processors for cor-respondence.
Notes and Attributes ............... Tracks and reports patient notes and
user defined data elements.
Patient Recall ..................... Tracks, reports and sends reminders for
patient exams.
Practice Management Applications
Referral ........................... Tracking SM*RT tracks referring doctors
or other sources. Complies with
regulatory requirements for claim
data. Tracks patient and dollar value
of referred patient by source.
Filter - Report Generator .......... Enables the practice to customize
reports beyond the standard reports.
System Reporting ................... System reporting includes: accounting,
transactional, clinical, recall,
referral, trend analysis, management,
and graphical.
Advanced Features
Electronic Linkage ................. Integrated with Wismer-Martin SM*RT Net
Healthcare Information Network, and
also provides custom interfaces as
required.
AutoPost ........................... Electronic claim remittance. Takes
carrier data for paid claim and post
to the patient account in an open
item format automatically.
Appointment Scheduler .............. Eliminates the appointment book and
gives immediate access to the
healthcare providers daily, weekly,
and monthly schedules. Tracks
appointment cancellations and
provides full reporting.
Dr. Dialer ......................... Anautomated appointment reminder
system which dials patients at home
using a digitized voice system and
patient input/response via touch-tone
keys.
EZ-CAP ............................. Provides complete management of
capitated reimbursement contracts for
practices. Provides projected,
actual, and variance reports for
management. Transmits claims to
carriers. Integrated with SM*RT
Practice. Available through third
party relationship.
Electronic Media Claims (EMC) ...... EMC will edit the claims for data
elements and electronically submit
edited claims to carriers or to
electronic clearing houses.
Wismer-Martin utilizes Equifax as the
national clearing house for all
client EMC.
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New Practice Management Product Development
During the second half of 1996, Wismer-Martin expects to release a new
version of its practice management product called SM*RT Practice for Windows.
This new version of the product runs under the Microsoft Windows 95 operating
system and replaces the old MS-DOS character based product.
Health Information Network Systems
SM*RT Net Suite
In the past four years Wismer-Martin has developed and implemented a new
product line now marketed under the name of SM*RT Net. The SM*RT Net suite was
designed to address the need for electronic exchange of information across the
network. Its objective is to streamline common, intra-organization communication
practices and processes. Specifically, the product suite enables organizations
such as, but not limited to, physician practices, hospitals, payors and allied
care providers to electronically exchange a common and standardized set of
information transactions related to the approval and delivery of patient care.
The breadth of information transactions exchanged are dependent upon the type
and variety of organizations participating in the network.
Wismer Martin's SM*RT Link product provides a true interactive interface
for all networked participants, including physicians, hospitals, labs, imaging
centers, managed care organizations, employers, third party payors, suppliers
and other entities. The distributed hub strategy facilitating this communication
capability uses a distributed processing platform to permit economical
incremental growth without degradation of communication performance. Strict
adherence to HL7 (Health Level 7) protocols ensures compatibility, as well as
efficient and swift integration with other healthcare products supporting this
clinical communication standard. The various modules of the SM*RT Net Suite
include:
SM*RT Practice Modules Capabilities
- ------------------------ --------------
SM*RT Net Hub ...................... SM*RT Net Hub provides an interactive
electronic interface between all
participants in a Healthcare
Information Network (HIN), including
physicians, hospitals, laboratories,
imaging centers, IPA's, PPO's, HMO's,
employers, third party payors,
suppliers and other entities.
Practices can transmit patient
referrals and demographics and
receive admit/discharge data,
scheduling information, lab and test
results, pre-authorizations and
claims status, as examples. The HUB
computer facilitating this
communication capability utilizes a
distributed processing platform to
permit economical incremental growth
without degradation of communications
performance. The HUB supports a
variety of communication links and
protocols, including TCP/IP, LU6.2,
and SNA. Strict adherence to HL7
protocols ensures compatibility, as
well as efficient and swift
integration's with other healthcare
products supporting this clinical
communication. The Net Hub modules
currently supports a wide range of
financial, clinical and other
transaction types.
SM*RT Net Link ..................... The SM*RT Net Link module is a Netware
loadable software module which
manages the sending and receiving of
messages between a HUB running SM*RT
Net Hub software and a single SM*RT
Link workstation. This module
includes a full GUI user interface.
The SM*RT Net Link module is a Netware
loadable software module which
manages the sending and receiving of
messages between a SM*RT Net Hub and
either a single workstation or a
Novell or Windows NT file server
attached to a LAN.
SM*RT IS Link ...................... The SM*RT Net Lan Link module is a
Netware loadable software module
which manages the sending and
receiving of messages between a HUB
running SM*RT Net Hub software and a
minicomputer or mainframe running a
third party application.
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<PAGE>
SM*RT Practice Modules Capabilities
- ------------------------ ---------------
SM*RT Link IDK ..................... The SM*RTLink IDK module is a set of C
Language routines which are provided
to third party vendors for use in
integrating their application with
the SM*RT Net Suite.
SM*RT Net Hub's development is driven by the strategy for creating
successful fee-for-service and managed care hospital-physician network feeder
systems. Capabilities include data distribution protocols, security and patient
referral tracking capability. This built-in marketing "intelligence" will
provide the capability of tracking all referral transactions: i.e. understanding
who the true referral source of the patient is.
SM*RT Net Hub is completely integrated with SM*RT Practice, permitting ease
of operation with consistent menu driven screens and the automatic updating of
practice computer files. Without this specific programming integration, the
transfer of information among providers merely generates a print/text file,
which normally must be re-keyed into the practice computer system files. This
integration is obviously crucial in creating a seamless network.
New SM*RT Net Suite Product Developments
During the second half of 1996, Wismer-Martin expects to release a new
version of its healthcare information network, product called SM*RT Net. This
new version of the product runs under the Microsoft Windows 95, NT, and Novell
operating systems and replaces the old MS-DOS character based product.
Hospital Information Systems
The ADDvantage Hospital Information System provides a fully integrated
application including financial, administrative, clinical, and managed care
modules to support the needs of the hospital from 50-300 beds. The system has
been developed, enhanced, and expanded over the past 12 years and operates on
the IBM AS/400. The System is modular, but is usually purchased in core groups.
The ADDvantage System is designed to work for a single hospital or in a
multi-hospital setting where certain administrative functions, such as medical
records, are shared between institutions.
ADDvantage Systems Modules Capabilities
- --------------------------- -------------
Financial Applications
Patient Billing .................... Insurance billing module including
payor logs and managed care
processing.
Accounts Receivable ................ Statement processing and Collections
follow-up. Payment and adjustment
posting with full account inquiry.
Accounts Payable ................... Controls vendor invoices and payments.
Includes master file maintenance,
transaction processing and reporting.
General Ledger ..................... Provides flexible financial management
including user defined reporting
based on current year, current
budget, and historical data.
Patient Registration ............... One process manages all types of
patient registrations, from
pre-admission to discharge.
Materials Management ............... Manages purchasing, receipts,
requisitions, transfers, Cart/Par
level, lost charges, vendors
statistics, physical inventory, and
reporting.
DRG OptiMiser ...................... Operates in tandem with Medical record
Abstracting Module to optimize DRG
assignment for each patient encounter
to ensure data quality and optimum
allowable reimbursement.
Cost Accounting .................... Provides complete cost tracking
utilizing step down methodology by
use of RVU's or actual costs.
Provides cost accounting information
at multiple levels of the
organization.
Fixed Assets ....................... Complete property management modules
with automatic depreciation
calculation via ACRS or MACRS.
Maintains three tax books; internal,
state and federal.
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<PAGE>
Clinical Applications
Clinical Information System ........ Provides a GUI based view of all
clinical data in the IHS Clinical
Modules via numeric and graphical
representation.
Quality Utilization/Management ..... Complete Quality Utilization
management, physicians maintenance,
infection control, and risk
management capabilities.
Radiology Management ............... Departmental management module
including orders, scheduling, result
reporting, film tracking, and
management statistics.
Pharmacy Management ................ Departmental management module
including orders, medication
administration, drug interactions,
and patient profile.
Laboratory Management .............. Departmental management module
including orders, result entry, on
time instrument interfaces for all
laboratory departments.
Clinical Documentation System ...... Multi-disciplinary module which
supports assessments, care plans,
flowsheets, and progress notes.
Provides standard care plans and
clinical pathways.
Administrative Applications
Resource Scheduling ................ Complete multi-resource scheduler for
hospital and clinic departments.
Executive Information System ....... GUI based executive decision support
module which presents in graphical
form all relevant key indicators for
hospital operations with a focus on
managed care indicators.
Order Communications ............... Hospital wide order entry module with
direct data entry or menu selection.
Includes complete order explosion
capability.
Medical Records .................... Complete departmental module including
patient index, abstracting, DRG/Case
mix reporting, chart deficiency, and
chart locator.
New ADDvantage System Product Developments
In the past year Wismer-Martin has begun a major technology shift away from
terminal based applications to client server applications utilizing the IBM
AS/400 as a database server with a PC LAN as a front end providing clients with
a GUI interface. The first two applications marketed using this new technology
are the Clinical Information System and Radiology Management System completed
during this fiscal year. In the next fiscal year it is planned to extend this
technology to the Clinical Documentation System.
Customers
Wismer-Martin has installed more than 1600 physician practice management
systems, currently serving over 3700 physicians in more than 30 medical
specialties ranging in practice size from one to more than 100 physicians.
Wismer-Martin markets its product to substantially all major specialties
including family practice, orthopedics, obstetrics and gynecology, internal
medicine and cardiology. IHS has installed its hospital systems in 66 hospitals
ranging in size from 20 beds to 400 beds. IHS's hospital system has been
utilized in small rural community hospitals, as well as large urban medical
centers. Wismer-Martin has installed its HIN products in three state wide
networks, sponsored by Blue Cross of Washington, Blue Cross of Alaska, and Blue
Shield of Eastern Washington, which encompass Washington and Alaska and which
have 370 client participants. Wismer-Martin believes that an increasing portion
of its sales are likely to be made to hospitals and other large healthcare
providers and has refocused its sales efforts to address this market
opportunity. 70% of the installed client base is located in eight states. Blue
Cross of Washington and Alaska accounted for 22% of Wismer-Martin's total
revenues for the year ended June 30, 1995.
Employees
As of July 31, 1996, Wismer-Martin and its subsidiary had 103 employees, of
whom 31 were in software design and development, 11 in marketing and sales, 33
in customer support, 10 in installation, and 18 in administration. Wismer-Martin
believes that its future success is dependent in part upon its ability to
continue to attract and retain highly skilled technical, marketing and
management personnel.
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None of Wismer-Martin's employees is subject to a collective bargaining
agreement and Wismer-Martin has never experienced a work stoppage.
Description of Property
Wismer-Martin's headquarters are housed in a 17,500 square foot
company-owned building in Mead, Washington. Additionally, Wismer-Martin leases
office space in the following cities;
<TABLE>
<CAPTION>
Location Monthly Lease Rental Expiration Date
------- -------------------- ----------------
<S> <C> <C>
N. 10220 Nevada ........................... $2,634 September 30, 1997
Spokane, Washington
6912-220th S.W............................. $4,436 July 30, 1997
Mountlake Terrace, Washington
4275 Executive Square...................... $8,000(1) June 30, 1998
La Jolla, California
- --------------
</TABLE>
(1) The monthly lease amount is shown net of sublease income.
Management believes that those existing facilities are adequate for present
and future operating needs.
Legal Proceedings
Wismer-Martin is a defendant from time to time in routine lawsuits which
are incidental to its business. Wismer-Martin believes that none of such current
proceedings, individually or in the aggregate, if adversely decided, will have a
material adverse effect upon Wismer-Martin's financial condition or results of
operation.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of July 31, 1996, (a)
by each person who is known by Wismer-Martin to beneficially own more than five
percent of Wismer-Martin Common Stock, (b) by each executive officer named in
the Summary Compensation table and each director of Wismer-Martin, and (c) by
all executive officers and directors of Wismer-Martin as a group. Shares not
outstanding but deemed beneficially owned by virtue of the right of an
individual or group to acquire them within 60 days are treated as outstanding
only when determining the amount and percentage owned by such individual or
group. Unless otherwise noted, each person or group identified has sole voting
and investment power with respect to the shares shown. Common Stock is the only
class of shares issued by Wismer-Martin.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name and Address of Beneficial Owner Beneficially Owned(1) Common Stock
- ----------------------------------- --------------------- ---------------
<S> <C> <C>
Executive Officers and Directors
Ronald Holden........................................... 7,679,916(2) 47%
12828 N. Newport Highway
Mead, WA 99021
Clarence H. Barnes, Ph.D. .............................. 32,000 Less than 1%
Glen E. Martin ......................................... 363,333(3) 2.2%
John F. Perez .......................................... 642,000(4) 3.9%
William D. Engel ....................................... 10,000 Less than 1%
Mehdi Moussavi ......................................... 100,000(5) Less than 1%
All executive officers and directors
as a group ........................................... 8,827,249 54.1%
Other Holders of More than Five Percent
Stanley T. Hatch ....................................... 853,500(6) 5.2%
North 1619 Westpoint Road
Spokane, Washington 99201
Ivory and Sime Enterprise Capital PLC................... 1,045,000(7) 6.4%
One Charlotte Square
Edinburgh, Scotland EH2 4DZ
</TABLE>
- ------------
(1) Unless otherwise stated, beneficial ownership is based upon the total
outstanding stock at July 31, 1996 of 16,324,495.
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<PAGE>
(2) These shares, 3,757,216 of which are beneficially owned jointly by Mr.
Holden and his wife, may be purchased by PCN under certain circumstances
pursuant to an Option and Voting Agreement. See "Security Ownership of
Certain Persons and Option and Voting Agreements."
(3) These shares, which are beneficially owned jointly by Mr. Martin and his
wife, may be purchased by PCN under certain circumstances pursuant to an
Option and Voting Agreement. See "Security Ownership of Certain Persons and
Option and Voting Agreements."
(4) Mr. Perez holds a current stock option that allows him to purchase 200,000
additional shares of Wismer-Martin's common stock. If the stock option was
exercised, Mr. Perez would be entitled to 200,000 shares of common stock in
addition to his current holdings of 442,000 shares. The shares reflected
above include the 442,000 shares currently held plus the 200,000 shares for
which Mr. Perez is deemed to be the beneficial owner. Mr. Perez's ownership
is based upon the total outstanding stock at July 31, 1996 of 16,324,495
plus, the 200,000 shares assumed to be exercised by Mr. Perez. Mr. Perez's
shares may be purchased by PCN under certain circumstances pursuant to an
Option and Voting Agreement. See "Security Ownership of Certain Persons and
Option and Voting Agreements."
(5) Mr. Moussavi holds a current stock option that allows him to purchase
100,000 shares of Wismer-Martin's common stock. The shares reflected above
include the 100,000 shares for which Mr. Moussavi is deemed to be the
beneficial owner. Mr. Moussavi's ownership is based upon the total
outstanding stock at July 31, 1996 of 16,324,495 plus the 100,000 shares
assumed to be exercised by Mr. Moussavi.
(6) Includes 20,000 shares held by Mr. Hatch's wife, the beneficial ownership
of which Mr. Hatch disclaims. These shares may be purchased by PCN under
certain circumstances pursuant to an Option and Voting Agreement. See
"Security Ownership of Certain Persons and Option and Voting Agreements."
(7) These shares may be purchased by PCN under certain circumstances pursuant
to an Option and Voting Agreement. See "Security Ownership of Certain
Persons and Option and Voting Agreements."
Management's Discussion and Analysis of Results of Operations and Financial
Condition
The following discussion and analysis should be read in conjunction with
"Selected Historical and Unaudited Financial Information -- Wismer-Martin --
Historical" and the Consolidated Financial Statements of the Company and related
notes incorporated herein by reference. See "Incorporation of Certain Documents
by Reference." The following discussion and analysis includes certain
forward-looking statements.
Results of Operations
Nine Months Ended March 31, 1996 Compared with Nine Months Ended March 31, 1995
Net Sales. As a result of decreases in service revenues and sales of
equipment, software and supplies, 1996 net sales decreased from 1995 net sales
by approximately $162,000 (2%).
Operating Expenses. Total 1996 operating expenses, compared to 1995,
decreased by over 2,924,000 (31%) due to certain cost cutting measures taken
during the period, as well as, an ongoing effort to make the overall operations
more efficient.
Interest expense for 1996, compared to 1995, decreased by approximately
$160,000 (53%). The reduction related to the conversion and pay-off of
convertible debentures and other debts.
The Company used a portion of its prior years' net operating loss
carryforwards to offset the income tax provision on its 1996 operating income.
The remaining net operating loss carryforwards will be available to offset the
future reversal of temporary differences created by software development costs
and other items which give rise to deferred tax liabilities.
The above resulted in a net income of over $1,112,000 ($0.07 per share) for
1996 compared to a net loss of $1,481,801 ($0.15 per share) for 1995.
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994
On February 10, 1994, Wismer-Martin acquired all of the outstanding shares
of common stock of IHS. IHS is in the business of developing and licensing
software programs for hospitals and related entities. In order to pay for the
acquisition, Wismer-Martin issued convertible subordinated debentures having a
face value of $2,500,000 in
47
<PAGE>
exchange for the shares of common stock. IHS's major shareholder was Mr. Ronald
Holden, who is also a major shareholder of Wismer-Martin. Due to Mr. Holden's
common control of both companies, the acquisition has been accounted for as a
combination of entities under common control, similar to a pooling of interests.
The financial statements have been retroactively restated to present
Wismer-Martin and IHS on a combined basis effective as of June 10, 1993, the
date on which Mr. Holden initially had common control of both companies. As a
result of including IHS as of June 10, 1993 rather than July 1, 1992, many of
the increases between 1993 and 1994 are the result of the inclusion of IHS for
the entire fiscal year 1994, while only being included for 20 days in 1993.
At the date of acquisition, the purchase price of $2,500,000 exceeded the
historical cost basis of the net assets of IHS by $2,533,308. Due to the common
control of the companies, the excess purchase price was recorded as a reduction
of shareholders' equity. The results of operations of IHS are included in the
consolidated financial statements since June 10, 1993, the date common control
by Mr. Holden began.
Net Sales. Software license fees decreased by $2,868,000. Of this amount,
approximately $1,425,000 resulted from fewer PHN "network" sales during the
fiscal year ended June 30, 1995 ("1995") as compared to the fiscal year ended
June 30, 1994 ("1994"). The remaining $1,443,000 decrease was the result of
fewer software license fee transactions for hospital information systems during
1995 as compared to 1994.
Equipment, software and supplies sales decreased by $462,000, or about 16%,
due to a decrease in the volume of sales of personal computer hardware
("equipment").
Software and hardware maintenance contract revenue increased by $373,000
primarily due to an increase in the number of Wismer-Martin's customers who
signed support contracts during 1995.
Service revenue decreased by $774,000. Network marketing services provided
to customers increased by approximately $272,000, while Wismer-Martin
experienced a decrease ($1,046,000) in the volume of custom modifications and
installation services provided to hospital customers. This latter decrease
coincides with the volume decrease in new software license fee sales to hospital
customers.
Discounts increased by $184,000 due to discounts required as a result of
the master licenses sold to two network customers in 1994 (see discussion below
"Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30, 1993"
for Software License Fees). Since Wismer-Martin distributes copies of the
software on behalf of its network customers who have purchased master licenses,
Wismer-Martin records a sale for the list price of the software, and a
corresponding amount as a discount (since no additional license fees are due to
Wismer-Martin).
Operating expenses. Cost of software license fees represents amortization
of capitalized software development costs for products which are available for
general release to customers. The amortization of capitalized software
development costs increased by 10% from 1994 to 1995, which resulted from
additional enhancements which were completed during 1995.
The cost of equipment, software and supplies sold decreased by $805,000
(32%). Approximately 10% of the decrease represents a volume decrease, while the
balance of the decrease (22%) resulted from Wismer-Martin's ability to negotiate
better discounts on computer hardware (equipment) from wholesale distributors
than it was previously able to obtain directly from the manufacturer.
Wholesalers, able to obtain greater volume discounts than Wismer-Martin, are
willing to pass on a large enough discount to enable Wismer-Martin to purchase
computer equipment at a lower price than Wismer-Martin can obtain direct from
the manufacturer.
Cost of support and operations includes: non-technical personnel who answer
customer support calls, the cost of third-party hardware maintenance contracts,
technical personnel who load Company and third-party software on computer
systems and assist with technical issues associated with customer support, and
personnel who perform consulting services for customers. Cost of support and
operations decreased by $1,186,000 (30%) from 1994 to 1995. This is the result
of a decrease of approximately 20 employees in this area. Of the 20 employees,
approximately 5 were transferred to "Product research, development and
enhancements." The rest of the reductions came through attrition, and were not
replaced. Many of the employees who left were technical personnel who are no
longer needed due to: (1) a reduction in new sales of software license contracts
(and thus a reduction in the number of personnel required for installation), and
(2) product improvements which have reduced the need for technical personnel to
assist with software support.
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Selling and marketing expenses increased by $340,000 or 17% from 1994 to
1995. This increase in expense was due to the addition of personnel in the sales
and marketing area, which occurred during the first six months of the fiscal
year. A significant number of these employees were subject to termination in
January, 1995 as part of Wismer-Martin's cost reduction efforts. Based on these
terminations, and voluntary resignations, future selling and marketing expenses
are expected to decline from the level established during 1995.
Product research, development and enhancement costs represent costs
associated with enhancements to, and maintenance of, existing software and
research and development expenses. These costs which relate to enhancement of
technologically feasible products are capitalized and amortized beginning when
the product is available for general release to the customer on a straight-line
basis over the remaining economic life of the products, which is estimated to be
five (5) years. Product research, development and enhancement costs increased
$1,137,000, or 89%, from 1994 to 1995. This is the result of adding
approximately 20 employees to new product development efforts. Wismer-Martin
expects the new products being developed will be ready for release between July
1995 and January 1996.
The amount of product research, development and enhancement expenses
capitalized for 1995 increased by $812,000 as compared to 1994. This is an 80%
increase over the prior year, and is approximately 60% of the increased
expenditures noted above as "Product research, development and enhancement
expenses." The increase in capitalized software development costs results from
the increase in personnel (noted above under "Product research development and
enhancement costs") performing product development.
The increase in product, research and enhancement expenses as well as the
increase in capitalized software development costs reflects Wismer-Martin's
commitment to the continuing development of SM*RT Link and its integration with
SM*RT Practice as well as the enhancement of the IHS product line.
General and administrative expenses decreased by $141,000, or 4%. This
reduction reflects the commencement of Wismer-Martin's efforts to control
overhead expenses such as executive salaries and rent expense. General and
administrative expenses are expected to continue to decline in 1996.
Interest expense has increased $206,000 from 1994 to 1995. The increase in
interest expense resulted from: (i) the issuance of $2,500,000 in convertible
subordinated debentures on February 10, 1994; and (ii) increased borrowings on
Wismer-Martin's line of credit (notes payable to bank).
During 1995, Wismer-Martin reported an income tax benefit of approximately
$342,000 as compared to an income tax provision of $265,000 in 1994. The 1995
benefit is primarily due to the creation of net operating loss carryforwards
resulting from the 1995 net operating loss which Wismer-Martin believes will be
available to offset the future reversal of temporary differences created by
software development costs and other items which give rise to deferred tax
liabilities. The remaining net deferred tax asset is offset 100% by a valuation
allowance as management could not determine that it was more likely than not
that this asset would be realized.
The factors discussed above resulted in a net loss of approximately
$1,377,000 during 1995, as compared to net income of $698,000 during 1994.
Fiscal Year Ended June 30, 1994 Compared to Fiscal Year Ended June 30, 1993
Net Sales. Software license fees increased by $2,916,000 during the fiscal
year ended June 30, 1994 ("1994") as compared to the year ended June 30, 1993
("1993"). The primary reason for the increase was the signing of two regional
"network" contracts which generated approximately $1,675,000 in additional
software license fee revenues for Wismer-Martin. These contracts gave the
customers (insurance providers) unlimited use of certain of Wismer-Martin's
software products within specified geographical regions of Washington and
Alaska. The remaining $1,241,000 is the result of the inclusion of IHS in the
results of operations for the full fiscal year 1994, as compared to only 20 days
(June 10, 1993 -- the date common control was established between Wismer-Martin
and IHS -- to June 30, 1993) for fiscal year 1993.
Equipment, software and supplies sales decreased by $138,000, or about 5%,
due to a decrease in the prices Wismer-Martin was able to charge for personal
computer hardware.
Software and hardware maintenance contract revenue increased by $876,000,
or 33% primarily due to an increase in the number of Wismer-Martin's customers
who signed support contracts during 1994.
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Service revenue increased by $2,784,000. Network marketing services
provided to customers increased by approximately $920,000, while the inclusion
of IHS for the full fiscal year 1994 added $1,864,000 in additional service
revenues.
Discounts increased by $351,000 due to discounts required as a result of
the master licenses sold to two large customers, noted above under "Software
license fees." Since Wismer-Martin distributes copies of the software on behalf
of its network customers who have purchased master licenses, Wismer-Martin
records a sale for the list price of the software, and a corresponding amount as
a discount (since no additional license fees are due to Wismer-Martin).
Operating expenses. Cost of software license fees represents the
amortization of capitalized software development costs. The amortization of
capitalized software development costs increased by $242,000 from 1993 to 1994.
This increase is the result of additional enhancements that were completed
during 1994. Of the total increase, $212,000 came from new products being
developed to add to the IHS product line.
Cost of equipment, software and supplies sold increased by $26,000 or 1%
from 1993 to 1994 as a result of a slight increase in the volume of hardware
sales.
Cost of support and operations increased $1,865,000 from 1993 to 1994. Of
this increase $1,796,000 is the result of the additional cost of support and
operations for IHS for a full year (1994) as compared to only 20 days of expense
in 1993. Cost of support and operations for Wismer-Martin only increased $69,000
or 4% (as a percentage of Wismer-Martin-only expenses) is due to an increase in
sales staff from the prior year.
Product research, development, and enhancement expenses increased by
$592,000 from 1993 to 1994. $354,000 of this increase is the result of the
additional cost of support and operations for IHS for a full year (1994) as
compared to only 20 days of expense in 1993. The increase in expenses for
Wismer-Martin were $238,000 or 35% (as a percentage of Wismer-Martin-only
expenses), and is due to an increase in the number of technical personnel
recruited for product development and enhancement. Wismer-Martin has increased
the number of staff to concentrate on enhancing existing products to take
advantage of the technological changes in computer hardware as well as
significantly enhancing the functionality of its software products.
The costs capitalized for software enhancements increased by $351,000 or
54% from 1993 to 1994. $267,000 of this increase is the result of the inclusion
of capitalized development and enhancements for IHS 1994 (IHS had no capitalized
research, development and enhancement expenses in 1993). The increase in
expenses capitalized for Wismer-Martin were $84,000 or 13% (as a percentage of
Wismer-Martin-only expenses), and is due to Wismer-Martin's increased efforts in
enhancing the SM*RT Link product and its SM*RT Practice product. Costs
associated with enhancements are capitalized and amortized over three to five
years. Research and development costs are expensed as incurred.
General and administrative expenses increased by $1,888,000 or 94% from
1993 to 1994. $1,762,000 of this increase is the result of the additional cost
of general and administrative expenses for IHS for a full year (1994) as
compared to only 20 days of expense in 1993. Wismer-Martin's expenses only
increased 6.7% during the same period.
Interest expense increased by approximately 31% from $147,339 in fiscal
1993 to $192,407 in fiscal 1994. This increase was a result of the interest
incurred on the subordinated convertible debentures which were outstanding from
February 10, 1994 through June 30, 1994.
Wismer-Martin adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income taxes" (SFAS No. 109), effective July
1, 1993. The cumulative effect of adopting SFAS No. 109 in fiscal 1994 was a
charge to operations of $27,479. SFAS No. 109 requires a company to recognize
deferred tax assets and liabilities for the expected future income tax
consequences of events that have been recognized in a company's financial
statements. Under this method, deferred tax liabilities and assets are
determined based on the temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities using enacted tax rates
in effect in the years in which the temporary differences are expected to
reverse. During the fiscal year ended June 30, 1993, Wismer-Martin accounted for
income taxes as required by Statement of Financial accounting Standards No. 96.
The income tax provision increased from $12,191 in fiscal 1993 to $265,107 as a
result of the increase in income from operations.
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The various factors discussed above resulted in net income of approximately
$698,000 during 1994 compared to net income of approximately $4,000 during 1993.
Liquidity and Capital Resources
During the twelve months ended June 30, 1996, in addition to approximately
$1,543,000 cash provided by operations, Wismer-Martin raised capital of
approximately $3,884,000 from issuance of common stock to the public investors,
$3,000,000 of which was through the conversion of subordinated debentures to
shares of common stock. Wismer-Martin paid-off amounts due on its revolving line
of credit and note payable to its bank. Additional cash proceeds of over
$164,000 were provided from disposition of property, plant and equipment.
Wismer-Martin invested over $1,100,000 in software development costs and
approximately $123,000 in property, plant and equipment. Management believes
that Wismer-Martin has sufficient resources to meet its immediate working
capital needs. On a long-term basis, management would consider the sale of
Wismer-Martin's office building and other assets necessary to generate
sufficient operating funds and to enter into joint venture arrangements with
strategic alliance partners who could provide additional capital required for
new product development and marketing. Although Wismer-Martin believes that its
operating plan and efforts to obtain other financing sources will be adequate to
meet its fiscal 1997 working capital needs, there can be no assurance that
Wismer-Martin will avoid liquidity problems because of adverse market conditions
or other unfavorable events.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Coopers & Lybrand, LLP, was engaged to perform the audit of Wismer-Martin's
financial statements for the fiscal years ended June 30, 1993 and June 30, 1994.
Without prior discussion with Wismer-Martin, Coopers & Lybrand, LLP ("Coopers")
informed Wismer-Martin on March 28, 1995 that the client-auditor relationship
between Wismer-Martin and their firm had ceased as of that date and that Coopers
would not consent to the use of the audit reports issued by Coopers for the
fiscal years ended June 30, 1993 and June 30, 1994 in any future filings with
the Securities and Exchange Commission. The Board of Directors of Wismer-Martin
had not considered or contemplated any decision to change accountants; in fact,
the shareholders of Wismer-Martin, at Wismer-Martin's request, had ratified the
selection of Coopers as independent public accountants for the fiscal year ended
June 30, 1995 at the Annual Meeting of Shareholders held March 21, 1995.
Wismer-Martin does not believe that there were any disagreements with
Coopers concerning any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures. Coopers, however, advised
Wismer-Martin on April 10, 1995 that events should have been reported by
Wismer-Martin on Form 8-K pursuant to Item 304(a)(1)(iv)(R)(3) of Regulation SB.
Although its reports on the June 30, 1994 and June 30, 1993 financial statements
were not modified or qualified, Coopers stated that, if its 1994 report had been
reissued, consideration would be given to Wismer-Martin's ability to continue as
a going concern which could result in a modification of the 1994 report. Coopers
said that it had not carried out sufficient procedures prior to its resignation
to conclude as to whether a modification of the 1994 report would be required.
Coopers also noted that it made certain inquiries in connection with the
issuance of the Form 10-QSB for the quarter ended December 31, 1994,
particularly as to the realizability of the deferred tax asset recorded at
December 31, 1994 in view of the significant loss recorded for the quarter and
six months then ended. There were no other items identified by Coopers which
would have caused them to refuse to reissue their reports on the financial
statement for the fiscal years ended June 30, 1994 and June 30, 1993.
Wismer-Martin and Coopers agree that Coopers had not been requested to perform,
nor had it performed, any procedures which might have assisted Wismer-Martin in
reaching an appropriate conclusion regarding the Form 10-QSB.
On April 26, 1995, Wismer-Martin engaged BDO Seidman, LLP as its
independent public accountants. No discussions regarding the opinion of BDO
Seidman, LLP on accounting matters or financial reporting issues occurred prior
to their engagement as Wismer-Martin's independent certified public accountants.
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COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of PCN Common Stock and the rights of holders of Wismer-Martin Common
Stock. PCN is incorporated under the laws of the State of New Jersey and,
accordingly, the rights of PCN shareholders are governed by the PCN Certificate,
the PCN By-Laws and the NJBCA. Wismer-Martin is incorporated under the laws of
the State of Washington and, accordingly, the rights of Wismer-Martin
shareholders are governed by the Wismer-Martin Articles, the Wismer-Martin
By-Laws and the WBCA.
General Shareholder Vote Requirements
The PCN Certificate provides that each outstanding share of PCN Common
Stock shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. The Wismer-Martin Articles provide that each
outstanding share of Wismer-Martin Common Stock shall be entitled to one vote on
each matter submitted to a vote at a meeting of shareholder.
Size and Classification of the Board of Directors
The NJBCA permits a New Jersey corporation to provide for a classified
board. Subject to any provisions contained in a New Jersey corporation's
certificate of incorporation, the corporation's by-laws must specify the number
of directors or provide that the number of directors not be less than a stated
minimum or more than a stated maximum. The PCN By-Laws state that the number of
directors shall be determined by a resolution adopted by a majority of the
board. The PCN By-Laws do not classify the board members, specifying that the
shareholders will elect each member to a one year term at the annual
shareholders' meeting. The PCN board has currently fixed the number of directors
at 8.
In the absence of provisions in the Articles of Incorporation classifying
the board, the WBCA requires all of the directors to be elected each year.
Wismer-Martin's By-Laws provide for annual election of all board members, and
the Wismer-Martin Articles state that the number of directors shall not be less
than 3 nor more than 7. The Wismer-Martin Board has currently fixed the number
of directors at 7.
Neither the PCN By-Laws nor the Wismer-Martin By-Laws and neither the PCN
Certificate nor the Wismer-Martin Articles require a classified board of
directors or establish a fixed number of board members.
Election of Directors and Director Nomination Procedures
The NJBCA provides that, unless the certificate of incorporation provides
otherwise, directors shall be elected by a plurality of the votes cast at an
election. The PCN Certificate contains no statement regarding the votes required
to elect a director. Under the NJBCA, cumulative voting in the election of
directors only applies if the certificate of incorporation provides therefor.
The PCN Certificate does not provide for cumulative voting.
The WBCA provides that, unless otherwise provided in the articles of
incorporation, in any election of directors the candidates receiving the largest
numbers of votes cast by the shares entitled to vote in the election shall be
elected. The Wismer-Martin Articles contain no exception to this rule. The WBCA
also states that there will be cumulative voting unless otherwise provided in
the articles of incorporation. The Wismer-Martin Articles expressly reject
cumulative voting and, therefore, the directors are elected by majority vote.
Neither the PCN By-Laws nor the Wismer-Martin By-Laws and neither the PCN
Certificate nor the Wismer-Martin Articles provide for director nomination
procedures.
Removal of Directors
The NJBCA provides that one or more directors of a corporation may be
removed for cause or, unless otherwise provided in the certificate of
incorporation, without cause by the shareholders by the affirmative vote of a
majority of the votes cast by the holders of shares entitled to vote for the
election of directors. The PCN By-Laws provide that an affirmative vote of the
majority of votes cast by the holders of shares entitled to vote for the
election of directors can remove a director or the entire board of directors
with or without cause. In addition, the PCN By-Laws provide that any director
may be removed for cause by action of the board of directors and that the board
shall have the power to suspend any director pending a final determination that
cause exists for removal.
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The WBCA provides that shareholders may remove one or more directors with
or without cause unless the articles of incorporation provide that directors may
be removed only for cause. Neither the Wismer-Martin Articles nor the
Wismer-Martin By-Laws contain any provision regarding the removal of directors.
Vacancies on the Board of Directors
The NJBCA provides that, unless otherwise provided in the certificate of
incorporation or by-laws, any vacancies occurring in the board, including any
newly created directorships, may be filled by the affirmative vote of a majority
of the remaining directors, even though constituting less than a quorum of the
board. The PCN By-Laws provide that board vacancies may be filled (including
those occurring by removal of directors without cause and newly created
directorships) by the affirmative vote of a majority of the remaining directors,
even though constituting less than a quorum, at a duly constituted meeting or by
a sole remaining director. The director(s) so chosen shall hold office until the
next succeeding meeting of the shareholders and until the shareholders elect and
duly qualify their successors, unless sooner displaced.
According to the WBCA, unless the articles of incorporation provide
otherwise, a vacancy on a board of directors may be filled by the shareholders,
the board of directors, or if the directors in office constitute fewer than a
quorum of the board, by the affirmative vote of a majority of all the directors
then holding office. Under the Wismer-Martin By-Laws, a majority of the
remaining board members may fill vacancies. Each director so selected serves
until the shareholders elect and qualify a successor at the next annual meeting,
until the director's death, or until such director shall resign or be removed.
Special Meetings of Shareholders
The NJBCA provides that a special meeting of the shareholders may be called
by the president or the board, or by such other officers, directors or
shareholders as may be provided in the by-laws. The NJBCA also permits the
holder or holders of not less than 10% of the shares entitled to vote at a
meeting to apply to the superior court, which, upon a showing of good cause, can
order a special meeting in a summary manner. According to the PCN By-Laws,
special meetings may be called by the chairman, president or the board. The
chairman and secretary can also call a meeting at the request of shareholders
owning a majority in amount of the entire capital stock issued and outstanding.
The request must state the purpose or purposes of the meeting. Notice of special
meetings must indicate the place, date and time of the meeting; the person(s)
calling the meeting; and the meeting's purpose.
The WBCA provides that a corporation shall hold a special meeting of
shareholders if called by the board directors, other individuals authorized
under the corporation's by-laws or articles of incorporation or the holder(s) of
at least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. The WBCA, however, also provides
that the right of shareholders to call a special meeting may be limited or
denied to the extent provided in the articles of incorporation. The
Wismer-Martin By-Laws allow either the president or the board to call a special
meeting. If shareholders holding one-tenth (1/10) of the voting power of all
shareholders request a special meeting, then the secretary or other person duly
authorized shall call the meeting and the notice shall state the meeting's
purpose(s). Notice must be given to each shareholder of record not less than 20
nor more than 60 days before the date of the meeting. Delivery must be through
personal written notice or certified mail with return receipt requested.
Shareholder Approval of Mergers and Sales of Assets
The NJBCA generally permits a merger to become effective without the
approval of the surviving corporation's shareholders if the certificate of the
surviving corporation does not change following the merger, the voting power of
the number of voting shares outstanding immediately after the merger, plus the
voting power of the number of voting shares issuable as a result of the merger,
will not exceed by more than 40% the voting power of the number of voting shares
outstanding immediately before the merger, and the board of directors of the
surviving corporation adopts a resolution approving the plan of merger.
Similarly, the WBCA generally permits a merger to become effective without the
approval of the surviving corporation's shareholders provided that the articles
of the surviving corporation do not change after the merger. However, unlike the
NJBCA, the WBCA requires that the number of voting shares outstanding
immediately after the merger, plus the number of voting shares issuable as a
result of the merger, may not exceed the total number of voting shares of the
surviving corporation authorized by its articles immediately before the merger.
Additionally, the WBCA requires the number of participating shares outstanding
immediately after the merger not to exceed the total number of participating
shares authorized by the surviving corporation's articles before the merger.
Furthermore, both the NJBCA and the WBCA provide that if the foregoing
conditions are not met, the adoption of a plan of merger must be approved by
shareholders of the surviving corporation entitled to vote thereon.
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Under the NJBCA, a majority of the outstanding shares of stock entitled to
vote on a merger or the sale, lease or exchange of all or substantially all, of
a corporation's assets must approve such transactions, unless the certificate of
incorporation requires the vote of a larger portion of the outstanding stock.
The PCN Certificate does not so provide. Under the WBCA, unless the articles of
incorporation provide otherwise, a merger or sale, lease, sale exchange or other
disposition of all, or substantially all, of a corporation's assets requires the
approval of the holders of two-thirds of the outstanding shares of stock
entitled to vote thereon. The Wismer-Martin Articles do not contain a contrary
provision.
Amendment of Articles and By-Laws
The NJBCA allows an amendment of a certificate of incorporation, from time
to time, in any and as many respects as may be desired so long as the amendment
contains only such provisions as may lawfully be contained in an original
certificate of incorporation filed at the time of making such amendment. The
NJBCA permits the corporation's board of directors to amend or repeal the
corporation's by-laws, or adopt new by-laws, unless (i) the certificate of
incorporation reserves this power exclusively to the shareholders or (ii) the
shareholders in amending or repealing a by-law expressly provide that the board
of directors may not amend or repeal such by-law. According to the PCN By-Laws,
a majority vote of shareholders or the board can amend the by-laws, provided
that such amendment does not contravene a provision in the certificate of
incorporation or the amendment does not alter a by-law adopted by shareholder
resolution that reserves the right of amendment to the shareholders.
The WBCA permits a corporation to amend its articles of incorporation at
any time to add or change a provision that the articles of incorporation require
or permit, or delete a provision the articles do not require. The WBCA permits
the board to amend or repeal by-laws unless such power is reserved to the
shareholders in the certificate of incorporation, but by-laws amended or
newly-adopted by the board may be altered or repealed by the shareholders. Under
the WBCA, shareholders may prescribe in the by-laws that any by-law adjusted by
them shall not be altered or repealed by the board. According to the
Wismer-Martin Articles, the Wismer-Martin Articles may be amended in any manner
prescribed or permitted by the WBCA. The Wismer-Martin By-Laws may be amended by
a special shareholders' meeting provided that shareholders receive proper notice
of the proposed amendment. Additionally, the Wismer-Martin By-Laws may be
amended by an affirmative vote of a majority of the board of directors provided
that such amendment does not alter the qualifications, classification, term of
office or compensation of the board members in any way.
Preemptive Rights
The NJBCA and WBCA both provide that unless the articles of incorporation
state otherwise, preemptive rights exist. The PCN Certificate and the
Wismer-Martin Articles both expressly deny preemptive rights.
Payment of Dividends
Unless there are other restrictions contained in the certificate of
incorporation, the NJBCA generally provides that a corporation may declare and
pay dividends on its outstanding stock so long as the corporation is not
insolvent and would not become insolvent as a result of the dividend payment.
The WBCA provides that dividends may only be paid if, after giving effect
to the dividend, a company will be able to pay its debts as they become due in
the ordinary course of business and its total assets will not be less than the
sum of its total liabilities plus the amount that would be needed, if the
company were dissolved at the time of the dividend, to satisfy the preferential
rights of persons whose right to payment is superior to those receiving the
dividend.
Inspection of Books and Records
Under the NJBCA, any shareholder who has been a shareholder for at least
six months or who holds, or is authorized by a person who holds, at least 5% of
the outstanding shares of any class or series of stock has the right, for any
proper purpose, to inspect the minutes of the proceedings of shareholders,
records of accounts and the record of shareholders. Notwithstanding the
foregoing requirements, a court may, upon a showing of proper purpose, issue a
court order permitting a shareholder to examine the books and records of
accounts, minutes and record of shareholders. In addition, the PCN By-Laws
provide that any shareholder attending a meeting may, upon request, inspect the
list of shareholders.
The WBCA provides that a shareholder of a corporation is entitled to
inspect and copy, during regular business hours at the corporation's principal
office, the following: the corporation's by-laws and articles of incorporation;
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shareholders' meeting minutes and records of all action taken by shareholders
without a meeting for the past three years; balance sheets and income statements
for the past three years; all written communications to shareholders generally
within the past three years; a list of the names and business addresses of its
current directors and officers; and its initial report or most recent annual
report delivered to the secretary of state. The WBCA provides that a shareholder
may only inspect board minutes, accounting records, and record of shareholders
if they make the request in good faith, with reasonable particularity, and the
records are directly connected with the shareholder's proper purpose.
Indemnification and Limitation of Liability of Officers and Directors
The PCN Certificate provides for indemnification of directors and officers
to the fullest extent permitted by New Jersey law. The NJBCA does not permit
indemnification of officers or directors with respect to an act or omission (i)
in breach of such person's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of the
law, or (iii) resulting in receipt of an improper personal benefit.
The Wismer-Martin Articles provides for indemnification of officers and
directors to the fullest extent permitted by Washington law. The WBCA does not
permit such indemnification if the acts or omissions of the person are adjudged
to be in violation of the law, if such person is liable to the corporation for
an unlawful distribution under Section 23A.08.450 of the Revised Code of
Washington, or if the individual personally received a benefit to which he or
she was not entitled.
LEGAL OPINION
The validity of the shares of PCN Common Stock offered by this Proxy
Statement and Prospectus will be passed upon for PCN by Gordon Altman Butowsky
Weitzen Shalov & Wein, 114 West 47th Street, New York, New York 10036.
EXPERTS
The consolidated financial statements and the financial statement schedule
of PCN as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference in
this Proxy Statement and Prospectus in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein and upon the authority of said firm as experts in accounting and
auditing.
The financial statements of CUSA Technologies, Inc. Medical and Commercial
Divisions as of March 31, 1996 and for the nine-month period then ended, have
been incorporated by reference in this Proxy Statement and Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements as of June 30, 1995 and 1994, of Wismer-Martin,
Inc., incorporated by reference in this Proxy Statement and Prospectus have been
audited by BDO Seidman, LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports incorporated herein by
reference, and are incorporated herein in reliance upon such report, given upon
the authority of said firm as experts in auditing and accounting.
SOLICITATION OF PROXIES
Wismer-Martin will bear the expenses in connection with the printing and
mailing of this Proxy Statement and Prospectus. The costs of solicitation of
proxies will be borne by Wismer-Martin. Wismer-Martin will reimburse brokers,
fiduciaries, custodians and other nominees for reasonable out-of-pocket expenses
incurred in sending this Proxy Statement and Prospectus and other proxy
materials to, and obtaining instructions relating to such materials from,
beneficial owners of stock. Wismer-Martin shareholder proxies may be solicited
by directors, officers, regular employees or the financial advisors of
Wismer-Martin in person, by letter or by telephone or telegram.
Wismer-Martin will also reimburse custodians, nominees and fiduciaries for
forwarding proxies and proxy materials to the beneficial owners of their stock
in accordance with regulations of the SEC and NASDAQ Stock Market.
BY ORDER OF THE BOARD OF DIRECTORS
DIRECTORS OF WISMER-MARTIN, INC.
Mehdi Moussavi
Secretary
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated June 20, 1996 (the "Agreement"), by and
among WISMER-MARTIN, INC., a Washington corporation (the "Company"), PHYSICIAN
COMPUTER NETWORK, INC., a New Jersey corporation ("PCN"), and NORTHWEST
ACQUISITION CORP., a Washington corporation that is a wholly-owned subsidiary of
PCN ("Merger Sub").
WHEREAS, the Boards of Directors of PCN, Merger Sub and the Company have
each determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company upon the terms
and subject to the conditions set forth herein, and have approved the merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended;
WHEREAS, PCN, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
merger and also to prescribe various conditions to the merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, PCN,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to the terms and conditions contained herein, Merger Sub shall be
merged with and into the Company (the "Merger") (Merger Sub and the Company are
sometimes referred to herein as the "Constituent Corporations"), in accordance
with the Washington Business Corporation Act (the "WBCA"), and the separate
existence of Merger Sub shall thereupon cease, and the Company shall be the
surviving corporation of the Merger (the "Surviving Corporation"). At and after
the Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties of the
Constituent Corporations; and all and singular rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well as for stock subscriptions and all other things in
action or belonging to each of the Constituent Corporations, shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Constituent
Corporations; and the title to any real estate vested by deed or otherwise, in
either of the Constituent Corporations, shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts and liabilities had been incurred by it. At PCN's election, any
direct wholly-owned Subsidiary (as defined in Section 1.7(c) hereof) of PCN
incorporated under the laws of the state of Washington may be substituted for
Merger Sub as a constituent corporation in the Merger, in which event, the
parties shall execute an appropriate amendment to this Agreement in form and
substance reasonably satisfactory to PCN and the Company in order to reflect
such substitution.
Section 1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, a certificate of merger in substantially the form attached hereto as
Exhibit I (the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the Surviving Corporation and thereafter delivered to the
Secretary of State of the State of Washington, for filing as provided in the
WBCA, as soon as practicable on or after the Closing Date (as defined in Section
1.3). The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Washington (the "Effective
Time" and the date on which the Effective Time occurs is referred to herein as
the "Effective Date").
Section 1.3 Closing. The closing of the Merger (the "Closing") will take
place as soon as practicable (but in no event later than the second Business Day
(as defined below)) after the latest to occur of the conditions set forth in
Article VI having been fulfilled or having been waived in accordance with this
Agreement (the "Closing Date"),
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at the offices of Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th
Street, New York, New York 10036, unless another date or place is agreed to in
writing by the parties hereto. For purposes of this Agreement, "Business Day"
means any day other than: (i) a Saturday or Sunday; and (ii) a day on which
banks in the state of Washington or the state of New York are required or
permitted to be closed.
Section 1.4 Articles of Incorporation. The Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the WBCA, except for the changes thereto
specified in the Certificate of Merger.
Section 1.5 By-Laws. The By-Laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation,
until duly amended in accordance with the terms thereof, of the articles of
incorporation of the Surviving Corporation and of the WBCA.
Section 1.6 Directors and Officers. The directors and officers of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the
directors and officers of the Surviving Corporation until the successors of all
such persons shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and by-laws.
Section 1.7 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
Common Stock (as defined below) or of any capital stock of Merger Sub:
(a) Each share of the capital stock of Merger Sub which is issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation.
(b) Each share of the Company's common stock, par value $.001 per
share (the "Common Stock"), which is issued and outstanding immediately
prior to the Effective Time, except those held by stockholders who validly
perfect dissenters' rights under the WBCA, shall be converted into the
right to receive (the "Merger Consideration"): (x) the Common Stock Cash
Consideration (as defined in Section 1.8 below), without interest; and (y)
that number (the "Conversion Number") of shares of duly authorized, validly
issued, fully paid and non-assessable shares of PCN's common stock, $.01
per share (the "PCN Stock"), computed in accordance with Section 1.9.
Anything contained in this Agreement to the contrary notwithstanding, in
the event that the per share Market Price (as defined in Section 1.9 below)
of PCN Stock on the Trigger Date (as defined in Section 1.9 below) is less
than or equal to nine dollars ($9.00), then, at PCN's option (the "All Cash
Option"), in lieu of the consideration described in clauses (x) and (y) of
the immediately preceding sentence, the "Merger Consideration" shall be an
amount in cash equal to (A) $14,000,000; divided by (B) the Common Share
Number (as defined in Section 1.8 below). All shares of Common Stock, and
each holder of a certificate representing such shares of Common Stock,
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section
1.11, without interest.
(c) All shares of the Common Stock and all other shares of capital
stock of the Company that are owned by the Company as treasury stock and
any shares of the Common Stock or other shares of capital stock of the
Company owned by the Company or any wholly-owned Subsidiary of the Company,
shall be canceled. As used in this Agreement, a "Subsidiary" of any party
means any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do
not have a majority of the voting interests in such partnership) or (ii)
50% or more of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries.
Section 1.8 Common Stock Cash Consideration. As used herein, the "Common
Stock Cash Consideration" means the amount equal to: (a) $1,980,000 (subject to
adjustment as provided in Section 1.9); divided by (b) the Common Share Number
(as defined below). As used herein, the "Common Share Number" means the number
of shares of Common Stock issued and outstanding immediately prior to the
Effective Time.
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Section 1.9 Conversion Number. As used herein, the Conversion Number means
the amount equal to: (a) the Adjusted PCN Share Number (as defined below);
divided by (b) the Common Share Number. As used herein, the "Adjusted PCN Share
Number" means 935,000; provided, however, that, in the event that on the third
business day prior to the Effective Time (the "Trigger Date") the aggregate
Market Price (as hereinafter defined) of 935,000 shares of PCN Stock is: (i)
less than $9,350,000, then the Adjusted PCN Share Number shall be increased to
equal such number of shares of PCN Stock as has an aggregate Market Price on the
Trigger Date equal to $9,350,000; or (ii) is greater than $11,453,750, then the
Adjusted PCN Share Number shall be decreased to equal such number of shares of
PCN Stock as has an aggregate Market Price on the Trigger Date equal to
$11,453,750. Notwithstanding the foregoing, in the event that stockholders of
the Company exercise dissenters' rights as provided in Section 1.10 and, as a
result, assuming for such purpose that each Dissenting Share (as defined in
Section 1.10) is entitled to receive, in lieu of the Merger Consideration, an
amount in cash (the "Dissenting Share Amount") equal to (i) the Common Stock
Cash Consideration plus (ii) the Market Price of the Conversion Number of shares
of PCN Stock on the Trigger Date, the aggregate Market Price of the Adjusted PCN
Share Number of PCN Stock (less the aggregate number of shares of PCN Stock into
which the Dissenting Shares would have been convertible pursuant to Section 1.7
had such dissenting stockholders not demanded dissenters' rights) on the Trigger
Date constitutes less than eighty-percent (80%) of the sum (the "Total Merger
Consideration") of the aggregate dollar value of (A) the Merger Consideration
plus (B) the Dissenting Share Amount, then (x) the aggregate number of shares
PCN Stock issued to non-Dissenting Shareholders (the "Stock Consideration")
shall be increased to equal such number of shares of PCN Stock as has an
aggregate Market Price equal to eighty-percent (80%) of the Total Merger
Consideration and (y) the aggregate amount of Common Stock Cash Consideration
paid to non-Dissenting Shareholders shall be decreased by the aggregate Market
Price of the number of shares of PCN Stock added to the Stock Consideration
pursuant to the preceding clause (x). As used herein, the "Market Price" of each
share of PCN Stock means the average of the closing sale price of a share of PCN
Stock as reported on the NASDAQ Stock Market during the fifteen (15) trading
days immediately preceding the date of the determination.
Section 1.10 Dissenters' Rights. Shares of Common Stock that have not been
voted for the adoption of the Merger and with respect to which dissenters'
rights shall have been properly demanded in accordance with the WBCA
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration as provided in Section 1.7 on or after the Effective Time
unless and until the holder of such shares withdraws his demand for such
appraisal in accordance with applicable law or becomes ineligible for such
appraisal, at which time such shares shall be converted into and represent the
right to receive the Merger Consideration, without interest, as set forth in
Section 1.7. The Company shall give PCN: (i) prompt notice of any written demand
for appraisal, withdrawals of demands for appraisal and any other instrument in
respect thereof received by the Company; and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal. The Company
will not voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of PCN, settle or offer to
settle any such demand.
Section 1.11 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, PCN shall deposit, or shall
cause to be deposited, with American Stock Transfer and Trust Company, or such
other bank or trust company which shall be mutually acceptable to the parties
hereto (the "Exchange Agent"), for the benefit of holders of shares of Common
Stock, for exchange in accordance with this Section 1.11, through the Exchange
Agent: (i) certificates representing the Adjusted PCN Share Number of PCN Stock;
(ii) the estimated amount of cash to be paid pursuant to Section 1.11(e); and
(ii) all funds necessary to pay the Cash Consideration for shares of Common
Stock converted by reason of the Merger (in each case other than Merger
Consideration with respect to Dissenting Shares) (together, all such
certificates and cash being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall deliver, pursuant to irrevocable instructions, the Cash
Consideration, the shares of PCN Stock contemplated to be issued pursuant to
Section 1.7 and the cash to be issued pursuant to Section 1.11(e) out of the
Exchange Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock (the "Certificates") whose shares
were converted into the right to receive the Merger Consideration pursuant to
Section 1.7: (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as PCN and the Company may reasonably
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specify); and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Cash Consideration
and shares of PCN Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by PCN,
together with such letter of transmittal, duly executed, and such other
documents as may be reasonably required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration which such holder has the right to receive pursuant to this
Section 1.17, and the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Common Stock which is not registered in
the transfer records of the Company, the Cash Consideration may be paid to and
certificates representing the proper number of shares of PCN Stock may be issued
to a transferee if the Certificate representing such Common Stock is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 1.11, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration. The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the PCN Stock held by it from time to time hereunder.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to PCN Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of PCN Stock represented thereby and no cash payment (including,
without limitation, cash payment in lieu of fractional shares) shall be paid to
any such holder pursuant to this Section 1.11 until the surrender of such
Certificate in accordance with this Section 1.11. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the Certificates representing whole shares of PCN Stock
issued in exchange therefor, without interest: (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
PCN Stock; and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of PCN Stock.
(d) No Further Ownership Rights in Common Stock. All shares of the PCN
Stock issued, together with the Cash Consideration paid, upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any cash
paid pursuant to Section 1.11(e)) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to such shares of Common Stock and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in this
Section 1.11.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of PCN Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of PCN. Notwithstanding any
other provision of this Agreement, each holder of shares of Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of PCN Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of PCN
Stock multiplied by the Market Price of a share of PCN Stock on the Effective
Date.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed for 180 days after the Effective Time shall be delivered
to PCN, upon demand, and any holders of the Certificates who have not
theretofore complied with this Section 1.11 shall thereafter look only to PCN
for delivery of the Merger Consideration.
(g) No Liability. None of PCN, Merger Sub, the Company nor the Exchange
Agent shall be liable to any holder of shares of Common Stock or PCN Stock, as
the case may be, for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund (or by PCN after the Exchange Fund has
terminated) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. At such time as any amounts remaining
unclaimed by holders of any such shares would otherwise escheat to or become
property of any Governmental Entity (as defined in Section 2.2(c)), such amounts
shall, to the extent permitted by applicable law, become the property of PCN
free and clear of any claims or interest of any such holders or their
successors, assigns or personal representatives previously entitled thereto.
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(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by PCN, on a daily basis. Any
interest and other income resulting from such investments shall be paid to PCN.
Section 1.12 Taking Necessary Action; Further Action. PCN, Merger Sub and
the Company, respectively, shall take all such action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of either of the Constituent
Corporations, the officers and directors of such corporations are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PCN AND MERGER SUB
PCN and Merger Sub hereby represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of PCN and Merger Sub:
(i) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; (ii) has all requisite corporate
power and corporate authority to own, lease and operate its properties and to
carry on its business as now being conducted; and (iii) is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification or licensing necessary, other than in such
jurisdictions where the failure so to be in good standing, qualified or licensed
does not, individually or in the aggregate, have a Material Adverse Effect (as
defined in Section 8.3). Each of PCN and Merger Sub has previously made
available to the Company complete and correct copies of its presently effective
Articles of Incorporation and By-Laws.
Section 2.2 Authority Relative to This Agreement. (a) PCN and Merger Sub
have all necessary corporate power and corporate authority to execute and
deliver this Agreement and each PCN Document (as hereinafter defined) to which
PCN and/or Merger Sub, as the case may be, is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement by PCN and Merger Sub and of each PCN Document by PCN and/or Merger
Sub, as the case may be, and the consummation by PCN and Merger Sub of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of PCN and Merger Sub. This Agreement has
been, and each PCN Document will be, duly executed and delivered by PCN and/or
Merger Sub, as the case may be, and, assuming this Agreement constitutes the
valid and binding agreement of the Company, constitutes the legal, valid and
binding obligation of PCN and/or Merger Sub, as the case may be, enforceable
against PCN and/or Merger Sub, as the case may be, in accordance with its terms.
As used herein, PCN Document means each or any instrument executed and delivered
by PCN or Merger Sub in connection with the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by PCN and Merger Sub does
not, and the consummation of the transactions contemplated hereby by PCN and
Merger Sub will not: (i) conflict with, or result in any violation or breach of
any provision of, the Articles of Incorporation or By-Laws of PCN or Merger Sub;
or (ii) except as to which requisite waivers or consents have been obtained and
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 2.2(c) are duly and timely obtained or
made, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets or
property, right of first refusal with respect to any asset or property (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss, creation or right of first refusal, a "Violation"), of any
loan or credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, concession, franchise, license, judgment, order, decree,
or, to PCN's knowledge, any statute, law, ordinance, rule or regulation
applicable to PCN and Merger Sub or their respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") is required by or with respect to PCN or
Merger Sub to validly execute and
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deliver this Agreement or to effect the Merger, except for: (i) the filing with
the Securities and Exchange Commission ("SEC") of (A) a proxy statement in
definitive form relating to the meetings of the Company's stockholders to be
held in connection with the Merger, as amended or supplemented (such definitive
proxy statement, as it may be amended or supplemented from time to time, the
"Proxy Statement"); (B), and effectiveness of, a registration statement on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the issuance of the PCN Stock pursuant to this Agreement, as
amended or supplemented (such registration statement, as it may be amended or
supplemented from time to time, the "S-4"); and (C) such reports under Section
13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and such other compliance with the Securities Act, the Exchange Act and the
rules and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby, and the obtaining from the
SEC of such orders as may be so required; (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Washington; (iii) such
filings and approvals as may be required by applicable "blue sky" or takeover
laws; and (iv) filing with the NASDAQ Stock Market for the listing of the shares
of PCN Stock issuable upon exchange of the Common Stock (and after the Effective
Time, the shares of PCN Stock issuable upon the exercise of Options (as defined
in Section 5.7)).
Section 2.3 Issuance of PCN Stock. All shares of PCN Stock which are to be
issued pursuant to the Merger will be, when issued in accordance with the terms
thereof, validly issued, fully paid and non-assessable and not subject to
preemptive rights.
Section 2.4 SEC Documents; Financial Statements. (a) PCN has filed all
forms, reports and documents required to be filed by PCN with the SEC and has
heretofore delivered to the Company, in the form filed with the SEC, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "PCN
10-K"), its Quarterly Report on Form 10-Q for the period ending March 31, 1996
(the "PCN 10-Q") and any Current Reports on Form 8-K filed by PCN with the SEC
since March 31, 1996 (the "PCN 8-K" and, together with the PCN 10-K and the PCN
10-Q, the "PCN SEC Documents"). As of their respective dates: (i) the PCN SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, and the rules and regulations of the SEC
thereunder applicable to such PCN SEC Documents; and (ii) none of the PCN SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The financial statements of PCN included in the PCN SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position of PCN
and its consolidated Subsidiaries as at their respective dates and the
consolidated results of operations and the consolidated cash flows of PCN for
the periods then ended.
Section 2.5 Absence of Certain Changes or Events. Since March 31, 1996 to
the date hereof (except as disclosed in the PCN SEC Documents), PCN and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date to the date hereof,
(except as disclosed in the PCN SEC Documents) there has not been any change in
the business, results of operations, properties (including intangible
properties), financial condition, assets or liabilities of PCN or any of its
Subsidiaries having a Material Adverse Effect.
Section 2.6 Finders and Investment Bankers. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or any other transaction contemplated hereby on
account of any actions taken by PCN or Merger Sub.
Section 2.7 Information Supplied. None of the information supplied or to be
supplied by PCN for inclusion or incorporation by reference in: (i) the S-4
will, at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
(ii) the Proxy Statement will, at the date mailed to stockholders of the Company
and at the times of any meetings of stockholders to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, insofar as it relates to PCN or
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Merger Sub or other information supplied by PCN for inclusion therein, will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder, and the S-4, insofar as it relates
to PCN or Merger Sub or other information supplied by PCN for inclusion therein,
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 2.8 Disclosure. No representation or warranty by PCN or Merger Sub
in this Agreement and no statement contained in any document or other writing
furnished or to be furnished to the Company or any of its representatives
pursuant to the provisions hereof contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary in
order to make the statements made herein or therein not misleading. All copies
of all documents delivered to the Company or any of its representatives pursuant
hereto are true, complete and accurate in all material respects. There has been
no event or transaction which has occurred or information which has come to the
attention of PCN (other than events or information relating to economic
conditions of general public knowledge) which could reasonably be expected to
have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to PCN and to Merger Sub as
follows:
Section 3.1 Organization, Standing and Power. Each of the Company and its
Subsidiaries: (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (ii) has all
requisite corporate power and corporate authority to own, lease and operate its
properties and to carry on its business as now being conducted; and (iii) is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the business it is conducting, or the operation, ownership
or leasing of its properties, makes such qualification or licensing necessary,
other than in such jurisdictions where the failure so to be in good standing,
qualified or licensed does not, individually or in the aggregate, have a
Material Adverse Effect. Set forth in the Company's disclosure schedule
previously delivered to PCN (the "Disclosure Schedule"), is a true and complete
list of all Subsidiaries of the Company and their respective jurisdictions of
incorporation or organization and the jurisdictions in which the Company or any
of its Subsidiaries are qualified or licensed to do business. The Company has
previously made available to PCN complete and correct copies of the presently
effective Articles of Incorporation and By-Laws of the Company and its
Subsidiaries.
Section 3.2 Capital Structure. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock.
(b) As of the date hereof 16,325,461 shares of Common Stock are issued and
outstanding, all of which are validly issued, fully paid and non-assessable and
not subject to preemptive rights. As of the date hereof, 528,333 shares of
Common Stock are reserved for issuance pursuant to options outstanding as of the
date hereof (whether or not vested).
(c) All outstanding shares of capital stock of the Subsidiaries of the
Company are owned directly by the Company, free and clear of all liens, charges,
encumbrances, claims and options of any nature (collectively, "Liens") other
than the Liens referred to in the Disclosure Schedule. Set forth in the
Disclosure Schedule is a true and complete schedule of all options which are
outstanding as of the date hereof, the number of shares of Common Stock for
which such options are exercisable, the exercise price of the option, the dates
on which such options become exercisable and the identity and the last known
address of the optionee. Except as set forth in this Section 3.2, there are not
outstanding any: (i) shares of capital stock or other voting securities of the
Company; (ii) securities of the Company or any of its Subsidiaries convertible
into or exchangeable for shares of capital stock or other voting securities of
the Company or any of its Subsidiaries; (iii) options, warrants, calls, rights
(including preemptive rights), commitments, agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which it is bound
obligating the Company or any of its Subsidiaries to issue, deliver, sell,
purchase, redeem or acquire or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or other voting
securities of the Company or any of its Subsidiaries or obligating the Company
or any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, right, commitment, agreement or understanding; or (iv) stock
appreciation or other similar or related right which is measured by, and no
person has or has the right or interest to acquire any equity interests in the
Company or any of its Subsidiaries or any interests measured by, the value of
the capital stock or the income, profits or other results of the operations or
conduct of the business of
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the Company or any of its Subsidiaries. There are no shareholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party or by which it is bound relating to the voting of any shares of the
capital stock of the Company.
Section 3.3 Authority Relative to This Agreement. (a) The Company has all
necessary corporate power and corporate authority to execute and deliver this
Agreement and each Company Document (as hereinafter defined) and, subject to
adoption of this Agreement by the affirmative vote of the holders of two thirds
of the outstanding shares of Common Stock entitled to vote thereon (the "Company
Vote"), to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and each Company Document by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company subject to adoption of this Agreement by the Company Vote. This
Agreement has been and each Company Document will be duly executed and delivered
by the Company and, subject to adoption of this Agreement by the Company Vote,
and assuming this Agreement constitutes the valid and binding agreement of PCN
and Merger Sub, constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. As used
herein, "Company Document" means each or any instrument executed and delivered
by the Company in connection with the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by the Company does not,
and the consummation of the transactions contemplated hereby by the Company will
not: (i) conflict with, or result in any violation or breach of any provision
of, the Articles of Incorporation or By-Laws of the Company or any of its
Subsidiaries; or (ii) except as to which requisite waivers or consents have been
obtained and assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 3.2(c) are duly and timely
obtained or made and the approval of this Agreement by the Company Vote has been
obtained, result in any Violation of any loan or credit agreement, note,
mortgage, indenture, real property lease, Benefit Plan (as defined in Section
3.15) or other Material Contract (as defined in Section 3.19), judgment, order,
decree, or, to the Company's knowledge, any statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity is required
by or with respect to the Company or any of its Subsidiaries to validly execute
and deliver this Agreement or to effect the Merger, except for: (i) the filing
with the SEC of (A) the Proxy Statement; and (B) such reports under Section
13(a) of the Exchange Act, and such other compliance with the Securities Act,
the Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby; (ii)
the filing of the Certificate of Merger with the Secretary of State of the State
of Washington; (iii) such filings and approvals as may be required by applicable
"blue sky" or takeover laws; and (iv) such other required consents as are set
forth on the Disclosure Schedule.
Section 3.4 SEC Documents; Financial Statements. (a) The Disclosure
Schedule sets forth a true and complete list of each report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC since June 30, 1993 (the "Company SEC Documents"), including, without
limitation, the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1995 (the "Company 10-KSB") and the Company's quarterly report on Form
10-QSB for the quarter ended March 31, 1996 (the "Company 10-QSB"). As of their
respective dates: (i) the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Documents and (ii) none of the Company SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company SEC
Documents complied as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of the Company and its consolidated Subsidiaries
as at their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company for the periods then ended.
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(c) The Company has delivered to PCN correct and complete copies of the
audited consolidated balance sheets of the Company and its consolidated
Subsidiaries as at March 31, 1996, and the audited related consolidated
statements of operations, cash flows and changes in shareholders' equity for the
nine-month period then ended and the notes thereto, together with a report
thereon by BDO Seidman & Company (the "Audited Financial Statements"). The
Audited Financial Statements: (i) are in accordance with the books and records
of the Company and its Subsidiaries; (ii) have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto); and (iii) fairly present in accordance with
applicable requirements of GAAP the consolidated balance sheets of the Company
and its consolidated Subsidiaries as at their respective dates and the
consolidated statements of operations, cash flows and changes in shareholders'
equity for the period then ended. The reserves provided for on the Audited
Financial Statements with respect to contingent liabilities of the Company are
adequate to cover all costs, expenses, liabilities and damages associated with
such contingent liabilities.
Section 3.5 No Undisclosed Material Liabilities. Since June 30, 1995,
neither the Company nor any of its Subsidiaries has incurred any material
obligations or liabilities of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than: (i) liabilities
provided for in the Company SEC Documents (or disclosed in the notes thereto)
filed by the Company with the SEC since June 30, 1995; (ii) liabilities incurred
in the ordinary course of business consistent with past practice since June 30,
1995, none of which were entered into for inadequate consideration; (iii)
liabilities under this Agreement; (iv) liabilities disclosed in the Disclosure
Schedule; and (v) liabilities disclosed in the Audited Financial Statements.
Section 3.6 Absence of Certain Changes or Events. Except as set forth in
the Disclosure Schedule, any Company SEC Document filed by the Company with the
SEC since June 30, 1995 or the Audited Financial Statements, the Company and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, neither the Company
nor any of its Subsidiaries has: (i) suffered any change in the business,
results of operations, properties (including any intangible properties),
financial condition, assets or liabilities of the Company or any of its
Subsidiaries which, individually or in the aggregate, has a Material Adverse
Effect; (ii) incurred damage to or destruction of any of the Company's assets by
casualty, whether or not covered by insurance, in an amount in excess of $20,000
or suffered or became subject to any pending or threatened condemnation of
property; (iii) made any change in the nature of its business; (iv) mortgaged,
pledged, assigned, hypothecated or subjected to any lien or any other
encumbrance any of the assets; (v) sold, transferred or leased any of its
assets, except, in each case, in the ordinary course of business and consistent
with past practice; (vi) sold, assigned, transferred, or granted any rights
under or with respect to, any of its licenses, agreements, patents, inventions,
trademarks, trade names, copyrights or formulae or with respect to know-how or
any other intangible asset, in each case, other than in the ordinary course of
business consistent with past practice; (vii) amended or terminated any of its
Material Contracts other than in the ordinary course of business consistent with
past practice; (viii) waived or released any other rights having a value in
excess of $20,000 in the aggregate; (ix) incurred or entered into any agreement
to incur indebtedness for borrowed money or guaranteed any liability or
obligation of any other person for borrowed money; (x) suffered any labor
dispute; (xi) made or granted any increase in wage or salary to any employee or
granted any severance or termination pay to any officer, director or employee
(other than in the ordinary course of business consistent with past practice or
contractual obligations) or entered into any employment agreement with any
officer or employee; (xii) made any increase in or commitment to increase any
employment benefit or adopted or made any commitments to adopt any additional
employee benefit plan; (xiii) made any change in any method of accounting or
accounting practice employed by the Company or any of its Subsidiaries; (xiv)
written down the value of inventory or written off notes or accounts receivable
other than in the ordinary course of business; (xv) declared, set aside or paid
any dividends or distributions in respect of the shares of its capital stock or
any issuance, sale, transfer by the Company, or commitment to issue, sell or
transfer any shares of its capital stock or any redemption, purchase or other
acquisition of any of its securities; or (xvi) received notice of a default
under any Material Contract (as defined in Section 3.19).
Section 3.7 Real Estate. (a) Neither the Company nor any of its
Subsidiaries have any interest in real property other than as disclosed in the
Disclosure Schedule or as a lessee of the property demised under the Real
Property Leases (as hereinafter defined). All real property which is now or was
previously owned by the Company or any of its current or former Subsidiaries is
listed in the Disclosure Schedule (all such real property currently owned
referred to herein as the "Owned Property" and all such real property formerly
owned or leased referred to as the "Former Property").
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(b) The leasehold estates listed in the Disclosure Schedule are all of the
leasehold estates under which the Company or any of its Subsidiaries is a
lessee, sublessee or sublessor of any real property or interest therein
(collectively, the "Real Property Leases") (the premises demised under the Real
Property Leases, together with the Owned Property, are, collectively, referred
to herein as the "Real Property"). No proceeding is pending or, to the best
knowledge of the Company, threatened, for the taking or condemnation of all or
any portion of the Real Property. Except as disclosed in the Disclosure
Schedule, the Company or its Subsidiary, as the case may be, holds valid title
to the Owned Property, leasehold estates and the Real Property Leases free and
clear of any encroachment, sublease, right of occupancy or use of any third
party, mortgage, pledge, lien, security interest, encumbrance, claim, charge,
covenant, conditional limitation or other restriction of any kind, except for:
(i) real property taxes, if any, affecting the Owned Properties or the
properties of which the premises demised under the Real Property Leases form a
part, not yet due and payable or for which adequate provision has been made;
(ii) landlord's liens, encumbrances, and other restrictions set forth in the
Real Property Leases or related documents or imposed by applicable law; (iii)
easements, right-of-way, restrictions, minor defects or irregularities in title,
and other encumbrances not interfering in any material respect with (x) the
ordinary conduct of the business of the Company or its Subsidiary and (y) the
marketability of the Owned Properties. Except as set forth in the Disclosure
Schedule, there is no brokerage commission or finder's fee due from the Company
or any of its Subsidiaries and unpaid with regard to any of Owned Property or
the Real Property Leases, or which will become due any time in the future with
regard to any Owned Property or Real Property Lease.
(c) Except as set forth in the Disclosure Schedule, to the knowledge of the
Company, there are no: (i) unrecorded agreements; (ii) rights of occupancy; or
(iii) mortgages, pledges, liens, security interests, encumbrances, claims,
charges which materially encumber any of the Owned Property or any of the
properties demised under any of the Real Property Leases.
(d) Except as set forth in the Disclosure Schedule, there are no easements,
rights of way or licenses necessary for the operations of the Owned Property or
the properties demised under the Real Property Leases which are not in full
force and effect.
(e) Except as set forth in the Disclosure Schedule, the Owned Property and
the building systems such as heating, plumbing, ventilation, air conditioning
and electric used in the operation of the Owned Property are adequate in all
material respects for the current operations of the Company, and the Owned
Property and such building systems now being used by the Company in its business
and operations, whether leased or owned, are in working order, repair and
operating condition (normal wear and tear excepted), and are, to the knowledge
of the Company, without any material structural defects.
(f) Neither the Company nor any of its Subsidiaries 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 any Real Property Lease. To the Company's knowledge, no other
party to any such lease is in material or monetary default thereunder.
Section 3.8 Title to Property; Encumbrances. Except as set forth in the
Disclosure Schedule and as set forth in Section 3.9 with respect to the
Intellectual Property (as defined in Section 3.9), the Company has good and
valid title to, and owns outright, all of the tangible and intangible personal
properties shown as owned by the Company and its Subsidiaries on the Company's
books and records, including, without limitation, all of the properties and
assets reflected on the Audited Financial Statements and all properties and
assets purchased by and delivered to it since March 31, 1996 (except for
properties and assets sold or disposed of since March 31, 1996, in the ordinary
course of business) free and clear of all mortgages, claims, liens, charges,
leases, subleases, encumbrances, security interests, restrictions on use or
transfer or other defects of any kind or nature, whether or not recorded, except
for (collectively, "Permitted Liens" and, together with the Liens referred to in
the Disclosure Schedule, the "Existing Liens"): (i) liens for taxes, assessments
or other governmental charges or levies the payment of which is not due; (ii)
landlord's liens in favor of the landlord of the premises demised under the Real
Property Leases and liens of carriers, warehousemen, mechanics, materialmen, and
other liens imposed by law incurred in the ordinary course of business of the
Company for amounts not yet due or being contested in good faith by appropriate
proceedings; and (iii) liens incurred or deposits made in the ordinary course of
business of the Company in connection with workers' compensation, unemployment
insurance and other types of social security. The tangible personal properties
and assets owned or leased by the Company are adequate and sufficient for the
current operations of the business of the Company and its Subsidiaries.
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Section 3.9 Intellectual Property. The Company and its Subsidiaries own,
license or have the right to use all franchises, patents, trademarks,
copyrights, service marks, tradenames, corporate names, licenses, trade secrets
and know-how and proprietary computer software or hardware, proprietary
technology, technical information, discoveries, designs and other proprietary
rights, whether or not patentable (collectively, "Intellectual Property") which
are currently used in, their respective businesses. Except as disclosed in the
Disclosure Schedule, the Company holds all Intellectual Property free and clear
of all mortgages, claims, liens, charges, leases, subleases, encumbrances,
security interests, restrictions on use or transfer or other defects of any kind
or nature, whether or not recorded, except for Permitted Liens. The Disclosure
Schedule sets forth a true, correct and complete list and description of all
such Intellectual Property (other than licenses for standard "off-the-shelf"
software which can be readily acquired or licensed for $10,000 or less) and
indicates whether the Company or its Subsidiaries, as applicable, is a licensor
or licensee thereof. Except for: (i) the Company's software licensed to others
in the ordinary course of the Company's business; or (ii) as set forth in the
Disclosure Schedule, the Company has sole title to and ownership of or has full,
exclusive right to use, for the life of the proprietary right, all Intellectual
Property. Except where the failure to do so would have a Material Adverse
Effect, all filings and other actions necessary to acquire, maintain, register,
renew and perfect the rights of the Company and its Subsidiaries to its or their
Intellectual Property rights have been duly made in all jurisdictions where such
rights are used by it or them. The use of the Intellectual Property by the
Company or its Subsidiaries in the operation of their respective businesses does
not violate or infringe on the rights of any other person. Neither the Company
nor any of its Subsidiaries has received any notice of or alleging any violation
of the asserted rights of others with respect to the Intellectual Property. The
Company is not aware of any third party that is infringing or violating any of
the rights of the Company or any of its Subsidiaries with respect to the
Intellectual Property.
Section 3.10 Litigation. Except as set forth in the Disclosure Schedule,
there are no actions, proceedings, claims or investigations pending or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries,
or any properties or rights of the Company or any of its Subsidiaries, before
any court, administrative, governmental or regulatory authority or body,
domestic or foreign. To the Company's knowledge, except as disclosed in the
Disclosure Schedule, no basis exists for the commencement of any action,
proceeding or investigation of the Company or its Subsidiaries. Except as set
forth in the Disclosure Schedule, as of the date hereof, neither the Company nor
any of its Subsidiaries nor any of their property is subject to any order,
judgment, writs, injunction or decree.
Section 3.11 Compliance with Laws. Except as set forth in the Disclosure
Schedule or with respect to Environmental Laws (as defined in Section 3.12
hereto), the Company and its Subsidiaries have complied and are in compliance
with all applicable laws, rules, regulations, ordinances, orders, judgments and
decrees (including, without limitation, occupational safety and health, pension,
fair employment, equal opportunity or similar laws, rules and regulations) of
any Governmental Entity and all other regulatory bodies which affect its
business or assets, the failure to comply with which has or would result in
liability to the Company or the Surviving Corporation of $5,000 or more with
respect to each such failure (a "Compliance Failure"), and there are no pending
claims which have been filed against the Company, its Subsidiaries or any of its
affiliates alleging a violation of any such law, rule, regulation, ordinance,
order, judgment and decree. All Compliance Failures, whether or not any such
occurrence, individually, results in liability to the Company or the Surviving
Corporation of $5,000 or less, collectively, will not result in liability to the
Company and the Surviving Corporation for an amount of $30,000 or more in the
aggregate.
Section 3.12 Environmental Laws. (a) The Company and its Subsidiaries are
in compliance with all applicable Environmental Laws (as defined below in this
Section 3.12), and have obtained all necessary licenses and permits required to
be issued pursuant to any Environmental Law, except where the failure to so
comply or to obtain such licenses or permits, individually or in the aggregate,
does not have a Material Adverse Effect. Except as disclosed in the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has received notice of
or communication from any Governmental Entity with respect to: (i) any Hazardous
Substance (as defined below in this Section 3.12) in relation to its operations,
property, Owned Properties, Former Properties (or any of them) or acts; or (ii)
any investigation, demand or request pursuant to enforcing any Environmental Law
relating to it or its operations or the Owned Properties or the Former
Properties (or any of them), and, to the Company's knowledge, no such
investigation is pending or threatened. For purposes of this Agreement: (i)
"Environmental Law" means any present or future federal, state or local law,
statute, regulation or ordinance, binding interpretation, binding policy, and
any judicial or administrative order or judgment thereunder and the common law,
pertaining to health, industrial hygiene, Hazardous Substances or the
environment, including, but not limited to, each of the following,
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as enacted as of the date hereof or as hereafter amended: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss.ss.9601-9657; the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
ss.ss.6901-6991; the Toxic Substance Control Act, 15 U.S.C. ss.ss.2601-2629; the
Water Pollution Control Act (also known as the Clean Water Act), 33 U.S.C.
ss.1251 et seq; the Clean Air Act, 42 U.S.C. ss.7401 et seq; the Federal Water
Pollution Control Act, 42 U.S.C. ss.1251, et seq; the Federal Safe Drinking
Water Act, 42 U.S.C. ss.300(f), et seq; the Federal Solid Waste Disposal Act, 42
U.S.C. ss.6901, et seq; the Atomic Energy Act, 42 U.S.C. ss.2011, et seq; and
the Hazardous Materials Transportation Act, 49 U.S.C. ss.1801 et seq; and (ii)
"Hazardous Substances" means any material, waste or substance which is included
within the definition of "hazardous substances," "hazardous materials," "toxic
substances," or "solid waste" in or pursuant to any Environmental Law, or
subject to regulation under any Environmental Law.
(b) There are presently no underground storage tanks ("USTS") located on
any of the Real Property nor, to the knowledge of the Company, were there any
USTS located on the Former Property, nor were any such USTS removed at any time
from the Real Property or Former Property unless such removal was completed in
accordance with Environmental Law and the requirements of each Governmental
Agency having jurisdiction over such removal. None of the properties contain
asbestos or Urea Formaldehyde (or Urea Formaldehyde insulation).
(c) The Company is not now under any duty to self-report any condition
existing on any of the Real Property or Former Property which constitutes or may
constitute a violation of any Environmental Law to any Governmental Agency.
(d) None of the Real Property or Former Property are or were used for the
manufacture or storage of Hazardous Substances.
(e) All transportation or disposition, if any, of Hazardous Substances from
the Real Property or Former Property, were performed in compliance with
applicable Environmental Laws.
(f) The Company has no knowledge of any pending or threatened claim against
the Company arising out of the transportation or disposition of Hazardous
Substances.
Section 3.13 Permits. The Disclosure Schedule sets forth a true and correct
list and description of each material consent, permit, approval, authorization,
license and order of or from a Governmental Entity that is held or has been
received by the Company or any of its Subsidiaries (collectively, the "Company
Permits"). The Company Permits constitute all of the consents, permits,
approvals, authorizations, licenses and orders necessary for the operations of
the Company and its Subsidiaries and their respective businesses, except for
those which, if not obtained, would not, individually or in the aggregate, have
a Material Adverse Effect. Each Company Permit is valid and in full force and
effect as of the date hereof. There has not been any attempt to revoke or in any
way limit or impair any of such Company Permits nor, to the Company's knowledge,
is there any reason for any such Company Permit not to be renewed. The Company
and each of its Subsidiaries is in material compliance with, and is not in
violation of or in breach or default under, and has not received any notice of
any alleged violation of or material breach or default under the terms of any
Company Permit held or received by it.
Section 3.14 Tax Matters. Except as disclosed in the Disclosure Schedule:
(a) The Company is the common parent of an affiliated group of corporations (the
"Consolidated Group") which includes the Company and its domestic Subsidiaries
and files consolidated Federal income tax returns. Except as set forth in the
Disclosure Schedule, all United States Federal, state, local and foreign tax
returns, including information returns, reports and forms ("Tax Returns") that
were required to be filed by, or with respect to, the Company and its
Subsidiaries on or before the date hereof have been filed on a timely basis in
accordance with the laws, regulations and administrative requirements of the
appropriate Governmental Entity. All such Tax Returns that have been filed were,
when filed, and continue to be, true, correct and complete in all material
respects.
(b) The Company recognized no income or gain on the cancellation of the
Company's 7% convertible subordinated debentures due 1998 by the holders of such
convertible subordinated debentures in exchange for the Company's Common Stock
offered through the Company's August 15, 1995 public offering.
(c) The Disclosure Schedule lists all Tax Returns by or with respect to the
Company and its Subsidiaries that are in the process of being audited by any
Governmental Entity. The Disclosure Schedule describes all adjustments to Tax
Returns filed by, or on behalf of, the Company and its Subsidiaries that have
been proposed by any representative of any Governmental Entity, and the
resulting Taxes (as defined below), if any, proposed to be
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assessed. As used herein, the term "Taxes" means all foreign, Federal, state,
county, local and other taxes, levies, impositions, deductions, charges and
withholdings, including, without limitation, income or franchise taxes or other
taxes imposed on or with respect to net income or capital, gross receipts,
profits, sales, use, occupation, value added, ad valorem, transfer, withholding,
payroll, employment excise or property taxes, and shall include any interest,
penalties or additions thereto. All deficiencies proposed (plus interest,
penalties and additions to Tax that were or are proposed to be assessed thereon,
if any) with respect to the Company and its Subsidiaries as a result of any
examinations have been paid or, as described in the Disclosure Schedule, are
being contested in good faith by appropriate proceedings. Except as set forth in
the Disclosure Schedule, there are no outstanding waivers or extensions of any
statute of limitations relating to the payment of Taxes for which the Company or
its Subsidiaries may be liable and no Governmental Entity has either formally or
informally requested such a waiver or extension.
(d) All Taxes (whether or not shown on any return) which were required to
be paid by the Company and its Subsidiaries on or before the date hereof have
been timely paid, except such Taxes, if any, as are set forth in the Disclosure
Schedule, that are being contested in good faith. All Taxes that the Company or
its Subsidiaries were required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the
appropriate Governmental Entity. There are no liens with respect to Taxes upon
any of the properties or assets, real or personal, tangible or intangible, of
the Company or its Subsidiaries (except for Taxes not yet due). Any liability
existing on March 31, 1996 of the Company for Taxes not yet due and payable has
adequately been provided for on the Audited Financial Statements.
(e) The Company has paid all consolidated Federal income Taxes (whether or
not shown on any return) which were required to be paid by the Consolidated
Group, except such Taxes, if any, as are set forth in the Disclosure Schedule,
that are being contested in good faith.
(f) Except for (i) consolidated Federal income Tax Returns filed by Company
with respect to the Consolidated Group, (ii) and as set forth on the Disclosure
Schedule, the Company and its Subsidiaries have never been included in a
consolidated or combined income Tax Return.
(g) No consent to the application of Section 341(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") has been filed with respect to any
property or assets held or acquired by the Company or its Subsidiaries.
(h) No property owned by the Company or its Subsidiaries is property that
the Company or its Subsidiaries are required to treat as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(i) The Company and its Subsidiaries: (i) have not agreed to or been
required to make any adjustment pursuant to Section 481(a) of the Code; (ii)
have no knowledge that the Internal Revenue Service has proposed any such
adjustment or change in accounting method with respect to it; (iii) do not have
an application pending with any taxing authority requesting permission for any
change in accounting method; and (iv) have reported all income and deductions
using a permissible method of accounting under Section 446 of the Code.
(j) The Company is not foreign person within the meaning of Section 1445 of
the Code.
(k) Except as disclosed on the Disclosure Schedule, neither the Company nor
its Subsidiaries has in effect any tax elections for Federal income tax purposes
under Section 108, 168, 338, 441, 471, 1017, 1033 or 4977 of the Code.
(l) There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, as a consequence of the Merger, could
give rise to the payment of any amount that would not be deductible by the
Company or its Subsidiaries by reason of Section 162(m) or 280G of the Code or
as excessive or unreasonable compensation.
(m) The Company and its Subsidiaries are not a party (other than as an
investor) to any industrial development bond.
(n) Except as provided on the Disclosure Schedule, during the previous two
years the Company and any person related to the Company (within the meaning of
Section 1031(f)(3)) have not engaged in any exchange under which the gain
realized on such exchange was not recognized due to Section 1031 of the Code.
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(o) No written claim has ever been made by an authority in a jurisdiction
in which the Company or its Subsidiaries do not file Tax Returns that it or they
are or may be subject to taxation by that jurisdiction.
(p) The Company and its Subsidiaries are not and have not been a party to
any tax sharing or similar agreement or arrangement.
(q) The Company and its Subsidiaries have not been a party to a
transaction, the income with respect to which was deferred under Treasury
Regulations issued under Section 1502 of the Code, which income will be taken
into account by the Company as a result of the Merger.
(r) The Disclosure Schedule hereto sets forth, as of March 31, 1996, the
liabilities of the Company and its Subsidiaries and the adjusted basis of the
assets of the Company and its Subsidiaries for Federal, state, local and foreign
income tax purposes, which has been determined by the Company in good faith
based on the best data available to the Company.
(s) The Company has provided PCN with copies of: (i) all Tax Returns of or
with respect to the Company and its Subsidiaries for all periods with respect to
which the statute of limitations on assessment has not expired; (ii) any
notices, protests, or closing agreements relating to issues arising, or
potentially arising, in any audit, litigation or similar proceeding with respect
to the liability for Taxes of the Company or its Subsidiaries; (iii) any
elections or disclosure of any controversial position filed by or on behalf of
the Company or its Subsidiaries with any taxing authority (whether or not filed
with any Tax Return); and (iv) any letter rulings, determination letters or
similar documents issued by any taxing authority with respect to the Company or
its Subsidiaries.
(t) The net operating loss carryovers and any credit carryovers of the
Company and each of its Subsidiaries as of June 30, 1995 for Federal income tax
purposes and for state income tax purposes in each state in which the Company or
its Subsidiaries file a state income tax return are set forth on the Disclosure
Schedule. Except to the extent attributable to income generated in the ordinary
course of business subsequent to June 30, 1995, neither the Company nor its
Subsidiaries has recognized income or gain which has reduced the net operating
loss carryovers or the credit carryovers set forth on the Disclosure Schedule.
Except as described in the Disclosure Schedule, neither the Company nor any
Subsidiary has a net operating loss carryover or a credit carryover which (i) in
the case of a net operating loss carryover, is subject to restriction under
Section 382 of the Code (or any similar provision under state, local, or foreign
law), (ii) in the case of any credit carryover, is subject to restriction under
Section 383 of the Code (or any similar provision under state, local or foreign
law) or (iii) in the case of either a net operating loss or credit carryover,
arose in a separate return limitation year.
(u) Except as set forth on the Disclosure Schedule, no contributions have
been made to capital of the Company or its Subsidiaries during the five year
period ending on the date hereof.
(v) Neither the Company or its Subsidiaries are liable for the payment of
any Taxes imposed on the Company or its Subsidiaries under Treasury Regulation
Section 1.1502-6 (or any successor provision thereto or similar provision under
state, local or foreign law).
Section 3.15 Benefit Plans. (a) The Disclosure Schedule contains a true and
complete list of each pension, retirement, savings, profit sharing, stock bonus,
stock ownership, deferred compensation, bonus, incentive compensation, stock
option, restricted stock, stock purchase, stock appreciation right, salary
continuation, severance or termination pay, medical, hospital, dental,
cafeteria, flexible spending, dependent care, life or other insurance,
disability, fringe benefit, vacation pay, sick pay, holiday, unemployment,
employee loan, educational assistance or other employee benefit plan or program,
agreement or arrangement, whether written or oral, covering current or former
employees, directors or agents of the Company or its Subsidiaries and
maintained, sponsored or contributed to by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its Subsidiaries
may otherwise have any liability (including, but not limited to, any "employee
benefit plans", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (all the foregoing being herein
called "Benefit Plans")). With respect to the Benefit Plans, the Company has
made available to PCN a true and correct copy of (i) the three most recent
annual reports (Form 5500) filed with the IRS, (ii) all such Benefits Plans,
(iii) any summary plan description relating to any Benefit Plan, (iv) each trust
agreement, insurance contract, annuity contract or other funding vehicle or
investment contract, relating to such Benefit Plans, (v) the most recent
actuarial report or valuation, (vi) the latest IRS determination letter and any
other IRS ruling relating to a Benefit Plan and (vii) the premium expenses and
claims experience for each Benefit Plan which is a welfare benefit plan for the
three most recent fiscal years and for the period from the end of the most
recent fiscal year to the last day of the month
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preceding the date hereof. Each of the Company and its Subsidiaries currently
has no commitment or plans to create any additional Benefit Plans.
(b) Except as disclosed on the Disclosure Schedule, each Benefit Plan is
and has been in compliance, in form and operation, in all material respects,
with all applicable laws and has been administered in all material respects in
accordance with its terms and ERISA, the Code or any other applicable statute,
order or governmental rule or regulation.
(c) Each of the Benefit Plans and related trusts that is intended to be
qualified under Section 401(a) and exempt from tax under Section 501(a) of the
Code has been determined by the IRS to be qualified and exempt under the Code,
and to the Company's knowledge, nothing has occurred since such determination to
cause any of such Benefit Plans and related trusts not to qualify under Section
401(a) or be exempt under Section 501(a) of the Code except as disclosed on the
Disclosure Schedule.
(d) Except as disclosed on the Disclosure Schedule, all required returns,
reports and descriptions with respect to the Benefit Plans have been
appropriately filed and distributed.
(e) With respect to the Benefit Plans, individually and in the aggregate,
except as disclosed on the Disclosure Schedule, there has been no prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code, or any liability for taxes or breach of fiduciary duty. There is no
action, suit, grievance, arbitration or other claim with respect to the
administration or investment of assets of the Benefit Plans (other than routine
claims for benefits made in the ordinary course of plan administration) pending
or threatened and which are likely to give rise to any such action, suit,
grievance, arbitration or other claim.
(f) Neither the Company nor any of its Subsidiaries currently maintains,
sponsors, or contributes to (or is required to contribute to) any "defined
benefit plan" as defined in Section 3(35) of ERISA, any "multiemployer plan" as
defined in Section 3(37) of ERISA or any "multiple employer plan" within the
meaning of Sections 4063 or 4064 of ERISA. With respect to any "employee benefit
plan" (as defined in Section 3(3) of ERISA), whether or not terminated,
currently or formerly maintained or contributed to by the Company or its
Subsidiaries, or any entity which was at any time treated as a single employer,
determined under Section 414(b), (c), (m) or (o) of the Code, with the Company
or its Subsidiaries, no liability currently exists and no event has occurred and
no condition exists, which could subject the Company, its Subsidiaries, the
Surviving Corporation or any of its Subsidiaries directly or indirectly (through
an indemnification agreement or otherwise) to any liability, including, without
limitation, any liability under Title IV of ERISA or Section 412, 4971, 4975 or
4980B of the Code.
(g) With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions are due and have
not been made or for which contributions have not been properly accrued as
required by GAAP, and there are no unfunded benefit obligations which have not
been (i) accounted for by reserves (if required by GAAP) or (ii) if required
(and to the extent required, if any), properly disclosed in accordance with
GAAP, in the consolidated financial statements of the Company.
(h) No Benefit Plan or other contract or agreement to which the Company or
any of its Subsidiaries is a party provides life, health or other welfare
benefits to retirees or other terminated employees of the Company or its
Subsidiaries or their dependents, other than continuation coverage mandated by
Section 4980B of the Code or any state law requiring similar continuation
coverage.
(i) The financial statements included in the Company SEC Documents and the
Audited Financial Statements reflect reserves which are adequate to cover any
reasonably expected liabilities for unresolved or outstanding workers
compensation claims or claims under the Company's self-funded employee welfare
plans.
Section 3.16 Employees; Labor Relations. (a) None of the Company's or any
of its Subsidiaries' employees is represented by any labor union. To the
Company's knowledge, there is no activity involving any employees of the Company
or any of its Subsidiaries seeking to certify a collective bargaining unit or
engaging in any other organizational activity. There are no pending or, to the
Company's knowledge, threatened, lawsuits, administrative proceedings, reviews,
or investigations by any person or Governmental Entity against the Company or
any of its Subsidiaries with respect to any violation or alleged violation of
any applicable Federal, state or local laws, rules or regulations: (i)
prohibiting discrimination on any basis, including, without limitation, on the
basis of race, color, religion, sex, disability, national origin or age; or (ii)
relating to employment or labor, including, without limitation, those related to
immigration, wages or hours.
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(b) The Disclosure Schedule contains a true and correct schedule of: (i)
the name, job title and current annual base salary of all current officers and
employees of the Company and its Subsidiaries and the amount of any bonuses the
Company or its Subsidiaries have promised to pay such persons; and (ii) all
written employment, consulting, severance or compensation agreements with each
such persons, true and correct copies of which have been previously delivered to
PCN. Except for employees with employment agreements or as set forth on the
Disclosure Schedule or as provided by the laws of the jurisdiction in which the
employee is employed, all employees of the Company and its subsidiaries are
at-will employees and the Company has taken no action which could result in any
such employees not being considered at-will employees.
(c) Except as set forth on the Disclosure Schedule, each employee of the
Company and its Subsidiaries is a party to a confidentiality and non-disclosure
agreement substantially in the form of the agreement attached to the Disclosure
Schedule (the "Employee Confidentiality Agreement").
Section 3.17 Insurance. The Disclosure Schedule sets forth a true, complete
and accurate list and summary description of all material insurance policies
maintained by the Company or any of its Subsidiaries which are currently in
effect or with respect to which there are unresolved pending claims, which
description includes, among other things, whether the policy is an "occurrence"
or "claims made" policy and whether there is any deductible or self-insured
retention with respect to such policy. All such current policies are in full
force and effect on the date hereof. Such policies insure the Company and/or its
Subsidiaries, as the case may be, against such risks and are in such amounts as
the Company reasonably believes are necessary to conduct its business. The
Company and its Subsidiaries are not in default with respect to any provisions
or requirements of any such policy nor have any of them failed to give notice or
present any claim thereunder in due and timely fashion, except for defaults or
failures which, individually or in the aggregate, do not have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries have received any notice
of cancellation or termination in respect of any of the insurance policies
listed on the Disclosure Schedule.
Section 3.18 Accounts Receivable. The Disclosure Schedule sets forth an
aged list of the accounts receivable of the Company and its Subsidiaries at May
31, 1996. All such accounts receivable, and all accounts receivable subsequently
acquired by the Company or any of its Subsidiaries, arose in the ordinary course
of business. The Company has no knowledge or any reason to believe that, subject
to the Company's allowance for doubtful accounts and maintenance contract
allowance as reflected in the Unaudited Financial Statements and/or the
Company's internal accounting records (all of which have been made available to
PCN for review), such accounts receivable are not collectible at their aggregate
recorded accounts in the ordinary course of business.
Section 3.19 Contracts. (a) Except as set forth in the Disclosure Schedule
or any Company SEC Document, neither the Company nor any of its Subsidiaries is
party to or bound by any:
(i) lease agreement (whether as lessor or lessee) relating to real or
personal property requiring payments of more than $10,000 on an annualized
basis or which cannot be canceled or terminated (or will not, by its terms,
terminate) within one year of the date hereof;
(ii) license agreement, assignment or contract (whether as licensor or
licensee, assignor or assignee) relating to trademarks, trade names,
patents, or copyrights (or applications therefor), software, unpatented
designs or processes, formulae, know-how or technical assistance, or other
proprietary rights, including, without limitation, the Intellectual
Property (other than standard licenses of the Company's software products
to in the ordinary course of business);
(iii) employment, consulting agreement, severance agreements, other
agreement regarding employees, directors or agents, including any (x)
agreement with any officer or other employee of the Company or any
Subsidiary the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement or (y) agreement or
plan, any of the benefits of or rights under which will be increased, or
the vesting or payment of the benefits of or rights under which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement, in each case other than agreements entered into at the
request of PCN;
(iv) non-competition, non-disclosure, secrecy or confidentiality
agreement or similar agreement, including, without limitation, any such
agreement with any employee of the Company, other than the Employee
Confidentiality Agreement (as defined in Section 3.16), agreements entered
into in the ordinary course of
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business consistent with past practice, agreements with the Company related
specifically to the transactions contemplated by this Agreement and
agreement under which the Company is the disclosing party;
(v) agreement or other arrangement pursuant to which the Company acts
as a remarketer or reseller of goods or services for another person or
entity;
(vi) agreement with any value-added reseller, business partner,
distributor, dealer, sales agent or representative with respect to the sale
or licensing of the Company's products or services;
(vii) agreement with any manufacturer, supplier or customer with
respect to discounts or allowances or extended payment terms;
(viii) any original equipment manufacture agreement;
(ix) joint venture or partnership agreement with any other person;
(x) agreement for the borrowing or lending of money;
(xi) agreement guaranteeing, indemnifying or otherwise becoming liable
for the obligations or liabilities of another;
(xii) agreement with any bank, financing company or similar
organization which acquires accounts receivable or contracts for the sale
of merchandise on credit;
(xiii) agreement granting to any person a lien, security interest or
mortgage on any asset of the Company or any of its Subsidiaries, including,
without limitation, any factoring agreement or agreement for the assignment
of accounts receivable or inventory;
(xiv) agreement for the construction or modification of any building
or structure or for the incurrence of any other capital expenditures in
excess of $20,000;
(xv) advertising agreement;
(xvi) agreement which restricts the Company or any of its Subsidiaries
from conducting any type of business anywhere in the world;
(xvii) long-term sale or private brand agreement;
(xviii) claims clearing agreement, electronic data interchange
agreement, clinical laboratory link or other agreement which permits or
relates to the linkage of any of the Seller's software products with any
other software product or service;
(xix) source-code escrow agreements;
(xx) agreement entered into since January 1, 1994 regarding any
acquisition or disposition of any assets by or from the Company other than
in the ordinary course of business containing any currently operative
provisions;
(xxi) currently operative agreement regarding the settlement of any
litigation; or
(xxii) other material agreement affecting the Company or its assets
entered into out of the ordinary course of business which are for an amount
in excess of $15,000 on an annualized basis or which have a remaining term
of one year or more.
Also set forth on the Disclosure Schedule is a list of (i) the 50 end-users
of the Company's medical software products who or which generated the most
revenues for the Company during the nine (9) month period ended March 31, 1996;
and (ii) the 50 end-users of the Company's hospital system software products who
or which generated the most revenue for the Company during the same period
(collectively, "Material End-Users"). Correct and complete copies of all such
agreements, licenses, leases, contracts, arrangements and other instruments and
written amendments thereto (or, where they are oral, true and complete written
summaries thereof) referred to in this Section 3.19(a) and shown or required to
be shown on the Disclosure Schedule or Company SEC Document (together with each
agreement with a Material End-User, collectively referred to herein as the
"Material Contracts"), have been made available to PCN on or prior to the date
hereof.
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(b) Except as set forth in the Disclosure Schedule, each of the Material
Contracts is valid, in full force and effect and enforceable in all material
respects by the Company or its Subsidiaries in accordance with its terms
(subject to the effects of insolvency and general creditors' rights laws and to
equitable principles of general application).
(c) Except as set forth in the Disclosure Schedule, the Company or its
Subsidiary, as applicable, has fulfilled, or has taken all action reasonably
necessary to have been taken to date to enable it to fulfill when due, all of
its material or monetary and obligations under the Material Contracts. Except as
indicated in the Disclosure Schedule, there has not occurred any material or
monetary default by the Company or any of its Subsidiaries or any event which,
with the giving of notice or the lapse of time or both, and/or the election of
any person other than the Company or such Subsidiary will become a material or
monetary default, nor, to the knowledge of the Company, has there occurred any
material or monetary default by others or any event which, with the lapse of
time and/or the election of the Company or its Subsidiary, will become a
material or monetary default under any of the Material Contracts. Except as set
forth in the Disclosure Schedule, neither the Company 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 Material Contracts
and, to the best knowledge of the Company, no waiver or indulgence has been
granted by any of the parties thereto.
(d) Except as set forth in the Disclosure Schedule, the Merger will not
result in a breach or default by the Company under any of the Material Contracts
and the consent of the other parties thereto will not be required with respect
thereto.
(e) Except as disclosed in the Disclosure Schedule or with respect to the
Company's agreements with the Material End-Users, all of the end-user license
agreements, end-user maintenance and enhancement agreements and end-user support
agreements between the Company and any end-user or licensor of the Company's
products or services, including, without limitation, computer hardware, medical
practice management software products and hospital information system software
products, are substantially in the form of the agreements attached to the
Disclosure Schedule and contain no material variation therefrom.
Section 3.20 Related Party Transactions. Except as set forth in the
Disclosure Schedule, neither the Company nor any of its Subsidiaries has entered
into any transaction which is still operative with (i) an officer or director of
the Company or of any of its Subsidiaries, (ii) a record or beneficial owner of
five percent or more of the voting securities of the Company or (iii) an
affiliate of any such officer, director or beneficial owner other than payment
of compensation for services rendered to the Company or its Subsidiaries.
Section 3.21 Vote Required; Voting Agreement. The only vote of the holders
of any class or series of the Company's capital stock necessary to adopt this
Agreement is the Company Vote. Pursuant to certain Voting Agreements (each a
"Voting Agreement" and collectively, the "Voting Agreements") dated as of the
date hereof among certain beneficial owners of Common Stock (the "Majority
Holders") and PCN, the Majority Holders have agreed to vote in favor of adopting
this Agreement votes that are presently sufficient, and will be sufficient at
the time of the meeting to be held by the Company regarding the adoption of this
Agreement (the "Company Meeting"), to approve the adoption of this Agreement by
the Company Vote. Each of the Majority Holders is: (i) the beneficial owner of
the number of shares of Common Stock shown as being beneficially owned by such
Majority Holder in the Voting Agreement and (ii) has the right to vote such
shares of Common Stock at the Company Meeting.
Section 3.22 Customers and Suppliers. The Disclosure Schedule contains: (a)
the number of currently active end-users who or which, as the case may be,
licensed any product from the Company or any of its Subsidiaries (categorized by
medical software products, hardware information system software products,
networking products and hardware products); (b) the number of current end-users
who or which, as the case may be, receives any services, including without
limitation, any maintenance or support services, from the Company or any of its
Subsidiaries (collectively, "Customers") (categorized by medical software
products, hardware information system software products, networking products and
hardware products); and (c) a good faith estimate of the number of physician
Customers who utilize the Company's medical software products. Except as set
forth on the Disclosure Schedule, neither the Company nor its
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Subsidiaries has received any notifications (whether written or verbal) that:
(i) any Material End-Users or suppliers; or (ii) other Customers who or which
account for 10% or more in the aggregate of the Company's current annualized
revenues, will or may cease to continue such relationship with the Company, or
will or may substantially reduce the extent of such relationship, at any time
prior to or after the Closing Date except normal turnover of the customer base
consistent with past experience. Neither the Company nor its Subsidiaries has
knowledge of any other material modification or change in the Company's or any
of its Subsidiaries' business relationship with such Material End-Users or
suppliers and neither the Company nor any of its Subsidiaries is engaged in any
material dispute with any Material End-User or suppliers. Except as set forth on
the Disclosure Schedule, neither the Company nor its Subsidiaries is obligated
to provide any maintenance or support services to any person or entity free of
charge.
Section 3.23 Bank Accounts. Set forth on the Disclosure Schedule is a true
and complete list of: (i) the name of each bank or other financial institutions
in which the Company or its Subsidiaries has an account or safe deposit box;
(ii) the type and number of each such account or safe deposit box; and (iii) the
names of all persons authorized to draw thereon or have access thereto.
Section 3.24 Accounting Controls. To the best knowledge of the Company, the
Company has not made, and does not have, any unlawful payments problems of the
type that could reasonably be expected to have a Material Adverse Effect.
Section 3.25 Finders and Investment Bankers. Except as set forth on the
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
any other transaction contemplated hereby on account of any actions taken by the
Company, any of its Subsidiaries or any of its shareholders.
Section 3.26 Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion in: (i) the S-4 will, at the time the
S-4 is filed with the SEC and at the time it becomes effective under the
Securities Act or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and (ii) the Proxy
Statement will, at the date mailed to the Company's stockholders and at the
respective times of any meetings of stockholders to be held in connection with
the Merger or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement, insofar as it
relates to the Company or Subsidiaries of Company or other information supplied
by the Company for inclusion therein, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, and the S-4, insofar as it relates to the Company or its
Subsidiaries or other information supplied by the Company for inclusion therein,
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 3.27 Disclosure. No representation or warranty by the Company in
this Agreement and no statement contained in any document or other writing
furnished or to be furnished to PCN or its representatives pursuant to the
provisions hereof contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary in order to make the
statements made herein or therein not misleading. All copies of Material
Contracts and all other documents delivered to PCN or its representatives
pursuant hereto are true, complete and accurate in all material respects. There
has been no event or transaction (other than the transactions contemplated
hereby and the matters related thereto) which has occurred or information which
has come to the attention of the Company (other than events or information
relating to economic conditions of general public knowledge) which could
reasonably be expected to have a Material Adverse Effect or which could
reasonably be expected to prevent or impair the ability of the Surviving
Corporation, after the Effective Time, to carry on the business of the Company
and its Subsidiaries in the same manner as it is presently being conducted.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.1 Conduct of Business of the Company Pending the Merger. During
the period from the date of this Agreement to the Effective Time, the Company
agrees as to itself and its Subsidiaries that (except as contemplated or
expressly permitted by this Agreement or to the extent that PCN shall otherwise
agree in writing):
(a) The businesses of the Company and its Subsidiaries shall be
conducted only in the ordinary course of business and in a manner
consistent with past practice.
(b) The Company shall use its reasonable commercial efforts to: (i)
preserve, and shall cause its Subsidiaries to preserve, intact the business
organization of itself and its Subsidiaries; (ii) keep available the
services of its
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present officers, employees and consultants; and (iii) preserve its present
relationships with Customers, suppliers and other persons with which it has
a significant business relationship.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, amend or propose to amend its Articles of Incorporation or
By-Laws or equivalent organizational documents.
(d) The Company shall not, nor shall it permit any of its Subsidiaries
to, issue, deliver, sell or pledge, or authorize or propose to issue,
deliver, sell or pledge, any shares of its capital stock of any class, or
any securities convertible into, or any rights, warrants or options to
acquire any such shares, or convertible securities or other ownership
interest, except, in each case, as required by the terms of the Options.
(e) The Company shall not, nor shall it permit any of its Subsidiaries
to: (i) declare, propose to declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock; or (ii) reclassify, combine, split,
subdivide or redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock.
(f) The Company shall not, nor shall it permit any of its Subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any material amount of assets
other than in the ordinary course of business.
(g) The Company shall not, nor shall it permit any of its Subsidiaries
to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease
(whether such lease is an operating or capital lease), encumber or
otherwise dispose of any portion of its assets, other than in the ordinary
course consistent with past practice.
(h) The Company shall not, nor shall it permit any of its Subsidiaries
to, incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others or enter into any lease (whether
such lease is an operating or capital lease) other than in each case in the
ordinary course of business under the Company's existing credit facilities.
(i) Neither the Company nor any of its Subsidiaries shall: (i) except
to the extent required by applicable law or as required or permitted by the
terms of any currently effective employment agreement, increase or agree to
increase the compensation (whether cash or non-cash) payable or to become
payable to their officers or employees, except for increases in salary or
wages of employees, other than officers who are currently paid annual
compensation in excess of $50,000, of the Company or any of its
Subsidiaries (whether in such capacity or otherwise) in accordance with
past practices and not to exceed 5% on an annual basis; (ii) increase or
agree to increase the compensation payable or to become payable to any
executive officer of the Company or any of its Subsidiaries who currently
receives annual compensation in excess of $50,000; (iii) grant any
severance or termination pay to, or enter into any employment, consulting
or severance agreement with any executive officer, director, employee or
agent of the Company or any of its Subsidiaries; (iv) enter into any
collective bargaining agreement; or (v) establish, adopt, enter into or
amend any Benefit Plan or establish or adopt any other employee benefit
plan for the benefit of any directors, officers or employees.
(j) Neither the Company nor any of its Subsidiaries shall authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution.
(k) Neither the Company nor any of its Subsidiaries shall enter into
any settlement agreement with respect to any grievances, litigation,
administrative charges, or any other litigation pending on the date hereof
or arising hereafter which are not either consistent with past practice or
which will have a Material Adverse Effect.
(l) Neither the Company nor any of its Subsidiaries shall terminate or
amend or modify in any material respect any of the Material Contracts.
(m) The Company will promptly notify PCN in the event that it fails to
operate its business in accordance with this Section 4.1.
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Section 4.2 Acquisition Proposals. The Company and its Subsidiaries will
not, nor will they authorize or permit any of their officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any of its Subsidiaries to: (i)
initiate contact with, solicit or otherwise encourage any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as hereinafter defined); or (ii) engage in
negotiations concerning, provide any nonpublic information to, or have any
discussions with, any person relating to any Acquisition Proposal. The Company
and its Subsidiaries will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company shall immediately
notify PCN of any negotiations, requests for nonpublic information or
discussions with respect to an Acquisition Proposal and will keep PCN fully
informed of the status and terms of any such Acquisition Proposal, indication or
request. As used in this Agreement, "Acquisition Proposal" means any proposal or
offer for a merger, consolidation, share exchange, recapitalization or other
business combination involving the Company or any of its Subsidiaries or any
proposal or offer to acquire an equity interest in, all or (other than in the
ordinary course of business consistent with past practice) any portion of the
assets of the Company (including any capital stock or assets of any of its
Subsidiaries) other than the transactions contemplated by this Agreement.
Section 4.3 Tax Returns. The Company and each of its Subsidiaries will file
all Tax Returns required to be filed by any of them (including estimated Tax
Returns) and will pay (or the Company will pay on its behalf) all taxes due
prior to the Effective Time.
Section 4.4 Financial Statements. As soon as available, the Company shall
deliver to PCN copies of unaudited financial statements for each fiscal quarter
and each month ending after the date hereof.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of S-4 and Proxy Statement. PCN and the Company
shall as promptly as practicable prepare and file with the SEC the Proxy
Statement and PCN shall prepare and file with the SEC the S-4, in which the
Proxy Statement will be included as a prospectus. PCN shall use all reasonable
efforts, and the Company shall cooperate with PCN, to have the S-4 declared
effective by the SEC as promptly as practicable and to keep the S-4 effective as
long as is necessary to consummate the Merger. PCN shall, as promptly as
practicable, provide copies of any written comments received from the SEC with
respect to the S-4 to the Company and advise the Company of any verbal comments
with respect to the S-4 received from the SEC. The Company shall use all
reasonable efforts to cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable date. PCN shall use all reasonable efforts to obtain
all necessary state securities laws or "blue sky" permits, approvals and
registrations in connection with the issuance of PCN Stock pursuant to this
Agreement. If at any time prior to the Effective Time, any event with respect to
PCN or any of its Subsidiaries or with respect to other information supplied by
PCN or for inclusion in the Proxy Statement or S-4 shall occur which is required
to be described in an amendment of, or a supplement to, the Proxy Statement or
the S-4, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of the Company. If at any time prior to the Effective Time, any
event with respect to the Company or any of its Subsidiaries or with respect to
other information supplied by the Company for inclusion in the Proxy Statement
or S-4 shall occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the S-4, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. PCN shall
advise the Company, promptly after it receives notice thereof, of the time when
the S-4 has become effective or any supplement or amendment thereto has been
filed, the issuance of any stop order, the denial or suspension of the
qualification of the PCN Stock issuable in connection with the Merger for
offering or sale in any jurisdiction or any request by the SEC for any amendment
or supplement to the S-4 or comments thereon and responses thereto or requests
by the SEC for additional information.
Section 5.2 Letters of Accountants. The Company shall use all reasonable
efforts to cause to be delivered to PCN a letter of BDO Seidman & Company, the
Company's independent auditors (the "Company Auditors"), dated a date within two
Business Days before the date on which the S-4 shall become effective and
addressed to PCN, of the kind contemplated by the Statement of Auditing
Standards with respect to Letters to Underwriters promulgated by the American
Institute of Certified Public Accountants (the "AICPA Statement") in form and
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substance reasonably acceptable to PCN and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
Section 5.3 Access to Information. From the date hereof to the Effective
Time, PCN and the Company shall each (and shall cause each of their respective
Subsidiaries to) afford to the other, and the officers, employees, accountants,
counsel and other representatives of the other, access at all reasonable times
to its officers, employees, agents, properties, offices, plants, other
facilities and to all books and records (including tax returns), and shall
furnish to the other party all financial, operating and other data and
information as the other party, through its officers, employees or agents, may
reasonably request; provided, however, that any such access and all such
requests shall be reasonably related to the transactions contemplated hereby and
shall not interfere unnecessarily with normal operations. Each of the Company
and PCN agrees that it will not, and will cause its respective representatives
not to, use any information obtained pursuant to this Section 5.3 for any
purpose unrelated to the consummation of the transaction contemplated by this
Agreement. The Confidentiality Agreement between PCN and the Company (the
"Confidentiality Agreement") shall apply with respect to information furnished
by the Company or its Subsidiaries and the Company's representatives thereunder
or hereunder and any other activities contemplated thereby and to information
furnished by PCN or its Subsidiaries and PCN's representatives thereunder or
hereunder and any other activities contemplated thereby. The parties agree that
this Agreement and the transactions contemplated hereby shall not constitute a
violation of the Confidentiality Agreement.
Section 5.4 Meetings of Stockholders. The Company shall promptly take all
action necessary in accordance with the WBCA and its articles of incorporation
and by-laws to convene a meeting of its stockholders for the purpose of
approving this Agreement and the transactions contemplated hereby. The Company
will, through its Boards of Directors, recommend to its stockholders approval of
such matters and shall use its reasonable best efforts to obtain approval and
adoption of this Agreement and the transactions contemplated hereby by its
stockholders.
Section 5.5 Legal Conditions to Merger. Each of the Company and PCN will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger (including
furnishing all information required in connection with approvals of or filings
with any Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with the Merger.
Section 5.6 NASDAQ Listing. Prior to the Effective Time, PCN shall use all
reasonable efforts to permit it to issue the number of shares of PCN Stock
required to be issued pursuant to this Agreement, including, without limitation,
filing for listing of such shares on the NASDAQ Stock Market prior to the
Closing Date.
Section 5.7 Stock Options. (a) The Company shall use its reasonable best
efforts to cause all options to purchase Common Stock, whether or not vested
("Options"), whose purchase price per share is less than or equal to the Merger
Consideration per share of Common Stock ("In-the-Money Options"), to be
exercised or canceled prior to the Effective Time. To the extent that the
Company has an obligation to do so or determines to be in the best interest of
the Company, promptly following June 30, 1996, the Company shall grant those
Options set forth in the Disclosure Schedule which are not outstanding as of the
date hereof. All such Options shall provide that, unless exercised prior
thereto, such Options shall terminate on the Trigger Date.
(b) After the Effective Time, each Option then outstanding shall
automatically be deemed to constitute an option or right to acquire, on the same
terms and conditions as were applicable under such Option, the amount of Cash
Consideration and the number of shares of PCN Stock as such Option would have
entitle the holder thereof to receive if such Option had been exercised in full
immediately prior to the Effective Time; provided however, that the number of
shares of PCN Stock that may be purchased upon exercise of such Option shall not
include any fractional share and, upon exercise of such Option, a cash payment
shall be made for any fractional share based upon the closing price of a share
of PCN Common Stock on the NASDAQ Stock Market on the trading day immediately
preceding the date of exercise.
Section 5.8 Advice of Changes; Governmental Filings. Each party shall
confer on a regular and frequent basis with the other, report on operational
matters and promptly advise the other orally and in writing of: (i) any event
which occurs after the date hereof that would under this Agreement have been
required to be disclosed on the date of the execution and delivery of this
Agreement had such event occurred on or prior to the date hereof or would have
resulted in a breach of any representation, warranty covenant or agreement
contained herein; and (ii) any change or event having, or which, insofar as can
reasonably be foreseen, could have, a Material Adverse Effect.
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Section 5.9 No Action. Except as contemplated by this Agreement, no party
hereto will, nor will either such party permit any of its Subsidiaries to, take
or agree or commit to take any action that is reasonably likely to make any of
its representations or warranties hereunder inaccurate in any material respect
at the date made (to the extent so limited) or as of the Effective Time.
Section 5.10 Legal Conditions to Merger. Each of the Company and PCN will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger
(including furnishing all information required in connection with approvals of
or filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger.
Section 5.11 Tax Opinion. The Company shall cause its counsel to issue to
the Company an opinion, dated prior to the date on which the S-4 is first mailed
to shareholders of the Company, to the effect that (so long as the All Cash
Option is not exercised): (i) the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code;
(ii) each of PCN, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii) no gain
or loss will be recognized by PCN, Merger Sub or the Company as a result of the
Merger; (iv) with respect to the shares of PCN Stock to be issued in connection
with the Merger, no gain or loss will be recognized by shareholders of the
Company; and (v) such other matters related to the tax treatment of the Merger
Consideration as are customary in connection with a transaction similar to the
Merger in which a Form S-4 joint proxy/prospectus is utilized, including,
without limitation, matters relating to stock basis, holding periods, treatment
of cash received for fractional shares and the treatment of the Cash
Consideration.
Section 5.12 Description of Owned Property. The Company shall deliver to
PCN, as soon practicable but in no event later than three days prior to the
Effective Time, a true and complete description of the Owned Property.
Section 5.13 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to use
all reasonable business efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using its reasonable best efforts to obtain all necessary waivers, consents and
approvals and to cause the conditions set forth in Article VI to be satisfied as
promptly as practicable. Without limiting the foregoing, the parties hereto will
execute and deliver, or cause to be executed and delivered, all such documents
and instruments, in addition to those specifically required by the provisions of
this Agreement, in form and substance reasonably satisfactory to the parties
hereto, as may be reasonably necessary or desirable to carry out and implement
the provisions of this Agreement.
ARTICLE VI
CONDITIONS OF MERGER
Section 6.1 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Shareholder Vote. This Agreement shall have been adopted by the
Company Vote.
(b) Other Approvals. Other than the filing provided for by Section
1.2, all authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
Governmental Entity required in connection with the consummation of the
Merger, the failure to obtain which has a Material Adverse Effect on PCN
and its Subsidiaries, taken as a whole (assuming the Merger had taken
place), shall have been filed, occurred or been obtained. PCN shall have
received all state securities laws or "blue sky" permits and authorizations
necessary to issue PCN Stock pursuant to the Merger.
(c) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(d) No Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction prohibiting the consummation of the Merger shall be in effect;
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provided, however, that prior to invoking this condition, each party shall
use all reasonable efforts to have any such decree, ruling, injunction or
order vacated, except as otherwise contemplated by this Agreement.
(e) Violation of Law. No statue, rule or regulation shall have been
adopted which will result in the consummation of the Merger violating any
applicable law.
Section 6.2 Additional Conditions to Obligations of PCN and Merger Sub. The
obligations of PCN and Merger Sub to effect the Merger are also subject to the
following conditions (any one or more of which may be waived by PCN, but only in
a writing signed by PCN):
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement or in any document or
instrument delivered by the Company in connection herewith, shall be true
and correct, individually and in the aggregate, in all material respects
(except that any specific representation or warranty that is qualified as
to materiality must be true as written) on and as of the Closing Date,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Closing Date, except that any such
representations or warranties made as of a specified date shall have been
true on and as of such date.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all of its agreements and covenants
contained in this Agreement to be performed or complied with by it at or
prior to the Closing Date (except that any specific agreement or covenant
that is qualified as to materiality must have been performed as written).
(c) No Material Adverse Change. There shall have been no change in the
business, results of operations, properties (including intangible
properties), financial condition, assets or liabilities of the Company
since the date of this Agreement which, individually or in the aggregate,
has a Material Adverse Effect.
(d) Third Party Consents. The Company shall have obtained, and PCN
shall have received copies of, all of the approvals, waivers, consents and
releases of third parties listed on the Disclosure Schedule under the
caption "Required Consents and Related Approvals," none of which shall have
been withdrawn, revoked or modified as of the Closing Date.
(e) Appraisal Rights. Shareholders holding no more than 5% of any
class of the outstanding the Common Stock shall have demanded their
dissenters rights under the WBCA.
(f) Options. All In-the-Money Options shall have been exercised or
canceled.
(g) Opinion of Counsel. PCN shall have received an opinion of outside
counsel to the Company in form and substance reasonably satisfactory to
PCN.
(h) Compliance Certificate. The Company shall have delivered to PCN a
certificate, dated the Closing Date, signed by the President of the
Company, certifying as to the fulfillment of the conditions specified in
paragraphs (a), (b) and (c) of this Section 6.2.
(i) Proceedings. All corporate proceedings taken by the Company in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in all material respects
to PCN and PCN's counsel, and PCN and PCN's counsel shall have received all
such counterpart originals or certified or other copies of such documents
as they may reasonably request.
Section 6.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger are also subject to the following
conditions (any one or more of which may be waived by the Company, but only in a
writing signed by the Company):
(a) Representations and Warranties. Each of the representations and
warranties of PCN and Merger Sub contained in this Agreement or in any
document or instrument delivered by PCN or Merger Sub in connection
herewith, shall be true and correct, individually and in the aggregate, in
all material respects (except that any specific representation or warranty
that is qualified as to materiality must be true as written) on and as of
the Closing Date, except for changes contemplated by this Agreement, with
the same force and effect as if made on and as of the Closing, except that
any such representations or warranties made as of a specified date shall
have been true on and as of such date.
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(b) Agreements and Covenants. PCN and the Merger Sub shall have
performed or complied in all material respects with all of its agreements
and covenants contained in this Agreement to be performed or complied with
by it at or prior to the Closing Date (except that any specific agreement
or covenant that is qualified as to materiality must have been performed as
written).
(c) No Material Adverse Change. There shall have been no change in the
business, results of operations, properties (including intangible
properties), financial condition, assets or liabilities of PCN since the
date of this Agreement which has a Material Adverse Effect.
(d) Opinion of Counsel. The Company shall have received an opinion of
counsel to PCN in form and substance reasonably satisfactory to the
Company.
(e) Compliance Certificate. PCN shall have delivered to the Company a
certificate, dated the Closing Date, signed by the Chairman, President or
any Vice President of PCN, certifying as to the fulfillment of the
conditions specified in paragraphs (a), (b) and (c) of this Section 6.3.
(f) Proceedings. All corporate proceedings taken by PCN in connection
with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in all material respects to the
Company and the Company's counsel, and the Company and the Company's
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after adoption of this Agreement by the
shareholders of the Company:
(a) By mutual consent of the Board of Directors of PCN and the Board
of Directors of the Company; or
(b) By either PCN or the Company, if the Merger shall not have been
consummated by October 15, 1996 (the "Termination Date") (provided that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation hereunder
has been the cause of or resulted in the failure of the Merger to occur on
or before such date); or
(c) By either PCN or the Company if there has been a material breach
of any representation, warranty, covenant or agreement on the part of the
other party set forth in this Agreement, which breach has not been cured
within fifteen (15) Business Days following receipt by the breaching party
of notice specifying such breach in reasonable detail; or
(d) By either PCN or the Company if a court of competent jurisdiction
or governmental regulatory or administrative agency or commission having
proper jurisdiction and authority thereof shall have issued an order,
decree or ruling (which order, decree or ruling the parties hereto shall
use their best efforts to lift) prohibiting the transactions contemplated
by this Agreement and such order, decree or ruling shall have become final
and non-appealable; or
(e) By PCN or the Company if the Company Vote shall not have been
obtained by reason of the failure to obtain the required vote at a duly
held meeting of shareholders or at any adjournment thereof; or
(f) By PCN, if any Majority Holder breaches any of the material terms
of a Voting Agreement or if any Voting Agreement is not in full force and
effect and enforceable in all material respects against the Majority Holder
executing such agreement.
Section 7.2 Effect of Termination. (a) Except as otherwise set forth in
this Section 7.2, in the event of termination of this Agreement as provided in
Section 7.1, this Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of any party hereto.
(b) In the event of termination of this Agreement as pursuant to Section
7.1(b) or (c) due to (a "Termination Event"): (i) failure of the conditions set
forth in 6.2(b) or 6.3(b), as the case may be, to occur; or (ii) if any
representation or warranty of the Company or of PCN and Merger Sub, as the case
may be, was materially inaccurate at the time that such representation or
warranty was given, the non-terminating party shall pay to the terminating party
an amount equal to all damages, losses, costs, expenses and liabilities,
including, without limitation, reasonable fees
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and disbursements of counsel, financing commitment and financial advisory fees
(collectively, "Termination Losses"), incurred by the non-terminating party in
connection with the transaction contemplated in this Agreement and any and all
other damages, losses, costs, expenses and liabilities incurred by the
terminating party as a result of such Termination Event. In the event of the
termination of this Agreement by a party (the "Terminating Party") as a result
of a Termination Event, the foregoing shall not be deemed in any way limit or
relieve the Terminating Party of any liability to the terminating terminating
party hereto on account of a breach by the Terminating Party of any of its
representations, warranties, covenants or agreements contained herein.
(c) Except as provided in paragraph (b) of this Section 7.2, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
the Merger, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto
(in the case of PCN, Merger Sub or the Company, by action taken by or on behalf
of their respective Boards of Directors) at any time prior to the Effective
Time; provided, however, that, after adoption of this Agreement by the
shareholders of the Company, no amendment may be made which would under
applicable law require further approval by such shareholders unless such further
approval is duly obtained. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time,
PCN, Merger Sub or the Company may, by action taken or authorized by their
respective Boards of Directors, to the extent legally allowed: (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements. (a)
None of the representations, warranties, covenants or agreements contained in
this Agreement or in any certificate, instrument or agreement delivered in
connection herewith survive the Closing, except for Sections 1.4, 1.5, 1.6, 1.7,
1.8, 1.9, 1.10 and 1.11 hereof.
Section 8.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made upon receipt, if made or given by hand delivery, telecopier or facsimile
transmission, or upon receipt by registered or certified mail (postage prepaid,
return receipt requested) at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to PCN or Merger Sub:
Physician Computer Network, Inc.
1200 The American Road
Morris Plains, New Jersey 07950
Attention: President
(201) 490-3100 (telephone)
(201) 490-3103 (telecopy)
with copies to:
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Jonathan Klein, Esq.
212-626-0879 (Telephone)
212-626-0799 (Telecopier)
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(b) if to the Company:
Wismer-Martin, Inc.
N. 12828 Newport Highway
Mead, Washington 99021
Attention: President
(509) 466-0396 (Telephone)
(509) 467-4538 (Telecopier)
with copies to:
Paine, Hamblen, Coffin, Brooke & Miller
717 West Sprague Avenue, Suite 1200
Spokane, Washington 99204
Attention: Lawrence R. Small, Esq.
(509) 455-0396 (Telephone)
(509) 838-0007 (Telecopier)
Section 8.3 Interpretation; Certain Definitions. When a reference is made
in this agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". As used herein, the term "Material Adverse
Effect" means with respect to PCN or the Company, as the case may be, any effect
on the business of PCN or the Company, as the case may be, or any of its
Subsidiaries that is or that a reasonable person would believe will be
materially adverse to the business, results of operations, properties (including
intangible properties), financial condition, assets or liabilities of PCN or the
Company, as the case may be, and its Subsidiaries, taken as a whole. The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available.
Section 8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder. The parties
hereby acknowledge that no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of the other party pursuant to
the Merger until consummation thereof.
Section 8.6 Governing Law. This Agreement shall be governed by, and
interpreted under, the laws of the State of Washington applicable to contracts
made and to be performed therein without regard to conflicts of law principles.
The consummation and effectiveness of the Merger shall be governed by, and
construed in accordance with, the WBCA.
Section 8.7 No Remedy in Certain Circumstances. Each party agrees that,
should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action makes the Agreement impossible to
perform in which case this Agreement shall terminate pursuant to Article VII
hereof. Except as otherwise expressly contemplated by this Agreement, to the
extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent authority, such party shall incur no
liability or obligation unless such party did not in good faith seek to resist
or object to the imposition or entering of such order or judgment.
A-27
<PAGE>
Section 8.8 Publicity. The parties will consult with each other and will
mutually agree upon any press release or public announcement pertaining to the
Merger and shall not issue any such press release or make any such public
announcement prior to such consultation and agreement, except as may be required
by applicable law, in which case the party proposing to issue such press release
or make such public announcement shall use reasonable efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcement.
Section 8.9 Assignment. Except as expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 8.10 Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 8.11 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed on the date first above written.
PHYSICIAN COMPUTER NETWORK, INC.
By: /s/ HENRY GREEN
-----------------------------
Title: President
NORTHWEST ACQUISITION CORP.
By: /s/ HENRY GREEN
-----------------------------
Title: President
WISMER-MARTIN, INC.
By: /s/ RONALD HOLDEN
-----------------------------
Title: Chairman & CEO
A-28
<PAGE>
EXHIBIT I
ARTICLES OF MERGER
Pursuant to the provisions of RCW 23B.11.050, Wismer-Martin, Inc., a
Washington corporation (Wismer-Martin"), hereby executes these Articles of
Merger by the terms of which Northwest Acquisition Corp., a Washington
corporation ("Northwest"), shall be merged with and into Wismer-Martin, and the
undersigned corporation further states as follows:
(1) Pursuant to and in accordance with the terms and provisions of an
Agreement and Plan of Merger dated June 20, 1996, between Physician
Computer Network, Inc., Wismer-Martin and Northwest (the "Merger
Agreement"), a copy of which is attached hereto as Exhibit A, (x)
Northwest shall be merged with and into Wismer-Martin, with
Wismer-Martin being designated as the surviving corporation and (y)
the articles of incorporation and by-laws of Northwest, copies of
which are attached hereto as Exhibits B and C, respectively, shall
become the articles of incorporation and by-laws of Wismer-Martin; and
(2) The Merger Agreement was duly approved by the shareholders of both
Wismer-Martin and Northwest pursuant to the provisions of RCW
23B.11.030.
IN WITNESS WHEREOF, Wismer-Martin, Inc., the surviving corporation has
caused these Articles of Merger to be executed by its duly authorized officer
this day of , 1996.
WISMER-MARTIN, INC.
By:
--------------------------------
John F. Perez
President
ATTEST:
- --------------------------------
Secretary
<PAGE>
STATE OF WASHINGTON
COUNTY OF SPOKANE } ss.
I certify that I know or have satisfactory evidence that John F. Perez is
the person who appeared before me, and said person acknowledged that he signed
this instrument, on oath stated that he authorized to execute the instrument and
acknowledged it as the President of WISMER-MARTIN, INC., to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument.
Dated: _____________________
------------------------------------------
Print Name: _____________________________
Notary Public in and for the State of
Washington, residing at Spokane
My commission expires: __________________
I-2
<PAGE>
ANNEX B
CHAPTER 23B.13 OF THE WASHINGTON BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
23B.13.010 DEFINITIONS.--As used in this chapter:
(A) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(B) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(C) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(D) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(E) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(F) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(G) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020 RIGHT TO DISSENT.
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the corporation
is a subsidiary that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired,
if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed
to the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
B-1
<PAGE>
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside
the corporate action; or
(c) The shareholder's demand for payment is withdrawn with the
written consent of the corporation.
23B.13.030 DISSENT OF NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter's other shares were registered in the names
of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
23B.13.200 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW
23B.13.020 is taken without a vote of shareholders, the corporation, within ten
days after [the] effective date of such corporate action, shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must (a) deliver to the corporation before
the vote is taken written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is effected, and (b) not
vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1) of this section is not entitled to payment for the shareholder's shares
under this chapter.
23B.13.220 DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
B-2
<PAGE>
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered;
and
(e) Be accompanied by a copy of this chapter.
23B.13.230 DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in RCW 23B.13.220
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to RCW 23B.13.220(2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (1) of this section retains all other rights
of a shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter.
23B.13.240 SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is effected or the restriction is released under RCW
23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250 PAYMENT.
(1) Except as provided in RCW 23B.13.270, within thirty days of the
later of the effective date of the proposed corporate action, or the date the
payment demand is received, the corporation shall pay each dissenter who
complied with RCW 23B.13.230 the amount the corporation estimates to be the fair
value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
(b) An explanation of how the corporation estimated the fair value
of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
RCW 23B.13.280; and
(b) A copy of this chapter.
23B.13.260 FAILURE TO TAKE ACTION.
(1) If the corporation does not effect the proposed action within sixty
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release any transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure.
B-3
<PAGE>
23B.13.270 AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by RCW
23B.13.250 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated that fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280.
23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and amount
of interest due, and demand payment of the dissenter's estimate, less any
payment under RCW 23B.13.250, or reject the corporation's offer under RCW
23B.13.270 and demand payment of the dissenter's estimate of the fair value of
the dissenter's shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250
or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250
within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
23B.13.300 COURT ACTION.
(1) If a demand for payment under RCW 23B.13.280 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the superior court
of the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled, parties to the proceeding as in
an action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
B-4
<PAGE>
(6) Each dissenter made a party to the proceeding is entitled to
judgment (a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or (b) for the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation elected to withhold
payment under RCW 23B.13.270.
23B.13.310 COURT COSTS AND COUNSEL FEES.
(1) The court in a proceeding commenced under RCW 23B.13.300 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess the costs against all
or some of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by Chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
B-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article SIXTH of the Company's Amended and Restated Certificate of
Incorporation and Article VIII of the Company's Restated By-Laws provide that
the Company shall, to the fullest extent permitted by Section 14A:3-5 of the New
Jersey Business Corporation Act, as the same may be amended and supplemented,
indemnify any and all corporate agents whom it shall have the power to indemnify
under said section from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section, and the indemnification
provided for therein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any by-law, agreement, vote of
shareholders, or otherwise, and shall continue as to a person who has ceased to
be a corporate agent and shall inure to the benefit of the heirs, executors,
administrators, and personal representatives of such corporate agent. The term
"corporate agent" as used therein shall have the meaning attributed to it by
Sections 14A:3-5 and 14A:5-21 of the New Jersey Business Corporation Act and by
another applicable provision of law.
Article SIXTH of the Company's Amended and Restated Certificate of
Incorporation also provides that the personal liability of the directors of the
Company is eliminated to the fullest extent permitted by subsection 14A:2-7 of
the New Jersey Business Corporation Act, as the same may be amended and
supplemented. The Company presently maintains directors' and officers' liability
insurance coverage with an aggregate policy limit of $1,000,000 for each policy
year.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit No. Description of Exhibit
-------- ---------------
2.1 Agreement and Plan of Merger, dated June 20, 1996, by and
among the Registrant, Northwest Acquisition Corp. and
Wismer-Martin, Inc. (attached as Annex A to the Proxy
Statement and Prospectus and incorporated herein by reference;
the Registrant agrees to furnish supplementally to the
Commission upon request a copy of any omitted exhibit or
schedule).
5.1 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.
8.1 Opinion of Paine, Hamblen,Coffin, Brooke & Miller with respect
to tax matters.
23.1 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein
(included in Exhibit 5.1).
23.2 Consent of Paine, Hamblen, Coffin, Brooke & Miller
(included in Exhibit 8.1).
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of BDO Seidman, LLP.
24.1 Power of Attorney (included on signature page to the
Registration Statement).
99.1 Wismer-Martin, Inc. Form of Proxy.
(b) and (c) Not applicable.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information
II-1
<PAGE>
called for by the applicable registration form with respect to reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(3) That, every prospectus (i) that is filed pursuant to the paragraph
(2) immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on August 9, 1996.
PHYSICIAN COMPUTER NETWORK, INC.
By: /s/ JOHN F. MORTELL
--------------------------------------
John F. Mortell
Executive Vice President and
Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Henry Green, John F. Mortell and Thomas F.
Wraback, and each and any one of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Jeffry M. Picower Chairman of the Board August 9, 1996
-----------------------------------
Jeffry M. Picower
/s/ Henry Green President, Chief Executive August 9, 1996
----------------------------------- Officer and Director
Henry Green (Principal Executive Officer)
/s/ John F. Mortell Executive Vice President and August 9, 1996
----------------------------------- Chief Operating Officer
John F. Mortell (Principal Financial Officer)
/s/ Thomas F. Wraback Vice President-- Finance August 9, 1996
----------------------------------- (Principal Accounting Officer)
Thomas F. Wraback
/s/ Jerry Brager Director August 9, 1996
-----------------------------------
Jerry Brager
/s/ Frederick Frank Director August 9, 1996
-----------------------------------
Frederick Frank
/s/ Frederic Greenberg Director August 9, 1996
-----------------------------------
Frederic Greenberg
/s/ Richard B. Kelsky Director August 9, 1996
-----------------------------------
Richard B. Kelsky
</TABLE>
II-3
<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------
Physician Computer Network, Inc.
(Exact name of registrant as specified in its charter)
===============================================================================
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
---------- ----------------------
2.1 Agreement and Plan of Merger, dated June 20, 1996, by and
among the Registrant, Northwest Acquisition Corp. and
Wismer-Martin, Inc. (attached as Annex A to the Proxy
Statement and Prospectus and incorporated herein by
reference; the Registrant agrees to furnish supplementally
to the Commission upon request a copy of any omitted exhibit
or schedule).
5.1 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.
8.1 Opinion of Paine, Hamblen, Coffin, Brooke & Miller with
respect to tax matters.
23.1 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein
(included in Exhibit 5.1).
23.2 Consent of Paine, Hamblen, Coffin, Brooke & Miller
(included in Exhibit 8.1).
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of BDO Seidman, LLP.
24.1 Power of Attorney (included on signature page to the
Registration Statement).
99.1 Wismer-Martin, Inc. Form of Proxy.
LETTERHEAD OF GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
August 7, 1996
Physician Computer Network, Inc.
1200 The American Road
Morris Plains, New Jersey 07950
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Physician Computer Network, Inc., a New Jersey
corporation (the "Company" or "PCN"), in connection with the merger (the
"Merger") of Northwest Acquisition Corp., a Washington corporation ("Merger
Sub"), which is a wholly- owned subsidiary of the Company, with and into
Wismer-Martin, Inc., a Washington corporation ("Wismer-Martin"), pursuant to an
Agreement and Plan of Merger, dated as of June 20, 1996, by and among the
Company, Merger Sub and Wismer-Martin (the "Merger Agreement") and the Company's
Registration Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Act"), relating to the registration of up to 1,450,000 shares of PCN
Common Stock, par value $.01 ("the "Merger Stock"), to be issued pursuant to the
Merger Agreement (such Registration Statement, including all exhibits thereto,
in the form declared effective by the Securities and Exchange Commission, the
"Registration Statement"). Capitalized terms not otherwise defined herein are
defined as set forth in the Merger Agreement.
In connection with this opinion, we have examined the following records,
documents, instruments and certificates:
(i) the Amended and Restated Certificate of Incorporation of the Company,
as currently in effect;
(ii) the By-Laws of the Company;
(iii) the Merger Agreement; and
(iv) such other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. As to any facts material to this opinion which we did
not independently establish or verify, we have relied
<PAGE>
Physicial Computer Network, Inc.
August 7, 1996
Page 2
upon statements and representations of officers and other representations of the
Company and others.
Based upon and subject to the foregoing, and further subject to the
assumptions and qualifications set forth below, it is our opinion that when (i)
the Registration Statement has become effective under the Act and (ii) the
Merger Stock has been issued in accordance with the terms of the Merger
Agreement, as it may be amended form time to time, the Merger Stock will be
validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and are not licensed or
admitted to practice law in any other jurisdiction, and we express no opinion
with respect to the laws of any other jurisdiction other than New York, the New
Jersey Business Corporation Act and the Federal law of the United States of
America.
We are furnishing this opinion to you solely in connection with the
Registration Statement. This opinion is solely for your benefit and is not to be
used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person without our express written permission. This
opinion is based and relies on the current status of the law, and is subject in
all respects to, and may be limited by, further rules, regulations and
legislation, as well as developing case law. We do not undertake to notify any
person of changes in facts or law occurring or coming to our attention after the
delivery of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Opinion" in the prospectus forming part of the Registration Statement. In giving
this consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
LETTERHEAD OF PAINE, HAMBLEN, COFFIN, BROOKE & MILLER
August 7, 1996
Wismer-Martin, Inc.
12828 N. Newport Highway
Mead, Washington 99021
RE: Certain Federal Income Tax Consequences as a Result of
the Merger of Northwest Acquisition Corp., a wholly-owned
subsidiary of Physician Computer Network, Inc., into
Wismer-Martin, Inc.
Ladies and Gentlemen:
We have acted as counsel to Wismer-Martin, Inc., a Washington corporation
("Wismer-Martin"), in connection with the proposed merger (the "Merger") of
Northwest Acquisition Corp., a Washington corporation ("Merger Sub"), with and
into Wismer-Martin pursuant to the terms of the Agreement and Plan of Merger
dated June 20, 1996 (the "Merger Agreement") among Wismer-Martin, Merger Sub and
Physician Computer Network, Inc., a New Jersey corporation ("PCN"). We
understand that Merger Sub is a wholly-owned subsidiary of PCN which has been
recently organized for the sole purpose of effecting the Merger. Capitalized
terms used herein but not otherwise defined herein shall have the meanings
assigned to such terms in the Merger Agreement.
Pursuant to the terms of the Merger Agreement, Merger Sub will be merged
under the Washington Business Corporation Act ("WBCA") with and into
Wismer-Martin, with Wismer-Martin being the surviving corporation, and each
share of Common Stock of Wismer-Martin ("Wismer-Martin Common Stock"), $.001 par
value per share, outstanding at the Effective Time of the Merger (except those
held
<PAGE>
Wismer-Martin, Inc
Page - 2
by Wismer-Martin shareholders who validly perfect dissenters' rights under the
WBCA) will be converted into the right to receive, unless PCN exercises the All
Cash Option referred to below, (i) such number of shares of Common Stock of PCN
("PCN Common Stock"), $.01 par value per share, as determined in accordance with
the terms of the Merger Agreement (the "Stock Consideration") (but with a cash
payment, in lieu of any fractional share interest of PCN Common Stock that would
otherwise have been received, as determined in accordance with the terms of the
Merger Agreement) and/or (ii) such amount in cash as determined in accordance
with the terms of the Merger Agreement (the "Cash Consideration"). Under the
terms of the Merger Agreement, however, PCN also has an All Cash Option pursuant
to which, in certain circumstances and at PCN's option, the consideration to be
received by the holders of Wismer-Martin Common Stock will be, in lieu of the
Stock Consideration and Cash Consideration referred to above, such amount
entirely in cash as determined in accordance with the terms of the Merger
Agreement. Pursuant to the terms of the Merger Agreement, each share of capital
stock of Merger Sub outstanding at the Effective Time of the Merger will be
converted into one share of Common Stock of the surviving corporation, par value
$.001 per share.
The terms of the Merger are more fully described in the Registration
Statement on Form S-4 (the "Registration Statement") of PCN (containing the
Proxy Statement and Prospectus of PCN and Wismer-Martin) relating to the Merger
which is being filed with the Securities and Exchange Commission on or about the
date hereof.
In rendering this opinion, we have reviewed the following:
(a) the Merger Agreement;
(b) the Registration Statement;
(c) Wismer-Martin's Articles of Incorporation;
(d) Wismer-Martin's Bylaws;
(e) the representation letters of (i) Wismer-Martin and Ronald L. Holden
("Holden") and (ii) Merger Sub and PCN; and
(f) such other documents and information as we have deemed necessary for
purposes of rendering this opinion.
In rendering this opinion, we have assumed the following:
(i) the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to authentic originals of all
documents submitted to us as copies;
<PAGE>
Wismer-Martin, Inc
Page - 3
(ii) the requisite corporate power and authority of each party thereto to
execute, deliver and perform the Merger Agreement and to consummate the
transactions contemplated thereby;
(iii) the due authorization, execution and delivery of the Merger Agreement
by each party thereto and the due authorization by each party thereto of the
transactions contemplated thereby;
(iv) the Merger Agreement constitutes the legal, valid and binding
obligation of, and is enforceable in accordance with its terms against, each
party thereto; and
(v) the Merger is effected in accordance with the terms of the Merger
Agreement.
In addition, we have relied, as to certain matters material to the opinions
set forth below, solely upon (a) representations of Wismer-Martin, Holden,
Merger Sub and PCN contained in the representation letters referred to above;
(b) representations and warranties of Wismer-Martin, Merger Sub and PCN
contained in the Merger Agreement; and (c) the information contained in the
Registration Statement. We have assumed that such representations,
representations and warranties, and information are true, correct, and complete;
and we have not made any independent review, investigation or verification
thereof.
Moreover, the opinions set forth below are further specifically limited to
the following circumstances (the "Limited Circumstances"):
(i) the All Cash Option is not exercised; and
(ii)(a) the number of shares of Wismer-Martin Common Stock for which
dissenters' rights are exercised, in the aggregate, do not exceed 2.5% of the
Wismer-Martin Common Stock outstanding at the Effective Time of the Merger and
(b) the amount per share received by Wismer-Martin shareholders exercising their
dissenters' rights does not exceed the value of the consideration that they
would otherwise receive pursuant to the terms of the Merger Agreement.
Based upon and subject to the foregoing qualifications (including without
limitation the Limited Circumstances) and the additional qualifications set
forth hereinafter, we are of the opinion that:
1. The Merger will constitute a reorganization for federal income tax
purposes as defined in Section 368(a) (specifically subsections (1)(A) and
(2)(E) thereof) of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
Wismer-Martin, Inc
Page - 4
2. Wismer-Martin, Merger Sub and PCN will each be a party to the
reorganization as defined by Section 368(b) of the Code.
3. The following federal income tax consequences will result from the
Merger:
a. None of Wismer-Martin, Merger Sub or PCN will recognize any gain or
loss as a result of the Merger;
b. Except for any Cash Consideration received and cash received in
lieu of fractional share interests, a holder of shares of Wismer-Martin Common
Stock who exchanges such shares for shares of PCN Common Stock will not
recognize any gain or loss upon such exchange;
c. A holder who receives Cash Consideration in the Merger will
recognize gain equal to the lesser of (x) the excess (if any) of (1) the Market
Price of the PCN Common Stock plus the amount of Cash Consideration received by
such holder in the Merger, over (2) such holder's tax basis in the shares of the
Wismer-Martin Common Stock tendered therefor, and (y) the amount of Cash
Consideration received by the holder in the Merger. Such gain will be long-term
capital gain provided that the holder has held the Wismer-Martin Common Stock as
a capital asset as of the Effective Time and for more than one year. No loss
shall be recognized by any holder as a result of such receipt of Cash
Consideration in the Merger;
d. The aggregate adjusted tax basis of the shares of PCN Common Stock
received in such exchange will be equal to a holder's aggregate adjusted tax
basis in the shares of Wismer- Martin Common Stock surrendered therefor (i)
decreased by the amount of Cash Consideration received by such holder in the
Merger and (ii) increased by the amount of gain recognized by such holder in the
Merger;
e. If the shares of Wismer-Martin Common Stock were held as a capital
asset at the Effective Time, the holding period of the shares of PCN Common
Stock received in the Merger will include the holding period of the shares of
Wismer-Martin Common Stock exchanged therefor; and
f. A holder of shares of Wismer-Martin Common Stock who receives cash
in the Merger in lieu of a fractional share interest of PCN Common Stock will be
treated as if such fractional share interest of PCN Common Stock was distributed
to such holder and then redeemed by PCN for cash. The deemed redemption will be
treated as a distribution in full payment in exchange for the fractional share
interest of the PCN Common Stock deemed received by the holder under Section
302(a) of the Code. Accordingly, such
<PAGE>
Wismer-Martin, Inc
Page - 5
holder will recognize a gain or loss equal to the difference between the amount
of cash received and the portion of such holder's adjusted tax basis in the
shares of Wismer-Martin Common Stock allocable to the fractional share interest
of PCN Common Stock. The gain or loss will be long-term capital gain or loss
provided that the shares of Wismer-Martin Common Stock deemed surrendered for
such fractional share interest of PCN Common Stock were held as a capital asset
at the Effective Time and for more than one year.
This opinion letter is limited to the opinions specifically expressed
herein, and no additional opinions are to be implied or inferred. Without
limiting the generality of the foregoing, (i) the opinions expressed herein are
limited to the federal income tax matters with respect to the parties
specifically set forth above, and we express no opinion as to any other federal
income tax matters, as to any other parties, or as to any State, local, foreign
or other tax law matters, and (ii) the opinions expressed herein are
specifically based upon, and/or specifically limited by or to, (a) the
assumptions set forth herein, (b) the representations, representations and
warranties, and information upon which we have relied, (c) the Limited
Circumstances, and (d) the other qualifications set forth herein, and we express
no opinion as to any circumstances other than the ones referred to in (a)
through (d) immediately above.
In addition, the opinions set forth above do not address any federal income
tax matters applicable to the holders of Wismer-Martin Common Stock who
exercise their dissenters' rights, entitling them to receive cash for their
shares of Wismer-Martin Common Stock in lieu of the consideration that they
would otherwise receive pursuant to the terms of the Merger Agreement.
Moreover, the federal income tax matters set forth above are ones of
general applicability only and may not necessarily apply to, or cover all
possible relevant aspects of the federal income tax matters applicable to,
particular holders of Wismer-Martin Common Stock in light of their personal
circumstances, including without limitation their being in categories of
shareholders who may be subject to special rules (such as Wismer-Martin
shareholders who hold shares of Wismer-Martin Common Stock by virtue of being
current or former employees of Wismer-Martin and/or holders of Wismer-Martin
options, and dealers in securities).
The opinions set forth above are based upon current law as contained in the
Code, the regulations promulgated thereunder, the published administrative
interpretations thereof, and the published court decisions as of this date.
<PAGE>
Wismer-Martin, Inc
Page - 6
The Internal Revenue Service has not promulgated regulations or published
administrative interpretations with respect to various provisions of the Code
relating to reorganizations. None of Wismer-Martin, Merger Sub or PCN have
requested a ruling from the Internal Revenue Service in connection with the
Merger. This opinion letter is neither binding upon the Internal Revenue Service
nor would it preclude the Internal Revenue Service from adopting a contrary
position. There is no assurance that the Internal Revenue Service will not
successfully contest some or all of the conclusions contained in the opinions
set forth above.
This opinion letter is given as of the date hereof and imposes no
obligation upon us to update this opinion letter. We specifically disclaim any
undertaking or obligation to advise the addressees hereof or any other person of
any facts or circumstances that may hereafter be brought to our attention or any
change in laws that may hereafter occur which may alter or affect the opinions
set forth above. We note, however, that the Merger Agreement contemplates that,
as a condition to the consummation of the Merger, we render an additional
opinion letter as of the Effective Time of the Merger to the same effect as this
opinion letter. Our ability to render such an additional opinion letter assumes,
among other things, that (i) no legislative, judicial or administrative changes
or interpretations occur prior to the Effective Time that would affect our
ability to render such additional opinion letter at that time and (ii) we
receive from Wismer-Martin and Holden and from Merger Sub and PCN representation
letters as of the Effective Time to the same effect as their representation
letters delivered in connection with this opinion letter.
This opinion letter is for the information of Wismer-Martin and the
shareholders of Wismer-Martin solely in connection with the Merger. This opinion
letter may not be (a) relied upon by such addressees for any other purpose, (b)
relied upon by any other person, or (c) filed with any governmental authority or
agency or otherwise divulged or delivered to any other person without our prior
express written consent. Notwithstanding the foregoing, we hereby consent to the
filing of this opinion letter as an Exhibit to the Registration Statement and to
the references to our firm in the section of the Registration Statement entitled
"Certain Federal Income Tax Consequences of the Merger". In giving this consent,
we do not admit that we are in the category of persons whose consent is required
by Section 7 of the Securities Act of 1933, as amended, or the regulations
promulgated thereunder.
Very truly yours,
PAINE, HAMBLEN, COFFIN, BROOKE
& MILLER LLP
By: /s/ Lawrence R. Small
EXHIBIT 23.3
Independent Accountants' Consent
The Board of Directors
Physician Computer Network, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the proxy and prospectus.
KPMG Peat Marwick LLP
Short Hills, New Jersey
August 8, 1996
EXHIBIT 23.4
Independent Accountants' Consent
The Board of Directors
Physician Computer Network, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-4 of Physician Computer Network, Inc. of our report dated July 19, 1996,
relating to the balance sheet comprised of certain assets and liabilities of the
medical and commercial divisions of CUSA Technologies, Inc. as of March 31, 1996
and the related statements of operations and cash flows for the nine- month
period then ended which report appears on Form 8-K/A of Physician Computer
Network, Inc. dated August 7, 1996 (July 2, 1996) .
We also consent to the reference to our firm under the heading "Experts" in the
proxy and prospectus.
KPMG Peat Marwick LLP
Salt Lake City, Utah
August 8, 1996
EXHIBIT 23.5
Consent of Independent Certified Public Accountants
Wismer*Martin, Inc.
Mead, Washington
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated September 26, 1995, relating to the
consolidated financial statements of Wismer*Martin, Inc. which is incorporated
by reference in that Prospectus.
We also consent to the reference to us under the captions "Selected Consolidated
Financial Information" and "Experts" incorporated by reference in the
Prospectus.
BDO Seidman LLP
Spokane, Washington
August 8, 1996
WISMER-MARTIN, INC.
12828 N. Newport Highway Mead, Washington 99021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF WISMER-MARTIN, INC.
The undersigned hereby appoints Ronald Holden and John Perez, and each of them,
with full power of substitution, as Proxies and hereby authorizes them to
represent and vote as designated below all of the shares of common stock, par
value $.001 per share, of Wismer-Martin, Inc., a Washington corporation
("Wismer-Martin"), which the undersigned is entitled to vote at the Special
Meeting (the "Special Meeting") of the shareholders of Wismer-Martin, to be held
at the executive offices of Wismer-Martin, 12828 N. Newport Highway, Mead,
Washington 99021, on September 9, 1996, at 9:00 a.m., local time, and at any
adjournments or postponements thereof, with the same force and effect as the
undersigned could do if personally present thereat:
1. Proposal to approve a Plan of Merger pursuant to an Agreement and Plan of
Merger, dated June 20, 1996 (the "Merger Agreement"), by and among Physician
Computer Network, Inc., a New Jersey corporation ("PCN"), Northwest Acquisition
Corp.,a wholly-owned subsidiary of PCN ("Merger Sub") and Wismer-Martin,
pursuant to which: (a) Merger Sub will merge with and into Wismer- Martin and
Wismer-Martin will be the surviving corporation and become a wholly-owned
subsidiary of PCN (the "Merger") and (b) each share of Wismer-Martin Common
Stock, par value $.001 per share ("Wismer- Martin Common Stock"), issued and
outstanding immediately prior to the effective time of the Merger shall be
converted into the right to receive a specified amount of cash and a specified
number of shares of PCN's Common Stock, par value $.01 per share, as more fully
described in the accompanying Proxy Statement and Prospectus.
|_| For |_| Against |_| Abstain
Continued on Other Side
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjournments or
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THE PROXIES SHALL VOTE FOR THE
PROPOSAL TO APPROVE THE PLAN OF MERGER.
PLEASE FILL IN DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Shareholder's signature should agree with name appearing on mailing label. When
signing as joint tenants, all parties to the joint tenancy shall sign. When
signing the proxy as attorney-in-fact, personal representative, trustee,
guardian, corporate officer, or other authorized representative, please indicate
capacity in which you are signing.
________________________________________________________________________________
Signature (Date)
________________________________________________________________________________
Signature (Date)
