<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997
REGISTRATION NO. 333-18923
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INFOCURE CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 58-2271614
(State or other jurisdiction of (Primary SIC Code) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
2970 CLAIRMONT ROAD, SUITE 950
ATLANTA, GEORGIA 30329
(404) 633-0046
(Address and telephone number of principal executive offices)
---------------------
FREDERICK L. FINE
CHIEF EXECUTIVE OFFICER
INFOCURE CORPORATION
2970 CLAIRMONT ROAD, SUITE 950
ATLANTA, GEORGIA 30329
(404) 633-0046
(Name, address and telephone number of agent for service)
---------------------
Copies to:
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<S> <C>
UGO F. IPPOLITO, ESQ. STEPHEN H. KAY, ESQ.
GLASS, MCCULLOUGH, SHERRILL & HARROLD, LLP SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP
1409 PEACHTREE STREET, N.E. 551 FIFTH AVENUE
ATLANTA, GEORGIA 30309 NEW YORK, NEW YORK 10176
(404) 885-6705 (212) 661-6500
</TABLE>
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
---------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY , 1997
2,000,000 SHARES
[LOGO]
INFOCURE CORPORATION
COMMON STOCK
All of the 2,000,000 shares of Common Stock offered hereby are being sold
by InfoCure Corporation (the "Company").
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently anticipated that the initial offering
price will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial offering
price. The Company has applied for quotation on the Nasdaq Stock Market's
National Market under the symbol "ICUR."
Concurrently with the offering made pursuant to this Prospectus and as a
condition to the closing thereof, the Company will issue 3,680,626 shares of
Common Stock pursuant to a Registration Statement on Form S-4 to the
stockholders of the Founding Businesses (as hereinafter defined) being acquired
by the Company.
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, INCLUDING MATERIAL
CONTINGENCIES RELATING TO THE ACQUISITION OF THE FOUNDING BUSINESSES, SEE "RISK
FACTORS" COMMENCING ON PAGE 13 AND "DILUTION" COMMENCING ON PAGE 21.
---------------------
THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total (3)......................... $ $ $
=============================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933
(the "Securities Act"). See "Underwriting" for a description of the
foregoing and certain other arrangements between the Company and the
Underwriters.
(2) Before deducting offering expenses estimated to be approximately $
payable by the Company.
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to 300,000
additional shares of Common Stock solely to cover over-allotments, if any,
on the same terms and conditions as the shares offered hereby. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of such
shares will be made at the offices of Rodman & Renshaw, Inc., New York, New
York, on or about , 1997.
---------------------
RODMAN & RENSHAW, INC. CRUTTENDEN ROTH
INCORPORATED
The date of this Prospectus is , 1997
<PAGE> 3
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
This Prospectus includes tradenames, trademarks and registered trademarks
of companies other than the Company.
<PAGE> 4
PROSPECTUS SUMMARY
Prior to and as a condition to the consummation of the offering made by
this Prospectus (the "Offering"), InfoCure Corporation will acquire (the
"Acquisitions") six practice management systems businesses (the "Founding
Businesses"). Unless otherwise indicated, all references herein to "InfoCure"
shall mean InfoCure Corporation prior to the consummation of the Acquisitions,
and references herein to the "Company" shall mean InfoCure and the Founding
Businesses. The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
and notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, all share, per share and financial information set forth herein
assumes (i) the consummation of the Acquisitions, (ii) an initial public
offering price of $10.00 per share and (iii) no exercise of the Underwriters'
over-allotment option. "Equivalent Shares of Common Stock" means the number of
shares of Common Stock which are to be issued to the holders of common stock of
American Medcare Corporation ("AMC") upon the merger of AMC into InfoCure.
This Prospectus includes forward-looking statements, known and unknown
risks and uncertainties or other factors which may cause actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed under the heading "Risk Factors." In
addition to statements which explicitly describe such risks and uncertainties,
investors are urged to consider statements labeled with the terms "believes,"
"belief," "expects," "intends," "plans" or "anticipates" to be uncertain and
forward-looking.
THE COMPANY
The Company is a leading provider of practice management software products
and related services that address the growing needs of health care providers to
manage and communicate cost-effectively administrative, clinical and financial
data. The Company's practice management systems are used primarily by small to
mid-size medical practices, including multi-provider management services
organizations and independent physician alliances. Recently, the Company
developed and introduced an all-payor-based electronic data interchange ("EDI")
system to enable its customers to realize significant cost savings by replacing
paper-based transactions with electronic transaction processing. The Company has
an installed customer base of approximately 17,000 health care providers in a
broad range of specialties at over 6,000 client sites.
Health care costs totalled approximately $1.0 trillion in 1995, having
risen at a rate approximately twice that of inflation during the last decade.
The escalation of such expenditures has led to pressure to contain costs and
attempts to shift the financial risk of delivering health care from payors to
providers. Many providers now participate in complex reimbursement arrangements,
resulting in multiple transactions, information exchanges and other
communications with payors per patient visit. As a result of these trends,
health care providers increasingly need to reduce operating costs, improve cash
flow and manage their businesses more efficiently while responding to the
increased administrative burdens and informational demands placed upon them by
payors. The Company's practice management systems address the efficiencies and
cost savings demanded by health care providers.
The Company's existing customer base comprises primarily office-based
health care practices that range in size from single practitioners to up to
several hundred providers with an emphasis on small and mid-size (up to 25
providers) health care practices. Based on industry sources, 60% of the
physicians in the United States are organized into approximately 190,000
office-based health care practices. Nearly all of these practices are small to
mid-size; there are fewer than 1,000 office-based medical practices in the
United States with more than 25 providers. Small and mid-size medical practices
are significantly under-penetrated with regard to practice management software
and EDI transaction processing. For example, while it is estimated that the
majority of hospitals submit their claims electronically, among small and
mid-size medical practices only approximately 35% submit claims electronically.
The Company markets a broad range of software products and services
designed to automate office-based practices of varying sizes; therefore, the
Company believes that it is well-positioned to take advantage of the
3
<PAGE> 5
increased technology needs of the health care industry, particularly among
practices with fewer than 25 health care providers. As the supplier of the core
practice management system adopted by its customers, the Company has established
its technology at its customer sites, which, the Company believes, will yield
significant growth opportunities and competitive advantages. The Company's
primary growth strategies include (i) increasing its recurring transactional
revenue by expanding its customers' utilization of EDI services, (ii) acquiring
established practice management system companies and consolidating niche
specialities, (iii) leveraging its customer base by cross-selling its products
and services, (iv) expanding its national sales efforts, (v) continuing to
develop and provide sophisticated practice management systems and (vi)
capitalizing on synergistic opportunities resulting from the Acquisitions.
InfoCure has entered into agreements to acquire, prior to and as a
condition to the consummation of the Offering, the Founding Businesses. The
integration of these businesses will combine existing and proven products,
research and development, sales, marketing and support efforts. Following
consummation of the Acquisitions, the Founding Businesses will be consolidated
into three operating divisions according to technical platform, thereby allowing
the Company to market and service cost-effectively its practice management
systems to a wide range of health care providers.
InfoCure was incorporated in Delaware in November 1996. InfoCure will have
a January 31 year-end. InfoCure's executive offices are located at 2970
Clairmont Road, Suite 950, Atlanta, GA 30329, and its telephone number is
(404)633-0046.
THE OFFERING
Common Stock Offered by the Company..... 2,000,000 shares
Common Stock to be Outstanding after the
Offering................................ 5,680,626 shares (1)
Use of Proceeds......................... For payments due upon the
consummation of the Acquisitions,
repayment of certain assumed
indebtedness, working capital and
general corporate purposes
including future acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market
Symbol.................................. "ICUR"
- ---------------
(1) Excludes an aggregate of (i) 840,000 shares of Common Stock reserved for
future issuance under the Company's Stock Option Plan, (ii) 319,374
Equivalent Shares of Common Stock reserved for issuance pursuant to
outstanding stock options and a warrant to be assumed by the Company upon
the consummation of the Acquisitions, (iii) 200,000 shares of Common Stock
reserved for issuance pursuant to warrants issuable to the Representatives
of the Underwriters upon consummation of the Offering (iv) 26,944
Equivalent Shares of Common Stock reserved for issuance to the stockholders
of Millard-Wayne, Inc. upon it meeting certain specific revenue or
operating profit amounts for each of the fiscal years 1998 and 1999, (v)
64,000 Equivalent Shares of Common Stock reserved for issuance to the
stockholders of Rovak, Inc. upon it meeting certain specified net operating
profit levels for the 1998 fiscal year and (vi) 242,354 Equivalent Shares
of Common Stock to be assigned and transferred to AMC for cancellation not
later than 20 days prior to the consummation of the Offering, pursuant to a
written agreement dated November 19, 1996. See "Shares Eligible for Future
Sale," "Management--Stock Options" and "Underwriting."
4
<PAGE> 6
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
InfoCure will acquire the Founding Businesses prior to and as a condition
to the consummation of the Offering. For financial statement presentation
purposes, AMC, a holding company and parent of International Computer Solutions,
Inc. ("ICS") and Health Care Division, Inc. ("HCD"), has been identified as the
accounting acquiror. The following summary unaudited pro forma combined
financial data present certain data for the Company as adjusted for (i) the
effects of the acquisition by AMC of the capital stock of Millard-Wayne, Inc.
("Millard-Wayne") prior to the consummation of the AMC Merger (as defined
herein) and the acquisition by HCD, a wholly-owned AMC subsidiary founded in
November 1996, of the assets of the Health Care Division of Info Systems of
North Carolina, Inc. ("Info Systems") on December 3, 1996 (the "HCD
Acquisition"), using the purchase method of accounting at their estimated fair
values, (ii) the effects of the merger of AMC with and into InfoCure (the "AMC
Merger"), (iii) the effects of the acquisitions by InfoCure of the capital stock
of KComp Management Systems, Inc. ("KComp"), DR Software, Inc. ("DR Software")
and Rovak, Inc. ("Rovak") using the purchase method of accounting at their
estimated fair values and (iv) the effects of certain pro forma adjustments to
the combined financial statements. KComp was founded in December 1995;
accordingly, results of KComp are included only for the nine months ended
October 31, 1996. See "The Company," "Management's Discussion and Analysis of
Pro Forma Combined Financial Condition and Pro Forma Combined Results of
Operations" and the Unaudited Pro Forma Combined Financial Statements and the
Notes thereto included elsewhere in this Prospectus.
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<CAPTION>
PRO FORMA
-------------------------------------
NINE MONTHS ENDED
YEAR ENDED OCTOBER 31,
JANUARY 31, -----------------------
1996 1995 1996
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<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA: (1)
Revenues:
Systems and software................................... $ 9,544 $ 6,656 $ 7,128
Maintenance and support................................ 6,236 4,948 6,327
Other.................................................. 762 562 665
------- ------- -------
Total revenues....................................... 16,542 12,166 14,120
Cost of revenues.......................................... 5,137 3,899 3,966
------- ------- -------
Gross profit.............................................. 11,405 8,267 10,154
Operating expenses:
Selling, general and administrative (2)(3)(4)(5)....... 8,387 6,089 7,630
Depreciation and amortization (6)...................... 1,322 992 1,008
------- ------- -------
Operating income.......................................... 1,696 1,186 1,516
Other expense (income):
Interest expense (7)................................... 77 82 69
Other.................................................. (121) (99) (30)
------- ------- -------
Income before taxes....................................... 1,740 1,203 1,477
Income tax (8)............................................ 842 596 695
------- ------- -------
Net income................................................ $ 898 $ 607 782
======= ======= =======
Pro forma net income per share............................ $ 0.17 $ 0.12 $ 0.15
Pro forma weighted average shares outstanding (9)......... 5,201 5,201 5,201
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1996
---------------------------------
PRO FORMA
PRO FORMA (10) AS ADJUSTED (10)
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<S> <C> <C>
SELECTED BALANCE SHEET DATA: (1)
Cash and cash equivalents................................. $ 840 $ 7,255
Working capital........................................... (2,180) 4,235
Total assets.............................................. 18,012 24,427
Short-term debt........................................... 657 657
Long-term debt, less current portion...................... 308 308
Total stockholders' equity................................ 12,009 18,460
</TABLE>
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(1) Assumes that the closing of the Acquisitions had occurred as of February 1,
1995, in the case of the pro forma statements of operations data, and as of
October 31, 1996, in the case of the unaudited selected pro forma balance
sheet data. The pro forma balance sheet data also give effect to the
issuance in
5
<PAGE> 7
November 1996 of 508,385 Equivalent Shares of Common Stock by AMC for
$750,000. The pro forma combined financial data are based upon preliminary
estimates, available information and certain assumptions that management
believes are appropriate. The unaudited selected pro forma combined
financial data presented herein are not necessarily indicative of the
results the Company would have obtained had such events occurred at the
beginning of the period or of the future results of the Company. The
unaudited selected pro forma combined financial data should be read in
conjunction with the other financial data and notes thereto included
elsewhere in this Prospectus.
(2) Includes pro forma adjustments to reflect (i) the elimination, as provided
in the respective acquisition agreements, of duplicative administrative
functions at the Company of approximately $1,773,000, $1,231,000 and
$1,330,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively, and (ii) the additional overhead
expenses at the Founding Businesses of approximately $452,000, $339,000 and
$339,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively. The Company considers that the
elimination of approximately $1,130,000 of these expenses, on an annualized
basis, was effected concurrent with HCD Acquisition on December 3, 1996.
(3) Includes pro forma adjustments to reflect the elimination of allocations
from Info Systems for (i) overhead of approximately $476,000, $324,000 and
$264,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively, and (ii) expense related to HCD's
participation in Info System's employee stock ownership plan of
approximately $159,000, $147,000 and $61,000 for the year ended January 31,
1996 and the nine months ended October 31, 1995 and 1996, respectively.
Upon the consummation of the HCD Acquisition on December 3, 1996, these
eliminations were effected.
(4) Includes pro forma adjustments to reflect the elimination of rent and other
expenses of approximately $352,000, $237,000 and $264,000, for the year
ended January 31, 1996 and the nine months ended October 31, 1995 and 1996,
respectively. Upon the consummation of the HCD Acquisition on December 3,
1996, the elimination of $117,000 of such expenses, on an annualized basis,
was effected.
(5) Includes pro forma adjustments to reflect the elimination of certain
commissions and royalties which are payable by Rovak under agreements that
will be terminated following the consummation of the Offering. Such
adjustments are approximately $125,000, $86,000 and $241,000 for the year
ended January 31, 1996 and the nine months ended October 31, 1995 and 1996,
respectively.
(6) Includes pro forma adjustments to reflect the amortization expense on the
goodwill recorded in connection with the Acquisitions of approximately
$768,000, $576,000 and $576,000 for the year ended January 31, 1996 and the
nine months ended October 31, 1995 and 1996, respectively. Also includes
pro forma adjustment to depreciation and amortization expense, after
adopting appropriate useful lives for related assets, of $300,000, $200,000
and $190,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively.
(7) Includes pro forma adjustments to reflect a reduction in interest expense
related to debt reduction, in connection with the Acquisitions and the
Offering, of $185,000, $95,000 and $188,000 for the year ended January 31,
1996 and the nine months ended October 31, 1995 and 1996, respectively.
(8) The pro forma provision for income taxes includes (i) the effects of the
non-deductible portion of goodwill for tax purposes and (ii) assumes that
the deferred tax asset represented by AMC's net operating loss
carryforwards of approximately $1,500,000 is recognized as of January 31,
1995.
(9) The pro forma weighted average shares outstanding includes (i) 4,954,369
shares to be issued in connection with the Acquisitions and the Offering
and (ii) 247,090 Common Stock equivalents issuable upon outstanding stock
options and a warrant.
(10) The selected pro forma combined balance sheet data reflects the adjustments
referenced above but excludes the effects of the receipt and application of
the net proceeds of the Offering. The pro forma combined balance sheet data
as adjusted reflects the changes that are expected to occur from the
proceeds of the Offering. See "Use of Proceeds" and "Capitalization".
6
<PAGE> 8
THE COMPANY
InfoCure was incorporated in November 1996 to develop, market and service
practice management systems for use by health care providers throughout the
United States. Prior to and as a condition to the consummation of the Offering,
InfoCure will acquire the six Founding Businesses, which will be consolidated
into three operating divisions according to technical platform: the Desktop
Division (DOS and Windows-based products), the Mid-Range Division (UNIX and
AIX-based products) and the Enterprise Division (IBM AS/400-based products).
All of the Founding Businesses provide practice management software
products to physicians and other professionals which are designed to automate
the administrative, financial, practice management and clinical requirements of
a professional's office practice. These systems range in capacity from one to
hundreds of users, allowing the Company to address the needs of both small and
large customers. The combination of the Founding Businesses will position the
Company as a national supplier of practice management products and services to
office-based health care providers. The Company believes that the combination of
the Founding Businesses will provide unique opportunities for (i) the
coordination of product research and development, sales and marketing, (ii) the
reduction of redundant expenses and operations and (iii) the maximization of the
experience of the assembled management team.
THE FOUNDING BUSINESSES
DR Software, Inc. ("DR Software")
DR Software was founded in 1983 and is headquartered in Atlanta, Georgia.
DR Software markets DOS and Windows-based practice management systems to small
(one to two providers) medical practices. DR Software currently has
approximately 2,200 clients serving an estimated 3,150 health care providers,
including approximately 25% of all podiatry practices in the United States. Upon
the consummation of the Acquisitions, DR Software will be organized into the
Company's Desktop Division. Donald M. Rogers, the founder of DR Software, will
become President of the Desktop Division.
Key technologies developed by DR Software include DR Dictation(TM), a
voice-activated medical records software product designed to give physicians and
other health care providers the power to dictate directly into the computer and
to create accurate medical reports in seconds. Additionally, Wisdom(TM), DR
Software's new Windows-based practice management software application, is
positioned to serve medical practices of a wide range of sizes and specialties,
and was created in a rapid development language applying relational database and
object-oriented technology. Wisdom(TM) incorporates a comprehensive suite of EDI
services that are fully integrated with the core practice management system, as
well as complying with open database connection ("ODBC") standards.
KComp Management Systems, Inc. ("KComp")
KComp was founded in December 1995 to acquire certain assets of a software
developer and is headquartered in Los Angeles, California. KComp markets DOS and
Windows-based practice management systems to small to mid-size (three to 25
providers) dental and oral surgery practices. KComp currently has approximately
725 clients serving an estimated 1,600 health care providers. Upon the
consummation of the Acquisitions, KComp will be organized into the Company's
Desktop Division. Key technologies of KComp include The Dental Wizard(TM), a
comprehensive Windows-based practice management software system designed to be
utilized by dental practices of all sizes and specialty concentrations.
International Computer Solutions, Inc. ("ICS")
ICS, which was founded in 1985 and acquired in 1993 by AMC, is
headquartered in Atlanta, Georgia. ICS markets DOS, Windows and UNIX-based
practice management systems to small to mid-size health care providers. ICS
currently has approximately 600 desktop clients serving an estimated 750 health
care providers and approximately 500 mid-range clients serving an estimated
1,800 health care providers. Upon the consummation of the Acquisitions, ICS's
DOS and Windows-based operations will be organized into the
7
<PAGE> 9
Company's Desktop Division and its UNIX operations will be organized into the
Company's Mid-Range Division. Key technologies of ICS include The Provider
Information Manager(TM), a Windows-based product which was created for use by
the professional business manager or managing physician to provide a "top down"
view of the practice, identifying financial, payor, patient, clinical, system
and EDI utilization, practice demographic and practice profitability trends.
Rovak, Inc. ("Rovak")
Rovak was founded in 1984 and is headquartered in Lake Elmo, Minnesota.
Rovak markets UNIX and AIX-based practice management software to mid-size
medical practices and clinics. Rovak's software products are targeted
specifically to meet the practice management needs of oral surgeons and
orthodontists. Rovak currently has approximately 1,000 clients serving an
estimated 1,800 health care providers. Upon the consummation of the
Acquisitions, Rovak will be organized into the Company's Mid-Range Division.
Brad Schraut, the President of Rovak, will become President of the Mid-Range
Division. Key technologies developed by Rovak include the Optical Mark
System(R), which uses optical scanning technologies to automate daily tasks and
eliminate data entry. Additionally, Rovak has developed its Digital Record
Keeping System(TM) which enable a practice to store and merge radiographic and
photographic images with correspondence and clinical medical records.
Millard-Wayne, Inc. ("Millard-Wayne")
Millard-Wayne, which was founded in 1977 and will be acquired by AMC
immediately prior to the consummation of the Offering, is headquartered in
Atlanta, Georgia. Millard-Wayne markets IBM AS/400-based enterprise-wide
practice management systems to mid-size to large (over 25 providers) medical
practices and clinics. Millard-Wayne currently has approximately 190 clients
serving an estimated 2,000 health care providers. Upon the consummation of the
Acquisitions, Millard-Wayne will be organized into the Company's Enterprise
Division. M. Wayne George, the founder of Millard-Wayne, will become President
of the Enterprise Division. Key technologies developed by Millard-Wayne include
a Graphical User Interface ("GUI") technology to work in conjunction with its
practice management system, which operates on the IBM AS/400.
Health Care Division, Inc. ("HCD")
HCD, which was founded in 1996 by AMC to acquire certain assets of Info
Systems, is headquartered in Charlotte, North Carolina. HCD markets IBM
AS/400-based practice management systems to mid-size to large medical practices
and clinics. HCD currently has approximately 200 clients serving an estimated
5,000 health care providers. Upon the consummation of the Acquisitions, HCD will
be organized into the Company's Enterprise Division. Key technologies developed
by HCD include a comprehensive managed care module designed for use in
conjunction with its practice management products which run on the IBM AS/400.
THE ACQUISITIONS
Prior to and as a condition to the consummation of the Offering (i) AMC, a
holding company and the parent company of ICS and HCD, will acquire
Millard-Wayne and immediately thereafter merge with and into InfoCure, with
InfoCure as the surviving corporation, and (ii) InfoCure will acquire all of the
outstanding capital stock of each of DR Software, KComp and Rovak. Upon the
consummation of the Acquisitions, each of the Founding Businesses will become a
wholly-owned subsidiary of InfoCure. See "Certain Transactions" and "Shares
Eligible for Future Sale."
The aggregate consideration to be paid by InfoCure to acquire the Founding
Businesses consists of approximately $9.3 million in cash, $2.5 million in
assumed indebtedness and 3,680,626 shares of Common
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Stock. The following table summarizes the consideration paid or payable upon the
consummation of the Acquisitions:
<TABLE>
<CAPTION>
ACQUISITION CONSIDERATION
-------------------------------------------
INDEBTEDNESS SHARES OF
FOUNDING BUSINESS CASH ASSUMED (1) COMMON STOCK
----------------- ------------ ------------ ------------
<S> <C> <C> <C>
AMC (2)(3)(4)(7)............................ $2,683,000 $1,074,900 3,594,115
Rovak (5)(7)................................ 2,983,000 1,039,055 --
KComp (6)................................... 1,533,000 299,785 --
DR Software................................. 2,128,500 99,389 86,511
---------- ---------- ---------
Total............................. $9,327,500 $2,513,129 3,680,626
========== ========== =========
</TABLE>
- ---------------
(1) Assumed indebtedness is as of October 31, 1996, prior to application of the
proceeds of the Offering. Excludes the assumption of current liabilities
except the current portion of the indebtedness.
(2) Includes ICS, HCD and Millard-Wayne. AMC recently formed HCD to consummate
the HCD Acquisition and will acquire Millard-Wayne immediately prior to the
consummation of the Offering.
(3) Includes (i) the aggregate consideration for the HCD Acquisition, which
consists of $150,000 cash already paid and a promissory note for $1,550,000
less an estimated post-closing adjustment of $117,000 and (ii) $1,100,000,
representing the cash portion of the purchase price of Millard-Wayne.
(4) Includes 26,944 Equivalent Shares of Common Stock to be issued upon the
consummation of the AMC Merger to stockholders of Millard-Wayne in
connection with AMC's acquisition of Millard-Wayne. Excludes an aggregate
of (i) 319,374 Equivalent Shares of Common Stock reserved for issuance upon
exercise of outstanding stock options and a warrant of AMC assumed by the
Company, (ii) 26,944 Equivalent Shares reserved for issuance if
Millard-Wayne meets certain specified revenue or operating profits for the
fiscal years 1998 and 1999, (iii) 64,000 shares of Common Stock reserved
for issuance if Rovak meets a certain specified level of net income for
fiscal 1998 and (iv) 242,354 Equivalent Shares of Common Stock to be
assigned and transferred to AMC for cancellation not later than 20 days
prior to the consummation of the Offering, pursuant to a written agreement
dated November 19, 1996.
(5) Includes reduction for an estimated post-closing adjustment of $7,000.
(6) Includes reduction for an estimated post-closing adjustment of $67,000.
(7) Excludes contingent consideration reserved for issuance to the stockholders
of Millard-Wayne and Rovak upon meeting certain future performance criteria
based on revenues and/or operating profits.
InfoCure has filed a registration statement on Form S-4 for the concurrent
offering of 3,680,626 shares of Common Stock to be issued to the stockholders of
certain of the Founding Businesses upon the consummation of the Acquisitions.
The following is a summary of the Acquisitions and is qualified in its
entirety by the terms of the definitive agreements with the Founding Businesses
or AMC, which are incorporated herein by reference.
AMC Acquisition. The merger agreement ("AMC Merger Agreement") between
InfoCure and AMC provides that AMC shall merge with and into InfoCure, with
InfoCure continuing as the surviving corporation ("AMC Merger"). The AMC Merger
will occur at the time the Offering becomes effective. Upon the consummation of
the AMC Merger, the holders of common stock of AMC will receive an aggregate of
3,594,115 shares of Common Stock of InfoCure, an estimated .06882 of a share of
Common Stock for each share of common stock of AMC owned of record (the
equivalent of one share of Common Stock for approximately 14.53 shares of common
stock of AMC). This exchange ratio ("Exchange Ratio") is subject to adjustment
depending upon the number of shares of common stock of AMC outstanding at the
time of the AMC Merger. Outstanding stock options and warrants to purchase
common stock of AMC which are not exercised prior to the AMC Merger will not be
terminated upon the AMC Merger and may be exercised after the AMC Merger for a
number of shares of Common Stock of InfoCure equal to the product of the
Exchange Ratio times the number of shares of common stock of AMC such holder
would have otherwise been entitled to purchase. At the time of the AMC Merger,
ICS, HCD and Millard-Wayne will be wholly-owned subsidiaries of AMC.
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<PAGE> 11
InfoCure and AMC make certain representations and warranties in the AMC
Merger Agreement as to, among other matters, their respective financial
positions, corporate existence, business and capital structure. The consummation
of the AMC Merger is subject to the fulfillment of various conditions at or
prior to the effective date of the AMC Merger including, among others, the
correctness of the representations and warranties and the absence of any
material and adverse change in the business of AMC.
InfoCure and AMC may, by written agreement, (i) extend the time for the
performance of any obligation or other act of the parties, (ii) waive any
inaccuracies in the representations or warranties contained in the AMC Merger
Agreement and (iii) waive compliance with or modify, amend or supplement any of
the covenants, agreements, representations or warranties contained in the merger
agreement or waive or modify performance of any of the obligations of any of the
parties to the AMC Merger Agreement.
The AMC Merger Agreement provides that it my be terminated prior to the
effective date of the AMC Merger, notwithstanding the approval of the holders of
a majority of outstanding shares of InfoCure and AMC, (i) by the mutual consent
of InfoCure and AMC, (ii) at any time after March 30, 1997 (or such later date
as the parties shall have agreed to in writing) by InfoCure if the conditions
precedent to its obligations have not been fulfilled or waived by it or (iii) at
any time after March 30, 1997 (or such later date as the parties shall have
agreed to in writing) by AMC if the conditions precedent to its obligations have
not been fulfilled or waived by it.
The AMC Merger has been approved by the boards of directors of AMC and
InfoCure. The membership of each board is identical. Under the Delaware General
Corporation Law, the written consent to the AMC Merger of the holders of a
majority of the outstanding shares of common stock of AMC and of InfoCure is
sufficient to approve the merger. AMC intends to obtain the written consents of
the holders of a majority of the outstanding shares of common stock of AMC
approving the AMC Merger. The directors and executive officers of AMC and
InfoCure and their affiliates and holders of 5% or more of the common stock of
AMC own 64.4% of the outstanding shares of common stock of AMC. All of such
stockholders of AMC have agreed to vote for the AMC Merger. All of the
outstanding shares of InfoCure are owned by its directors and officers and such
stockholders have also agreed to vote for the AMC Merger.
AMC conducts business solely through its subsidiaries ICS, HCD and, upon
its acquisition, Millard-Wayne. The current directors of AMC, Messrs. Fine and
Price, and executive officers of AMC, Messrs. Fine, Price, Warren and Chastain,
are also executive officers of InfoCure. Also, employment agreements have been
or will be entered into between AMC or InfoCure and certain of their respective
officers. See "Management."
For a description of transactions between AMC and any director, executive
officer and any holder of more than 5% of the common stock of AMC and their
affiliates, see "Certain Transactions."
DR Software Acquisition. The stock purchase agreement among the
stockholders of DR Software and InfoCure ("DR Stock Purchase Agreement")
provides that InfoCure will acquire all of the outstanding capital stock of DR
Software ("DR Software Acquisition") at the time the Offering becomes effective
for consideration consisting of (i) $2,128,500 payable in cash upon the closing
of the Offering and (ii) 86,511 shares of Common Stock. In addition, the DR
Stock Purchase Agreement provides for a reduction to the purchase price in the
event the net worth of DR Software at the time of the acquisition is less than a
negative $100,000. Shares of Common Stock and/or cash having a value equivalent
to 10% of the aggregate consideration payable will be held in escrow as a source
of recovery of damages to InfoCure in the event of breach of any warranty,
representation or covenant of the stockholders of DR Software or adjustment to
the purchase price. Donald M. Rogers, a stockholder of DR Software, has also
agreed not to compete with the business of DR Software for a period of five
years after the closing. See "Risk Factors -- Dependence on Key Personnel."
InfoCure and the stockholders of DR Software will make certain
representations and warranties in the DR Stock Purchase Agreement as to, among
other matters, the financial position, corporate existence, business and capital
structure of InfoCure or DR Software. The consummation of the sale/purchase of
the capital stock of DR Software by its stockholders and InfoCure is subject to
the fulfillment of various conditions at or prior to the effective date of the
Offering including, among others, the correctness of the
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<PAGE> 12
representations and warranties and the absence of any material, adverse change
in the business of DR Software.
InfoCure and the stockholders of DR Software may, by written agreement, (i)
extend the time period for the performance of any obligation or other act of the
parties pursuant to the DR Stock Purchase Agreement, (ii) waive any inaccuracies
in the representations and warranties contained in the DR Stock Purchase
Agreement and (iii) waive compliance with or modify, amend or suspend any of the
covenants, agreements, representations or warranties contained in the DR Stock
Purchase Agreement or waive or modify performance of any of the obligations of
any of the parties to the DR Stock Purchase Agreement.
The DR Stock Purchase Agreement provides that it may be terminated or
abandoned prior to the effective date of the Offering (i) by mutual consent of
InfoCure and the stockholders of DR Software, (ii) at any time after March 30,
1997 (or such later date as the parties shall have agreed to in writing) by
InfoCure if the conditions precedent to its obligations have not been fulfilled
or waived by it or (iii) at any time after March 30, 1997 (or such later date as
the parties shall have agreed to in writing) by the stockholders of DR Software
if the conditions precedent to their obligations have not been fulfilled or
waived by them. In event of termination, each party shall pay its own expenses
incurred in connection with the DR Stock Purchase Agreement.
Donald M. Rogers, a director, officer and principal stockholder of DR
Software, will become an officer of InfoCure. In addition, Mr. Rogers will enter
into an employment agreement with InfoCure upon the consummation of the
acquisition. See "Management."
Rovak Acquisition. The stock purchase agreement entered into among all of
the stockholders of Rovak and InfoCure ("Rovak Stock Purchase Agreement")
provides that InfoCure will acquire all of the outstanding capital stock of
Rovak at the time of the Offering in consideration of $2,990,000. The Rovak
Stock Purchase Agreement provides for an adjustment to the consideration in the
event the net worth of Rovak at the time of the acquisition is less than or more
than a negative $161,000. In addition, the purchase price is to be increased if
the net income before interest and taxes ("net income") of Rovak for the year
ending December 31, 1997 is more than $621,000. The maximum increase of $815,000
is applicable if such net income is $750,000 or more and is prorated if it is
less than $750,000 and more than $621,000. Cash consideration and shares of
Common Stock having an aggregate value of $815,000 are to be held in escrow as a
source of recovery of damages to InfoCure in the event of breach of any
warranty, representation or covenant of the stockholders of Rovak or to be
disbursed as an adjustment to the purchase price. Certain stockholders of Rovak
have also agreed not to compete with the business of Rovak for a period of five
years after the closing. See "Risk Factors -- Dependence on Key Personnel."
InfoCure and the stockholders of Rovak will make certain representations
and warranties in the stock purchase agreement as to, among other matters, the
financial position, corporate existence, business and capital structure of
InfoCure or Rovak. The consummation of the sale/purchase of the capital stock of
Rovak by its stockholders and InfoCure is subject to the fulfillment of various
conditions at or prior to the effective date of the Offering including, among
others, the correctness of the representations and warranties and the absence of
any material, adverse change in the business of Rovak.
InfoCure and the stockholders of Rovak may, by written agreement, (i)
extend the time period for the performance of any obligation or other act of the
parties pursuant to the Rovak Stock Purchase Agreement, (ii) waive any
inaccuracies in the representations and warranties contained in the Rovak Stock
Purchase Agreement and (iii) waive compliance with or modify, amend or suspend
any of the covenants, agreements, representations or warranties contained in the
Rovak Stock Purchase Agreement or waive or modify performance of any of the
obligations of any of the parties to the Rovak Stock Purchase Agreement.
The Rovak Stock Purchase Agreement provides that it may be terminated or
abandoned prior to the effective date of the Offering (i) by mutual consent of
InfoCure and the stockholders of Rovak (ii) at any time after March 30, 1997 (or
such later date as the parties shall have agreed to in writing) by InfoCure if
the conditions precedent to its obligations have not been fulfilled or waived by
it or (iii) at any time after March 30, 1997 (or such later date as the parties
shall have agreed to in writing) by the stockholders of Rovak if the conditions
precedent to their obligations have not been fulfilled or waived by them. In
event of
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<PAGE> 13
termination, each party shall pay its own expenses incurred in connection with
the Rovak Stock Purchase Agreement.
A two-year employment agreement is to be entered into by the Company and
Brad Schraut, a director, officer and principal stockholder of Rovak, Mr.
Schraut will become an officer of InfoCure upon the Rovak Acquisition. The
employment agreement will provide for an annual based salary of $110,000 and a
seven-year incentive stock option with an exercise price at the fair market
value of the Common Stock at the time the stock option is granted. Also, Mr.
Schraut will be eligible for a bonus based upon his performance. The number of
shares of Common Stock to be subject to the stock option and the terms of the
bonus have not been determined as of this date.
KComp Acquisition. The stock purchase agreement entered into among all of
the stockholders of KComp and InfoCure ("KComp Stock Purchase Agreement")
provides that InfoCure will acquire all of the outstanding capital stock of
KComp ("KComp Acquisition") at the time the Offering becomes effective for
consideration consisting of $1,600,000 payable in cash upon the closing of the
Offering. The KComp Stock Purchase Agreement provides for a reduction to the
consideration in the event the net worth of KComp at the time of the KComp
Acquisition is less than $242,703. In addition the purchase price is to be
increased, if the operating income for the 1998 fiscal year of KComp exceeds
$400,000, by an amount equal to 5.5 times the operating profits in excess of
$400,000. In no event will the additional consideration exceed $150,000. As a
source of recovery of damages to InfoCure in the event of breach of any
warranty, representation or covenant of the stockholders of KComp or adjustment
to the purchase price in favor of InfoCure, an escrow account will be
established in the amount of $80,000 and InfoCure will be granted a right of
offset against certain notes of KComp payable to its stockholders in the
principal amount of $250,000. In addition, InfoCure has granted to the holders
of certain notes of KComp and recipients of deferred bonuses from KComp a right
to purchase an aggregate of $450,000 in value of Common Stock at 120% of the
initial public offering price of the Common Stock of InfoCure. The right is
exercisable within 30 days of the final installment of such payments, which are
due no later than the second anniversary of the KComp Acquisition.
InfoCure and the stockholders of KComp will make certain representations
and warranties in the KComp Stock Purchase Agreement as to, among other matters,
the financial position, corporate existence, business and capital structure of
InfoCure or KComp. The consummation of the KComp Acquisition by its stockholders
and InfoCure is subject to the fulfillment of various conditions at or prior to
the effective date of the Offering including, among others, the correctness of
the representations and warranties and the absence of any material and adverse
change in the business of KComp.
InfoCure and the stockholders of KComp may, by written agreement, (i)
extend the time period for the performance of any obligation or other act of the
parties pursuant to the stock purchase agreement, (ii) waive any inaccuracies in
the representations and warranties contained in the stock purchase agreement and
(iii) waive compliance with or modify, amend or suspend any of the covenants,
agreements, representations or warranties contained in the KComp Stock Purchase
Agreement or waive or modify performance of any of the obligations of any of the
parties to the KComp Stock Purchase Agreement.
The KComp Stock Purchase Agreement provides that it may be terminated prior
to the effective date of the Offering (i) by mutual consent of InfoCure and the
stockholders of KComp, (ii) at any time after March 30, 1997 (or such later date
as the parties shall have agreed to in writing) by InfoCure if the conditions
precedent to its obligations have not been fulfilled or waived by it, or (iii)
at any time after March 30, 1997 (or such later date as the parties shall have
agreed to in writing) by the stockholders of KComp if the conditions precedent
to their obligations have not been fulfilled or waived by them. In event of
termination, each party shall pay its own expenses incurred in connection with
the KComp Stock Purchase Agreement.
A two-year employment agreement is to be entered into by the Company and
Marc Kloner, a principal stockholder of KComp, upon the consummation of the
KComp Acquisition. The employment agreement will provide for an annual based
salary of $110,000 and a bonus. The bonus will be an amount equal to a
percentage of the operating profits of KComp in excess of $400,000, adjusted for
any acquisition or disposition of any business. In addition, Mr. Kloner will
receive a fee of five percent of the operating profits of any business acquired
by KComp in which he participated for the first 12 months following the KComp
Acquisition.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk and immediate and substantial dilution. In evaluating an
investment in the Common Stock being offered hereby, investors should consider
carefully, among other matters, the following risk factors, as well as the other
information contained in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; OPERATING LOSSES
InfoCure was incorporated in November 1996 and to date has conducted no
operations and generated no revenue. InfoCure has entered into agreements to
acquire the Founding Businesses concurrently with the consummation of the
Offering. The Founding Businesses have been operating as separate independent
entities, and there can be no assurance that the Company will be able to
successfully integrate the operations of these businesses or institute the
necessary company-wide systems and procedures to successfully manage the
combined enterprise on a profitable basis. Although the unaudited pro forma
combined financial statements indicate that the Company had pro forma net income
of $898,000, $782,000 and $607,000 for the year ended January 31, 1996 and the
nine months ended October 31, 1996 and 1995, respectively, the pro forma
combined financial results of the Company cover periods when the Founding
Businesses were not under common control or management and include adjustments
to compensation expense and certain other operating expenses as provided in the
respective purchase agreements to levels effective concurrent with the
Acquisitions. These adjustments total $2,150,000, $1,623,000 and $1,405,000 for
the year ended January 31, 1996 and the nine months ended October 31, 1996 and
1995, respectively. Therefore, such pro forma financial results may not be
indicative of the Company's future financial condition or operating results.
AMC, which is considered the predecessor to the Company for accounting purposes,
had net losses of $180,196 and $1,075,308 for the years ended January 31, 1996
and 1995, respectively, and net losses of approximately $325,476 and $23,945 for
the nine months ended October 31, 1996 and 1995, respectively. In addition, each
of DR Software, Rovak and Millard-Wayne recorded a net loss for certain of the
periods reflected in their respective financial statements and notes thereto
included elsewhere in this Prospectus. The inability of the Company to
successfully integrate the Founding Businesses and reduce operating expenses in
the manner described in the Notes to the Unaudited Pro Forma Combined Financial
Statements, or otherwise improve results of operations, could have a material
adverse effect on the Company's results of operations, financial condition or
business and could negatively impact the Company's ability to acquire other
companies or otherwise execute its business strategy. See "Management's
Discussion and Analysis of Pro Forma Combined Financial Condition and Pro Forma
Combined Results of Operations," "Business--Business Strategy," "Management" and
Unaudited Pro Forma Combined Financial Statements and the Notes thereto.
MATERIAL CONTINGENCIES RELATING TO THE FOUNDING BUSINESSES
InfoCure has entered into definitive agreements to acquire the Founding
Businesses. InfoCure and each of the Founding Businesses have made certain
representations and warranties in the definitive agreements as to, among other
matters, their respective financial positions, corporate existence, business and
capital structure. The consummation of each Acquisition is subject to the
fulfillment of various conditions at or prior to the effective date of each
Acquisition, including, among others, the correctness of the representations and
warranties and the absence of any material and adverse change in the business of
the respective Founding Business. There can be no assurances that InfoCure will
consummate all of the Acquisitions, which is a condition precedent to the
consummation of the Offering. See "The Company -- The Acquisitions."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
As part of its growth strategy, the Company intends to acquire additional
companies providing health care practice management systems and complementary
products and technologies. Increased competition for acquisition candidates may
develop, in which event there may be fewer acquisition opportunities available
to the Company as well as higher acquisition prices. There can be no assurance
that the Company will be able to identify, acquire or profitably integrate and
manage additional companies or complementary products or technologies, if any,
into the Company without substantial costs, delays or other operational or
financial
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<PAGE> 15
problems. Further, acquisitions involve a number of special risks, including
possible adverse effects on the Company's operating results, diversion of
management's attention, failure to retain key personnel of the acquired
companies, amortization of acquired intangible assets and risks associated with
unanticipated events or liabilities, some or all of which could have a material
adverse effect on the Company's results of operations, financial condition or
business. Customer dissatisfaction or performance problems at a single acquired
company could have an adverse effect on the reputation of the Company. In
addition, there can be no assurance that the Founding Businesses or other
companies or complementary products or technologies acquired in the future will
achieve anticipated revenue and earnings. See "The Company -- The Acquisitions",
"Business--Business Strategy", "Principal Stockholders", "Certain Transactions"
and Unaudited Pro Forma Combined Financial Statements and the Notes thereto.
POSSIBLE NEED FOR FUTURE ACQUISITION FINANCING
The Company currently intends to finance future acquisitions by using the
remaining net proceeds of the Offering and/or issuing shares of its Common Stock
for all or a substantial portion of the consideration to be paid. In the event
that its Common Stock does not maintain a sufficient market value or potential
acquisition candidates are otherwise unwilling to accept Common Stock as part of
the consideration for the sale of their businesses, the Company may be required
to utilize more of its cash resources, if available, in order to initiate and
maintain its acquisition program. If the Company does not have sufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. There can be no assurance that the
Company will be able to obtain the financing it will need on terms it deems
acceptable, or at all. See "Use of Proceeds" and "Management's Discussion and
Analysis of Pro Forma Combined Financial Condition and Pro Forma Combined
Results of Operations--Liquidity and Capital Resources."
DEPENDENCE ON EDI
The Company's business strategy is largely based upon increasing the
percentage of its customers who utilize EDI for establishing patient eligibility
with insurers, precertification and eligibility of insurance claims, insurance
claims submission, claim status, remittance advice and patient statements.
Failure to increase the use of EDI services by health care providers in general,
and by the Company's customers in particular, could have a material adverse
effect on the Company's results of operations, financial condition or business.
A decrease or limited growth in the net fees realized by the Company for EDI
services could have a material adverse effect on the Company's future results of
operations, financial condition or business. See "Business--Business Strategy."
DIFFICULTIES IN MANAGING GROWTH
The continued growth of the Company may place a significant strain on the
Company's management and operations. Certain of the Company's key personnel have
recently joined the Company, and none of the Company's officers has had
experience in managing a large, public health care information services company.
The Company's future growth will depend in part of the ability of its officers
and other key employees to implement and expand financial control systems and to
expand, train and manage its employee base and provide support to an expanded
customer base. The Company's inability to manage growth effectively could have a
material adverse affect on the Company's results of operations, financial
condition or business.
DEPENDENCE ON PROPRIETARY SOFTWARE; RISK OF INFRINGEMENT
The Company's success is dependent to a significant extent on its ability
to protect the proprietary and confidential aspects of its software technology.
The Company relies on a combination of trade secret, copyright and trademark
laws, license agreements, nondisclosure and other contractual provisions and
technical measures to establish and protect its proprietary rights in its
products. The Company's software technology is not patented and existing
copyright laws offer only limited practical protection. There can be no
assurance that the legal protections afforded to the Company or the steps taken
by the Company will be adequate to prevent misappropriation of the Company's
technology. In addition, these protections do not prevent independent
third-party development of competitive products or services. The Company
believes that its products,
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<PAGE> 16
trademarks and other proprietary rights do not infringe upon the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims against the company in the future or that
any such assertion will not require the Company to enter into a license
agreement or royalty arrangement with the party asserting such a claim. As
competing health care information systems increase in complexity and overall
capabilities and the functionality of these systems further overlap, providers
of such systems may become increasingly subject to infringement claims.
Responding to and defending any such claims may require significant management
resources and otherwise have a material adverse effect on the Company's results
of operations, financial condition or business. See "Business--Product
Protection."
EVOLVING INDUSTRY STANDARDS AND RAPID TECHNOLOGICAL CHANGES
The market for the Company's products and services is characterized by
technological advances and rapid changes requiring ongoing expenditures for
research and development and the timely introduction of new products and
enhancements of existing products. The Company's future success will depend in
part upon its ability to (i) enhance its current products, (ii) respond
effectively to market requirements and technological changes, (iii) sell
additional products to its existing customer base and (iv) introduce new
products and technologies that address the increasingly sophisticated needs of
its customers and the health care industry. The Company will be required to
devote significant resources to the development of enhancements to its existing
products and the migration of existing products to new software platforms. There
can be no assurance that the Company will successfully complete the development
of new products or the migration of existing products to new platforms or that
the Company's current or future products will satisfy the needs of the market
for practice management systems. Further, there can be no assurance that
products or technologies developed by others will not adversely affect the
Company's competitive position or render its products or technologies
noncompetitive or obsolete. See "Business--Product Research and Development."
COMPETITION
The market for practice management systems, such as those marketed by the
Company, is highly competitive. The Company's competitors vary in size and in
the scope and breadth of the products and services they offer. The Company's
principal competitors are providers of health care information systems such as
Medic Computer Systems, Inc., IDX Systems Corporation, Physician Computer
Network, Inc., Medical Manager Corporation, Quality Systems, Inc., Reynolds and
Reynolds, Inc. (HealthCare Division) and National Data Corporation (Dental
Division). Many of the Company's competitors have greater financial, research
and development, technical, marketing and sales resources than the Company,
including the competitors named herein. In addition, other entities not
currently offering products and services similar to those offered by the
Company, including claims processing organizations, third-party administrators,
insurers and others, may enter certain markets in which the Company competes.
There can be no assurance that future competition and industry pressures for
cost reduction and containment will not have a material adverse effect on the
Company's results of operations, financial condition or business. See
"Business--Competition."
PRODUCT RELATED CLAIMS; PRODUCT ACCEPTANCE CONCERNS
Certain of the Company's products provide applications that relate to
financial records, patient medical records and treatment plans. Any failure of
the Company's products to provide accurate, confidential and timely information
could result in product liability or breach of contract litigation against the
Company by its clients, their patients or others. In addition, because the
Company's products facilitate electronic claims submissions, any resulting loss
of financial data could result in claims against the Company. The Company
currently does not maintain product liability insurance but intends to obtain
insurance to protect against claims associated with the use of its products;
however, there can be no assurance that such insurance coverage will be
available or, if available, at a reasonable cost or will adequately cover any
claim asserted against the Company. A successful claim brought against the
Company in excess of its insurance coverage could have a material adverse effect
on the Company's results of operations, financial condition or business. Even
unsuccessful claims could result in the expenditure of funds in litigation, as
well as diversion of
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management time and resources. Additionally, such failures or errors may result
in the loss of, or delay in, market acceptance of the Company's products.
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of its
executive officers. Furthermore, the Company will likely be dependent on the
senior management of any businesses acquired in the future. If any of these
persons becomes unable or unwilling to continue in his or her role with the
Company, or if the Company is unable to attract and retain other qualified
employees, the Company's business or prospects could be adversely affected.
Although the Company will have entered into an employment agreement upon the
consummation of the Offering with each of the Company's executive officers,
which will include confidentiality and non-compete provisions, there can be no
assurance that any individual will continue in his or her present capacity with
the Company for any particular period of time or that the non-compete provisions
will be enforceable or free from certain limitations under the laws of all
jurisdictions. The success of the Company is also dependent to a significant
degree on its ability to attract, motivate and retain highly skilled sales,
marketing and technical personnel, including software programmers and systems
architects skilled in the computer language with which the Company's products
operate. Competition for such personnel in the software and information services
industries is intense. The loss of key personnel or the inability to hire or
retain qualified personnel could have a material adverse effect on the Company's
results of operations, financial condition or business. The Company does not
intend to maintain key man insurance on its executive officers or key employees.
Although the Company has been successful to date in attracting and retaining
skilled personnel, there can be no assurance that the Company will continue to
be successful in attracting and retaining the personnel it requires to
successfully develop new and enhanced products and to continue to grow and
operate profitably. See "Business--Employees" and "Management."
UNCERTAINTY IN HEALTH CARE INDUSTRY; GOVERNMENT REGULATION
The health care industry in the United States is subject to changing
political, economic and regulatory influences that may affect the procurement
practices and operations of health care organizations. Governmental
organizations account for a substantial portion of revenues paid to health care
providers in the United States and impose significant regulatory burdens. From
time to time, certain proposals to reform the health care system have been
considered by Congress and further proposals may be considered in the future.
These reforms may increase government involvement in health care, lower
reimbursement rates and otherwise adversely affect the operating environment for
the Company's clients. Health care organizations may react to these reforms by
curtailing or deferring investments, including those for the Company's products
and services. The Company cannot predict with any certainty what impact, if any,
such health care reforms might have on its results of operations, financial
condition or business.
The U.S. Food and Drug Administration (the "FDA") has jurisdiction under
the 1976 Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act
(the "FDC Act") to regulate computer products and software as medical devices if
they are intended for use in the diagnosis, cure, mitigation, treatment or
prevention of disease in humans. The FDA has issued a draft policy statement
under which manufacturers of medical image storage devices and related software
are required to submit to the FDA premarket notification applications and
otherwise comply with the requirements of the FDC Act applicable to medical
devices. Recently, FDA officials expressed an intention to initiate agency
rulemaking to exempt certain medical image management devices from premarket
notification procedures, but there can be no assurance that such an exemption
actually will be adopted and, if so, that the rulemaking will apply to the
Company's products.
It is unclear to what extent the Company's Digital Record Keeping System,
when marketed with the Company's practice management applications, would be
deemed under the draft policy statement to be a medical device subject to FDA
regulation. Enforcement action may consist of warning letters, refusal to
approve or clear products, revocation of approvals or clearances previously
granted, civil penalties, product seizures, injunctions, recalls, operating
restrictions and criminal prosecutions. Any enforcement action by the FDA, any
refusal by it to grant clearance of the Section 510(k) application or any
substantial delay by the
16
<PAGE> 18
FDA in granting such clearance could have a material adverse effect on the
Company's ability to market its Digital Record Keeping System. See
"Business--Government Regulation."
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES; INTERESTS OF CERTAIN
PERSONS
Approximately $9.2 million, representing approximately 51% of the net
proceeds of the Offering will be paid and 3,680,626 shares of Common Stock will
be issued, upon the consummation of the Acquisitions. Approximately $3.7 million
of such payments and 2,639,842 shares of Common Stock will be paid or issued, as
the case may be, directly or indirectly, to stockholders of the Founding
Businesses who will become directors or executive officers of the Company or
holders of more than 5% of the outstanding Common Stock. In addition, upon the
consummation of the Acquisitions and the Offering, Messrs. Fine, Price, Warren,
Chastain, Rogers, George and Schraut, former executive officers of the Founding
Businesses, will become executive officers of the Company. Proceeds available
for repayment of indebtedness, working capital and other uses by the Company
will be approximately $8.7 million, representing 49% of the net proceeds of the
Offering. See "The Company -- The Acquisitions," "Use of Proceeds," "Management"
and "Certain Transactions."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the consummations of the Acquisitions and the Offering, the
Company's directors, executive officers and holders of more than 5% of the
Common Stock will beneficially own approximately 24% of the outstanding shares
of Common Stock. Although these persons do not presently have any agreements or
understanding to act in concert, any such agreement or understanding would make
it difficult for others to elect the entire Board of Directors and to control
the disposition of any matter submitted to a vote of stockholders. See
"Principal Stockholders."
SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock may be adversely affected by the sale,
or availability for sale, of substantial amounts of the Common Stock in the
public market following the Offering. The 2,000,000 shares of Common Stock being
sold in the Offering will be freely tradable unless acquired by affiliates of
the Company. Concurrently with the consummation of the Offering, not more than
3,680,626 shares of Common Stock will be issued in connection with the AMC
Merger and the Acquisitions of which approximately 2,639,842 shares of Common
Stock will be issued to affiliates of the Company and 1,040,784 shares of Common
Stock to persons who are not affiliates. In addition 170,544 Equivalent Shares
of Common Stock are subject to outstanding stock options and a warrant which may
be exercised prior to the consummation of the AMC Merger. Such shares will be
registered under the Securities Act and therefore also will be freely tradable
unless acquired by affiliates of the Company. The future sales of such shares
may have a depressive effect on the market price of the Common Stock.
The Company, its directors, executive officers and certain of its
stockholders, including all affiliates of the Company, holding an aggregate of
3,027,078 Equivalent Shares of Common Stock, have agreed not to offer or dispose
of, without the prior written consent of Rodman & Renshaw, Inc., any shares of
Common Stock for a period of 180 days (the "Lock-Up Period") following the date
the Commission declares effective the Registration Statement and, for a period
of 18 months following expiration of the Lock-Up Period, not to publicly offer
or sell except in accordance with the volume limitations of Rule 144(e), except
that the Company may issue Common Stock in connection with future acquisitions
and upon the exercise of stock options and warrants. See "Principal
Stockholders", "Shares Eligible for Future Sale" and "Underwriting."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or be
sustained upon consummation of the Offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price for the Common Stock will be determined by
negotiation among the Company and the
17
<PAGE> 19
Representatives of the Underwriters and may not be indicative of the prices that
will prevail in the public market. The market price of the Common Stock may be
subject to significant fluctuations in response to numerous factors, including
variations in the annual or quarterly financial results of the Company or its
competitors, changes by financial research analysts in their estimates of the
earnings of the Company, conditions in the economy in general or in the health
care or technology sectors in particular, announcements of technological
innovations or new products or services by the Company or its competitors,
proprietary rights development, unfavorable publicity or changes in applicable
laws and regulations (or judicial or administrative interpretations thereof)
affecting the Company or the health care or technology sectors. Moreover, from
time to time, the stock market experiences significant price and volume
volatility that may affect the market price of the Common Stock for reasons
unrelated to the Company's performance. See "Underwriting."
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter, in part because of changes in customer purchasing patterns,
competition, the timing of the recognition of licensing revenues and the timing
of, and costs related to, any new product introductions. The Company operates
without any backlog of product orders and a majority of the revenues realized in
a quarter result from orders received or services rendered in that quarter. The
Company's operating results for any particular quarter are not necessarily
indicative of any future results. The uncertainties associated with the
introduction of any new products and with general market trends may limit
management's ability to forecast short-term results of operations accurately.
The Company is subject to slight seasonal increases in its systems and software
sales in the fourth quarter of its fiscal year. Additionally, a high percentage
of the Company's expenses is relatively fixed, including costs of personnel, and
are not susceptible to rapid reduction. See "Management's Discussion and
Analysis of Pro Forma Combined Financial Condition and Pro Forma Combined
Results of Operations."
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares of $9.07 per share. In the event the Company issues additional
Common Stock in the future, including shares issued in connection with future
acquisitions, purchasers of Common Stock pursuant to the Offering may experience
further dilution. See "Dilution."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND EMPLOYMENT AGREEMENT PROVISIONS AND
DELAWARE LAW
Certain provisions of Delaware law, the Company's Certificate of
Incorporation and certain of its executive employment agreements could, together
or separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company and limit the price that certain investors
might be willing to pay in the future for the Company's Common Stock. These
provisions include the right of the Company's Board of Directors to issue,
without further stockholder approval, one or more series of preferred stock with
rights and preferences senior to the rights associated with the Common Stock.
The Company is also subject to Section 203 of the Delaware General Corporation
Law, which may inhibit or discourage a change in control of the Company. In
addition, the provisions of certain executive employment agreements and stock
option agreements may result in economic benefits to the holders thereof upon
the occurrence of a change in control. See "Management--Stock Options,"
"--Employment Agreements," "Description of Capital Stock--Preferred Stock" and
"--Delaware Anti-Takeover Law."
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,000,000 shares of Common
Stock offered hereby are estimated to be approximately $17.9 million after
deducting underwriting discount and estimated expenses of the Offering payable
by the Company. If the Underwriters exercise the over-allotment option, the
Company will not realize any additional net proceeds, as those shares will be
sold by the Selling Stockholders. See "Principal Stockholders."
The Company intends to use approximately $9.2 million of the net proceeds
for payments due upon the consummation of the Acquisitions (excluding $150,000
paid for HCD), approximately $1.5 million for the repayment of certain
outstanding indebtedness, approximately $495,000 principally for expenses
related to the Acquisitions and approximately $265,000 for satisfaction of a
contractual obligation. Of the $1.5 million intended to discharge indebtedness,
$381,000 will be used to repay an AMC 11.25% note scheduled to mature in 2003
and $648,000 will be used to repay three Rovak variable rate notes (10.25% at
September 30, 1996) which mature variously from 1998 through 2000. The balance
will be used to liquidate a number of smaller notes payable principally to
banks. The balance of the net proceeds, approximately $6.4 million, will be used
for working capital and other general corporate purposes, which are expected to
include the acquisition of businesses offering products or technologies that are
complementary to the Company's existing business. Although the Company is
exploring acquisition opportunities, it has no agreements or understandings at
this time to make any additional acquisitions and is not involved in any
negotiation with respect to any such transactions.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds from the sale of the Common Stock offered hereby based upon the
current state of its business operations, its current plans and current economic
and industry conditions and is subject to reallocation among the categories
listed above. The amounts and timing of actual expenditures will depend on
numerous factors, including the status of the Company's income, the availability
of alternative financing for acquisitions, the Company's business development
activities and competition. Pending the aforementioned uses, the net proceeds
from the Offering will be invested in interest-bearing government securities or
short-term, investment grade securities.
The Company has entered into a letter of intent with FINOVA Capital
Corporation ("FINOVA") to obtain a line of credit of up to $10 million to be
used for working capital and other general corporate purposes, including future
acquisitions. The Company intends to enter into a definitive line of credit
agreement to become effective upon the consummation of the Offering. There can
be no assurance that a line of credit will be obtained or that, if obtained, it
will be on terms that are favorable to the Company. See "Management's Discussion
and Analysis of Pro Forma Combined Financial Condition and Pro Forma Combined
Results of Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company intends to retain its earnings to finance the development and
continued expansion of its business and for general corporate purposes and
therefore does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future. Any future payment of dividends will be at the
discretion of the Board of Directors and will depend upon the Company's
financial condition, results of operations and such other factors as the Board
of Directors deems relevant. There can be no assurance that dividends will ever
be paid by the Company.
There are no current contractual restrictions on the payment of dividends.
However, it is anticipated that if a line of credit agreement is entered into
hereafter, the definitive line of credit terms will contain restrictions on the
payment of dividends. See "Use of Proceeds."
19
<PAGE> 21
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
as of October 31, 1996 (i) on a pro forma basis to give effect to the November
1996 issuance of shares of AMC common stock for $750,000, the Acquisitions and
the repayment of certain outstanding indebtedness and (ii) on a pro forma
adjusted basis to give effect to the November 1996 issuance of shares of AMC
common stock for $750,000, the Acquisitions, the consummation of the Offering
and the applications of the estimated net proceeds of the Offering. This table
should be read in conjunction with the Unaudited Pro Forma Combined Financial
Statements and the Notes thereto included elsewhere in this Prospectus. See "Use
of Proceeds."
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1996
-------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current portion of long-term
debt...................................................... $ 657 $ 657
Long-term debt, excluding current portion................... 308 308
Stockholders' equity:
Preferred Stock, $0.001 par value; 10,000,000 shares
authorized and no shares issued and outstanding........ -- --
Common Stock, $0.001 par value; 40,000,000 shares
authorized; 4,954,369 shares issued and outstanding pro
forma and 5,680,626 shares issued and outstanding pro
forma as adjusted (1).................................. 5 6
Additional paid-in capital................................ 15,834 22,284
Accumulated deficit....................................... (3,830) (3,830)
------- -------
Total stockholders' equity............................. 12,009 18,460
------- -------
Total capitalization................................. $12,974 $19,425
======= =======
</TABLE>
- ---------------
(1) Excludes an aggregate of (i) 319,734 Equivalent Shares of Common Stock
reserved for issuance upon the exercise of outstanding stock options and a
stock warrant and (ii) 242,354 Equivalent Shares of Common Stock to be
assigned and transferred to AMC for cancellation not later than 20 days
prior to the consummation of the Offering, pursuant to a written agreement
dated November 19, 1996.
20
<PAGE> 22
DILUTION
The pro forma net tangible book value (deficit) of the Company's Common
Stock as of October 31, 1996, after giving pro forma effect to the Acquisitions,
certain debt repayments and the November 1996 issuance of shares of AMC common
stock for $750,000, was approximately $(1.2) million, or $(0.24) per share of
Common Stock. The pro forma net tangible book value per share is equal to the
total tangible assets of the Company less total liabilities divided by the
number of shares of Common Stock outstanding. After giving effect to the sale of
2,000,000 shares of Common Stock offered hereby (after deducting the
underwriting discount and estimated expenses of the Offering payable by the
Company), the adjusted pro forma net tangible book value of the Company as of
October 31, 1996 would have been approximately $5.3 million, or $0.93 per share,
representing an immediate increase in pro forma net tangible book value of $1.17
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $9.07 per share, or 90.7%, to investors purchasing shares
at the assumed initial public offering price in the Offering. The following
table illustrates the per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma net tangible book value per share before the
Offering.................................................. $(0.24)
Increase in net tangible book value per share attributable
to new investors.......................................... 1.17
------
Adjusted pro forma net tangible book value per share after
the Offering.............................................. 0.93
------
Dilution in net tangible book value per share to new
investors................................................. $ 9.07
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the net
tangible book value per share of Common Stock after the consummation of the
Offering will not change because the shares sold to meet the over-allotment
option will be from outstanding shares held by the Selling Stockholders.
The following table summarizes as of October 31, 1996, after giving pro
forma effect to the Acquisitions, certain debt repayments and the November 1996
issuance of shares of AMC common stock for $750,000, the total consideration
paid and the average price paid per share of Common Stock by existing
stockholders and new investors in the Offering (before deducting the
underwriting discount and estimated expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)....... 3,680,626 64.8% $ 2,907,667 12.7% $ 0.79
New investors................... 2,000,000 35.2 20,000,000 87.3 10.00
--------- ----- ----------- -----
Total................. 5,680,626 100.0% $22,907,667 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Excludes an aggregate of (i) stock options and a warrant to purchase an
aggregate of 319,374 Equivalent Shares of Common Stock outstanding at a
weighted average per share exercise price of $2.26 and (ii) 242,354
Equivalent Shares of Common Stock to be assigned and transferred to AMC for
cancellation not later than 20 days prior to the consummation of the
Offering.
21
<PAGE> 23
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
InfoCure will acquire the Founding Businesses prior to and as a condition
to the consummation of the Offering. For financial statement presentation
purposes, AMC has been identified as the accounting acquiror. The following
summary unaudited pro forma combined financial data present certain data for the
Company, as adjusted for (i) the effects of the AMC Merger on an historical
basis, (ii) the effects of the HCD Acquisition, the acquisition by AMC of
Millard-Wayne and the acquisitions by InfoCure of KComp, DR Software and Rovak
using the purchase method of accounting at their estimated fair values and (iii)
the effects of certain pro forma adjustments to the combined financial
statements. KComp was founded in December 1995; accordingly, results of KComp
are included only for the nine months ended October 31, 1996. See "Management's
Discussion and Analysis of Pro Forma Combined Financial Condition and Pro Forma
Combined Results of Operations" and the Unaudited Pro Forma Combined Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------
NINE MONTHS ENDED
YEAR ENDED OCTOBER 31,
JANUARY 31, -----------------------
1996 1995 1996
----------- ---------- ----------
<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA: (1)
Revenues:
Systems and software................................... $ 9,544 $ 6,656 $ 7,128
Maintenance and support................................ 6,236 4,948 6,327
Other.................................................. 762 562 665
------- ------- -------
Total revenues....................................... 16,542 12,166 14,120
Cost of revenues.......................................... 5,137 3,899 3,966
------- ------- -------
Gross profit.............................................. 11,405 8,267 10,154
Operating expenses:
Selling, general and administrative (2)(3)(4)(5)....... 8,387 6,089 7,630
Depreciation and amortization (6)...................... 1,322 992 1,008
------- ------- -------
Operating income.......................................... 1,696 1,186 1,516
Other expense (income):
Interest expense (7)................................... 77 82 69
Other.................................................. (121) (99) (30)
------- ------- -------
Income before taxes....................................... 1,740 1,203 1,477
Income tax (8)............................................ 842 596 695
------- ------- -------
Net income................................................ $ 898 $ 607 782
======= ======= =======
Pro forma net income per share............................ $ 0.17 $ 0.12 $ 0.15
Pro forma weighted average shares outstanding (9)......... 5,201 5,201 5,201
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1996
---------------------------------
PRO FORMA
PRO FORMA (10) AS ADJUSTED (10)
-------------- ----------------
<S> <C> <C>
SELECTED BALANCE SHEET DATA: (1)
Cash and cash equivalents................................. $ 840 $ 7,255
Working capital........................................... (2,180) 4,235
Total assets.............................................. 18,012 24,427
Short-term debt........................................... 657 657
Long-term debt, less current portion...................... 308 308
Total stockholders' equity................................ 12,009 18,460
</TABLE>
- ---------------
(1) Assumes that the closing of the Acquisitions had occurred as of February 1,
1995, in the case of the pro forma statements of operations data, and as of
October 31, 1996, in the case of the unaudited selected pro forma balance
sheet data. The pro forma balance sheet data also give effect to the
issuance in November 1996 of 508,385 Equivalent Shares of Common Stock by
AMC for $750,000. The pro forma
22
<PAGE> 24
combined financial data are based upon preliminary estimates, available
information and certain assumptions that management believes are
appropriate. The unaudited selected pro forma combined financial data
presented herein are not necessarily indicative of the results the Company
would have obtained had such events occurred at the beginning of the period
or of the future results of the Company. The unaudited selected pro forma
combined financial data should be read in conjunction with the other
financial data and notes thereto included elsewhere in this Prospectus.
(2) Includes pro forma adjustments to reflect (i) the elimination, as provided
in the respective acquisition agreements, of duplicative administrative
functions at the Company of approximately $1,773,000, $1,231,000 and
$1,330,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively, and (ii) the additional overhead
expenses at the Founding Businesses of approximately $452,000, $339,000 and
$339,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively. The Company considers that the
elimination of approximately $1,130,000 of these expenses, on an annualized
basis, was effected concurrent with the HCD Acquisition on December 3,
1996.
(3) Includes pro forma adjustments to reflect the elimination of allocations
from Info Systems for (i) overhead of approximately $476,000, $324,000 and
$264,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively, and (ii) expense related to HCD's
participation in Info System's employee stock ownership plan of
approximately $159,000, $147,000 and $61,000 for the year ended January 31,
1996 and the nine months ended October 31, 1995 and 1996, respectively.
Upon the consummation of the HCD Acquisition on December 3, 1996, these
eliminations were effected.
(4) Includes pro forma adjustments to reflect the elimination of rent and other
expenses of approximately $352,000, $237,000 and $264,000, for the year
ended January 31, 1996 and the nine months ended October 31, 1995 and 1996,
respectively. Upon the consummation of the HCD Acquisition on December 3,
1996, the elimination of $117,000 of such expenses, on an annualized basis,
was effected.
(5) Includes pro forma adjustments to reflect the elimination of certain
commissions and royalties which are payable by Rovak under agreements that
will be terminated following the consummation of the Offering. Such
adjustments are approximately $125,000, $86,000 and $241,000 for the year
ended January 31, 1996 and the nine months ended October 31, 1995 and 1996,
respectively.
(6) Includes pro forma adjustments to reflect the amortization expense on the
goodwill recorded in connection with the Acquisitions of approximately
$768,000, $576,000 and $576,000 for the year ended January 31, 1996 and the
nine months ended October 31, 1995 and 1996, respectively. Also includes
pro forma adjustment to depreciation and amortization expense, after
adopting appropriate useful lives for related assets, of $300,000, $200,000
and $190,000 for the year ended January 31, 1996 and the nine months ended
October 31, 1995 and 1996, respectively.
(7) Includes pro forma adjustments to reflect a reduction in interest expense
related to debt reduction, in connection with the Acquisitions and the
Offering, of $185,000, $95,000 and $188,000 for the year ended January 31,
1996 and the nine months ended October 31, 1995 and 1996, respectively.
(8) The pro forma provision for income taxes includes (i) the effects of the
non-deductible portion of goodwill for tax purposes and (ii) assumes that
the deferred tax asset represented by AMC's net operating loss
carryforwards of approximately $1,500,000 is recognized as of January 31,
1995.
(9) The pro forma weighted average shares outstanding includes (i) 4,954,369
shares to be issued in connection with the Acquisitions and the Offering
and (ii) 247,090 Common Stock equivalents issuable upon outstanding stock
options and a warrant.
(10) The selected pro forma combined balance sheet data reflects the adjustments
referenced above but excludes the effects of the receipt and application of
the net proceeds of the Offering. The pro forma combined balance sheet data
as adjusted reflects the changes that are expected to occur from the
proceeds of the Offering. See "Use of Proceeds" and "Capitalization".
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA COMBINED FINANCIAL
CONDITION AND PRO FORMA COMBINED RESULTS OF OPERATIONS
GENERAL
InfoCure was incorporated in November 1996 to develop, market and service
practice management systems for use by health care providers throughout the
United States.
Prior to and as a condition to the consummation of the Offering, InfoCure
will acquire the seven Founding Businesses, which will be consolidated into
three operating divisions: the Desktop Division, the Mid-Range Division and the
Enterprise Division. The Desktop Division markets DOS and Windows-based practice
management systems and other software products primarily to small to mid-size
medical practices, including podiatric, dental, oral and maxillofacial
providers. The Mid-Range Division offers AIX and UNIX-based practice management
systems to mid-size medical practices, including oral surgeons and
orthodontists. The Enterprise Division markets IBM AS/400-based practice
management systems to mid-size to large medical practices and clinics.
The Company's total revenues are derived primarily from the delivery of
systems and software sales and maintenance and support services. Systems and
software sales include revenue from new systems, hardware, training and other
services provided during a customer installation as well as upgrades to existing
customers. Maintenance and support services revenues are generated by providing
customers with training, updates, enhancements and telephone support.
The Company recognizes systems revenue in accordance with the provisions of
AICPA Statement of Position No. 91-1 "Software Revenue Recognition." Revenue
from support and maintenance contracts is recognized as the services are
performed ratably over the contract period, which typically is one quarter or a
full year. Revenue from other services is recognized as the services are
provided.
Selling, general and administrative expense consists primarily of
marketing, advertising, administrative, research, software development and other
overhead costs. The Company's pro forma combined financial results cover periods
when the Founding Businesses were not under common control or management and
include adjustments to compensation expense and certain other operating expenses
to levels the Company intends to or has implemented in connection with the
Acquisitions. See "Risk Factors -- Absence of Combined Operating History;
Operating Losses" and Unaudited and Pro Forma Combined Financial Statements and
the Notes thereto.
The Company's acquisition strategy is to take advantage of the
consolidation opportunities existing in the practice management systems sector.
This strategy involves acquiring a significant customer base of software
installations and expanding customer and electronic services. The Company has an
installed customer base of approximately 17,500 health care providers in a broad
range of specialties at over 6,000 client sites.
RESULTS OF OPERATIONS
The following pro forma combined financial data contain the results of
operations for the nine months ended October 31, 1996 and 1995. KComp was
established in December 1995. The only results of KComp included in the pro
forma combined financial data are for the nine months ended October 31, 1996.
The following discussions should be read in conjunction with the Selected
Pro Forma Combined Financial Data, the Selected Financial Data of AMC and the
other financial statements and notes thereto appearing elsewhere in this
Prospectus.
Nine Months Ended October 31, 1996 Compared with Nine Months Ended October 31,
1995
Revenues increased by $1,954,000, or 16.1%, to $14,120,000 for the nine
months ended October 31, 1996 from $12,166,000 for the nine months ended October
31, 1995. Maintenance and support revenue increased $1,379,000, or 27.9%, to
$6,327,000 for the nine months ended October 31, 1996 from $4,948,000 for the
comparable period. The increase primarily was due to the formation of KComp,
which contributed maintenance and support revenues of $1,275,000, and additional
revenues from onsite training services.
24
<PAGE> 26
Systems and software sales increased $472,000, or 7.1%, to $7,128,000 for the
nine months ended October 31, 1996 from $6,656,000 for the nine months ended
October 31, 1995.
Cost of revenue increased by $67,000, or 1.7%, to $3,966,000 for the nine
months ended October 31, 1996 from $3,899,000 for the nine months ended October
31, 1995. As a percentage of revenue, cost of sales decreased to 28.1% for the
nine months ended October 31, 1996 from 32.0% for the nine months ended October
31, 1995. This decrease in cost of revenue as a percent of sales principally
reflects a change in product mix, whereby maintenance and support revenue
increased to 44.8% of total revenues for the nine months ended October 31, 1996
from 40.7% of total revenues for the nine months ended October 31, 1995. The
cost of revenue for KComp for the nine months ended October 31, 1996 was
$112,000.
Selling, general and administrative expense increased by $1,541,000, or
25.3%, to $7,630,000 for the nine months ended October 31, 1996 from $6,089,000
for the nine months ended October 31, 1995. This increase primarily is due to
the formation of KComp, which added $1,134,000 to selling, general and
administrative expense.
As a result of the foregoing factors, operating income increased by
$330,000, or 27.8%, to $1,516,000 for the nine months ended October 31, 1996
from $1,186,000 for the nine months ended October 31, 1995. This increase
reflects the operating income of $249,000 from the KComp operations for the nine
months ended October 31, 1996, which were not included in the prior year. As a
percentage of revenues, income from operations increased to 10.7% for the nine
months ended October 31, 1996 from 9.8% for the nine months ended October 31,
1995.
Interest expense decreased by $13,000, or 15.9%, for the nine months ended
October 31, 1995 to $69,000 from $82,000 for the nine months ended October 31,
1996, primarily due to repayment of the notes payable and long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
The Founding Businesses have lines of credit providing for combined
advances of up to $175,000, with borrowings outstanding at October 31, 1996
totalling $120,000. Following consummation of the Acquisitions and the Offering,
the Company will have outstanding long-term debt of $773,000, including $465,000
which will be classified as the current portion of long-term debt.
The Company has gross cash flow from operations (net income plus
depreciation and amortization) for the nine months ended October 31, 1996 and
for the year ended January 31, 1996 of $1,790,000 and $2,220,000, respectively.
The Company believes that funds generated from operations, together with the net
proceeds of the Offering, will be sufficient to finance its current operations,
potential obligations relating to the Acquisitions and planned capital
expenditure requirements at least through the next 18 months. In the longer
term, the Company may require additional sources of capital to fund future
growth and acquisitions. Such sources of capital may include additional equity
or debt financings.
The Company has entered into a letter of intent with FINOVA to obtain a
line of credit of up to $10 million to be used for working capital and other
general corporate purposes, including future acquisitions. Under the line of
credit FINOVA would advance up to an agreed upon percentage of acceptable
accounts receivables. Advances for acquisitions would be subject to the sole
discretion of FINOVA. The funds advanced will be secured by a security interest
in the tangible and intangible assets of the Company. The Company intends to
enter into a definitive line of credit to become effective upon the consummation
of the Offering. There can be no assurances that a line of credit will be
obtained or that, if obtained, it will be on terms that are favorable to the
Company.
SEASONALITY AND FLUCTUATIONS
The Company is subject to slight seasonal increases in its systems and
software sales in the fourth quarter of its fiscal year.
25
<PAGE> 27
SELECTED FINANCIAL DATA OF AMC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data present certain data for AMC for the
years ended January 31, 1995 and 1996 and the nine months ended October 31, 1995
and 1996. The selected financial data presented for AMC should be read in
conjunction with its audited financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JANUARY 31, OCTOBER 31,
----------------- -----------------
1995 1996 1995 1996
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
SELECTED STATEMENTS OF OPERATIONS DATA:
Revenues:
Software and services................................ $ 2,866 $ 2,026 $ 1,618 $ 1,430
Hardware............................................. 620 387 297 230
------- ------- ------- -------
Total revenues..................................... 3,486 2,413 1,915 1,660
Cost of sales........................................... 1,116 516 434 299
------- ------- ------- -------
Gross profit............................................ 2,370 1,897 1,481 1,361
Operating expenses:
Salaries and operating expenses...................... 2,848 2,018 1,491 1,574
Depreciation and amortization........................ 564 112 82 55
------- ------- ------- -------
Loss from operations.................................... (1,042) (233) (92) (268)
Other income (expense):
Interest expense..................................... (54) (68) (47) (60)
Other................................................ 21 121 115 3
------- ------- ------- -------
Net loss................................................ $(1,075) $ (180) $ (24) $ (325)
======= ======= ======= =======
Net loss per share...................................... $ (0.03) $ (0.00) $ (0.00) $ (0.01)
Weighted average shares outstanding..................... 41,963 41,387 41,349 43,531
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 31, AS OF OCTOBER 31,
1996 1996
----------------- -----------------
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 250 $ 183
Working capital........................................... (1,201) (987)
Total assets.............................................. 567 664
Short-term debt........................................... 336 311
Long-term debt, less current portion...................... 545 539
Total stockholders' equity................................ (1,618) (1,273)
</TABLE>
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AMC
GENERAL
For financial statement purposes, AMC has been presented herein as the
acquiring company. For the periods presented herein, AMC functioned with
operations exclusively through a single operating subsidiary, ICS. After October
31, 1996, HCD became, and Millard-Wayne will become, subsidiaries of AMC in
transactions accounted for as purchases. The following discussion and analysis
should be read in conjunction with the audited financial statements and notes
thereto included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Nine Months Ended October 31, 1996 Compared with Nine Months Ended October 31,
1995
Total revenues decreased by $255,353, or 13.3%, to $1,659,671 for the nine
months ended October 31, 1996 from $1,915,024 for the nine months ended October
31, 1995. Software and services revenues decreased by $188,460, or 11.6%, to
$1,429,876 for the nine months ended October 31, 1996 from $1,618,336 for the
nine months ended October 31, 1995 due to a decrease in UNIX software sales of
$117,131 and a decrease in net EDI revenues of $32,333. The method by which EDI
revenues and costs are recorded was changed from a gross amount to a net amount
during the year ended January 31, 1996. As a result, EDI revenues are shown at a
net amount of $260,349 for the nine months ended October 31, 1996 compared to
$292,682 for the nine months ended October 31, 1995. The overall EDI transaction
volume increased by 136,339 transactions, or 19.8%, to 824,650 for the nine
months ended October 31, 1996 from 688,311 transactions for the nine months
ended October 31, 1995.
Cost of sales decreased by $135,024, or 31.1%, to $299,075 for the nine
months ended October 31, 1996 from $434,099 for the nine months ended October
31, 1995. As a percentage of revenue, cost of sales decreased to 18.0% for the
nine months ended October 31, 1996 from 22.7% for the comparable nine month
period ended October 31, 1995. This decrease in cost of sales as a percentage of
total revenues reflects a change in product mix whereby revenues associated with
UNIX hardware sales decreased to 8.5% for the nine months ended October 31, 1996
from 15.3% for the nine months ended October 31, 1995.
Salaries and operating expenses increased by $82,452, or 5.5%, to
$1,573,936 for the nine months ended October 31, 1996 from $1,491,483 for the
nine months ended October 31, 1995. This increase was due to an increase in
contract labor, as AMC identified specific tasks to be performed by outside
contractors for training and installation services, and additional overhead
associated with opening a second office for purposes of implementing its
acquisition strategy.
Depreciation and amortization expense decreased by $451,376, or 80.1%, to
$112,314 for the year ended January 31, 1996 from $563,690 for the year ended
January 31, 1995. This decrease was due to the accelerated write off in 1995 of
substantial development costs of UNIX software products. Also, a significant
amount of tangible and intangible assets became fully depreciated or amortized
during 1995.
As a result of the foregoing factors, AMC had a loss from operations of
$268,229 for the nine months ended October 31, 1996, as compared to a loss of
$92,211 for the nine months ended October 31, 1995. Year Ended January 31,
1996 Compared with Year Ended January 31, 1995
Total sales decreased by $1,072,825, or 30.8%, to $2,412,734 for the year
ended January 31, 1996 from $3,485,559 for the year ended January 31, 1995.
Software and services revenues decreased by $839,468, or 29.3%, to $2,026,114
for the year ended January 31, 1996 from $2,865,582 for the year ended January
31, 1995. Several factors contributed to this decrease. UNIX maintenance
decreased by $262,387, or 24.6%, to $805,321 for the year ended January 31, 1996
from $1,067,708 for the year ended January 31, 1995, due to the change in
billing methods associated with the outsourcing of hardware maintenance
services. Sales of DOS-based practice management software products and
maintenance decreased by $236,670, or 30.2%, to $546,134 for the year ended
January 31, 1996 from $782,804 for the year ended January 31, 1995. This
decrease was
27
<PAGE> 29
related to AMC's shift to direct marketing, rather than marketing through
third-party distributors. The method by which EDI revenues and costs are
recorded was changed from a gross amount to a net amount during the year ended
January 31, 1996. As a result, EDI revenues are shown at a net amount of
$372,516 for the year ended January 31, 1996, a decrease of $219,384, or 37.9%,
from $591,900 for the year ended January 31, 1995. Hardware sales decreased by
$233,357, or 37.6%, to $386,620 for the year ended January 31, 1996 from
$619,977 for the year ended January 31, 1995, primarily due to a decrease in
UNIX hardware sales.
Cost of sales decreased by $599,884, or 53.8%, to $515,842 for the year
ended January 31, 1996 from $1,115,726 for the year ended January 31, 1995. As a
percentage of sales, cost of sales decreased to 21.3% for the year ended January
31, 1996 from 32.0% for the year ended January 31, 1995. This decrease in cost
of sales as a percentage of sales reflects a reduction in cost of sales
resulting from the change in EDI billing and a change in product mix whereby
revenues associated with UNIX hardware sales decreased to 14.3% for the year
ended January 31, 1996 from 15.6% for the year ended January 31, 1995.
Salaries and operating expense decreased by $830,616, or 29.2%, to
$2,017,389 for the year ended January 31, 1996 from $2,848,005 for the year
ended January 31, 1995. This decrease was due to operational efficiencies,
including the outsourcing of hardware support, and EDI billing and collections.
The decrease was also due to salary and benefit reductions of $384,517
associated with the reduction in total personnel.
As a result of the foregoing factors, the operating loss decreased to
$232,811 for the year ended January 31, 1996 from $1,041,862 for the year ended
January 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended January 31, 1996, cash provided by operating activities
totalled $15,415, cash used for investing activities totalled $10,976 and cash
provided by financing activities totalled $240,575. Cash provided by financing
activities resulted from long-term debt and a note payable. Other than advances
available from certain officers and stockholders, AMC had no available line of
credit or financing source. For the nine months ended October 31, 1996, cash
used for operating activities totalled $637,655, cash used for investing
activities totalled $142,796 and cash provided by financing activities totalled
$713,765. Cash provided by financing activities resulted from issuance of common
stock.
As of January 31, 1996, AMC had an accumulated deficit of $3,504,880 and a
working capital deficiency of $1,200,963. As of October 31, 1996, AMC had an
accumulated deficit of $3,830,356 and a working capital deficit of $986,509.
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<PAGE> 30
BUSINESS
The Company is a leading provider of practice management software products
and related services that address the growing needs of health care providers to
manage and communicate cost-effectively administrative, clinical and financial
data. The Company's practice management systems are used primarily by small to
mid-size medical practices, including multi-provider management services
organizations and independent physician alliances. Recently, the Company
developed and introduced an all-payor-based electronic data interchange ("EDI")
system to enable its customers to realize significant cost savings by replacing
paper-based transactions with electronic transaction processing. The Company has
an installed customer base of approximately 17,000 health care providers in a
broad range of specialties at over 6,000 client sites.
InfoCure has entered into agreements to acquire, concurrently with the
consummation of the Offering, the seven Founding Businesses. In connection
therewith, InfoCure has filed a registration statement on Form S-4 for the
offering of 3,680,626 shares of Common Stock to be issued to the stockholders of
certain of the Founding Businesses upon the consummation of the Acquisitions.
The integration of these businesses will combine existing and proven products,
research and development, sales, marketing and support efforts. Following
consummation of the Acquisitions, the Founding Businesses will be consolidated
into three operating divisions, according to technical platform, thereby
allowing the Company to market and service cost-effectively its practice
management systems to a wide range of health care providers.
The Company's existing customer base comprises primarily office-based
health care practices that range in size from single practitioners to up to
several hundred providers with an emphasis on small and mid-size (up to 25
providers) health care practices. Based on industry sources, 60% of the
physicians in the United States are organized into approximately 190,000
office-based medical practices. Nearly all of these practices are small to
mid-size; there are fewer than 1,000 office-based medical practices in the
United States with more than 25 providers. Small and mid-size health care
practices are significantly under-penetrated with regard to practice management
software and EDI transaction processing. For example, while it is estimated that
the majority of hospitals submit their claims electronically, among small and
mid-size medical practices only approximately 35% submit claims electronically.
INDUSTRY BACKGROUND
Health care costs totalled approximately $1.0 trillion in 1995, having
risen at a rate approximately twice that of inflation during the last decade.
The escalation of such expenditures has led to pressure to contain costs and
attempts to shift the financial risk of delivering health care from payors to
providers. Many providers now participate in complex reimbursement arrangements,
resulting in multiple transactions, information exchanges and other
communications with payors per patient visit. As a result of these trends,
health care providers increasingly need to reduce operating costs, improve cash
flow and manage their businesses more efficiently while responding to the
increased administrative burdens and informational demands placed upon them by
payors. The Company's practice management systems address the efficiencies and
cost savings demanded by health care providers.
The Company believes that increased utilization of information
technologies, including EDI, can provide cost savings to providers and payors,
and to the health care system as a whole. Both payors and providers benefit from
reduced overhead as a result of the administrative simplification provided by
the direct electronic interchange of data traditionally handled manually (i.e.,
eligibility verification and claim status inquiries). In addition, payors are
able to detect fraud more easily and screen for unusual utilization trends. By
processing claims electronically, all providers, but especially office-based
providers, can reduce staff time and help meet the challenges of health care
cost containment initiatives. Providers also benefit from improved accounts
receivable turnover as a result of EDI.
The Company believes that the foregoing trends in the health care industry
will encourage greater consolidation within the practice management software
business, as many of the smaller practice management software companies find it
difficult to address the needs of providers in this rapidly changing
environment. Historically, sellers of health care information systems to
office-based health care providers have been focused either regionally or by
specialty. Due to the fragmented nature of practice management systems
suppliers, the
29
<PAGE> 31
Company believes that opportunities exist to increase its market share of
installed customers through acquisitions of complementary businesses, products
and services.
BUSINESS STRATEGY
The Company believes that it is well-positioned to take advantage of the
increased technology needs of the health care industry particularly among
smaller health care providers. As the supplier of the core practice management
system adopted by its customers, the Company has established its technology in
many customer sites, which, it believes, will yield significant growth
opportunities and competitive advantages.
The Company's primary growth strategies are to:
- Accelerate the Integration of EDI Services. The Company believes that
EDI services address the needs of patients, physicians and third-party
payors to increase efficiency and reduce overall costs while providing
the Company with a potential recurring revenue source. The Company
intends to introduce new EDI services in 1997 which will include
electronic eligibility and referral authorization, precertification,
claims status, encounter and payment approval. The Company intends to
promote the use of EDI services, primarily among the smaller practices
that constitute the core of the Company's existing customer base.
- Expand Through Strategic Acquisitions. The Company intends to acquire
companies that (i) have an established base of customers using practice
management software, (ii) own either key technologies or distribution
networks that complement existing products or (iii) provide the Company
with the opportunity for market leadership within specialty niches.
- Leverage its Customer Base. The Company's wide range of products and
services provides its sales force with opportunities to cross-sell
among its operating divisions. The Company intends to generate revenues
from existing customers by providing (i) system maintenance and
services, (ii) system upgrades, (iii) additional software applications
and (iv) EDI services. To generate new sales opportunities, the Company
will continue to devote significant resources to developing and
maintaining relationships with its existing customers and their
business systems consultants. The Company also will continue to
transition its customers gradually to newer technologies in order to
protect their system investments and minimize operational disruption.
- Expand its National Sales Efforts. The Company intends to expand its
direct sales efforts to market its products and services to a greater
number of health care providers. The Company believes that it can
increase its sales effectiveness and can better address the needs of
small, mid-size and large practices as a result of its organization
into three operating divisions. See "-- Sales and Marketing."
- Continue to Develop and Provide Sophisticated Practice Management
Software Products. In order to serve its customers' needs, the Company
will continue to make available innovative products and develop and
enhance its core practice management applications. In addition, where
appropriate, the Company will integrate software products developed by
third parties into its practice management systems.
- Capitalize on the Combination of Founding Businesses. The Company
believes that the combination of the Founding Businesses provides
unique opportunities for (i) the coordination of product research and
development, sales and marketing, (ii) the reduction of redundant
expenses and operations and (iii) the maximization of the experience of
the assembled management team.
PRODUCTS AND SERVICES
EDI Services
The Company has developed software allowing it to offer transaction-based
EDI services, including patient billing and insurance claims submission. The
Company believes that these services address the needs of patients, physicians
and third-party payors to increase efficiencies and reduce overall costs and
that EDI
30
<PAGE> 32
services present the Company with a new recurring revenue source. The Company
provides EDI services on a fee per transaction basis or for a fixed fee
determined on the basis of estimated volume and type of electronic transactions.
The Company estimates that over 240 million potential annual recurring
transactions are now being generated via non-electronic methods by its base of
installed customers. The Company's current EDI services include:
<TABLE>
<S> <C>
Electronic Claims Submission.................... Submits insurance claims electronically
from practices to an independent national
clearinghouse which forwards, either
electronically or on paper, to the
appropriate payors for payment.
Electronic Patient Billing...................... Submits patient billing information
electronically from practices to an
independent national clearinghouse which
processes, prints and mails bills and
provides billing reports to the practice.
Electronic Claims Remittance.................... Remits insurance payment from payor via
electronic payment which automatically
posts explanation of benefits into the
practice management system.
</TABLE>
The Company intends to market a suite of additional EDI services in 1997
which are currently available through clearinghouses engaged by the Company.
These additional EDI services include electronic eligibility and referral
authorization, precertification, claims status, encounter and payment approval.
In January 1996, ICS entered into an agreement with Envoy Corporation
("Envoy") pursuant to which ICS will exclusively promote to its customers the
electronic processing of health care insurance claims by Envoy. The Company
intends to establish a broader alliance with Envoy or another major
clearinghouse after the consummation of the Offering and believes that such an
alliance is important to the EDI strategy of the Company. There can be no
assurances that such alliance will be entered into.
Core Software Products
All of the practice management software products offered by the Company
provide physicians and other professionals with comprehensive office management
software designed to automate the administrative, financial, practice management
and clinical requirements of a professional's office practice. These systems
range in capacity from one to hundreds of users, allowing the Company to address
the needs of both small and large customers. The Company believes that its
practice management products meet the information requirements of the vast
majority of all medical specialties and office-based practices in the United
States by providing the following applications:
<TABLE>
<S> <C>
FINANCIAL APPLICATIONS
Patient Billing................................. Prepares patient statements. Accommodates
family billing or individual patient
billing and open item billing.
Patient Records................................. Maintains patient demographic, insurance,
financial, referral, diagnosis and other
user defined records.
Insurance Processing............................ Processes and prints claims. Coordinates
benefits when multiple insurance carriers
are involved. Tracks aging and payments of
all claims.
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C>
Refund Processing............................... Prints refund checks for all credit
balances and posts adjusting entries to
patient accounts.
Collection...................................... Enhances the effectiveness of collection
procedures. Standardizes in-house
collection process, tracks collection
results and integrates a series of
delinquency correspondence.
ADMINISTRATIVE APPLICATIONS
Patient Communication........................... Integrates word processor with database to
allow user to create form letters and other
types of repetitive correspondence.
Appointment Scheduling.......................... Automates appointment scheduling. Provides
on-line patient appointment inquiry,
cancellation history, balance inquiry,
credit alerts and patient notes.
Referral Analysis............................... Tracks and analyzes all referral sources,
both statistically and financially.
Categorizes referrals by specialty and
volume.
PRACTICE MANAGEMENT APPLICATIONS
Management Reporting............................ Generates reports including aged accounts
receivable, insurance claims analysis and
aging, physician financial analysis, audit
report, receipts analysis, service
analysis, financial and procedure analysis
and revenue categories.
Report Generator................................ Creates custom reports from practice
management database with ability to store
report formats in a library format.
Graphic Analysis................................ Produces graphs displaying practice
management information and allows formats
to be stored in a library format.
Managed Care Analysis........................... Tracks managed care plans and analyzes them
for profitability to help the practice
manage plan participation.
CLINICAL APPLICATIONS
Patient Medical History......................... Stores and allows retrieval of patient
medical history such as allergies, current
and past diagnoses, procedures with
analysis by gender and age categories.
Patient Treatment Planning...................... Allows automated treatment planning and
tracking.
Hospital Link................................... Permits user's computer to emulate a
terminal connected to hospital system in
order to extract hospital data.
</TABLE>
The Company's core product offerings and services include software,
hardware, installation and training. The prices of the Company's products depend
upon a number of factors, including number of providers, number of system users
and technical platform, and range from $1,500 to over $500,000. Each customer
typically contracts with the Company for maintenance services, with annual fees
ranging from $360 to $40,000. Maintenance contracts are renewable annually.
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<PAGE> 34
Add-On Software Modules
Recently the Company has developed and introduced new information modules
to address certain specific needs of health care practices. These modules can be
integrated with the Company's practice management software products to enhance
their capabilities, which include:
<TABLE>
<S> <C>
Voice Automated Medical Records................. Designed to give physicians the power to
dictate directly to the computer and to
create accurate medical reports in seconds.
Digital Record Keeping(TM)...................... Enables a practice to store and merge
radiographic and photographic images with
correspondence and clinical medical
records.
Optical Mark System(R).......................... Uses optical scanner technology to automate
daily tasks and eliminate data entry.
Laboratory Interface............................ Interfaces with outside medical
laboratories to automate independent
laboratory test requisition and results
reporting processes.
Advanced Analytical Software Products........... Created for use by the professional
business manager or managing physician to
provide a "top down" view of the practice,
identifying financial, payor, patient,
clinical, system and EDI utilization,
practice demographic and practice
profitability trends.
</TABLE>
PRODUCT RESEARCH AND DEVELOPMENT
The Company believes that the health care information system industry is in
a technological transition from older, more structured data base system designs
to products designed to take advantage of (i) newer programming techniques, (ii)
greater processing capability, (iii) increases in data storage, compression and
retrieval capacity, (iv) faster communications, (v) graphical interfaces, (vi)
optical input and digital output and (vii) broad based client server
architecture. The Company is developing a new core practice management product
anticipated to be released in 1997 that utilizes the client server architecture
programmed in a rapid development language applying relational data base and
object oriented technology. The product will incorporate a comprehensive suite
of EDI services that are fully integrated with the core practice management
system, as well as complying with open data base connectivity (ODBC) standards.
This new product is in beta testing. The Company intends to continue to invest
in product development and to emphasize Windows-based products, software
improvements and enhancements to its EDI programs. Also, the Company intends to
expand its voice activation and other technologies, such as imaging and
scanning. See "Risk Factors--Product Development."
As of October 31, 1996, the Company had 47 employees responsible for
product development and technical services.
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<PAGE> 35
SALES AND MARKETING
The Company markets its products to its existing customers via a dedicated
sales force who promote and sell system upgrades, maintenance services,
peripherals, add-on software products and EDI services. The Company believes
that the decision making process of providers to purchase practice management
systems is often influenced by the recommendations of other providers, practice
management consultants and payors. Therefore, the Company intends to target
consultants and payors for sales opportunities. In addition, the Company targets
markets through industry seminars, trade shows, direct telephone and mail
campaigns and advertisements in various publications. The Company markets its
products nationally to new customers through a direct sales force consisting of
32 sales representatives located in: Atlanta, Georgia; Lake Elmo, Minnesota and
Los Angeles, California.
The Company believes that the nature, scope and structure of the purchasers
of health care information systems technology are changing. To address the
complex needs of larger potential customers, the Company is forming an executive
sales group, which will be directed by the Vice President of Sales. Senior
divisional and corporate management also will assist in the sales and marketing
to larger and more technically advanced potential customers.
The Company believes that its fundamental strength lies in its diverse base
of installed customers, which will require more of the Company's products and
services as a result of the impact of managed care on health care providers. It
is a primary focus of the Company to direct a substantial portion of its sales
and marketing efforts to cross-selling its existing customer base for the
introduction of new software products, maintenance and support services and EDI
services.
CUSTOMER SUPPORT AND SERVICES
The Company offers software maintenance and support, enhancements, training
and, to a limited extent, custom development services to its customers. The
Company generally provides a limited warranty of 90 days or less with its
software products. Thereafter, maintenance and support services are available
for an additional charge. Maintenance and support services include telephone
support, maintenance updates, new releases which operate on new operating
systems and/or contain additional features and functions.
The Company believes that support is critical to the successful
installation and on-going operation of its practice management systems, and it
has dedicated substantial resources to customer support. As of October 31, 1996,
the Company had 88 full-time employees engaged in customer services. The Company
offers several toll free support lines staffed by experienced personnel who
answer general questions about the systems and solve operational difficulties.
Technical and research development staff provide additional technical expertise
to solve more complex issues and questions.
The Company operates eight regional customer training, support and service
facilities in: Atlanta, Georgia (three facilities); Lake Elmo, Minnesota; Los
Angeles, California; Charlotte, North Carolina and Pittsburgh, Pennsylvania.
Annual customer meetings are held at various times during the year, and
newsletters are distributed to the Company's customers on a periodic basis.
CUSTOMERS
The Company has installed more than 6,000 practice management systems,
serving approximately 17,000 health care providers that range in practice size
from one to more than 200 providers in all 50 states. The Company has customers
in all major specialties and subspecialties. No single customer accounted for
more than 3% of revenue during 1995.
COMPETITION
The practice management systems industry is highly competitive. There are
numerous competitors, both regional and national, that market in this fragmented
industry. The Company believes that the primary competitive factors in this
market are service, support and customer satisfaction combined with price,
functionality, user friendliness, ongoing product enhancements and the
reputation and stability of the seller.
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<PAGE> 36
The Company believes that its principal competitive advantages are its
commitment to providing the highest level of service and support, its offerings
of feature-rich products customized to meet its customer's needs and size and
its substantial installed customer base. The Company's principal competitors
include other practice management system companies and local software resellers.
In addition, the Company competes with certain national and regional companies
which provide health care information systems and data processing which provide
computerized billing, insurance processing and record management services to
practices. Among the Company's principal competitors are IDX Systems
Corporation, Medic Computer Systems, Inc., Medical Manager Corporation,
Physician Computer Network, Inc. and Quality Systems, Inc. Certain of the
Company's competitors have greater financial, development, technical, marketing
and sales resources than the Company, although the Company believes that none of
its competitors dominates the overall practice management systems market.
Additionally, as the markets for the Company's products and services develop,
additional competitors may enter those markets and competition may intensify.
See "Risk Factors -- Competition."
PRODUCT PROTECTION
The Company regards its software as proprietary. The Company enters into
written license agreements with its customers which limit the use and copying of
its software. "Shrink wrap" licenses are used in connection with certain end
users sales. The Company relies principally on copyright law and trade secret
protection to protect its proprietary software. The software usually is
furnished in object code only, although source code licenses are granted in a
limited number of situations. The Company has not applied for any patents for
its software and does not believe that patent laws will be a source of
protection of the Company's products. Employees and technical consultants of the
Company are required to execute agreements providing for the confidentiality of
information and the assignment to the Company of proprietary property. See "Risk
Factors--Product Protection."
GOVERNMENT REGULATION
Many aspects of the health care industry presently are subject to extensive
federal and state government regulation. Certain of these laws and regulations
are applicable to the record keeping and reporting requirements of health care
providers. The Company will continue to modify its products to assist health
care providers to comply with all applicable laws.
The U.S. Food and Drug Administration (the "FDA") has jurisdiction under
the 1976 Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act
(the "FDC Act") to regulate compute products and software as medical devices if
they are intended for use in the diagnosis, cure, mitigation, treatment or
prevention of disease in humans. The FDA has issued a draft policy statement
under which manufacturers of medical image storage devices and related software
are required to submit to the FDA premarket notification applications and
otherwise comply with the requirements of the FDC Act applicable to medical
devices. Recently, FDA Officials expressed an intention to initiate agency
rulemaking to exempt certain medical image management devices from premarket
notification procedures, but there can be no assurance that such an exemption
actually will be adopted and, if so, that the rulemaking will apply to the
Company's products.
It is unclear to what extent the Company's Digital Record Keeping System,
when marketed with the Company's practice management applications, would be
deemed under the draft policy statement to be a medical device subject to FDA
regulation. Enforcement action can consist of warning letters, refusal to
approve or clear products, revocation of approvals or clearances previously
granted, civil penalties, product seizures, injunctions, recalls, operating
restrictions and criminal prosecutions. Any enforcement action by the FDA, any
refusal by it to grant clearance of the Section 501(k) application or any
substantial delay by the FDA in granting such clearance could have a material
adverse effect on the Company's ability to market its Digital Record Keeping
System. See "Risk Factors--Uncertainty in Health Care Industry; Government
Regulation."
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EMPLOYEES
As of October 31, 1996, the Company employed 203 persons, including 32 in
marketing and sales, 88 in customer support services, 47 in product research and
development and 36 in administration, finance and management. None of the
employees of the Company is represented by a labor union.
FACILITIES
The Company leases nine facilities, having an aggregate of 53,409 square
feet and located in: Atlanta, Georgia (four facilities); Lake Elmo, Minnesota;
Los Angeles, California; Charlotte, North Carolina and Pittsburgh, Pennsylvania.
Sales, product development and administrative functions are conducted at each
facility. The leases have remaining terms ranging between one and five years.
The Company believes that its facilities are adequate for its current needs,
that suitable additional space will be available as required and that
opportunities exist for the Company to consolidate operations in a manner that
may reduce the Company's facilities requirements and rental costs.
LEGAL PROCEEDINGS
The Company is not currently a party to any litigation that would have a
material adverse effect on its business, results of operations or financial
condition.
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<PAGE> 38
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frederick L. Fine.......................... 38 Chairman of the Board, President and Chief
Executive Officer (1)
James K. Price............................. 38 Executive Vice President and Director
Michael E. Warren.......................... 42 Chief Financial Officer and Director
R. Ernest Chastain......................... 47 Vice President -- Sales and Marketing
Donald M. Rogers........................... 38 President, Desktop Division
M. Wayne George............................ 56 President, Enterprise Division
Brad Schraut............................... 35 President, Mid-Range Division
James D. Elliot............................ 36 Director (1)(2)
Richard E. Perlman......................... 50 Director (1)(2)
</TABLE>
- ---------------
(1) Member of the Audit Committee of the Board of Directors
(2) Member of the Compensation Committee of the Board of Directors
The directors are elected annually by the stockholders and hold office
until the next annual meeting of stockholders or until their respective
successors are duly elected and qualified or until their earlier resignation or
removal.
The business experience, principal occupation and employment, as well as
the periods of service of each of the directors and executive officers of the
Company during at least the last five years, are set forth below:
Frederick L. Fine is a founder of the Company. Mr. Fine has served as
president of AMC since 1995 and as president of ICS since 1994. From 1993 to
1995, Mr. Fine served as executive vice president of AMC, and from 1985 to 1994
served as executive vice president of ICS, which he co-founded in 1985. From
1991 to 1993, Mr. Fine served as vice president of Newport Capital, Inc.
("Newport"), predecessor to AMC. Mr. Fine has served as a director of AMC, ICS
and Newport throughout the terms of his employment by each company. From 1983 to
1985, Mr. Fine was a regional manager with Informatics General Corporation, a
supplier of accounting software and from 1981 to 1983 was a sales representative
with Moore Business Systems, a provider of practice management systems. Mr. Fine
holds a B.S. in Economics from the University of Georgia.
James K. Price is a founder of the Company. Mr. Price has served as
executive vice president of AMC since 1995 and was vice president from 1993 to
1995. Mr. Price co-founded ICS and has served as its executive vice president
since 1994, as vice president from 1987 to 1994 and as president from 1985 to
1987. In addition, from 1991 to 1993, Mr. Price was a vice president of Newport.
Mr. Price has served as a director of AMC, ICS and Newport throughout the terms
of his employment by each company. From 1983 to 1985, Mr. Price was health care
sales manager of Executive Business Systems, a practice management systems
supplier, and from 1981 to 1983 was a sales representative with Moore Business
Systems. Mr. Price holds a B.A. in Marketing from the University of Georgia.
Michael E. Warren, since joining AMC in August 1994, has served as its vice
president of operations and as chief financial officer. From 1992 to 1994, Mr.
Warren was director of provider systems at Millennium Healthcare, a supplier of
electronic health care services. From 1986 to 1992, Mr. Warren was director of
the Computer Risk Management Practice in the Southeast of Arthur Andersen, LLP.
From 1983 to 1986, Mr. Warren worked as Manager of Systems Auditing for
NationsBank, and from 1980 to 1983 was an accountant with Coopers & Lybrand,
LLP. Mr. Warren holds a Masters in Business Information Systems from Georgia
State University and a B.A. in Accounting from the University of Georgia. Mr.
Warren is a CPA, a member of the AICPA and a member of the Georgia Society of
CPAs.
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<PAGE> 39
R. Ernest Chastain joined AMC in November 1996. From 1994 until his
employment by AMC he served as vice president of sales of Quality Systems, Inc.,
a health care practice management company; and from 1993 to 1994, Mr. Chastain
served as vice president of sales for ELCOMP, Inc., a health care practice
management company; and from 1983 to 1986, Mr. Chastain served as regional vice
president for Contel Business Systems, Inc., a supplier of practice management
systems, which was acquired in 1986 by Versyss, Inc., another practice
management system supplier. From 1986 to 1992, Mr. Chastain served as vice
president of sales management for Versyss, Inc. Mr. Chastain holds a B.A. in
Marketing from the University of Georgia.
Donald M. Rogers is a founder of DR Software and has served as its
president since its formation in 1984. From 1983 to 1984, Mr. Rogers was an
account manager at HBO & Company, health care software company, and from 1980 to
1983 was a systems analyst at NCR Corporation, a computer hardware manufacturer.
Mr. Rogers holds a B.S. in Management from the State University of New York at
Buffalo.
M. Wayne George is the founder of Millard-Wayne and has served as its
president and chief executive officer since its formation in 1977. From 1975 to
1977, Mr. George was a principal of Dynamic Control Corp, a hospital information
systems developer. From 1971 to 1975, Mr. George served in sales and marketing
capacities for General Systems Division of IBM. Mr. George holds a B.S. in
Industrial Management from the Georgia Institute of Technology.
Brad E. Schraut has served as the president of Rovak, Inc. since 1993. From
1985 to 1993, Mr. Schraut served as Rovak's vice president and was one of the
original founders of the company. From 1984 to 1985 Mr. Schraut was General
Manager of the Los Angeles plant of Scientific Coatings, Inc.
James D. Elliott has been executive vice president and general manager of
GE Integrated Technology Solutions ("GE") since August 1996. Prior to his
current employment, Mr. Elliott co-founded Universal Data Consultants, Inc., a
systems integrator, in 1983 and served as its president from 1983 until it was
purchased by an affiliate of GE in July 1996. Mr. Elliott holds a B.S. in
Economics from the University of Georgia.
Richard E. Perlman is the founder of Compass Partners, L.L.C., a merchant
banking and financial advisory firm specializing in corporate restructuring and
middle market companies and has served as its president since its inception in
May 1995. From 1991 to 1995, Mr. Perlman was executive vice president of Matthew
Stuart & Co., Inc., an investment banking firm. Mr. Perlman received a B.S. in
Economics from The Wharton School of The University of Pennsylvania and a
Masters in Business Administration from the Columbia University Graduate School
of Business.
EXECUTIVE COMPENSATION
InfoCure was incorporated in November 1996 and has not conducted any
operations prior to the Offering; however, the Company anticipates that during
fiscal 1998 annualized base salaries of the chief executive officer and the five
other most highly compensated officers will be as follows: Mr. Fine at $125,000,
Mr. Price at $125,000, Mr. Chastain at $125,000, Mr. Schraut at $110,000, Mr.
Rogers at $110,000 and Mr. George at $110,000. No compensation is payable to
directors for services rendered in such capacity.
STOCK OPTIONS
In October 1996, AMC adopted and issued stock options under AMC's 1996
Stock Option Plan (the "AMC Plan"). All stock options outstanding under the AMC
Plan at the time of the consummation of the Offering will be assumed by the
Company; however, no additional stock options under the AMC Plan will be granted
thereafter. In addition, InfoCure's Board of Directors has adopted the InfoCure
Corporation 1996 Stock Option Plan (the "Company's Plan"), subject to
stockholder approval, and intends to grant stock options to certain key
employees thereunder. A maximum of 840,000 shares of Common Stock may be issued
under the Company's Plan.
The Company's Plan and the AMC Plan (collectively, the "Stock Option
Plans") each provide for the granting to key employees of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code and for
the granting of nonstatutory stock options to employees and consultants. The
Stock Option Plans are administered by the board of directors, or a committee
thereof, which determines the term of
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the option grant, exercise price, number of shares subject to the option, the
vesting schedule and the form of consideration payable upon its exercise.
Options granted under the Stock Option Plans are not transferable by the
optionee other than by will or the laws of descent and distribution, and each
option is exercisable during the lifetime of the optionee only by the optionee.
The exercise price of all incentive stock options granted under the Stock Option
Plans must be at least equal to the fair market value of the common stock on the
date of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the outstanding common stock of
the issuer, the exercise price of any incentive stock option granted must equal
at least 110% of the fair market value on the grant date and the maximum term of
the option must not exceed five years. The term of all options granted under the
Stock Option Plans may not exceed ten years. Stock options may be granted within
ten years of the adoption of the Stock Option Plan by the board of directors.
All stock options under the Stock Option Plans granted in 1996 and to be
granted to executive officers upon the consummation of the Acquisitions shall
expire seven years after the date of grant and vest 25% on each anniversary date
of an option grant, thus becoming fully exercisable on the fourth anniversary of
its grant. The board of directors determines the fair market value of the common
stock on the date of grant. If the executive officer's employment is terminated
for any reason, except a change in control, prior to the vesting of the option,
that portion of the option which has not vested shall be terminated. Upon a
change in control of the Company, all options become fully vested.
As of the date of this Prospectus, options to purchase the equivalent of
149,690 shares of Common Stock were outstanding under the AMC Plan at an
equivalent weighted average exercise price of $3.63 per share. No stock options
granted to date to key employees under the AMC Plan will vest before October 1,
1997. It is contemplated that no additional stock options will be granted under
the AMC Plan. To date, no stock options have been granted under the Company's
Plan.
Michael E. Warren, chief financial officer, was granted two non-qualified
stock options upon his employment with AMC in September 1994. One option, for
the equivalent of 34,412 shares of Common Stock for an aggregate consideration
of $500, was exercised in 1996. The other option, for the equivalent of 34,412
shares of Common Stock at an exercise price of $1.45 per share, is exercisable
at any time prior to September 25, 2000. The stock options granted to Mr.
Warren, to the extent not exercised prior to the consummation of the Offering,
will be assumed by the Company. These stock options were not granted under a
stock option plan under which other persons were granted stock options.
The Company intends to file a registration statement covering the shares of
Common Stock which may be acquired under the Stock Option Plans and the option
granted to Michael E. Warren within 180 days from the date of consummation of
the Offering.
EMPLOYMENT AGREEMENTS
The Company will either enter into employment agreements or assume
employment agreements entered into by AMC with all persons who will become
executive officers of the Company upon the consummation of the Offering.
The Company will enter into five-year employment agreements with Frederick
L. Fine and James K. Price concurrently with the consummation of the
Acquisitions. Each agreement will provide for an annual base salary of $125,000
and a severance payment equal to the then-current annual base salary rate upon
the termination of employment by the Company without cause and a voluntary
termination in the event of a change in control of the Company following the
consummation of the Offering.
Michael E. Warren entered into a three-year employment agreement with AMC
on September 23, 1994. His current annual base salary is $95,000. In addition,
he was granted the two stock options described above. Upon consummation of the
AMC Merger, the Company shall assume the obligations of AMC under this
employment agreement. See "Business--Stock Options."
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<PAGE> 41
R. Ernest Chastain, upon his employment with AMC in November 1996, entered
into a two-year employment agreement at an annual base salary of $125,000. At
that time he was granted an incentive stock option to acquire the equivalent of
92,911 Equivalent Shares of Common Stock at an exercise price of $3.63 per
share. Upon consummation of the AMC Merger, the Company shall assume the
obligations of AMC under this employment agreement.
The Company will enter into two-year employment agreements with M. Wayne
George, Donald M. Rogers and Brad Schraut upon the consummation of the
Acquisitions, each of which will provide an annual base salary of $110,000. In
addition, each agreement will grant the employee a seven-year incentive stock
option with an exercise price equal to the fair market value of the Common Stock
at the time the stock option is granted. The number of shares for which such
stock options will be exercised has not been determined at this time.
Each of the foregoing employment agreements has, or will have, a covenant
that the executive may not compete with the Company for a period of one year
following termination of employment. In addition, certain executive officers,
who are stockholders of the Founding Business, may not compete with the Company
for a period of five years following the consummation of the Acquisitions.
The Company has not adopted a formal bonus plan. However, all executive
officers of the Company are eligible for a bonus depending upon their individual
performance and the performance of the Company to be awarded at the sole
discretion of the Board of Directors.
INDEMNIFICATION
Pursuant to the Company's Certificate of Incorporation and By-laws,
officers and directors of the Company shall be indemnified by the Company to the
fullest extent allowed under Delaware law for claims brought against them in
their capacities as officers or directors. Indemnification is not allowed if the
officer or director does not act in good faith and in a manner reasonably
believed to be in the best interests of the Company, or if the officer or
director had no reasonable cause to believe his conduct was lawful. Accordingly,
indemnification may occur for liabilities arising under the Securities Act. The
Company and the Underwriters have agreed to indemnify each other (including
officers and directors) against certain liabilities, including liabilities under
the Securities Act. See "Underwriting." Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock, after giving effect to the
Acquisitions, by (i) each person who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) each named executive officer of the
Company (iii) each director and person who is or will become a director upon the
consummation of the Offering and (iv) all directors and executive officers as a
group. Except as otherwise indicated, each named beneficial owner has sole
voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND COMMON STOCK OWNED
NATURE OF ---------------------------
BENEFICIAL BEFORE AFTER
NAME OWNERSHIP(1) OFFERING OFFERING(2)
---- ------------ ------------ ------------
<S> <C> <C> <C>
Norson's International, LLC (3)(4)....................... 629,364 17.1% 11.1%
Frederick L. Fine (3)(5)................................. 473,695 12.9 8.3
James K. Price (3)(6).................................... 473,695 12.9 8.3
Robert L. Fine (3)....................................... 362,498 9.9 6.4
William A. Baker (3)..................................... 246,809 6.7 4.3
W. K. Price (3)(7)....................................... 234,535 6.4 4.1
Michael E. Warren........................................ 84,348 2.3 1.5
James D. Elliott......................................... 22,941 * *
Richard E. Perlman (8)................................... 161,377 4.2 2.8
All directors and executive officers as a group (8
persons)............................................... 1,422,418 36.1% 24.0%
</TABLE>
- ---------------
* Indicates less than 1%.
(1) Includes shares subject to outstanding options, which options are
exercisable on the date hereof, and includes all shares of Common Stock
beneficially owned by Compass Partners, L.L.C. ("Compass").
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to 300,000 shares of Common Stock from certain stockholders. See
"Underwriting." It is contemplated that if the over-allotment option is
exercised in full, Robert L. Fine will sell 136,615 shares, W.K. Price will
sell 88,390 shares and Norson's International, LLC ("Norson's") will sell
74,995 shares of Common Stock. The Company will not receive any proceeds
from the sale of Common Stock by these stockholders.
(3) Frederick L. Fine's and James K. Price's address is 2970 Clairmont Road,
Suite 950, Atlanta, Georgia 30329; Norson's address is 1411 Rouse Lane,
Suite 201, Roswell, Georgia 30076; Robert L. Fine's address is 7675 Fox
Court, Duluth, Georgia 30155; William A. Baker's address is 781 Brentwood
Trail, Atlanta, Georgia 30201 and W. K. Price's address is 3987 Land O'
Lakes Drive, Atlanta, Georgia 30342.
(4) Excludes 32,987 shares of Common Stock and a warrant (which warrant is
exercisable on the date hereof) to acquire 128,390 Equivalent Shares of
Common Stock owned by Compass, of which Norson's has shared dispositive
powers with Richard E. Perlman, a director of the Company. Mr. Sauey is the
principal owner of Norson's.
(5) Includes 4,130 shares of Common Stock owned as custodian for his children
and 1,376 shares of Common Stock held in a charitable trust over which he
has sole voting and investment power.
(6) Includes 3,721 shares of Common Stock over which he has sole voting power.
(7) Includes 7,441 shares of Common Stock over which he has sole voting power.
(8) Includes 32,987 shares and a warrant (which warrant is exercisable on the
date hereof) to acquire 128,390 Equivalent Shares of Common Stock owned by
Compass, in which Mr. Perlman has a majority interest and over which Mr.
Perlman and Norson's have shared dispositive powers.
CERTAIN TRANSACTIONS
THE ACQUISITIONS
In connection with the Acquisitions, and as consideration for their
ownership interests in the Founding Businesses, certain persons who are, or are
to become, executive officers of the Company upon the consummation of the
Acquisitions or the holders of more than 5% of the outstanding shares of Common
Stock of the Company will receive shares of Common Stock and/or cash as follows:
Frederick L. Fine, 468,189
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<PAGE> 43
shares of Common Stock; James K. Price, 469,974 shares of Common Stock; Robert
L. Fine, 362,498 shares of Common Stock; William A. Baker, 246,089 shares of
Common Stock; W. K. Price, 227,025 shares of Common Stock; Michael E. Warren,
49,933 shares of Common Stock and an option to acquire 34,412 shares of Common
Stock; Norson's, 629,364 shares of Common Stock; Donald M. Rogers, 86,511 shares
of Common Stock and approximately $2.1 million in cash; M. Wayne George, 26,944
shares of Common Stock and approximately $1.1 million in cash; and Brad Schraut,
approximately $521,000 in cash. Robert L. Fine is the father of Frederick L.
Fine. W. K. Price is the father of James K. Price. If Millard-Wayne meets
certain financial criteria after the Offering, Wayne George may receive up to an
additional 26,944 shares of Common Stock. If Rovak achieves certain financial
criteria after the Offering, Brad Schraut may receive up to 11,007 shares of
Common Stock. Pursuant to certain agreements to be entered into in connection
with the Acquisitions, Mssrs. George, Rogers and Schraut of the Founding
Businesses have agreed not to compete with the Company for five years,
commencing on the date of consummation of the Offering. See "The Company -- The
Acquisitions" and "Risk Factors -- Dependence on Key Employees."
COMPASS
In June 1996, pursuant to a written agreement, AMC engaged Compass to
render financial advisory services in connection with AMC's acquisition program.
Compass received an initial retainer of $15,000 and a monthly retainer of $5,000
per month commencing July 1, 1996, and $10,000 per month from October 1, 1996
through February 28, 1997. As compensation for services, Compass received the
equivalent of 32,987 shares of Common Stock and a warrant exercisable within
five years to purchase the equivalent of 128,390 shares of Common Stock at an
exercise price equal to the AMC stock price as of the date of the agreement
($0.91 per equivalent share) subject to the consummation of the Acquisitions. In
addition, pursuant to the agreement, Compass will receive approximately $410,000
upon the consummation of the Acquisitions. Mr. Perlman, a director of the
Company, is the president and founder of Compass and holds a majority equity
interest in Compass. In addition, Compass shall be entitled to a fee of $200,000
in the event a definitive line of credit agreement is entered into by the
Company with FINOVA. "See Use of Proceeds."
NORSON'S
In July 1996, AMC sold to Norson's in a private placement the equivalent of
120,978 shares of Common Stock for $50,000, and in November 1996, AMC sold
Norson's the equivalent of 508,385 shares of Common Stock for $750,000. Mr.
Sauey holds a 95% equity interest in Norson's.
LOAN BY ROBERT L. FINE
In April 1995, Robert L. Fine loaned AMC $94,500 in exchange for a
promissory note bearing interest at 12% and payable in a balloon payment of
principal and interest in April 1997. The Company intends to repay this loan in
from the proceeds of this Offering. See "Use of Proceeds."
RELEASE OF STOCKHOLDERS' GUARANTY
In November 1996, AMC, ICS, Robert L. Fine, Frederick L. Fine, W.K. Price,
James K. Price and William A. Baker entered into a termination agreement (the
"Termination Agreement") with MDP Corporation ("MDP") and Jonathan J. Oscher,
pursuant to which, upon consummation of the Offering, Robert L. Fine, Frederick
L. Fine, W.K. Price, James K. Price and William A. Baker will be released from
their obligation to pay a termination fee to MDP if the agreement whereby MDP
agreed to act as an electronic claims processing clearinghouse for ICS is
terminated for certain events. In addition, Robert L. Fine and W.K. Price had
secured such obligation with certain real estate parcels with an approximate
value of $300,000, and the Termination Agreement will release these parcels from
such security upon consummation of the Offering. As of the date of this
Prospectus, the termination fee, if triggered, would total approximately
$265,000. The Termination Agreement shall be null and void if the Offering is
not consummated on or before June 30, 1997.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of InfoCure consists of 50,000,000 shares of
capital stock, consisting of 40,000,000 shares of Common Stock, par value $.001
per share, and 10,000,000 shares of preferred stock, par
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<PAGE> 44
value $.001 per share (the "Preferred Stock"). As of December 2, 1996, there
were ten shares of Common Stock of InfoCure outstanding, five shares held of
record by each of Frederick L. Fine and James K. Price. The outstanding shares
of Common Stock are, and the shares to be issued pursuant to the Offering will
be, fully paid and nonassessable. No shares of Preferred Stock are outstanding
or are to be issued in connection with the Acquisitions.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share held of record
on each matter submitted to a vote of stockholders. The holders of Common Stock
have no cumulative voting rights, no pre-emptive rights and no rights to convert
their shares of Common Stock into any other securities. Because holders of
Common Stock do not have cumulative voting rights, the holders of the majority
of the shares of Common Stock represented at the annual meeting of stockholders
can elect all the directors. Under Delaware law, the affirmative vote of a
majority of the outstanding shares of Common Stock is necessary for certain
corporate actions, including merger or consolidation with another corporation,
sale or other disposition of all or substantially all of the Company's property
and assets and voluntary dissolution of the Company. Delaware law allows the
Company to establish a higher percentage of stockholder approval necessary to
take such corporate action.
Holders of Common Stock are entitled to receive dividends when and if
declared by the Board of Directors out of funds legally available therefor,
subject to any contractual restrictions on the payment of dividends. The Company
does not anticipate paying any cash dividends in the foreseeable future. See
"Dividend Policy."
Upon dissolution, liquidation or sale of all or substantially all of the
assets of the Company, and after payment in full of all amounts required to be
paid to creditors and liquidation preferences, if any, the holders of the Common
Stock will be entitled to receive pro rata the net assets of the Company
available for distribution.
PREFERRED STOCK
The Board of Directors is authorized by the Company's Certificate of
Incorporation, without any action of the stockholders, to issue one or more
classes and series of Preferred Stock with respect to which the Board of
Directors may determine voting, conversion, redemption and other rights which
could adversely affect the rights of holders of Common Stock. The rights of the
holders of the Common Stock would generally be subject to the prior rights of
the Preferred Stock with respect to dividends, liquidation preferences and other
matters. Among other things, Preferred Stock could be issued by the Company to
raise capital or to finance acquisitions. The issuance of Preferred Stock under
certain circumstances could have the effect of delaying or preventing a change
of control of the Company. There are no agreements or understandings for the
issuance of Preferred Stock, and the Company has no present plans to issue any
shares of Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock or (iii) on or after such date, the business combination is
approved by the board of directors and by the affirmative vote of at least
66 2/3 of the outstanding voting stock that is not owned by the interested
stockholder. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person, who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock.
43
<PAGE> 45
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is American Stock
Transfer & Trust, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Acquisitions and the Offering, the Company
will have 5,680,626 shares of Common Stock outstanding. In addition, outstanding
stock options and a warrant to acquire 170,544 shares of Common Stock are
immediately exercisable as of the date of this Prospectus. The Company, its
executive officers and directors and certain stockholders who hold an aggregate
of 3,027,078 shares of Common Stock (including 162,801 of the immediately
exercisable stock options and warrants), have agreed with the Underwriters not
to sell or dispose of, directly or indirectly, without the prior written consent
of Rodman & Renshaw, Inc., any of the remaining Common Stock held by them for a
period of 180 days (the "Lock-Up Period") following the date the Commission
declares effective the Registration Statement and, for a period of 18 months
following expiration of the Lock-Up Period, not to publicly offer or sell except
in accordance with the volume limitations of Rule 144(e), except that the
Company may issue shares of Common Stock in connection with acquisitions or upon
the exercise of stock options. Rodman & Renshaw, Inc. has no current intention
to waiver or shorten the Lock-Up Period. See "Risk Factors -- Substantial Shares
Eligible for Future Sale."
In general, under Rules 144 and 145, a person (or group of persons whose
shares are aggregated) who may be deemed "affiliates" (as defined in Rule 144)
of the Company, will be entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of the Common Stock or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding the forwarding of
the notice of proposed sale to the Commission. The sales are also subject to
certain manner of sale limitations, notice requirements and the availability of
current public information about the Company. A person who has not been an
"affiliate" of the Company for the 90 days preceding a sale will be entitled to
sell such shares in the public market without restriction. Securities properly
sold in reliance upon Rules 144 and 145 are thereafter freely tradeable without
restrictions or registration under the Securities Act, unless thereafter held by
an "affiliate" of the Company.
Prior to the Offering, there has been no public market for the Common
Stock, and no predictions can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares for sale will have
on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Company's Common Stock in the public market could
adversely affect market prices. See "Risk Factors -- Substantial Shares Eligible
for Future Sale."
44
<PAGE> 46
UNDERWRITING
The Underwriters named below (the "Underwriters"), represented by Rodman &
Renshaw, Inc. and Cruttenden Roth Incorporated (the "Representatives"), have
severally agreed, subject to the terms and conditions in the underwriting
agreement (the "Underwriting Agreement") by and among the Company and the
Underwriters, to purchase from the Company the number of shares of Common Stock
indicated below opposite their respective names, at the public offering price
less the underwriting discount set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of the shares of Common Stock if they purchase any.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Rodman & Renshaw, Inc. .....................................
Cruttenden Roth Incorporated................................
Total............................................. 2,000,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow selected
dealers a concession of not more than $ per share and the Underwriters
may allow, and such dealers may reallow, a concession of not more than
$ per share to certain other dealers. After the initial public
offering, the offering price and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.
The Selling Stockholders have granted to the Underwriters an over-allotment
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to a maximum of 300,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial shares to be
purchased by the Underwriters. To the extent the Underwriters exercise such
over-allotment option, each of the Underwriters will be committed, subject to
certain conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may exercise this
over-allotment option only to cover over-allotments made in connection with the
Offering.
In connection with the Offering, the Company has agreed to issue and sell
to the Representatives, for nominal consideration, warrants to purchase a number
of shares of Common Stock equal to 10% of the shares of Common Stock sold in the
Offering, exclusive of any shares of Common Stock sold pursuant to the
Underwriters' over-allotment option (the "Representatives' Warrants"). The
Representatives' Warrants will be initially exercisable at a price per share
equal to 120% of the public offering price, commencing one year from the date of
this Prospectus, and will continue to be exercisable for a period of three years
after such date. The Representatives' Warrants are restricted from sale,
transfer, assignment or hypothecation for a period of 12 months from the
effective date of the Offering, except to officers, partners or successors of
the Representatives. The exercise price of the Representatives' Warrants and the
number of shares of Common Stock issuable upon exercise thereof are subject to
adjustment under certain circumstances. The Representatives' Warrants grant to
the holders thereof certain rights regarding the registration of the Common
Stock issuable upon exercise of the Representatives' Warrants.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company, its officers, directors and certain stockholders have agreed
not to sell or dispose of, without the prior written consent of Rodman &
Renshaw, Inc., any shares of Common Stock for a period of 180 days (the "Lock-Up
Period") from the date on which the Registration Statement is declared effective
by the Commission and, for a period of 18 months following expiration of the
Lock-Up Period, not to publicly offer or sell or dispose of any shares of Common
Stock except in accordance with the volume limitations of Rule 144(e), except
with respect to shares of Common Stock being sold in connection with the
Offering.
45
<PAGE> 47
Prior to the Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public price was determined by
negotiations between the Company and the Representatives. Among the factors
considered in such negotiations were the history of and prospects for the
Company and the industry in which it operates, an assessment of the Company's
management, its past and present earnings and the trend of such earnings, the
prospectus for future earnings of the Company, the present state of the
Company's development, the general condition of securities markets at the time
of the Offering and the market price of publicly traded stock of comparable
companies in recent periods.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
and certain other legal matters will be passed upon for the Company and the
Selling Stockholders by Glass, McCullough, Sherrill & Harrold, LLP, 1409
Peachtree Street, N.E., Atlanta, Georgia 30309. Ugo F. Ippolito, a partner of
the firm, owns 2,753 shares of Common Stock. Certain legal matters in connection
with the Offering will be passed upon for the Underwriters by Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176.
EXPERTS
The historical financial statements as indicated on pages F-1 and F-2 of
this Prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in its reports
thereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 (the "Registration Statement") under the Securities Act, with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Certain items were omitted in accordance with the rules and regulations of the
Commission. Any interested party may inspect the Registration Statement without
charge at the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, and may obtain copies of all or any part of it
from the Commission upon payment of the fees prescribed by the Commission.
Statements contained herein which refer to a document as filed as an exhibit to
the Registration Statement are qualified in their entirety by reference to the
copy of such document filed with the Commission.
Following the effectiveness of the Registration Statement, the Company will
be subject to the information requirements of the Securities Exchange Act of
1934, (the "Exchange Act"), and in accordance therewith will file reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy statements and other information regarding the Company at
http://www.sec.gov. AMC has filed reports and other information with the
Commission pursuant to the Exchange Act.
46
<PAGE> 48
INFOCURE CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFOCURE CORPORATION AND FOUNDING BUSINESSES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation..................................... F-3
Pro Forma Combined Balance Sheet as of October 31, 1996... F-4
Pro Forma Combined Statement of Operations for the nine
months ended October 31, 1996.......................... F-6
Pro Forma Combined Statement of Operations for the nine
months ended October 31, 1995.......................... F-7
Pro Forma Combined Statement of Operations for the year
ended January 31, 1996................................. F-8
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-9
INFOCURE CORPORATION
Report of Independent Certified Public Accountants........ F-13
Balance Sheet............................................. F-14
Notes to Balance Sheet.................................... F-15
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants........ F-16
Consolidated Balance Sheets............................... F-17
Consolidated Statements of Operations..................... F-18
Consolidated Statements of Stockholder's Equity (Capital
Deficit)............................................... F-19
Consolidated Statements of Cash Flows..................... F-20
Notes to Consolidated Financial Statements................ F-21
KCOMP MANAGEMENT SYSTEMS, INC.
Report of Independent Certified Public Accountants........ F-29
Balance Sheets............................................ F-30
Statements of Operations.................................. F-31
Statements of Changes in Stockholders' Equity............. F-32
Statements of Cash Flows.................................. F-33
Notes to Financial Statements............................. F-34
MILLARD-WAYNE, INC.
Report of Independent Certified Public Accountants........ F-38
Balance Sheets............................................ F-39
Statements of Operations and Retained Earnings............ F-40
Statements of Cash Flows.................................. F-41
Notes to Financial Statements............................. F-42
HEALTH CARE DIVISION (A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA,
INC.)
Report of Independent Certified Public Accountants........ F-46
Balance Sheets............................................ F-47
Statements of Operations.................................. F-48
Statements of Cash Flows.................................. F-49
Notes to Financial Statements............................. F-50
ROVAK, INC.
Report of Independent Certified Public Accountants........ F-56
Balance Sheets............................................ F-57
Statements of Operations and Accumulated Deficit.......... F-58
Statements of Cash Flows.................................. F-59
Notes to Financial Statements............................. F-60
</TABLE>
F-1
<PAGE> 49
INFOCURE CORPORATION
INDEX TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DR SOFTWARE, INC.
Report of Independent Certified Public Accountants........ F-66
Balance Sheets............................................ F-67
Statements of Operations.................................. F-68
Statements of Stockholders' Equity........................ F-69
Statements of Cash Flows.................................. F-70
Notes to Financial Statements............................. F-71
</TABLE>
F-2
<PAGE> 50
INFOCURE CORPORATION AND FOUNDING BUSINESSES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(UNAUDITED)
The following pro forma combined financial statements give effect to the
acquisition by InfoCure Corporation of six businesses (the "Founding
Businesses", collectively, the "Company"). The Founding Businesses are (i)
International Computer Solutions, Inc. ("ICS"), a subsidiary of AMC, (ii) Health
Care Division, Inc. ("HCD"), a subsidiary of AMC founded in November 1996 to
acquire the assets of Health Care Division of Info Systems of North Carolina,
Inc., (iii) Millard-Wayne, Inc. ("Millard-Wayne"), (iv) DR Software, Inc. ("DR
Software"), (v) KComp Management Systems, Inc. ("KComp") and (vi) Rovak, Inc.
("Rovak"). The merger of AMC with and into InfoCure Corporation will occur
contemporaneously with the closing of the Company's initial public offering (the
"Offering"). Prior to the AMC Merger, AMC will have acquired HCD and
Millard-Wayne. AMC is considered the predecessor to the Company and this
transaction will be accounted for as a combination at historical cost for
accounting purposes. The remaining acquisitions will also be treated as
occurring simultaneously with the closing and will be accounted for as purchases
at estimated fair value for accounting purposes.
Inasmuch as AMC is the predecessor to the Company, the Unaudited Pro Forma
Combined Financial Statements are presented on AMC's reporting period. The
Founding Businesses report on a calendar year, except for HCD, which reports on
a June 30 year, and KComp, which has a March 31 year-end. The Pro Forma Combined
Balance Sheet as of October 31, 1996 includes the balance sheet of AMC at that
date and the balance sheets of the Founding Businesses as of September 30, 1996.
The Pro Forma Combined Statement of Operations for the nine months ended October
31, 1996 and 1995 and the year ended January 31, 1996 include the statements of
operations for AMC for the respective periods and the statements of operations
for the Founding Businesses as of nine month periods ended September 30, 1996
and 1995 and the year ended December 31, 1995. These statements are based on
historical financial statements of the Founding Businesses updated as of and for
periods ending through December 31, 1996 and 1995, included elsewhere in this
Prospectus and the estimates and assumptions set forth below and in the notes to
the Unaudited Pro Forma Combined Financial Statements of the Company.
Additionally, there are no significant events, transactions or trends in the
period September 30 to December 31 which, in the opinion of management, would
make the proforma financial statements significantly different.
The Unaudited Pro Forma Combined Balance Sheet gives effect to the
Acquisitions and the Offering as if they had occurred on October 31, 1996. The
Unaudited Pro Forma Combined Statements of Operations give effect to these
transactions as if they had occurred at the beginning of each period presented.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma combined financial data presented herein do not purport to
represent what the Company's financial position or results of operations would
have actually been had such events occurred at the beginning of the periods
presented, as assumed, or to project the Company's financial position or results
of operations for any future period or the future results of the Company. The
Unaudited Pro Forma Combined Financial Statements should be read in conjunction
with the other financial statements and notes thereto included elsewhere in this
Prospectus. Also see "Risk Factors" included elsewhere in this Prospectus.
F-3
<PAGE> 51
INFOCURE CORPORATION AND FOUNDING BUSINESSES
PRO FORMA COMBINED BALANCE SHEET (1)
AS OF OCTOBER 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DR MILLARD-
AMC SOFTWARE KCOMP HCD ROVAK WAYNE
------- -------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................. $ 183 $ 27 $ 28 $ -- $ -- $ 2
Accounts receivable, net.................. 198 275 449 529 571 287
Inventory................................. -- 100 -- 35 286 --
Deferred tax assets....................... -- -- -- 48 -- 72
Prepaid expenses and other................ 31 73 6 26 52 3
------- ------ ------ ------ ------ ----
Total current assets.............. 412 475 483 638 909 364
Property and equipment, net................. 45 165 86 67 371 127
Capitalized software costs, net............. 36 592 111 130 -- 361
Goodwill, net............................... -- -- 425 -- -- --
Deferred tax assets......................... -- -- -- -- 189 --
Other....................................... 171 -- -- -- 117 18
------- ------ ------ ------ ------ ----
Total assets...................... $ 664 $1,232 $1,105 $ 835 $1,586 $870
======= ====== ====== ====== ====== ====
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Notes payable to bank..................... $ -- $ 70 $ 50 $ -- $ 186 $ 76
Other notes payable....................... -- -- -- -- -- 72
Current portion of long-term debt......... 310 8 437 147 226 59
Accounts payable.......................... 302 155 213 500 397 113
Accrued expenses.......................... 379 137 134 52 78 58
Deferred revenue and customer deposits.... 406 877 123 546 240 313
------- ------ ------ ------ ------ ----
Total current liabilities......... 1,397 1,247 957 1,245 1,127 691
Deferred income tax liabilities............. -- -- -- 44 -- --
Long term debt, less current portion........ 540 21 28 195 627 18
------- ------ ------ ------ ------ ----
Total liabilities................. 1,937 1,268 985 1,484 1,754 709
------- ------ ------ ------ ------ ----
Stockholders' equity (deficit):
Common stock.............................. 47 50 -- -- 158 1
Stock purchase warrant.................... 500 -- -- -- -- --
Additional paid-in capital................ 2,110 -- 4 -- -- 42
Divisional equity (deficit)............... -- -- -- (649) -- --
(Deficit) retained earnings............... (3,830) (86) 116 -- (326) 118
Treasury stock (100) -- -- -- -- --
------- ------ ------ ------ ------ ----
Total stockholders' equity
(deficit)....................... (1,273) (36) 120 (649) (168) 161
------- ------ ------ ------ ------ ----
Total liabilities and
stockholders' equity
(deficit)....................... $ 664 $1,232 $1,105 $ 835 $1,586 $870
======= ====== ====== ====== ====== ====
</TABLE>
- ---------------
(1) Pro forma amounts for InfoCure Corporation have not been included as such
amounts are insignificant.
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE> 52
INFOCURE CORPORATION AND FOUNDING BUSINESSES
PRO FORMA COMBINED BALANCE SHEET (1) -- (CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS TOTAL
----------------------------------- PRO FORMA
SUBTOTAL A B D E ADJUSTMENTS TOTAL
-------- -------- ---- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents.............. $ 240 $ (9,327) $750 $(2,308) $17,900 $ 7,015 $ 7,255
Accounts receivable, net............... 2,309 (326) -- -- -- (326) 1,983
Inventory.............................. 421 -- -- -- -- -- 421
Deferred tax assets.................... 120 (48) -- -- -- (48) 72
Prepaid expenses and other............. 191 (28) -- -- -- (28) 163
------- -------- ---- ------- ------- ------- -------
Total current assets............ 3,281 (9,729) 750 (2,308) 17,900 6,613 9,894
Property and equipment, net.............. 861 -- -- -- -- -- 861
Capitalized software costs, net.......... 1,230 -- -- -- -- -- 1,230
Goodwill, net............................ 425 11,112 -- 410 -- 11,522 11,947
Deferred tax assets...................... 189 -- -- -- -- -- 189
Other.................................... 306 -- -- -- -- -- 306
------- -------- ---- ------- ------- ------- -------
Total assets.................... $ 6,292 $ 1,383 $750 $(1,898) $17,900 $18,135 $24,427
======= ======== ==== ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Notes payable to bank.................. $ 382 $ -- $ -- $ (262) $ -- $ (262) $ 120
Other notes payable.................... 72 -- -- -- -- -- 72
Current portion of long-term debt...... 1,187 (334) -- (388) -- (722) 465
Accounts payable....................... 1,680 (41) -- -- -- (41) 1,639
Accrued expenses....................... 838 320 -- (35) -- 285 1,123
Deferred revenue and customer
deposits............................. 2,505 -- -- (265) -- (265) 2,240
------- -------- ---- ------- ------- ------- -------
Total current liabilities....... 6,664 (55) -- (950) -- (1,005) 5,659
Deferred income tax liabilities.......... 44 (44) -- -- -- (44) --
Long-term debt, less current portion..... 1,429 (223) -- (898) -- (1,121) 308
------- -------- ---- ------- ------- ------- -------
Total liabilities............... 8,137 (322) -- (1,848) -- (2,170) 5,967
------- -------- ---- ------- ------- ------- -------
Stockholders' equity (deficit):
Common stock........................... 256 (253) 1 -- 2 (250) 6
Stock purchase warrant................. 500 -- -- (500) -- (500) --
Additional paid-in capital............. 2,156 1,031 749 450 17,898 20,128 22,284
Divisional equity (deficit)............ (649) 649 -- -- -- 649 --
(Deficit) retained earnings............ (4,008) 178 -- -- -- 178 (3,830)
Treasury stock......................... (100) 100 -- -- -- 100 --
------- -------- ---- ------- ------- ------- -------
Total stockholders' equity
(deficit)..................... (1,845) 1,705 750 (50) 17,900 20,305 18,460
------- -------- ---- ------- ------- ------- -------
Total liabilities and
stockholders' equity
(deficit)..................... $ 6,292 $ 1,383 $750 $(1,898) $17,900 $18,135 $24,427
======= ======== ==== ======= ======= ======= =======
</TABLE>
- ---------------
(1) Pro forma amounts for InfoCure Corporation have not been included as such
amounts are insignificant.
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE> 53
INFOCURE CORPORATION AND FOUNDING BUSINESSES
PRO FORMA COMBINED STATEMENT OF OPERATIONS (1)
NINE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DR MILLARD-
AMC SOFTWARE KCOMP HCD ROVAK WAYNE
------ -------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales................................ $ 592 $1,448 $ 284 $1,681 $2,462 $ 661
Maintenance and support................................... 1,068 1,050 1,275 1,296 654 984
Other..................................................... -- -- -- 62 548 55
------ ------ ------ ------ ------ ------
Total revenues...................................... 1,660 2,498 1,559 3,039 3,664 1,700
Cost of revenues............................................ 299 584 112 917 1,726 328
------ ------ ------ ------ ------ ------
Gross profit................................................ 1,361 1,914 1,447 2,122 1,938 1,372
------ ------ ------ ------ ------ ------
Operating expenses:
Selling, general and administrative....................... 1,574 1,731 1,134 2,055 1,682 1,275
Depreciation.............................................. 20 43 15 3 53 34
Amortization.............................................. 35 193 49 85 -- 92
------ ------ ------ ------ ------ ------
Total operating expenses............................ 1,629 1,967 1,198 2,143 1,735 1,401
------ ------ ------ ------ ------ ------
Gross operating income (loss)............................... (268) (53) 249 (21) 203 (29)
------ ------ ------ ------ ------ ------
Other expense (income):
Interest expense.......................................... 60 9 33 27 109 19
Other..................................................... (3) (19) 2 -- (10) --
------ ------ ------ ------ ------ ------
Total other expense (income)........................ 57 (10) 35 27 99 19
------ ------ ------ ------ ------ ------
Income (loss) before taxes.................................. (325) (43) 214 (48) 104 (48)
Taxes (benefit)............................................. -- -- 46 (19) 46 (20)
------ ------ ------ ------ ------ ------
Net income (loss)................................... $ (325) $ (43) $ 168 $ (29) $ 58 $ (28)
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS TOTAL
------------------------------- PRO FORMA
SUBTOTAL C F G H ADJUSTMENTS TOTAL
-------- ----- ----- ----- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales........................... $7,128 $ -- $ -- $ -- $ -- $ -- $ 7,128
Maintenance and support.............................. 6,327 -- -- -- -- 6,327
Other................................................ 665 -- -- -- -- -- 665
------ ----- ----- ----- ------- ------- -------
Total revenues................................. 14,120 -- -- -- -- -- 14,120
Cost of revenues....................................... 3,966 -- -- -- -- -- 3,966
------ ----- ----- ----- ------- ------- -------
Gross profit........................................... 10,154 -- -- -- -- -- 10,154
------ ----- ----- ----- ------- ------- -------
Operating expenses:
Selling, general and administrative.................. 9,451 -- -- -- (1,821) (1,821) 7,630
Depreciation......................................... 168 -- -- -- -- -- 168
Amortization......................................... 454 -- 386 -- -- 386 840
------ ----- ----- ----- ------- ------- -------
Total operating expenses....................... 10,073 -- 386 -- (1,821) (1,435) 8,638
------ ----- ----- ----- ------- ------- -------
Gross operating income (loss).......................... 81 -- (386) -- 1,821 1,435 1,516
------ ----- ----- ----- ------- ------- -------
Other expense (income):
Interest expense..................................... $ 257 $ -- $ -- $(161) $ (27) $ (188) $ 69
Other................................................ (30) -- -- -- -- -- (30)
------ ----- ----- ----- ------- ------- -------
Total other expense (income)................... 227 -- -- (161) (27) (188) 39
------ ----- ----- ----- ------- ------- -------
Income (loss) before taxes............................. (146) -- (386) 161 1,848 1,623 1,477
Taxes (benefit)........................................ 53 (113) (29) 63 721 642 695
------ ----- ----- ----- ------- ------- -------
Net income (loss).............................. $ (199) $ 113 $(357) $ 98 $ 1,127 $ 981 $ 782
====== ===== ===== ===== ======= ======= =======
Pro forma income per share............................. $ 0.15
=======
Shares used in computing pro forma income per share
(I).................................................. 5,201
=======
</TABLE>
- ---------------
(1) Pro forma amounts for InfoCure Corporation have not been included as such
amounts are insignificant.
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<PAGE> 54
INFOCURE CORPORATION AND FOUNDING BUSINESSES
PRO FORMA COMBINED STATEMENT OF OPERATIONS (1)
NINE MONTHS ENDED OCTOBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DR MILLARD-
AMC SOFTWARE HCD ROVAK WAYNE
------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales................................ $ 734 $1,633 $1,928 $1,818 $ 543
Maintenance and support................................... 1,181 871 1,607 421 868
Other..................................................... -- -- 64 439 59
------ ------ ------ ------ ------
Total revenues...................................... 1,915 2,504 3,599 2,678 1,470
Cost of revenues............................................ 434 793 1,234 1,244 194
------ ------ ------ ------ ------
Gross profit................................................ 1,481 1,711 2,365 1,434 1,276
------ ------ ------ ------ ------
Operating expenses:
Selling, general and administrative....................... 1,491 1,499 2,325 1,473 987
Depreciation.............................................. 25 37 8 26 49
Amortization.............................................. 57 182 103 -- 129
------ ------ ------ ------ ------
Total operating expenses............................ 1,573 1,718 2,436 1,499 1,165
------ ------ ------ ------ ------
Gross operating income (loss)............................... (92) (7) (71) (65) 111
------ ------ ------ ------ ------
Other expense (income):
Interest expense.......................................... 47 8 3 100 19
Other..................................................... (115) (1) -- -- 17
------ ------ ------ ------ ------
Total other expense (income)........................ (68) 7 3 100 36
------ ------ ------ ------ ------
Income (loss) before taxes.................................. (24) (14) (74) (165) 75
Taxes (benefit)............................................. -- -- (29) (65) 31
------ ------ ------ ------ ------
Net income (loss)................................... $ (24) $ (14) $ (45) $ (100) $ 44
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS TOTAL
------------------------------ PRO FORMA
SUBTOTAL C F G H ADJUSTMENTS TOTAL
-------- ----- ----- ---- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales............................. $ 6,656 $ -- $ -- $ -- $ -- $ -- $ 6,656
Maintenance and support................................ 4,948 -- -- -- -- -- 4,948
Other.................................................. 562 -- -- -- -- -- 562
------- ----- ----- ---- ------- ------- -------
Total revenues................................... 12,166 -- -- -- -- -- 12,166
Cost of revenues......................................... 3,899 -- -- -- -- -- 3,899
------- ----- ----- ---- ------- ------- -------
Gross profit............................................. 8,267 -- -- -- -- -- 8,267
Operating expenses:
Selling, general and administrative.................... 7,775 -- -- -- (1,686) (1,686) 6,089
Depreciation........................................... 145 -- 20 -- -- 20 165
Amortization........................................... 471 -- 356 -- -- 356 827
------- ----- ----- ---- ------- ------- -------
Total operating expenses......................... 8,391 -- 376 -- (1,686) (1,310) 7,081
------- ----- ----- ---- ------- ------- -------
Gross operating income (loss)............................ (124) -- (376) -- 1,686 1,310 1,186
------- ----- ----- ---- ------- ------- -------
Other expense (income):
Interest expense....................................... 177 -- -- (92) (3) (95) 82
Other.................................................. (99) -- -- -- -- -- (99)
------- ----- ----- ---- ------- ------- -------
Total expense (income)........................... 78 -- -- (92) (3) (95) (17)
------- ----- ----- ---- ------- ------- -------
Income (loss) before taxes............................... (202) -- (376) 92 1,689 1,405 1,203
Taxes (benefit).......................................... (63) (17) (19) 36 659 659 596
------- ----- ----- ---- ------- ------- -------
Net income (loss)................................ (139) $ 17 $(357) $ 56 $ 1,030 $ 746 $ 607
======= ===== ===== ==== ======= ======= =======
Pro forma income per share............................... $ 0.12
=======
Shares used in computing pro forma income per share
(I).................................................... 5,201
=======
</TABLE>
- ---------------
(1) Pro forma amounts for InfoCure Corporation have not been included as such
amounts are insignificant.
See accompanying notes to unaudited pro forma combined financial statements.
F-7
<PAGE> 55
INFOCURE CORPORATION AND FOUNDING BUSINESSES
PRO FORMA COMBINED STATEMENT OF OPERATIONS(1)
YEAR ENDED JANUARY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DR MILLARD-
AMC SOFTWARE HCD ROVAK WAYNE
------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales................................ $ 900 $2,192 $2,957 $2,695 $ 800
Maintenance and support................................... 1,513 1,212 1,764 503 1,244
Other..................................................... -- -- 85 604 73
------ ------ ------ ------ ------
Total revenues...................................... 2,413 3,404 4,806 3,802 2,117
Cost of revenues............................................ 516 1,074 1,445 1,811 291
------ ------ ------ ------ ------
Gross margin................................................ 1,897 2,330 3,361 1,991 1,826
------ ------ ------ ------ ------
Operating expenses:
Selling, general and administrative....................... 2,017 2,050 3,167 2,065 1,521
Depreciation.............................................. 32 49 4 68 64
Amortization.............................................. 80 244 141 -- 172
------ ------ ------ ------ ------
Total operating expenses............................ 2,129 2,343 3,312 2,133 1,757
------ ------ ------ ------ ------
Gross operating income (loss)............................... (232) (13) 49 (142) 69
------ ------ ------ ------ ------
Other expense (income):
Interest expense.......................................... 69 11 26 133 23
Other..................................................... (121) (12) -- (5) 17
------ ------ ------ ------ ------
Total other expense (income)........................ (52) (1) 26 128 40
------ ------ ------ ------ ------
Income (loss) before taxes.................................. (180) (12) 23 (270) 29
Taxes (benefit)............................................. -- -- 9 (99) (5)
------ ------ ------ ------ ------
Net income (loss)................................... $ (180) $ (12) $ 14 $ (171) $ 34
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS TOTAL
------------------------------- PRO FORMA
SUBTOTAL C F G H ADJUSTMENTS TOTAL
-------- ----- ----- ----- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software sales........................... $ 9,544 $ -- $ -- $ -- $ -- $ -- $ 9,544
Maintenance and support.............................. 6,236 -- -- -- -- -- 6,236
Other................................................ 762 -- -- -- -- -- 762
------- ----- ----- ----- ------- ------- -------
Total revenues................................. 16,542 -- -- -- -- -- 16,542
Cost of revenues....................................... 5,137 -- -- -- -- -- 5,137
------- ----- ----- ----- ------- ------- -------
Gross profit........................................... 11,405 -- -- -- -- -- 11,405
------- ----- ----- ----- ------- ------- -------
Operating expenses:
Selling general and administrative................... 10,820 -- -- -- (2,433) (2,433) 8,387
Depreciation......................................... 217 -- -- -- -- -- 217
Amortization......................................... 637 -- 468 -- -- 468 1,105
------- ----- ----- ----- ------- ------- -------
Total operating expenses....................... 11,674 -- 468 -- (2,433) (1,965) 9,709
------- ----- ----- ----- ------- ------- -------
Gross operating income (loss).......................... (269) -- (468) -- 2,433 1,965 1,696
------- ----- ----- ----- ------- ------- -------
Other expense (income):
Interest expense..................................... 262 -- -- (159) (26) (185) 77
Other................................................ (121) -- -- -- -- -- (121)
------- ----- ----- ----- ------- ------- -------
Total other expense (income)................... 141 -- -- (159) (26) (185) (44)
------- ----- ----- ----- ------- ------- -------
Income (loss) before taxes............................. (410) -- (468) 159 2,459 2,150 1,740
Taxes (benefit)........................................ (95) (73) (11) 62 959 937 842
------- ----- ----- ----- ------- ------- -------
Net income (loss).............................. $ (315) $ 73 $(457) $ 97 $ 1,500 $ 1,213 $ 898
======= ===== ===== ===== ======= ======= =======
Pro forma income per share............................. $ 0.17
=======
Shares used in computing pro forma income per
share(I)............................................. 5,201
=======
</TABLE>
- ---------------
(1) Pro forma amounts for InfoCure Corporation have not been included as such
amounts are insignificant.
See accompanying notes to unaudited pro forma combined financial statements.
F-8
<PAGE> 56
INFOCURE CORPORATION AND FOUNDING BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. INFOCURE CORPORATION BACKGROUND
InfoCure Corporation ("InfoCure") was formed to bring together in one
entity the research, development, service and support and sales and marketing
efforts for a comprehensive array of practice management systems. InfoCure has
conducted no operations to date and will acquire the Founding Businesses
contemporaneously with the consummation of the Offering.
2. HISTORICAL FINANCIAL STATEMENTS
The historical financial statements represent the financial position and
results of operations of all the Founding Businesses and were derived from the
respective financial statements where indicated. The audited historical
financial statements included elsewhere in this Prospectus have been included in
accordance with Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 80.
3. ACQUISITION OF FOUNDING COMPANIES
Contemporaneously with the consummation of the Offering, InfoCure will
acquire substantially all of the net assets of the Founding Businesses. The AMC
merger (for 3,594,115 shares) will be accounted for as a combination at
historical cost and the acquisition of the Founding Businesses will be recorded
at fair value.
The following table sets forth for the Founding Businesses the
consideration to be paid to their common stockholders in cash and in shares of
common stock of InfoCure:
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
FAIR VALUE OF
CASH SHARES SHARES(1)
------- -------- --------------
(IN THOUSANDS, EXCEPT SHARES)
<S> <C> <C> <C>
DR Software........................................... $ 2,128 86,511 $ 865
KCOMP................................................. 1,533 -- --
HCD................................................... 1,583 -- --
Rovak................................................. 2,983 -- --
Millard-Wayne......................................... 1,100 26,944 269
------- -------- -------
Total....................................... $ 9,327 113,455 $ 1,134
======= ======== =======
Total consideration for these companies(2)................................ $10,461
Net book value (deficit) of these companies' assets....................... (651)
-------
Consideration allocated to goodwill....................................... $11,112
=======
</TABLE>
- ---------------
(1) Estimated at $10.00 per share, the assumed initial public offering price.
(2) Excludes contingent consideration payable or issuable to the selling
stockholders of Millard-Wayne and Rovak.
Due to the nature of the identifiable net assets, the book values were
determined to approximate fair value at the date of the acquisition. Property
and equipment are assigned lives of 3 to 5 years. Capitalized software costs
represent the intangible asset associated with enhancements and new modules for
existing products. Such costs are capitalized when technological feasibility is
determined and expensed when available for general release. These costs
generally have an estimated useful life of four years. The allocation to
goodwill of the consideration in excess of net book value for these acquisitions
recognizes the absence of other specifically identifiable intangible assets and
is reflective of the value ascribed to the ongoing businesses and the revenue
potential for existing and future products and services, particularly electronic
transactions processing, which the Company feels can be derived from the
installed customer base being acquired.
F-9
<PAGE> 57
INFOCURE CORPORATION AND FOUNDING BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(A) Records the cash portion to be paid and the shares of stock to be issued to
the stockholders of the Founding Businesses in connection with the
acquisitions and elimination of subsidiary equity accounts for the combined
pro forma balance sheet. Additionally, reflects adjustments for certain
assets and liabilities not acquired and/or converted to equity as part of
the acquisition agreements.
(B) Records the cash proceeds of issuance by AMC in November 1996 of the
equivalent of 508,385 shares of Common Stock for $750,000.
(D) Records the repayment of certain debt obligations and other pro forma
adjustments. Of the anticipated debt repayment: $475,715 reduces AMC's
obligations under terms of a 11.25% note payable to the Small Business
Administration ("SBA") ($381,215) and a 12% note payable to a stockholder
($94,500), $135,440 reduces Millard-Wayne's obligations under 10.25% bank
notes payable and $936,972 reduces Rovak's obligations under a prime plus
.5% bank note payable ($186,032), prime plus 2% notes payable to the SBA
($647,885), and other miscellaneous notes payable to stockholders
($103,055). Additionally, payments totalling $350,000 are anticipated to
eliminate AMC's obligations under the terms of a claims processing
agreement ($265,000), a stock purchase warrant ($50,000) and certain
accrued expenses ($35,000). Further, approximately $410,000 in additional
acquisition-related expenses are to be paid from proceeds of the Offering.
(E) Records the proceeds from the issuance of 2,000,000 shares of InfoCure
common stock, net of estimated offering costs of $2,100,000 (based on an
assumed initial public offering price of $10 per share, the midpoint of the
estimated price range); offering costs consist primarily of underwriting
discounts and commissions, legal fees, accounting fees and printing
expenses.
The holders of 3,027,078 shares of Common Stock issued in partial payment
of the acquisitions have agreed not to offer, sell or otherwise dispose of any
of those shares for a period of 180 days after the Offering and for 18 months
thereafter (or for such shorter period as the SEC may prescribe as the holding
period for restricted securities under Rule 144(e)).
5. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
(C) Records the adjustment to the provision for federal and state income taxes
relating to the tax effect of filing a consolidated return.
(F) Records pro forma change to adjust amortization of capitalized software
development costs to a useful life of four years. Also, records the
amortization on a straight-line basis over 15 years of goodwill associated
with the acquisition of the Founding Businesses. Management believes that a
15 year useful life is a conservative estimate of the useful life of
goodwill measured against the estimated discounted future cash flows of the
Founding Businesses after the acquisitions. The related tax benefit is
based on the deductible portion of goodwill.
(G) Records the pro forma change in interest expense for pro forma adjustments
to debt.
F-10
<PAGE> 58
INFOCURE CORPORATION AND FOUNDING BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(H) Records pro forma adjustments to compensation expense and certain other
operating expenses pursuant to the acquisition agreements of the Founding
Businesses where certain personnel will be eliminated. Corporate overhead
and interest expense allocation from the former parent company of HCD is
also eliminated pursuant to terms of the acquisition agreement. These
adjustments are summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR
OCTOBER 31, ENDED
------------------------- JANUARY 31,
(IN THOUSANDS) 1996 1995 1996
-------------- ----------- ----------- -----------
<S> <C> <C> <C>
Reduction of compensation and related expenses........ $1,330 $1,231 $1,773
Reduction in rental and certain operating expenses.... 505 323 477
Reduction in corporate allocations to HCD:
Corporate overhead.................................. 264 324 476
ESOP expenses....................................... 61 147 159
Interest............................................ 27 3 26
Increase in the Company's overhead expenses to
integrate the acquisitions.......................... (339) (339) (452)
------ ------ ------
$1,848 $1,689 $2,459
====== ====== ======
</TABLE>
The acquisition of HCD was consummated on December 3, 1996. As a result,
certain personnel and costs which were not part of the acquisition have
been eliminated. Consequently, the Company considers that, on an annualized
basis, such costs savings have been effected as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) AMOUNT
-------------- ------
<S> <C>
Compensation, primarily duplicative administrative
functions................................................. $1,130
Allocations from the division's former parent company:
Overhead.................................................. 476
ESOP expenses............................................. 159
Rent...................................................... 117
Interest.................................................. 26
------
$1,908
======
</TABLE>
Additionally, pro forma reductions in rental and other operating expenses
include the elimination of certain commissions and royalties which are
payable by Rovak under agreements that will be terminated following
consummation of the Acquisitions. Such adjustments are approximately
$125,000, $86,000 and $241,000 for the year ended January 31, 1996 and the
nine months ended October 31, 1995 and 1996, respectively.
Finally, of the remaining pro forma expense reductions for the year ended
January 31, 1996, approximately $100,000 relate to adjustments in
compensation of certain key executives as part of employment agreements to
be effective upon consummation of the Acquisitions. The balance relates to
costs associated with duplicative functions to be eliminated, net of
increases in certain administrative costs deemed appropriate to effect
integration of the Acquisitions. These adjustments are made based on
appropriate provisions of the respective acquisition agreements. The
effects of the pro forma adjustments have been applied to the nine month
periods ended October 31, 1996 and 1995 on bases designed to be consistent
with the annual period presented.
F-11
<PAGE> 59
INFOCURE CORPORATION AND FOUNDING BUSINESSES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(I) The weighted average number of shares used to calculate pro forma earnings
per share included the following:
<TABLE>
<S> <C>
Issued to acquire Founding Businesses....................... 3,680,626
Issued to pay cash portion of Acquisitions.................. 1,025,363
Issued to pay certain indebtedness.......................... 202,570
Issued to pay certain costs................................. 45,810
Shares assumed issued from exercise of options and a
warrant................................................... 319,374
Shares assumed repurchased from proceeds from shares assumed
issued from exercise of options........................... (72,284)
---------
Shares estimated to be outstanding.......................... 5,201,459
---------
</TABLE>
F-12
<PAGE> 60
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
InfoCure Corporation
Atlanta, Georgia
We have audited the accompanying balance sheet of InfoCure Corporation as
of November 27, 1996. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1 to the balance sheet, the Company was formed in
November 1996 and has entered into definitive agreements for the acquisition of
six healthcare information systems businesses ("the Founding Businesses")
through transactions involving American Medcare Corporation, Inc.; Health Care
Division of Info Systems of North Carolina; Inc., Millard-Wayne, Inc.; DR
Software, Inc.; KComp Management Systems, Inc. and Rovak, Inc. concurrently with
an initial public offering of its common stock.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of InfoCure Corporation as of November
27, 1996 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
February 18, 1997
Atlanta, Georgia
F-13
<PAGE> 61
INFOCURE CORPORATION
BALANCE SHEET
AS OF NOVEMBER 27, 1996
<TABLE>
<S> <C>
ASSETS:
Subscription receivable..................................... $100
----
$100
====
LIABILITIES AND STOCKHOLDERS' EQUITY:
Stockholders' equity:
Preferred Stock, $0.001 par value, 10,000,000 shares
authorized, none issued and outstanding................ $ --
Common Stock, $0.001 par value, 40,000,000 shares
authorized, 10 shares issued and outstanding........... 1
Additional paid in capital................................ 99
----
Total stockholders' equity........................ $100
====
</TABLE>
See accompanying notes to balance sheet.
F-14
<PAGE> 62
INFOCURE CORPORATION
NOTES TO BALANCE SHEET
NOVEMBER 27, 1996
NOTE 1 -- ORGANIZATION AND GENERAL
InfoCure Corporation ("InfoCure") was formed in November 1996 to develop,
market and service healthcare information systems for use by healthcare
providers throughout the United States. InfoCure has conducted no operations to
date and will acquire the Founding Businesses concurrently with the consummation
of an initial public offering of its common stock.
F-15
<PAGE> 63
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
American Medcare Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of American
Medcare Corporation and subsidiaries as of January 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (capital
deficit) and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described in Note 3, effective October 29, 1993, the Company acquired
all of the outstanding capital stock of Integrated Computer Systems, Inc. and
Electronic Transmitting Solutions, Inc. On July 22, 1994, Integrated Computer
Systems, Inc. and Electronic Transmitting Solutions, Inc. filed voluntary
petitions for Chapter 7 bankruptcy with the United States Bankruptcy
Court -- Northern District of Georgia. Accordingly, the subsidiaries are not
consolidated.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Medcare Corporation and subsidiaries at January 31, 1995 and 1996, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
April 12, 1996
(except for Notes 11 and 13,
as to which
the date is December 20, 1996
and Note 15, as to
which the date is
February 18, 1997)
Atlanta, Georgia
F-16
<PAGE> 64
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
------------------------- OCTOBER 31,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............................. $ 4,684 $ 249,698 $ 183,012
Accounts and notes receivable, net.................... 283,888 156,936 196,547
Prepaid expenses and other current assets............. 27,195 32,620 30,888
----------- ----------- -----------
Total current assets.......................... 315,767 439,254 410,447
Property and equipment, net............................. 72,789 54,372 45,282
Miscellaneous........................................... 156,934 73,315 207,852
----------- ----------- -----------
$ 545,490 $ 566,941 $ 663,581
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT):
Current liabilities:
Accounts payable...................................... $ 462,227 $ 374,824 $ 300,879
Accrued expenses...................................... 408,459 448,627 379,269
Deferred revenue...................................... 502,916 481,224 405,677
Note payable.......................................... 73,027 -- --
Current portion of long-term debt..................... 47,565 335,542 311,131
----------- ----------- -----------
Total current liabilities..................... 1,494,194 1,640,217 1,396,956
Long-term debt, less current portion.................... 419,154 544,780 539,314
----------- ----------- -----------
Total liabilities............................. 1,913,348 2,184,997 1,936,270
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity (capital deficit):
Common stock.......................................... 41,577 41,577 47,470
Stock purchase warrant................................ 500,000 500,000 500,000
Additional paid-in capital............................ 1,415,249 1,445,247 2,110,197
Deficit............................................... (3,324,684) (3,504,880) (3,830,356)
Treasury stock, 228,489 shares at cost................ -- (100,000) (100,000)
----------- ----------- -----------
Total stockholders' equity (capital
deficit).................................... (1,367,858) (1,618,056) (1,272,689)
----------- ----------- -----------
$ 545,490 $ 566,941 $ 663,581
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE> 65
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, NINE MONTHS ENDED OCTOBER 31,
-------------------------- ------------------------------
1995 1996 1995 1996
----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Software and services............... $ 2,865,582 $ 2,026,114 $ 1,618,336 $ 1,429,876
Hardware............................ 619,977 386,620 296,688 229,795
----------- ----------- ----------- -----------
Total revenues...................... 3,485,559 2,412,734 1,915,024 1,659,671
Cost of revenues...................... 1,115,726 515,842 434,099 299,075
----------- ----------- ----------- -----------
Gross margin.......................... 2,369,833 1,896,892 1,480,925 1,360,596
----------- ----------- ----------- -----------
Operating expenses:
Salaries and operating expenses..... 2,848,005 2,017,389 1,491,483 1,573,935
Depreciation and amortization....... 563,690 112,314 81,653 54,890
----------- ----------- ----------- -----------
Total operating expenses............ 3,411,695 2,129,703 1,573,136 1,628,825
----------- ----------- ----------- -----------
Loss from operations.................. (1,041,862) (232,811) (92,211) (268,229)
Other income (expense):
Interest expense.................... (54,116) (68,609) (46,909) (60,680)
Other income, net................... 20,670 121,224 115,175 3,433
----------- ----------- ----------- -----------
Net loss.............................. $(1,075,308) $ (180,196) $ (23,945) $ (325,476)
=========== =========== =========== ===========
Net loss per common share............. $ (0.03) $ (0.00) $ (0.00) $ (0.01)
=========== =========== =========== ===========
Weighted average common shares
outstanding......................... 41,963,205 41,387,381 41,349,299 43,531,234
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE> 66
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLAR VALUE
--------------------- ------------------- STOCK ADDITIONAL
COMMON TREASURY COMMON TREASURY PURCHASE PAID-IN
STOCK STOCK STOCK STOCK WARRANT CAPITAL DEFICIT TOTAL
---------- -------- ------- --------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at January 31,
1994.................... 40,652,788 -- $40,652 $ -- $500,000 $1,274,175 $(2,249,376) $ (434,549)
Issuance of 925,000
shares................ 925,000 -- 925 -- 128,575 -- 129,500
Issuance of stock
options............... -- -- -- -- -- 12,499 12,499
Net loss.................. -- -- -- -- -- -- (1,075,308) (1,075,308)
---------- -------- ------- --------- -------- ---------- ----------- -----------
Balance, at January 31,
1995.................... 41,577,788 -- 41,577 -- 500,000 1,415,249 (3,324,684) $(1,367,858)
Acquisition of treasury
stock................. -- (228,489) -- (100,000) -- -- -- (100,000)
Issuance of stock
options............... -- -- -- -- -- 29,998 -- 29,998
Net loss.................. -- -- -- -- -- -- (180,196) (180,196)
---------- -------- ------- --------- -------- ---------- ----------- -----------
Balance, at January 31,
1996.................... 41,577,788 (228,489) 41,577 (100,000) 500,000 1,445,247 (3,504,880) (1,618,056)
Issuance of common stock
(unaudited)........... 5,892,286 -- 5,893 -- -- 642,450 -- 648,343
Issuance of stock
options (unaudited)... -- -- -- -- -- 22,500 -- 22,500
Net loss (unaudited).... -- -- -- -- -- -- (325,476) (325,476)
---------- -------- ------- --------- -------- ---------- ----------- -----------
Balance, at October 31,
1996 (unaudited)........ 47,470,074 (228,489) $47,470 $(100,000) $500,000 $2,110,197 $(3,830,356) $(1,272,689)
========== ======== ======= ========= ======== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 67
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JANUARY 31, OCTOBER 31,
----------------------- ---------------------
1995 1996 1995 1996
----------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash provided by (used for) operating
activities:
Net loss...................................... $(1,075,308) $(180,196) $ (23,945) $(325,476)
Adjustments to reconcile net loss to cash used
for operating activities:
Depreciation and amortization.............. 581,650 114,056 55,947 27,767
Allowance for doubtful accounts............ (41,705) 18,368 -- --
Compensatory stock options................. 12,499 29,998 22,500 22,500
Gain on sale of fixed assets............... (22,646) -- -- --
Other noncash charges...................... 30,000 -- -- --
Changes in current assets and liabilities:
Accounts and notes receivable............ 192,405 107,540 72,448 (38,354)
Inventory................................ 17,885 -- -- --
Prepaid expenses and other current
assets................................ 60,462 (5,424) 3,510 (7,331)
Accounts payable and accrued expenses.... (73,900) (47,235) 35,277 (249,464)
Deferred revenue......................... (20,921) (21,692) (52,585) (67,297)
----------- --------- --------- ---------
Net cash provided by (used in) operating
activities................................. (339,579) 15,415 113,152 (637,655)
----------- --------- --------- ---------
Cash (used for) provided by investing
activities:
Property and equipment expenditures........... (6,199) (15,189) (15,972) (10,419)
Purchases of intangible assets................ -- 34,194 (107,903)
Proceeds from sale of fixed assets............ 80,000 -- -- --
Expenditures for software development costs... (22,445) -- (725) (24,474)
Proceeds from collection of notes and other
receivables................................ 113,888 4,213 -- --
----------- --------- --------- ---------
Net cash provided by (used in) investing
activities................................. 165,244 (10,976) 17,497 (142,796)
----------- --------- --------- ---------
Cash provided by (used for) financing
activities:
Proceeds from issuance of common stock........ -- -- -- 648,343
Proceeds from note payable to stockholder..... 85,000 94,500 -- --
Repayment of note payable to stockholder...... -- (73,027) (73,028) --
Proceeds from issuance of long-term debt...... -- 366,665 94,500 --
Principal payments on long-term debt.......... (53,780) (47,563) (25,508) 65,422
Repurchase of common stock.................... -- (100,000) (100,000) --
----------- --------- --------- ---------
Net cash provided by (used in) financing
activities................................. 31,220 240,575 (104,036) 713,765
----------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (143,115) 245,014 26,613 (66,686)
Cash and cash equivalents, beginning............ 147,799 4,684 4,684 249,698
----------- --------- --------- ---------
Cash and cash equivalents, ending............... $ 4,684 $ 249,698 $ 31,297 $ 183,012
=========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 68
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND NATURE OF BUSINESS
American Medcare Corporation (the "Company" or "AMC") was incorporated on
January 11, 1983, and was originally formed to provide management services to
professional corporations practicing family and emergency medicine.
In May 1993, the Company merged with Newport Capital, Inc. ("Newport"),
whose principal asset was its wholly-owned subsidiary, International Computer
Solutions, Inc. ("ICS"). ICS develops, markets and supports health care data
processing and claims transmission systems, including hardware and software
packages, primarily for physician and dentist practice offices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. See Note 3 for accounting
for failed acquisitions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from these estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed over the
estimated useful lives of the related assets using both straight line and
accelerated methods for financial reporting and accelerated methods for income
tax purposes. Substantial betterments to property and equipment are capitalized
and repairs and maintenance are expensed as incurred.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally two to
three years). Development costs include detailed design, prototyping, coding,
testing, documentation, production and quality assurance. Such costs are
capitalized once the product's technological feasibility is established and are
expensed after the product is available for general release. During the year
ended January 31, 1995, the Company capitalized $22,445 of software development
costs. Amortization of capitalized software development costs for the years
ended January 31, 1995, and 1996, was $279,284 and $42,925, respectively.
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and determine whether the
software should be completely or partially written off or the amortization
period accelerated. The Company will recognize an impairment if undiscounted
estimated future cash flows of the capitalized software is determined to be less
than the carrying amount of capitalized software.
F-21
<PAGE> 69
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REVENUE RECOGNITION
Revenue is recognized, net of allowances for estimated returns, from the
sale of computer hardware and computer software when the product is shipped and
when training services, where applicable, are provided. Revenue from hardware
maintenance and customer support contracts and claims processing services are
recognized in the period in which the services are provided; amounts not yet
earned are recorded as deferred revenue. Revenue from contract services for
maintenance and support were approximately $1,068,000 and $805,000 for 1995 and
1996, respectively. Revenue from claims processing services totaled about
$554,000 and $338,000 for 1995 and 1996, respectively.
INCOME TAXES
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than possible enactments of changes in the tax laws or rates.
LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during each year.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995 and was adopted by
the Company as of February 1, 1996.
This statement requires that long-lived assets, including certain
intangibles, held and used by the Company be reviewed for potential impairment.
This new pronouncement did not have a material effect on the Company's financial
statements when adopted.
SFAS No. 123, "Accounting for Stock Based Compensation" is effective for
years beginning after December 15, 1995 and was adopted by the Company as of
February 1, 1996. This statement establishes financial accounting and reporting
standards for stock based employee compensation plans. SFAS No. 123 permits, but
does not require, a fair-value based method of accounting for employee stock
option plans which results in compensation expense recognition when stock
options are granted. As permitted by SFAS No. 123, the Company will provide pro
forma disclosure of net income and earnings per share, as applicable in the
notes to future consolidated financial statements.
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying (unaudited) interim
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the Company's results of operations and
cash flows for the nine months ended October 31, 1995 and 1996. The results of
operations and cash flows for the nine months ended October 31, 1995 and 1996
are not necessarily indicative of the results to be expected for the full year.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Accounts receivable
arise from sale of healthcare practice management
F-22
<PAGE> 70
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
systems to the Company's customer base located throughout the United States. The
Company performs ongoing credit evaluations of its customers' financial
condition, and generally requires no collateral from its customers. The
Company's credit losses are subject to general economic conditions of the
healthcare industry.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of accounts
receivable, accounts payable, notes payable and long-term debt. Accounts
receivable and accounts payable are short term in nature, accordingly, carrying
value is deemed to approximate fair value. The notes payable to bank, including
both the short-term line of credit and the long-term loan, bear interest at
rates which vary with current market conditions, accordingly, carrying values
are deemed to approximate fair value. Notes receivable and payable with
shareholders bear interest at fixed rates ranging between 10% and 12% which,
based on their terms and their current interest rates in the market, are deemed
to approximate fair value.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. FINANCIAL CONDITION AND FISCAL 1997 OUTLOOK
During the year ended January 31, 1996, the Company incurred a loss from
operations of approximately $233,000. This loss is in addition to the prior
year's operating loss of approximately $1,042,000. As of January 31, 1996, the
Company had a capital deficit of approximately $1,618,000 and a working capital
deficiency of approximately $1,201,000. In addition, other than resources
obtainable from certain of its officers and principal shareholders, the Company
has no available line of credit or other access to immediate short term
financing.
The Company has devised certain plans and strategies which, in management's
opinion, will allow the Company to reduce costs and operate more profitably.
During the second quarter of fiscal 1995, the Company decreased its workforce by
approximately 40%, which resulted in significant reductions in salaries,
benefits and other personnel related expenses. In addition, the Company moved
its headquarters to smaller leased offices and negotiated a three-month free
rent period and escalating payments during subsequent months. This reduction in
rental payments, along with certain other operational changes such as billing
maintenance in advance quarterly rather than monthly, have provided some amount
of currently available cash.
In addition to operational changes, the Company believes that its decision
to place Integrated Computer Systems, Inc. and Electronic Transmitting
Solutions, Inc. into bankruptcy and the rescission of the Capital Enterprises,
Inc. acquisition eliminated a significant portion of the Company's unprofitable
operations and allows management to focus on the Company's primary business (see
Note 3). Management believes that the expenses and resultant losses associated
with the above failed acquisitions are one time occurrences, which were
recognized in fiscal 1994. No such similar costs were included in the 1995 or
1996 financial statements.
There is no assurance that management's plans will be successful, but
management believes it has the resources to insure survivability of the Company.
F-23
<PAGE> 71
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LOSS ASSOCIATED WITH FAILED ACQUISITIONS
On July 22, 1994, Integrated Computer Systems, Inc. ("Integrated") and
Electronic Transmitting Solutions, Inc. ("Electronic"), two wholly-owned
subsidiaries of the Company, filed voluntary petitions for Chapter 7 bankruptcy
with the United States Bankruptcy Count -- Northern District of Georgia. The
Company also filed suit against the sellers of Integrated and Electronic on July
19, 1994 in the United States District Court -- Northern District of Georgia.
The suit called for rescission of the October 29, 1993 acquisitions along with
the return of the stock issued to the sellers. In addition, the suit asks for
damages for monetary amounts incurred by the Company as a result of problems
related to the acquisitions.
The Company has accrued a liability for estimated costs associated with the
liquidation of Integrated and Electronic. As of January 31, 1995 and 1996,
approximately $183,000 and $120,000, respectively, was included in accrued
expenses for such estimated costs.
The shares of stock issued in connection with the acquisition of Integrated
and Electronic are reflected as being outstanding in the accompanying
consolidated balance sheets and statements of shareholders' equity (capital
deficit). These shares will, however, be canceled in the event that the Company
is granted a rescission of the acquisitions by the United States Bankruptcy
District Court.
On January 31, 1994, the Company acquired all of the outstanding capital
stock of Capital Enterprises, Inc. ("CEI"), whose principal asset was an office
building. As a result of the Company's inability to maintain certain financial
ratios between the Company and the seller of CEI, the parties entered into a
rescission and release agreement on May 31, 1994. This agreement rescinded the
acquisition effective as of January 31, 1994.
4. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accounts receivable -- trade................................ $336,696 $229,155
Notes receivable (0-10% interest)........................... 23,547 18,169
-------- --------
360,243 247,324
Less allowance for doubtful accounts........................ 76,355 90,388
-------- --------
$283,888 $156,936
======== ========
</TABLE>
5. PROPERTY, EQUIPMENT AND DEPRECIATION
Major classes of property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1995 1996
------------ -------- --------
<S> <C> <C> <C>
Computer equipment.................................... 3-5 $316,247 $331,436
Furniture and fixtures................................ 5-7 293,381 293,381
--- -------- --------
609,628 624,817
Less accumulated depreciation......................... 536,839 570,445
-------- --------
$ 72,789 $ 54,372
======== ========
</TABLE>
Depreciation was $70,052 and $34,389 for the years ended January 31, 1995
and 1996, respectively.
F-24
<PAGE> 72
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. MISCELLANEOUS ASSETS
Miscellaneous assets consist of the following:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Deferred rent asset......................................... $ 90,072 $52,547
Capitalized software development costs, net................. 62,436 19,511
Long-term notes receivable.................................. 4,426 1,257
-------- -------
$156,934 $73,315
======== =======
</TABLE>
Capitalized software development costs are stated net of accumulated
amortization of $660,803 and $656,505, at January 31, 1995 and 1996,
respectively.
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Expenses related to loss on failed acquisition.............. $182,849 $119,590
Compensation................................................ 140,925 151,537
Taxes other than income..................................... 48,623 57,995
Professional fees........................................... 25,000 50,000
Customer costs.............................................. 6,455 28,606
Other accruals.............................................. 4,607 40,899
-------- --------
$408,459 $448,627
======== ========
</TABLE>
8. NOTE PAYABLE AND LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Notes payable to banks...................................... $430,555 $396,042
Other....................................................... 36,164 484,280
-------- --------
466,719 880,322
Less current portion........................................ 47,565 335,542
-------- --------
$419,154 $544,780
======== ========
</TABLE>
During fiscal 1994, the Company refinanced its existing bank loans with a
new note payable to a bank which is guaranteed by the Small Business
Administration ("SBA"). This loan bears interest at a rate of 11.25% and is
payable in monthly installments through May 2003. The loan is secured by
substantially all of the assets of the Company and certain other real estate
owned by two stockholders. In addition, the loan is personally guaranteed by
five of the Company's stockholders.
In June 1994, the Company borrowed $85,000 in exchange for a promissory
note which bore a 15% annual interest rate and was payable in monthly
installments of $4,000 until April 1995 when a balloon payment of approximately
$68,000 was tendered in satisfaction of the remaining obligation under the note.
In April 1995, the Company borrowed $94,500 from the majority stockholder
of the Company in exchange for a promissory note bearing interest at 12% payable
in a balloon payment of principal and interest in April 1997.
F-25
<PAGE> 73
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In January 1996, the Company received a loan from a third party in the
amount of $366,666 in the form of a promissory note payable bearing interest at
a rate of 9.95%. In conjunction with this note the Company has entered into an
agreement to exclusively promote the third party's claims processing services as
a component of the Company's products. The note is to be repaid based on fees
charged by the third party for claims submitted by the Company for processing.
As of January 31, 1996, no such claims had been submitted. The note is payable
together with accrued and unpaid interest at December 31, 1998 and is included
in other long-term debt.
Also included in other long-term debt are capital leases of $36,164 and
$19,612 at January 31, 1995 and 1996, respectively. Also included are notes
payable to stockholders in the amount of $3,500 and $98,000 at January 31, 1995
and 1996, respectively.
As of January 31, 1996, future maturities of these obligations are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1997........................................................ $335,542
1998........................................................ 243,051
1999........................................................ 66,611
2000........................................................ 63,823
2001........................................................ 63,823
Thereafter.................................................. 107,472
--------
$880,322
========
</TABLE>
9. OPERATING LEASES
The Company leases certain office equipment under noncancellable operating
leases with initial or remaining terms of one year or more. At January 31, 1996,
the remaining amounts due under these leases totaled approximately $29,000 in
the aggregate.
In August 1994, the Company entered into a new office space lease which
contained a free rent period through November 1994. Total future minimum annual
rental payments under this lease are approximately $82,000, $91,100 and $56,000
for 1997, 1998 and 1999, respectively.
Rent expense for 1995 and 1996, which included lease payments for office
space, was approximately $110,000 and $101,000, respectively.
10. COMMON STOCK
The Company had 50,000,000 shares of common stock, par value .001 per
share, authorized at January 31, 1995 and 1996, respectively. Shares of common
stock outstanding totaled 41,577,778 and 41,349,299 at January 31, 1995 and
1996, respectively.
At January 31, 1996, 925,000 shares of common stock issued during fiscal
1995 were subject to certain restrictions limiting their sale during the two
years subsequent to their issuance.
During the nine months ended October 31, 1996 the Company issued
approximately 5,900,000 shares of common stock in private placements to several
individuals, primarily for cash.
11. STOCK PURCHASE WARRANT AND OPTIONS
On January 4, 1991, the Company issued to Moore Business Forms, Inc.
("Moore") a stock purchase warrant, exercisable through December 31, 2000, for
20% of ICS common stock, in full satisfaction of approximately $445,000 of
amounts owed to Moore. In addition, Moore transferred ownership of the Medical
Practice Manager, Dental Practice Manager and Oral Surgeon Practice Manager
software and source code to
F-26
<PAGE> 74
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ICS. The warrant was assigned a value of $500,000 and the Company recorded
approximately $55,000 as the value of the software and source code.
Pursuant to terms of an agreement dated December 20, 1996, the Company
repurchased the warrant for $50,000 and terminated all related obligations and
liabilities.
During fiscal 1995, the Company granted options to a director and an
officer of the Company. The options enable the holders to purchase up to
4,000,000 shares of common stock at prices ranging from $0.01 to $1.00 per
share. The options may be exercised at various times through September 1999.
No options had been exercised as of January 31, 1996.
12. INCOME TAXES
Deferred taxes result from temporary differences between the bases of
assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations. The sources of the temporary differences
and their effect on deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Basis difference of capitalized software costs and purchased
customer lists............................................ $ (76,000) $ (61,000)
Differences in basis of property and equipment.............. (5,000) (14,000)
Allowance for doubtful accounts............................. 29,000 34,000
Other basis differences..................................... 6,000 8,000
Net operating loss carryforwards............................ 657,000 704,000
--------- ---------
Gross deferred tax assets................................... 611,000 671,000
Deferred tax asset valuation allowance...................... (611,000) (671,000)
--------- ---------
Net deferred tax asset (liability)................ $ -- $ --
========= =========
</TABLE>
As of January 31, 1996, the Company and its subsidiaries have net operating
loss carryforwards for federal income tax purposes of approximately $1,759,000
which expire beginning in 2004. Due to the Company's net operating loss
carryforwards, there is no provision for income taxes at January 31, 1995 and
1996.
13. CLAIM PROCESSING AGREEMENT
ICS has an agreement with another company whereby ICS assisted in the
establishment of an electronic claims processing clearinghouse and in the
subsequent marketing of the clearinghouse by submitting electronic claims of ICS
customers for processing through the clearinghouse. The other company is owned
by a minority stockholder of the Company. ICS received a fee which included the
cancellation of a $324,000 note payable to this minority stockholder, plus
additional periodic payments totaling $100,000.
As part of the agreement, ICS agreed to submit all its eligible electronic
claims exclusively to the other company for processing and will pay $0.25 per
claim processed. The agreement commenced September 1, 1992 and will terminate
upon the processing of 11,800,000 claims, or certain other events (principally
related to the transfer of ownership of ICS) or discontinuance of electronic
claim-related business activities. If the agreement is terminated due to the
other events, five shareholders of the Company shall pay a termination fee of
$324,000 less the number of claims processed to date times $0.05 per claim, plus
an annual interest surcharge of prime plus 3%. ICS has guaranteed the
shareholders' obligation for the termination fee which totaled approximately
$284,000 at January 31, 1996. The service center became functional in September
of 1993 and processed approximately 349,000 and 431,000 claims from ICS
customers in fiscal 1995 and 1996, respectively. As of January 31, 1995 and
1996, approximately $305,000 and $284,000, respectively, was included in
deferred revenue related to this agreement.
F-27
<PAGE> 75
AMERICAN MEDCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In November 1996, the Company entered into an agreement to terminate this
agreement in consideration of $265,000 to be paid upon the successful completion
of a public offering of the Company or its successor.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest amounted to $66,028 and $55,338 for the years
ended January 31, 1995 and 1996, respectively.
15. SUBSEQUENT EVENTS
(a) The Company entered into negotiations with Health Care Division (the
"Division") (a division of Info Systems of North Carolina, Inc.), whereby the
Company would acquire certain assets and liabilities of the Division in exchange
for an estimated $1,750,000. The Company has also entered into negotiations with
Millard-Wayne, Inc. (Millard-Wayne) whereby the Company would acquire all of the
common stock of Millard-Wayne in exchange for an estimated $1,100,000 cash and
391,500 shares of common stock. An additional 391,500 shares of stock are
contingently issuable in the Millard-Wayne transaction based on earnings
subsequent to the acquisition. The Division acquisition was consummated in
December 1996. The Millard-Wayne acquisition is expected to be consummated in
the first quarter of 1997. The Company has also signed non-binding letters of
intent to acquire three additional practice management software companies for
aggregate consideration of approximately $7,500,000 in cash and common stock.
(b) In November 1996, the Company, through a private placement, issued
approximately 7,387,000 shares of the Company's common stock for an aggregate
consideration of $750,000.
F-28
<PAGE> 76
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
KComp Management Systems, Inc.
Los Angeles, California
We have audited the accompanying balance sheet of KComp Management Systems,
Inc. as of March 31, 1996, and the related statements of operations, changes in
stockholders' equity and cash flows for the period from inception (December 15,
1995) to March 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KComp Management Systems,
Inc. at March 31, 1996, and the results of its operations and its cash flows for
the period from inception (December 15, 1995) to March 31, 1996, in conformity
with generally accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
November 15, 1996
F-29
<PAGE> 77
KCOMP MANAGEMENT SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash...................................................... $ 33,427 $ 496
Accounts receivable -- trade.............................. 27,453 57,137
Accounts receivable -- other.............................. 172,914 364,219
Other..................................................... -- 9,069
-------- ----------
Total current assets.............................. 233,794 430,921
-------- ----------
Property and equipment:
Computer equipment........................................ 62,051 62,051
Phone equipment........................................... 29,409 37,183
Other..................................................... 3,171 3,171
-------- ----------
Total property and equipment...................... 94,631 102,405
Less accumulated depreciation............................. 6,153 21,111
-------- ----------
Net property and equipment........................ 88,478 81,294
-------- ----------
Other assets:
Capitalized software development costs, less accumulated
amortization of $11,706 and $47,352.................... 128,765 200,384
Goodwill less accumulated amortization of $9,995 and
$32,483................................................ 439,759 417,272
-------- ----------
Total assets...................................... $890,796 $1,129,871
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Lines of credit........................................... $ 24,134 $ 49,919
Accounts payable.......................................... 235,550 217,556
Accrued expenses.......................................... 72,686 40,857
Income taxes payable...................................... -- 122,000
Deferred revenue.......................................... 79,248 75,052
Current portion of notes payable.......................... 448,435 436,501
-------- ----------
Total current liabilities......................... 860,053 941,885
Notes payable............................................... 27,761 27,761
-------- ----------
Total liabilities........................................... 887,814 969,646
-------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, $0.01 stated value, 500,000
shares authorized; 30,000 shares issued and
outstanding............................................ 300 300
Additional paid-in capital................................ 3,682 3,682
Retained earnings (accumulated deficit)................... (1,000) 156,243
-------- ----------
Total stockholders' equity........................ 2,982 160,225
-------- ----------
Total liabilities and stockholders' equity........ $890,796 $1,129,871
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 78
KCOMP MANAGEMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(DECEMBER 15, NINE MONTHS
1995) TO ENDED
MARCH 31, DECEMBER 31,
1996 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Systems and hardware sales................................ $172,781 $ 221,519
Maintenance and support................................... 486,764 1,271,786
-------- ----------
Total revenues.................................... 659,545 1,493,305
-------- ----------
Cost and expenses:
Salaries and wages........................................ 467,390 729,104
Telephone................................................. 73,904 158,638
Depreciation and amortization............................. 27,854 73,092
Rent...................................................... 27,280 65,060
Insurance................................................. 10,045 9,078
Other..................................................... 40,328 145,846
-------- ----------
Total cost and expenses........................... 646,801 1,180,818
-------- ----------
Income from operations...................................... 12,744 312,487
Other income (expense):
Other income (expense).................................... (665) --
Interest expense.......................................... (13,079) (33,244)
-------- ----------
Income (loss) before taxes.................................. (1,000) 279,243
Income tax provision........................................ -- 122,000
-------- ----------
Net income (loss)........................................... $ (1,000) $ 157,243
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE> 79
KCOMP MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 15, 1995 (inception)........... -- -- -- -- --
Issuance of common stock....................... 30,000 $300 $3,682 $ -- $ 3,982
Net loss for the period........................ -- -- -- (1,000) (1,000)
------ ---- ------ -------- --------
Balance, March 31, 1996.......................... 30,000 300 3,682 (1,000) 2,982
Net income for the nine months ending December
31, 1996 (unaudited)........................ -- -- -- 157,243 157,243
------ ---- ------ -------- --------
Balance, December 31, 1996 (unaudited)........... 30,000 $300 $3,682 $156,243 $160,225
====== ==== ====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE> 80
KCOMP MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(DECEMBER 15, NINE MONTHS
1995 TO ENDED
MARCH 31, DECEMBER 31,
1996 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
Cash provided by (used in) operating activities:
Net (loss) income......................................... $ (1,000) $ 157,243
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 27,854 73,092
Increase (decrease) from change in:
Accounts receivable.................................. (200,367) (220,989)
Accounts payable and accrued expenses................ 154,793 (49,823)
Income taxes payable................................. -- 122,000
Deferred revenue..................................... 54,131 (4,196)
Other................................................ -- (9,069)
--------- ---------
Net cash provided by operating activities................. 35,411 68,258
--------- ---------
Cash provided by (used in) investing activities:
Purchase of equipment..................................... (5,191) (7,774)
Increase in software development costs.................... -- (107,266)
--------- ---------
Net cash used in investing activities..................... (5,191) (115,040)
--------- ---------
Cash provided by (used in) financing activities:
Proceeds from line of credit.............................. 24,134 25,785
Increase in notes payable................................. 77,425 161,276
Payments on notes payable................................. (102,334) (173,210)
Issuance of common stock.................................. 3,982 --
--------- ---------
Net cash provided by financing activities................. 3,207 13,851
--------- ---------
Net increase (decrease) in cash............................. 33,427 (32,931)
Cash, beginning............................................. -- 33,427
--------- ---------
Cash, ending................................................ $ 33,427 $ 496
========= =========
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE> 81
KCOMP MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
KComp Management Systems, Inc. (the "Company") was formed in March 1995 and
began operations in December 1995, following the acquisition of certain assets
and assumption of certain liabilities of Songbird Data Systems, Inc.
("Songbird") in December 1995. The Company provides support and training
services for computer software for the dental industry. The Company also updates
and sells the current version of its computer software and other related
auxiliary products.
REVENUE RECOGNITION
Revenue from maintenance and support contracts is recognized ratably over
the contract period. Revenue from software sales is recorded when the product is
delivered.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of cash flows, the Company considers all short-term securities
purchased with a maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the respective assets on the straight-line basis
ranging from five to seven years.
Expenditures for major renewals and betterment that extend the useful lives
of property and equipment are capitalized. Expenditures for repairs and
maintenance are charged to expense as incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of purchase price over fair value of net assets acquired arises
in connection with business combinations accounted for as purchases and is
amortized on a straight-line basis over fifteen years. Accumulated amortization
amounted to approximately $10,000 for the period from inception (December 15,
1995) to March 31, 1996 and $32,500 (unaudited) for the nine months ended
December 31, 1996.
The Company's operational policy for the assessment and measurement of any
impairment in the value of excess of cost over net assets acquired which is
other that temporary is to evaluate the recoverability and remaining life of its
goodwill and determine whether the goodwill should be completely or partially
written off or the amortization period accelerated. The Company will recognize
an impairment of goodwill if undiscounted estimated future operating cash flows
of the acquired business are determined to be less than the carrying amount of
goodwill. If the Company determines that goodwill has been impaired, the
measurement of the impairment will be equal to the excess of the carrying amount
of goodwill over the amount of the undiscounted estimated operating cash flows.
If an impairment of goodwill were to occur, the Company would reflect the
impairment through a reduction in the carrying value of goodwill.
F-34
<PAGE> 82
KCOMP MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally four
years). Development costs include detailed design, prototyping, coding, testing,
documentation, production and quality assurance. Such costs are capitalized once
the product's technological feasibility is established and are expensed after
the product is available for general release. During the nine months ended
December 31, 1996, the Company capitalized approximately $107,000 (unaudited) of
software development costs. Amortization of capitalized software development
costs for the period from inception (December 15, 1995) to March 31, 1996, was
approximately $12,000, and for the nine months ended December 31, 1996,
approximately $36,000 (unaudited).
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and determine whether the
software should be completely or partially written off or the amortization
period accelerated. The Company will recognize an impairment if undiscounted
estimated future cash flows of the capitalized software is determined to be less
than the carrying amount of capitalized software.
INCOME TAXES
The Company uses the liability method to account for income taxes. Under
this approach, deferred income taxes are provided for the temporary differences
between the book and tax bases of assets and liabilities using currently enacted
tax rates. Changes in tax laws or rates are recognized in the deferred tax
balances when enacted.
CONCENTRATION OF CREDIT RISK
The Company markets its products and services to a wide variety of
customers in diverse geographic areas. This diversity reduces the concentration
of credit risk which may arise from the resultant accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include receivables, accounts and notes
payable and accrued liabilities. Such instruments are reported at values which
the Company believes are not materially different from their fair values.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995.
This statement requires that long-lived assets, including certain
intangibles, held and used by the Company be reviewed for potential impairment.
This new pronouncement is not expected to have a material effect on the
Company's financial statements.
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying (unaudited) interim
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the Company's financial position as of
December 31, 1996 and the results of operations and cash flows for the nine
months ended
F-35
<PAGE> 83
KCOMP MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996. The results of operations for the nine months ended December
31, 1996 are not necessarily indicative of the results to be expected for the
full year.
2. NOTES PAYABLE
The Company maintains two lines of credit with a bank which provide for an
aggregate of $75,000 in borrowings. The lines bear interest of 9.75% and are due
March 1997. At March 31, 1996, $24,134 was outstanding on the lines. At December
31, 1996, borrowings under the lines of credit amounted to $49,919 (unaudited).
These lines of credit are collateralized by certain certificates of deposit
pledged by the Company's president.
The Company maintains several term notes payable to certain officers,
directors and affiliates. The notes bear interest at rates from 7%-12%. Future
maturities under these term notes are as follows:
<TABLE>
<CAPTION>
MARCH 31, AMOUNT
--------- --------
<S> <C>
1997........................................................ $448,435
1998........................................................ 27,761
--------
$476,196
========
</TABLE>
3. COMMITMENTS
The Company is obligated under terms of operating leases for its office
facilities and certain equipment and utilities. Rent expense was approximately
$27,000 for the period from inception (December 31, 1995) to March 31, 1996 and
approximately $65,000 (unaudited) for the nine months ended December 31, 1996.
Future minimum payments under these leases are as follows:
<TABLE>
<CAPTION>
MARCH 31, AMOUNT
--------- --------
<S> <C>
1997........................................................ $338,635
1998........................................................ 172,772
1999........................................................ 45,000
--------
$556,407
========
</TABLE>
4. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(DECEMBER 31, 1995) ENDED
TO MARCH 31, 1996 DECEMBER 31, 1996
------------------- ------------------
(UNAUDITED)
<S> <C> <C>
Current
Federal.......................................... $ -- $ 97,000
State............................................ -- 25,000
-------- --------
Total current............................ -- 122,000
-------- --------
Deferred........................................... -- --
-------- --------
Net tax expense.......................... $ -- $122,000
-------- --------
</TABLE>
F-36
<PAGE> 84
KCOMP MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCK WARRANT
In May 1996, the Company issued Marc Kloner a stock purchase warrant to
purchase 327,240 shares of common stock of the Company. Exercise of the warrant
is anticipated to result in the reduction of an account payable to Mr. Kloner of
approximately $41,000.
6. SUPPLEMENTAL CASH FLOW INFORMATION
As discussed in Note 1 the Company acquired certain assets and assumed
certain liabilities of Songbird. The assets and liabilities were as follows:
<TABLE>
<S> <C>
Fixed assets................................................ $ 89,440
Capitalized software........................................ 140,471
Accounts payable and accrued expenses....................... (153,443)
Deferred revenue............................................ (25,117)
Notes payable............................................... (501,105)
---------
Net liabilities assumed........................... $(449,754)
=========
</TABLE>
Cash paid for interest for the period from inception (December 31, 1995) to
March 31, 1996 was approximately $13,000 and $33,000 (unaudited) for the nine
months ended December 31, 1996.
7. SUBSEQUENT EVENT
Subsequent to March 31, 1996, the Company signed a letter of intent to be
acquired by American Medcare Corporation ("AMC"), whereby AMC would acquire all
of the common stock of the Company in exchange for an estimated $1,600,000. The
sale is anticipated to occur in the first quarter of 1997.
F-37
<PAGE> 85
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Millard-Wayne, Inc.
Atlanta, Georgia
We have audited the accompanying balance sheets of Millard-Wayne, Inc. as
of December 31, 1995 and 1996, and the related statements of operations and
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Millard-Wayne, Inc. at
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the years then ended in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 15, 1997
F-38
<PAGE> 86
MILLARD-WAYNE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
-------- ----------
<S> <C> <C>
ASSETS:
Current assets:
Cash...................................................... $ 8,257 $ 29,257
Accounts receivable net of $8,100 allowance............... 366,741 450,278
Deferred tax asset........................................ 47,000 62,000
Other current assets...................................... 2,256 414
-------- ----------
Total current assets.............................. 424,254 541,949
Property and equipment, net of accumulated depreciation..... 132,372 115,984
Capitalized software development costs, net of accumulated
amortization of $1,339,800 and $1,481,512................. 249,487 248,634
Purchased software rights, net of accumulated amortization
of $8,561 and $13,637..................................... 54,539 89,082
Other assets................................................ 23,625 18,137
-------- ----------
$884,277 $1,013,786
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current liabilities:
Accounts payable.......................................... $ 90,882 $ 252,710
Accrued expenses.......................................... 59,119 94,283
Deferred revenue.......................................... 377,927 311,756
Current portion of notes payable.......................... 136,672 127,868
10 1/2% demand note payable to officer.................... -- 73,495
-------- ----------
Total current liabilities......................... 664,600 860,112
-------- ----------
Notes payable............................................... 30,482 18,514
-------- ----------
Commitments and contingencies
Stockholder's equity:
Common stock, $1.00 par, 500 shares authorized, issued and
outstanding............................................ 500 500
Additional paid-in-capital................................ 42,549 42,549
Retained earnings......................................... 146,146 92,111
-------- ----------
Total stockholder's equity........................ 189,195 135,160
-------- ----------
Total liabilities and stockholder's equity........ $884,277 $1,013,786
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 87
MILLARD-WAYNE, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues:
Systems sales............................................. $ 800,434 $ 975,413
Support and services...................................... 1,243,558 1,319,944
Other..................................................... 73,492 60,411
---------- ----------
Total revenues.................................... 2,117,484 2,355,768
---------- ----------
Operating costs and expenses:
Salaries and wages........................................ 938,408 1,040,846
Hardware purchases for resale............................. 290,857 497,899
Commissions and support................................... 115,580 165,104
Depreciation and amortization............................. 236,034 193,753
Rent...................................................... 131,442 132,505
Travel and entertainment.................................. 65,894 73,266
Telephone................................................. 66,884 73,268
Insurance................................................. 59,229 63,873
Other..................................................... 143,572 155,616
---------- ----------
Total operating costs and expenses................ 2,047,900 2,396,130
---------- ----------
Income (loss) from operations............................... 69,584 (40,362)
---------- ----------
Other expenses:
Interest expense.......................................... 22,972 24,673
Loss on sale of assets.................................... 17,186 --
---------- ----------
Total other expenses.............................. 40,158 24,673
---------- ----------
Income (loss) before taxes.................................. 29,426 (65,035)
Income taxes (benefit)...................................... (5,528) (11,000)
---------- ----------
Net income (loss)........................................... 34,954 (54,035)
Retained earnings, beginning................................ 111,192 146,146
---------- ----------
Retained earnings, ending................................... $ 146,146 $ 92,111
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE> 88
MILLARD-WAYNE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash provided by operating activities:
Net income (loss)......................................... $ 34,954 $ (54,035)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization.......................... 236,034 193,754
Loss on sale of property, plant and equipment.......... 17,186 --
Decrease (increase) in:
Accounts receivable.................................. 27,266 (83,537)
Other assets......................................... (2,819) 6,330
Net deferred income taxes............................ (528) (15,000)
Accrued expenses..................................... (14,168) 35,164
Accounts payable..................................... (79,248) 161,828
Deferred revenue..................................... -- (66,171)
--------- ---------
Net cash provided by operating activities................. 218,677 178,333
--------- ---------
Cash provided by (used in) investing activities:
Proceeds from sale of property, plant and equipment....... 22,745 --
Purchase of property, plant and equipment................. (64,285) (29,578)
Increase in software development costs.................... (163,439) (140,859)
Increase in purchased software rights..................... (28,100) (39,619)
--------- ---------
Net cash used in investing activities..................... (233,079) (210,056)
--------- ---------
Cash provided by (used in) financing activities:
New borrowings............................................ 258,589 125,814
(Decrease) increase in loans from shareholder............. (6,339) 73,495
Payments on notes payable................................. (262,349) (146,586)
--------- ---------
Net cash provided by (used in) financing activities....... (10,099) 52,723
--------- ---------
Net decrease in cash........................................ (24,501) 21,000
Cash, beginning............................................. 32,758 8,257
--------- ---------
Cash, ending................................................ $ 8,257 29,257
========= =========
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 89
MILLARD-WAYNE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company develops, sells, installs and services computer software for
the medical industry. The Company also sells computer hardware and supplies.
Costs of sales are included in other costs and expenses.
REVENUE RECOGNITION
Revenue from sales of hardware and software is recognized when products are
delivered. Revenue from maintenance and support service contracts is recognized
ratably over the contract period. Revenue from other services is recorded when
the service is performed.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful life of the assets using straight-line methods. Gains and
losses arising from disposal of property and equipment are included in income.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally four
years). Development costs include detailed design, prototyping, coding, testing,
documentation, production and quality assurance. Such costs are capitalized once
the product's technological feasibility is established and are expensed after
the product is available for general release. During the years ended December
31, 1995, and 1996, the Company capitalized approximately $163,000 and $141,000,
respectively, of software development costs. Amortization of capitalized
software development costs for the years ended December 31, 1995, and 1996, was
approximately $172,000 and $142,000, respectively.
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and determine whether the
software should be completely or partially written off or the amortization
period accelerated. The Company will recognize an impairment if undiscounted
estimated future cash flows of the capitalized software is determined to be less
than the carrying amount of capitalized software.
INCOME TAXES
The Company uses the liability method to account for income taxes. Under
this approach, deferred income taxes are provided for the temporary differences
between the book and tax bases of assets and liabilities using currently enacted
tax rates. Changes in tax laws or rates are recognized in the deferred tax
balances when enacted.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-42
<PAGE> 90
MILLARD-WAYNE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company markets its products and services to a wide variety of
customers in diverse geographic areas. This diversity reduces the concentration
of credit risk which may arise from the resultant accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include accounts receivable, accounts
payable, accrued liabilities and long-term debt. Such instruments are reported
at values which the Company believes are not materially different from their
fair values.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995.
This statement required that long-lived assets, including certain
intangibles, held and used by the Company be reviewed for potential impairment.
This new pronouncement did not have a material effect on the Company's financial
statements when adopted.
2. INCOME TAXES
Deferred income taxes relate to temporary differences between financial and
income tax reporting and relate primarily to the Company reporting on a cash
basis for income tax purposes.
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current
Federal................................................... $ -- $ --
State..................................................... -- --
-------- --------
Total current..................................... -- --
-------- --------
Deferred
Federal................................................... (4,423) (9,000)
State..................................................... (1,105) (2,000)
-------- --------
Total deferred.................................... (5,528) (11,000)
-------- --------
$ (5,528) $(11,000)
======== ========
</TABLE>
F-43
<PAGE> 91
MILLARD-WAYNE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current:
Deferred income tax assets
Book over tax basis in receivables, net of deferred
revenues, payables and accrued expenses................ $ 47,000 $ 62,000
-------- --------
Noncurrent:
Deferred income tax assets (liabilities)
Net operating loss........................................ 1,000 5,000
Tax credit carryforwards.................................. 81,000 75,000
Book over tax basis in capitalized software............... (77,000) (79,000)
-------- --------
5,000 1,000
-------- --------
Net deferred income tax assets.............................. $ 52,000 $ 63,000
======== ========
</TABLE>
Income taxes differed from amounts computed by applying the U.S. Federal
income tax statutory rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Expected tax expense (benefit).............................. $ 10,005 $(26,014)
Increase (decrease) in income taxes resulting from:
State income taxes........................................ 1,765 (3,902)
Effect of graduated rates................................. (11,119) 14,958
Other, net................................................ (6,179) 3,958
-------- --------
Net income taxes (benefit).................................. $ (5,528) $(11,000)
======== ========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Furniture and equipment..................................... $531,222 $560,800
Transportation equipment.................................... 40,587 40,587
-------- --------
571,809 601,387
Less accumulated depreciation............................... 439,437 485,403
-------- --------
$132,372 $115,984
======== ========
</TABLE>
4. NOTES PAYABLE
Notes payable consist of a $75,000 outstanding balance on a credit line of
$100,000, plus various installment notes. The credit line matures May 1997,
bears interest at prime plus 2.00% and is secured by
F-44
<PAGE> 92
MILLARD-WAYNE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
certain property and equipment and guarantee of the Company's stockholder.
Interest on the installment notes is at normal market rates for these types of
obligations.
Principal maturities on the note obligations are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------------------------------------------------------ --------
<S> <C>
1997........................................................ $127,868
1998........................................................ 10,881
1999........................................................ 7,055
2000........................................................ 578
--------
$146,382
========
</TABLE>
5. LEASES
The Company is obligated under terms of operating leases for its office
facilities and certain equipment.
Future minimum payments under these operating leases, which expire in 1997,
totalled $84,000 at December 31, 1996.
Rent expense was approximately $131,000 and $132,000 for the years ended
December 31, 1995 and 1996, respectively.
6. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan for its eligible employees. In addition
to the amount deferred by each employee, the company matches 25% of employee
contributions, up to a maximum amount of 4% of salary on a pay period by pay
period basis. Expense related to this plan was $4,631 and $9,148 for the years
ended December 31, 1995 and 1996, respectively.
7. SUBSEQUENT EVENT
The Company has entered into negotiations with American Medcare Corporation
("AMC"), whereby AMC would acquire all of the common stock of the Company in
exchange for an estimated $1,100,000 cash and approximately 391,500 shares of
common stock of AMC. An additional 391,500 shares would be contingently issuable
upon meeting certain revenue and/or profit criteria in 1998 and 1999. The sale
is expected to occur in the first quarter of 1997.
F-45
<PAGE> 93
REPORT OF INDEPENDENT CERTIFIED INDEPENDENT PUBLIC ACCOUNTANTS
The Management of
Health Care Division (a division of Info Systems of North Carolina, Inc.)
Charlotte, North Carolina
We have audited the accompanying balance sheets of Health Care Division (a
division of Info Systems of North Carolina, Inc.) as of June 30, 1995 and 1996,
and the related statements of operations and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Health Care Division (a
division of Info Systems of North Carolina, Inc.) as of June 30, 1995 and 1996,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
November 8, 1996
F-46
<PAGE> 94
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
----------------------- DECEMBER 2,
1995 1996 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Accounts receivable, less reserves for uncollectible
accounts of $25,000, $20,000 and $12,000,
respectively.......................................... $1,348,602 $ 325,121 $ 154,376
Work-in-progress......................................... 68,545 18,914 8,902
Prepaid expenses......................................... 40,745 27,438 --
Deferred income tax assets............................... 50,000 24,000 21,000
---------- ---------- ---------
Total current assets............................. 1,507,892 395,473 184,278
---------- ---------- ---------
Property and equipment:
Property and equipment, at cost.......................... 197,277 183,675 193,967
Accumulated depreciation and amortization................ (153,394) (127,689) (133,521)
---------- ---------- ---------
Total property and equipment..................... 43,883 55,986 60,446
---------- ---------- ---------
Capitalized software development costs, net of accumulated
amortization of $161,823, $302,572 and $350,719,
respectively............................................. 269,929 148,679 105,407
---------- ---------- ---------
Total assets..................................... $1,821,704 $ 600,138 $ 350,131
========== ========== =========
LIABILITIES AND DIVISIONAL EQUITY (DEFICIT):
Current liabilities:
Lines-of-credit.......................................... $ 405,808 $ 491,380 $ --
Current portion of long-term debt........................ 152,295 171,518 113,435
Accounts payable and accrued expenses.................... 1,051,580 71,927 59,921
Deferred maintenance and service fees.................... 443,190 535,641 432,324
Income taxes payable..................................... 15,000 14,000 64,000
Customer deposits........................................ 70,361 4,335 3,348
---------- ---------- ---------
Total current liabilities........................ 2,138,234 1,288,801 673,028
Long-term debt, less current portion....................... 270,746 227,362 138,851
Deferred income tax liabilities............................ 92,000 52,000 34,000
---------- ---------- ---------
Total liabilities................................ 2,500,980 1,568,163 845,879
---------- ---------- ---------
Commitments and contingencies
Divisional equity (deficit)................................ (679,276) (968,025) (495,748)
---------- ---------- ---------
Total liabilities and divisional equity
(deficit)...................................... $1,821,704 $ 600,138 $ 350,131
========== ========== =========
</TABLE>
See accompanying notes to financial statements.
F-47
<PAGE> 95
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SIX MONTHS JULY 1,
ENDED 1996 TO
YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 2,
----------------------- ------------ -----------
1995 1996 1995 1996
---------- ---------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Systems and software sales................. $4,675,581 $1,833,211 $1,125,380 $1,346,485
Maintenance and support.................... 2,106,571 2,099,720 1,028,301 695,498
Other...................................... 96,691 104,146 45,004 8,289
---------- ---------- ---------- ----------
Total revenues..................... 6,878,843 4,037,077 2,198,685 2,050,272
---------- ---------- ---------- ----------
Operating costs and expenses:
Cost of hardware and certain software
sales................................... 3,345,509 750,242 429,622 1,033,436
Personnel costs............................ 2,107,663 2,167,934 1,118,049 534,307
Other selling, general and administrative
expenses................................ 534,846 452,984 214,874 98,105
Allocated corporate selling, general and
administrative.......................... 595,089 405,455 231,163 153,579
Employee benefit contribution expense...... 170,860 80,044 39,780 34,436
Depreciation and amortization.............. 142,495 147,448 76,476 53,979
---------- ---------- ---------- ----------
Total operating costs and
expenses......................... 6,896,462 4,004,107 2,109,964 1,907,842
---------- ---------- ---------- ----------
Operating income (loss)...................... (17,619) 32,970 88,721 142,430
Other expenses:
Interest expense, net...................... 35,437 29,887 11,950 17,167
---------- ---------- ---------- ----------
Income (loss) before taxes................... (53,056) 3,083 76,771 125,263
Income tax expense (benefit)................. (17,000) -- 37,000 49,000
---------- ---------- ---------- ----------
Net income (loss)............................ $ (36,056) $ 3,083 $ 39,771 $ 76,263
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-48
<PAGE> 96
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SIX MONTHS JULY 1,
YEAR ENDED JUNE 30, ENDED 1996 TO
---------------------- DECEMBER 31, DECEMBER 2,
1995 1996 1995 1996
--------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash provided by (used in) operating activities:
Net income (loss)............................. $ (36,056) $ 3,083 $ 39,771 $ 76,263
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating
activities:
Depreciation and amortization.............. 142,495 147,448 76,476 53,979
Deferred taxes............................. (32,000) (14,000) (21,000) (15,000)
Decrease (increase) in:
Accounts receivable...................... (535,411) 1,023,481 527,757 170,745
Work in progress......................... (35,254) 49,631 34,327 10,012
Prepaid expenses......................... (27,060) 13,307 (7,855) 27,438
Increase (decrease) in:
Accounts payable and accrued expenses.... (6,630) (979,653) (926,387) (12,006)
Deferred maintenance and service fees and
customer deposits..................... 74,249 26,425 140,030 (104,304)
Income taxes payable..................... 15,000 (1,000) 4,000 50,000
--------- ---------- --------- ---------
Net cash provided by (used in) operating
activities................................. (440,667) 268,722 (132,881) 257,127
--------- ---------- --------- ---------
Cash provided by (used in) investing activities:
Purchase of property and equipment, net....... (35,144) (18,803) (146,542) (10,292)
Capitalized software development costs........ (57,552) (19,498) (6,507) (4,875)
--------- ---------- --------- ---------
Net cash used in investing activities......... (92,696) (38,301) (153,049) (15,167)
--------- ---------- --------- ---------
Cash used in financing activities:
Proceeds from (reduction of) lines of credit,
net........................................ 405,808 85,572 42,786 (491,380)
Proceeds from long-term debt.................. 42,172 118,158 124,325 93,925
Repayment of long-term debt................... (304,399) (142,319) (180,171) (240,519)
--------- ---------- --------- ---------
Net cash provided by (used in) financing
activities................................. 143,581 61,411 (13,060) (637,974)
--------- ---------- --------- ---------
Net cash retained (disbursed) by Company........ $(389,782) $ 291,832 $(298,990) $(396,014)
========= ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-49
<PAGE> 97
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Health Care Division ("HCD"), a division of Info Systems of North Carolina,
Inc., (the "Company") is engaged in designing, programming, licensing,
installing, and supporting hardware and software systems to the medical industry
throughout the United States. HCD has long-term marketing rights to and
ownership of licensed software in various industry segments. The assets and
liabilities of HCD were acquired by American Medcare Corporation on December 3,
1996. Unaudited information is provided for the interim period up to this date
and for the comparable period for 1995.
BASIS OF PRESENTATION
The accompanying financial statements present the financial position,
results of operations and cash flows of HCD. The balance sheets present the
assets and liabilities which are specifically identifiable to HCD and a pro rata
allocation of the Company's long-term debt. The statements of operations include
an allocation of Company general and administrative expenses incurred on behalf
of HCD. Expenses allocated to HCD are allocated based on factors such as ratios
of sales or personnel in HCD to total sales or personnel in consolidated
entities. Company management believes the allocations are reasonable, however,
these allocated expenses are not necessarily indicative of expenses that would
have been incurred by HCD on a stand-alone basis.
REVENUE RECOGNITION
Professional services revenue represents fees for designing, programming,
consulting and other installation services and is recognized as revenue as the
related services are performed, or under the percentage of completion method for
fixed price contracts. Maintenance fees are recognized ratably over the term of
the related contract. Deferred revenues include the unearned portion of all
maintenance and service agreements.
Software licensing fees represent revenues under licensing agreements that
provide customers with the right to use HCD's software products. Certain
agreements also provide for professional services such as installation of the
software and customer training. Software licensing fees are recognized as
revenue when the related software is delivered.
COSTS OF HARDWARE AND CERTAIN SOFTWARE SALES
Costs of hardware and certain software sales include those costs incurred
related to software licensing fees (primarily royalty and referral expenses) and
amounts paid for the purchase of hardware from IBM and other vendors under HCD's
remarketing arrangements.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally four
years). Development costs include detailed design, prototyping, coding, testing,
documentation, production and quality assurance. Such costs are capitalized once
the product's technological feasibility is established and are expensed after
the product is available for general release. During the years ended June 30,
1995, and 1996, the Company capitalized $57,552 and $19,498, respectively, of
software development costs. Amortization of capitalized software development
costs for the years ended June 30, 1995, and 1996, was $131,383 and $142,548,
respectively.
F-50
<PAGE> 98
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and determine whether the
software should be completely or partially written off or the amortization
period accelerated. The Company will recognize an impairment if undiscounted
estimated future cash flows of the capitalized software is determined to be less
than the carrying amount of capitalized software.
CUSTOMER DEPOSITS
Customer deposits represent deposits received on licensing agreements and
hardware sales agreements (prior to delivery of the software and hardware) and
the portion of licensing fee revenue relating to installations and customer
training that have not been completed as of year-end.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over their
estimated useful lives using the straight-line method for financial reporting
purposes and accelerated methods for tax reporting purposes.
INCOME TAXES
The Company uses the asset and liability approach where deferred income
taxes are provided for temporary differences between the book and tax bases of
assets and liabilities using the tax rates, under existing legislation, expected
to be in effect at the date temporary differences are expected to reverse. The
effects of changes in tax laws or rates are recognized in deferred tax balances
when enacted.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
HCD sells its systems and services to a wide variety of customers in
several geographic areas. This diversity limits the concentration of credit risk
which may arise from the resultant accounts receivable. The Division had two
customers in 1996 which accounted for approximately $478,000 and $464,000,
respectively, of its revenue and three customers in 1995 which accounted for
approximately $1,915,000, $1,071,000, and $711,000, respectively, of total
revenue.
FAIR VALUE OF FINANCIAL INSTRUMENTS
HCD's financial instruments include accounts receivables, accounts payable,
accrued liabilities and long-term debt. Such instruments are reported at values
which HCD believes are not materially different from their fair values.
NEW ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995.
F-51
<PAGE> 99
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
This statement required that long-lived assets, including certain
intangibles, held and used by HCD be reviewed for potential impairment. This new
pronouncement did not have a material effect on HCD's financial statements when
adopted.
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying (unaudited) interim
financial statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly HCD's financial position at December 2,
1996 and its results of operations and its cash flows for the six months ended
December 31, 1995 and the period ended December 2, 1996. The results of
operations and its cash flows for the interim periods are not necessarily
indicative of the results to be expected for the full year.
SIGNIFICANT TRANSACTIONS
In fiscal 1995, HCD benefitted from a significant, non-recurring sale of
hardware. Sales, cost of sales and gross profit attributable to this transaction
were approximately $1.2 million, $900,000 and $300,000, respectively. The
customer in this transaction is a continuing customer for service and support in
fiscal 1996; however, hardware sales to this and other customers returned to
levels more typically experienced.
2. PROPERTY AND EQUIPMENT
Property and equipment consists entirely of computer equipment. The Company
does not identify other property and equipment by division and no allocation of
these assets are made for disclosure purposes. Depreciation of non-allocated
assets is included as part of the allocation of corporate expenses.
3. LINES-OF-CREDIT
The Company has a $1,500,000 line-of-credit with a bank that is
collateralized by equipment and various assets and is intended to be used for
general working capital purposes. Interest is payable monthly at either the
bank's prime rate or LIBOR plus 2.25 percent, at the Company's option. The
line-of-credit expires November 30, 1996. The outstanding balance at June 30,
1996, was $1,541,462. There was no outstanding balance at June 30, 1995.
The Company has a $600,000 line-of-credit with IBM for equipment financing
under its remarketing agreement that is due on demand and secured by certain
accounts receivable. IBM may approve borrowings above the $600,000 limit.
Interest is not accrued for the first 30 days; the rate varies from 1.75 percent
to 3.25 percent thereafter. The outstanding balances at June 30, 1995 and 1996,
were $1,664,834 and $641,730, respectively.
The Company's line-of-credit has been allocated to HCD based upon HCD's pro
rata share of total Company revenues.
4. LONG-TERM DEBT
Long-term debt consists of five notes payable to banks and one note payable
to stockholders due in various monthly installments ranging from $1,143 to
$35,000. These notes bear interest at various rates ranging from 7.45% to 9%,
including certain notes which bear interest at variable rates based on the prime
rate or LIBOR. The bank notes are secured by receivables, equipment and vehicles
and mature at various dates through June 1999. One of the bank notes payable and
the note payable to shareholders relate to the
F-52
<PAGE> 100
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company's ESOP plan (Note 6). The long-term debt allocation to HCD is based on
its pro rata share of the total revenues and consists of:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1996
--------- ---------
<S> <C> <C>
Notes payable to banks and shareholders..................... $ 423,041 $ 398,880
Less current portion........................................ (152,295) (171,518)
--------- ---------
$ 270,746 $ 227,362
========= =========
</TABLE>
Scheduled principal repayments on long-term debt at June 30, 1996, are as
follows:
<TABLE>
<CAPTION>
JUNE 30,
--------
<S> <C>
1997........................................................ $171,518
1998........................................................ 178,616
1999........................................................ 41,362
2000........................................................ 7,384
--------
Total............................................. $398,880
========
</TABLE>
Under the terms of certain of the notes payable, and the line-of-credit the
Company is required to comply with certain covenants, the most restrictive of
which require maintenance of certain financial and operating ratios and a
minimum level of tangible net worth; limit capital expenditures and prohibit the
Company from incurring additional indebtedness. The Company is either in
compliance with all covenants at June 30, 1996, or has obtained appropriate
waivers from the bank.
5. INCOME TAXES
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1995 1996
-------- --------
<S> <C> <C>
Current:
Federal................................................ $ 10,000 $ 9,000
State.................................................. 5,000 5,000
-------- --------
15,000 14,000
-------- --------
Deferred:
Federal................................................ (25,000) (11,000)
State.................................................. (7,000) (3,000)
-------- --------
(32,000) (14,000)
-------- --------
Total........................................... $(17,000) $ --
======== ========
</TABLE>
F-53
<PAGE> 101
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes differed from amounts computed by applying the U.S. Federal
income tax statutory rate to pre-tax income as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996
--------- --------
<S> <C> <C>
Expected tax expense (benefit)............................ $(18,039) $ 1,048
Increase (decrease) in income taxes resulting from:
State income taxes..................................... (4,112) 1,124
Nondeductible expenses................................. 2,886 3,909
Effect of graduated rates.............................. 2,265 (2,754)
Other.................................................. -- (3,327)
-------- -------
$(17,000) $ --
======== =======
</TABLE>
Deferred income tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1995 1996
------- -------
<S> <C> <C>
Deferred income tax liability
Book over tax basis in capitalized software............... $92,000 $52,000
======= =======
Deferred income tax assets
Accounts receivable....................................... $ 9,000 $ 7,000
Accrued vacation.......................................... 17,000 16,000
Customer deposits......................................... 24,000 1,000
------- -------
$50,000 $24,000
======= =======
</TABLE>
6. EMPLOYEE BENEFIT PLANS
HCD's employees are covered under benefit plans established by the Company,
including a 401(k) profit sharing plan and an Employee Stock Ownership Plan
(ESOP). Eligibility for participation is based on age and length of service.
In connection with the ESOP's purchase of the Company's common stock, the
Company entered into certain notes payable, made a cash contribution to the ESOP
and obligated itself to make contributions to the ESOP sufficient to enable the
ESOP to service its debt. HCD's allocation of long-term debt includes an
allocation of ESOP debt.
Costs incurred by the Company under these benefit plans have been allocated
to HCD pro rata based on the number of employees.
7. COMMITMENTS AND CONTINGENCIES
HCD markets, licenses, and supports software packages under license and
distributorship agreements. These agreements require HCD to pay agreed-upon
royalties on each sale of a software package as well as certain minimum
royalties over various terms of the agreements. Royalty expense amounted to
approximately $55,000 and $21,000 in fiscal 1995 and 1996, respectively.
The Company has several operating leases for office space and equipment,
including that used by HCD, under one to seven year leases that are accounted
for as operating leases. In conjunction with the acquisition of HCD (Note 8),
operations of HCD will be moved to another location. HCD will not be responsible
for
F-54
<PAGE> 102
HEALTH CARE DIVISION
(A DIVISION OF INFO SYSTEMS OF NORTH CAROLINA, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
obligations under the existing leases after the relocation. Rent expense
allocated to HCD totalled $117,446 and $133,334 in fiscal 1995 and 1996,
respectively.
The Company is involved in various lawsuits arising in the normal course of
business. Management believes that such matters will not have a material effect
on the financial condition of HCD, its liquidity or operating results.
8. DIVISIONAL EQUITY (DEFICIT)
Divisional equity (deficit) reflects the historical activity between HCD
and the Company, including the effect of allocations of the Company's lines of
credit and long-term debt. An analysis of the change in divisional equity
(deficit) follows:
<TABLE>
<CAPTION>
1995 1996
----------- ---------
<S> <C> <C>
Balance, July 1............................................. $(1,033,002) $(679,276)
Net income (loss)......................................... (36,056) 3,083
Net cash (to) from Company................................ 389,782 (291,832)
----------- ---------
Balance, June 30............................................ $ (679,276) $(968,025)
=========== =========
</TABLE>
F-55
<PAGE> 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Rovak, Inc.
Lake Elmo, Minnesota
We have audited the accompanying balance sheets of Rovak, Inc., as of
December 31, 1995 and 1996, and the related statements of operations and
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rovak, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 17, 1997
F-56
<PAGE> 104
ROVAK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS:
Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $10,000.................................... $ 207,196 $ 159,233
Inventory................................................. 428,990 180,325
Notes receivable -- stockholders.......................... 105,862 288,090
Other current assets...................................... 33,794 96,963
---------- ----------
Total current assets.............................. 775,842 724,611
Deferred income taxes....................................... 235,000 185,000
Property and equipment, net................................. 188,080 382,465
Prepaid royalties........................................... 116,993 221,218
---------- ----------
Total assets...................................... $1,315,915 $1,513,294
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Checks written in excess of available funds............... $ 3,949 $ 17,283
Note payable -- bank...................................... 56,000 233,500
Accounts payable.......................................... 239,179 242,842
Accrued compensation and payroll taxes.................... 82,735 122,390
Other accrued liabilities................................. 1,557 4,518
Customer deposits......................................... 154,275 152,210
Deferred revenue.......................................... -- 58,226
Long-term debt -- current portion......................... 187,473 197,404
Obligations under capital leases -- current portion....... 25,926 49,479
---------- ----------
Total current liabilities......................... 751,094 1,077,852
Notes payable -- stockholders............................... 124,842 92,971
Long-term debt.............................................. 593,598 407,044
Obligations under capital leases............................ 72,976 100,913
---------- ----------
Total liabilities................................. 1,542,510 1,678,780
---------- ----------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, no par value; 10,000 shares authorized;
8,217 shares issued and outstanding.................... 157,919 157,919
Accumulated deficit....................................... (384,514) (323,405)
---------- ----------
Total stockholders' equity (deficit).............. (226,595) (165,486)
---------- ----------
Total liabilities and stockholders' equity
(deficit)....................................... $1,315,915 $1,513,294
========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-57
<PAGE> 105
ROVAK, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996
---------- ------------
<S> <C> <C>
Revenues:
Systems and software sales................................ $2,694,785 $3,246,036
Maintenance and support services.......................... 503,353 864,604
Other..................................................... 603,734 743,590
---------- ----------
Total revenues.................................... 3,801,872 4,854,230
Cost of sales............................................... 1,811,047 2,310,587
---------- ----------
Gross margin................................................ 1,990,825 2,543,643
---------- ----------
Operating expenses:
Personnel costs........................................... 940,919 1,195,684
Other selling, general and administrative................. 825,964 801,075
Research and development.................................. 297,834 237,989
Depreciation.............................................. 68,341 72,531
---------- ----------
Total operating expenses.......................... 2,133,058 2,307,279
---------- ----------
Operating income (loss)..................................... (142,233) 236,364
Interest expense, net....................................... 127,853 125,255
---------- ----------
Income (loss) before taxes.................................. (270,086) 111,109
Income taxes (benefit)...................................... (99,000) 50,000
---------- ----------
Net (loss) income........................................... (171,086) 61,109
Accumulated deficit, beginning.............................. (213,428) (384,514)
---------- ----------
Accumulated deficit, ending................................. $ (384,514) $ (323,405)
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-58
<PAGE> 106
ROVAK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash provided by (used in) operating activities:
Net (loss) income......................................... $(171,086) $ 61,109
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation........................................... 68,341 72,531
(Increase) decrease in assets:
Accounts receivable.................................. 76,130 47,963
Inventory............................................ (65,255) 248,665
Prepaid royalties.................................... -- (104,225)
Other current assets................................. (2,705) (63,169)
Deferred income taxes................................ (99,000) 50,000
Increase (decrease) in liabilities:
Accounts payable..................................... 11,746 3,663
Accrued expenses..................................... 53,786 42,616
Customer deposits.................................... 60,394 (2,065)
Deferred revenue..................................... -- 58,226
Net (increase) decrease in notes
receivable -- stockholders.......................... (27,791) (182,228)
--------- ---------
Net cash provided by (used in) operating activities....... (95,440) 233,086
--------- ---------
Cash provided by (used in) investing activity:
Purchase of property and equipment........................ (25,482) (184,676)
--------- ---------
Cash provided by (used in) financing activities:
Checks written in excess of available funds............... 3,949 13,334
Increase in credit line................................... 594,038 1,002,859
Decreases in credit line.................................. (638,038) (825,359)
Repayment of note payable -- stockholders................. (31,529) (31,871)
Issuance of long-term debt................................ 330,350 --
Repayment of long-term debt............................... (117,883) (176,623)
Repayment of capital lease obligations.................... (24,240) (30,750)
--------- ---------
Net cash provided by (used in) financing activities....... 116,647 (48,410)
--------- ---------
Net (decrease) increase in cash............................. (4,275) --
Cash, beginning............................................. 4,275 --
--------- ---------
Cash ending................................................. $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
F-59
<PAGE> 107
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ORGANIZATION
Rovak, Inc., (the "Company") is a Minnesota corporation engaged in the
design, development, marketing, installation and servicing of its proprietary
healthcare practice management software systems and related computer equipment
to clinics located throughout the United States.
REVENUE RECOGNITION
Revenue on computer system sales and software license fees is recognized
when the system is shipped. Revenue for maintenance and support is deferred and
recognized ratably over the period to which it relates.
INVENTORIES
Inventories are stated at cost and represent computer systems and
replacement parts.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method and is charged to expense based on the estimated useful
lives of the assets.
Expenditures for additions and improvements are capitalized, while repairs
and maintenance are expensed as incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Accounts receivable
arise from sale of practice management systems to the Company's customer base
located throughout the United States. The Company performs ongoing credit
evaluations of its customers' financial condition, and generally requires no
collateral from its customers. The Company's credit losses are subject to
general economic conditions of the health care industry.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumption about the future outcome of current transactions which may affect the
reporting and disclosure of these transactions. Accordingly, actual results
could differ from those estimates used in the preparation of these financial
statements.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes,
if any. Deferred taxes represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of accounts
receivable, notes receivable, accounts payable, notes payable, and long term
debt. Accounts receivable and accounts payable are short term in nature,
accordingly, carrying value is deemed to approximate fair value. The notes
payable to bank, including both the short-term line of credit and long-term
loans, bear interest at rates which vary with current
F-60
<PAGE> 108
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
market conditions, accordingly, carrying values are deemed to approximate fair
value. Notes receivable and payable with stockholders bear interest at fixed
rates ranging between 8% and 10% which, based on their terms and their current
interest rates in the market, are deemed to approximate fair value.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995.
This statement requires that long-lived assets, including certain
intangibles, held and used by the Company be reviewed for potential impairment.
This new pronouncement did not have a material effect on the Company's financial
statements when adopted.
2. NOTES RECEIVABLE -- STOCKHOLDERS
Notes receivable -- stockholders aggregated $105,862 and $288,090 at
December 31, 1995 and 1996, respectively. The notes bear interest at 8%, are due
upon demand and are unsecured.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE -------------------
IN YEARS 1995 1996
----------- -------- --------
<S> <C> <C> <C>
Furniture and fixtures................................. 5-7 $ 35,490 $ 45,415
Computer equipment..................................... 5 151,162 297,738
Office equipment....................................... 7 115,008 115,567
Equipment under capital lease.......................... 5-7 135,456 217,696
Leasehold improvements................................. 5-7 32,272 59,888
-------- --------
469,388 736,304
Less accumulated depreciation.......................... 281,308 353,839
-------- --------
Property and equipment, net............................ $188,080 $382,465
======== ========
</TABLE>
Depreciation expense, including that on equipment under capital lease, was
$68,341 and $72,531 in 1995 and 1996, respectively. Accumulated depreciation on
the equipment under capital leases was $38,379 and $70,923 at December 31, 1995
and 1996, respectively.
4. NOTE PAYABLE -- BANK
At December 31, 1995 and 1996, the Company had outstanding short-term
borrowings of $56,000 and $233,500, respectively, under a bank line of credit
totalling $200,000 and $500,000, respectively. The unused portion of the line of
credit was $144,000 at December 31, 1995 and was $266,500 at December 31, 1996.
The line of credit accrues interest monthly at a variable rate (8.75% at
December 31, 1996) and is collateralized by a first security interest of
substantially all corporate assets.
5. NOTES PAYABLE -- STOCKHOLDERS
Notes payable -- stockholders aggregated $124,842 and $92,971 at December
31, 1995 and 1996, respectively. The notes bear interest at 10%, are due in 1999
and are collateralized by substantially all assets subordinated to the note
payable -- bank and long-term debt.
F-61
<PAGE> 109
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
--------- ---------
<S> <C> <C>
Notes payable -- bank bearing interest at a variable rate
(10.25% at September 30, 1996) and due in monthly
installments at various dates through November 2000. The
notes are collateralized by a first security interest in
substantially all corporate assets........................ $ 781,071 $ 604,448
Less current portion...................................... (187,473) (197,404)
--------- ---------
Long-term debt.............................................. $ 593,598 $ 407,044
========= =========
YEAR ENDING DECEMBER 31:
1997...................................................... $ 197,404
1998...................................................... 201,350
1999...................................................... 132,425
2000...................................................... 73,269
---------
$ 604,448
=========
</TABLE>
7. OBLIGATIONS UNDER CAPITAL LEASES
The Company leases certain office equipment under capital leases expiring
at various dates through May 2001. Future minimum lease payments as of December
31, 1996 are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31:
1997...................................................... $ 61,550
1998...................................................... 61,550
1999...................................................... 41,688
2000...................................................... 5,976
Thereafter................................................ 2,490
--------
Total minimum lease payments...................... 173,254
Less amount representing interest........................... (22,862)
--------
Present value of net minimum lease payments................. 150,392
Less current portion........................................ (49,479)
--------
Long-term portion........................................... $100,913
========
</TABLE>
F-62
<PAGE> 110
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its corporate offices and operating facilities under an
operating lease with a corporation related through common control.
The aggregate future minimum lease payments as of December 31, 1996 are as
follows for:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31:
1997...................................................... 90,000
1998...................................................... 90,000
1999...................................................... 90,000
2000...................................................... 45,000
--------
$315,000
========
</TABLE>
Rent expense was $44,807 and $75,000 in 1995 and 1996, respectively.
401(K) PROFIT-SHARING PLAN
In 1996, the Company established a 401(k) plan available to all employees
meeting certain service requirements. Eligible employees may contribute up to
15% of their annual salary to the plan, subject to certain limitations. The
Company may make matching contributions and also may provide profit-sharing
contributions at the discretion of its board of directors. Employees become
fully vested in the Company contributions after seven years of service. In 1996,
the Company contribution was $17,462.
LICENSE AGREEMENTS
In February 1996, the Company entered into a license agreement with Centaur
Systems, Inc. ("CSI") whereby CSI granted Rovak the exclusive right to license
certain programs owned by CSI, in exchange for future royalty payments on
revenue received by the Company related to maintenance services provided to
CSI's customer base. The royalty is calculated on an annual declining scale
starting at 60% of related revenue for 1996 and ending at 20% of revenue for the
year 2000. During 1996, the Company paid $53,025 of royalties to CSI, of which
$37,881 was prepaid.
In September 1994, the Company entered a license agreement with PCM
Systems, Inc. ("PCM") whereby PCM granted Rovak the exclusive right to license
certain programs owned by PCM, in exchange for future royalty payments equal to
5% of revenue received by the Company related to PCM's line of business,
including any related maintenance fees earned. In addition, the agreement
required a royalty prepayment of $80,000 and minimum monthly royalties of
$3,333, with guaranteed minimum aggregate royalty payments of $280,000 through
August 31, 2001, after which royalties no longer accrue. As of December 31,
1996, $291,171 of royalties have been paid, including $183,337 of prepaid
royalties.
Also in connection with the PCM license agreement, the Company entered into
an employment agreement with an officer/shareholder of PCM, whereby that
individual became employed by Rovak in exchange for base compensation plus a 5%
commission on all revenue earned by Rovak related to PCM's line of business.
This agreement runs through 2001 and may be canceled by either party.
9. RELATED PARTY TRANSACTIONS
During 1995 and 1996, the Company purchased computer forms and supplies
from a corporation owned by a family member of a Company stockholder aggregating
$214,886 and $291,882, respectively. These costs
F-63
<PAGE> 111
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are included in cost of sales in the Company's statement of operations. At
December 31, 1995 and 1996, accounts payable to this related party totalled
$30,020 and $28,682, respectively.
Additionally, the Company leases its operating facility and offices from a
related party (Note 8).
10. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
-------- -------
<S> <C> <C>
Current
Federal................................................... $ -- $ --
State..................................................... -- --
-------- -------
Total current..................................... -- --
-------- -------
Deferred
Federal................................................... (77,000) 45,000
State..................................................... (22,000) 5,000
-------- -------
Total deferred.................................... (99,000) 50,000
-------- -------
$(99,000) $50,000
======== =======
</TABLE>
Deferred tax assets at December 31, 1995 and 1996 of $235,000 and $185,000
relate principally to the anticipated benefit from the Company's $396,000 net
operating loss carryforward which expires in 2011. Other temporary differences
are immaterial.
Income taxes differed from amounts computed by applying the U.S. Federal
income tax statutory rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
-------- -------
<S> <C> <C>
Expected tax (benefit) expense.............................. $(91,830) $37,800
Increase (decrease) in income taxes resulting from:
State income taxes........................................ (16,494) 6,600
Other, net.................................................. 9,324 5,600
-------- -------
Net income tax (benefit) expense............................ $(99,000) $50,000
======== =======
</TABLE>
11. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
-------- --------
<S> <C> <C>
Cash paid for interest during the years.................... $133,933 $139,780
======== ========
</TABLE>
During 1996, the Company incurred obligations under capital leases
totalling $82,240 in exchange for equipment. In addition, the Company
transferred $133,972 of inventory to equipment.
F-64
<PAGE> 112
ROVAK, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENT
The Company has entered into negotiations with American Medicare
Corporation ("AMC"), whereby AMC would acquire all of the common stock of the
Company in exchange for an estimated $3,000,000 plus contingent consideration of
$815,000 based on earnings subsequent to the transaction. Of the total
consideration, approximately $3,165,000 is payable in cash and the balance by
issuance of common stock. The sale is anticipated to occur in the first quarter
of 1997.
F-65
<PAGE> 113
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
DR Software, Inc.
Atlanta, Georgia
We have audited the accompanying balance sheets of DR Software, Inc. as of
December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DR Software, Inc. at
December 31, 1995 and 1996, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 17, 1997
F-66
<PAGE> 114
DR SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS:
Current assets:
Cash...................................................... $ 169,834 $ 155,048
Accounts receivable, net of allowance of $14,000.......... 262,385 369,715
Inventory................................................. 135,587 63,256
Other assets.............................................. 37,028 71,560
---------- ----------
Total current assets.............................. 604,834 659,579
---------- ----------
Property and equipment:
Office and computer equipment............................. 340,561 399,030
Furniture and fixtures.................................... 32,771 58,157
---------- ----------
Total property and equipment...................... 373,332 457,187
Less accumulated depreciation..................... (243,165) (301,888)
---------- ----------
Net property and equipment........................ 130,167 155,299
---------- ----------
Capitalized software development costs, net of accumulated
amortization of $1,070,143 and $1,296,324................. 514,414 683,515
---------- ----------
Total assets...................................... $1,249,415 $1,498,393
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable to bank...................................... $ -- $ 70,000
Accounts payable.......................................... 187,377 156,010
Accrued expenses.......................................... 138,050 137,937
Deferred revenue from software maintenance agreements..... 881,754 1,045,776
Current portion of capital lease obligations.............. 4,913 8,833
---------- ----------
Total current liabilities......................... 1,212,094 1,418,556
---------- ----------
Capital lease obligations, less current portion............. 15,227 19,249
---------- ----------
Commitments
Stockholders' equity:
Common stock, $1.00 par value; 100,000 shares authorized;
50,000 shares issued and outstanding................... 50,000 50,000
Retained earnings (deficit)............................... (27,906) 10,588
---------- ----------
Total stockholders' equity........................ 22,094 60,588
---------- ----------
Total liabilities and stockholders' equity........ $1,249,415 $1,498,393
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-67
<PAGE> 115
DR SOFTWARE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues:
System sales.............................................. $2,192,378 $1,908,845
Support and services...................................... 1,211,916 1,450,606
---------- ----------
Total revenues.................................... 3,404,294 3,359,451
---------- ----------
Operating expenses:
Salaries and wages........................................ 1,461,901 1,585,559
Hardware purchases for resale............................. 1,073,920 785,173
Depreciation and amortization............................. 292,641 284,904
Rent...................................................... 48,191 81,123
Travel and entertainment.................................. 207,508 184,262
Telephone................................................. 120,290 126,196
Advertising............................................... 76,790 102,060
Other..................................................... 135,938 181,025
---------- ----------
Total operating expenses.......................... 3,417,179 3,330,302
---------- ----------
Income (loss) from operations............................... (12,885) 29,149
Other income (expense):
Interest expense.......................................... (11,139) (12,447)
Miscellaneous income...................................... 11,747 36,792
---------- ----------
Net income (loss)........................................... $ (12,277) $ 53,494
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE> 116
DR SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON EARNINGS STOCKHOLDERS'
STOCK (DEFICIT) EQUITY
------- --------- -------------
<S> <C> <C> <C>
Balance, at December 31, 1994............................... $50,000 $(10,629) $ 39,371
Net loss.................................................. -- (12,277) (12,277)
Distributions............................................. -- (5,000) (5,000)
------- -------- --------
Balance, at December 31, 1995............................... 50,000 (27,906) 22,094
Net income................................................ -- 53,494 53,494
Distributions............................................. -- (15,000) (15,000)
------- -------- --------
Balance, at December 31, 1996............................... $50,000 $ 10,588 $ 60,588
======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE> 117
DR SOFTWARE INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996
--------- --------
<S> <C> <C>
Cash provided by (used) in operating activities:
Net income (loss)......................................... $ (12,277) $ 53,494
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 292,641 284,904
Changes in:
Accounts receivable.................................. (52,822) (107,330)
Inventory............................................ (35,874) 72,331
Other assets......................................... (7,054) (34,532)
Accounts payable and accrued expenses................ 89,370 (31,480)
Deferred revenue..................................... 132,692 164,022
--------- --------
Net cash provided by operating activities................. 406,676 401,409
--------- --------
Cash provided by (used) in investing activities:
Purchase of property and equipment........................ (41,314) (69,455)
Increase in capitalized software development costs........ (254,530) (395,282)
--------- --------
Net cash used in investing activities..................... (295,844) (464,737)
--------- --------
Cash provided by (used) in financing activities:
Net borrowings under line of credit....................... -- 70,000
Decrease in loans from stockholders....................... (10,000) --
Payments on capital lease obligations..................... (4,241) (6,458)
Distributions paid........................................ (5,000) (15,000)
--------- --------
Net cash provided by (used in) financing activities....... (19,241) 48,542
--------- --------
Net increase (decrease) in cash............................. 91,591 (14,786)
Cash, beginning............................................. 78,243 169,834
--------- --------
Cash, ending................................................ $ 169,834 $155,048
========= ========
</TABLE>
See accompanying notes to financial statements.
F-70
<PAGE> 118
DR SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
DR Software, Inc. (the "Company"), a Georgia corporation, was incorporated
on February 24, 1983. The Company provides turnkey computer hardware and
software systems to physicians. The Company's offices are located in Marietta,
Georgia.
CASH AND CASH EQUIVALENTS
For purposes of cash flows, the Company considers all short-term debt
securities purchased with an initial maturity of three months or less to be cash
equivalents.
INVENTORIES
Inventories are valued at the lower of cost, which is determined using the
specific identification method, or market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for renewals and
improvements that significantly add to productive capacity or extend the useful
life of an asset are capitalized. Expenditures for maintenance and repairs are
charged to expense accounts currently. When depreciable properties are retired
or otherwise disposed of, the cost and related accumulated depreciation are
eliminated from the accounts and the resultant gain or loss is reflected in the
Company's statement of income during the applicable period.
For financial statement purposes, depreciation of property and equipment is
computed using the straight-line method of depreciation over the estimated
useful lives of the assets, which range from 5-7 years.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Certain costs incurred in the internal development of computer software and
costs of purchased computer software, which is to be licensed, sold, or
otherwise marketed, are capitalized and amortized on a straight-line basis over
the expected useful life of the individual software products (generally four
years). Development costs include detailed design, prototyping, coding, testing,
documentation, production and quality assurance. Such costs are capitalized once
the product's technological feasibility is established and are expensed after
the product is available for general release. During the years ended December
31, 1995, and 1996, the Company capitalized $254,530 and $395,282, respectively,
of software development costs. Amortization of capitalized software development
costs for the years ended December 31, 1995, and 1996, was $243,752 and
$226,181, respectively.
The Company's operational policy for the assessment and measurement of the
continuing value of capitalized software is to evaluate the recoverability of
the remaining life of its capitalized software and determine whether the
software should be completely or partially written off or the amortization
period accelerated. The Company will recognize an impairment if undiscounted
estimated future cash flows of the capitalized software is determined to be less
than the carrying amount of capitalized software.
REVENUE RECOGNITION
Revenue on computer system sales and software license fees is recognized
when the system is shipped. Revenue for maintenance and support is deferred and
recognized ratably over the period to which it relates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-71
<PAGE> 119
DR SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company markets its products and services to a wide variety of
customers in diverse geographic areas. This diversity reduces the concentration
of credit risk which may arise from the resultant accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include accounts receivable, accounts
payable, accrued liabilities and long-term debt. Such instruments are reported
at values which the Company believes are not materially different from their
fair values.
VALUE OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" is effective for years beginning after December 15, 1995.
This statement required that long-lived assets, including certain
intangibles, held and used by the Division be reviewed for potential impairment.
This new pronouncement did not have a material effect on the Company's financial
statements.
2. NOTE PAYABLE
The Company has arranged for a line of credit with a bank in the maximum
amount of $100,000, with interest at the bank's prime rate plus 1.75%. The line
of credit is collateralized by accounts receivable, property and equipment, and
a general assignment of inventory behind IBM Credit Corporation. The line of
credit must remain clear for at least 30 consecutive days during the year, and
is personally guaranteed by certain of the Company's stockholders. The balance
under this line of credit at December 31, 1996, was $70,000.
3. CAPITAL LEASE OBLIGATION
The Company leases certain equipment under noncancelable lease agreements,
with monthly payments totalling $965 through July 2000. The following is a
schedule, by years, of the future required payments:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997........................................................ $11,578
1998........................................................ 11,578
1999........................................................ 8,655
2000........................................................ 1,140
-------
Total future payments............................. 32,951
Less amount representing interest........................... (4,869)
-------
Present value of minimum lease payments..................... $28,082
=======
</TABLE>
4. COMMITMENTS
The Company leases its premises as well as certain office equipment and a
vehicle under noncancellable operating leases which expire at various dates
through 2001.
F-72
<PAGE> 120
DR SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The remaining obligations under these leases at December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1997........................................................ $114,862
1998........................................................ 121,240
1999........................................................ 126,178
2000........................................................ 133,997
2001........................................................ 33,988
--------
$530,265
========
</TABLE>
Rent expense for the years ended December 31, 1995 and 1996, was $48,191 and
$81,123, respectively
5. INCOME TAXES
The Company has elected to be taxed as an "S" Corporation under the
provisions of Subchapter S of the Internal Revenue Code. As such, the profits of
the Company are taxed on the individual income tax returns of the stockholders.
Accordingly, no provision for income taxes has been made in the accompanying
financial statements.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Equipment acquired through capital leases totalled $0 and $14,400 in 1995
and 1996, respectively. Cash paid for interest during 1995 and 1996 was $11,139
and $12,447, respectively.
7. SUBSEQUENT EVENT
The Company has entered into negotiations with American Medcare Corporation
("AMC"), whereby AMC would acquire all of the common stock of the Company in
exchange for an estimated $3,000,000. Of the total consideration approximately
$2,100,000 is payable in cash and the balance by issuance of common stock. The
sale is anticipated to occur in the first quarter of 1997.
F-73
<PAGE> 121
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 7
Risk Factors.......................... 13
Use of Proceeds....................... 19
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 21
Selected Pro Forma Combined Financial
Data................................ 22
Management's Discussion and Analysis
of Pro Forma Combined Financial
Condition and Pro Forma Combined
Results of Operations............... 24
Selected Financial Data of AMC........ 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of AMC................ 27
Business.............................. 29
Management............................ 37
Principal Stockholders................ 41
Certain Transactions.................. 41
Description of Capital Stock.......... 42
Shares Eligible for Future Sale....... 44
Underwriting.......................... 45
Legal Matters......................... 46
Experts............................... 46
Available Information................. 46
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
[LOGO]
INFOCURE CORPORATION
2,000,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
RODMAN & RENSHAW, INC.
CRUTTENDEN ROTH
INCORPORATED
, 1997
======================================================
<PAGE> 122
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of the performance of their duties as directors and
officers provided that this provision shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
arising under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of Stockholders or otherwise. The
Company's By-laws provide that the Company will indemnify its directors,
executive officers, other officers, employees and agents to the fullest extent
permitted by Delaware law.
Article Eight of the Company's Certificate of Incorporation eliminates the
personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
The Company does not currently have any liability insurance coverage for
its officers and directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering are as follows:
<TABLE>
<S> <C>
SEC filing fee.............................................. $ 8,467
Nasdaq National Market Listing Fees......................... 33,343
NASD filing fee............................................. 3,294
Accounting fees and expenses................................ 275,000
Legal fees and expenses..................................... 200,000
Blue Sky fees and expenses.................................. 25,000
Printing and engraving...................................... 125,000
Transfer Agent's and Registrar's fees....................... 5,000
Miscellaneous expenses...................................... 24,896
-----------
Total............................................. $ 700,000
===========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following information sets forth all securities of the Company sold by
it since inception, which securities were not registered under the Securities
Act of 1933, as amended (the "Securities Act"): On December 3, 1996, Frederick
L. Fine and James K. Price, President and Executive Vice President of the
Company respectively, each purchased five (5) shares of Common Stock at $10.00
per share. The sale was exempt from registration under Section 4(2) of the
Securities Act of 1933.
II-1
<PAGE> 123
ITEM 27. EXHIBITS.
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement*
2.1 -- Plan and Agreement of Merger dated February , 1997 between
InfoCure Corporation and American Medcare Corporation*
4.1 -- Specimen Certificate for shares of Common Stock*
5.1 -- Opinion of Glass, McCullough, Sherrill & Harrold, LLP,
counsel to the Company*
10.1 -- InfoCure Corporation Stock Option Plan
10.2 -- Form of Incentive Stock Option Agreement of Company
10.3 -- Stock Purchase Agreement among Company and the shareholders
of Rovak, Inc. dated February 1, 1997
10.4 -- Stock Purchase Agreement among the Company and the
shareholders of Millard-Wayne, Inc. dated February 11, 1997
10.5 -- Stock Purchase Agreement among the Company and the
shareholders of KCOMP Management Systems, Inc. dated
February 12, 1997
10.6 -- Deleted
10.7 -- Stock Purchase Agreement among the Company and the
shareholders of DR Software dated February 11, 1997
10.11 -- Pledge and Security Agreement dated January 4, 1996 by and
between ICS and Envoy Corporation*
10.12 -- Form of Employment Agreement between the Company and
Frederick L. Fine dated March , 1997
10.13 -- Form of Employment Agreement between the Company and James
K. Price dated March , 1997
10.14 -- Employment Agreement between the Company and R. Ernest
Chastain dated December , 1996*
10.16 -- Form of Employment Agreement to be entered into between the
Company and Donald M. Rogers upon the consummation of the
Acquisitions
10.17 -- Form of Employment Agreement to be entered into between the
Company and M. Wayne George upon the consummation of the
Acquisitions
10.18 -- Form of Employment Agreement to be entered into between the
Company and Mark Kloner upon the consummation of the
Acquisitions
10.21 -- Form of Lock-up Agreement
10.22 -- Termination Agreement among MDP Corporation, Jonathan J.
Oscher, AMC, ICS and certain shareholders of AMC dated
November 19, 1996
10.23 -- Form of Employment Agreement to be entered into between the
Company and Brad Schraut
23.1 -- Consent of Glass, McCullough, Sherrill & Harrold, LLP (to be
included in Exhibit 5.1)*
23.3 -- Consent of BDO Seidman, LLP
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
(a) Rule 415 Offering. The undersigned Registrant will file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, an increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated
II-2
<PAGE> 124
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering.
File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.
(b) Equity Offerings of Nonreporting Small Business Issuers. The
undersigned Registrant will provide to the underwriter at the closing specified
in the underwriting agreement certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each
purchaser.
(c) Indemnification. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or controlling
persons of the Registrant pursuant to the provisions referred to in Item 24 of
this Registration Statement 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 Securities 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 Securities Act and will be governed by the final adjudication
of such issue.
(d) Request for Acceleration of Effective Date. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer 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.
(e) Rule 430A. The undersigned Registrant will:
1. For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in the form of a
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of the
time the Commission declared it effective;
2. For any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that the offering of the securities at that time as the
initial bona fide offering of those securities.
II-3
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form SB-2 and authorized this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, in the
City of Atlanta, State of Georgia, on the 24th day of February, 1997.
INFOCURE CORPORATION
By: /s/ FREDERICK L. FINE
------------------------------------
Frederick L. Fine,
Chairman of the Board of Directors,
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated and on February 24, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ FREDERICK L. FINE Chairman of the Board of
- ----------------------------------------------------- Directors, President and
Frederick L. Fine Chief Executive Officer
/s/ JAMES K. PRICE Director and Executive Vice
- ----------------------------------------------------- President
James K. Price
/s/ MICHAEL WARREN Director and Chief Financial
- ----------------------------------------------------- Officer
Michael Warren
JAMES D. ELLIOT* Director
- -----------------------------------------------------
James D. Elliot
RICHARD E. PERLMAN* Director
- -----------------------------------------------------
Richard E. Perlman
/s/ FREDERICK L. FINE
- -----------------------------------------------------
Frederick L. Fine,
Attorney-in-Fact
</TABLE>
- ---------------
* By Power of Attorney
II-4
<PAGE> 126
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement*.............................
2.1 -- Plan and Agreement of Merger dated February , 1997 between
InfoCure Corporation and American Medcare Corporation*......
4.1 -- Specimen Certificate for shares of Common Stock*............
5.1 -- Opinion of Glass, McCullough, Sherrill & Harrold, LLP,
counsel to the Company*.....................................
10.1 -- InfoCure Corporation Stock Option Plan......................
10.2 -- Form of Incentive Stock Option Agreement of Company.........
10.3 -- Stock Purchase Agreement among Company and the shareholders
of Rovak, Inc. dated February 1, 1997.......................
10.4 -- Stock Purchase Agreement among the Company and the
shareholders of Millard-Wayne, Inc. dated February 11,
1997........................................................
10.5 -- Stock Purchase Agreement among the Company and the
shareholders of KCOMP Management Systems, Inc. dated
February 12, 1997...........................................
10.6 -- Deleted.....................................................
10.7 -- Stock Purchase Agreement among the Company and the
shareholders of DR Software dated February 11, 1997.........
10.11 -- Pledge and Security Agreement dated January 4, 1996 by and
between ICS and Envoy Corporation*..........................
10.12 -- Form of Employment Agreement between the Company and
Frederick L. Fine dated March , 1997......................
10.13 -- Form of Employment Agreement between the Company and James
K. Price dated March , 1997...............................
10.14 -- Employment Agreement between the Company and R. Ernest
Chastain dated December , 1996*...........................
10.16 -- Form of Employment Agreement to be entered into between the
Company and Donald M. Rogers upon the consummation of the
Acquisitions................................................
10.17 -- Form of Employment Agreement to be entered into between the
Company and M. Wayne George upon the consummation of the
Acquisitions................................................
10.18 -- Form of Employment Agreement to be entered into between the
Company and Mark Kloner upon the consummation of the
Acquisitions................................................
10.21 -- Form of Lock-up Agreement...................................
10.22 -- Termination Agreement among MDP Corporation, Jonathan J.
Oscher, AMC, ICS and certain shareholders of AMC dated
November 19, 1996...........................................
10.23 -- Form of Employment Agreement to be entered into between the
Company and Brad Schraut....................................
23.1 -- Consent of Glass, McCullough, Sherrill & Harrold, LLP (to be
included in Exhibit 5.1)*...................................
23.3 -- Consent of BDO Seidman, LLP.................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 10.1
INFOCURE CORPORATION
1996 STOCK OPTION PLAN
I. PURPOSE.
The InfoCure Corporation 1996 Stock Option Plan is intended to
encourage stock ownership by directors, officers, other key employees,
consultants and employees of consultants of the Corporation, of its
Subsidiaries and of its Affiliates, to provide them with a proprietary interest
or to increase their proprietary interest in the Corporation's success and/or
to encourage them to remain in the employ of the Corporation or any of its
Subsidiaries or Affiliates.
II. DEFINITIONS
Where the following words appear in the Plan, they shall have the
respective meanings set forth below, unless their context clearly indicates a
contrary meaning:
A. Affiliate - Any corporation or other business organization in
which the Parent owns, directly or indirectly, 25% or more of
the voting stock or capital at the time of the granting of the
Option.
B. Board of Directors - The Board of Directors of the
Corporation.
C. Code - The Internal Revenue Code of 1986, as amended,
including amendments hereafter adopted.
D. Committee - The Compensation Committee of the Board of
Directors or any successor Committee appointed by the Board of
Directors. In the absence of the appointment of the
Committee, the Board of Directors of the Corporation shall
exercise all of the powers of the Committee under the Plan.
E. Corporation - InfoCure Corporation, a Delaware corporation,
which is the grantor corporation as defined in Subsections
424(e) and (g) of the Code.
F. Employee - Employee shall mean any officer or other key
employee (including an officer or other key employee who is
also a director) employed on a full-time basis by the
Corporation or of any present or future Parent, Subsidiary or
Affiliate. For this purpose, individuals who are leased to
the Corporation or any present or future Parent, Subsidiary or
Affiliate by any leasing organization shall be treated as
being employed by the Corporation or the present or future
Parent, Subsidiary or Affiliate, as the case may be, if such
individuals are common law employees of the Corporation or
the present or future Parent, Subsidiary or Affiliate who are
eligible to receive ISOs issued by the Corporation pursuant to
section 422 of the Code.
<PAGE> 2
G. ISO - An option granted under the Plan which constitutes an
incentive stock option within the meaning of Section 422 of
the Code.
H. Non-Qualified Stock Option or NQSO - An option granted under
the Plan which does not qualify as an ISO.
I. Option - An option granted under the Plan which may be either
an ISO or a Non-Qualified Stock Option.
J. Option Agreement - The document setting forth the terms and
conditions of each Option.
K. Optionee - The holder of an Option.
L. Parent - Parent shall mean any present or future parent of the
Corporation as defined in Subsections 424(e) and (g) of the
Code.
M. Plan - InfoCure Corporation 1996 Stock Option Plan, as the
same may be amended from time to time in accordance with the
terms hereof.
N. Shares - The shares of Common Stock of the Corporation, $.001
par value, subject to adjustment and substitution as provided
in Paragraph V of the Plan.
O. Subsidiary - Any present or future subsidiary of the
Corporation as defined in Subsections 424(f) and (g) of the
Code.
III. ADMINISTRATION.
A. The Committee shall have full and complete authority in its
sole discretion, but subject to the express provisions of the Plan: to grant
Options; to determine the option price of the Shares covered by each Option; to
determine the directors, Employees, consultants and employees of consultants of
the Corporation, of its Parent, of its Subsidiaries and of its Affiliates to
whom, and the time or times at which, Options shall be granted; to determine
the number of Shares to be covered by each Option; to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective option grants (which terms
need not be identical); to cancel and amend Options (with the consent of the
holder of the Option where required); to impose such conditions on the grant of
Options as it determines to be appropriate, including the surrender of
outstanding stock options issued under the Plan or any other stock option plan,
regardless of the option price; and to make all other determinations and rules
and take such other action deemed necessary or advisable for the administration
of the Plan. In addition, the Committee may extend the duration of any NQSO for
-2-
<PAGE> 3
a period not to exceed one year subject to the provisions of Paragraph VI B
hereof without changing the option price upon such terms as the Committee may
deem advisable.
Each determination, interpretation, rule or other action made or taken
pursuant to the Plan by the Committee shall be final and conclusive for all
purposes and binding upon all persons, including, but without limitation
thereto, the Corporation, Parent, Subsidiaries, Affiliates, the Board of
Directors, the Committee and Optionees and their respective successors in
interest.
B. The Committee shall consist of not less than two (2)
directors. In the event any class of equity security of the Corporation is
registered pursuant to Section 12 of the Securities Exchange Act of 1934 ("34
Act"), each member of the Committee shall be a member of the Board of Directors
who is not eligible to participate under the Plan and who has not been granted
or awarded equity securities of the Corporation for at least one year prior to
the time the director becomes a member of the Committee or during such service
on the Committee pursuant to the Plan or any other "plan" within the meaning of
Rule 16b-3 promulgated under the 34 Act, except as otherwise permitted under
Rule 16b-3 (or any successor rule or regulation).
The Board of Directors may designate one (1) of the members of the
Committee as its chairperson and the Committee shall hold its meetings at such
times and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members present at a meeting at which a quorum was present.
Any decision or determination reduced to writing and signed by all the members
of the Committee shall be effective as if it had been made by a vote at a
meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
C. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the administration of the Plan
and the granting of Options thereunder.
IV. ELIGIBILITY AND LIMITATIONS.
Options may be granted only to directors, Employees, consultants and
employees of consultants of the Corporation, of the Parent or of any Subsidiary
or Affiliate. Persons who are not Employees of the Corporation or of a
Subsidiary or Parent will not be eligible to receive an ISO. In determining
the number of shares to be covered by each Option, subject to Paragraph V
hereof, and persons to whom Options shall be granted, the Committee shall take
into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Paragraph I hereof. Any
person who has been granted an Option may be granted an additional Option or
Options if the Committee shall so determine. No ISO shall be granted to an
individual who, at the time the ISO is granted, owns (within the meaning of
subsection 422(b)(6) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or of its
Parent or any Subsidiary, unless, at the time the ISO is
-3-
<PAGE> 4
granted, the option price is at least 110 percent (110%) of the fair market
value of the Shares subject to the ISO, and the ISO by its terms is not
exercisable after the expiration of five (5) years from the date the ISO is
granted. Directors of the Corporation who are not Employees will not be
eligible to receive a grant of an Option after any class of equity security of
the Corporation is registered pursuant to Section 12 of the 34 Act.
ISOs granted to an Optionee in excess of the limitations set forth in
subsection 422(d) of the Code for any calendar year shall be deemed to be a
Non-Qualified Stock Option.
Each Option must be granted within ten (10) years from the date on
which the Plan is adopted by the Board of Directors.
V. AVAILABLE SHARES AND STOCK ADJUSTMENTS.
A. The total number of Shares that may be issued pursuant to
Options granted under the Plan shall not exceed 1,125,000 Shares, subject to
adjustment as set forth hereinafter. Shares subject to the Plan may be either
authorized but unissued Shares or Shares that were once issued and subsequently
reacquired by the Corporation. If any Option is surrendered before exercise or
lapses without exercise or for any other reason ceases to be exercisable, the
Shares reserved therefor shall continue to be available under the Plan. The
Corporation will reserve and keep available a sufficient number of authorized
but unissued Shares and/or treasury Shares to be issued upon the exercise of
the Options.
B. In the event of a stock split, reverse stock split, stock
dividend, or a reclassification of the Shares or other similar action by the
Corporation, the total number of Shares which may be issued under the Plan upon
the exercise of Options and the total number of Shares and/or the option price
contained in any outstanding Option pursuant to which Options were granted
under the Plan, shall be appropriately adjusted as determined by the Board of
Directors in its sole discretion. Any such adjustment in the number of Shares
and/or option price of an ISO shall be made in such manner as to not constitute
a modification as defined in Subsection 424(h)(3) of the Code and only to the
extent permitted by Sections 422 and 424 of the Code.
C. In the event of any merger or consolidation or other
reorganization in which the Corporation shall be the surviving corporation and
its shareholders retain all of the Shares held immediately prior to such event
and receive no securities or other property upon the merger or consolidation or
other reorganization, there shall be no change in the securities, the number of
Shares or the option price that the holder of the Option will be entitled to
receive upon the exercise of the Option except as set forth in Paragraph V B,
if applicable.
D. In the event of any merger or consolidation or other
reorganization in which the Corporation shall be the surviving corporation and
its shareholders have a right to receive
-4-
<PAGE> 5
securities for or other property in addition to or in lieu of, the outstanding
Shares held, each holder of an outstanding Option shall be entitled to receive,
upon the exercise of the Option, in lieu of the number of Shares as to which
such holder of the Option would otherwise have been entitled to receive upon
the exercise of the Option immediately prior to such merger or consolidation or
other reorganization, the number and class of shares and other securities and
other property to which such holder of the Option would have been entitled to
receive (or retain) pursuant to the terms of the merger or consolidation or
other reorganization if, at the time of such merger or consolidation or other
reorganization, such holder of the Option had been the holder of record of a
number of Shares equal to the number of Shares to which such Option is then
being so exercised. Comparable rights shall accrue to each holder of an Option
in the event of successive mergers or consolidations or other reorganizations.
E. In the event of any merger or consolidation or other
reorganization, in which the Corporation is not the surviving corporation and
the shareholders of the Corporation shall not receive any equity securities of
the surviving corporation (or its parent) for their Shares, except as
hereinafter set forth, all Options (whether or not vested in whole or in part)
which have not been exercised prior to or upon such event, shall terminate upon
such event unless and to the extent the Board of Directors shall have provided
for the substitution of other options for, or for the assumption by the
surviving corporation (or its parent) of any unexercised Options then
outstanding. Such action by the Board of Directors may be taken with respect
to ISO's only to the extent permitted by the Code, including Sections 422 and
424. Except to the extent the Board of Directors shall have provided for the
substitution of other options for, or for the assumption by another corporation
of, any unexercised Options then outstanding or shall have specifically
otherwise provided as permitted by this Subparagraph E, the Options which have
not vested shall not become exercisable upon such event and all outstanding
Options shall expire upon such event.
F. In the event of any merger or consolidation or other
reorganization in which the Corporation is not the surviving corporation and in
which its shareholders shall receive equity securities (regardless of whether
they receive other property) for their Shares, each holder of an outstanding
Option shall be entitled to receive, upon the exercise of the Option, in lieu
of the number of Shares as to which such holder of the Option would otherwise
have been entitled to receive upon the exercise of the Option immediately prior
to such merger or consolidation or other reorganization, the number and class
of shares and other securities and other property to which such holder of the
Option would have been entitled to receive pursuant to the terms of the merger
or consolidation or other reorganization if, at the time of such merger or
consolidation or other reorganization, such holder of the Option had been the
holder of record of a number of Shares
-5-
<PAGE> 6
equal to the number of Shares to which such Option is then being so exercised.
Comparable rights shall accrue to each holder of an Option in the event of
successive mergers or consolidations or reorganizations.
G. Upon the dissolution or liquidation of the Corporation, all
Options, whether or not vested in whole or in part, which have not been
exercised prior to such event shall terminate upon such event.
H. Any adjustments pursuant to this Paragraph V may provide for
the elimination of any fractional interest which might otherwise become subject
to an Option, with or without consideration, as determined by the Board of
Directors.
VI. OPTION TERMS.
The Options will be granted under terms and conditions set forth in a
written instrument as determined by the Committee from time to time. The
Options will include (but not by way of limitation) the following:
A. Price and Payment - The purchase price of each Share covered
by each Option as determined by the Committee. The purchase price of each
Share covered by an Option shall not be less than the fair market value of a
Share at the time of the granting of the Option. The fair market value of a
Share shall be determined without regard to any restriction other than
restrictions which by their terms will never lapse. The purchase price of the
Shares to which an Option shall be exercised shall be paid in full at the time
of the exercise in cash or by check, subject to collection. The Committee may
also provide that the purchase price may be paid in whole or in part by
assigning to the Corporation a number of Shares having a fair market value,
determined as of the date the Option is exercised, equal to the amount of the
purchase price for the Shares being acquired upon the exercise of the Option
which the Committee permits to be paid by the assigning of Shares to the
Corporation. In such event, the Committee may, in its sole discretion, require
certain representations and other conditions precedent to the acceptance of the
Shares from the Optionee.
B. Duration - The duration of the Options shall be as determined
by the Committee, but in no event shall an Option granted hereunder be
exercisable after the earliest of any of the following dates: (i) the
expiration of ten (10) years from the date the Option is granted; (ii) one (1)
year after the cessation of employment or engagement, as the case may be, of
the holder of the Option with the Corporation, any Subsidiary, or the Parent or
Affiliate, except in the event of termination of such employment or engagement,
as the case may be, by reason of disability or death; (iii) two (2) years after
the cessation of such employment or engagement, as the case may be, in the
event of termination of employment or engagement, as the case may be, due to
death or disability (within in the meaning of Subsection 422(c)(6) of the
Code). The Committee's determination as to whether such employment, engagement
or election of an Optionee has ceased
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<PAGE> 7
and the effective date thereof shall be final and conclusive on all persons
affected thereby. Whether military or other government or eleemosynary service
or other leave of absence will constitute termination of such employment or
engagement shall be determined in each case by the Committee in its sole
discretion.
C. Non-transferability - ISO's granted under the Plan shall not
be transferable otherwise than by will or the laws of descent and distribution
or as otherwise permitted pursuant to Subsection 424(c)(4) of the Code (or any
successor provision). ISOs may be exercised during the lifetime of the
Optionee only by the Optionee personally or by the Optionee's legal
representative.
D. Exercise of Option - Options granted hereunder shall be
exercisable in whole or in part as determined by the Committee.
E. Conditions to Exercise of Options - Shares shall not be issued
with respect to any Option granted under the Plan unless the issuance and
delivery of such Shares shall comply with (or be exempt from) all relevant
provisions of law, including, without limitation, the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, any applicable
state securities law, and the requirements of any stock exchange or national
market system on which the Shares may then be listed. If the issuance or
transfer of Shares to be issued or issued pursuant to any Option granted under
the Plan may in the opinion of counsel to the Corporation conflict or be
inconsistent with or not be permitted under any applicable law or regulation of
any governmental agency having jurisdiction, including, without limitation,
regulations promulgated pursuant to federal and state securities laws, the
Corporation reserves the right to delay the issuance of the Shares upon the
exercise of an Option and such delay shall be without liability to or other
obligation of the Corporation. The Corporation shall have no obligation
hereunder to file registration statements or other reports or notices or obtain
any license or permit or exemption under any federal or state law with respect
to the grant of an Option or the issuance of Shares upon the exercise of an
Option or the transfer of such Shares at any time thereafter. The Board of
Directors or Committee may require that the holder of an Option, as a condition
to each exercise of the Option in whole or in part, to represent to the
Corporation in writing that the Shares to be acquired upon the exercise of the
Option are to be acquired by the holder of the Option for investment purposes
only, for such person's own account, and not with a view to distribution and
make such other representations as counsel to the Corporation may reasonably
request to assure the availability of an exemption from or compliance with the
registration, notice, reporting or permitting requirements of applicable
federal or state securities laws. The Option may also set forth such other
terms and conditions relating to the non-registration or qualification of the
Shares or the issuance of the Shares by the Corporation or the transfer of the
Shares by the Optionee under the federal and state securities laws, as the
Board of Directors or Committee may prescribe. Such representations and other
terms and conditions shall continue in effect as long as counsel to the
Corporation may reasonably request.
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<PAGE> 8
F. Disposition of Shares - In the event the disposition of Shares
acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act of 1933, as amended, and under
applicable state securities laws, the Shares so purchased shall be restricted
against transfer to the extent and for as long as required by such laws and
regulations promulgated thereunder or until, and as long as, the Shares are
covered by applicable registration statements filed by the Corporation in its
sole discretion.
G. Tax Withholding - The Corporation, in its sole discretion and
on terms it shall determine, may withhold, or may grant to an Optionee the
right to elect to have withheld, Shares having a fair market value not in
excess of the amount necessary to satisfy the withholding tax obligations of
the Optionee, in whole or in part, relating to the exercise of the Option. In
the event any class of equity security of the Corporation is registered
pursuant to Section 12 of the 34 Act, any election granted to an executive
officer (as defined pursuant to rules promulgated under the 1934 Act) or
director of the Parent shall only be made during the period set forth in Rule
16b-3 promulgated under the 1934 Act (or any successor rule or regulation).
The Optionee shall also pay in cash to the Corporation any amount required
under the Code and other applicable statute or regulation to be withheld upon
the exercise of an Option.
VII. EXERCISE.
An Option granted hereunder shall be exercisable in whole or in part
only by written notice delivered in person or by mail to the President of the
Corporation (or such other person designated by the Committee) at the
Corporation's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and other consideration in
accordance with the Option. The holder of an Option shall not be deemed to be
a holder of any Shares subject to any Option and shall not be entitled to the
rights of a holder of any Shares, including the right to vote the Shares and to
receive dividends, unless and until such Shares have been issued.
VIII. TERMINATION AND AMENDMENT.
The Board of Directors may at any time terminate the Plan, or make
such amendments thereto or modifications thereof as it shall deem advisable,
including amendments deemed necessary or desirable to conform any ISO to any
change in the Code or regulations thereto; provided, however, that the Board of
Directors may not, without further approval by the shareholders of the
Corporation, increase the maximum number of Shares for which Options may be
granted under the Plan or change the designation of the class of employees and
other persons eligible to receive Options. No termination, modification or
amendment of the Plan shall, without the consent of the Optionee to whom an
Option shall theretofore have been granted, adversely affect the rights of such
Optionee under such Option without the written consent of such Optionee.
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<PAGE> 9
IX. MISCELLANEOUS.
A. Applicable Law. The Plan shall be governed and construed in
accordance with the laws of the State of Georgia.
B. Employee/Employer Rights. The granting of Options hereunder
shall be entirely discretionary and nothing in the Plan shall be deemed to give
any person any right of continued employment, engagement or officership, as the
case may be, or give any person any right to receive Options or additional
Options hereunder or interfere in any way with the right of the Corporation,
its Parent, its Subsidiary or its Affiliate to terminate the Optionee's
employment, engagement or election, as the case may be, for any reason or the
right of the Optionee to terminate his/her employment, engagement, or
officership, as the case may be, for any reason.
C. ISO Grants. The Plan is intended to provide in part for the
grant of ISO's pursuant to Section 422 of the Code, including amendments
thereto hereafter adopted, and the provisions of the Plan as they relate to
ISO's and the ISO's granted shall be construed to effectuate such purpose. If
for any reason it is subsequently determined that an Option intended to qualify
as an ISO does not so qualify, the Corporation, Parent and Subsidiary shall
have no liability to the Optionee and such Options shall be deemed to be
Non-Qualified Stock Options.
X. EFFECTIVE DATE.
The Plan shall become effective on the date of its adoption by the
Board of Directors subject to the approval of the Plan by the shareholders of
the Corporation within twelve (12) months after the date of its adoption. The
date of granting of an Option shall be the date on which the Board of Directors
or the Committee makes the determination of granting such Option or such later
date as designated by the Board of Directors or the Committee.
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<PAGE> 1
EXHIBIT 10.2
Optionee: ___________________
Option Shares: ______
(number of shares of
Common Stock)
Purchase Price
per share: $___
Date of Option Grant: _____ __, 1997
First Anniversary
Date: _____ __, 1998
Expiration Date: _____ __, 2004
INFOCURE CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
("OPTION AGREEMENT")
SECTION I
GRANT
INFOCURE CORPORATION ("Corporation") hereby grants to the optionee set
forth above ("Optionee") an incentive stock option ("Option") within the meaning
of Section 422 of the Internal Revenue Code to purchase the number of shares of
common stock $.001 par value, of the Corporation set forth above (collectively
"Option Shares") on the terms and conditions herein set forth and the provisions
of the InfoCure Corporation 1997 Stock Option Plan, as amended from time to time
("Plan"). The Plan is subject to the approval of the shareholders. The failure
of the shareholders to approve the Plan shall render this option null and void.
The purchase price of each such Option Share shall be the Purchase Price set
forth above. The Option shall expire on the Expiration Date set forth above,
unless sooner terminated as provided in Section III or Section X of this Option
Agreement or Paragraphs V and VI of the Plan. To the extent the Option does not
qualify as an incentive stock option it shall be treated as options which are
not incentive stock options.
Each term used herein shall have the same meaning as provided in the
Plan unless herein otherwise provided. The Option is granted pursuant to the
Plan.
<PAGE> 2
SECTION II
EXERCISE OF THE OPTION
The Option granted hereunder may be exercised at any time and from time
to time during the period commencing from the date the Option was granted until
the date the Option expires provided and to the extent that this Option has
vested and is exercisable as provided hereinafter and in the Plan. To the extent
any Option Shares do not vest prior to the termination of the Option for any
reason, such Option Shares may not be acquired hereunder.
SECTION III
EARLY TERMINATION OF OPTION
The provisions of Sections I and II of this Option Agreement
notwithstanding, this Option may not be exercised in whole or in part after the
earlier of (i) termination for cause as defined in the employment agreement
("Employment Agreement") between the Corporation and Optionee of event date;
(ii) termination of employment by Optionee for any reason; (iii) three (3)
months following the date of the termination of employment of the Optionee by
the Corporation, any Subsidiary or Parent of the Optionee for any reason, other
than for cause, total disability (as defined in the Employment Agreement) or
death of the Optionee while an employee of the Corporation or any Subsidiary or
Parent; and (iv) twelve (12) months following the date of termination of
employment of the Optionee with the Corporation, any Subsidiary or Parent, in
the event the termination of employment is due to death or to total disability
of the Optionee.
SECTION IV
VESTING OF OPTION
The Option hereby granted shall vest only during the Optionee's
continuous employment with the Corporation and/or any Parent and/or any
Subsidiary, and shall be exercisable only upon and after such vesting and prior
to its termination, by Optionee in accordance with the following schedule:
25% of the Option Shares Commencing on the first (1st)
anniversary of the grant of the Option
Additional 25% of the Commencing on the second (2nd)
Option Shares anniversary of the grant of the Option
Additional 25% of the Commencing on the third (3rd)
Option Shares anniversary of the grant of the Option
Additional 25% of the Commencing on the (4th) anniversary
Option Shares of the grant of the Option
-2-
<PAGE> 3
Notwithstanding the foregoing provisions of this Section IV, in the
event of a Change in Control (as hereinafter defined) during the Optionee's
employment with the Corporation and/or any Parent and/or any Subsidiary, the
Option hereby granted shall vest with respect to all of the Option Shares
immediately prior to such Change in Control.
The term "Change in Control" shall mean:
(i) The acquisition (other than from the Corporation) by any
person, entity or "group" within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 ("34 Act") (excluding,
for this purpose, the Corporation, its Parent or its Subsidiaries, or
any employee benefit plan of the Corporation, its Parent or its
Subsidiaries) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 34 Act) of more than 50% of either the then
outstanding shares of common stock of the Corporation or of the
combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the
board of directors of the Corporation ("Incumbent Board") cease for any
reason to constitute at least a majority of the board of directors,
provided that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual is a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Corporation of a
merger, consolidation or other reorganization in each case, with
respect to which persons who were the shareholders of the Corporation
and optionees immediately prior to such merger, consolidation or other
reorganization, immediately thereafter, do not own more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the merged, consolidated or reorganized corporation's then
outstanding voting securities, or of the sale of all or substantially
all of the assets of the Corporation; provided, however, in such event
the Change in Control will be deemed to have occurred immediately prior
to the merger, consolidation or other reorganization.
SECTION V
TRANSFER
The Option may not be transferred except by will or the laws of descent
and distribution and may be exercised only by Optionee during the lifetime of
the Optionee. More particularly, but without limiting the generality of the
foregoing, the Option may not be assigned, transferred (except as permitted in
Section VI), pledged or hypothecated in any way (whether by operation of law or
otherwise). The Option shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or
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<PAGE> 4
other disposition of the Option contrary to the provisions hereof, and the levy
of any attachment or similar process on the Option, shall be null and void and
without effect.
SECTION VI
DEATH OF OPTIONEE
In the event of Optionee's death, the Option may be exercised by the
legal representatives of the estate of Optionee or by the person or persons to
whom Optionee's rights under the Option shall have passed by will or by the laws
of descent and distribution.
SECTION VII
TOTAL OR PARTIAL EXERCISE
The portion of the Option which has vested and is exercisable may be
exercised either at one time as to the total number of such Option Shares or may
be exercised from time to time as to any portion thereof prior to the
termination of the Option.
SECTION VIII
NOTICE OF EXERCISE; ISSUANCE OF CERTIFICATES
Subject to the terms and conditions of the Option, the vested portions
of the Option may be exercised by written notice to the Corporation, at its
principal office at InfoCure Corporation, at _________________________________,
or such other place designated in writing by the Corporation from time to time
to the Optionee. Such notice shall state the election to exercise the Option and
the number of Option Shares in respect of which it is being exercised, and shall
be signed by the person so exercising the Option. Such notice shall be
accompanied by a certified or bank cashier's check payable to the order of the
Corporation or other consideration approved by the Board of Directors for the
full purchase price of the Option Shares in respect of which the Option is being
exercised. If permitted in advance by the Board of Directors, the purchase price
may be paid in whole or in part by assigning to the Corporation a number of
shares of the common stock of the Corporation having a fair market value,
determined as of the date the Option is exercised, equal to the amount of the
purchase price for the Option Shares being acquired upon the exercise of the
Option. In such event, the Board of Directors may, in its sole discretion,
require certain representations and other conditions precedent to the acceptance
of the shares from the Optionee. The certificate or certificates representing
the Option Shares shall be issued and delivered by the Corporation as soon as
practicable after receipt of the notice and payment. Such certificate or
certificates shall be registered in the name of the person so exercising the
Option and, if the Option shall be exercised by Optionee and the Optionee shall
so request in the notice exercising the Option, such certificate or certificates
shall be registered in the name of Optionee and another person jointly, with
right of survivorship, and shall be delivered to or on the written order of the
person or persons exercising the Option. In the event the Option is being
exercised pursuant to Section VI hereof, by any person or persons other than
Optionee,
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<PAGE> 5
the notice shall be accompanied by appropriate proof of the right of such person
or persons to exercise the Option.
SECTION IX
ISSUANCE AND TRANSFER OF SHARES
Subject to the provisions of Paragraph VI of the Plan, in the event the
issuance or transfer of Option Shares may, in the opinion of counsel to the
Corporation, conflict or be inconsistent with any applicable law or regulation
of any governmental agency having jurisdiction, the Corporation reserves the
right to refuse or to delay the issuance or transfer of such Option Shares.
SECTION X
ADJUSTMENT, MODIFICATIONS OR TERMINATION UPON RECAPITALIZATION
In the event of a merger, consolidation, reorganization,
recapitalization, reclassification of stock, stock dividend, split-up, reverse
split or other change in the corporate structure or capitalization of the
Corporation affecting the Corporation's common stock as presently constituted or
the liquidation or dissolution of the Corporation, the Option shall be adjusted,
modified or terminated as provided in or pursuant to the provisions of Paragraph
V of the Plan.
SECTION XI
GOVERNING LAW
This option grant shall be governed by the laws of the State of
Georgia.
INFOCURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------
Title:
----------------------------
OPTIONEE ACKNOWLEDGMENT
I have read the above Incentive Stock Option Agreement and the InfoCure
Corporation 1996 Stock Option Plan ("Plan") and hereby accept the above Option
to purchase shares of the common stock of the Corporation in accordance with and
subject to the terms and conditions of the Incentive Stock Option Agreement and
the Plan with which I am familiar and I agree to be bound thereby. I further
understand that (i) any rule, regulation and determination,
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<PAGE> 6
including interpretation by the Board of Directors or Committee regarding the
Plan, the Options granted thereunder and the exercise thereof shall be final,
conclusive and binding for all purposes and on all persons including the
Corporation and myself; and (ii) the grant of the Option to me shall not affect
in any way the Corporation and/or its Subsidiary and/or Parent's right to
terminate my employment for any reason or constitute an agreement by me to
remain in the employ of the Corporation or the Subsidiary or its Parent for any
specified term.
OPTIONEE -
-------------------------------
Acceptance Date: As of the Date of Grant
-6-
<PAGE> 1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION ("BUYER"),
AND THE SHAREHOLDERS ("SHAREHOLDERS") OF
ROVAK, INC. ("COMPANY")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION I.
DEFINITIONS........................................................................................... 1
1.1 CERTAIN DEFINITIONS................................................................. 1
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING.......................................................... 3
2.1 COMPANY SHARES Subject to the terms and conditions of this Agreement,
at the Closing, Shareholders will sell and transfer the Company Shares to Buyer,
and Buyer will purchase the Company Shares from Shareholders........................ 3
SECTION III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS........................................................ 6
3.1 CORPORATE........................................................................... 6
3.2 FINANCIAL STATEMENTS................................................................ 7
3.3 CUSTOMERS........................................................................... 7
3.4 ABSENCE OF CERTAIN FINANCE AND BUSINESS CHANGES..................................... 8
3.5 GUARANTIES/LIENS.................................................................... 8
3.6 NO UNDISCLOSED LIABILITIES.......................................................... 8
3.7 ACCOUNTS RECEIVABLE................................................................. 9
3.8 OWNERSHIP OF INTELLECTUAL PROPERTY.................................................. 9
3.9 PROPERTY AND EQUIPMENT.............................................................. 11
3.10 LICENSE AGREEMENTS.................................................................. 11
3.11 CONSULTING AND DEVELOPMENT AGREEMENTS............................................... 12
3.12 MAINTENANCE/COMMITMENTS............................................................. 12
3.13 ALL INTANGIBLE ASSETS USED IN THE BUSINESS.......................................... 12
3.14 EMPLOYEES/CONSULTANTS/DIRECTORS..................................................... 12
3.15 ASSUMED AGREEMENTS.................................................................. 13
3.16 LITIGATION AND ADVERSE EVENTS....................................................... 14
3.17 COMPLIANCE WITH APPLICABLE LAW...................................................... 14
3.18 TAXES AND TAX RETURNS............................................................... 14
3.19 CONSENTS............................................................................ 14
3.20 BROKERS AND FINDERS................................................................. 14
3.21 RELATED TRANSACTIONS................................................................ 15
3.22 NO UNTRUE STATEMENTS................................................................ 15
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF BUYER............................................................... 16
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
4.1 ORGANIZATION AND STANDING OF BUYER....................................................16
4.2 AUTHORIZATION.........................................................................16
4.3 CORPORATE.............................................................................17
4.4 BROKERS AND FINDERS...................................................................17
4.5 NO UNTRUE STATEMENTS..................................................................17
SECTION V.
CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................................17
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE...........................................17
5.2 THIRD PARTY CONSENTS..................................................................18
5.3 OPINION OF COUNSEL TO THE SHAREHOLDERS................................................18
5.4 UPDATE DISCLOSURE SCHEDULE............................................................18
5.5 PUBLIC OFFERING.......................................................................18
5.6 ESCROW AGREEMENT. ...................................................................18
5.7 EMPLOYMENT AGREEMENT..................................................................18
5.8 EMPLOYMENT AGREEMENT..................................................................18
5.9 LEASE AGREEMENT.......................................................................18
5.10 NO MATERIAL ADVERSE CHANGE............................................................18
5.11 TERMINATION OF CERTAIN AGREEMENTS.....................................................18
5.12 S-4 REGISTRATION STATEMENT............................................................19
5.13 AGREEMENT OF CERTAIN SHAREHOLDERS. ..................................................19
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS.......................................................19
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE...........................................19
6.2 OPINION OF COUNSEL TO BUYER...........................................................19
6.3 PUBLIC OFFERING.......................................................................19
6.4 ESCROW AGREEMENT. ...................................................................19
SECTION VII.
OTHER COVENANTS.........................................................................................20
7.1 CONDUCT OF BUSINESS...................................................................20
SECTION VIII.
CONFIDENTIALITY AND SECURITY............................................................................20
8.1 CONFIDENTIALITY.......................................................................20
SECTION IX.
INDEMNIFICATION.........................................................................................23
9.1 INDEMNIFICATION BY THE SHAREHOLDERS...................................................23
9.2 INDEMNIFICATION BY BUYER..............................................................24
9.3 REIMBURSEMENT.........................................................................26
9.4 CLAIMS................................................................................26
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
9.5 RESOLUTION OF DISPUTES................................................................26
SECTION X.
COVENANT NOT TO COMPETE.................................................................................27
SECTION XI.
TERMINATION AND ABANDONMENT.............................................................................28
11.1 TERMINATION AND ABANDONMENT...........................................................28
11.2 RIGHTS AND OBLIGATIONS ON TERMINATION.................................................28
SECTION XII.
MISCELLANEOUS PROVISIONS................................................................................29
12.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES................................................29
12.2 HEADINGS..............................................................................29
12.3 FURTHER ASSURANCES....................................................................29
12.4 FORCE MAJEURE.........................................................................29
12.5 CUMULATIVE REMEDIES...................................................................29
12.6 ENTIRE AGREEMENT......................................................................29
12.7 SPECIFIC PERFORMANCE..................................................................30
12.8 NOTICES...............................................................................30
12.9 NON-WAIVER OF DEFAULT.................................................................30
12.10 PARTIAL INVALIDITY....................................................................30
12.11 DUPLICATE ORIGINALS...................................................................30
12.12 ASSIGNMENT............................................................................31
12.13 FEES AND EXPENSES.....................................................................31
12.14 GOVERNING LAW.........................................................................31
12.15 COUNTERPARTS AND EXHIBITS.............................................................31
12.16 PUBLICITY.............................................................................31
</TABLE>
iv
<PAGE> 5
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION ("BUYER"),
AND THE SHAREHOLDERS ("SHAREHOLDERS") OF
ROVAK, INC. ("COMPANY")
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 1st day
of February, 1997 by and among INFOCURE CORPORATION, a Delaware corporation
("Buyer"), and the UNDERSIGNED SHAREHOLDERS ("Shareholders") of ROVAK, INC., a
Minnesota corporation ("Company").
WHEREAS, Shareholders desire to sell, and Buyer desires to purchase,
all of the issued and outstanding shares (the "Company Shares") of capital stock
of Company for the consideration and on the terms set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS
1.1 CERTAIN DEFINITIONS
(a) "Adjustment Amount" is defined in Section 2.5.
(b) "Affiliate" means any person, corporation, or other
business entity (i) which, whether directly or indirectly through one or more
intermediaries, is controlled by the Shareholders (individually or as a group)
or (ii) in which Shareholders (individually or as a group) own, directly or
indirectly through one or more intermediaries, 5% or more of the voting power
for the election of the governing board.
(c) "Business" means the development, marketing and
support of the Software as currently conducted by Company.
(d) "Closing" is defined in Section 2.3.
(e) "Closing Date" means the date and time as of which
the Closing actually takes place.
(f) "Copyright" means all copyright ownership of the
Software and Documentation.
1
<PAGE> 6
(g) "Development Software" means all software, object, source,
and executable code licensed by Company as licensee which is used in the conduct
of the development, maintenance, and support of the Software. A list of the
Development Software is set forth in Section 1.1(g) of the Disclosure Schedule.
(h) "Distributor Software" means all software, object, source,
and executable code, sublicensed, sold, leased or distributed by Company as
licensor or lessor which is not owned by Company. The term excludes Development
Software. A list of the Distributor Software is set forth in Section 1.1(h) of
the Disclosure Schedule.
(i) "Distributorship Agreements" means all appointments of
Company to sell or license Hardware or Distributor Software. A list of such
appointments is set forth in Section 1.1(i) of the Disclosure Schedule.
(j) "Documentation" means all technical manuals and notes,
user manuals, and all other documents developed or in development relating to or
used in the development, maintenance, support, enhancement and use of the
Software, including pending improvements, fixes and enhancements regardless of
the media upon which the Documentation exists, which is owned by Company.
(k) "Escrow Fund" is defined in Section 2.7.
(l) "Escrow Shares" are defined in Section 2.7.
(m) "GAAP" means generally accepted United States accounting
principles, consistently applied on an accrual basis.
(n) "Hardware" means all computers, components, peripherals,
and other equipment currently offered for sale by Company in the course of its
business. Section 1.1(n) of the Disclosure Schedule lists all Hardware currently
being sold by Company.
(o) "Intellectual Property" means all patents, patent pending,
copyrights, trade secrets, techniques, know-how, and other intangible assets and
are legally protectable or recognized as forms of property, whether or not
reduced to practice or a writing.
(p) "License Agreements" means those agreements entered into
by Company (or its predecessors) as licensor for the licensing of any Software,
Distributor Software and/or Intellectual Property.
(q) "Management of Company" means the current chief executive
officer, the chief operating officer, and the chief financial officer of
Company.
2
<PAGE> 7
(r) "Public Offering" means the first public offering of
common stock of Buyer or any entity into which it merges prior to or upon
consummation of the public offering, the net proceeds of which paid to the
issuer shall exceed $12 million.
(s) "Purchase Price is defined in Section 2.2.
(t) "Purchase Price Delivery Date" is defined in Section 2.4.
(u) "Software" means all software, object, source and
executable code, licensed, sold or leased by Company as licensor or lessor, and
all fixes, updates, upgrades and enhancements heretofore developed or being
developed as well as other software developed or being developed for marketing
to dentists, dental practices, physicians, clinics, hospitals and medical groups
which is owned by Company. A list of the Software is set forth in Section 1.1(g)
of the Disclosure Schedule.
(v) "Trademarks" mean the trademarks listed in Section 3.8(c)
of the Disclosure Schedule.
(w) "Shareholder" shall include holders of warrants to
purchase shares of common stock of Company.
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING
2.1 COMPANY SHARES Subject to the terms and conditions of this
Agreement, at the Closing, Shareholders will sell and transfer the Company
Shares to Buyer, and Buyer will purchase the Company Shares from Shareholders.
2.2 PURCHASE PRICE The purchase price (the "Purchase Price") for the
Company Shares will be: (a) the sum of Two Million Eight Hundred Five Thousand
and No/100ths United States Dollars (US$2,805,000), plus or minus the Adjustment
Amount, and (b) a number of shares of common stock in Buyer equal to the
quotient of (i) One Million (1,000,000) divided by (ii) the price to the public
of a share of common stock of Buyer pursuant to the Public Offering, which
number of shares shall have a total value of $1,000,000 at the Public Offering
price. Notwithstanding anything in this Agreement to the contrary, Buyer
reserves the right to substitute up to $360,000 of cash for an equivalent value
of shares of common stock of Buyer based on the Public Offering price.
2.3 CLOSING. The closing ("Closing") of the sale of the Company Shares
as contemplated by this Agreement shall occur at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia at 10:00 a.m. local time
on the day on which the Public Offering commences, or such other date or place
as the parties hereafter mutually agree in writing, subject to the conditions
set forth hereafter. The Public Offering of the Shares shall be deemed to have
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commenced at the time, which is the earlier of the time after (i) the Buyer's
Registration Statement as filed with the Securities and Exchange Commission
becomes effective, or (ii) the underwriters have agreed to purchase the shares
of Buyer pursuant to the Public Offering. The sale of Company Shares shall be
effective upon the commencement of business on the date of Closing ("Closing
Date"), notwithstanding subsequent delivery of the Purchase Price as set forth
in Paragraph 2.4 below.
2.4 DELIVERY OF PURCHASE PRICE. Delivery by the Buyer of the shares of
Buyer comprising the Purchase Price for the respective accounts of the
Shareholders (less the Escrow Shares described in paragraph 2.7), delivery of
the Escrow Shares and payment of the Escrow Fund to the escrow agent as
described in paragraph 2.7, and payment of the monetary portion of the Purchase
Price (less the Escrow Fund) by certified or official bank check or checks
payable in New York Clearing House (next day) funds or wire transfers or other
means of immediately available funds to the respective accounts of the
Shareholders, shall take place at the offices of Glass, McCullough, Sherrill &
Harrold, LLP in Atlanta, Georgia, or at such other location as Buyer may
designate by written notice to Shareholders, at 10:00 a.m., local time, one
business day after Buyer receives the proceeds of the Public Offering (such time
and date of delivery and payment are called the "Purchase Price Delivery Date").
2.5 ADJUSTMENT AMOUNT. The Adjustment Amount (which may be a positive
or negative number) will be equal to (a) the consolidated stockholders' equity
of the Company as of the Closing Date determined in accordance with GAAP
consistent with the basis on which the Financial Statements referred to in
paragraph 3.2 were prepared, minus (b) negative $161,000.00. If the Adjustment
Amount is positive, the Purchase Price shall be increased; if the Adjustment
Amount is negative, the Purchase Price shall be decreased. For periods during
which the Company pays income taxes on a cash basis, there shall be accrued a
deferred liability for taxes payable by reason of such election to be taxed on a
cash basis versus an accrual basis.
2.6 ADJUSTMENT PROCEDURE.
(a) Buyer shall cause, at its expense, a balance sheet to be
prepared as of the Closing Date of the Company. The balance sheet shall be
completed within sixty (60) days after the Closing Date. As soon as such
financial statement is available to Buyer, Buyer shall deliver to Shareholders
the financial statement. Shareholders shall have thirty (30) days to review and
object to the balance sheet. Any disagreements as to the amounts of any
adjustment to be made to the balance sheet, if not mutually resolved, shall be
resolved as provided in paragraph 9.5, except that the arbitrator(s) shall be
person(s) experienced in financial and accounting matters. Upon the final
resolution of the financial statement as of the Closing Date, a final adjustment
shall be made to the consideration paid at the Closing as provided in paragraph
2.5 and the amount of the final adjustment shall be immediately paid to the
appropriate parties from the Escrow Fund to the extent thereof, with any
shortfall immediately payable by the appropriate parties.
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(b) The parties shall use their best efforts to estimate the
amount of the adjustment on or prior to the Closing Date and the Purchase Price
as of the Closing Date will reflect such tentative adjustment which will be
subject to further adjustment pursuant to the provisions of paragraph 2.6(a).
All adjustments shall be made by increasing or decreasing the monetary portion
of the Purchase Price.
2.7 ESCROW. On or before the Closing Date, the parties shall enter into
an Escrow Agreement in substantially the form attached as Exhibit 2.7
establishing an escrow of (a) a number of shares of Buyer equal to the lesser of
(i) the number of shares of common stock in Buyer which comprise a portion of
the Purchase Price pursuant to paragraph 2.2, or (ii) the quotient of 815,000
divided by the per share price to the public of the common stock of Buyer in the
Public Offering (the "Escrow Shares"); and (b) an amount in cash equal to the
difference of $815,000 and the total value of the Escrow Shares based on the per
share price to the public in the Public Offering (the "Escrow Fund"). After
determination of the post-closing adjustment pursuant to paragraph 2.8 below,
the escrow shall be adjusted to an amount equal to ten percent (10%) of the
total Purchase Price.
2.8 POST-CLOSING ADJUSTMENT.
(a) The number of shares of Buyer comprising the Purchase Price shall
be subject to adjustment based on the actual net operating profit (net income
before interest and taxes) of Company or its successor for the year ended
December 31, 1997 as follows:
ACTUAL NET OPERATING PROFIT REDUCTION IN SHARES OF BUYER
$621,000 or less All of the Escrow Shares
Between $621,000 and $750,000 The product of the Escrow Shares times
the quotient of (i) $750,000 minus actual
net operating profit, divided by (ii)
$129,000
$750,000 or more No adjustment
(b) Buyer shall cause, at its expense, an income statement showing net
operating profit of the Company or its successor to be prepared as of December
31, 1997. The income statement sheet shall be completed within sixty (60) days
after December 31, 1997. As soon as such financial statement is available to
Buyer, Buyer shall deliver to Shareholders the financial statement. Shareholders
shall have thirty (30) days to review and object to the income statement. Any
disagreements as to the amounts of any adjustment to be made to the income
statement, if not mutually resolved, shall be resolved as provided in paragraph
9.5, except that the arbitrator(s) shall be person(s) experienced in financial
and accounting matters. Upon the final resolution of the financial statement as
of December 31, 1997, a final post-closing adjustment shall be made to the
consideration paid at the Closing as provided in paragraph 2.8(a) and the amount
of the final
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post-closing adjustment shall be immediately paid to the appropriate parties
from the Escrow Shares, subject to the amount to remain in escrow after the
post-closing adjustment as provided in paragraph 2.7 above.
(c) For purposes of this paragraph 2.8 only, net operating
profit shall not be reduced for any income taxes, interest, expenses related to
the Public Offering, allocations of corporate overhead by Buyer or its
subsidiaries (other than the Company), expenses related to corporate meetings
and other divisions, incentive compensation payable to Brad Schraut in excess
of the base salary stated in his employment agreement and extraordinary one
time charges; it being understood that interpretations consistent herewith,
allocations, credits, debits and adjusting transactions are subject to
quarterly review by Buyer and a single representative of the Shareholders.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to Buyer
on the date hereof as follows:
3.1 CORPORATE
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of Minnesota and is qualified to conduct
business in all other jurisdictions in which the character of its assets and the
nature of its business requires it to be qualified to do business and in which
the failure to be so qualified could have a materially adverse effect on its
business, operations, prospects, assets or financial condition.
(b) A true, correct and complete copy of the Articles of
Incorporation and bylaws of Company are as set forth in Section 3.1(b)(i) of the
Disclosure Schedule. There are 8,217 shares of common stock of Company issued
and outstanding and no warrants or options or other rights to acquire capital
stock of Company are outstanding.
(c) Company holds all licenses, permits, authorizations and
other approvals from all governmental authorities necessary for the conduct of
the Business of Company as currently conducted, which failure could have a
material adverse effect on its business, operations, prospects, assets or
financial condition of Company. A complete list of such licenses, permits,
authorizations and approvals are set forth in Section 3.1(c) of the Disclosure
Schedule.
(d) This Agreement constitutes the legal, valid, and
binding obligation of Shareholders, enforceable against Shareholders in
accordance with its terms. Upon the execution and delivery by Shareholders of
the Escrow Agreement, the Escrow Agreement will constitute the
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legal, valid, and binding obligation of Shareholders, enforceable against
Shareholders in accordance with its respective terms.
(e) Company has no subsidiaries.
(f) The shareholders of Company of record and beneficial
owners and the shares of common stock of Company owned by each shareholder and
the holders of all warrants, options, convertible securities and other rights to
acquire common stock of Company are set forth in Section 3.1(f) of the
Disclosure Schedule. Each Shareholder represents that the Company Shares
registered in the Shareholder's name are free and clear of any and all liens,
restrictions, claims, charges, options, rights of first refusal or encumbrances,
with no defects of title whatsoever. Each Shareholder has the exclusive right,
power and authority to vote and to transfer the shares of common stock
registered in the Shareholder's name.
3.2 FINANCIAL STATEMENTS. The audited balance sheets as of
September 30, 1996, and December 31, 1995 and the statements of income of
Company for the nine months ended September 30, 1996 and the year ended
December 31, 1995 have been prepared in accordance with GAAP and present fairly
the results of the operations of Company during those periods. Said financial
statements are sometimes collectively referred to as "Financial Statements." A
true, correct and complete copy of the Financial Statements are set forth in
Section 3.2 of the Disclosure Schedule.
3.3 CUSTOMERS
(a) Company (or its predecessors) has granted over 1,100
licenses to use the Software to end users. Section 3.3(a)(i) of the Disclosure
Schedule contains the list of the licensed users of the Software who are
currently provided maintenance under an annual maintenance agreement with
Company. Section 3.3(a)(i) of the Disclosure Schedule shall be updated as of the
Closing. Section 3.3(a)(ii) of the Disclosure Schedule contains a list of the
licensed users of the Software who have contracted for maintenance and support
during the period October 1, 1995 through September 30, 1996 on a time and
materials basis. Section 3.3(a)(iii) of the Disclosure Schedule contains a list
of all customers of Company whose aggregate fees and other charges during the
twelve (12) month period ending September 30, 1996 exceeded $50,000.
(b) Except as set forth in Section 3.3(b) of the Disclosure
Schedule, Company has not received any notice or other communication (written
or, to the knowledge of the Management of Company, oral) from any customer
listed on Section 3.3(a)(i), (ii) or (iii) of the Disclosure Schedule
terminating or reducing in any material respect or setting forth an intention to
terminate or reduce in any material respect in the future the amount of business
conducted with Company. (The termination or reduction in any material respect or
notice of any intention to terminate or reduce in any material respect during
the next succeeding 12 months of the amount
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of business conducted with Company by any customer listed in Section 3.3(a)(iii)
of the Disclosure Schedule shall constitute a material adverse event and a
breach of this warranty and representation.) To the knowledge of the Management
of Company, the consummation of the transactions contemplated herein will not
have a material adverse effect on the business relationships with any of the
customers listed on Section 3.3(a)(iii) of the Disclosure Schedule.
(c) Section 3.3(c) of the Disclosure Schedule sets forth a
list of licensees of the Software for which Company has any warranty or other
unfulfilled obligation under the applicable License Agreement and a description
of the unfulfilled obligation and the agreement under which it arises. Company
is not in material breach of its obligations thereunder.
3.4 ABSENCE OF CERTAIN FINANCE AND BUSINESS CHANGES
(a) Since December 31, 1995, there has not been any event or
events which will have a material adverse effect taken as a whole on the
financial condition of Company (including software and service revenues) except
as set forth in Section 3.4(a) of the Disclosure Schedule or the declaration or
payment of any dividend on the capital stock or the redemption of any shares of
capital stock of Company.
(b) Since December 31, 1995, no material loss, damage or
destruction of the assets has occurred, whether or not covered by insurance,
which may have a material adverse affect on the financial condition of Company
or on the Business.
(c) Since December 31, 1995, the Business has been conducted
substantially in the manner heretofore conducted consistent with past practices,
including with respect to the fees charged and the terms and conditions of the
License Agreements and maintenance agreements entered into, and no waiver or
release of any right was granted by Company except (i) of an immaterial value
and (ii) in the ordinary course of business consistent with past practices, and
no assets were sold except for the licensing of the Software in the ordinary
course of the Business.
3.5 GUARANTIES/LIENS. Company is not guaranteeing the obligations
of any person and has no commitment to guarantee any of the obligations of any
person and is not currently granting and Company has no commitment to grant to
anyone an interest in or liens on any of its assets to secure the obligations of
Company or another except as set forth in Section 3.5 of the Disclosure
Schedule.
3.6 NO UNDISCLOSED LIABILITIES.
(a) Section 3.6(a) of the Disclosure Schedule identifies the written
agreements and describes all oral agreements relating to all indebtedness of the
Company, including without limitation shareholder loans and capital leases.
Correct and complete copies of each such agreements have been furnished to
Buyer.
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(b) Company has no liabilities, absolute or contingent, known or
unknown, except those recorded on the Financial Statements as of December 31,
1995 and those incurred in the ordinary course of business of Company since
December 31, 1995, all of which are recorded on the financial books and records
of Company, are consistent with past practices and are not in the aggregate
materially adverse to the financial condition or prospects of Company.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Company,
billed and unbilled, as of the Closing will be valid and enforceable
obligations of third parties and will be collectible in full, without offset or
fulfillment of any condition, within three (3) months of their due date without
the engagement of any collection agency or attorney or the commencement of any
action, except to the extent of any reserves for bad debts and doubtful
accounts established on its financial books and records as of the Closing,
which reserves have been established in a manner which is consistent with past
practices.
3.8 OWNERSHIP OF INTELLECTUAL PROPERTY
(a) Software. Except as set forth in Section 3.8 of the
Disclosure Schedule, Company is the sole and exclusive owner throughout the
United States of (i) the Software, including the software and software code
developed or being developed by or on behalf of or at the request of Company
(regardless of the state of the development of the software and whether it has
been released); and (ii) the Software constitutes all the software used and/or
licensed in the conduct of the Business of Company, except for the Distributor
Software and the Development Software. Company has not granted licenses to
others to use or to sublicense others to use the Software outside of the United
States and to the knowledge of the Management, the Software or derivatives
thereof are not being used or distributed outside of the United States.
(b) Other Intellectual Property Rights. Except as set
forth in Section 3.8(b) of the Disclosure Schedule, Company is the sole and
exclusive owner throughout the United States of (i) all Copyrights, whether or
not registered, including but not limited to the moral rights; (ii) all other
Intellectual Property rights, including, without limitation, trade secrets,
know-how, inventions (patented and unpatented), and discoveries, embodied in or
used in the development of the Software, or any part thereof, and the screen
displays generated by the Software; and (iii) all Documentation; in each case
except the Development Software used in the development of the Software and the
Distributor Software. The Copyrights, Trademarks, Software, Documentation, and
other Intellectual Property of Company are collectively hereinafter referred to
as "Company Intellectual Property". Section 3.8(b)(i) of the Disclosure Schedule
contains a correct and complete list of all registered Copyrights, the date of
registration and jurisdiction of such registrations. Company has not filed any
patent applications and does not hold any patents.
(c) Trademarks. Company is the sole and exclusive owner
of the Trademarks which include all identifying names and marks which are
associated with the Software or which are otherwise used in the Business
conducted by Company. A complete and correct list of all
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such Trademarks is set forth in Section 3.8(c) of the Disclosure Schedule, none
of which are registered or have any applications for registrations pending.
(d) Software Developers. Section 3.8(d) of the Disclosure
Schedule sets forth the list of all persons and entities (other than full time
employees of Company) that have assisted at any time, directly or indirectly, in
the design, development, correction, improvement, modification, and/or
enhancement of the Software, Copyrights and/or Trademarks. Section 3.8(d) of the
Disclosure Schedule also identifies the written agreements and describes all
oral agreements pursuant to which each such person or entity assigned or
licensed its rights in such intellectual property to Company or acknowledged
Company's ownership rights therein. Correct and complete copies of each such
agreement or assignment or license has been furnished to Buyer. The employees
and former employees of Company do not have any right, title or interest in the
Software, Copyrights, Trademarks, or other Company Intellectual Property.
Section 3.8(d) of the Disclosure Schedule sets forth the current form of
agreements with its employees regarding ownership of the Company Intellectual
Property.
(e) Rights of Licensees. The ownership rights of Company in
Company Intellectual Property are subject only to the non-exclusive licenses
granted (i) to end users and (ii) to distributors by Company as described in
Paragraph 3.10 of this Agreement.
(f) No Infringements. The Company Intellectual Property does
not, and did not at any time, violate or infringe any copyright, patent, trade
secrets, know-how, trademarks or other intellectual property rights of any third
party, is not in the public domain, has not been licensed by Company and/or
permitted to be duplicated by Company except as disclosed in this Agreement or
provided by law and, to the knowledge of the Management of Company, the Company
Intellectual Property (i) has not been duplicated except as permitted under the
applicable licenses and law, (ii) has not been reverse compiled or engineered
and (iii) there are no claims or actions pending or threatened or which have
been brought asserting such violation or infringement or that any Company
Intellectual Property is in the public domain.
(g) Distribution Software and Development Software. Section
3.8(g)of the Disclosure Schedule sets forth the complete and correct list of
license agreements pursuant to which Distribution Software and Development
Software is licensed to Company. Company does not license to others Distribution
Software or Development Software.
(h) Confidentiality. Company has taken reasonable commercial
efforts and has required its employees, consultants, and licensees to take
reasonable commercial efforts to maintain the confidentiality of the Company
Intellectual Property.
(i) Source Code Escrow Agreements. Section 3.8(i) of the
Disclosure Schedule contains a list of all source code escrow agreements entered
into by Company and all agreements licensing the source code or agreeing to
license the source code of the Software. Correct and complete copies of such
agreements have been heretofore provided to Buyer.
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3.9 PROPERTY AND EQUIPMENT
(a) Section 3.9 of the Disclosure Schedule lists the fixed
assets, including equipment, used in the Business as currently conducted which
are owned by Company and those which are leased by Company ("Leased Property").
Section 3.9 of the Disclosure Schedule contains a correct and complete copy of
the agreements for the lease of fixed assets not owned by Company. The fixed
assets and the Leased Property are generally in good operating condition and
repair, reasonable wear and tear excepted.
(b) Company is not in default in the payments due under the
leases of the Leased Property or any other obligation which would give the
lessor the right to terminate the lease for such Leased Property.
(c) Since December 31, 1995, Company has not sold or otherwise
disposed of any fixed assets, other than in the ordinary course of business.
3.10 LICENSE AGREEMENTS
(a) Company has not sold to others or leased or licensed
others to use the Company Intellectual Property, or any part thereof, except the
granting of written non-exclusive rights (i) to end users to use released
versions of the Software and Documentation in the ordinary course of the
Business pursuant to end user license agreements; and (ii) to distributors,
dealers, OEM's and other remarketers (collectively "Distributors") to use and
sublicense the Software and Documentation. Section 3.10(a) of the Disclosure
Schedule contains a correct and complete list of the Distributors. A correct and
complete copy of all written agreements with Distributors currently outstanding
has been previously furnished to Buyer. To the extent any agreement with a
Distributor is not in writing, a complete description of the understanding is
set forth in Section 3.10(a) of the Disclosure Schedule.
(b) The standard form of end user license agreement currently
used by Company to license the Software is listed in Section 3.10(b) of the
Disclosure Schedule.
(c) Section 3.10(c) of the Disclosure Schedule contains a list
of all License Agreements under which Company has not completed its performance
thereunder, except for ongoing warranty and maintenance and support undertakings
contained therein, which list shall be updated as of the Closing.
(d) Unfulfilled warranty obligations under the License
Agreements are described in Section 3.10(d) of the Disclosure Schedule, which
description shall be updated as of the Closing.
(e) Company is not in default of its obligations under any
License Agreement.
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(f) Section 3.10(c) of the Disclosure Schedule also includes
all outstanding commitments to sell, lease or license any Company Intellectual
Property hereafter.
(g) Company does not license or sublicense any
Distributor Software and is not a distributor of any software developed by
others.
3.11 CONSULTING AND DEVELOPMENT AGREEMENTS. There are no
consulting and software development agreements, written or oral, entered into
by Company pursuant to which others are performing services to Company as a
consultant or in a similar capacity or are developing software (regardless of
the party who is to hold title to the software) for Company for use or license
by Company.
3.12 MAINTENANCE/COMMITMENTS
(a) Section 3.12(a) of the Disclosure Schedule sets forth a
correct and complete description of all commitments of Company outstanding to
provide services, or support and/or maintenance services, including to provide
patches, corrections, improvements, modifications and enhancements of the
Software, ("Maintenance Agreements"). A copy of all written Maintenance
Agreements has been made available to Buyer and, to the extent the Maintenance
Agreements are not in writing, a complete description of the understanding is
set forth in Section 3.12(a) of the Disclosure Schedule. The current standard
form of Maintenance Agreement is set forth in Section 3.12(a) of the Disclosure
Schedule.
(b) Section 3.12(b) of the Disclosure Schedule sets forth all
commitments of Company to develop any special feature or function or to port any
software not otherwise disclosed pursuant to this Agreement ("Development
Agreements"). A correct and complete copy of the Development Agreements have
been furnished to Buyer. To the extent any such agreement or commitment, where
legally binding, is oral, a summary thereof is set forth in Section 3.12(b) of
the Disclosure Schedule.
(c) Company has substantially complied with its obligations
under the Maintenance Agreements and Development Agreements and there is no
basis for any claim against or default by Company by any party arising under the
Maintenance Agreements or Development Agreements.
3.13 ALL INTANGIBLE ASSETS USED IN THE BUSINESS. The Company
Intellectual Property and the Development Software constitute all of the
intangible assets used in the conduct of the Business as currently being
conducted by Company.
3.14 EMPLOYEES/CONSULTANTS/DIRECTORS
(a) Section 3.14(a) of the Disclosure Schedule sets forth a
list of all current employees and consultants engaged by Company or serving in
such capacity as of October 31,
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1996 and their compensation. Section 3.14(a) of the Disclosure Schedule will
be updated as of the Closing;
(b) The employees of Company are not represented by any
collective bargaining agreement or otherwise organized;
(c) Section 3.14(c) of the Disclosure Schedule lists all
employee benefit plans which are currently in effect or as to which Company has
any ongoing obligation or liability. The term "employee benefit plan" means any
employment or consulting contract, deferred compensation, profit sharing,
pension, bonus, stock option, stock purchase or other fringe benefit or
compensation arrangement or commitment, written or oral, including each welfare
plan (as defined in Section 3(1) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), which Company has established or maintained
or in which any of its employees participate or have participated or under which
Company has an obligation to make contributions or to pay benefits. Company has
no obligations to provide any benefits to any retired or former employees,
including medical and hospital benefits;
(d) Company has no ERISA affiliate and never had an
ERISA affiliate;
(e) The 401(k) Plan made available to employees of Company is
in full compliance and has been in full compliance with all applicable laws and
regulations regarding the establishment, maintenance and operation of the 401(k)
Plan and all contributions by Company have been paid or properly accrued on its
financial books; and
(f) Company has no contracts or agreements with any of its
employees except agreements as to inventions, discoveries and copyright
ownership, a copy of which have been previously provided to Buyer. Schedule
3.14(f) of the Disclosure Schedule contains a copy of the employee benefit
brochure provided or made available to the employees. All employees are "at
will" employees of Company.
3.15 ASSUMED AGREEMENTS
(a) Sections 3.10(b) and (d), 3.12(a), 3.12(b), and 3.15(a) of
the Disclosure Schedule lists all unfilled commitments of Company as of October
31, 1996 not otherwise disclosed in the Disclosure Schedule. Section 3.15(a)
shall be updated as of the Closing. Such commitments represent all of the then
outstanding obligations of the Business and, to the knowledge of the Management
of Company, all of the commitments of Company, can in the ordinary course of
business be fulfilled without a financial loss to Company and in a timely
manner.
(b) Company is not in default of any term or condition under
any unfilled agreement listed on Sections 3.10(b) and (d), 3.12(a), 3.12(b), and
3.15(a) of the Disclosure Schedule and there are no basis for any claim against
or default by Company by any party arising
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under any such agreement, and no event has occurred which under any such
agreement could constitute a default which would give the other party the right
to terminate the contract or to demand money damages.
(c) Company has not waived any of its rights under any of such
agreements listed on Section 3.10(b) and (d), 3.12(a), 3.12(b), or Section
3.15(a) of the Disclosure Schedule nor is the other party to such agreement in
default in any respect under any such agreement.
(d) Correct and complete copies of the agreements listed in
Section 3.15(a) of the Disclosure Agreement have been made available to Buyer.
3.16 LITIGATION AND ADVERSE EVENTS. There are no investigations,
suits, actions, administrative, arbitration or other proceedings or
other occurrences pending, or, to the knowledge of the Management of Company,
threatened against Company arising out of the conduct of the Business.
3.17 COMPLIANCE WITH APPLICABLE LAW. Company, in the conduct of the
Business, is in substantial compliance with all applicable laws, statutes,
ordinances, permits and regulations, including all such laws, statutes,
ordinances and regulations relating to wages, tax withholdings, hours, equal
pay, equal opportunity, and pollution of the environment, and there are no
violations which, if enforced, would materially adversely affect the Business or
prospects of the Business after the Closing or the value of the Business; and no
proceeding alleging any such violation is pending or, to the knowledge of the
Management of Company, threatened.
3.18 TAXES AND TAX RETURNS
(a) Company has timely filed with the appropriate governmental
agencies all tax returns and reports required to be filed by it (or obtained
extensions in which to file). Company has paid or accrued all taxes and
withholdings of any kind now due and payable.
(b) Company has provided Buyer with correct and complete
copies of all tax returns, including income, property and sales tax returns
filed since its incorporation to date. No returns are currently being audited by
any governmental authority.
3.19 CONSENTS. No consents or approvals are required to effect
the transactions contemplated herein, except as set forth in Section 3.19 of the
Disclosure Schedule.
3.20 BROKERS AND FINDERS. None of the Shareholders, the Company,
nor any of its officers, directors, employees or agents have employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement which is payable directly or indirectly, by Buyer or Company
or the Shareholders.
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3.21 RELATED TRANSACTIONS. Section 3.21 of the Disclosure
Schedule contains a complete and correct list of all transactions since
January 1, 1996 between Company and any Shareholder or Affiliate of any
Shareholder.
3.22 NO UNTRUE STATEMENTS. No statements (including
representations and warranties) contained in this Agreement (including
in the Disclosure Schedule hereto and documents described as having been
provided to Buyer herein and therein), contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein contained not misleading.
3.23 INVESTMENT REPRESENTATIONS.
(a) Each Shareholder is acquiring the common stock of Buyer for
his/her own account (and not for others) and for investment purposes
only and not with a view to distribution, as such is defined by the Securities
Act of 1933, as amended ("Act"), or any rule or regulation thereunder
("Rules"), in violation of the Act or any of said Rules.
(b) Each Shareholder has such knowledge and experience in
financial and business matters that he/she is capable of evaluating the
merits and economic risks of this particular investment and that an investment
in the common stock of Buyer involves numerous risks, including the risks set
forth in Buyer's Registration Statement on Form SB-2, No. 333-18923 ("SB
Registration Statement").
(c) Each Shareholder agrees that the certificate or certificates
representing the common stock of Buyer shall be inscribed with the legend that
such stock may not be transferred in the absence of an effective registration
statement under the Act covering the stock or an opinion of counsel satisfactory
to Buyer that registration is not required, and such stock may not be
transferred except as permitted under the provisions of the standstill agreement
set forth in paragraph 7.2 hereof and the Act and Rules.
(d) In making this decision to acquire the common stock of Buyer,
each Shareholder has been given the opportunity to discuss the business,
management and financial affairs of Buyer with officers of Buyer and
has had the opportunity to ask questions of, and receive answers from, such
officers and to obtain additional information necessary to verify the accuracy
of the information received and to evaluate Buyer and an investment in the
common stock of Buyer and the Shareholders desire no further information for
such evaluation. Each Shareholder acknowledges receipt of a copy of the SB
Registration Statement as filed with the Securities and Exchange Commission on
December 27, 1996.
(e) Each Shareholder acknowledges that no representations were
made by Buyer to the Shareholders with respect to the business,
management or financial affairs of Buyer except as set forth in Section IV of
this Agreement, and except that Buyer is negotiating with several companies the
purchase or merger of their businesses by or into Buyer or an affiliated
company
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("Acquisitions") and the financing of such purchases in part through the Public
Offering by Buyer, all as more fully described in the SB Registration Statement.
Each Shareholder acknowledges there can be no assurances that such Acquisitions
will be effected or that the Public Offering will occur or that the financing
obtained in the Public Offering will be sufficient to meet the obligations of
Buyer , including working capital requirements, or that Buyer will be
profitable.
(f) Each Shareholder acknowledges that (i) Buyer may acquire American
Medcare Corporation and subsidiaries ("AMC") as part of the Acquisitions; (ii)
he/she has heretofore been furnished with recent financial statements of AMC as
part of the SB Registration Statement; (iii) he/she has been advised that AMC
continues to operate at a loss and has and is incurring expenses in its efforts
to acquire several businesses; (iv) no representations are or were made by Buyer
with respect to the business or financial affairs of AMC except as set forth in
the financial and other statements of AMC as referenced in the preceding clause;
and (v) no representations are made with respect to any business plan,
projections or acquisitions by AMC or Buyer.
(g) Each Shareholder acknowledges that Buyer has relied on the
representations contained in this Agreement in determining that an exemption
from registration under the Act for this Agreement is available and that but for
such representations, this Agreement would not be offered to the Shareholders.
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Shareholders on the date
hereof as follows:
4.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; has full corporate power and authority to conduct the business of
developing, distributing and marketing software, including through its
subsidiaries, and has full right, power and authority to issue the shares of
common stock as part of the Purchase Price contemplated by this Agreement.
4.2 AUTHORIZATION
(a) The execution, delivery and performance of this Agreement
has been duly authorized by all requisite corporate action on the part of Buyer.
A duly certified copy of the resolutions of the Board of Directors of Buyer has
been delivered to Company. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms. Upon the execution and
delivery by Buyer of the Escrow Agreement, the Escrow Agreement will constitute
the legal, valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with its respective terms.
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(b) The execution and delivery of this Agreement, and the
consummation by Buyer of the transactions contemplated herein on the Closing,
will not (with or without the giving of notice, lapse of time or both) violate,
conflict with, or result in a default under, any of the provisions of the
certificate of incorporation or by-laws of Buyer, any mortgage, indenture,
contract, agreement, license, permit, instrument, judgment, decree, order,
statute, regulation or ruling of any court or governmental authority to which
Buyer or any subsidiary is a party or by which it is bound.
4.3 CORPORATE. Buyer was formed in November 1996 and Buyer and AMC are
incurring considerable expenses in its efforts to acquire several businesses and
effect the Public Offering to raise funds to effect certain of the acquisitions
and for general corporate purposes. No representations are or were made by Buyer
to the Shareholders with respect to the business or financial affairs of Buyer
and its subsidiaries or the companies after such acquisitions.
4.4 BROKERS AND FINDERS. Neither Buyer nor any of its officers,
directors, employees or agents have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement which is payable directly
or indirectly by the Shareholders.
4.5 NO UNTRUE STATEMENTS. No statements (including representations) by
Buyer contained in this Agreement, and no written statements furnished by Buyer
to the Shareholders pursuant to this Agreement, contain any untrue statement of
a material fact, or omit to state a material fact necessary in order to make the
statements therein contained not misleading.
SECTION V.
CONDITIONS TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed
on or prior to the Closing shall be subject to the satisfaction on or prior to
the Closing of each of the following conditions, any of which condition may be
waived in writing by Buyer, but such waiver shall not waive any representation,
warranty or covenant of the Shareholders.
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties made by any Shareholder herein as of the date of this Agreement
shall be true and correct in all material respects on the Closing with the same
effect as though made on the Closing; Shareholders shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to or on the Closing;
and Shareholders shall have delivered to Buyer a certificate of the Shareholders
in substantially the form attached hereto as Exhibit 5.1, dated the Closing,
certifying as to the fulfillment of the foregoing conditions.
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5.2 THIRD PARTY CONSENTS. All consents, approvals or authorizations
from third parties or government agencies required to consummate the
transactions contemplated hereby and contemplated by this Agreement, including
the consents set forth pursuant to paragraph 3.19.
5.3 OPINION OF COUNSEL TO THE SHAREHOLDERS. An opinion of counsel to
the Shareholders dated the Closing and addressed to Buyer reasonably
satisfactory in all respects to Buyer in substantially the form attached hereto
as Exhibit 5.3.
5.4 UPDATE DISCLOSURE SCHEDULE. The Shareholders shall have
updated the Disclosure Schedule as herein provided.
5.5 PUBLIC OFFERING. The Public Offering shall have commenced.
5.6 ESCROW AGREEMENT. The parties have entered into the Escrow
Agreement in the form attached as Exhibit 2.7.
5.7 EMPLOYMENT AGREEMENT. Buyer and Brad Schraut shall have
entered into an employment and incentive compensation agreement in form and
substance satisfactory to Buyer.
5.8 EMPLOYMENT AGREEMENT. Buyer and Ron Vagle shall have entered
into an employment agreement in form and substance satisfactory to Buyer.
5.9 LEASE AGREEMENT. Buyer and the appropriate landlords shall have
entered into lease agreements for the continued use of Company's office and
warehouse space in form and substance satisfactory to Buyer on the same economic
terms currently in effect.
5.10 NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change to the favorable outlook and prospects of Company or to its
projected operating profit of $750,000 for the period ending December 31, 1997.
5.11 TERMINATION OF CERTAIN AGREEMENTS. The salary obligation between
Company and Swenson shall be terminated in a manner satisfactory to Buyer. In
the event commissions and royalty payments due to Paul Swenson and PCM are
terminated, the costs of said terminations paid and to be paid to Paul Swenson
and PCM during calendar 1997 in excess of the commissions and royalties due Paul
Swenson and PCM under the current agreements (calculated as if such agreements
had not been terminated) based on the 1997 revenues shall be considered an
extraordinary one time charge as contemplated in paragraph 2.8(c) hereinabove
and such excess payments shall not be used in the computation of the paragraph
2.5 adjustment amount except as set forth below.
The monies paid and to be paid Swenson to terminate his salary
obligation shall be the responsibility of the Company and shall be
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accrued as an expense prior to the Closing Date and applied in the computation
of the shareholders' equity as of the Closing Date pursuant to paragraph 2.5.
5.12 S-4 REGISTRATION STATEMENT. The Registration Statement on Form S-4
registering the shares of common stock of Buyer to be issued pursuant to this
Agreement and certain other acquisitions and mergers becomes effective.
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
Each and every obligation of the Shareholders under this Agreement to
be performed on or prior to the Closing shall be subject to the satisfaction on
or prior to the Closing of each of the following conditions, any of which
conditions may be waived in writing by the Shareholders, but such waiver shall
not waive any representation, warranty, or covenant of Buyer:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties made by Buyer herein as of the date of this Agreement shall be
true and correct in all material respects on the Closing with the same effect as
though made on the Closing; Buyer shall each have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by it on or prior to the Closing; and Buyer shall
have delivered to the Shareholders a certificate of an officer of Buyer in
substantially the form attached hereto as Exhibit 6.1, dated the Closing,
certifying as to the fulfillment of the foregoing conditions.
6.2 OPINION OF COUNSEL TO BUYER. An opinion of Glass, McCullough,
Sherrill & Harrold LLP, counsel to Buyer, dated the Closing, reasonably
satisfactory in all respects to the Shareholders substantially in the form
attached as Exhibit 6.2.
6.3 PUBLIC OFFERING. The Public Offering shall have commenced.
6.4 ESCROW AGREEMENT. The parties have entered into the Escrow
Agreement in the form attached as Exhibit 2.7.
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SECTION VII.
OTHER COVENANTS
7.1 CONDUCT OF BUSINESS. From the date hereof to the Closing, except as
otherwise consented to or approved by Buyer in writing, the Shareholders hereby
covenant and agree that they shall cause Company:
(a) Maintain Corporate Existence, Etc. (i) to conduct the
Business in a diligent manner, consistent with past management practices,
including maintaining adequate personnel to maintain, develop, enhance, support
and market the Software; (ii) to market and license the Software and Distributor
Software and Hardware to end users, and with the written consent of Buyer, to
distributors; and (iii) grant non-exclusive licenses of the Software and
Distributor Software to end users pursuant to its standard end user license
agreement at its standard fees.
(b) Disposition of Assets. Not to sell or otherwise
dispose of any asset except for the granting of non-exclusive licenses as
permitted pursuant to paragraph 7.1(a).
(c) Full Access. To afford to Buyer, and to its counsel,
accountants and other authorized representatives, full access to the facilities,
contracts, books, records, Software, key personnel and public accountants of
Company during normal business hours upon reasonable prior notice; and to cause
its officers and employees to promptly furnish such additional financial and
operating data and other information as Buyer or its authorized representatives
shall from time to time reasonably request.
7.2 STANDSTILL AGREEMENT. Each Shareholder agrees not to sell or
otherwise dispose of any shares of common stock of Buyer acquired pursuant to
this Agreement for a period of six (6) months following the Public Offering
without the prior written consent of Buyer and its underwriters and, for the
eighteen (18) month period thereafter, not to sell any such shares except in
accordance with the volume limitations set forth in Rule 144 applicable to
Restricted Securities, as defined in Rule 144. The agreement contained in this
paragraph 7.2 is intended to benefit Buyer and its underwriters and may be
enforced by any of them.
SECTION VIII.
CONFIDENTIALITY AND SECURITY
8.1 CONFIDENTIALITY
(a) The parties acknowledge that information, documents and
materials regarding each other have been exchanged under a confidentiality
understanding. The provisions of this Section VIII reflect the understanding
with respect to, and shall govern, all such exchanges
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and the permitted use and disclosure by a party or its Affiliate hereafter of
any confidential information and trade secrets of the other party, regardless of
when acquired. Each party heretohereby agrees that all information, documents
and materials the party ("Recipient") received heretofore and receives or
obtains hereafter from any other party or its Affiliate ("Owner") shall be
considered valuable assets of the Owner and shall at all times be treated by the
Recipient and the officers, directors, employees and agents of the Recipient as
confidential information or trade secrets of the Owner if so identified as such
or which under the circumstances surrounding disclosure ought to be treated as
confidential information or trade secrets of the Owner. Each party hereto, as a
Recipient, hereby agrees that it shall not hereafter (and shall use commercially
reasonable efforts to ensure that its Affiliates, officers, directors, employees
and consultants do not) in any manner, directly or indirectly (i) transmit,
disclose or otherwise communicate or make available any such confidential
information or trade secrets to any third party, or (ii) use the same for its
own account or for the benefit of any third party, other than as permitted by
this Agreement; or (iii) make any copies of any such confidential information or
trade secrets except as is necessary to perform its obligations or exercise its
rights hereunder. The parties each agree not to reverse engineer or reverse
compile the computer software of any other party hereto.
(b) Each party hereto, as a Recipient, hereby shall take all
commercially reasonable actions necessary or desirable, including with respect
to its officers, directors, employees and all other authorized persons having
access to the confidential information or trade secrets of the Owner, to satisfy
its obligations to protect and maintain the confidentiality and security of such
confidential information or trade secrets, including the source code of the
Software.
(c) It is recognized and acknowledged between the parties
hereto that the covenants respecting confidentiality set forth in this Section
VIII hereof are essential elements of this Agreement and shall continue after
the Closing or the termination of this Agreement for any reason. Each party
further acknowledges that the Owner of the confidential information and trade
secrets may have no adequate remedy at law if the Recipient shall violate the
terms thereof. In such event, the Owner shall have the right, in addition to any
other rights and remedies it may have, to obtain in any court of competent
jurisdiction injunctive relief or other equitable relief with regard to any
breach or threatened breach thereof or otherwise specifically enforce the
provisions of this Agreement without proof of actual damages.
(d) The parties each agree as follows:
(i) Confidential information or trade secret of the
Owner that is disclosed to Recipient or to which Recipient obtains access shall
not be disclosed by Recipient to others, except to directors, officers,
employees and consultants of the Recipient having a need to know in connection
with the consideration and/or consummation of the transactions contemplated
herein and Recipient shall be responsible for such other person's compliance
with the confidentiality obligations of this Section VIII.
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(ii) The Recipient, when receiving such
confidential information or trade secrets from the Owner, shall protect such
confidential information and trade secrets with the same degree of care that
Recipient regularly employs to safeguard its own confidential information or
trade secret of like importance from unauthorized use or disclosure.
(iii) The rights and obligations of the parties
with respect to all such confidential information and trade secrets of the Owner
that is disclosed and subject to this Agreement shall survive termination of
this Agreement and shall remain in effect for a period of five (5) years from
the date of this Agreement; provided, however, that the expiration of the above
five (5) years shall not affect any rights of the parties with respect to
patents, trademarks, copyrights and trade secrets and trade secrets shall be
protected by this Section VIII as long as they may be legally protected or
constitute a trade secret.
(iv) Any portion of such Owner's confidential
information or trade secret that:
(A) is rightfully received from a third
party who has a lawful right to disclose it without accompanying markings or
disclosure restrictions;
(B) is independently developed by
employees of the Recipient who have not had access to such confidential
information or trade secret;
(C) is or becomes publicly available
through no wrongful act of the Recipient;
(D) is already known by the Recipient
as evidenced by documentation bearing a date prior to the first date of
disclosure by the Owner; or
(E) is approved for release in writing
by the President of the Owner;
is not entitled to the protection provided in this Section VIII, except for
patent, trademark and copyright protection as provided by law.
(e) Confidential information and trade secrets of Company have
been and will be used by Buyer only in connection with its evaluation of Company
and the decision to acquire the capital stock of Company and confidential
information and trade secrets of Buyer have been and will be used by them and
the Shareholder only in furtherance of the Merger as contemplated herein.
(f) Notwithstanding the foregoing, nothing herein shall
restrict the right of either party to disclose such confidential information or
trade secret that is disclosed pursuant to a judicial or administrative order,
but only to the extent so ordered, provided, however, that
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the party receiving such order shall notify the other party of such order in
sufficient time to permit such other party to intervene in response to such
order.
(g) All such confidential information and trade secrets and
copies thereof of Owner shall remain the property of the Owner. All such written
confidential information and trade secrets, and any copies thereof, shall be
promptly returned to the Owner upon written request, or destroyed at the Owner's
options. All reports and other documents prepared by a Recipient containing any
such confidential information or trade secrets shall be destroyed at the Owner's
written request and the Recipient shall so certify to Owner upon Owner's request
that it has been destroyed. The restrictions on disclosure and use shall survive
the return and destruction of such written confidential information and trade
secrets, reports and other documents and the Closing of the transactions
contemplated by this Agreement.
(h) Upon the Closing, all trade secrets and confidential
information owned by Company shall be deemed to be owned by Buyer as of the
Closing for purposes of this Agreement, including this Section VIII.
(i) Notwithstanding the foregoing, nothing in this Section
VIII shall restrict the disclosure of any confidential information in any
registration statement filed with the Securities and Exchange Commission in
contemplation of the Public Offering, including the prospectus which is a part
thereof, and the public distribution of the prospectus, including preliminary
prospectuses and registration statement.
SECTION IX.
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SHAREHOLDERS.
(a) The Shareholders hereby agree, jointly and severally, to
indemnify and hold Buyer, and its successors (collectively "Buyer" for purposes
of this Section IX only) harmless at all times from and after the Closing,
against and in respect of the following:
(i) All losses, liabilities, costs and damages,
including without limitation, interest, penalties and fines, resulting from any
(a) breach of a representation or warranty of the Shareholders set forth herein
or (b) non-fulfillment of any agreement or covenant, on the part of the
Shareholders set forth herein.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 9.1 are collectively referred to as "Buyer
Losses".
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(b) The period during which Buyer must give notice in writing
to the Shareholders of claims for indemnification hereunder shall expire on June
30, 1998 except that such period shall be extended to the applicable statute of
limitations plus thirty (30) days with respect to claims (i) for unpaid taxes
and failure to file required tax reports, including related interest, penalties
and fines ("Tax Claims"), (ii) for breaches of Section VIII, and (iii) for
breaches of any covenant or obligation which first arises after the Closing.
(c) Interest at the prime rate as quoted in The Wall Street
Journal shall accrue on all amounts to be indemnified from the date of the
Closing to the date of payment by the Shareholders, or if payment of an Buyer
Loss is made after the Closing by Buyer, from the date of such payment by Buyer
to the date of indemnification by the Shareholders.
(d) The total liability of the Shareholders under this Section
IX shall not exceed the consideration received or to be received by the
Shareholders pursuant to Section II.
(e) In the event that any third party asserts an action or
claim as to which Buyer is entitled to indemnification hereunder, Buyer shall
notify the Shareholders in writing of any such asserted liability with
reasonable promptness, and the Shareholders shall have a right to compromise or
defend any such matter involving such asserted liability, through counsel of its
own choosing who shall be subject to the approval of the Buyer, which approval
will not be unreasonably withheld, at the expense of the Shareholders; provided,
however, that the Shareholders shall indemnify Buyer against any costs and
damages resulting from the failure of the Shareholders to defend or pay such
claims. In the event the Shareholders shall notify Buyer in writing promptly of
the intention of the Shareholders to do so, Buyer shall cooperate with the
Shareholders and their counsel in the compromising of or the defending against
any such liabilities or claims, at the expense of the Shareholders and provide
the Shareholders with reasonable access to the books and records of Company to
the extent necessary for the compliance with any document request and the
reasonable defense of such claim.
(f) Buyer shall be entitled to payment hereunder only if and
to the extent the aggregate Buyer Losses under this Agreement exceed Thirty Five
Thousand Dollars ($35,000).
(g) The amount of any Loss shall be reduced by amounts
received by the Buyer under any policy of insurance maintained by Company prior
to the Closing. Amounts received from any such policy of insurance after the
receipt of payment of any Loss from the Shareholders shall be promptly
reimbursed to the Shareholders.
9.2 INDEMNIFICATION BY BUYER
(a) Buyer hereby agrees to indemnify and hold the Shareholders
harmless at all times from and after the Closing, against and in respect of the
following:
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(i) All losses, liabilities, costs and damages,
including without limitation, interest, penalties and fines, resulting from any
(a) breach of a representation or warranty of Buyer set forth herein or (b)
non-fulfillment of any agreement or covenant, on the part of Buyer set forth
herein.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 9.2 are collectively referred to as "Shareholder
Losses".
(b) The period during which the Shareholders must give notice
in writing to Buyer of claims for indemnification hereunder shall expire on June
30, 1998 except that such period shall be extended to the applicable statute of
limitations for breaches of Section VIII and for breaches of any covenant or
obligation which first arises after the Closing.
(c) Interest at the prime rate as quoted in The Wall Street
Journal shall accrue on all amounts to be indemnified from the date of the
Closing to the date of payment by Buyer, or if payment of a Shareholder Loss is
made after the Closing by the Shareholder, from the date of such payment by any
Shareholder to the date of indemnification by Buyer.
(d) The total liability of Buyer under this Section IX shall
not exceed the consideration received or to be received by the Shareholders
pursuant to Section II.
(e) In the event that any third party asserts an action or
claim as to which the Shareholders are entitled to indemnification hereunder,
the Shareholders shall notify Buyer in writing of any such asserted liability
with reasonable promptness, and Buyer shall have a right to compromise or defend
any such matter involving such asserted liability, through counsel of its own
choosing who shall be subject to the approval of the Shareholders, which
approval will not be unreasonably withheld, at the expense of Buyer; provided,
however, that Buyer shall indemnify the Shareholders against any costs and
damages resulting from the failure of Buyer to defend or pay such claims. In the
event Buyer shall notify the Shareholders in writing promptly of the intention
of Buyer to do so, the Shareholders shall cooperate with Buyer and its counsel
in the compromising of or the defending against any such liabilities or claims,
at the expense of Buyer and provide Buyer with reasonable access to the books
and records of the Company to the extent necessary for the compliance with any
document request and the reasonable defense of such claim.
(f) The Shareholders shall be entitled to payment hereunder
only if and to the extent the aggregate of Shareholder Losses under this
Agreement exceed Thirty Five Thousand Dollars ($35,000).
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(g) The amount of any Shareholder Loss shall be reduced by
amounts received by the Shareholders under any policy of insurance. Amounts
received from any such policy of insurance after the receipt of payment of any
Shareholder Loss from Buyer shall be promptly reimbursed to Buyer.
9.3 REIMBURSEMENT. Buyer or Shareholders, as the case may be, shall be
reimbursed promptly for any Shareholder Loss or Buyer Loss for which it is to be
indemnified under paragraph 9.1 or 9.2. Buyer and the Shareholders shall have
the right to set off and deduct any Buyer Loss or Shareholder Loss, as the case
may be, against the amount of any obligation of such person however arising to
the other person. In the event of any dispute as to the right to set off or
deduction of any amount or the amount of the Buyer or Shareholder Loss, the
dispute shall be resolved as provided in paragraph 9.5. If Shareholder
reimburses Buyer for a breach of the warranties and representations set forth in
paragraph 3.7, Buyer shall assign all such uncollected receivables to the
Shareholders without further consideration.
9.4 CLAIMS. Should any claim be made by a person not a party to this
Agreement with respect to any matter to which the foregoing indemnity relates
for which the indemnifying party has not elected to compromise or defend as set
forth in paragraph 9.1(e) or 9.2(e), the party to be indemnified, on not less
than fifteen (15) days' notice to the other, may make settlement of such claim,
and such settlement shall be binding on the Shareholders and Buyer for the
purposes of this Section IX; provided, however, that if within said fifteen (15)
day period the Shareholders shall have requested the other party to contest any
such claim at the expense of the Shareholders and has provided reasonable
assurances of the ability of the parties to pay such expenses and other losses
should such occur, the indemnified party will promptly comply and the
indemnifying party shall have the right to defend on their own behalf with
counsel of their own choosing at their expense. Any payment or settlement
resulting from such contest, together with the total expense thereof, shall be
binding on the Shareholders and Buyer for the purposes of this Section IX.
Failure to give notice shall not constitute a defense, in whole or in part, to
any claim by the Buyer except and only to the extent that such failure to do so
shall result in material prejudice to the Shareholders.
9.5 RESOLUTION OF DISPUTES. In the event of any dispute between Buyer
and the Shareholders over any claim by or on behalf of Buyer or the Shareholders
for indemnification under this Section IX and the parties are unable to resolve
such dispute, either party may submit the dispute to binding arbitration as
hereinafter provided. The arbitration shall be in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") then in
effect. The arbitration shall be held before three arbitrators, unless the
amount in dispute is less than One Hundred Thousand Dollars ($100,000), in which
event the arbitration shall be held before one arbitrator. In the event the
arbitration is to be held before three arbitrators, the Shareholders and Buyer
shall each appoint one arbitrator within thirty (30) days of the receipt of
notice by the party commencing the arbitration which includes a copy of the
petition filed with the AAA. The arbitrators shall select the third arbitrator.
In the event the two arbitrators fail to do so within fifteen (15) days of their
appointment or in the event a party hereto fails to designate an
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arbitrator or in the event only one arbitrator is to be appointed, such
arbitrator(s) shall be appointed by the AAA. The arbitrator(s) shall be
knowledgeable in the business of softwaredistribution. All decisions by the
arbitrators shall be by majority vote of the arbitrators. The award of the
arbitrator(s) shall be binding on the parties hereto and such awards may be
entered in any applicable court. The arbitration and all hearings in connection
therewith shall be held in Georgia. The arbitrator(s) shall have no authority to
award punitive damages or any other awards other than as herein contemplated.
Notwithstanding the foregoing, the parties hereto may seek in a court proceeding
a restraining order, or a preliminary or permanent injunction as permitted by
law or equity whenever applicable to enjoin the unauthorized use of the
confidential information or trade secret of a party hereto or as otherwise
provided herein. All parties hereto agree to service by mail in any such
proceedings.
SECTION X.
COVENANT NOT TO COMPETE
(a) For a period of five (5) years following the Closing, each
of Ron Vagle and Brad Schraut agrees that he will not, directly or indirectly,
including through an Affiliate, own, manage, operate, control, be engaged in, or
participate in the ownership, management, operation, or control of or be
connected in any manner or have any other direct or indirect financial interest
in any business, firm, person, partnership, corporation, or concern which is
engaged in any business of the type and character which is competitive with the
Business which is being acquired by Buyer in the United States. The Shareholders
acknowledge that the Business is conducted throughout the United States.
(b) Notwithstanding the covenants contained in subparagraph
(a), the Shareholders shall not be prohibited from owning less than 5% of any
class of equity securities of a company which is listed on a recognized stock
exchange or for which prices are quoted on the National Association of
Securities Dealers Automated Quotation System.
(c) During the non-compete period set forth in subparagraph
(a), each Shareholder in any capacity will not suggest, urge or persuade any
user of the Software not to purchase or not to do business with Buyer or the
successor of the Business or solicit the employment of any employee of Company
or its successor.
(d) Each state of the United States and each month of time
covered by this covenant not to compete shall be deemed a severable unit, and
should any court determine that the inclusion of all such states or months would
render any such undertaking unreasonable or unenforceable for any reason, those
units which are necessary in the judgment of the court to be deleted in order to
render such undertaking reasonable and enforceable shall be deemed free of such
non-compete undertaking but such undertaking shall remain in full force and
effect as to each other unit of territory or time.
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<PAGE> 32
(e) Each Shareholder agrees that in addition to any other
rights and remedies available to Buyer for any breach by a Shareholder of his
obligations under this Section X, Buyer shall be entitled to enforcement of such
obligations hereunder by court injunction or other equitable remedy and the
Shareholders in such proceeding will not urge that Buyer has an adequate remedy
at law.
SECTION XI.
TERMINATION AND ABANDONMENT
11.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
at any time and the acquisition of the Company Shares as herein contemplated
abandoned at any time prior to the Closing without liability of any party to any
other party, except for breaches of warranties, representations, and covenants
set forth in this Agreement which are within the control of the defaulting or
non-performing party, under the following circumstances:
(a) The mutual written agreement of Buyer, Company, and the
Shareholders;
(b) By Buyer if the Closing has not occurred before March 30,
1997 because all conditions to the obligations of Buyer have not been satisfied
or waived or because the Shareholders have not made all required deliveries
pursuant to Section V;
(c) By the Shareholders if the Closing has not occurred before
March 30, 1997 because all conditions to the obligations of the Shareholders
have not been satisfied or waived or because Buyer has not made all required
deliveries pursuant to Section VI; and
(d) Any party may terminate by written notice to the other if
any action or proceeding shall have been instituted before any court or other
governmental body or, to the knowledge of the party giving such notice, shall
have been threatened formally in writing by any public authority with requisite
jurisdiction, to restrain or prohibit the transactions contemplated by this
Agreement or to subject one or more of the parties or their directors or their
officers to liability on the grounds that it or they have breached any law or
regulation or otherwise acted improperly in connection with such proposed
transactions ("Governmental Objection"), and such action or proceeding shall not
have been dismissed or such written threat shall not have been withdrawn or
rescinded before March 30, 1997.
11.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is
terminated and abandoned as provided in this Section XI, each party will, at the
request of the other, return all documents, work papers, and other material of
the requesting party, including all copies thereof, relating to the transactions
contemplated by this Agreement, whether so obtained before or after the
execution of this Agreement, to the party furnishing the same, and all
information received by any party to this Agreement with respect to the business
of any other party shall not be governed by the confidentiality obligations of
Section VIII and shall at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
28
<PAGE> 33
information except as may be required by law; provided, however, that this shall
not apply to any document, work paper, material, or any other information which
is a matter published in any publication for public distribution or filed as
public information with any governmental authority or is otherwise in the public
domain.
SECTION XII.
MISCELLANEOUS PROVISIONS
12.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES. The respective
representations, warranties and covenants of the Shareholders and Buyer
contained herein or in any certificates or other documents delivered prior to or
on the Closing shall not be deemed waived or otherwise affected by any
investigations made by any party hereto. Each and every representation, warranty
and covenant of the Shareholders and Buyer, and the indemnification provisions
set forth in Section IX hereof, shall survive the Closing and remain operative
in full force and effect as provided in Section IX.
12.2 HEADINGS. The paragraph captions and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be
part of this Agreement or to affect its meaning or interpretation.
12.3 FURTHER ASSURANCES. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement, including requests
made after the Closing.
12.4 FORCE MAJEURE. A party hereto shall not be liable for failure or
delay in performing any of the party's obligations hereunder if such failure or
delay is occasioned by compliance with any governmental regulation, request or
order, or by circumstances beyond the reasonable control of the party so failing
or delaying, including, but not limited to, Acts of God, war, insurrection,
fire, flood, accident, earthquakes, labor strikes, or inability to obtain
materials, supplies, power or equipment necessary to enable such party to
perform its obligations hereunder. Each party shall (a) promptly notify the
other in writing of any such event of force majeure, the expected duration
thereof and its anticipated effect on the ability of such party to perform its
obligations hereunder, and (b) make reasonable efforts to remedy any such event
of force majeure.
12.5 CUMULATIVE REMEDIES. Except as herein provided and subject to
any applicable limitation herein provided, the parties shall have all remedies
for breaches of this Agreement available to them provided by law or equity.
12.6 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties hereto regarding the acquisition of the Company Stock by
Buyer and related matters as set forth in this Agreement. No representations or
agreements, whether written or oral, other than
29
<PAGE> 34
those contained or referenced herein, shall be binding on the parties. This
Agreement may not be amended or modified except in a writing signed by all of
the parties hereto.
12.7 SPECIFIC PERFORMANCE. This Agreement may be specifically
enforceable in accordance with applicable principles of law and equity. The
parties hereby acknowledge that it is impossible to measure the monetary damages
which would result from a party's failure to perform any obligation imposed upon
such party by this Agreement. Therefore, if any party hereto should institute an
action or proceeding to enforce the provisions hereof, any other party against
whom such action or proceeding is thereby brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such person shall not
urge in any action or proceeding the claim or defense that an adequate remedy at
law exists.
12.8 NOTICES. All notices or other communications required or permitted
to be given hereunder shall be given in writing to the address of the party set
forth below their signature to this Agreement or to such other last authorized
address/telecopier number of the intended recipient provided in writing to the
party giving such notice, and shall be deemed to have been duly given on (i) the
date of receipt if personally delivered or delivered by overnight courier, (ii)
five (5) business days after posting if transmitted by postage prepaid
registered or certified mail (return receipt requested), or (iii) the date of
transmission if transmitted by telecopy (with postage prepaid registered or
certified mail confirmation) to the party to whom such notice or communication
is being given. Any party hereto may change such party's address or the person
to whom notice is given for purposes hereof by written notice to the other
parties. Such notices are effective only upon receipt.
12.9 NON-WAIVER OF DEFAULT. Any failure by any party hereto at any time
or from time to time to enforce and/or require strict compliance with any term
or condition of this Agreement shall not constitute a waiver of such term or
condition. All waivers hereunder must be in writing executed by the party
waiving the right. The consummation of the transactions with knowledge of a
breach of a warranty, representation or covenant shall not constitute a waiver
of any such warranty, representation or covenant.
12.10 PARTIAL INVALIDITY. If any term or provision of this Agreement,
not essential to the basic purposes of the transactions contemplated herein,
shall be held to be illegal, invalid or unenforceable by a court or arbitrator
of competent jurisdiction, it is the intention of the parties hereto that (i)
the remaining terms hereof shall constitute the agreement with respect to the
subject matter hereof, (ii) all such remaining terms shall remain in full force
and effect and shall be deemed to constitute the entirety of this Agreement as
though such illegal, invalid or unenforceable provision had never been part
hereof, and (iii) such illegal, invalid, or unenforceable provision shall be
construed as closely as possible to the parties' original intent in order to
render such provision legal, valid, or enforceable, as applicable.
30
<PAGE> 35
12.11 DUPLICATE ORIGINALS. For the convenience of the parties
hereto, any number of counterparts hereof may be executed, and such
counterparts, taken together, shall be deemed one and the same original.
12.12 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Shareholders and Buyer and their
successors and assigns. Buyer may on or prior to the Closing designate a
subsidiary as the party to acquire the Company Stock; provided, however, Buyer
shall remain liable to the Shareholders for any breach of Buyer's warranties,
representations and covenants contained herein.
12.13 FEES AND EXPENSES. Each party hereto shall pay all expenses which
that party has incurred, including attorneys' and accountants' fees, in
connection with this Agreement and the transactions contemplated hereby.
12.14 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect and performance.
12.15 COUNTERPARTS AND EXHIBITS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The Disclosure
Schedule is made a part of this Agreement.
12.16 PUBLICITY. The Shareholders shall make no public announcement of
the entering into of this Agreement or the terms and conditions hereof without
the prior written consent of Buyer thereto. The Shareholders acknowledge that
Buyer may be required or deem it desirable to make and as part of the proposed
Public Offering may make such public disclosure of the execution of this
Agreement and the terms and conditions hereof at any time hereafter. With
respect to any disclosure prior to the Closing, Buyer shall provide the
Shareholders with a copy of any such disclosure promptly after it is made and,
to the extent practical, will review any proposed press release with Company
before it is released. After the Closing, the parties shall have no obligations
to the other under this paragraph 12.16.
12.17 SHAREHOLDERS' REPRESENTATIVE. By the execution and delivery of
the Agreement by the Shareholders, including counterparts thereof, each
Shareholder irrevocably constitutes and appoints Brad Schraut as the true and
lawful agent and attorney-in-fact of such Shareholder ("Shareholders'
Representative") with full powers of substitution to act in the name, place and
stead of such Shareholder with the following powers:
(a) To receive, hold and deliver to Buyer the certificates or
instruments evidencing the common stock of Company owned by Shareholders,
accompanied by executed stock powers, signature guarantees, and any other
documents relating thereto on behalf of the Shareholders, including the power to
endorse and present any such certificate or stock power or instruments on behalf
of the Shareholders;
31
<PAGE> 36
(b) To execute and deliver all ancillary agreements,
certificates, and documents which the Shareholders' Representative deems
necessary or appropriate in connection with the consummation of the transactions
contemplated by the terms and provisions of this Agreement;
(c) To receive and provide instructions for all payments
and other deliveries made pursuant to this Agreement and other funds payable for
and on behalf of the Shareholders;
(d) To act for the Shareholders with regard to all
indemnification matters referred to in this Agreement including, without
limitation, the power to consent to settlement of claims and the power to
compromise any claim on behalf of each such Shareholder;
(e) To enter into the Escrow Agreement and to serve as the
agent of the Shareholders with respect to all matters thereunder, and to
terminate, amend or waive any provision of the Escrow Agreement and to pay any
expenses reasonably incurred by the Escrow Agent or Shareholders' Representative
in connection with the Escrow Agreement or matters arising thereunder;
(f) To negotiate, terminate, amend or waive any provision of
this Agreement and to incur expenses (including fees of attorneys and
accountants) in any way relating to this transaction or any indemnification
proceedings relating thereto and deduct such expenses from amounts otherwise
payable to the Shareholders; and
(g) To do or refrain from doing any further act or deed on
behalf of the Shareholders which the Shareholders' Representative deems
necessary or appropriate in their sole discretion relating to the subject matter
of this Agreement as fully and completely as any Shareholder could do if
personally present.
The appointment of the Shareholders' Representative shall be deemed coupled with
an interest and shall be irrevocable and the Buyer may conclusively and
absolutely rely, without inquiry, upon any actions of the Shareholders'
Representative evidenced by a writing as the act of the Shareholder in all
matters referred to in this Agreement and the Escrow Agreement. With respect to
each Shareholder who is a natural person, the authority conferred by such
Shareholder shall not be revoked by such Shareholder's death or physical or
mental disability. In the event Shareholders' Representative refuses to serve as
Shareholders' Representative or service in such capacity is terminated for any
reason, a successor Shareholders' Representative may be designated by a writing
executed by the Shareholders who held a majority of the common stock of Company
listed on Exhibit 3.01(f) of the Disclosure Schedule. The Shareholders'
Representative shall not be responsible to the Shareholders for any loss or
damage the Shareholders may suffer by reason of the performance of the
Shareholders' Representative of his duties under this Agreement, other than loss
or damage arising from willful violation of law or gross negligence in the
performance of his duties under this Agreement.
32
<PAGE> 37
BUYER:
INFOCURE CORPORATION
By:
--------------------------------------------
Name:----------------------------------
Title:---------------------------------
ADDRESS FOR NOTICE:
Address: 2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Telecopy No.: 404-636-7525
Attention: Frederick L. Fine,
Chief Executive Officer
33
<PAGE> 38
SHAREHOLDERS:
---------------------------------------------------
Ronald M. Vagle
ADDRESS FOR NOTICE: 1372 Tamberwood Trail
Woodbury, MN 55125
---------------------------------------------------
Melvin C. Vagle
ADDRESS FOR NOTICE: 7906 Pinehurst Road
Woodbury MN 55125
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Brad E. Schraut
ADDRESS FOR NOTICE: 8645 Lake Jane Trail North
Lake Elmo, MN 50042
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Thomas E. Hawksford
ADDRESS FOR NOTICE: 463 West Omaha Road
Hudson, WI 54106
34
<PAGE> 39
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Sherry J. (Passa) Schraut
ADDRESS FOR NOTICE: 8645 Lake Jane Trail North
Lake Elmo, MN 50042
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Jay P. Malmquist
ADDRESS FOR NOTICE: 5415 SW Westgate Drive
Portland, OR 97221
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Richard Horsfall
ADDRESS FOR NOTICE: 3 Hemlock
Flanders, NJ 07836
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Patrick Chaney
ADDRESS FOR NOTICE: 830 West High Street #301
Lima, OH 45801
Telecopy:
---------------------
Tax ID No.:
---------------------
35
<PAGE> 40
---------------------------------------------------
Erik E. Vagle
ADDRESS FOR NOTICE: 2516 Lincoln Street
Minneapolis, MN 55418
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Joe Winkelman
ADDRESS FOR NOTICE: 512 - 77th Street, West
Eagan, MN 55121
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Wade Vagle
ADDRESS FOR NOTICE:
--------------------------------
Telecopy:
---------------------
Tax ID No.:
---------------------
---------------------------------------------------
Laurie Horsfall
ADDRESS FOR NOTICE:
--------------------------------
36
<PAGE> 41
Telecopy:
---------------------
Tax ID No.:
---------------------
37
<PAGE> 1
EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
AMONG AMERICAN MEDCARE CORPORATION
AND THE SHAREHOLDERS OF
MILLARD-WAYNE, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION I.
DEFINITIONS..............................................................................................1
1.1 Certain Definitions.............................................................................1
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING.............................................................3
2.1 Company Shares..................................................................................3
2.2 Purchase Price..................................................................................3
2.3 Closing.........................................................................................4
2.4 Delivery of Purchase Price......................................................................4
2.5 Escrow..........................................................................................4
2.6 Net Worth Shortfall.............................................................................5
2.7 Post Closing Adjustment.........................................................................5
SECTION III.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.......................................................7
3.1 Corporate.......................................................................................7
3.2 Financial Statements............................................................................8
3.3 Customers.......................................................................................8
3.4 Absence of Certain Finance and Business Changes.................................................9
3.5 Guaranties/Liens................................................................................9
3.6 No Undisclosed Liabilities......................................................................9
3.7 Accounts Receivable.............................................................................9
3.8 Ownership of Intellectual Property.............................................................10
3.9 Property and Equipment.........................................................................12
3.10 License Agreements.............................................................................12
3.11 Consulting and Development Agreements..........................................................13
3.12 Maintenance/Commitments........................................................................13
3.13 All Intangible Assets Used in the Business.....................................................14
3.14 Employees/Consultants/Directors................................................................14
3.15 Assumed Agreements.............................................................................15
3.16 Litigation and Adverse Events..................................................................15
3.17 Compliance with Applicable Law.................................................................15
3.18 Taxes and Tax Returns..........................................................................15
3.19 Consents.......................................................................................16
3.20 Brokers and Finders............................................................................16
3.21 Related Transactions...........................................................................16
3.22 No Untrue Statements...........................................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION IV.
INVESTOR REPRESENTATIONS REGARDING THE SECURITIES.......................................................16
4.1 Investment Representations.....................................................................16
4.2 Ownership of Company Shares....................................................................18
SECTION V.
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................18
5.1 Organization and Standing of Buyer.............................................................18
5.2 Authorization..................................................................................19
5.3 Brokers and Finders............................................................................19
5.4 No Untrue Statements...........................................................................19
5.5 Registration Statements........................................................................19
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................................20
6.1 Representations and Warranties; Performance....................................................20
6.2 Third Party Consents...........................................................................20
6.3 Opinion of Counsel to the Shareholders.........................................................20
6.4 Authorization..................................................................................20
6.5 Update Disclosure Schedule.....................................................................20
6.6 Escrow Agreement...............................................................................20
6.7 Employment Agreement...........................................................................20
6.8 Public Offering................................................................................20
6.9 S4 Registration Statement......................................................................21
SECTION VII.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS.......................................................21
7.1 Representations and Warranties; Performance....................................................21
7.2 Opinion of Counsel to Buyer....................................................................21
7.3 Common Stock of Buyer..........................................................................21
7.4 Authorization..................................................................................21
7.5 Escrow Agreement...............................................................................21
7.6 Public Offering................................................................................21
7.7 S4 Registration Statement......................................................................21
7.8 Repayment of Shareholder Loans.................................................................22
7.9 Third Party Consents...........................................................................22
7.10 Employment Agreement...........................................................................22
SECTION VIII.
OTHER COVENANTS.........................................................................................22
8.1 Conduct of Business............................................................................22
8.2 Standstill Agreement...........................................................................22
8.3 Covenants Relating to Taxes....................................................................23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION IX.
CONFIDENTIALITY AND SECURITY............................................................................23
9.1 Confidentiality................................................................................23
SECTION X.
INDEMNIFICATION.........................................................................................26
10.1 Indemnification by the Shareholders............................................................26
10.2 Indemnification by Buyer.......................................................................27
10.3 Reimbursement..................................................................................28
10.4 Claims.........................................................................................29
10.5 Resolution of Disputes.........................................................................29
SECTION XI.
COVENANT NOT TO COMPETE.................................................................................30
SECTION XII.
TERMINATION AND ABANDONMENT.............................................................................31
12.1 Termination and Abandonment....................................................................31
12.2 Rights and Obligations on Termination..........................................................31
SECTIIII.
MISCELLANEOUS PROVISIONS................................................................................32
13.1 Investigations; Survival of Warranties.........................................................32
13.2 Payment of Certain Indebtedness................................................................32
13.3 Headings.......................................................................................32
13.4 Further Assurances.............................................................................32
13.5 Force Majeure..................................................................................32
13.6 Cumulative Remedies............................................................................33
13.7 Entire Agreement...............................................................................33
13.8 Specific Performance...........................................................................33
13.9 Notices........................................................................................33
13.10 Non-Waiver of Default..........................................................................33
13.11 Partial Invalidity.............................................................................33
13.12 Duplicate Originals............................................................................34
13.13 Assignment.....................................................................................34
13.14 Fees and Expenses..............................................................................34
13.15 Millard-Wayne Name.............................................................................34
13.16 Insurance Policies.............................................................................34
13.17 Governing Law..................................................................................34
13.18 Counterparts and Exhibits......................................................................35
13.19 Publicity......................................................................................35
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
AMONG AMERICAN MEDCARE CORPORATION
AND THE SHAREHOLDERS
OF MILLARD-WAYNE, INC.
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 11th day
of February, 1997 by and between American Medcare Corporation, a Delaware
corporation ("Buyer") and the undersigned shareholder ("Shareholders") of
Millard-Wayne, Inc., a Florida corporation ("Company").
WHEREAS, Shareholders desire to sell, and Buyer desires to purchase,
all of the issued and outstanding shares ("Company Shares") of capital stock of
Company for the consideration and on the terms set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS
1.1 CERTAIN DEFINITIONS
(a) "Affiliate" means any person, corporation, or other
business entity (i) which, whether directly or indirectly through one or more
intermediaries, is controlled by the Shareholders (individually or as a group)
or (ii) in which Shareholders (individually or as a group) own, directly or
indirectly through one or more intermediaries, 5% or more of the voting power
for the election of the governing board.
(b) "Business" means the development, marketing and support of
the Software as currently conducted by Company.
(c) "Closing" is defined in Section 2.3.
(d) "Closing Date" means the date and time as of which the
Closing actually takes place.
(e) "Copyright" means all copyright ownership of the Software
and Documentation.
(f) "Development Software" means all software, object, source,
and executable code, licensed by Company as licensee which is used in the
conduct of the development, maintenance, and support of the Software. A list of
the Development Software is set forth in Section 1.1(f) of the Disclosure
Schedule.
<PAGE> 6
(g) "Distributor Software" means all software, object, source,
and executable code, licensed, sold or leased by Company as licensor or lessor
which is not owned by Company excluding Development Software. A list of the
Licensed Software is set forth in Section 1.1(g) of the Disclosure Schedule.
(h) "Distributorship Agreements" means all appointments of
Company to sell or license the Hardware or Distributor Software. A list of such
appointments is set forth in Section 1.1(h) of the Disclosure Schedule.
(i) "Documentation" means all technical manuals and notes, user
manuals, and all other documents developed or in development relating to or used
in the development, maintenance, support, enhancement and use of the Software,
including pending improvements, fixes and enhancements regardless of the media
upon which the Documentation exists, which is owned by Company.
(j) "Escrow Fund" is defined in Section 2.5.
(k) "Escrow Shares" are defined in Section 2.5.
(l) "GAAP" means generally accepted United States accounting
principles, consistently applied on an accrual basis.
(m) "Hardware" means all computers, components, peripherals,
and other equipment currently offered for sale by Company in the course of its
business. Section 1.1(m) of the Disclosure Schedule lists all Hardware currently
being sold by Company.
(n) "Intellectual Property" means all patents, patent pending,
copyrights, trade secrets, techniques, know-how, and other intangible assets
that are legally protectable or recognized as forms of property, whether or not
reduced to practice or a writing.
(o) "License Agreements" means those agreements entered into by
Company (or its predecessors) as licensor or lessor for the licensing of any
Software, Distributor Software and/or Intellectual Property.
(p) "Management of Company" means the current chief executive
officer, the chief operating officer, and the chief financial officer of
Company.
(q) "Public Offering" means the first public offering of common
stock of InfoCure Corporation, any entity into which Buyer intends to merge
prior to or upon consummation of the public offering, the net proceeds of which
paid to the issuer, after deducting the underwriter's discount, shall exceed $12
million.
(r) "Purchase Price" is defined in Section 2.2.
2
<PAGE> 7
(s) "Purchase Price Delivery Date" is defined in Section 2.4.
(t) "Shareholder" shall include holders of options or warrants
to purchase shares of common stock of Company.
(u) "Software" means all software, object, source and
executable code, licensed, sold or leased by Company as licensor or lessor, and
all fixes, updates, upgrades and enhancements heretofore developed or being
developed as well as other software developed or being developed for marketing
to physicians, clinics, hospitals and medical groups which is owned by Company,
including the software marketed under the trade name "MIMS." A list of the
Software is set forth in Section 1.01(u) of the Disclosure Schedule.
(v) "Trademarks" mean the trademarks and trade names listed in
Section 1.1(v) of the Disclosure Schedule.
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING
2.1 COMPANY SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Shareholders will sell, assign and transfer the
Company Shares to Buyer, and Buyer will purchase the Company Shares from the
Shareholders.
2.2 PURCHASE PRICE. The purchase price ("Purchase Price") for the
Company Shares will be: (a) the sum of One Million One Hundred Thousand and
No/100ths Dollars ($1,100,000.00) minus the Net Worth Shortfall (as hereinafter
defined), if any, and (b) 783,000 shares of common stock of Buyer. Upon the
proposed merger of Buyer into InfoCure Corporation ("InfoCure"), shares of
common stock of Buyer will be exchanged for shares of InfoCure. The final
exchange ratio ("Exchange Ratio") used to exchange the total number of
outstanding shares of Buyer immediately prior to the Public Offering to common
stock of InfoCure will be that set forth in the merger agreement pursuant to
which Buyer will merge into InfoCure and will be applicable to the exchange of
all shares of common stock of Buyer into shares of common stock of InfoCure. The
Exchange Rate has not been determined as of this date. It is currently estimated
at 0.0640072, which would result in a total of 50,117 shares of common stock of
InfoCure in exchange for 783,000 shares of common stock of Buyer. The Exchange
Ratio stated herein is an estimate only and is subject to change prior to the
Public Offering; provided however, that in no event shall the number of shares
of InfoCure issued pursuant to this paragraph 2.2 be less than the quotient of
$325,767 divided by the price to the public per share of common stock of
InfoCure offered pursuant to the SB Registration Statement.
3
<PAGE> 8
2.3 CLOSING. The closing ("Closing") of the sale of the Company Shares
as contemplated by this Agreement shall occur at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia at 9:00 a.m. local time
on the day on which the Public Offering commences, or such other date or place
as the parties hereafter mutually agree in writing, subject to the conditions
set forth hereafter. The Public Offering of the common stock of InfoCure shall
be deemed to have commenced at the time, which is the latest of (i) the time the
InfoCure's Registration Statement on Form SB-2, No. 333-18923 (SB Registration
Statement) as filed with the Securities and Exchange Commission ("Commission")
becomes effective, or (ii) the time at which the underwriters have agreed to
purchase the shares of common stock of InfoCure pursuant to the Public Offering
or (iii) the time at which the Registration Statement on Form S-4, No. 333-
20571 ("S4 Registration Statement") registering the shares of common stock of
InfoCure to be issued pursuant to this Agreement and certain other acquisitions
and mergers becomes effective. The sale of the Company Shares shall be effective
on the date of Closing, notwithstanding subsequent delivery of the Purchase
Price as set forth in paragraph 2.4 below.
2.4 DELIVERY OF PURCHASE PRICE. Delivery by the Buyer of the shares of
Buyer comprising the Purchase Price for the respective accounts of the
Shareholders (less the Escrow Shares described in paragraph 2.5), delivery of
the Escrow Shares to the Escrow Agent as described in paragraph 2.5, and payment
of the monetary portion of the Purchase Price by certified or official bank
check or checks payable in New York Clearing House (next day) funds or wire
transfers or other means of immediately available funds to the respective
accounts of the Shareholders, shall take place at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia, or at such other
location as Buyer may designate by written notice to Shareholders, at 10:00
a.m., local time, one business day after Buyer receives the proceeds of the
Public Offering (such time and date of delivery and payment is called the
"Purchase Price Delivery Date").
2.5 ESCROW. On or before the Closing Date, the parties shall enter into
an Escrow Agreement in a form acceptable to Buyer and Shareholders establishing
an escrow fund ("Escrow Fund") in an amount equal to:
(i) 10% of the cash portion of the Purchase Price and of
the value of 391,500 shares of common stock of Buyer;
and
(ii) 391,500 shares of the common stock of Buyer,
constituting a portion of the Purchase Price.
For purposes of calculating the Purchase Price and the number of shares to be
placed in the Escrow Fund only, the shares of Common Stock of Buyer will be
valued at the price to the public of the equivalent number of shares of common
stock of InfoCure offered in the Public Offering based upon the Exchange Ratio.
At the option of the Shareholders, the Escrow Fund to be established pursuant to
paragraph 2.5(i) shall consist of all stock, all cash or a combination thereof.
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<PAGE> 9
2.6 NET WORTH SHORTFALL.
(a) If the consolidated stockholders' equity of the Company as
of the Closing Date determined in accordance with GAAP but consistent with the
basis on which the Financial Statements referred to in paragraph 3.2 were
prepared is less than $122,098 ("Net Worth Shortfall"), the stock portion of the
Purchase Price shall be decreased by the amount of the Net Worth Shortfall
(based on the price per share at the Public Offering); otherwise the Purchase
Price shall not be adjusted by this paragraph 2.6. For periods during which the
Company pays income taxes on a cash basis, there shall be accrued a deferred
liability for taxes payable by reason of such election to be taxed on a cash
basis versus an accrual basis.
(b) The parties shall use their best efforts to estimate the
amount of the adjustment on or prior to the Closing and the Purchase Price as of
the Closing will reflect such tentative adjustment which will be subject to
further adjustment pursuant to the provisions of paragraph 2.6(a). Any
adjustments shall be made by decreasing the stock portion of the Purchase Price
(based on the price per share at the Public Offering).
(c) Buyer shall cause, at its expense, a balance sheet of the
Company as of the Closing to be prepared and completed within ninety (90) days
after the Closing. As soon as such financial statement is available to Buyer,
Buyer shall deliver to Shareholders the financial statement. Shareholders shall
have thirty (30) days to review and object to the balance sheet. Any
disagreements as to the amounts of any adjustment to be made to the balance
sheet, if not mutually resolved, shall be resolved as provided in paragraph 9.5,
except that the arbitrator(s) shall be person(s) experienced in financial and
accounting matters. Upon the final resolution of the financial statement as of
the Closing, any adjustment shall be made to the stock portion of the Purchase
Price as provided in subparagraph 2.6(a) and the amount of any remaining Net
Worth Shortfall (after consideration of the estimate made pursuant to
subparagraph 2.6(b)) shall be immediately paid by the Shareholders to Buyer;
provided however, that any stock amounts withheld pursuant to subparagraph
2.6(b) in excess of Net Worth Shortfall shall be refunded promptly by Buyer.
2.7 POST CLOSING ADJUSTMENT.
(a) 195,750 shares of common stock of Buyer plus one-half of
the shares withheld from Shareholder pursuant to Paragraph 2.6(c) (collectively,
the "Adjustment Shares) shall be earned and payable to the Shareholders each
year (an aggregate of two times the number of Adjustment Shares) if either the
total revenues or operating profits of the Company and the Health Care Division,
Inc. ("HCD") combined equal or exceed the applicable amount set forth below for
each year:
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<PAGE> 10
<TABLE>
<CAPTION>
FISCAL YEAR TOTAL REVENUES OPERATING PROFITS
----------- -------------- -----------------
<S> <C> <C>
1997 $6,000,000 plus six times $1,000,000 plus one-
(one-half of the Net half of the Net Worth
Worth Shortfall) Shortfall
1998 $6,600,000 plus 5.3 times $1,250,000 plus one-
(one-half of the Net half the Net Worth
Worth Shortfall) Shortfall
</TABLE>
If the operating profits for either year is less than 20% below the specified
operating profit for such year ("Minimum Amount"), the number of shares of
common stock of Buyer which shall be payable for such year shall be a fraction
of said Adjustment Shares, the numerator of which is the amount by which the
operating profits for such year exceeds the Minimum Amount, not to exceed the
difference between the operating profit set forth above and the Minimum Amount
("Difference") and the denominator of which is the Difference. The shares of
common stock of Buyer shall be converted into shares of InfoCure at the Exchange
Ratio pursuant to the offering to be made in accordance with the S4 Registration
Statement.
(b) Buyer shall cause, at its expense, an income statement
showing total revenues and net operating profit of the Company and HCD combined
to be prepared as of January 31, 1998 and January 31, 1999. The income statement
shall be completed within sixty (60) days after the end of the calendar year. As
soon as such financial statement is available to Buyer, Buyer shall deliver to
Shareholders the financial statement. Shareholders shall have thirty (30) days
to review and object to the income statement. Any disagreements as to the
calculation of and amounts of any proposed adjustment to be made to the income
statement, if not mutually resolved, shall be resolved as provided in paragraph
9.5, except that the arbitrator(s) shall be person(s) experienced in financial
and accounting maters. Upon the final resolution of each financial statement,
the amount of the post-closing adjustment shall be immediately delivered to the
appropriate parties from the Escrow Shares, subject to the amount to remain in
escrow after the post-closing adjustment as provided in paragraph 2.5 above and
the Escrow Agreement.
(c) For purposes of this paragraph 2.7 only, net operating
profits shall not be reduced for any income taxes, interest, expenses related to
the Public Offering, allocations of corporate overhead by Buyer or its
subsidiaries (other than the Company and HCD), or expenses related to corporate
meetings and other divisions.
(d) The total revenues and net operating profits are to be
adjusted to reflect any acquisition or disposition of the businesses of the
Company or HCD, or any part thereof, as currently constituted as reasonably
agreed upon by the parties in good faith and in the event of any dispute, such
dispute shall be resolved as set forth in paragraph 10.5 hereof.
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SECTION III.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to Buyer
on the date hereof as follows:
3.1 CORPORATE
(a) Except as set forth in Section 3.1(a) of the Disclosure
Schedule, Company is a corporation duly organized, validly existing and in good
standing under the laws of Florida and is qualified to conduct business in
Georgia and in all other jurisdictions in which the character of its assets and
the nature of its business requires it to be qualified to do business and in
which the failure to be so qualified could have a materially adverse effect on
its business, operations, prospects, assets or financial condition.
(b) Except as set forth in Section 3.1(a) of the Disclosure
Schedule, a true, correct and complete copy of the Articles of Incorporation and
bylaws of Company are as set forth in Section 3.1(b)(i) of the Disclosure
Schedule. There are 52,083 shares of common stock of Company issued and
outstanding and there are no warrants, options, convertible securities or other
rights to acquire capital stock outstanding.
(c) To the knowledge of the Management of Company, Company
holds all licenses, permits, authorizations and other approvals from all
governmental authorities necessary for the conduct of the Business of Company,
which failure could have a material adverse affect on its business, operations,
prospects, assets or financial condition of Company. A complete list of such
licenses, permits, authorizations and approvals are set forth in Section 3.1(c)
of the Disclosure Schedule.
(d) This Agreement constitutes the legal, valid and binding
obligation of the Shareholders, enforceable against the Shareholders in
accordance with its terms. Upon the execution and delivery by the Shareholders
of the Escrow Agreement, the Escrow Agreement will constitute the legal, valid
and binding obligation of the Shareholders, enforceable against the Shareholders
in accordance with its respective terms.
(e) Company has no subsidiaries.
(f) The shareholders of Company of record are the beneficial
owners and the shares of common stock of Company owned by each shareholder and
the holders of all warrants, options, convertible securities and other rights to
acquire common stock of Company are set forth in Section 3.1(f) of the
Disclosure Schedule.
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<PAGE> 12
3.2 FINANCIAL STATEMENTS.
(a) Except as disclosed in Section 3.2(a) of the Disclosure
Schedule, the audited balance sheets as of December 31, 1995 and September 30,
1996 and the statements of income of Company for the periods then ended compiled
by BDO Seidman present fairly in all material respects in the aggregate the
results of the operations of Company during those periods. Said financial
statements are sometimes collectively referred to as "Financial Statements." A
true, correct and complete copy of the Financial Statements are set forth in
Section 3.2(a) of the Disclosure Schedule.
(b) Section 3.2(b) of the Disclosure Schedule contains a list
of the amounts outstanding under all indebtedness of the Company to financial
institutions and other lenders, including loans from Shareholders and capital
leases, and the principal amounts outstanding as of January 31, 1997. Correct
and complete copies of each such loan agreements, if any, have been furnished to
Buyer.
3.3 CUSTOMERS
(a) Company has granted more than 235 licenses to use the
Software to end users. Section 3.3(a)(i) of the Disclosure Schedule contains the
list of the licensed users of the Software who are currently provided
maintenance under an annual maintenance agreement with the Company. Section
3.3(a)(i) of the Disclosure Schedule shall be updated as of the Closing. Section
3.3(a)(ii) of the Disclosure Schedule contains a list of the licensed users of
the Software who have contracted for maintenance and support during the period
January 1, 1996 through December 31, 1996 on a time and material basis. Section
3.3(a)(iii) of the Disclosure Schedule contains a list of all customers of
Company whose aggregate fees and other charges during the twelve (12) month
period ending December 31, 1996 exceeded $50,000.
(b) Except as set forth in Section 3.3(b) of the Disclosure
Schedule, Company has not received any notice or other communication (written
or, to the knowledge of the Management of Company, oral) from any customer
listed on Section 3.3(a)(i), (ii) or (iii) of the Disclosure Schedule
terminating or reducing in any material respect the amount of business conducted
with Company. To the knowledge of the Management of Company, the consummation of
the transactions contemplated herein will not have a material adverse effect on
the business relationships with any of the customers listed on Section
3.3(a)(iii) of the Disclosure Schedule.
(c) Section 3.3(c) of the Disclosure Schedule sets forth a list
of licensees of the Software for which Company has any warranty or other
unfulfilled obligation under the applicable License Agreement and a description
of the unfulfilled obligation and the agreement under which it arises. Company
is not in material breach of its obligations thereunder.
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<PAGE> 13
3.4 ABSENCE OF CERTAIN FINANCE AND BUSINESS CHANGES.
(a) Since September 30, 1996, there has not been any (i) event
or events due to actions or omissions of the Company and/or its employees which
will have a material adverse effect taken as a whole on the financial condition
or Business of Company (including software and service revenues) except as set
forth in Section 3.4(a) of the Disclosure Schedule or (ii) declaration or
payment of any dividend on the capital stock or the redemption of any shares of
capital stock of Company.
(b) Since September 30, 1996, no material loss, damage or
destruction of the tangible assets has occurred, whether or not covered by
insurance, which had a material adverse affect on the financial condition of
Company or on the Business.
(c) Since September 30, 1996, the Business has been conducted
substantially in the manner heretofore conducted consistent with past practices,
including with respect to the fees charged and the terms and conditions of the
License Agreements and maintenance and support agreements entered into, and no
waiver or release of any right was granted by the Company except (i) of an
immaterial value and (ii) in the ordinary course of business consistent with
past practices and no assets were sold except for the licensing of the Software,
sale of the Hardware and sale of Third Party Software in the ordinary course of
the Business.
3.5 GUARANTIES/LIENS. Company is not guaranteeing the obligations of
any person and has no commitment to guarantee any of the obligations of any
person and is not currently granting and Company has no commitment to grant to
anyone an interest in or lien on any of its assets to secure the obligations of
Company or another except as set forth in Section 3.5 of the Disclosure
Schedule.
3.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 3.6 of
the Disclosure Schedule, Company has no liabilities, absolute or contingent,
known or unknown, except those recorded on the Financial Statements as of
September 30, 1996 and those incurred in the ordinary course of business of
Company since September 30, 1996, all of which are recorded on the financial
books and records of Company, are consistent with past practices and are not in
the aggregate materially adverse to the financial condition or prospects of
Company.
3.7 ACCOUNTS RECEIVABLE. Except as set forth in Section 3.7 of the
Disclosure Schedule, the accounts receivable of Company, billed and unbilled, as
of the Merger will be valid and enforceable obligations of third parties and
will be collectible in full, without offset or fulfillment of any condition,
within six (6) months of their due date without the engagement of any collection
agency or attorney or the commencement of any action, except to the extent any
reserves for bad debts and doubtful accounts established on its financial books
and records as of the Closing, which reserves have been established in a manner
which is consistent with past practices. In the event that any such receivables
are not collected within said six months, in
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<PAGE> 14
determining amounts to be indemnified pursuant to Article X, any subsequent
recovery net of the cost of recovery shall be deducted from the amounts to be
indemnified for all purposes.
3.8 OWNERSHIP OF INTELLECTUAL PROPERTY
(a) Software. Except as set forth in Section 3.8(a) of the
Disclosure Schedule, Company is the sole and exclusive owner (including as
copyright owner) throughout the United States of (i) the Software, including the
software and software code developed or being developed by or on behalf of or at
the request of Company (regardless of the state of the development of the
software and whether it has been released); and (ii) the Software constitutes
all the software used and/or licensed in the conduct of the Business of Company,
except for the Distributor Software and the Development Software. Except as set
forth in Section 3.8(a) of the Disclosure Schedule, Company has not granted
licenses to others to use or to sublicense others to use the Software outside
the United States and to the knowledge of the Management, the Software or
derivatives thereof are not being used or distributed outside of the United
States.
(b) Other Intellectual Property Rights. Except as set forth in
Section 3.8(b)(i) of the Disclosure Schedule, Company is the sole and exclusive
owner throughout the United States of (i) all Copyrights, whether or not
registered; (ii) all other Intellectual Property rights, including, without
limitation, trade secrets, know-how, inventions (patented and unpatented), and
discoveries, including those embodied in or used in the development of the
Software, or any part thereof, and the screen displays generated by the
Software; and (iii) all Documentation; in each case except the Development
Software used in the development of the Software and the Distributor Software.
The Copyrights, Trademarks, Software, Documentation, and other Intellectual
Property are collectively hereinafter referred to as "Company Intellectual
Property". Section 3.8(b)(ii) of the Disclosure Schedule contains a correct and
complete list of all registered Copyrights, the date of registration and
jurisdiction of such registrations. Company has not filed any patent
applications and does not hold any patents.
(c) Trademarks. Company is the sole and exclusive owner of the
Trademarks which include all identifying names and marks which are associated
with the Software or which are otherwise used in the Business conducted by
Company. A complete and correct list of all the Trademarks is set forth in
Section 1.1(v) of the Disclosure Schedule. Section 1.1(v) of the Disclosure
Schedule also lists the date of registration, registration number, and
jurisdiction of the registration of each Trademark or the date of application if
the trademark application is pending.
(d) Software Developers. Section 3.8(d) of the Disclosure
Schedule sets forth the list of all persons and entities (other than past or
present full-time employees of Company) that have been engaged by the Company at
any time, directly or indirectly, in the design, development, correction,
improvement, modification, and/or enhancement of the Software, Documentation,
Copyrights and/or Trademarks. Section 3.8(d) of the Disclosure Schedule also
identifies the written agreements and describes all oral agreements pursuant to
which each such person or entity assigned or licensed its rights in such
intellectual property to Company or
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<PAGE> 15
acknowledged Company's ownership rights therein. Correct and complete copies of
each such agreement or assignment or license has been furnished to Buyer. The
employees and former employees of Company do not have any right, title or
interest in the Software, Copyrights, Trademarks, or other Company Intellectual
Property. Section 3.8(d) of the Disclosure Schedule sets forth the current form
of agreements with its employees regarding ownership of the Company Intellectual
Property.
(e) Rights of Licensees. The ownership rights of Company in
Company Intellectual Property are subject only to the non-exclusive licenses
granted to end users and to distributors of the Company as described in
paragraph 3.10 of this Agreement.
(f) No Infringements. The Company Intellectual Property does
not, and did not at any time, violate or infringe any copyright, patent, trade
secrets, know-how, trademarks or other intellectual property rights of any third
party, is not in the public domain, has not been licensed and/or permitted to be
duplicated except as disclosed in this Agreement or provided by law and, to the
knowledge of the Management of Company, The Company Intellectual Property has
not been duplicated except as permitted under the applicable licenses and law,
has not been reverse compiled or engineered and there are no claims or actions
pending or threatened or which have been brought asserting such violation or
infringement or that any Company Intellectual Property is in the public domain.
(g) Distribution Software and Development Software. Section
3.8(b)(g) of the Disclosure Schedule sets forth the complete and correct list of
license agreements pursuant to which Distribution Software and Development
Software is licensed to Company. Company does not license to others Distribution
Software or Development Software.
(h) Confidentiality. Company has taken the actions described in
Section 3.8(h) of the Disclosure Schedule with respect to maintaining the
confidentiality of the Company Intellectual Property.
(i) Source Code Escrow Agreements. Section 3.8(i) of the
Disclosure Schedule contains a list of all source code escrow agreements entered
into by Company and all agreements licensing the source code or agreeing to
license the source code of the Software. Correct and complete copies of such
agreements have been heretofore provided to Buyer.
(j) Clear Title. Except for taxes not yet due, the right,
title and ownership of Company in the Company Intellectual Property, and all
other assets of Company are free and clear of all mortgages, liens, restrictions
as to its use or right to license its use, security interests and ownership
rights of others except as set forth in Section 3.8 (j) of the Disclosure
Schedule.
(k) Year 2000. Except as set forth in Section 3.8(k) of the
Disclosure Schedule, the design and performance capabilities of the Software
insures year 2000 capabilities
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including calculations which accommodate same century and multi-century formulas
and date values.
3.9 PROPERTY AND EQUIPMENT
(a) Section 3.9 of the Disclosure Schedule lists the fixed
assets, including equipment, used in the Business of Company as currently
conducted which are owned by Company and those which are leased by the Company
("Leased Property"). Section 3.9 of the Disclosure Schedule contains a correct
and complete copy of the agreements for the Leased Property. The fixed assets
owned by the Company and the Leased Property are generally in good operating
condition and repair, reasonable wear and tear excepted and constitute all of
the fixed assets used in the Business.
(b) Company is not in default in the payments due under the
leases of the Leased Property or any other obligation which would give the
lessor the right to terminate the lease for the Leased Property.
(c) Since December 31, 1996, Company has not sold or otherwise
disposed of any fixed assets except as set forth in Section 3.9 of the
Disclosure Schedule.
3.10 LICENSE AGREEMENTS
(a) Company has not sold to others or leased or licensed others
to use the Company Intellectual Property, or any part thereof, except the
granting of written non-exclusive rights (i) to end users to use released
versions of the Software and Documentation in the ordinary course of the
Business pursuant to end user license agreements; and (ii) to distributors,
dealers, OEM's and other remarketers (collectively "Distributors") to use and
sublicense the Software and Documentation. Section 3.10(a) of the Disclosure
Schedule contains a correct and complete list of the Distributors. A correct and
complete copy of all written agreements with Distributors currently outstanding
has been previously furnished to CMA. To the extent any agreement with a
Distributor is not in writing, a complete description of the understanding is
set forth in Section 3.10(a) of the Disclosure Schedule.
(b) The standard form of end user license agreement used by
Company since December 31, 1995 to license the Software is contained in Section
3.10(b) of the Disclosure Schedule.
(c) Section 3.10(c) of the Disclosure Schedule contains a list
of all License Agreements, which Company has not completed its performance
thereunder, except for ongoing warranty and maintenance and support undertakings
therein, which list shall be updated as of the Closing.
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<PAGE> 17
(d) Unfulfilled warranty obligations under the License
Agreements are described in Section 3.10(d) of the Disclosure Schedule, which
description shall be updated as of the Closing. To the knowledge of Management
all such obligations can be fulfilled in the ordinary course of providing
support and maintenance services.
(e) The Company is not in material default of its obligations
under any License Agreement.
(f) Section 3.10(b) of the Disclosure Schedule includes all
unfilled commitments to sell, lease or license any Company Intellectual Property
hereafter.
(g) Distributor Software is licensed by the Company as set
forth in Section 3.10(g) of the Disclosure Schedule.
3.11 CONSULTING AND DEVELOPMENT AGREEMENTS. Except as described in
Section 3.11 of the Disclosure Schedule, there are no consulting and software
development agreements, written and oral, entered into by Company pursuant to
which others performed or are performing services as a consultant or in a
similar capacity or are developing software (regardless of the party who is to
hold title to the software) for Company for use or license by Company.
3.12 MAINTENANCE/COMMITMENTS.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a
correct and complete description of all commitments of Company outstanding to
provide support and/or maintenance services for any customer, including to
provide patches, corrections, improvements, modifications and enhancements of
the Software ("Maintenance Agreements"). A copy of all written Maintenance
Agreements has been made available to Buyer and, to the extent the Maintenance
Agreements are not in writing, a complete description of the understanding is
set forth in Section 3.12(a) of the Disclosure Schedule. The current standard
form of Maintenance Agreement is set forth in Section 3.12(a) of the Disclosure
Schedule.
(b) Section 3.12(b) of the Disclosure Schedule sets forth all
commitments of Company to develop any special feature or function for any
customer or to port any software for any customer not otherwise disclosed
pursuant to this Agreement ("Development Agreements"). A correct and complete
copy of the written agreements has been furnished to Buyer and a description of
all oral agreements is set forth in Section 3.12(b) of the Disclosure Schedule.
To the extent any such agreement or commitment, whether legally binding or not,
is oral, a summary thereof is set forth in Section 3.12(b) of the Disclosure
Schedule.
(c) Company has substantially complied with its obligations
accrued to date under the Maintenance Agreements and Development Agreements and
there is no default by Company arising under the Maintenance Agreements or
Development Agreements which could give the other party the right to terminate
the agreement or to demand money damages.
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3.13 ALL INTANGIBLE ASSETS USED IN THE BUSINESS. The Company
Intellectual Property, the Distributor Software and the Development Software
constitute all of the intangible assets used in the conduct of the Business as
conducted since September 30, 1996 and as currently being conducted.
3.14 EMPLOYEES/CONSULTANTS/DIRECTORS.
(a) Section 3.14(a) of the Disclosure Schedule sets forth a
list of all current employees and consultants engaged by Company or serving in
such capacity as of December 31, 1996 and their compensation. Section 3.14(a) of
the Disclosure Schedule will be updated as of the Closing;
(b) The employees of the Company are not represented by any
collective bargaining representative or otherwise organized;
(c) Section 3.14(c) of the Disclosure Schedule lists all
employee benefit plans which are currently in effect or as to which Company has
any ongoing obligation or liability. The term "employee benefit plan" means any
employment or consulting contract, deferred compensation, profit sharing,
pension, bonus, stock option, stock purchase or other fringe benefit or
compensation arrangement or commitment, written or oral, including each welfare
plan (as defined in Section 3(1) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), which Company has established or maintained
or in which any of its employees participate or have participated or under which
Company has an obligation to make contributions or to pay benefits. Company has
no obligations to provide any benefits to any retired or former employees,
including medical and hospital benefits (excluding COBRA);
(d) Company has no ERISA affiliate and never had an ERISA
affiliate;
(e) The 401(k) Plan made available to employees of Company is
in substantial compliance and has been in substantial compliance with all
applicable laws and regulations regarding the establishment, maintenance and
operation of the 401(k) Plan and the assets held pursuant thereto all
contributions by Company have been paid or properly accrued on its financial
books and all reports have been timely filed; and
(f) Company has no employment contracts or agreements with any
of its employees except agreements as to inventions, discoveries and copyright
ownership, a copy of which has been previously provided to Buyer. Schedule
3.14(f) of the Disclosure Schedule contains a copy of the most recent employee
benefit brochure provided or made available to the employees of the Company.
Except as set forth in Section 3.14(f) of the Disclosure Schedule, all employees
are "at will" employees of Company.
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3.15 ASSUMED AGREEMENTS.
(a) Sections 3.2(b), 3.10(b) and (d), 3.12(a), 3.12(b), and
3.15(a) of the Disclosure Schedule list all agreements of Company as of December
31, 1996 under which the Company has not performed all of its obligations not
otherwise disclosed in the Disclosure Schedule (i) for amounts payable to it in
excess of $5,000 or (ii) which are not to be fulfilled within six (6) months of
the Closing other than Maintenance Agreements ("Material Contracts"). Section
3.15(b) shall be updated as of the Closing. Such commitments represent all of
the then outstanding Material Contracts and, to the knowledge of the Management
of Company, all of the Material Contracts can be performed by the Company in the
ordinary course of business without a financial loss to Company.
(b) Company is not in default of any term or condition under
any Material Contract and no default by Company has occurred which under any
such Material Contract could constitute a default which would give the other
party the right to terminate the Material Contract or to demand money damages.
(c) Company has not waived any of its material rights under any
Material Contract nor is the other party to such Material Contract in default in
any material respect thereunder.
(d) Correct and complete copies of the Material Contracts
listed in Section 3.15(a) of the Disclosure Schedule have been made available to
Buyer.
3.16 LITIGATION AND ADVERSE EVENTS. There are no investigations,
suits, actions, administrative, arbitration or other proceedings pending, or, to
the knowledge of the Management of Company, threatened against Company.
3.17 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in Section
3.17 of the Disclosure Schedule, Company is in substantial compliance with all
applicable laws, statutes, ordinances, permits and regulations, including all
such laws, statutes, ordinances and regulations relating to wages, tax
withholdings, hours, equal pay, equal opportunity, and pollution of the
environment, and there are no violations which, if enforced, would materially
adversely affect the Business or prospects of the Business after the Closing or
the value of the Business; and no proceeding alleging any such violation is
pending or, to the knowledge of the Management of Company, threatened.
3.18 TAXES AND TAX RETURNS.
(a) Except as set forth in Section 3.18 of the Disclosure
Schedule, Company has timely filed with the appropriate governmental agencies
all tax returns and reports required to be filed by it (or obtained extensions
in which to file). Except as set forth in Section 3.18 of the Disclosure
Schedule, Company has timely paid or accrued all taxes and tax withholdings.
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<PAGE> 20
(b) Company has provided Buyer with correct and complete copies
of all tax returns, including income, property and sales tax returns filed for
the years 1992 to date. No tax returns of the Company are currently being
audited by any governmental authority.
3.19 CONSENTS. No consents or approvals are required to effect the
transactions contemplated herein by the Company and the Shareholders, except as
set forth in Section 3.19 of the Disclosure Schedule.
3.20 BROKERS AND FINDERS. None of the Shareholders or Company nor
any of its officers, directors, employees or agents have employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated by this Agreement which is
payable, directly or indirectly, by Buyer or Company.
3.21 RELATED TRANSACTIONS. Section 3.21 of the Disclosure Schedule
contains a complete and correct list of all transactions since September 30,
1996 or currently in effect between Company and any Shareholder or Affiliate of
any Shareholder except employment and related benefits arising therefrom and
other transactions otherwise disclosed as between the Company and any
Shareholder or affiliate of any Shareholder in the Disclosure Schedule.
3.22 NO UNTRUE STATEMENTS. No statements (including representations
and warranties) contained in this Agreement (including in the Disclosure
Schedule and documents described as having been provided to Buyer in this
Agreement or in the Disclosure Schedule), contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and in the Disclosure Schedule not misleading.
SECTION IV.
INVESTOR REPRESENTATIONS REGARDING THE SECURITIES
4.1 INVESTMENT REPRESENTATIONS.
Each Shareholder represents to Buyer as follows:
(a) The Shareholder is acquiring the common stock of Buyer for
the account of the Shareholder (and not for others) and for investment purposes
only and not with a view to distribution, as such is defined by the Securities
Act of 1933, as amended ("Act"), or any rule or regulation promulgated
thereunder ("Rules"), in violation of the Act or any of the Rules;
(b) The Shareholder has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating the
merit and economic risks of this particular investment and acknowledges that an
investment in the common stock of Buyer involves risks, including the risks set
forth in the S4 Registration Statement.
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(c) The Shareholder agrees that the certificate or certificates
representing the common stock of Buyer shall be inscribed with the legend that
such stock may not be transferred in the absence of an effective registration
statement under the Act covering the stock or an opinion of counsel satisfactory
to Buyer that registration is not required. In addition, such stock may not be
transferred except as permitted under the provisions of the standstill agreement
set forth in paragraph 8.2 hereof and the Acts and Rules.
(d) In making this decision to acquire the common stock of
Buyer, the Shareholder has been given the opportunity to discuss the business,
management and financial affairs of Buyer and their subsidiaries with officers
of Buyer and has had the opportunity to ask questions of, and to receive answers
from, such officers and to obtain additional information necessary to verify the
accuracy of the information received and to evaluate Buyer and an investment in
the common stock of Buyer and the Shareholder desire no further information for
such evaluation. The Shareholder acknowledges receipt of a copy of the SB
Registration Statement as filed with the Commission on December 27, 1996 and the
S4 Registration Statement as filed with the Commission on January 28, 1997.
(e) The Shareholder acknowledges that no representations were
made by Buyer to the Shareholder with respect to the business, management or
financial affairs of Buyer except as set forth in Section V of this Agreement
and except that Buyer and InfoCure are negotiating with several companies the
purchase or merge of their businesses by or into Buyer or InfoCure or a
subsidiary thereof ("Acquisitions") and the financing of the cash payments for
such Acquisitions through the Public Offering by InfoCure into which Buyer
intends to merge ("Merger") upon the effective dates of the SB and S4
Registration Statements, all as more fully described in the SB Registration
Statement. The Shareholder acknowledges that there can be no assurances that the
Acquisitions will be effected or that the Public Offering will occur or the net
proceeds of the Public Offering will be sufficient to meet the obligations of
InfoCure including working capital requirements or that the companies after the
Acquisition will be profitable. The Shareholder acknowledges that no
representations are made by Buyer as to the definitive Exchange Ratio.
(f) The Shareholder acknowledges that no representations are or
were made by Buyer with respect to the business or financial condition of Buyer
except as set forth herein and in the S4 and SB Registration Statements (subject
to subsequent amendments hereto and thereto) and no representations are made
with respect to any business plan or projections of Buyer or InfoCure.
(g) The Shareholder understands and agrees that the common
stock of the Buyer to be acquired by the Shareholder as herein provided, if it
is not issued pursuant to an effective registration statement filed with the
Commission, shall be inscribed with a legend to the effect that the common stock
of Buyer may not be transferred in the absence of an effective registration
statement under the Act covering the common stock of Buyer or an opinion of
counsel satisfactory to Buyer, that registration is not required under the Act.
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(h) The Shareholder acknowledges that no registration statement
relating to common stock of Buyer to be delivered pursuant to this Agreement has
been filed at this time under the Act or under the laws of any state and that
the common stock of Buyer must be held by the Shareholder for an indefinite
period of time (at least two years under current rules) unless the common stock
of Buyer, before the expiration of that period, is registered under the Act and
any applicable state law or unless an exemption from such registrations is
available. The Shareholder realizes that there is no existing market for the
common stock of Buyer which is not freely tradeable. The Shareholder further
acknowledges that Buyer is under no obligation to register the shares of common
stock of Buyer owned by the Shareholder or to aid the Shareholder in obtaining
any exemption from the registration requirements or permits to sell the
securities.
(i) The Shareholder agrees that the shares of common stock of
Buyer may not be transferred without compliance with applicable federal and
state laws.
(j) The Shareholder acknowledges that there are no assurances
that the underwriters will proceed with the Public Offering or that the Public
Offering will become effective.
4.2 OWNERSHIP OF COMPANY SHARES. Each Shareholder represents to
Buyer that the Shareholder is the sole and exclusive record and beneficial owner
of all shares of Company Shares registered in the Shareholder's name as set
forth in Section 3.1(f) of the Disclosure Schedule. Section 3.1(f) of the
Disclosure Schedule contains the principal residence or domicile of the
Shareholder. Each Shareholder represents that the shares of Company Shares
registered in the Shareholder's name are free and clear of any and all liens,
restrictions, claims, charges, options, rights of first refusal or encumbrances,
with no defects of title whatsoever. Each Shareholder has the exclusive right,
power and authority to vote and to transfer the Company Shares registered in the
Shareholder's name. Each Shareholder represents that the Shareholder's right,
title and interest in the Company Shares were acquired on or before January 1,
1990 and no other person has any right, title or interest therein.
SECTION V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Shareholders on the date
hereof as follows:
5.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; has full corporate power and authority to conduct the business of
developing, distributing and marketing software, including through its
subsidiaries, and has full right, power and authority to issue the shares of
common stock as part of the Purchase Price, as contemplated by this Agreement.
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5.2 AUTHORIZATION
(a) The execution, delivery and performance of this Agreement,
including the issuance of the common stock of Buyer, have been duly authorized
by all requisite corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer enforceable against it in accordance with its terms.
Upon the execution and delivery by Buyer of the Escrow Agreement, the Escrow
Agreement will constitute the legal, valid and binding obligation of Buyer,
enforceable agreement Buyer in accordance with its terms.
(b) The execution and delivery of this Agreement, and the
consummation by Buyer of the transactions contemplated herein on the Closing,
will not (with or without the giving of notice, lapse of time or both) violate,
conflict with or result in a default under, any of the provisions of the
certificate of incorporation or by-laws of Buyer, any mortgage, indenture,
contract, agreement, license, permit, instrument, judgment, decree, order,
statute, regulation or ruling of any court or governmental authority to which
Buyer is a party or by which it is bound.
(c) The common stock of Buyer to be issued and delivered to
Company will be validly issued, fully paid and non-assessable securities and
will not be subject to any outstanding warrants, options, preemptive rights or
other restrictions except those arising under applicable federal and state
securities laws.
5.3 BROKERS AND FINDERS. Neither Buyer nor any of its officers,
directors, employees or agents have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement which is payable directly
or indirectly by the Shareholders.
5.4 NO UNTRUE STATEMENTS. No statements (including
representations) by Buyer contained in this Agreement, and no written
statements furnished by Buyer to the Shareholders pursuant to this Agreement,
contain any untrue statement of a material fact, or omit to state a material
fact necessary in order to make the statements therein contained not
misleading.
5.5 REGISTRATION STATEMENTS. The S4 and SB Registration Statements
do not contain any untrue statement of a material fact or omit to state therein
such facts required to be stated therein or necessary to make such statements
therein not misleading. The foregoing representa tion does not include any
statement in the S4 and SB Registration Statements furnished to the Buyer or
InfoCure Corporation by any Shareholder for use in connection with the
preparation of the S4 and SB Registration Statements or any omission by any
Shareholder to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
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SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed
on or prior to the Closing Date shall be subject to the satisfaction on or prior
to the Closing Date of each of the following conditions, any of which condition
may be waived in writing by Buyer, but such waiver shall not waive any
representation, warranty or covenant of the Shareholders.
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by the Shareholders herein as of the date of
this Agreement shall be true and correct in all material respects on the Closing
Date with the same effect as though made on the Closing Date; the Shareholders
shall have performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by them prior to or
on the Closing; and the Shareholders shall have delivered to Buyer a certificate
of the Shareholders dated the Closing, certifying as to the fulfillment of the
foregoing conditions.
6.2 THIRD PARTY CONSENTS. All consents, approvals or authorizations
from third parties or government agencies required to consummate the
transactions contemplated hereby and contemplated by this Agreement, including
the consents set forth pursuant to paragraph 3.19.
6.3 OPINION OF COUNSEL TO THE SHAREHOLDERS. An opinion of counsel
to the Shareholders dated the Closing Date and addressed to Buyer reasonably
satisfactory in all respects to Buyer.
6.4 AUTHORIZATION. Evidence that all actions required to be taken
by the Shareholders or Company pursuant to this Agreement, including the
execution and delivery thereof, has been taken to authorize and consummate the
transactions contemplated herein.
6.5 UPDATE DISCLOSURE SCHEDULE. The Shareholders shall have
updated the Disclosure Schedule as herein provided.
6.6 ESCROW AGREEMENT. The Shareholders have executed the Escrow
Agreement.
6.7 EMPLOYMENT AGREEMENT. Buyers and M. Wayne George shall have
entered into an employment agreement in form and substance satisfactory to
Buyer.
6.8 PUBLIC OFFERING. The Public Offering shall have commenced.
6.9 S4 REGISTRATION STATEMENT. S4 Registration Statement, which
includes the shares of common stock of InfoCure to be issued pursuant to the
Merger of Buyer into InfoCure, has been declared effective by the Commission.
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SECTION VII.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
Each and every obligation of the Shareholders under this Agreement to
be performed on or prior to the Closing shall be subject to the satisfaction on
or prior to the Closing of each of the following conditions, any of which
conditions may be waived in writing by the Shareholders, but such waiver shall
not waive any representation, warranty, or covenant of Buyer:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by Buyer herein as of the date of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on the Closing Date; Buyer shall have
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed and complied with by it on or prior to the
Closing Date; and Buyer shall have delivered to the Shareholders a certificate
of an officer of Buyer, certifying as to the fulfillment of the foregoing
conditions.
7.2 OPINION OF COUNSEL TO BUYER. An opinion of Glass, McCullough,
Sherrill & Harrold, LLP, counsel to Buyer, dated the Closing reasonably
satisfactory in all respects to the Shareholders.
7.3 COMMON STOCK OF BUYER. The Common Stock of Buyer is delivered
by Buyer to the Shareholders.
7.4 AUTHORIZATION. Evidence that all actions required to be taken
by Buyer pursuant to this Agreement have been taken, including instructions to
the transfers agent to issue the common stock of Buyer and deliver the
certificates to the Shareholder and/or Escrow Agent and delivery of copies of
the articles of incorporation, bylaws, and board resolutions certified by the
secretary or assistant secretary of Buyer evidencing the authorization of the
issuance of the common stock of Buyer.
7.5 ESCROW AGREEMENT. The parties have entered into the Escrow
Agreement.
7.6 PUBLIC OFFERING. The Public Offering shall have commenced.
7.7 S4 REGISTRATION STATEMENT. The S4 Registration Statement which
includes the shares of common stock of InfoCure to be issued pursuant to the
Merger of Buyer into InfoCure, has been declared effective by the Commission.
7.8 REPAYMENT OF SHAREHOLDER LOANS. All indebtedness of the
Company for loans from Shareholders shall be paid in full.
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7.9 THIRD PARTY CONSENTS. All consents, approvals or authorizations
from third parties or governmental agencies to consummate the transactions
contemplated hereby and contemplated by this Agreement have been received.
7.10 EMPLOYMENT AGREEMENT. M. Wayne George and Buyer shall have
entered into an Employment Agreement in form and substance satisfactory to M.
Wayne George.
SECTION VIII.
OTHER COVENANTS
8.1 CONDUCT OF BUSINESS. From the date hereof to the Closing except
as otherwise consented to or approved by Buyer in writing, the Shareholders
hereby covenant and agree that they shall cause Company:
(a) Maintain Corporate Existence, Etc. (i) to conduct the
Business in a diligent manner, consistent with past management practices,
including maintaining adequate personnel to maintain, develop, enhance, support
and market the Software; (ii) to market and license the Software and Distributor
Software and Hardware to end users; (iii) grant non-exclusive licenses of the
Software and Distributor Software to end users pursuant to its standard end user
license agreement at its standard fees in the ordinary course of its business;
and (iv) not appoint new distributors without the prior written consent of
Buyer.
(b) Disposition of Assets. Not to sell or otherwise dispose of
any asset except for the granting of non-exclusive licenses as permitted
pursuant to paragraph 8.1(a).
(c) Full Access. To afford to Buyer, and to its counsel,
accountants and other authorized representatives, full access to the facilities,
contracts, books, records, Software, key personnel and public accountants of
Company during normal business hours upon reasonable prior notice; and to cause
its officers and employees to promptly furnish such additional financial and
operating data and other information as Buyer or its authorized representatives
shall from time to time reasonably request.
8.2 STANDSTILL AGREEMENT. Each Shareholder agrees to execute the
standstill agreement in the form attached hereto as Exhibit 8.2. Buyer
represents that the form of the standstill agreement is identical to those being
executed by the directors and executive officers of Buyer.
8.3 COVENANTS RELATING TO TAXES. Following Closing, in the event
that the Company receives notice of any audit of any tax return for the Company
for any taxable period, through and including the Closing Date by any taxing
authority, the Company shall promptly notify the Shareholders, individually, of
the commencement of any such audit or examination and the Shareholders may
participate in such audit or examination and shall be kept fully apprised of the
progress of such audit or examination. The Company shall keep the Shareholders
fully apprised
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of the progress of such audit examination and the Shareholders may participate
in such audit or examination. The Company agrees that it will not agree to any
audit or revision that would result in taxable income to the Shareholders,
without the Shareholders' approval.
SECTION IX.
CONFIDENTIALITY AND SECURITY
9.1 CONFIDENTIALITY
(a) The parties acknowledge that information, documents and
materials have hereafter been exchanged under a confidentiality understanding.
The provisions of this Section IX reflect the understanding with respect to, and
shall govern, all such exchanges and the permitted use and disclosure by a party
or its Affiliate hereafter of any confidential information and trade secrets of
the other party regardless of when acquired. Each party hereto hereby agrees
that all information, documents and materials the party ("Recipient") received
heretofore and receives hereafter from any other party or its Affiliate
("Owner") shall be considered valuable assets of such Owner and shall at all
times to be treated by the Recipient and the officers, directors, employees and
agents of the Recipients as confidential information or trade secrets of the
Owner if so identified as such or which under the circumstances surrounding
disclosure ought to be treated as confidential information or trade secrets of
the Owners. Each party hereto, as a Recipient, hereby agrees that it shall not
hereafter (and shall use commercially reasonable efforts to ensure that its
Affiliates, officers, directors, employees and consultants do not) in any
manner, directly or indirectly (i) transmit, disclose or otherwise communicate
or make available any such confidential information or trade secrets to any
third party, or (ii) use the same for its own account or for the benefit of any
third party, other than as permitted by this Agreement; or (iii) make any copies
of any such confidential information or trade secrets except as is necessary to
perform its obligations or exercise its rights hereunder. The parties each agree
not to reverse engineer or reverse compile the computer software of any other
party.
(b) Each party hereto as Recipient shall take all commercially
reasonable actions necessary or desirable, including with respect to its
officers, directors, employees and consultants having access to the confidential
information or trade secrets, to satisfy its obligations to protect and maintain
the confidentiality and security of such confidential information or trade
secrets, including the source code of the Software.
(c) It is recognized and acknowledged between the parties
hereto that the covenants respecting confidentiality set forth in this Section
IX hereof are essential elements of this Agreement and shall continue after the
Closing or the termination of this Agreement for any reason. Each party further
acknowledges that the Owner of the confidential information and trade secrets
may have no adequate remedy at law if the Recipient shall violate the terms
thereof. In such event, the Owner shall have the right, in addition to any other
rights and remedies it may have, to obtain in any court of competent
jurisdiction injunctive relief to restrain any breach or
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threatened breach thereof or otherwise specifically enforce the provisions of
this Agreement without proof of actual damages.
(d) The parties each agree as follows:
(i) Confidential information or trade secret of the
Owner that is disclosed shall not be disclosed to others, except to directors,
officers, employees and consultants of the Recipient having a need to know in
connection with the consideration and/or consummation of the transactions
contemplated herein and Recipient shall be responsible for and other person's
compliance with the confidentiality obligation of this Section IX.
(ii) The Recipient, when receiving such confidential
information or trade secrets from the Owner, shall protect such confidential
information and trade secrets with the same degree of care that Recipient
regularly employs to safeguard its own confidential information or trade secret
of like importance from unauthorized use or disclosure.
(iii) The rights and obligations of the parties with
respect to all such confidential information and trade secrets of the Owner that
is disclosed and subject to this Agreement shall survive termination of this
Agreement and shall remain in effect for a period of five (5) years from the
date of this Agreement; provided however that the expiration of the above five
(5) years shall not affect any rights of the parties with respect to patents,
trademarks, copyrights and trade secrets which shall be so protected as long as
they may be legally protected or constitute a trade secret.
(iv) Any portion of such Owner's confidential information
or trade secret that:
(A) is rightfully received from a third party, who
has a right to disclose it, without accompanying markings or disclosure
restrictions;
(B) is independently developed by Recipient by
personnel who have not had access to such confidential information or trade
secret;
(C) is or becomes publicly available through no
wrongful act of the Recipient;
(D) is already known by the Recipient as evidenced by
documentation bearing a date prior to the date of disclosure by Owner; or
(E) is approved for release in writing by the
President of the Owner;
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is not entitled to the protection provided in this Section IX, except for
patents, trademarks and copyrights protection as provided by law.
(e) Confidential information and trade secrets of Company have
been and will be used by Buyer only in connection with its evaluation of Company
and the decision to acquire the capital stock of Company and the confidential
information and trade secrets of Buyer have been and will be used by the
Shareholders only in furtherance of the transactions contemplated herein and in
the S4 Registration Statement.
(f) Notwithstanding the foregoing, nothing herein shall
restrict the right of either party to disclose such confidential information or
trade secret that is disclosed pursuant to a judicial or administrative order,
but only to the extent so ordered, provided, however, that the party receiving
such order shall notify the other party of such order in sufficient time to
permit such other party to intervene in response to such order.
(g) All such confidential information and trade secrets and
copies thereof of Owner shall remain the property of the Owner. All such written
confidential information and trade secrets, and any copies thereof, shall be
promptly returned to the Owner upon written request, or destroyed at the Owner's
options. All reports and other documents prepared by a Recipient containing any
such confidential information or trade secrets shall be destroyed at the Owner's
written request and the Recipient shall so certify to Owner upon Owner's request
that it has been destroyed. The restrictions on disclosure and use shall survive
the return and destruction of such written confidential information and trade
secrets, reports and other documents and the Closing of the transactions
contemplated by this Agreement and the merger of Buyer into InfoCure.
(h) Upon the Closing, all trade secrets and confidential
information owned by Company shall be deemed to be owned by Buyer or its
subsidiary as of the Closing for purposes of this Agreement, including this
Section IX.
(i) Notwithstanding the foregoing, nothing in this Section IX
shall restrict the disclosure of any confidential information in any
registration statement filed with the Commission in contemplation of the Public
Offering, including the prospectus which is a part thereof and the public
distribution of the prospectus, including the preliminary prospectus and
registration statement.
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SECTION X.
INDEMNIFICATION
10.1 INDEMNIFICATION BY THE SHAREHOLDERS.
(a) The Shareholders hereby agree, jointly and severally, to
indemnify and hold Buyer and Company, including the successor of the Business
(collectively "Buyer" for purposes of this Section X only) harmless at all times
from and after the Closing Date, against and in respect of the following:
(i) All losses, liabilities, costs and damages, including
without limitation, interest, penalties and fines, resulting from any (a) breach
of a representation or warranty of the Shareholders set forth herein or (b)
non-fulfillment of any agreement or covenant, on the part of the Shareholders
set forth herein or of any condition precedent (except for the third party
consents) as set forth in this Agreement.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 10.1 are collectively referred to as "Buyer
Losses".
(b) The period during which Buyer must give notice in writing
to the Shareholders of claims for indemnification hereunder shall expire on the
second anniversary of the Closing except that such period shall be extended to
the applicable statute of limitations (i) plus thirty (30) days with respect to
claims for unpaid taxes and failure to file required tax reports, including
related interest, penalties and fines ("Tax Claims"); (ii) with respect to
claims regarding the ownership of Company (including warrants, options and
convertible securities) or regarding the ownership by the Shareholders of the
Company Shares; (iii) for breaches of any covenant or obligation which first
arises after the Closing; or (iv) for breaches of Section IX.
(c) Interest at the prime rate as quoted in The Wall Street
Journal shall accrue on all amounts to be indemnified from the date of the
Closing to the date of payment by the Shareholders, or if payment of a Buyer
Loss is made after the Closing by Buyer, from the date of such payment by Buyer
to the date of indemnification by the Shareholders.
(d) The total liability of the Shareholders under this Section
IX shall not exceed the Purchase Price received or to be received by the
Shareholders pursuant to Section II.
(e) In the event that any third party asserts an action or
claim as to which Buyer is entitled to indemnification hereunder, Buyer shall
notify the Shareholders in writing of any such asserted liability with
reasonable promptness, and the Shareholders shall have a right to compromise or
defend any such matter involving such asserted liability, through counsel of its
own choosing who shall be subject to the approval of the Buyer, which approval
will not be unreasonably withheld, at the expense of the Shareholders; provided,
however, that the
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Shareholders shall indemnify Buyer against any costs and damages resulting from
the failure of the Shareholders to defend or pay such claims. In the event the
Shareholders shall notify Buyer in writing promptly of the intention of the
Shareholders to do so, Buyer shall cooperate with the Shareholders and their
counsel in the compromising of or the defending against any such liabilities or
claims, at the expense of the Shareholders and provide the Shareholders with
reasonable access to the books and records of Company to the extent necessary
for the compliance with any document request and the reasonable defense of such
claim.
(f) Buyer shall be entitled to payment hereunder only if and to
the extent the aggregate Buyer Losses under this Agreement exceed Thirty-Five
Thousand Dollars ($35,000).
(g) The amount of any Buyer Losses shall be reduced by amounts
received by the Buyer under any policy of insurance maintained by Company prior
to the Closing. Amounts received from any such policy of insurance after the
receipt of payment of any Buyer Losses from the Shareholders shall be promptly
reimbursed to the Shareholders.
10.2 INDEMNIFICATION BY BUYER.
(a) Buyer hereby agrees to indemnify and hold the Shareholders
harmless at all times from and after the Closing, against and in respect of the
following:
(i) All losses, liabilities, costs and damages, including
without limitation, interest, penalties and fines, resulting from (a) any breach
of a representation or warranty of Buyer set forth herein, (b) any
non-fulfillment of any agreement or covenant, on the part of Buyer set forth
herein, (c) guarantees of any of the Shareholders not released pursuant to
paragraph 13.2 hereof, (d) operation of the Company after the Closing except to
the extent resulting from negligent acts or omissions of the applicable
Shareholder after the Closing Date, or (e) claims relating to the merger of
Buyer and InfoCure Corporation.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 10.2 are collectively referred to as "Shareholder
Losses."
(b) The period during which the Shareholders must give notice
in writing to Buyer of claims for indemnification hereunder shall expire on the
second anniversary of the Closing except that such period shall be extended to
the applicable statute of limitations (i) for breaches of Section IX, (ii) for
breaches of any covenant or obligation which first arises after the Closing or
(iii) plus thirty (30) days with respect to claims for unpaid taxes and failure
to file required tax reports, including related interest, penalties and fines.
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(c) Interest at the prime rate as quoted in The Wall Street
Journal shall accrue on all amounts to be indemnified from the date of the
Closing to the date of payment by Buyer, or if payment of a Shareholder Loss is
made after the Closing by the Shareholder, from the date of such payment by any
Shareholder to the date of indemnification by Buyer.
(d) The total liability of Buyer under this Section X shall not
exceed the consideration received or to be received by the Shareholders pursuant
to Section II.
(e) In the event that any third party asserts an action or
claim as to which the Shareholders are entitled to indemnification hereunder,
the Shareholders shall notify Buyer in writing of any such asserted liability
with reasonable promptness, and Buyer shall have a right to compromise or defend
any such matter involving such asserted liability, through counsel of its own
choosing who shall be subject to the approval of the Shareholders, which
approval will not be unreasonably withheld, at the expenses of Buyer; provided,
however, that Buyer shall indemnify the Shareholders against any costs and
damages resulting from the failure of Buyer to defend or pay such claims. In the
event Buyer shall notify the Shareholder in writing promptly of the intention of
Buyer to do so, the Shareholders shall cooperate with Buyer and its counsel on
the compromising of or the defending against any such liabilities or claims, at
the expense of Buyer and provide Buyer with reasonable access to the books and
records of the Company to the extent necessary for the compliance with any
document request and the reasonable defense of such claim.
(f) The Shareholders shall be entitled to payment hereunder
only if and to the extent the aggregate of Shareholder Losses under this
Agreement exceed Thirty-Five Thousand Dollars ($35,000); provided however, that
the foregoing shall not be applicable to the Shareholders Loss arising out of a
breach of paragraph 13.2.
(g) The amount of any Shareholder Losses shall be reduced by
amounts received by the Shareholder under any policy of insurance. Amounts
received from any such policy of insurance after the receipt of payment of any
Shareholder Losses from Buyer shall be promptly reimbursed to Buyer.
10.3 REIMBURSEMENT. Buyer or Shareholders, as the case may be,
shall be reimbursed promptly for any Buyer Losses or Shareholder Losses for
which it is to be indemnified under paragraphs 10.1 and 10.2. Buyer and the
Shareholders shall have the right to set off and deduct any Buyer Losses or
Shareholder Losses, as the case may be, against the amount of any obligation of
such person however arising to the other person. In the event of any dispute as
to the right to set off or deduction any amount or the amount of the Buyer or
Shareholder Losses, the dispute shall be resolved as provided in paragraph
10.5. If Shareholder reimburses Buyer for a breach of the warranties and
representations set forth in paragraph 3.7, Buyer shall assign all such
uncollected receivables to the Shareholders without further consideration.
28
<PAGE> 33
10.4 CLAIMS. Should any claim be made by a person not a party to
this Agreement with respect to any matter to which the foregoing indemnity
relates for which the indemnifying party has not elected to compromise or defend
as set forth in paragraphs 10.1(e) or 10.2(e), the party to be indemnified, on
not less than fifteen (15) days' notice to the other party, may make settlement
of such claim, and such settlement shall be binding on the indemnifying party
for the purposes of this Section X; provided, however, that if within said
fifteen (15) day period the indemnifying party shall have requested the other
party to contest any such claim at the expense of the indemnifying party and has
provided reasonable assurances of the ability of the indemnifying party to pay
such expenses and other losses which may occur, the indemnified party will
promptly comply and the indemnifying party shall have the right to defend on its
own behalf with counsel of its own choosing at its expense. Any payment or
settlement resulting from such contest, together with the total expense thereof,
shall be binding on the Shareholders and Buyer for the purposes of this Section
X. Failure to give notice shall not constitute a defense, in whole or in part,
to any claim by the indemnified party except and only to the extent that such
failure to do so shall result in material prejudice to the indemnifying party.
10.5 RESOLUTION OF DISPUTES. In the event of any dispute between
Buyer and the Shareholders over any claim for indemnification under this Section
X and the parties are unable to resolve such dispute, either party may submit
the dispute to binding arbitration as hereinafter provided. The arbitration
shall be in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") then in effect. The arbitration shall be held
before three arbitrators, unless the amount in dispute is less than One Hundred
Thousand Dollars ($200,000), in which event the arbitration shall be held before
one arbitrator. In the event the arbitration is to be held before three
arbitrators, the Shareholders and Buyer shall each appoint one arbitrator within
thirty (30) days of the receipt of notice by the party commencing the
arbitration which includes a copy of the petition filed with the AAA. The
arbitrators shall select the third arbitrator. In the event the two arbitrators
fail to do so within fifteen (15) days of their appointment or in the event a
party hereto fails to designate an arbitrator or in the event only one
arbitrator is to be appointed, such arbitrator(s) shall be appointed by the AAA.
The arbitrator(s) shall be knowledgeable in the business of software
distribution. All decisions shall be by majority vote of the arbitrators. The
award of the arbitrator(s) shall be binding on the parties hereto and such
awards may be entered in any applicable court. The arbitration and all hearings
in connection therewith shall be held in Georgia. The arbitrator(s) shall have
no authority to award punitive damages or any other awards other than as herein
contemplated. Notwithstanding the foregoing, the parties hereto may seek in a
court proceeding a restraining order, or a preliminary or permanent injunction
as permitted by law or equity whenever applicable to enjoin the unauthorized use
of the confidential information or trade secret of a party hereto or as
otherwise provided herein. All parties hereto agree to service by mail in any
such proceedings.
29
<PAGE> 34
SECTION XI.
COVENANT NOT TO COMPETE
(a) For a period of five (5) years following the Closing Date,
each Shareholder agrees that the Shareholder will not, directly or indirectly,
including through an Affiliate, own, manage, operate, control, be engaged in, or
participate in the ownership, management, operation, or control of or be
connected in any manner or have any other direct or indirect financial interest
in any business, firm, person, partnership, corporation, or concern which is
engaged in any business of the type and character which is competitive with the
Business which is being conducted by Company on the Closing Date in the United
States. The Shareholders and Buyer agree that the Business is conducted
throughout the United States and the Business is the development, marketing,
training, implementing, and/or supporting of computer software or hardware to
physician practice management computer systems, but is not, for example,
physician service bureau systems, medical records systems, third party
administration systems or reimbursement consulting services..
(b) Notwithstanding the covenants contained in subparagraph
(a), the Shareholders shall not be prohibited from owning less than 5% of any
class of equity securities of a company which is listed on a recognized stock
exchange or for which prices are quoted on the National Association of
Securities Dealers Automated Quotation System.
(c) During the non-compete period set forth in subparagraph
(a), each Shareholder will not suggest, urge or persuade any user of the
Software not to purchase or license or not to do business with Company or the
successor of the Business or solicit the employment of any employee of Company
or its successor.
(d) Each state of the United States and each month of time
covered by this covenant not to compete shall be deemed a severable unit, and
should any court determine that the inclusion of all such states or months would
render any such undertaking unreasonable or unenforceable for any reason, those
units which are necessary in the judgment of the court to be deleted in order to
render such undertaking reasonable and enforceable shall be deemed free of such
non-compete undertaking but such undertaking shall remain in full force and
effect as to each other unit of territory or time.
(e) Each Shareholder agrees that in addition to any other
rights and remedies available to Buyer and Company for any breach by a
Shareholder of his obligations under this Section XI, Buyer or Company shall be
entitled to enforcement of such obligations hereunder by court injunction or
other equitable remedy and the Shareholders in such proceeding will not urge
that Buyer or Company has an adequate remedy at law.
30
<PAGE> 35
SECTION XII.
TERMINATION AND ABANDONMENT
12.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
at any time and the Acquisition of the Company Shares as herein contemplated
abandoned at any time prior to the Closing without liability of any party to any
other party, except for breaches of warrants, representations, and covenants set
forth in this Agreement which are within the control of the defaulting or
non-performing party (the effectiveness of the SB Registration Statement and the
S4 Registration Statement shall be deemed as not being in the control of Buyer),
under the following circumstances:
(a) The mutual written agreement of Buyer and the Shareholders;
(b) By Buyer if the Closing has not occurred before March 30,
1997 because all conditions to the obligations of Buyer have not been satisfied
or waived or because the Shareholders have not made all required deliveries
pursuant to Section VI;
(c) By the Shareholders if the Closing has not occurred before
March 30, 1997 because all conditions to the obligations of the Shareholders
have not been satisfied or waived or because Buyer has not made all required
deliveries pursuant to Section VII; and
(d) Any party may terminate by written notice to the other if
any action or proceeding shall have been instituted before any court or other
governmental body or, to the knowledge of the party giving such notice, shall
have been threatened formally in writing by any public authority with requisite
jurisdiction, to restrain or prohibit the transactions contemplated by this
Agreement or to subject one or more of the parties or their directors or their
officers to liability on the grounds that it or they have breached any law or
regulation or otherwise acted improperly in connection with such proposed
transactions ("Governmental Objection"), and such action or proceeding shall not
have been dismissed or such written threat shall not have been withdrawn or
rescinded before March 30, 1997.
12.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is
terminated and abandoned as provided in this Section XII, each party will, at
the request of the other, return all documents, work papers, and other material
of the requesting party, including all copies thereof, relating to the
transactions contemplated by this Agreement, whether so obtained before or after
the execution of this Agreement, to the party furnishing the same, provided,
however, that Section IX shall not apply to any document, work paper, material,
or any other information which is published in any publication for public
distribution or filed as public information, including in the SB and S4
Registration Statements, with any governmental authority or is otherwise in the
public domain.
31
<PAGE> 36
SECTION XIII.
MISCELLANEOUS PROVISIONS
13.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES. The respective
representations, warranties and covenants of the Shareholders and Buyer
contained herein or in any certificates or other documents delivered prior to or
on the Closing shall not be deemed waived or otherwise affected by any
investigations made by any party hereto. Each and every representation, warranty
and covenant of the Shareholders and Buyer and the indemnification provisions
set forth in Section X hereof, shall survive the Closing and remain operative in
full force and effect as provided in Section X. The updating of the Disclosure
Schedule on or before the Closing is for information purposes only and shall not
modify in any way the warranties and representations set forth herein and in the
Disclosure Schedule delivered at the time of the execution of this Agreement.
13.2 PAYMENT OF CERTAIN INDEBTEDNESS. Within thirty (30) days of the
Closing, Buyer (or its successor) shall discharge in full certain indebtedness
of the Company theretofore guaranteed by the Shareholders or any Shareholder and
obtain a release of all such Shareholder's guarantees of such indebtedness
provided that such indebtedness can be discharged without a penalty or other
similar special charge. Buyer (or its successor) shall use reasonable commercial
efforts to obtain the release of the Shareholders from any other guarantees of
obligations of the Company as disclosed in the Disclosure Schedule.
13.3 HEADINGS. The paragraph captions and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
part of this Agreement or to affect its meaning or interpretation.
13.4 FURTHER ASSURANCES. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement, including requests
made after the Closing.
13.5 FORCE MAJEURE. A party hereto shall not be liable for failure
or delay in performing any of the party's obligations hereunder if such failure
or delay is occasioned by compliance with any governmental regulation, request
or order, or by circumstances beyond the reasonable control of the party so
failing or delaying, including, but not limited to, Acts of God, war,
insurrection, fire, flood, accident, labor strikes, or inability to obtain
materials, supplies, power or equipment necessary to enable such party to
perform its obligations hereunder. Each party shall (a) promptly notify the
other in writing of any such event of force majeure, the expected duration
thereof and its anticipated effect on the ability of such party to perform its
obligations hereunder, and (b) make reasonable efforts to remedy any such event
of force majeure.
32
<PAGE> 37
13.6 CUMULATIVE REMEDIES. Except as herein provided and subject to
any applicable limitation herein provided, the parties shall have all remedies
for breaches of this Agreement available to them provided by law or equity.
13.7 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties hereto regarding the acquisition of the Company Shares and
related matters. No represen tations or agreements, whether written or oral,
other than those contained or referenced herein, shall be binding on the
parties. This Agreement may not be amended or modified except in a writing
signed by all of the parties hereto.
13.8 SPECIFIC PERFORMANCE. This Agreement may be specifically
enforceable in accordance with applicable principles of law and equity. The
parties hereby acknowledge that it is impossible to measure the monetary damages
which would result from a party's failure to perform any obligation imposed upon
such party by this Agreement. Therefore, if any party hereto should institute an
action or proceeding to enforce the provisions hereof, any other party against
whom such action or proceeding is thereby brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such person shall not
urge in any action or proceeding the claim or defense that an adequate remedy at
law exists.
13.9 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be given in writing to the last authorized
address/telecopier number of the intended recipient, provided in writing to the
party giving such notice and shall be deemed to have been duly given on (i) the
date of receipt if personally delivered or delivered by overnight courier, (ii)
five (5) business days after posting if transmitted by postage prepaid
registered or certified mail (return receipt requested), or (iii) the date of
transmission if transmitted by telecopy (with a copy sent postage prepaid
registered or certified mail return receipt requested) to the party to whom such
notice or communication is being given. Any party hereto may change such party's
address or the person to whom notice is given for purposes hereof by written
notice to the other parties. Such notices are effective only upon receipt.
13.10 NON-WAIVER OF DEFAULT. Any failure by any party hereto at any
time or from time to time to enforce and/or require strict compliance with any
term or condition of this Agreement shall not constitute a waiver of such term
or condition. All waivers hereunder must be in writing executed by the party
waiving the right. The consummation of the transactions with knowledge of a
breach of a warranty, representation or covenant shall not constitute a waiver
of any such warranty, representation or covenant.
13.11 PARTIAL INVALIDITY. If any term or provision of this Agreement,
not essential to the basic purposes of the transactions contemplated herein,
shall be held to be illegal, invalid or unenforceable by a court or arbitrator
of competent jurisdiction, it is the intention of the parties hereto that (i)
the remaining terms hereof shall constitute the agreement with respect to the
subject matter hereof, (ii) all such remaining terms shall remain in full force
and effect and shall be deemed to constitute the entirety of this Agreement as
though such illegal, invalid or
33
<PAGE> 38
unenforceable provision had never been part hereof, and (iii) such illegal,
invalid, or unenforceable provision shall be construed as closely as possible to
the parties' original intent in order to render such provision legal, valid, or
enforceable, as applicable.
13.12 DUPLICATE ORIGINALS. For the convenience of the parties hereto,
any number of counterparts hereof may be executed, and such counterparts, taken
together, shall be deemed one and the same original.
13.13 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Shareholders and Buyer and
their successors and assigns. Buyer may on or prior to the Closing designate a
subsidiary as the party to acquire the Company Shares; provided, however, Buyer
shall remain liable to the Shareholders for any breach of Buyers warranties,
representations and covenants contained herein.
13.14 FEES AND EXPENSES. Each party hereto shall pay all expenses the
party has incurred, including attorneys' and accountants' fees, in connection
with this Agreement and the transactions contemplated hereby, except that any
expenses of the Shareholders paid by the Company shall be deducted from the net
worth calculation as of the closing without reduction or offset, except as
otherwise agreed in writing by the parties.
13.15 MILLARD-WAYNE NAME. The parties recognize that the name of the
Company is named after one of the Shareholders, M. Wayne George. Should the
Company (or any successor) cease using the name "Millard-Wayne" or any
combination or variation thereof as its corporate name, the Buyer agrees that it
will license the use by the Shareholder of a corporate name using Millard-Wayne
or any combination or variation thereof for a company which does not conduct any
business in the health care industry in the United States.
13.16 INSURANCE POLICIES. The Company holds life insurance policies
on the life of M. Wayne George, a Shareholder, as set forth in Section 13.16 of
the Disclosure Schedule. Prior to Closing, M. Wayne George may purchase those
policies and assume all of the current loans, including accrued interest, which
are borrowed against such policies as set forth in Section 13.16 of the
Disclosure Schedule. M. Wayne George shall present evidence of the discharge of
the Company from any liability for such loans.
13.17 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect and performance.
13.18 COUNTERPARTS AND EXHIBITS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The Disclosure
Schedule is made a part of this Agreement.
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<PAGE> 39
13.19 PUBLICITY. The Shareholders shall make no public announcement
of the entering into of this Agreement or the terms and conditions hereof
without the prior written consent of Buyer thereto. The Shareholders acknowledge
that Buyer or InfoCure will be required or may deem it desirable to make and, as
part of the proposed public offerings, will make public disclosure of the
execution of this Agreement and the terms and conditions hereof, including in
the SB and S4 Registration Statements. With respect to any disclosure prior to
the Closing, Buyer shall provide the Shareholders with a copy of any such
disclosure promptly after it is made and, to the extent practical, will review
any proposed press release with Company before it is released. After the
Closing, the parties shall have no obligations to the other under this paragraph
13.16.
SHAREHOLDERS:
-----------------------------------
Name: M. Wayne George
ADDRESS FOR NOTICE:
Address:
---------------------------
Telecopy No.:
----------------------
Attention:
------------------------
AMERICAN MEDCARE CORPORATION
By:
-------------------------------
James Price, Executive
Vice President
ADDRESS FOR NOTICE:
Address: 2970 Clairmont Road,
Suite 950
Atlanta, Georgia 30329
Telecopy No.: 404-636-7525
Attention: Frederick L. Fine,
Chief Executive Officer
35
<PAGE> 1
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION
AND THE SHAREHOLDERS OF
KCOMP MANAGEMENT SYSTEMS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION I.
DEFINITIONS 1
1.1 Certain Definitions......................................1
SECTION II.
SALE AND TRANSFER OF STOCK; CLOSING 3
2.1 Stock....................................................3
2.2 Purchase Price...........................................3
2.3 Closing..................................................3
2.4 Delivery of Purchase Price...............................3
2.5 Escrow...................................................4
2.6 Net Worth Shortfall......................................4
2.7 Additional Consideration.................................4
2.8 Outstanding Notes/Election...............................5
SECTION III.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS 6
3.1 Corporate and Shareholder................................6
3.2 Financial Statements.....................................7
3.3 Customers................................................8
3.4 Absence of Certain Finance and Business Changes..........9
3.5 Guaranties/Liens.........................................9
3.6 No Undisclosed Liabilities...............................9
3.7 Accounts Receivable......................................9
3.8 Ownership of Intellectual Property......................10
3.9 Property and Equipment..................................11
3.10 License Agreements......................................12
3.11 Consulting and Development Agreements...................13
3.12 Maintenance/Commitments.................................13
3.13 All Intangible Assets Used in the Business..............13
3.14 Employees/Consultants/Directors.........................13
3.15 Assumed Agreements......................................14
3.16 Litigation and Adverse Events...........................15
3.17 Compliance with Applicable Law..........................15
3.18 Taxes and Tax Returns...................................15
3.19 Consents................................................15
3.20 Brokers and Finders.....................................15
3.21 Related Transactions....................................15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.22 No Untrue Statements...................................16
3.23 Additions..............................................16
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF BUYER 16
4.1 Organization and Standing of Buyer.....................16
4.2 Authorization..........................................16
4.3 No Consents............................................16
4.4 Brokers and Finders....................................17
4.5 No Untrue Statements...................................17
SECTION V.
CONDITIONS TO THE OBLIGATIONS OF BUYER 17
5.1 Representations and Warranties; Performance............17
5.2 Third Party Consents...................................17
5.3 Opinion of Counsel to the Shareholders.................17
5.4 Update Disclosure Schedule.............................17
5.5 Public Offering........................................17
5.6 Employment Agreement...................................18
5.7 Escrow Agreement.......................................18
5.8 Guaranties.............................................18
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS 18
6.1 Representations and Warranties; Performance............18
6.2 Opinion of Counsel to Buyer............................18
6.3 Authorization..........................................18
6.4 Public Offering........................................18
6.5 Employment Agreement...................................19
6.6 Escrow Agreement.......................................19
SECTION VII.
OTHER COVENANTS 19
7.1 Conduct of Business....................................19
7.2 Public Offering Status.................................20
7.3 Option to Receive Stock................................20
7.4 Registration Rights....................................20
SECTION VIII.
CONFIDENTIALITY AND SECURITY 21
8.1 Confidentiality........................................21
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION IX.
INDEMNIFICATION 24
9.1 Indemnification by the Shareholders....................24
9.2 Indemnification by Buyer...............................25
9.3 Reimbursement..........................................26
9.4 Claims.................................................27
9.5 Resolution of Disputes.................................27
SECTION X.
COVENANT NOT TO COMPETE 28
SECTION XI.
TERMINATION AND ABANDONMENT 29
11.1 Termination and Abandonment............................29
11.2 Rights and Obligations on Termination..................29
SECTION XII.
MISCELLANEOUS PROVISIONS 30
12.1 Investigations; Survival of Warranties.................30
12.2 Headings...............................................30
12.3 Further Assurances.....................................30
12.4 Force Majeure..........................................30
12.5 Cumulative Remedies....................................30
12.6 Entire Agreement.......................................30
12.7 Specific Performance...................................31
12.8 Notices................................................31
12.9 Non-Waiver of Default..................................31
12.10 Partial Invalidity.....................................31
12.11 Assignment.............................................31
12.12 Fees and Expenses......................................32
12.13 Governing Law..........................................32
12.14 Counterparts and Exhibits..............................32
12.15 Publicity..............................................32
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION
AND THE SHAREHOLDERS OF
KCOMP MANAGEMENT SYSTEMS, INC.
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the _____ day
of January, 1997 by and among INFOCURE CORPORATION, a Delaware corporation
("Buyer") and the undersigned shareholders and warrant holders (collectively
"Shareholders") of KCOMP MANAGEMENT SYSTEMS, INC. ("Company").
WHEREAS, the Shareholders desire to sell, and Buyer desires to
purchase, all of the issued and outstanding shares ("Company Shares") of the
capital stock of Company upon the terms and conditions set forth hereafter;
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS
1.1 CERTAIN DEFINITIONS
(a) "Affiliate" means any person, corporation, or other
business entity (i) which, whether directly or indirectly through one or more
intermediaries, is controlled by the Shareholders (individually or as a group)
or (ii) in which Shareholders (individually or as a group) own, directly or
indirectly through one or more intermediaries, 5% or more of the voting power
for the election of the governing board.
(b) "Business" means the development, marketing and support of
the Software, including upgrades, as currently conducted by Company and the
sales and marketing of Hardware, including upgrades (as of the Closing).
(c) "Copyright" means all copyright ownership of the Software
and Documentation.
(d) "Development Software" means all software, object, source,
and executable code licensed by Company as licensee which is used in the conduct
of the development, maintenance, and support of the Software. A list of the
Development Software is set forth in Section 1.1(d) of the Disclosure Schedule.
(e) "Distributor Software" means all software, object, source,
and executable code, sublicensed, sold, leased or distributed by Company as
licensor or lessor which is not owned
<PAGE> 6
by Company. The term excludes Development Software. A list of the Distributor
Software is set forth in Section 1.1(e) of the Disclosure Schedule.
(f) "Distributorship Agreements" means all appointments of
Company to sell or license Hardware or Distributor Software. A list of such
appointments is set forth in Section 1.1(f) of the Disclosure Schedule.
(g) "Documentation" means all technical manuals and notes, user
manuals, and all other documents developed or in development relating to or used
in the development, maintenance, support, enhancement and use of the Software,
including pending improvements, fixes and enhancements regardless of the media
upon which the Documentation exists, which is owned by Company.
(h) "GAAP" means generally accepted United States accounting
principles, consistently applied on an accrual basis.
(i) "Hardware" means all computers, components, peripherals,
and other equipment to be offered for sale by Company as of the Closing in the
course of its business. Section 1.1(h) of the Disclosure Schedule lists all
Hardware currently being sold by Company.
(j) "Intellectual Property" means all patents, patent pending,
copyrights, trade secrets, techniques, know-how, and other intangible assets
which are legally protectable or recognized as forms of property, whether or not
reduced to practice or a writing.
(k) "License Agreements" means those agreements entered into by
Company (or its predecessors) as licensor for the licensing of any Software,
Distributor Software and/or Intellectual Property of Company.
(l) "Management of Company" means the current chief executive
officer, the chief operating officer, and the chief financial officer of
Company.
(m) "Public Offering" means the first public offering of common
stock of Buyer the net proceeds of which paid to the issuer, after deduction of
the underwriters discount, shall exceed $12 million and shall occur prior to
March 30, 1997.
(n) "Shareholder" shall include holders of warrants and options
to purchase shares of capital stock of Company.
(o) "Software" means all software, object, source and
executable code, licensed, sold or leased by Company as licensor or lessor, and
all fixes, updates, upgrades and enhancements heretofore developed or being
developed as well as other software developed or being developed for marketing
to dentists, dental practices, physicians, clinics, hospitals and
2
<PAGE> 7
medical groups which is owned by Company. A list of the Software is set forth in
Section 1.1(o) of the Disclosure Schedule.
(p) "Stock" means all of the capital stock of Company as set
forth in Section 1.1(p) of the Disclosure Schedule.
(q) "Trademarks" mean the trademarks listed in Section 1.1(q)
of the Disclosure Schedule.
SECTION II.
SALE AND TRANSFER OF STOCK; CLOSING
2.1 STOCK. Subject to the terms and conditions of this Agreement,
at the Closing (as hereinafter defined), Shareholders will sell, assign and
transfer the Company Shares to Buyer, and Buyer will purchase the Company Shares
from the Shareholders.
2.2 PURCHASE PRICE. The aggregate purchase price ("Purchase Price")
for the Company Shares will be One Million Six Hundred Thousand Dollars
($1,600,000) subject to adjustment pursuant to paragraph 2.6, which aggregate
amount shall be allocated among the Shareholders on a pro rata basis.
2.3 CLOSING. The closing ("Closing") of the sale of the Company
Shares as contemplated by this Agreement shall occur at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia at 8:00 a.m. local time
on the day on which the Public Offering commences, or such other date or place
as the parties hereafter mutually agree in writing, subject to the conditions
set forth hereafter. The Public Offering of the Company Shares shall be deemed
to have commenced at the time which is the latest of the time at which (i) the
Buyer's Registration Statement on Form SB-2 No. 333-18923 ("SB Registration
Statement") is filed with the Securities and Exchange Commission ("Commission")
becomes effective; or (ii) the underwriters have agreed to purchase the shares
of Buyer pursuant to the Public Offering or (iii) the Registration Statement on
Form S-4 ("S4 Registration Statement") registering the shares of common stock of
Buyer to be issued pursuant to certain other acquisitions and mergers becomes
effective. The sale of Company Shares shall be effective on the date of Closing,
notwithstanding subsequent delivery of the Purchase Price as set forth in
Paragraph 2.4 below.
2.4 DELIVERY OF PURCHASE PRICE. Delivery by Buyer of the aggregate
amount of $1,520,000 (subject to any reduction pursuant to paragraph 2.6) by
certified or official bank check or checks payable in New York Clearing House
(next day) funds or wire transfers or other means of immediately available funds
to the respective accounts of the Shareholders located in the United States as
designated by the Shareholders, shall occur one business day after Buyer
receives the proceeds of the Public Offering (such time and date of delivery and
payment is called the "Purchase Price Delivery Date").
3
<PAGE> 8
2.5 ESCROW. On or before the Closing, the parties shall enter into
an escrow agreement ("Escrow Agreement") establishing an escrow fund ("Escrow
Fund") in the amount of $80,000.
2.6 NET WORTH SHORTFALL.
(a) The Purchase Price of $1,600,000 is based on the fact that
the sum of the assets less all liabilities ("Net Worth") of Company determined
in accordance with GAAP (except as otherwise provided herein), on the Closing
will not be less than minus $242,703. In the event it is less than minus
$242,703, the Purchase Price will be reduced by an amount equal to the
difference between minus $242,703 and the Net Worth as of the Closing determined
as set forth in subparagraph (b).
(b) Buyer shall cause an audited balance sheet to be prepared
as of the Closing in order to determine the Net Worth of Company, at the expense
of Buyer by the independent auditors of Buyer. The audit shall be completed
within ninety (90) days after the Closing. The Shareholders' advisors may
observe the audit and procedures and will have access to all work papers,
procedures and personnel of Buyer's independent auditors. As soon as such
audited financial statement is available to Buyer, Buyer shall deliver to the
Shareholders the financial statement as certified by the independent auditors.
The Shareholders shall have thirty (30) days to review and object to the balance
sheet. Any disagreements as to the amounts of any adjustment to be made to the
balance sheet, if not mutually resolved, shall be resolved as provided in
paragraph 9.5, except that the arbitrator(s) shall be person(s) experienced in
financial and accounting matters. Upon the final resolution of the Net Worth as
of the Closing, a final adjustment shall be made to the consideration paid at
the Closing as provided in paragraph 2.2. All adjustments shall be made on a pro
rata basis among the Shareholders.
(c) The parties shall use their best efforts to estimate the
amount of the adjustment, if any, on or prior to the Closing and the Purchase
Price as of the Closing will reflect such tentative adjustment which will be
subject to further adjustment pursuant to the provisions of subparagraphs (a)
and (b). All payments of the balance of the Purchase Price by Buyer or a return
of a portion of the Purchase Price by the Shareholders shall be made within ten
(10) days of the final resolution of the determination of the Net Worth pursuant
to subparagraph (b).
2.7 ADDITIONAL CONSIDERATION.
(a) If the income from operations ("Operating Income") of the
Company (which is defined as the Company's earnings from operations exclusive of
interest, taxes, depreciation, extraordinary expenses, and overhead burden from
Buyer and its Affiliates) for the twelve-month period ending December 31, 1997,
determined in accordance with GAAP, exceeds $400,000, the Shareholders will
receive, on a pro rata basis, as additional consideration ("Additional
Consideration") for the Company Shares an amount equal to the product of (i) 5.5
times (ii) the amount of the income from operations of the Company in excess
("Excess") of
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$400,000; provided, however, in no event shall the Excess exceed $27,273 for
calculating the Additional Consideration.
(b) Buyer shall cause the Company to prepare a statement of
operations for the twelve-month period ending December 31, 1997 within 120 days
thereafter. A copy of the statement of operations shall be promptly provided to
the Shareholders. The Shareholders shall have thirty (30) days to review and
object to the income from operations contained in the statement of operations.
The Shareholders and their advisors shall be given access to all work papers and
procedures and personnel used by the Company's accountants. Any disagreements
shall be resolved by the Company's independent accountants. Within ten (10) days
of the final resolution of the adjustment, payment shall be made by Buyer to the
Shareholders pro rata, subject to the right of set off for any amounts payable
to Buyer or Company pursuant to Section IX hereof.
2.8 OUTSTANDING NOTES/ELECTION.
(a) At the time of the Closing, the principal of and accrued
interest on any notes payable to directors, officers and Shareholders shall not
exceed in the aggregate $250,000. Such obligations shall be replaced by delivery
by Company at the Closing of promissory notes ("Notes") to the Shareholders, pro
rata, in the aggregate principal amount not to exceed $250,000. Any amounts in
excess of $250,000 shall constitute a capital contribution.
(b) Each holder of Notes may elect to purchase shares of common
stock of the Buyer ("Purchased Shares") equal to the quotient of (i) the
principal amount of the holder's Notes divided by (ii) 120% of the price to the
public of a share of common stock of Buyer included in the SB Registration
Statement. The election is to be made in writing not more than thirty (30) days
and not less than ten (10) days prior to the date on which the payment of the
last installments of such Notes are otherwise due. Payment for the Purchased
Shares is to be made in cash and/or surrender of Notes at its principal amount.
The holders of the Notes are third party beneficiaries under this Agreement and
can independently enforce this paragraph 2.8.
(c) The purchase of the Purchased Shares shall occur upon the
maturity date of the Notes. The Purchased Shares will not be issued pursuant to
any registration statement. The Purchased Shares will be "Restricted Securities"
within the meaning of Rule 144 promulgated by the Commission. The issuance of
the Purchased Shares is subject to compliance with the applicable federal and
state securities laws. The acquirors of the Purchased Shares will be required by
the Buyer to make such representatives and warranties customarily made to
issuers as a condition to the private placement of securities. Buyer hereby
agrees that the Purchased Shares shall, upon their purchase, be duly authorized,
validly issued, fully paid and non-assessable.
(d) The Notes shall have a final maturity date of July 1, 1999.
The interest shall be at the annual rate of 7%. Principal and interest shall be
paid in five (5) equal quarterly installments commencing July 1, 1998. Buyer
shall have right to offset any amounts payable to
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Buyer or Company pursuant to this Agreement, including Section IX, against
amounts payable pursuant to the Notes.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to Buyer
on the date hereof as follows:
3.1 CORPORATE AND SHAREHOLDER.
(a) Company is a corporation duly organized, validly existing
and in good standing under the laws of California and is qualified to conduct
business in all other jurisdictions in which the character of its assets and the
nature of its business requires it to be qualified to do business and in which
the failure to be so qualified could have a materially adverse effect on its
business, operations, prospects, assets or financial condition.
(b) A true, correct and complete copy of the Articles of
Incorporation and bylaws of Company are as set forth in Section 3.1(b) of the
Disclosure Schedule. There are 30,000 shares of common stock of Company issued
and outstanding and warrants to purchase 327,240 shares of common stock of
Company which warrants will be exercised prior to the Closing in which event
there will be 357,240 shares of common stock of Company outstanding upon the
Closing. There are no other outstanding rights to acquire any shares of capital
stock of Company.
(c) Company holds all licenses, permits, authorizations and
other approvals from all governmental authorities necessary for the conduct of
the Business of Company as currently conducted, and in which failure to hold
such items could have a material adverse effect on the business, operations,
prospects, assets or financial condition of Company. A complete list of such
licenses, permits, authorizations and approvals are set forth in Section 3.1(c)
of the Disclosure Schedule.
(d) Company has no subsidiaries.
(e) The Company Shares owned by each Shareholder and the
holders of all warrants, options, convertible securities and other rights to
acquire stock or other securities of Company are set forth in Section 3.1(e) of
the Disclosure Schedule.
(f) Each Shareholder has the right, power and capacity to
execute, deliver and perform this Agreement and all other agreements, documents
and certificates contemplated or required by this Agreement, to which such
Shareholder is a party hereby (collectively, "Security Holders' Documents") and
to consummate the transactions contemplated hereby and thereby.
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(g) This Agreement and each of Security Holders' Documents to
which such Shareholder is or will be a party constitute, or will constitute,
upon execution and delivery by the Shareholder, the valid and binding
obligations of such Shareholder, enforceable against such Shareholder in
accordance with their respective terms, except to the extent the enforceability
may be limited by bankruptcy, insolvency, moratoriums or other laws affecting
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in law or in equity.
(h) The execution, delivery and performance by each
Shareholder of this Agreement and such of Security Holders' Documents to which
such Shareholder is a party and the consummation of the transactions
contemplated hereby and thereby will not, with or without the giving of notice
or the lapse of time, or both, (i) violate any provision of law, statute, rule
or regulation to which such Shareholder is subject, (ii) violate any order,
judgment or decree applicable to such Shareholder or Company, or (iii) conflict
with, or result in a breach or default under, any term or condition of any court
order, trust document, will, shareholder agreement, articles of incorporation,
bylaws, or any other agreement, document or instrument to which such Shareholder
or Company is a party or by which such Shareholder or Company is bound.
(i) Each Shareholder has sole and exclusive record title to
and ownership of all of the Company Shares registered in such Shareholder's
name, as set forth in Section 3.1(e) of the Disclosure Schedule, free and clear
of any liens, restrictions (except federal and state securities law restrictions
of general applicability), claims, charges, options, rights of first refusal or
encumbrances, with no defects of title whatsoever.
(j) Each Shareholder (i) has had full and complete access to
information concerning Company, (ii) has had the opportunity to consult with
legal and financial advisers prior to executing this Agreement and the Security
Holders' Documents, (iii) has reviewed this Agreement and accompanying
documents; (iv) has sufficient knowledge and experience to evaluate the merits
of the transactions contemplated by this Agreement and the Security Holders'
Documents; and (v) has been given the opportunity to examine all documents
related to the transactions contemplated by this Agreement and to ask questions
of Company.
3.2 FINANCIAL STATEMENTS. The balance sheet as of March 31, 1996
and the statements of operations of Company for the fiscal year then ended
audited by BDO Seidman LLP and the unaudited balance sheet as of September 30,
1996 and the unaudited statement of operations for the six-month period ended
September 30, 1996 have been prepared in accordance with GAAP (except that the
unaudited financial statements do not contain normal year-end adjustments and
notes as required by GAAP) and presents fairly the results of the operations of
Company during those periods. Said financial statements are sometimes
collectively referred to as "Financial Statements." A true, correct and complete
copy of the Financial Statements are set forth in Section 3.2 of the Disclosure
Schedule. Prior to the Closing, the outstanding warrants will have been
exercised and all directors, shareholders and affiliates loans will have been
canceled
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and the amounts thereof contributed to the capital of Company to the extent they
exceed $250,000 (principal and interest).
3.3 CUSTOMERS
(a) Company or its predecessor has granted over 725 licenses
to use the Software to end users. Section 3.3(a)(i) of the Disclosure Schedule
contains the list of the licensed users of the Software who are currently
provided maintenance under existing customer service agreements, each of which
can be terminated upon 90 days prior written notice by either the customer or
Company. Section 3.3(a)(i) of the Disclosure Schedule shall be updated as of the
Closing. Section 3.3(a)(ii) of the Disclosure Schedule contains a list of the
licensed users of the Software who have not entered into such service agreements
and who were charged for maintenance and support during the period December 1,
1995 through November 30, 1996 on a time and materials basis. Section
3.3(a)(iii) of the Disclosure Schedule contains a list of all customers of
Company whose aggregate fees and other charges during the twelve (12) month
period ending November 30, 1996 exceeded $50,000.
(b) Except as set forth in Section 3.3(b) of the Disclosure
Schedule, Company has not received any notice or other communication (written
or, to the knowledge of the Management of Company, oral) from any customer
listed on Section 3.3(a)(i), (ii) or (iii) of the Disclosure Schedule
terminating or reducing in any material respect or setting forth an intention to
terminate or reduce in any material respect in the future the amount of business
conducted with Company. (The termination or reduction in any material respect or
notice of any intention to terminate or reduce in any material respect during
the next succeeding 12 months of the amount of business conducted with Company
by any customer listed in Section 3.3(a)(iii) of the Disclosure Schedule shall
constitute a material adverse event and a breach of this warranty and
representation.) To the knowledge of the Management of Company, the consummation
of the transactions contemplated herein will not have a material adverse effect
on the business relationships with any of the customers listed on Section
3.3(a)(iii) of the Disclosure Schedule.
(c) Section 3.3(c) of the Disclosure Schedule sets forth a
list of licensees of the Software for which Company has any warranty or other
unfulfilled obligation under the applicable License Agreement and a description
of the unfulfilled obligation and the agreement under which it arises. Company
is not in material breach of its obligations thereunder.
(d) Section 3.3(d) of the Disclosure Schedule sets forth the
1996 revenues, commissions and gross profits from the sale of Hardware and
upgrades by all Shareholders and all entities affiliated with any Shareholder to
customers of the Company.
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3.4 ABSENCE OF CERTAIN FINANCE AND BUSINESS CHANGES.
(a) Since March 31, 1996, there has not been any event or
events which will have a material adverse effect taken as a whole on the
financial condition of Company (including software and service revenues) except
as set forth in Section 3.4(a) of the Disclosure Schedule or the declaration or
payment of any dividend on the capital stock or the redemption of any shares of
capital stock of Company.
(b) Since March 31, 1996, no material loss, damage or
destruction of the assets has occurred, whether or not covered by insurance,
which may have a material adverse affect on the financial condition of Company
or on the Business.
(c) Since March 31, 1996, the Business has been conducted
substantially in the manner heretofore conducted consistent with past practices,
including with respect to the fees charged and the terms and conditions of the
License Agreements and Maintenance Agreements entered into, and no waiver or
release of any right was granted by Company except (i) of an immaterial value;
(ii) in the ordinary course of business consistent with past practices, and no
assets were sold except for the licensing of the Software in the ordinary course
of the Business; (iii) the Business has been expanded to include the
development, licensing and support of the Software and, upon the Closing, the
marketing and sale of Hardware, including upgrades; and (iv) all obligations and
liabilities between the Company and any Affiliate of a Shareholder have been
paid or canceled.
3.5 GUARANTIES/LIENS. Company is not guaranteeing the obligations
of any person and has no commitment to guarantee any of the obligations of any
person and is not currently granting and Company has no commitment to grant to
anyone an interest in or liens on any of its assets to secure the obligations of
Company or another except as set forth in Section 3.5 of the Disclosure
Schedule.
3.6 NO UNDISCLOSED LIABILITIES. Company has no liabilities,
absolute or contingent, known or unknown, except those recorded on the Financial
Statements as of March 31, 1996 and those incurred in the ordinary course of
business of Company since March 31, 1996, all of which are recorded on the
financial books and records of Company, are consistent with past practices and
are not in the aggregate materially adverse to the financial condition or
prospects of Company.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Company,
billed and unbilled, as of the Closing will be valid and enforceable
obligations of third parties and will be collectible in full, without offset or
fulfillment of any condition, within three (3) months of their due date without
the engagement of any collection agency or attorney or the commencement of any
action, except to the extent of any reserves for bad debts and doubtful
accounts established on its financial books and records as of the Closing,
which reserves have been established in a manner which is consistent with past
practices.
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3.8 OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) Software. Except as set forth in Section 3.8(a)(i) of the
Disclosure Schedule, (i) Company is the sole and exclusive owner throughout the
United States of the Software, including the software and software code
developed or being developed by or on behalf of or at the request of Company
(regardless of the state of the development of the software and whether it has
been released); and (ii) the Software constitutes all the software used and/or
licensed in the conduct of the Business of Company, except for the Distributor
Software and the Development Software. Company has not granted licenses to
others to use or to sublicense others to use the Software outside of the United
States and to the knowledge of the Management of Company, the Software or
derivatives thereof are not being used or distributed outside of the United
States.
(b) Other Intellectual Property Rights. Except as set forth in
Section 3.8(b) of the Disclosure Schedule, Company is the sole and exclusive
owner throughout the United States of (i) all Copyrights, whether or not
registered, including but not limited to the moral rights; (ii) all other
Intellectual Property rights, including, without limitation, trade secrets,
know-how, inventions (patented and unpatented), and discoveries, embodied in or
used in the development of the Software, or any part thereof, and the screen
displays generated by the Software; and (iii) all Documentation; in each case
except the Development Software used in the development of the Software and the
Distributor Software. The Copyrights, Trademarks, Software, Documentation, and
other Intellectual Property of Company are collectively hereinafter referred to
as "Company Intellectual Property". Section 3.8(b)(ii) of the Disclosure
Schedule contains a correct and complete list of all registered Copyrights, the
date of registration and jurisdiction of such registrations. Company has not
filed any patent applications and does not hold any patents.
(c) Trademarks. Company is the sole and exclusive owner of the
Trademarks which include all identifying names and marks which are associated
with the Software or which are otherwise used in the Business conducted by
Company. A complete and correct list of all such Trademarks is set forth in
Section 1.1(q) of the Disclosure Schedule, none of which are registered or have
any applications for registrations pending.
(d) Software Developers. Section 3.8(d) of the Disclosure
Schedule sets forth the list of all persons and entities (other than full time
employees of Company) that have assisted at any time, directly or indirectly, in
the design, development, correction, improvement, modification, and/or
enhancement of the Software, Copyrights and/or Trademarks or from whom such
property has been acquired. Section 3.8(d) of the Disclosure Schedule also
identifies the written agreements and describes all oral agreements pursuant to
which each such person or entity assigned or licensed its rights in such
intellectual property to Company or acknowledged Company's ownership rights
therein. Correct and complete copies of each such agreement or assignment or
license has been furnished to Buyer. The employees and former employees of
Company do not have any right, title or interest in the Software, Copyrights,
Trademarks, or other Company Intellectual Property. Section 3.8(d) of the
Disclosure Schedule sets forth the
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current form of agreements with its employees regarding ownership of the Company
Intellectual Property.
(e) Rights of Licensees. The ownership rights of Company in
Company Intellectual Property are subject only to the non-exclusive licenses
granted (i) to end users and (ii) to distributors by Company as described in
Paragraph 3.10 of this Agreement.
(f) No Infringements. The Company Intellectual Property does
not, and did not at any time, violate or infringe any copyright, patent, trade
secrets, know-how, trademarks or other intellectual property rights of any third
party, is not in the public domain, has not been licensed by Company and/or
permitted to be duplicated by Company except as disclosed in this Agreement or
provided by law and, to the knowledge of the Management of Company, the Company
Intellectual Property (i) has not been duplicated except as permitted under the
applicable licenses and law, (ii) has not been reverse compiled or engineered
and (iii) there are no claims or actions pending or threatened or which have
been brought asserting such violation or infringement or that any Company
Intellectual Property is in the public domain.
(g) Distributor Software and Development Software. Section
3.8(g)of the Disclosure Schedule sets forth the complete and correct list of
license agreements pursuant to which Distributor Software and Development
Software is licensed to Company. Company does not license to others Distributor
Software or Development Software.
(h) Confidentiality. Company has taken reasonable commercial
efforts and has required its employees, consultants, and licensees to take
reasonable commercial efforts to maintain the confidentiality of the Company
Intellectual Property.
(i) Source Code Escrow Agreements. Section 3.8(i) of the
Disclosure Schedule contains a list of all source code escrow agreements entered
into by Company and all agreements licensing the source code or agreeing to
license the source code of the Software. Correct and complete copies of such
agreements have been heretofore provided to Buyer.
(j) Year 2000. Except as set forth in Sections 3.8(j) of the
Disclosure Schedule, the design and performance capabilities of the Software
ensures year 2000 capabilities including calculations which accommodate same
century and multi-century formulas and date values.
3.9 PROPERTY AND EQUIPMENT.
(a) Section 3.9 of the Disclosure Schedule lists the fixed
assets, including equipment, used in the conduct of the Business as conducted
(during the prior twelve months) which are owned by Company and those which are
leased by Company ("Leased Property"). Section 3.9 of the Disclosure Schedule
contains a correct and complete copy of the agreements
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for the lease of fixed assets not owned by Company. The fixed assets and the
Leased Property are generally in good operating condition and repair, reasonable
wear and tear excepted.
(b) Company is not in default in the payments due under the
leases of the Leased Property or any other obligation which would give the
lessor the right to terminate the lease for such Leased Property.
(c) Since March 31, 1996, Company has not sold or otherwise
disposed of any fixed assets, other than in the ordinary course of business.
3.10 LICENSE AGREEMENTS.
(a) Company has not sold to others or leased or licensed
others to use the Company Intellectual Property, or any part thereof, except the
granting of written non-exclusive rights (i) to end users to use released
versions of the Software and Documentation in the ordinary course of the
Business pursuant to end user License Agreements; and (ii) to distributors,
dealers, OEM's and other remarketers (collectively "Distributors") to use and
sublicense the Software and Documentation. Section 3.10(a) of the Disclosure
Schedule contains a correct and complete list of the Distributors. A correct and
complete copy of all written agreements with Distributors currently outstanding
has been previously furnished to Buyer. To the extent any agreement with a
Distributor is not in writing, a complete description of the understanding is
set forth in Section 3.10(a) of the Disclosure Schedule.
(b) The standard forms of end user License Agreement currently
used (and those used since the organization of the Company) by Company to
license the Software is listed in Section 3.10(b) of the Disclosure Schedule.
(c) Section 3.10(c) of the Disclosure Schedule contains a list
of all License Agreements under which Company has not completed its performance
thereunder, except for ongoing warranty and maintenance and support undertakings
contained therein, which list shall be updated as of the Closing.
(d) Unfulfilled warranty obligations under the License
Agreements are described in Section 3.10(d) of the Disclosure Schedule, which
description shall be updated as of the Closing.
(e) Company is not in default of its obligations under any
License Agreement.
(f) Section 3.10(c) of the Disclosure Schedule also includes
all outstanding commitments to sell, lease or license any Company Intellectual
Property hereafter.
(g) Company does not license or sublicense any Distributor
Software and is not a distributor of any software developed by others.
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3.11 CONSULTING AND DEVELOPMENT AGREEMENTS. There are no consulting
and software development agreements, written or oral, entered into by Company
pursuant to which others are performing services to Company as a consultant or
in a similar capacity or are developing software (regardless of the party who is
to hold title to the software) for Company for use or license by Company.
3.12 MAINTENANCE/COMMITMENTS.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a
correct and complete general description of all commitments of Company
outstanding to provide services, or support and/or maintenance services,
including to provide patches, corrections, improvements, modifications and
enhancements of the Software ("Maintenance Agreements"). A copy of all written
Maintenance Agreements has been made available to Buyer and, to the extent the
Maintenance Agreements are not in writing, a complete description of the
understanding is set forth in Section 3.12(a) of the Disclosure Schedule. The
current (and all other forms used within the past 12 months) standard form of
Maintenance Agreement is set forth in Section 3.12(a) of the Disclosure
Schedule.
(b) Section 3.12(b) of the Disclosure Schedule sets forth all
commitments of Company to develop any special feature or function or to port any
software not otherwise disclosed pursuant to this Agreement ("Development
Agreements"). A correct and complete copy of the Development Agreements, if any,
have been furnished to Buyer. To the extent any such agreement or commitment,
where legally binding, is oral, a summary thereof is set forth in Section
3.12(b) of the Disclosure Schedule.
(c) Company has substantially complied with its obligations
under the Maintenance Agreements and Development Agreements and there is no
basis for any claim against or default by Company by any party arising under the
Maintenance Agreements or Development Agreements.
3.13 ALL INTANGIBLE ASSETS USED IN THE BUSINESS. The Company
Intellectual Property and the Development Software constitute all of the
intangible assets used in the conduct of the Business as conducted (during the
preceding 12 months) by Company.
3.14 EMPLOYEES/CONSULTANTS/DIRECTORS.
(a) Section 3.14(a) of the Disclosure Schedule sets forth a
list of all current employees and consultants engaged by Company or serving in
such capacity as of February 1, 1997 and their compensation. Section 3.14(a) of
the Disclosure Schedule will be updated as of the Closing.
(b) The employees of Company are not represented by any
collective bargaining agreement or otherwise organized.
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(c) Section 3.14(c) of the Disclosure Schedule lists all
employee benefit plans which are currently in effect or as to which Company has
any ongoing obligation or liability. The term "employee benefit plan" means any
employment or consulting contract, deferred compensation, profit sharing,
pension, bonus, stock option, stock purchase or other fringe benefit or
compensation arrangement or commitment, written or oral, including each welfare
plan (as defined in Section 3(1) of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA"), which Company has established or maintained
or in which any of its employees participate or have participated or under which
Company has an obligation to make contributions or to pay benefits. Company has
no obligations to provide any benefits to any retired or former employees,
including medical and hospital benefits, except as provided by law.
(d) Company has no ERISA affiliate and never had an ERISA
affiliate.
(e) The 401(k) Plan made available to employees of Company is
in full compliance and has been in full compliance with all applicable laws and
regulations regarding the establishment, maintenance and operation of the 401(k)
Plan and all contributions by Company have been paid or properly accrued on its
financial books.
(f) Company has no contracts or agreements with any of its
employees except agreements as to inventions, discoveries and copyright
ownership, a copy of which have been previously provided to Buyer. Schedule
3.14(f) of the Disclosure Schedule contains a copy of the employee benefit
brochure provided or made available to the employees. All employees are "at
will" employees of Company.
3.15 ASSUMED AGREEMENTS.
(a) Sections 3.10(b) and (d), 3.12(a), 3.12(b), and 3.15(a) of
the Disclosure Schedule lists all unfilled binding commitments of Company as of
October 31, 1996 not otherwise disclosed in the Disclosure Schedule, including
for indebtedness. Section 3.15(a) of the Disclosure Schedule shall be updated as
of the Closing. Such commitments represent all of the then outstanding binding
obligations of the Business and, to the knowledge of the Management of Company,
all of the commitments of Company can in the ordinary course of business be
fulfilled by the payment of money due by Company as purchaser or obligor or by
its providing of product or services, without a financial loss to Company and in
a timely manner.
(b) Company is not in default of any term or condition under
any unfilled agreement listed on Sections 3.10(b) and (d), 3.12(a), 3.12(b), and
3.15(a) of the Disclosure Schedule and there are no basis for any claim against
or default by Company by any party arising under any such agreement, and no
event has occurred which under any such agreement could constitute a default
which would give the other party to such agreement the right to terminate the
contract or to demand money damages.
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(c) Company has not waived any of its rights under any of such
agreements listed on Section 3.10(b) and (d), 3.12(a), 3.12(b), or Section
3.15(a) of the Disclosure Schedule nor is the other party to such agreement in
default in any respect under any such agreement.
(d) Correct and complete copies of the agreements listed in
Section 3.15(a) of the Disclosure Agreement have been made available to Buyer.
3.16 LITIGATION AND ADVERSE EVENTS. There are no investigations,
suits, actions, administrative, arbitration or other proceedings or other
occurrences pending, or, to the knowledge of the Management of Company,
threatened against Company arising out of the conduct of the Business.
3.17 COMPLIANCE WITH APPLICABLE LAW. Company, in the conduct of the
Business, is in substantial compliance with all applicable laws, statutes,
ordinances, permits and regulations, including all such laws, statutes,
ordinances and regulations relating to wages, tax withholdings, hours, equal
pay, equal opportunity, and pollution of the environment, and there are no
violations which, if enforced, would materially adversely affect the Business or
prospects of the Business after the Closing or the value of the Business; and no
proceeding alleging any such violation is pending or, to the knowledge of the
Management of Company, threatened.
3.18 TAXES AND TAX RETURNS.
(a) Company has timely filed with the appropriate governmental
agencies all tax returns and reports required to be filed by it (or obtained
extensions in which to file). Company has paid or accrued all taxes and
withholdings of any kind now due and payable.
(b) Company has provided Buyer with correct and complete
copies of all tax returns, including income, property and sales tax returns
filed since its incorporation to date. No returns are currently being audited by
any governmental authority.
3.19 CONSENTS. No consents or approvals are required to effect the
transactions contemplated herein, except as set forth in Section 3.19 of the
Disclosure Schedule.
3.20 BROKERS AND FINDERS. Neither Company nor any of its officers,
directors, employees or agents have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement which is payable directly
or indirectly, by Buyer or Company.
3.21 RELATED TRANSACTIONS. Section 3.21 of the Disclosure Schedule
contains a complete and correct list of all transactions since January 1, 1996
between Company and any Shareholder or Affiliate of any Shareholder.
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3.22 NO UNTRUE STATEMENTS. No statements (including representations
and warranties) contained in this Agreement (including in the Disclosure
Schedule hereto and documents described as having been provided to Buyer herein
and therein), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein contained not
misleading.
3.23 ADDITIONS. On or prior to the Closing, the Company shall have
engaged the necessary personnel for the sales of Hardware, as set forth in
Section 3.23 of the Disclosure Schedule.
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Shareholders on the date
hereof as follows:
4.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; has full corporate power and authority to conduct the
business of developing, distributing and marketing software, including through
its subsidiaries, and is duly qualified and is authorized to conduct business
and is in good standing as a foreign corporation in Georgia.
4.2 AUTHORIZATION.
(a) The execution, delivery and performance of this Agreement
has been duly authorized by all requisite corporate action on the part of Buyer.
A duly certified copy of the resolutions of the Board of Directors of Buyer has
been delivered to Company. This Agreement has been duly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against it in accordance with its terms.
(b) The execution and delivery of this Agreement, and the
consummation by Buyer of the transactions contemplated herein on the Closing,
will not (with or without the giving of notice, lapse of time or both) violate,
conflict with, or result in a default under, any of the provisions of the
certificate of incorporation or by-laws of Buyer, any mortgage, indenture,
contract, agreement, license, permit, instrument, judgment, decree, order,
statute, regulation or ruling of any court or governmental authority to which
Buyer or any subsidiary is a party or by which it is bound.
4.3 NO CONSENTS. No consents or approvals are required to effect
the transactions contemplated herein by Buyer.
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4.4 BROKERS AND FINDERS. Neither Buyer nor any of its officers,
directors, employees or agents have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement which is payable directly
or indirectly by the Shareholders.
4.5 NO UNTRUE STATEMENTS. No statements (including
representations) by Buyer contained in this Agreement, and no written statements
furnished by Buyer to the Shareholders pursuant to this Agreement, contain any
untrue statement of a material fact, or omit to state a material fact necessary
in order to make the statements therein contained not misleading.
SECTION V.
CONDITIONS TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed
on or prior to the Closing shall be subject to the satisfaction on or prior to
the Closing of each of the following conditions, any of which condition may be
waived in writing by Buyer, but such waiver shall not waive any representation,
warranty or covenant of the Shareholders.
5.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by any Shareholder herein as of the date of
this Agreement shall be true and correct in all material respects on the Closing
with the same effect as though made on the Closing; the Shareholders shall have
performed and complied in all material respects with all agreements, covenants
and conditions required by this Agreement to be performed and complied with by
them prior to or on the Closing; and the Shareholders shall have delivered to
Buyer a certificate of the Shareholders dated the Closing, certifying as to the
fulfillment of the foregoing conditions.
5.2 THIRD PARTY CONSENTS. All consents, approvals or
authorizations from third parties or government agencies required to consummate
the transactions contemplated hereby and contemplated by this Agreement,
including the consents set forth pursuant to paragraph 3.19 shall have been
obtained.
5.3 OPINION OF COUNSEL TO THE SHAREHOLDERS. An opinion of counsel
to the Shareholders dated the Closing and addressed to Buyer reasonably
satisfactory in all respects to Buyer's counsel.
5.4 UPDATE DISCLOSURE SCHEDULE. The Shareholders shall have
updated the Disclosure Schedule as herein provided.
5.5 PUBLIC OFFERING. The Public Offering shall have commenced as
defined in paragraph 2.3 hereof.
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5.6 EMPLOYMENT AGREEMENT. Marc Kloner shall have executed and
delivered the Employment Agreement attached hereto as Exhibit D to Buyer.
5.7 ESCROW AGREEMENT. The Shareholders have entered into the
Escrow Agreement in the form attached hereto as Exhibit B ("Escrow Agreement").
5.8 GUARANTIES. The guaranties of Company are discharged in full
without cost or further obligation of the Company and evidence, reasonably
satisfactory to Buyer's counsel, is delivered to Buyer; provided however, that
at the written request of the Shareholders, a portion of the Purchase Price may
be paid at Closing to effect the release of such guaranties.
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
Each and every obligation of the Shareholders under this Agreement to
be performed on or prior to the Closing shall be subject to the satisfaction on
or prior to the Closing of each of the following conditions, any of which
conditions may be waived in writing by the Shareholders, but such waiver shall
not waive any representation, warranty, or covenant of Buyer:
6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by Buyer herein as of the date of this
Agreement shall be true and correct in all material respects on the Closing with
the same effect as though made on the Closing; Buyer shall have performed and
complied, in all material respects, with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by it on
or prior to the Closing; and Buyer shall have delivered to the Shareholders a
certificate of an officer of Buyer dated the Closing, certifying as to the
fulfillment of the foregoing conditions.
6.2 OPINION OF COUNSEL TO BUYER. An opinion of Glass, McCullough,
Sherrill & Harrold LLP, counsel to Buyer, dated the Closing, reasonably
satisfactory in all respects to the Shareholders' counsel.
6.3 AUTHORIZATION. Certification by an appropriate officer of
Buyer that all corporate actions required to be taken by Buyer pursuant to this
Agreement, including its execution and delivery, including copies of the
certificate of incorporation, bylaws, and board resolutions certified by the
secretary or assistant secretary of Buyer has been taken to authorize and
consummate the transactions contemplated herein.
6.4 PUBLIC OFFERING. The Public Offering shall have commenced as
defined in paragraph 2.3 hereof.
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6.5 EMPLOYMENT AGREEMENT. Buyer shall have executed and delivered
an Employment Agreement attached hereto as Exhibit D to Marc Kloner.
6.6 ESCROW AGREEMENT. Buyer shall execute and deliver to the
Shareholders the Escrow Agreement.
SECTION VII.
OTHER COVENANTS
7.1 CONDUCT OF BUSINESS. From the date hereof to the Closing,
except as otherwise consented to or approved by Buyer in writing, the
Shareholders hereby covenant and agree that they shall cause Company:
(a) Maintain Corporate Existence, Etc. (i) to conduct the
Business in a diligent manner, consistent with past management practices,
including maintaining adequate personnel to maintain, develop, enhance, support
and market the Software, provided that any unfilled binding commitment for more
than $10,000 not set forth in the Disclosure Schedule as of the date hereof
shall not be assumed unless approved in writing by Buyer; (ii) to market and
license the Software, Documentation and Distributor Software to end users, and
with the written consent of Buyer, to distributors; (iii) grant non-exclusive
licenses of the Software, Documentation and Distributor Software to end users
pursuant to its standard end user License Agreement at its standard fees; (iv)
not to make any distributions to the Shareholders; and (v) not to increase any
salaries or pay bonuses except for the payment of bonuses to key employees as
heretofore approved by Buyer not to exceed in the aggregate $75,000 in cash and
$285,000 in deferred bonuses ("Deferred Bonuses"). The Deferred Bonuses are to
be awarded upon the Closing, and are payable in four (4) equal quarterly amounts
commencing three (3) months after the Closing. All bonuses provided herein for
purposes of determining the Net Worth of Company pursuant to Section II shall be
considered to be a liability of the Company to the extent not paid prior to the
Closing and no tax offset shall be recognized in the calculation of Net Worth.
(b) Disposition of Assets. Not to sell or otherwise dispose of
any asset except for the granting of non-exclusive licenses and for sales in the
ordinary course of business as permitted pursuant to paragraph 7.1(a).
(c) Full Access. To afford to Buyer, and to its counsel,
accountants and other authorized representatives, full access to the facilities,
contracts, books, records, Software, key personnel and public accountants of
Company during normal business hours upon reasonable prior notice; and to cause
its officers and employees to promptly furnish such additional financial and
operating data and other information as Buyer or its authorized representatives
shall from time to time reasonably request.
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7.2 PUBLIC OFFERING STATUS. Buyer agrees to keep the Shareholders
informed as to the status of the Public Offering and agrees to provide the
Shareholders with copies of the registration statement and amendments thereto
(excluding exhibits) filed with the Securities and Exchange Commission promptly
after filing with the SEC.
7.3 OPTION TO RECEIVE STOCK. Each recipient of the Deferred Bonus
may elect to acquire shares of common stock of the Buyer ("Bonus Shares") equal
to the quotient of (i) the amount of the Deferred Bonus divided by (ii) 120% of
the price to the public of a share of common stock of Buyer included in the SB
Registration Statement. The election is to be made in writing not more than
thirty (30) days and not less than ten (10) days prior to the date on which the
payment of the last installment of the Deferred Bonus is otherwise due. Payment
by the recipient is to be made in cash and/or upon surrender of his/her right to
receive any unpaid portion of the Deferred Bonus. The Bonus Shares will be
"Restricted Securities" within the meaning of Rule 144 promulgated by the
Commission. The issuance of the Bonus Shares is subject to compliance with the
applicable federal and state securities laws. The recipient of the Bonus Shares
will be required by the Buyer to make certain representations and warranties
customarily made to issuers as a condition to the private placement of
securities. The recipients of the Deferred Bonus are third-party beneficiaries
under this Agreement and can independently enforce this paragraph 7.3. Buyer
hereby agrees that the Bonus Shares shall, upon their issuance, be duly
authorized, validly issued, fully paid and non-assessable. Buyer shall have the
right to offset any amounts payable to Buyer or Company by the recipient of the
Deferred Bonus pursuant to this Agreement, including Section IX, against
payments of the Deferred Bonus, in cash or in stock.
7.4 REGISTRATION RIGHTS. At any time after the first anniversary
of the Closing, the holders of not less than an aggregate of 20,000 shares of
common stock of Buyer acquired pursuant to this Agreement, i.e. Purchased Shares
and Bonus Shares, may request Buyer to register such shares ("Registrable
Shares") on Form S-3 (or other successors and equivalent form of abbreviated
registration statement then available) provided that Buyer qualifies for the use
of such form and such shares can not be sold in a brokerage transaction under
Rule 144 promulgated by the Commission. Buyer agrees to use commercially
reasonable efforts to prepare and file a registration statement on Form S-3 and
cause the registration statement to become effective. Buyer shall maintain the
effectiveness of the registration statement for a period of three months. Only
one registration can be requested pursuant to this paragraph 7.4. In addition,
the holders of Purchased Shares and Bonus Shares shall be given the right to
"piggyback" their shares on the next public offering of the Buyer following the
issuance of such shares, unless the shares can be sold in full under Rule 144 or
other rule in brokerage transactions.
The holders of such Purchased Shares and Bonus Shares shall be
third-party beneficiaries under this Agreement and can independently enforce
this paragraph 7.4.
The holders of the Registrable Shares agree, that if requested by
Buyer, not to effect any public sale or distribution of the Registrable Shares
during a 30 day period preceding and 90 days following the commencement of any
underwritten public offering of common stock, except to the
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extent the Registrable Shares are included in such public offering. Buyer will
pay the cost of preparing the registration statement and filing fees. The
holders of the Registrable Shares shall pay all underwriting discounts and
selling commissions attributable to the Registrable Shares. At the time of the
registration of the Registrable Shares such holders shall enter into an
indemnity agreement and such other agreements as are customary with respect to
such offerings.
SECTION VIII.
CONFIDENTIALITY AND SECURITY
8.1 CONFIDENTIALITY.
(a) The parties acknowledge that information, documents and
materials regarding each other have been exchanged since September 1, 1996. Such
disclosures have been made under a confidentiality understanding. The provisions
of this Section VIII reflect the understanding with respect to, and shall
govern, all such exchanges and the permitted use and disclosure by a party or
its Affiliate hereafter of any confidential information and trade secrets of the
other party, regardless of when acquired. Each party hereto hereby agrees that
all information, documents and materials the party ("Recipient") received
heretofore and receives or obtains hereafter from any other party or its
Affiliate ("Owner") shall be considered valuable assets of the Owner and shall
at all times be treated by the Recipient and the officers, directors, employees
and agents of the Recipient as confidential information or trade secrets of the
Owner if so identified as such or which under the circumstances surrounding
disclosure ought to be treated as confidential information or trade secrets of
the Owner. Each party hereto, as a Recipient, hereby agrees that it shall not
hereafter (and shall use commercially reasonable efforts to ensure that its
Affiliates, officers, directors, employees and consultants do not) in any
manner, directly or indirectly (i) transmit, disclose or otherwise communicate
or make available any such confidential information or trade secrets of the
Owner to any third party, or (ii) use the same for its own account or for the
benefit of any third party, other than as permitted by this Agreement; or (iii)
make any copies of any such confidential information or trade secrets except as
is necessary to perform its obligations or exercise its rights hereunder. The
parties each agree not to reverse engineer or reverse compile the computer
software of any other party hereto.
(b) Each party hereto, as a Recipient, hereby shall take all
commercially reasonable actions necessary or desirable, including with respect
to its officers, directors, employees and all other authorized persons having
access to the confidential information or trade secrets of the Owner, to satisfy
its obligations to protect and maintain the confidentiality and security of such
confidential information or trade secrets, including the source code of the
Software.
(c) It is recognized and acknowledged between the parties
hereto that the covenants respecting confidentiality set forth in this Section
VIII hereof are essential elements of this Agreement and shall continue after
the Closing or the termination of this Agreement for any reason. Each party
further acknowledges that the Owner of the confidential information and trade
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secrets may have no adequate remedy at law if the Recipient shall violate the
terms thereof. In such event, the Owner shall have the right, in addition to any
other rights and remedies it may have, to obtain in any court of competent
jurisdiction injunctive relief or other equitable relief with regard to any
breach or threatened breach thereof or otherwise specifically enforce the
provisions of this Agreement without bond, security or proof of actual damages.
(d) The parties each agree as follows:
(i) Confidential information and trade secrets
of the Owner that are disclosed to Recipient or to which Recipient obtains
access shall not be disclosed by Recipient to others, except to directors,
officers, employees and consultants of the Recipient having a need to know in
connection with the consideration and/or consummation of the transactions
contemplated herein and Recipient shall be responsible for such other person's
compliance with the confidentiality obligations of this Section VIII.
(ii) The Recipient, when receiving such
confidential information or trade secrets from the Owner, shall protect such
confidential information and trade secrets with the same degree of care (A) that
Recipient regularly employs to safeguard its own confidential information or
trade secrets of like importance from unauthorized use or disclosure or (B)
which a prudent business person employs to safeguard its own confidential
information or trade secrets of like importance from unauthorized use or
disclosure, whichever is greater.
(iii) The rights and obligations of the parties
with respect to all such confidential information and trade secrets of the Owner
that are disclosed and subject to this Agreement shall survive termination of
this Agreement and shall remain in effect for a period of five (5) years from
the date of this Agreement; provided, however, that the expiration of the above
five (5) years shall not affect any rights of the parties with respect to
patents, trademarks, copyrights and trade secrets, and trade secrets shall be
protected by this Section VIII as long as they may be legally protected or
constitute a trade secret.
(iv) Any portion of such Owner's confidential
information or trade secret that:
(A) is rightfully received from a third
party who has a lawful right to disclose it without accompanying markings or
disclosure restrictions;
(B) is independently developed by
employees of the Recipient who have not had access to such confidential
information or trade secret;
(C) is or becomes publicly available
through no breach or wrongful act of the Recipient;
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(D) is already known by the Recipient
as evidenced by documentation bearing a date prior to the first date of
disclosure by the Owner; or
(E) is approved for release in writing
by the President of the Owner;
is not entitled to the protection provided in this Section VIII, except for
patent, trademark and copyright protection as provided by law.
(e) Confidential information and trade secrets of Company have
been and will be used by Buyer only in connection with its evaluation of Company
and the decision to acquire the capital stock of Company and confidential
information and trade secrets of Buyer have been and will be used by Company and
the Shareholders only in furtherance of the sale of capital stock as
contemplated herein.
(f) Notwithstanding the foregoing, nothing herein shall
restrict the right of either party to disclose such confidential information or
trade secret that is disclosed pursuant to a judicial or administrative order,
but only to the extent so ordered, provided, however, that the party receiving
such order shall notify the other party of such order in sufficient time to
permit such other party to intervene in response to such order or to take such
other reasonable steps as may be necessary to protect the confidentiality
thereof.
(g) All such confidential information and trade secrets and
copies thereof of Owner shall remain the property of the Owner. All such written
confidential information and trade secrets, and any copies thereof, shall be
promptly returned to the Owner upon written request, or destroyed at the Owner's
options. All reports and other documents prepared by a Recipient containing any
such confidential information or trade secrets shall be destroyed at the Owner's
written request and the Recipient shall so certify to Owner upon Owner's request
that it has been destroyed. The restrictions on disclosure and use shall survive
the return and destruction of such written confidential information and trade
secrets, reports and other documents and the Closing.
(h) Upon the sale of the capital stock as contemplated herein,
all trade secrets and confidential information owned by Company shall be deemed
to be owned by Buyer as of the Closing for purposes of this Agreement, including
this Section VIII.
(i) Notwithstanding the foregoing, nothing in this Section
VIII shall restrict the disclosure of any confidential information in any
registration statement filed with the Securities and Exchange Commission in
contemplation of the Public Offering, including the prospectus which is a part
thereof, and the public distribution of the prospectus, including preliminary
prospectuses and registration statement.
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SECTION IX.
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SHAREHOLDERS.
(a) The Shareholders hereby agree, jointly and severally, to
indemnify and hold Buyer, and its successor (collectively "Purchaser" for
purposes of this Section IX only) harmless at all times from and after the
Closing, against and in respect of the following:
(i) All losses, liabilities, costs and damages, including
without limitation, interest, penalties and fines, resulting from any (a) breach
of a representation or warranty of the Shareholders set forth herein or (b)
non-fulfillment of any agreement or covenant, on the part of the Shareholders
set forth herein.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided herein are collectively referred to as "Buyer Losses".
(b) The period during which Purchaser must give notice in
writing to the Shareholders of claims for indemnification hereunder shall expire
on the second anniversary of the Closing except that such period shall be
extended to the applicable statute of limitations plus thirty (30) days with
respect to claims (i) for unpaid taxes and failure to file required tax reports,
including related interest, penalties and fines ("Tax Claims"), (ii) for
breaches of Section VIII, and (iii) for breaches of any covenant or obligation
which first arises after the Closing.
(c) Interest at the prime rate shall accrue and be paid on all
amounts to be indemnified from the date of the Closing to the date of payment by
the Shareholders, or if payment of a Buyer Loss is made after the Closing by
Purchaser, from the date of such payment by Purchaser to the date of
indemnification by the Shareholders.
(d) The total liability of each Shareholder under this Section
IX shall not exceed the consideration received or to be received by such
Shareholder pursuant to Section II.
(e) In the event that any third party asserts an action or
claim as to which Purchaser is entitled to indemnification hereunder, Purchaser
shall notify the Shareholders in writing of any such asserted liability with
reasonable promptness, and the Shareholders shall have a right to compromise or
defend any such matter involving such asserted liability, through counsel of its
own choosing who shall be subject to the approval of the Purchaser, which
approval will not be unreasonably withheld, at the expense of the Shareholders;
provided, however, that the Shareholders shall indemnify Purchaser against any
costs and damages resulting from the failure
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of the Shareholders to defend or pay such claims. In the event the Shareholders
shall notify Purchaser in writing promptly of the intention of the Shareholders
to do so, Purchaser shall cooperate with the Shareholders and their counsel in
the compromising of or the defending against any such liabilities or claims, at
the expense of the Shareholders and provide the Shareholders with reasonable
access to the books and records of Company to the extent necessary for the
compliance with any document request and the reasonable defense of such claim.
(f) Purchaser shall be entitled to payment hereunder only if
and to the extent the aggregate Buyer Losses under this Agreement exceed
Thirty-Five Thousand Dollars ($35,000).
(g) The amount of any Buyer Loss shall be reduced by amounts
received by the Purchaser under any policy of insurance maintained by Company
prior to the Closing. Amounts received from any such policy of insurance after
the receipt of payment of any Buyer Loss from the Shareholders shall be promptly
reimbursed to the Shareholders.
9.2 INDEMNIFICATION BY BUYER.
(a) Buyer hereby agrees to indemnify and hold the Shareholders
harmless at all times from and after the Closing, against and in respect of the
following:
(i) All losses, liabilities, costs and damages, including
without limitation, interest, penalties and fines, resulting from any (a) breach
of a representation or warranty of Buyer set forth herein or (b) non-fulfillment
of any agreement or covenant, on the part of Buyer set forth herein.
(ii) All expenses, including reasonable attorney fees,
arising from or incurred in connection with suits, proceedings, decrees or
judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided herein are collectively referred to as "Shareholder Losses".
(b) The period during which the Shareholders must give notice
in writing to Purchaser of claims for indemnification hereunder shall expire on
the second anniversary of the Closing except that such period shall be extended
to the applicable statute of limitations for breaches of Section VIII and for
breaches of any covenant or obligation which first arises after the Closing.
(c) Interest at the prime rate payable shall accrue and be
paid on all amounts to be indemnified from the date of the Closing to the date
of payment by Buyer, or if payment of a Shareholder Loss is made after the
Closing by the Shareholder, from the date of such payment by any Shareholder to
the date of indemnification by Buyer.
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(d) The total liability of Buyer under this Section IX shall
not exceed the consideration received or to be received by the Shareholders
pursuant to Section II.
(e) In the event that any third party asserts an action or
claim as to which the Shareholders are entitled to indemnification hereunder,
the Shareholders shall notify Buyer in writing of any such asserted liability
with reasonable promptness, and Buyer shall have a right to compromise or defend
any such matter involving such asserted liability, through counsel of its own
choosing who shall be subject to the approval of the Shareholders, which
approval will not be unreasonably withheld, at the expense of Buyer; provided,
however, that Buyer shall indemnify the Shareholders against any costs and
damages resulting from the failure of Buyer to defend or pay such claims. In the
event Buyer shall notify the Shareholders in writing promptly of the intention
of Buyer to do so, the Shareholders shall cooperate with Buyer and its counsel
in the compromising of or the defending against any such liabilities or claims,
at the expense of Buyer and provide Buyer with reasonable access to the books
and records of the Company to the extent necessary for the compliance with any
document request and the reasonable defense of such claim.
(f) The Shareholders shall be entitled to payment hereunder
with respect to Shareholder Losses for which Buyer has agreed to indemnify
pursuant to paragraph 9.2(a)(i)(a) only if and to the extent the aggregate of
such Shareholder Losses under this Agreement exceed Thirty-Five Thousand Dollars
($35,000).
(g) The amount of any Shareholder Loss shall be reduced by
amounts received by the Shareholders under any policy of insurance. Amounts
received from any such policy of insurance after the receipt of payment of any
Shareholder Loss from Buyer shall be promptly reimbursed to Buyer.
9.3 REIMBURSEMENT. Purchaser or Shareholders, as the case may be,
shall be reimbursed promptly for any Shareholder Loss or Buyer Loss for which it
is to be indemnified under paragraph 9.1 or 9.2. Purchaser and the Shareholders
shall have the right to set off and deduct any Buyer Loss or Shareholder Loss,
as the case may be, against the amount of any obligation of such person however
arising to the other person; provided, however, there shall be no offset against
any salary, bonus or other compensation payable to Shareholder for services
rendered as an employee or consultant. In the event of any dispute as to the
right of set off or deduction of any amount or the amount of the Buyer Loss or
Shareholder Loss, the dispute shall be resolved as provided in paragraph 9.5. If
Shareholder reimburses Purchaser for a breach of the warranties and
representations set forth in paragraph 3.7, Purchaser shall assign all such
uncollected receivables (together with all applicable documentation related
thereto) to the Shareholders without further consideration.
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9.4 CLAIMS. Should any claim be made by a person not a party to
this Agreement with respect to any matter to which the foregoing indemnity
relates for which the indemnifying party has not elected to compromise or defend
as set forth in paragraph 9.1(e) or 9.2(e), the party to be indemnified, on not
less than fifteen (15) days' notice to the indemnifying party, may make
settlement of such claim, and such settlement shall be binding on the
indemnifying party for the purposes of this Section IX; provided, however, that
if within said fifteen (15) day period the indemnifying party shall have advised
the indemnified party that the indemnifying party will contest any such claim at
the expense of the indemnifying party and has provided reasonable assurances of
the ability of the indemnifying party to pay such expenses and other losses
should such occur, the indemnified party will promptly comply and the
indemnifying party shall have the right to defend with counsel of its own
choosing at its expense. Any payment or settlement resulting from such contest,
together with the total expense thereof, shall be binding on the Shareholders
and Purchaser for the purposes of this Section IX. Failure to give notice shall
not constitute a defense, in whole or in part, to any claim by the indemnified
party except and only to the extent that such failure to do so shall result in
material prejudice to the indemnifying party.
9.5 RESOLUTION OF DISPUTES. In the event of any dispute between
Purchaser and the Shareholders over any claim by or on behalf of Purchaser or
the Shareholders for indemnification under this Section IX and the parties are
unable to resolve such dispute, either party may submit the dispute to binding
arbitration as hereinafter provided. The arbitration shall be in accordance with
the Commercial Arbitration Rules of the American Arbitration Association ("AAA")
then in effect. The arbitration shall be held before three arbitrators, unless
the amount in dispute is less than One Hundred Thousand Dollars ($100,000), in
which event the arbitration shall be held before one arbitrator. In the event
the arbitration is to be held before three arbitrators, the Shareholders and
Buyer shall each appoint one arbitrator within thirty (30) days of the receipt
of notice by the party commencing the arbitration which includes a copy of the
petition filed with the AAA. The arbitrators shall select the third arbitrator.
In the event the two arbitrators fail to do so within fifteen (15) days of their
appointment or in the event a party hereto fails to designate an arbitrator or
in the event only one arbitrator is to be appointed, such arbitrator(s) shall be
appointed by the AAA. The arbitrator(s) shall be knowledgeable in the business
of software distribution. All decisions by the arbitrators shall be by majority
vote of the arbitrators. The award of the arbitrator(s) shall be binding on the
parties hereto and such awards may be entered in any applicable court. The
arbitration and all hearings in connection therewith shall be held in Georgia.
The arbitrator(s) shall have no authority to award punitive damages or any other
awards other than as herein contemplated. Notwithstanding the foregoing, the
parties hereto may seek in a court proceeding a restraining order, or a
preliminary or permanent injunction as permitted by law or equity whenever
applicable to enjoin the unauthorized use of the confidential information or
trade secret of a party hereto or as otherwise provided herein. All parties
hereto agree to service by mail in any such proceedings. The parties shall be
entitled to reasonable discovery of documents and deposition of witnesses prior
to the arbitration hearing. In the event of any dispute with respect to such
discovery, the dispute shall be submitted to the arbitrator(s) for
determination.
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SECTION X.
COVENANT NOT TO COMPETE
(a) For a period of five (5) years following the Closing, each
Shareholder agrees that he will not, directly or indirectly, including through
an Affiliate, own, manage, operate, control, be engaged in, or participate in
the ownership, management, operation, or control of or be connected in any
manner or have any other direct or indirect financial interest in any business,
firm, person, partnership, corporation, or concern which is engaged in any
business of the type and character which is competitive with the Business which
is being acquired by Buyer upon the purchase of the capital stock of Company in
the United States. The Shareholder's employment by Buyer or any subsidiary
thereof shall not be deemed a violation of this Section X and the Employment
Agreement between Company and Marc Kloner shall not be deemed a violation of
this Section X. The Shareholders acknowledge that the Business is conducted
throughout the United States.
(b) Notwithstanding the covenants contained in subparagraph
(a), the Shareholders shall not be prohibited from owning less than 5% of any
class of equity securities of a company which is listed on a recognized Company
Shares exchange or for which prices are quoted on the National Association of
Securities Dealers Automated Quotation System.
(c) During the non-compete period set forth in subparagraph
(a), each Shareholder in any capacity will not suggest, urge or persuade any
user of the Software not to purchase or not to do business with Buyer or the
successor of the Business or solicit the employment of any employee of Company
or its successor.
(d) Each state of the United States and each month of time
covered by this covenant not to compete shall be deemed a severable unit, and
should any court determine that the inclusion of all such states or months would
render any such undertaking unreasonable or unenforceable for any reason, those
units which are necessary in the judgment of the court to be deleted in order to
render such undertaking reasonable and enforceable shall be deemed free of such
non-compete undertaking but such undertaking shall remain in full force and
effect as to each other unit of territory or time.
(e) Each Shareholder agrees that in addition to any other
rights and remedies available to Buyer for any breach by a Shareholder of his
obligations under this Section X, Buyer shall be entitled to enforcement of such
obligations hereunder by court injunction or other equitable remedy and the
Shareholders in such proceeding will not urge that Buyer has an adequate remedy
at law.
28
<PAGE> 33
SECTION XI.
TERMINATION AND ABANDONMENT
11.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
at any time and the acquisition of the capital stock of Company as herein
contemplated abandoned at any time prior to the Closing without liability of any
party to any other party, except for breaches of warranties, representations,
and covenants set forth in this Agreement which are within the control of the
defaulting or non-performing party, under the following circumstances:
(a) The mutual written agreement of Buyer and the
Shareholders;
(b) By Buyer if the Closing has not occurred before March 30,
1997 because all conditions to the obligations of Buyer have not been satisfied
or waived or because the Shareholders have not made all required deliveries
pursuant to Section V;
(c) By the Shareholders if the Closing has not occurred before
March 30, 1997 because all conditions to the obligations of the Shareholders
have not been satisfied or waived or because Buyer has not made all required
deliveries pursuant to Section VI; and
(d) Any party may terminate by written notice to the other if
any action or proceeding shall have been instituted before any court or other
governmental body or, to the knowledge of the party giving such notice, shall
have been threatened formally in writing by any public authority with requisite
jurisdiction, to restrain or prohibit the transactions contemplated by this
Agreement or to subject one or more of the parties or their directors or their
officers to liability on the grounds that it or they have breached any law or
regulation or otherwise acted improperly in connection with such proposed
transactions ("Governmental Objection"), and such action or proceeding shall not
have been dismissed or such written threat shall not have been withdrawn or
rescinded before March 30, 1997.
11.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is
terminated and abandoned as provided in this Section XI, each party will, at the
request of the other, return all documents, work papers, and other material of
the requesting party, including all copies thereof, relating to the transactions
contemplated by this Agreement, whether so obtained before or after the
execution of this Agreement, to the party furnishing the same, and all
information received by any party to this Agreement with respect to the business
of any other party shall be governed by the confidentiality obligations of
Section VIII and shall not at any time be used for the advantage of, or
disclosed to third parties by, such party to the detriment of the party
furnishing such information except as may be required by law; provided, however,
that this shall not apply to any document, work paper, material, or any other
information which is a matter previously published in any publication for public
distribution or previously filed as public information with any governmental
authority or is otherwise in the public domain.
29
<PAGE> 34
SECTION XII.
MISCELLANEOUS PROVISIONS
12.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES. The respective
representations, warranties and covenants of the Shareholders and Buyer
contained herein or in any certificates or other documents delivered prior to or
on the Closing shall not be deemed waived or otherwise affected by any
investigations made by any party hereto. Each and every representation, warranty
and covenant of the Shareholders and Buyer, and the indemnification provisions
set forth in Section IX hereof, shall survive the Closing and remain operative
in full force and effect as provided in Section IX.
12.2 HEADINGS. The paragraph captions and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
part of this Agreement or to affect its meaning or interpretation.
12.3 FURTHER ASSURANCES. The parties hereto shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement, including requests
made after the Closing.
12.4 FORCE MAJEURE. A party hereto shall not be liable for failure
or delay in performing any of the party's obligations hereunder if such failure
or delay is occasioned by compliance with any governmental regulation, request
or order, or by circumstances beyond the reasonable control of the party so
failing or delaying, including, but not limited to, Acts of God, war,
insurrection, fire, flood, accident, or earthquakes. Each party shall (a)
promptly notify the other in writing of any such event of force majeure, the
expected duration thereof and its anticipated effect on the ability of such
party to perform its obligations hereunder, and (b) make reasonable efforts to
remedy any such event of force majeure.
12.5 CUMULATIVE REMEDIES. Except as herein provided and subject to
any applicable limitation herein provided, the parties shall have all remedies
for breaches of this Agreement available to them provided by law or equity.
12.6 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties hereto regarding the acquisition of the Business by Buyer
through the purchase of the capital stock of Company and related matters as set
forth in this Agreement. No representations or agreements, whether written or
oral, other than those contained or referenced herein, shall be binding on the
parties. This Agreement may not be amended or modified except in a writing
signed by all of the parties hereto.
30
<PAGE> 35
12.7 SPECIFIC PERFORMANCE. This Agreement may be specifically
enforceable in accordance with applicable principles of law and equity. The
parties hereby acknowledge that it is impossible to measure the monetary damages
which would result from a party's failure to perform any obligation imposed upon
such party by this Agreement. Therefore, if any party hereto should institute an
action or proceeding to enforce the provisions hereof, any other party against
whom such action or proceeding is thereby brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such person shall not
urge in any action or proceeding the claim or defense that an adequate remedy at
law exists.
12.8 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be given in writing to the address of the
party set forth below their signature to this Agreement or to such other last
authorized address/telecopier number of the intended recipient provided in
writing to the party giving such notice, and shall be deemed to have been duly
given on (i) the date of receipt if personally delivered or delivered by
overnight courier, (ii) five (5) business days after posting if transmitted by
postage prepaid registered or certified mail (return receipt requested), or
(iii) the date of transmission if transmitted by telecopy (with postage prepaid
registered or certified mail confirmation) to the party to whom such notice or
communication is being given. Any party hereto may change such party's address
or the person to whom notice is given for purposes hereof by written notice to
the other parties. Such notices are effective only upon receipt.
12.9 NON-WAIVER OF DEFAULT. Any failure by any party hereto at any
time or from time to time to enforce and/or require strict compliance with any
term or condition of this Agreement shall not constitute a waiver of such term
or condition. All waivers hereunder must be in writing executed by the party
waiving the right. The consummation of the transactions with knowledge of a
breach of a warranty, representation or covenant shall not constitute a waiver
of any such warranty, representation or covenant.
12.10 PARTIAL INVALIDITY. If any term or provision of this
Agreement, not essential to the basic purposes of the transactions contemplated
herein, shall be held to be illegal, invalid or unenforceable by a court or
arbitrator of competent jurisdiction, it is the intention of the parties hereto
that (i) the remaining terms hereof shall constitute the agreement with respect
to the subject matter hereof, (ii) all such remaining terms shall remain in full
force and effect and shall be deemed to constitute the entirety of this
Agreement as though such illegal, invalid or unenforceable provision had never
been part hereof, and (iii) such illegal, invalid, or unenforceable provision
shall be construed as closely as possible to the parties' original intent in
order to render such provision legal, valid, or enforceable, as applicable.
12.11 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Shareholders and Buyer and
their successors and assigns. Buyer may on or prior to the Closing designate a
subsidiary as the party to acquire the Business; provided, however, Buyer shall
remain liable to the Shareholders for any breach of Buyer's warranties,
representations and covenants contained herein.
31
<PAGE> 36
12.12 FEES AND EXPENSES. Each party hereto shall pay all expenses
which that party has incurred, including attorneys' and accountants' fees, in
connection with this Agreement and the transactions contemplated hereby.
12.13 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect and performance.
12.14 COUNTERPARTS AND EXHIBITS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The Disclosure
Schedule is made a part of this Agreement.
12.15 PUBLICITY. The Shareholders shall make no public announcement
of the entering into of this Agreement or the terms and conditions hereof
without the prior written consent of Buyer thereto. The Shareholders acknowledge
that Buyer, as a publicly-held company, may be required or deem it desirable to
make and as part of the proposed Public Offering may make such public disclosure
of the execution of this Agreement and the terms and conditions hereof at any
time hereafter. With respect to any disclosure prior to the Closing, Buyer shall
provide the Shareholders with a copy of any such disclosure promptly after it is
made and, to the extent practical, will review any proposed press release and
other public announcements with Company before it is released. After the
Closing, the parties shall have no obligations to the other under this paragraph
12.16.
SHAREHOLDERS:
--------------------------------------
Name: Craig Bourne
ADDRESS FOR NOTICE:
Address: 10643 Jill Street
Cypress, California 90630
Telecopy No.: 714-995-6404
32
<PAGE> 37
---------------------------------------------
Name: Marc Kloner
ADDRESS FOR NOTICE:
Address: 21058 Mendenhall Court
Topanga, California 90212
Telecopy No.: 818-347-6998
INFOCURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ADDRESS FOR NOTICE:
Address: 2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Telecopy No.: 404-636-7525
Attention: President
33
<PAGE> 1
EXHIBIT 10.7
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION ("BUYER"),
AND THE SHAREHOLDERS ("SHAREHOLDERS") OF
DR SOFTWARE, INC. ("COMPANY")
<PAGE> 2
TABLE OF CONTENTS
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SECTION I.
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Delivery of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Net Worth Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Absence of Certain Finance and Business Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Guaranties/Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Ownership of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Consulting and Development Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Maintenance/Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 All Intangible Assets Used in the Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Employees/Consultants/Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Assumed Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Litigation and Adverse Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.18 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.20 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21 Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22 No Untrue Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION IV.
INVESTOR REPRESENTATIONS REGARDING THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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4.1 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Ownership of Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION V.
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Organization and Standing of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 S4 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1 Representations and Warranties; Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Third Party Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Opinion of Counsel to the Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Update Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Public Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.7 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.9 Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 S4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION VII.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Representations and Warranties; Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Opinion of Counsel to Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Public Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.5 S4 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7 Common Stock of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.8 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.9 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION VIII.
OTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Standstill Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Section 338(h) (10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.4 Covenants Relating to Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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SECTION IX.
CONFIDENTIALITY AND SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION X.
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 Resolution of Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION XI.
COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION XII.
TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Termination and Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Rights and Obligations on Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION XIII.
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.1 Investigations; Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2 Payment of Certain Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.4 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.5 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.6 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.8 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.10 Non-Waiver of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.11 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.12 Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.13 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.14 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.15 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.16 Counterparts and Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.17 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
iv
<PAGE> 5
STOCK PURCHASE AGREEMENT
AMONG INFOCURE CORPORATION ("BUYER"),
AND THE SHAREHOLDERS ("SHAREHOLDERS") OF
DR SOFTWARE, INC. ("COMPANY")
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 10th day
of February, 1997 by and among InfoCure Corporation, a Delaware corporation
("Buyer"), and the undersigned Shareholders ("Shareholders") of DR Software,
Inc., a Georgia corporation ("Company").
WHEREAS, Shareholders desire to sell, and Buyer desires to purchase,
all of the issued and outstanding shares ("Company Shares") of capital stock of
Company for the consideration and on the terms set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS
1.1 CERTAIN DEFINITIONS.
(a) "Affiliate" means any person, corporation, or other
business entity (i) which, whether directly or indirectly through one or more
intermediaries, is controlled by the Shareholders (individually or as a group)
or (ii) in which Shareholders (individually or as a group) own, directly or
indirectly through one or more intermediaries, 5% or more of the voting power
for the election of the governing board.
(b) "Business" means the development, marketing and
support of the Software as currently conducted by Company.
(c) "Closing" is defined in Section 2.3.
(d) "Closing Date" means the date and time as of which
the Closing actually takes place.
(e) "Copyright" means all copyright ownership of the
Software and Documentation.
<PAGE> 6
(f) "Development Software" means all software, object,
source, and executable code, licensed by Company as licensee which is used in
the conduct of the development, maintenance, and support of the Software. A
list of the Development Software is set forth in Section 1.1(f) of the
Disclosure Schedule.
(g) "Distributor Software" means all software, object,
source, and executable code, sublicensed, sold, leased or distributed by
Company as licensor or lessor which is not owned by Company excluding
Development Software. A list of the Distributor Software is set forth in
Section 1.1(g) of the Disclosure Schedule.
(h) "Distributorship Agreements" means all appointments
of Company to sell or license Hardware or Distributor Software. A list of such
appointments is set forth in Section 1.1(h) of the Disclosure Schedule.
(i) "Documentation" means all technical manuals and
notes, user manuals, and all other documents developed or in development
relating to or used in the development, maintenance, support, enhancement and
use of the Software, including pending improvements, fixes and enhancements
regardless of the media upon which the Documentation exists, which is owned by
Company.
(j) "Escrow Fund" is defined in Section 2.5.
(k) "Escrow Shares" are defined in Section 2.5.
(l) "GAAP" means generally accepted United States
accounting principles, consistently applied on an accrual basis.
(m) "Hardware" means all computers, components,
peripherals, and other equipment currently offered for sale by Company in the
course of its business. Section 1.1(m) of the Disclosure Schedule lists all
Hardware currently being sold by Company.
(n) "Intellectual Property" means all patents, patent
pending, copyrights, trade secrets, techniques, know-how, and other intangible
assets that are legally protectable or recognized as forms of property, whether
or not reduced to practice or a writing.
(o) "License Agreements" means those agreements entered
into by Company (or its predecessors) as licensor for the licensing of any
Software, Distributor Software and/or Intellectual Property.
(p) "Management of Company" means the current chief
executive officer, the chief operating officer, and the chief financial officer
of Company.
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<PAGE> 7
(q) "Public Offering" means the first public offering of
common stock of Buyer the net proceeds of which paid to the issuer, after
deduction of the underwriters discount, shall exceed $12 million.
(r) "Purchase Price is defined in Section 2.2.
(s) "Purchase Price Delivery Date" is defined in Section
2.4.
(t) "Shareholder" shall include holders of options or
warrants to purchase shares of common stock of Company.
(u) "Software" means all software, object, source and
executable code, licensed, sold or leased by Company as licensor or lessor, and
all fixes, updates, upgrades and enhancements heretofore developed or being
developed as well as other software developed or being developed for marketing
to dentists, dental practices, physicians, clinics, hospitals and medical
groups which is owned by Company. A list of the Software is set forth in
Section 1.1(u) of the Disclosure Schedule.
(v) "Trademarks" mean the trademarks listed in Section
1.1(v) of the Disclosure Schedule.
SECTION II.
SALE AND TRANSFER OF COMPANY SHARES; CLOSING
2.1 COMPANY SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Shareholders will sell and transfer the Company
Shares to Buyer, and Buyer will purchase the Company Shares from Shareholders.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Company Shares will be: (a) the sum of Two Million One Hundred Twenty-Eight
Thousand Five Hundred and No/100ths United States Dollars (US$2,128,500.00),
minus the Net Worth Shortfall (as hereafter defined), if any, and (b) a number
of shares of common stock of Buyer equal to the product of (i) One Million Two
Hundred Fifty-Seven Thousand (1,257,000) and (ii) the final exchange ratio
("Exchange Ratio") used to exchange the total number of outstanding shares of
InfoCure to be issued for each share in American Medcare Corporation ("AMC")
prior to the Public Offering. The Exchange Ratio will be that set forth in the
merger agreement pursuant to which AMC will merge into Buyer and will be
applicable to the exchange of all shares of common stock of AMC into shares of
common stock of Buyer. The Exchange Ratio has been tentatively calculated at
0.0640072, which would result in a total of 80,457 shares of common stock of
Buyer. The Exchange Ratio is an estimate only and is subject to change prior
to the Public Offering; provided however, that in no event shall the number of
shares of Buyer issued pursuant to this paragraph 2.2 be less than the quotient
of $522,971 divided by the price to the public per
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<PAGE> 8
share of common stock of Buyer offered pursuant to the SB Registration
Statement (as hereinafter defined).
2.3 CLOSING. The closing ("Closing") of the sale of the Company
Shares as contemplated by this Agreement shall occur at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia at 9:00 a.m. local time
on the day on which the Public Offering commences, or such other date or place
as the parties hereafter mutually agree in writing, subject to the conditions
set forth hereafter. The Public Offering of the common stock of Buyer shall be
deemed to have commenced at the time, which is the latest of (i) the time at
which the Buyer's Registration Statement on Form SB-2 No. 333-18923 ("SB
Registration Statement") as filed with the Securities and Exchange Commission
("Commission") becomes effective, or (ii) the time at which the underwriters
have agreed to purchase the shares of common stock of Buyer pursuant to the
Public Offering or (iii) the time at which the Registration Statement on Form
S4, No. 333-20571 ("S4 Registration Statement") registering the shares of
common stock of Buyer to be issued pursuant to this Agreement and certain other
acquisitions and mergers becomes effective. The sale of the Company Shares
shall be effective on the date of Closing, notwithstanding subsequent delivery
of the Purchase Price as set forth in Paragraph 2.4 below.
2.4 DELIVERY OF PURCHASE PRICE. Delivery by the Buyer of the
shares of Buyer comprising the Purchase Price for the respective accounts of
the Shareholders (less the Escrow Shares described in paragraph 2.5), delivery
of the Escrow Shares to the escrow agent as described in paragraph 2.5, and
payment of the monetary portion of the Purchase Price by certified or official
bank check or checks payable in New York Clearing House (next day) funds or
wire transfers or other means of immediately available funds to the respective
accounts of the Shareholders, shall take place at the offices of Glass,
McCullough, Sherrill & Harrold, LLP in Atlanta, Georgia, or at such other
location as Buyer may designate by written notice to Shareholders, at 10:00
a.m., local time, one business day after Buyer receives the proceeds of the
Public Offering (such time and date of delivery and payment are called the
"Purchase Price Delivery Date").
2.5 ESCROW. On or before the Closing, the parties shall enter
into an Escrow Agreement in a form acceptable to Buyer and the Shareholders
establishing an escrow fund ("Escrow Fund") in an amount equal to 10% of the
Purchase Price. The shares of common stock of Buyer will be valued at the
price to the public of the shares offered in the Public Offering only for
purposes of calculating the Purchase Price. At the option of the Shareholders
the Escrow Fund shall consist of all stock ("Escrow Shares"), all cash or a
combination thereof.
2.6 NET WORTH SHORTFALL.
(a) If the consolidated stockholders' equity of the
Company as of the Closing determined in accordance with GAAP consistent with
the basis on which the Financial Statements referred to in paragraph 3.2 were
prepared is less than negative $100,000 ("Net Worth Shortfall"), the monetary
portion of the Purchase Price shall be decreased by the amount of the
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<PAGE> 9
Net Worth Shortfall; otherwise the monetary portion of the Purchase Price shall
not be adjusted by this paragraph 2.6. For periods during which the Company
pays income taxes on a cash basis, there shall be accrued a deferred liability
for taxes payable by reason of such election to be taxed on a cash basis versus
an accrual basis. The calculation shall be made without taking into effect the
election pursuant to Section 338(h)(10) under the Internal Revenue Code.
(b) The parties shall use their best efforts to estimate
the amount of the adjustment on or prior to the Closing and the Purchase Price
as of the Closing will reflect such tentative adjustment which will be subject
to further adjustment pursuant to the provisions of paragraph 2.6(a). Any
adjustments shall be made by decreasing the monetary portion of the Purchase
Price.
(c) Buyer shall cause, at its expense, a balance sheet of
the Company as of the Closing to be prepared and completed within ninety (90)
days after the Closing. As soon as such financial statement is available to
Buyer, Buyer shall deliver to Shareholders the financial statement.
Shareholders shall have thirty (30) days to review and object to the balance
sheet. Any disagreements as to the amounts of any adjustment to be made to the
balance sheet, if not mutually resolved, shall be resolved as provided in
paragraph 10.5, except that the arbitrator(s) shall be person(s) experienced in
financial and accounting matters. Upon the final resolution of the financial
statement as of the Closing, any adjustment shall be made to the monetary
portion of the Purchase Price as provided in subparagraph 2.6(a) and the amount
of any remaining Net Worth Shortfall (after consideration of the estimate made
pursuant to subparagraph 2.6(b)) shall be immediately paid by the Shareholders
to Buyer; provided however, that any amounts withheld pursuant to subparagraph
2.6(b) in excess of the Net Worth Shortfall shall be refunded promptly by Buyer.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to
Buyer on the date hereof as follows:
3.1 CORPORATE.
(a) Except as set forth in Schedule 3.1(a) of the
Disclosure Schedule, Company is a corporation duly organized, validly existing
and in good standing under the laws of Georgia and is qualified to conduct
business in all other jurisdictions in which the character of its assets and
the nature of its business requires it to be qualified to do business and in
which the failure to be so qualified could have a materially adverse effect on
its business, operations, prospects, assets or financial condition.
(b) A true, correct and complete copy of the Articles of
Incorporation and bylaws of Company are as set forth in Section 3.1(b)(i) of
the Disclosure Schedule. There are
5
<PAGE> 10
51,882 shares of common stock of Company issued and outstanding and there are
no warrants, options, convertible securities or other rights to acquire capital
stock of Company outstanding.
(c) To the knowledge of the Management, Company holds all
licenses, permits, authorizations and other approvals from all governmental
authorities necessary for the conduct of the Business of Company, which failure
could have a material adverse affect on its business, operations, prospects,
assets or financial condition of Company. A complete list of such licenses,
permits, authorizations and approvals are set forth in Section 3.1(c) of the
Disclosure Schedule.
(d) This Agreement constitutes the legal, valid, and
binding obligation of Shareholders, enforceable against Shareholders in
accordance with its terms. Upon the execution and delivery by Shareholders of
the Escrow Agreement, the Escrow Agreement will constitute the legal, valid,
and binding obligation of Shareholders, enforceable against Shareholders in
accordance with its respective terms.
(e) Company has no subsidiaries.
(f) The shareholders of Company of record are the
beneficial owners and the shares of common stock of Company owned by each
shareholder and the holders of all warrants, options, convertible securities
and other rights to acquire common stock of Company are set forth in Section
3.1(f) of the Disclosure Schedule.
3.2 FINANCIAL STATEMENTS. (a) Except as disclosed in Section
3.2(a) of the Disclosure Schedule, the audited balance sheets as of September
30, 1996, and December 31, 1995 and the statements of income of Company for the
nine months ended September 30, 1996 and the year ended December 31, 1995
present fairly in all material respects in the aggregate the results of the
operations of Company during those periods. Said financial statements are
sometimes collectively referred to as "Financial Statements." A true, correct
and complete copy of the Financial Statements are set forth in Section 3.2(a)
of the Disclosure Schedule.
(b) Section 3.2(b) of the Disclosure Schedule contains a
list of the amounts outstanding under all indebtedness of the Company to
financial institutions and other lenders, including loans from shareholders and
capital leases and the principal amounts outstanding as of January 31, 1997.
Correct and complete copies of each such loan agreement, if any, have been
furnished to Buyer.
3.3 CUSTOMERS
(a) Company has granted more than 2,200 licenses to use
the Software to end users. Section 3.3(a)(i) of the Disclosure Schedule
contains the list of the licensed users of the Software who are currently
provided maintenance under an annual maintenance agreement with Company.
Section 3.3(a)(i) of the Disclosure Schedule shall be updated as of
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<PAGE> 11
the Closing. Section 3.3(a)(ii) of the Disclosure Schedule contains a list of
the licensed users of the Software who have contracted for maintenance and
support during the period January 1, 1996 through December 31, 1996 on a time
and materials basis. Section 3.3(a)(iii) of the Disclosure Schedule contains a
list of all customers of Company whose aggregate fees and other charges during
the twelve (12) month period ending December 31, 1996 exceeded $50,000.
(b) Except as set forth in Section 3.3(b) of the
Disclosure Schedule, Company has not received any notice or other communication
(written or, to the knowledge of the Management of Company, oral) from any
customer listed on Section 3.3(a)(i), (ii) or (iii) of the Disclosure Schedule
terminating or reducing in any material respect the amount of business
conducted with Company. To the knowledge of the Management of Company, the
consummation of the transactions contemplated herein will not have a material
adverse effect on the business relationships with any of the customers listed
on Section 3.3(a)(iii) of the Disclosure Schedule.
(c) Section 3.3(c) of the Disclosure Schedule sets forth
a list of licensees of the Software for which Company has any warranty or other
unfulfilled obligation under the applicable License Agreement and a description
of the unfulfilled obligation and the agreement under which it arises. Company
is not in material breach of its obligations thereunder.
3.4 ABSENCE OF CERTAIN FINANCE AND BUSINESS CHANGES
(a) Since September 30, 1996, there has not been any (i)
event or events due to actions or omissions of the Company and/or its employees
which will have a material adverse effect taken as a whole on the financial
condition or Business of Company (including software and service revenues)
except as set forth in Section 3.4(a) of the Disclosure Schedule or (ii)
declaration or payment of any dividend on the capital stock or the redemption
of any shares of capital stock of Company, except as set forth in Section
3.4(a) of the Disclosure Schedule.
(b) Since September 30, 1996, no material loss, damage or
destruction of the tangible assets has occurred, whether or not covered by
insurance, which had a material adverse affect on the financial condition of
Company or on the Business.
(c) Since September 30, 1996, the Business has been
conducted substantially in the manner heretofore conducted consistent with past
practices, including with respect to the fees charged and the terms and
conditions of the License Agreements and maintenance and support agreements
entered into, and no waiver or release of any right was granted by Company
except (i) of an immaterial value and (ii) in the ordinary course of business
consistent with past practices, and no assets of the Company were sold except
for the licensing of the Software and sale of Third Party Software and sale of
hardware in the ordinary course of the Business or sale of tangible assets
which were immaterial.
7
<PAGE> 12
3.5 GUARANTIES/LIENS. Company is not guaranteeing the obligations
of any person and has no commitment to guarantee any of the obligations of any
person and is not currently granting and Company has no commitment to grant to
anyone an interest in or liens on any of its assets to secure the obligations
of Company or another except as set forth in Section 3.5 of the Disclosure
Schedule.
3.6 NO UNDISCLOSED LIABILITIES.
Except as set forth in Section 3.6 to the Disclosure Schedule,
Company has no liabilities, absolute or contingent, known or unknown, except
those recorded on the Financial Statements as of September 30, 1996 and those
incurred in the ordinary course of business of Company since September 30,
1996, all of which are recorded on the financial books and records of Company,
are consistent with past practices and are not in the aggregate materially
adverse to the financial condition or prospects of Company.
3.7 ACCOUNTS RECEIVABLE. Except as set forth in Section 3.7 of
the Disclosure Schedule, the accounts receivable of Company, billed and
unbilled, as of the Closing will be valid and enforceable obligations of third
parties and will be collectible in full, without offset or fulfillment of any
condition, within six (6) months of their due date without the engagement of
any collection agency or attorney or the commencement of any action, except to
the extent of any reserves for bad debts and doubtful accounts established on
its financial books and records as of the Closing, which reserves have been
established in a manner which is consistent with past practices. In the event
that any such receivables are not collected within said six months, in
determining amounts to be indemnified pursuant to Article X, any subsequent
recovery net of the cost of recovery shall be deducted from the amounts to be
indemnified for all purposes.
3.8 OWNERSHIP OF INTELLECTUAL PROPERTY
(a) Software. Except as set forth in Section 3.8(a) of
the Disclosure Schedule, Company is the sole and exclusive owner (including as
copyright owner) throughout the United States of (i) the Software, including
the software and software code developed or being developed by or on behalf of
or at the request of Company (regardless of the state of the development of the
software and whether it has been released); and (ii) the Software constitutes
all the software used and/or licensed in the conduct of the Business of
Company, except for the Distributor Software and the Development Software.
Except as set forth in Section 3.8(a) of the Disclosure Schedule, Company has
not granted licenses to others to use or to sublicense others to use the
Software outside of the United States and to the knowledge of the Management,
the Software or derivatives thereof are not being used or distributed outside
of the United States.
(b) Other Intellectual Property Rights. Except as set
forth in Section 3.8(b)(i) of the Disclosure Schedule, Company is the sole and
exclusive owner throughout the United States of (i) all Copyrights, whether or
not registered, including but not limited to moral rights; (ii) all other
Intellectual Property rights, including, without limitation, trade secrets,
know-how,
8
<PAGE> 13
inventions (patented and unpatented), and discoveries, embodied in or used in
the development of the Software, or any part thereof, and the screen displays
generated by the Software; and (iii) all Documentation; in each case except the
Development Software used in the development of the Software and the
Distributor Software. The Copyrights, Trademarks, Software, Documentation, and
other Intellectual Property of Company are collectively hereinafter referred to
as "Company Intellectual Property". Section 3.8(b)(ii) of the Disclosure
Schedule contains a correct and complete list of all registered Copyrights, the
date of registration and jurisdiction of such registrations. Company has not
filed any patent applications and does not hold any patents.
(c) Trademarks. Company is the sole and exclusive owner
of the Trademarks which include all identifying names and marks which are
associated with the Software or which are otherwise used in the Business
conducted by Company. A complete and correct list of all such Trademarks is
set forth in Section 1.1(v) of the Disclosure Schedule, none of which are
registered or have any applications for registrations pending. Section 1.1(v)
of the Disclosure Schedule also lists the date of registration, registration
number and jurisdiction of the registration of each Trademark or the date of
application if the trademark application is pending.
(d) Software Developers. Section 3.8(d) of the
Disclosure Schedule sets forth the list of all persons and entities (other than
past or present full-time employees of Company) that have been engaged by the
Company at any time, directly or indirectly, in the design, development,
correction, improvement, modification, and/or enhancement of the Software,
Copyrights and/or Trademarks. Section 3.8(d) of the Disclosure Schedule also
identifies the written agreements and describes all oral agreements pursuant to
which each such person or entity assigned or licensed its rights in such
intellectual property to Company or acknowledged Company's ownership rights
therein. Correct and complete copies of each such agreement or assignment or
license has been furnished to Buyer. The employees and former employees of
Company do not have any right, title or interest in the Software,
Documentation, Copyrights, Trademarks, or other Company Intellectual Property.
Section 3.8(d) of the Disclosure Schedule sets forth the current form of
agreements with its employees regarding ownership of the Company Intellectual
Property.
(e) Rights of Licensees. The ownership rights of Company
in Company Intellectual Property are subject only to the non-exclusive licenses
granted (i) to end users and (ii) to distributors of the Company as described
in Paragraph 3.10 of this Agreement.
(f) No Infringements. The Company Intellectual Property
does not, and did not at any time, violate or infringe any copyright, patent,
trade secrets, know-how, trademarks or other intellectual property rights of
any third party, is not in the public domain, has not been licensed by Company
and/or permitted to be duplicated by Company except as disclosed in this
Agreement or provided by law and, to the knowledge of the Management of
Company, the Company Intellectual Property (i) has not been duplicated except
as permitted under the applicable licenses and law, (ii) has not been reverse
compiled or engineered and (iii) there are no
9
<PAGE> 14
claims or actions pending or threatened or which have been brought asserting
such violation or infringement or that any Company Intellectual Property is in
the public domain.
(g) Distribution Software and Development Software.
Section 3.8(g)of the Disclosure Schedule sets forth the complete and correct
list of license agreements pursuant to which Distribution Software and
Development Software is licensed to Company. Company does not license to
others Distribution Software or Development Software.
(h) Confidentiality. Company has taken the actions
described in Section 3.8(h) of the Disclosure Schedule with respect to
maintaining the confidentiality of the Company Intellectual Property.
(i) Source Code Escrow Agreements. Section 3.8(i) of
the Disclosure Schedule contains a list of all source code escrow agreements
entered into by Company and all agreements licensing the source code or
agreeing to license the source code of the Software. Correct and complete
copies of such agreements have been heretofore provided to Buyer.
(j) Clear Title. Except for liens for taxes not yet
due, the right, title and ownership of Company in the Company Intellectual
Property and all other assets of Company are free and clear of all mortgages,
liens, restrictions as to its use or right to license its use, security
interests and ownership rights of others except as set forth in Section 3.8(j)
of the Disclosure Schedule.
3.9 PROPERTY AND EQUIPMENT.
(a) Section 3.9 of the Disclosure Schedule lists the
fixed assets, including equipment, used in the Business as currently conducted
which are owned by Company and those which are leased by Company ("Leased
Property"). Section 3.9 of the Disclosure Schedule contains a correct and
complete copy of the agreements for the Leased Property. The fixed assets
owned by the Company and the Leased Property are generally in good operating
condition and repair, reasonable wear and tear excepted and constitute all of
the fixed assets used in the Business.
(b) Company is not in default in the payments due under
the leases of the Leased Property or any other obligation which would give the
lessor the right to terminate the lease for such Leased Property.
(c) Since December 31, 1996, Company has not sold or
otherwise disposed of any fixed assets, other than in the ordinary course of
business.
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<PAGE> 15
3.10 LICENSE AGREEMENTS.
(a) Except as disclosed in Section 3.10(a) of the
Disclosure Schedule, Company has not sold to others or leased or licensed
others to use the Company Intellectual Property, or any part thereof, except
the granting of written non-exclusive rights (i) to end users to use released
versions of the Software and Documentation in the ordinary course of the
Business pursuant to end user license agreements; and (ii) to distributors,
dealers, OEM's and other remarketers (collectively "Distributors") to use and
sublicense the Software and Documentation. Section 3.10(a) of the Disclosure
Schedule contains a correct and complete list of the Distributors. A correct
and complete copy of all written agreements with Distributors currently
outstanding has been previously furnished to Buyer. To the extent any
agreement with a Distributor is not in writing, a complete description of the
understanding is set forth in Section 3.10(a) of the Disclosure Schedule.
(b) The standard form of end user license agreement
currently used by Company to license the Software is contained in Section
3.10(b) of the Disclosure Schedule.
(c) Section 3.10(c) of the Disclosure Schedule contains a
list of all License Agreements under which Company has not completed its
performance thereunder, except for ongoing warranty and maintenance and support
undertakings contained therein, which list shall be updated as of the Closing.
(d) Unfulfilled warranty obligations under the License
Agreements are described in Section 3.10(d) of the Disclosure Schedule, which
description shall be updated as of the Closing. To the knowledge of
Management, all such obligations can be fulfilled in the ordinary course of
providing support and maintenance services.
(e) Company is not in default of any material obligations
under any License Agreement.
(f) Section 3.10(c) of the Disclosure Schedule also
includes all outstanding commitments to sell, lease or license any Company
Intellectual Property hereafter.
(g) Except as described in Section 1.1(g) of the
Disclosure Schedule, Company does not license or sublicense any Distributor
Software and is not a distributor of any software developed by others.
3.11 CONSULTING AND DEVELOPMENT AGREEMENTS. Except as described in
Section 3.11 of the Disclosure Schedule, there are no consulting and software
development agreements, written or oral, entered into by Company pursuant to
which others performed or are performing services to Company as a consultant or
in a similar capacity relating to software development or are developing
software (regardless of the party who is to hold title to the software) for
Company for use or license by Company.
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3.12 MAINTENANCE/COMMITMENTS
(a) Section 3.12(a) of the Disclosure Schedule sets forth
a correct and complete description of all commitments of Company outstanding to
provide support and/or maintenance services for any customer, including to
provide patches, corrections, improvements, modifications and enhancements of
the Software, ("Maintenance Agreements"). A copy of all written Maintenance
Agreements has been made available to Buyer and, to the extent the Maintenance
Agreements are not in writing, a complete description of the understanding is
set forth in Section 3.12(a) of the Disclosure Schedule. The current standard
form of Maintenance Agreement is set forth in Section 3.12(a) of the Disclosure
Schedule.
(b) Section 3.12(b) of the Disclosure Schedule sets forth
all commitments of Company to develop any special feature or function for any
customer or to port any software for any customer not otherwise disclosed
pursuant to this Agreement ("Development Agreements"). A correct and complete
copy of the written Development Agreements have been furnished to Buyer and a
description of all oral agreements is set forth in Section 3.12(b) of the
Disclosure Schedule. To the extent any such agreement or commitment, where
legally binding, is oral, a summary thereof is set forth in Section 3.12(b) of
the Disclosure Schedule.
(c) Company has substantially complied with its
obligations under the Maintenance Agreements and Development Agreements and
there is no default by Company arising under the Maintenance Agreements or
Development Agreements which could give the other party the right to terminate
the agreement or to demand monetary damages.
3.13 ALL INTANGIBLE ASSETS USED IN THE BUSINESS. The Company
Intellectual Property, the Distributor Software and the Development Software
constitute all of the intangible assets used in the conduct of the Business as
conducted since September 30, 1996 and as currently being conducted by Company.
3.14 EMPLOYEES/CONSULTANTS/DIRECTORS
(a) Section 3.14(a) of the Disclosure Schedule sets forth
a list of all current employees and consultants engaged by Company or serving
in such capacity as of December 31, 1996 and their compensation. Section
3.14(a) of the Disclosure Schedule will be updated as of the Closing;
(b) The employees of Company are not represented by any
collective bargaining representative or otherwise organized;
(c) Section 3.14(c) of the Disclosure Schedule lists all
employee benefit plans which are currently in effect or as to which Company has
any ongoing obligation or liability. The term "employee benefit plan" means
any employment or consulting contract, deferred compensation, profit sharing,
pension, bonus, stock option, stock purchase or other fringe benefit
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or compensation arrangement or commitment, written or oral, including each
welfare plan (as defined in Section 3(1) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"), which Company has established or
maintained or in which any of its employees participate or have participated or
under which Company has an obligation to make contributions or to pay benefits.
Company has no obligations to provide any benefits to any retired or former
employees, including medical and hospital benefits (excluding COBRA);
(d) Company has no ERISA affiliate and never had an ERISA
affiliate;
(e) The 401(k) Plan made available to employees of
Company is in substantial compliance and has been in substantial compliance
with all applicable laws and regulations regarding the establishment,
maintenance and operation of the 401(k) Plan and all contributions by Company
have been paid or properly accrued on its financial books and all required
reports have been timely filed; and
(f) Company has no employment contracts or agreements
with any of its employees. Schedule 3.14(f) of the Disclosure Schedule
contains a copy of the most recent employee benefit brochure provided or made
available to the employees of the Company. Except as set forth in Section
3.14(f), all employees are "at will" employees of Company.
3.15 ASSUMED AGREEMENTS
(a) Sections 3.2(b), 3.10(b) and (d), 3.12(a), 3.12(b) or
3.15(a) of the Disclosure Schedule list all agreements of Company as of
December 31, 1996 under which the Company has not performed all of its
obligations not otherwise disclosed in the Disclosure Schedule (i) for amounts
payable to it in excess of $5,000 or (ii) which are not to be fulfilled within
six (6) months of the Closing other than Maintenance Agreements ("Material
Contracts"). Section 3.15(a) shall be updated as of the Closing. Such
commitments represent all of the then outstanding Material Contracts and, to
the knowledge of the Management of Company, all of the Material Contracts can
be performed by the Company in the ordinary course of business without a
financial loss to Company.
(b) Company is not in default of any term or condition
under any Material Contract in the Disclosure Schedule and no default by
Company has occurred which under any such Material Contract could constitute a
default which would give the other party the right to terminate the Material
Contract or to demand money damages.
(c) Company has not waived any of its material rights
under any Material Contracts nor is the other party to the Material Contracts
in default in any material respect under any such agreement.
(d) Correct and complete copies of the Material Contracts
listed in Section 3.15(a) of the Disclosure Schedule have been made available
to Buyer.
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3.16 LITIGATION AND ADVERSE EVENTS. There are no investigations,
suits, actions, administrative, arbitration or other proceedings pending, or,
to the knowledge of the Management of Company, threatened against Company.
3.17 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 3.17 of the Disclosure Schedule, Company is in substantial compliance
with all applicable laws, statutes, ordinances, permits and regulations,
including all such laws, statutes, ordinances and regulations relating to
wages, tax withholdings, hours, equal pay, equal opportunity, and pollution of
the environment, and there are no violations which, if enforced, would
materially adversely affect the Business or prospects of the Business after the
Closing or the value of the Business; and no proceeding alleging any such
violation is pending or, to the knowledge of the Management of Company,
threatened.
3.18 TAXES AND TAX RETURNS
(a) Except as set forth in Section 3.17 of the Disclosure
Schedule, Company has timely filed with the appropriate governmental agencies
all tax returns and reports required to be filed by it (or obtained extensions
in which to file). Except as set forth in Section 3.17 of the Disclosure
Schedule, Company has timely paid or accrued all taxes and tax withholdings.
No representations are made in this Agreement regarding the liability of the
Company for any taxes resulting from the exercise of the election by the
Shareholders under Sections 338(h)(10) of the Internal Revenue Code.
(b) Company has provided Buyer with correct and complete
copies of all tax returns, including income, property and sales tax returns
filed for the years 1992 to date. No tax returns of the Company are currently
being audited by any governmental authority.
3.19 CONSENTS. No consents or approvals are required to effect the
transactions contemplated herein by Company and Shareholders, except as set
forth in Section 3.19 of the Disclosure Schedule.
3.20 BROKERS AND FINDERS. None of the Shareholders or the Company,
nor any of its officers, directors, employees or agents have employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement which is payable, directly or indirectly, by Buyer or Company.
3.21 RELATED TRANSACTIONS. Section 3.21 of the Disclosure Schedule
contains a complete and correct list of all transactions since September 30,
1996 between Company and any Shareholder or Affiliate of any Shareholder except
employment and related benefits arising therefrom and other transactions
disclosed as being between a Shareholder or an Affiliate of any Shareholder and
Company in the Disclosure Schedule.
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3.22 NO UNTRUE STATEMENTS. No statements (including
representations and warranties) contained in this Agreement (including in the
Disclosure Schedule and documents described as having been provided to Buyer in
this Agreement or in the Disclosure Schedule), contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements herein and therein contained not materially misleading.
SECTION IV.
INVESTOR REPRESENTATIONS REGARDING THE SECURITIES
4.1 INVESTMENT REPRESENTATIONS.
Each Shareholder represents to Buyer as follows:
(a) The Shareholder is acquiring the common stock of
Buyer for the account of the Shareholder (and not for others) and for
investment purposes only and not with a view to distribution, as such is
defined by the Securities Act of 1933, as amended ("Act"), or any rule or
regulation promulgated thereunder ("Rules"), in violation of the Act or any of
the Rules.
(b) The Shareholder has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating
the merits and economic risks of this particular investment and acknowledges
that an investment in the common stock of Buyer involves numerous risks,
including the risks set forth in the S4 Registration Statement.
(c) Unless the common stock of Buyer are issued pursuant
to the S4 Registration Statement, the Shareholder agrees that the certificate
or certificates representing the common stock of Buyer shall be inscribed with
the legend that such stock may not be transferred in the absence of an
effective registration statement under the Act covering the stock or an opinion
of counsel satisfactory to Buyer that registration is not required. In
addition such stock may not be transferred except as permitted under the
provisions of the standstill agreement set forth in paragraph 8.2 hereof and
the Act and Rules.
(d) In making this decision to acquire the common stock
of Buyer, the Shareholder has been given the opportunity to discuss the
business, management and financial affairs of Buyer with officers of Buyer and
has had the opportunity to ask questions of, and receive answers from, such
officers and to obtain additional information necessary to verify the accuracy
of the information received and to evaluate Buyer and an investment in the
common stock of Buyer and the Shareholder desire no further information for
such evaluation. The Shareholder acknowledges receipt of a copy of the S4
Registration Statement as filed with the Securities and Exchange Commission on
January 28, 1997.
(e) The Shareholder acknowledges that no representations
were made by Buyer to the Shareholder with respect to the business, management
or financial affairs of Buyer except as set forth in Section V of this
Agreement, and except that Buyer and American Medcare
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Corporation ("AMC") are negotiating with several companies the purchase or
merger of their businesses by or into Buyer or subsidiary ("Acquisitions") and
the financing of the cash payments for such purchases through the Public
Offering. The Shareholder acknowledges that there can be no assurances that
the Acquisitions will be effected or that the Public Offering will occur or
that the net proceeds of the Public Offering will be sufficient to meet the
obligations of Buyer, including working capital requirements, or that Buyer
will be profitable after the Acquisitions. The Shareholder acknowledges that
no representations are made by Buyer as to the definitive Exchange Ratio.
(f) The Shareholder acknowledges that no representations
are or were made by Buyer with respect to the business or financial affairs of
Buyer except as set forth herein in the S4 and SB Registration Statements; and
no representations are made with respect to any business plan or projections by
Buyer.
4.2 OWNERSHIP OF COMPANY SHARES. Each Shareholder represents to
Buyer that the Shareholder is the sole and exclusive record and beneficial
owner of all shares of Company Shares registered in the Shareholder's name as
set forth in Section 3.1(f) of the Disclosure Schedule. Section 3.1(f) of the
Disclosure Schedule contains the principal residence or domicile of the
Shareholder. Each Shareholder represents that the shares of Company Shares
registered in the Shareholder's name are free and clear of any and all liens,
restrictions, claims, charges, options, rights of first refusal or
encumbrances, with no defects of title whatsoever. Each Shareholder has the
exclusive right, power and authority to vote and to transfer the Company Shares
registered in the Shareholder's name. Each Shareholder represents that the
Shareholder's right, title and interest in the Company Shares were acquired on
or before January 1, 1994 and no other person has any right, title or interest
therein, except as set forth in Section 3.21 of the Disclosure Schedule.
SECTION V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Shareholders on the date
hereof as follows:
5.1 ORGANIZATION AND STANDING OF BUYER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; has full corporate power and authority to conduct the
business of developing, distributing and marketing software, including through
its subsidiaries, and has full right, power and authority to issue the shares
of common stock as part of the Purchase Price contemplated by this Agreement.
5.2 AUTHORIZATION.
(a) The execution, delivery and performance of this
Agreement including the issuance of the common stock of Buyer, have been duly
authorized by all requisite corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and
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constitutes the legal, valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms. Upon the execution and delivery by
Buyer of the Escrow Agreement, the Escrow Agreement will constitute the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
(b) The execution and delivery of this Agreement, and the
consummation by Buyer of the transactions contemplated herein on the Closing,
will not (with or without the giving of notice, lapse of time or both) violate,
conflict with, or result in a default under, any of the provisions of the
certificate of incorporation or by-laws of Buyer, any mortgage, indenture,
contract, agreement, license, permit, instrument, judgment, decree, order,
statute, regulation or ruling of any court or governmental authority to which
Buyer or any subsidiary is a party or by which it is bound.
(c) The common stock of Buyer to be issued and delivered
to Company will be validly issued, fully paid and non-assessable securities and
will not be subject to any outstanding warrants, options, preemptive rights or
other restrictions except those arising under applicable federal and state
securities laws.
5.3 BROKERS AND FINDERS. Neither Buyer nor any of its officers,
directors, employees or agents have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement which is
payable directly or indirectly by the Shareholders.
5.4 NO UNTRUE STATEMENTS. No statements (including
representations) by Buyer contained in this Agreement, and no written
statements furnished by Buyer to the Shareholders pursuant to this Agreement,
contain any untrue statement of a material fact, or omit to state a material
fact necessary in order to make the statements therein contained not misleading.
5.5 S4 REGISTRATION STATEMENT. The S4 and SB Registration
Statements do not contain any untrue statement of a material fact or omits to
state therein such facts required to be stated therein or necessary to make
such statements therein not misleading. The foregoing representation does not
include any statement in the S4 and SB Registration Statements furnished to the
Buyer or AMC by any Shareholder for use in connection with the preparation of
the S4 and SB Registration Statements or any omission by any Shareholder to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION VI.
CONDITIONS TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be
performed on or prior to the Closing shall be subject to the satisfaction on or
prior to the Closing of each of the following conditions, any of which
condition may be waived in writing by Buyer, but such waiver shall not waive
any representation, warranty or covenant of the Shareholders.
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6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by any Shareholder herein as of the date of
this Agreement shall be true and correct in all material respects on the
Closing with the same effect as though made on the Closing; Shareholders shall
have performed and complied with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by them prior to
or on the Closing; and Shareholders shall have delivered to Buyer a certificate
of the Shareholders dated the Closing, certifying as to the fulfillment of the
foregoing conditions.
6.2 THIRD PARTY CONSENTS. All consents, approvals or
authorizations from third parties or government agencies required to consummate
the transactions contemplated hereby and contemplated by this Agreement,
including the consents set forth pursuant to paragraph 3.19.
6.3 OPINION OF COUNSEL TO THE SHAREHOLDERS. An opinion of counsel
to the Shareholders dated the Closing and addressed to Buyer reasonably
satisfactory in all respects to Buyer.
6.4 AUTHORIZATION. Evidence that all actions required to be taken
by the Shareholders or Company pursuant to this Agreement, including the
execution and delivery thereof, has been taken to authorize and consummate the
transactions contemplated herein.
6.5 UPDATE DISCLOSURE SCHEDULE. The Shareholders shall have
updated the Disclosure Schedule as herein provided.
6.6 PUBLIC OFFERING. The Public Offering shall have commenced.
6.7 ESCROW AGREEMENT. The parties have entered into the Escrow
Agreement.
6.8 EMPLOYMENT AGREEMENT. Buyer and Donald M. Rogers shall have
entered into an employment agreement in form and substance satisfactory to
Buyer.
6.9 SECTION 338(H)(10) ELECTION. The Shareholders shall have
delivered to Buyer an election under Section 338(h)(10) of the Internal Revenue
Code for Company on Internal Revenue Service Form 8023-A in accordance with
paragraph 8.3 hereof.
6.10 S4 REGISTRATION STATEMENT. The S4 Registration Statement,
which includes shares of common stock of Buyer to be issued pursuant to the
transactions contemplated by this Agreement has been declared effective by the
Commission.
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SECTION VII.
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS
Each and every obligation of the Shareholders under this Agreement to
be performed on or prior to the Closing shall be subject to the satisfaction on
or prior to the Closing of each of the following conditions, any of which
conditions may be waived in writing by the Shareholders, but such waiver shall
not waive any representation, warranty, or covenant of Buyer:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The
representations and warranties made by Buyer herein as of the date of this
Agreement shall be true and correct in all material respects on the Closing
with the same effect as though made on the Closing; Buyer shall each have
performed and complied with all agreements, covenants and conditions required
by this Agreement to be performed and complied with by it on or prior to the
Closing; and Buyer shall have delivered to the Shareholders a certificate of an
officer of Buyer dated the Closing, certifying as to the fulfillment of the
foregoing conditions.
7.2 OPINION OF COUNSEL TO BUYER. An opinion of Glass, McCullough,
Sherrill & Harrold LLP, counsel to Buyer, dated the Closing, reasonably
satisfactory in all respects to the Shareholders.
7.3 PUBLIC OFFERING. The Public Offering shall have commenced.
7.4 ESCROW AGREEMENT. The parties have entered into the Escrow
Agreement.
7.5 S4 REGISTRATION STATEMENT. The S4 Registration Statement,
which includes shares of common stock of Buyer to be issued pursuant to the
transactions contemplated by this Agreement has been declared effective by the
Commission.
7.6 AUTHORIZATION. Evidence that all actions required to be taken
by Buyer pursuant to this Agreement have been taken, including its instructions
to the transfer agent to issue the common stock of Buyer and deliver the
certificates to the Shareholders and/or Escrow Agent and delivery of copies of
the articles of incorporation, bylaws, and board resolutions certified by the
secretary or assistant secretary of Buyer evidencing the authorization of the
issuance of the common stock of Buyer.
7.7 COMMON STOCK OF BUYER. The common stock of Buyer is delivered
by Buyer to the Shareholders.
7.8 THIRD PARTY CONSENTS. All consents, approvals or
authorizations from third parties or government agencies required to consummate
the transactions contemplated hereby and contemplated by this Agreement.
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7.9 EMPLOYMENT AGREEMENT. Donald M. Rogers and Buyer shall have
entered into an Employment Agreement in form and substance satisfactory to
Donald M. Rogers.
SECTION VIII.
OTHER COVENANTS
8.1 CONDUCT OF BUSINESS. From the date hereof to the Closing,
except as otherwise consented to or approved by Buyer in writing, the
Shareholders hereby covenant and agree that they shall cause Company:
(a) Maintain Corporate Existence, Etc. (i) to conduct
the Business in a diligent manner, consistent with past management practices,
including maintaining adequate personnel to maintain, develop, enhance, support
and market the Software; (ii) to market and license the Software and
Distributor Software and Hardware to end users, and with the written consent of
Buyer, to distributors; (iii) grant non-exclusive licenses of the Software and
Distributor Software to end users pursuant to its standard end user license
agreement at its standard fees in the ordinary course of its business and (iv)
not appoint new distributors without the prior written consent of Buyer;
provided however, that Company may discharge without consideration a certain
loan owed from Donald Rogers of approximately $51,030, including principal and
interest.
(b) Disposition of Assets. Not to sell or otherwise
dispose of any asset except for the granting of non-exclusive licenses as
permitted pursuant to paragraph 8.1(a).
(c) Full Access. To afford to Buyer, and to its counsel,
accountants and other authorized representatives, full access to the
facilities, contracts, books, records, Software, key personnel and public
accountants of Company during normal business hours upon reasonable prior
notice; and to cause its officers and employees to promptly furnish such
additional financial and operating data and other information as Buyer or its
authorized representatives shall from time to time reasonably request.
8.2 STANDSTILL AGREEMENT. Each Shareholder agrees to execute the
standstill agreement in the form attached hereto as Exhibit 8.2. Buyer
represents that the form of the standstill agreement is identical to those
being executed by the directors and executive officers of Buyer.
8.3 SECTION 338(H) (10) ELECTION. The Shareholders shall deliver
to Buyer an election under Section 338(h)(10) of the Internal Revenue Code for
Company on Internal Revenue Service Form 8023-A in accordance with the
instructions to the form. The Buyer and Shareholders agree to allocate the
Purchase Price among the assets of the Company in accordance with Treasury
Regulation Section 1.338(h)(10)-1 and the other Treasury Regulations referred
to therein, as determined by Buyer's and the Company's independent certified
public accountants prior to Closing.
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8.4 COVENANTS RELATING TO TAXES. Following Closing, in the event
that the Company receives notice of any audit of any tax return for the Company
for any taxable period, through and including the Closing Date by any taxing
authority, except as specifically provided below, the Company shall promptly
notify the Shareholders, individually, of the commencement of any such audit or
examination and the Shareholders may participate in such audit or examination
and shall be kept fully apprised of the progress of such audit or examination.
For taxable periods prior to and through the Closing Date, except as
specifically provided below, the Shareholders shall have the right to control
any audit or examination relating to state and federal income taxes ("Taxes")
of the Company by any taxing authority, including but not limited to initiating
any claims, filing any original or amended returns, contesting, resolving, and
defending against any assessment, notice of deficiency or other adjustment or
proposed adjustment relating to or with respect to any Taxes of the Company
after reviewing such action with the Company, and shall be entitled to any
refunds with respect to such taxable periods payable to the Shareholders. The
Shareholders shall keep the Company fully apprised of the progress of such
audit or examination and the Company may participate in such audit or
examination. The Shareholders agree that they will not agree to any audit
adjustment or revision that would result in taxable income to the Company,
without the Company's approval. The Company agrees that it will not agree to
any audit adjustment or revision that would adversely affect the taxable
incomes of the Shareholders, individually, without the Shareholders' approval,
which approval shall not be unreasonably withheld.
The Company shall pay the federal and state tax liabilities arising out of the
Section 338(h)(10) election to be made by the Shareholders as provided in
Section 8.3 of this Agreement. The Company shall have control over all audits
or examinations relating to taxes of the Company related to periods after the
Closing and to the Section 338(h)(10) election. The Company shall keep the
Shareholders fully apprised of the progress of such audit examination and the
Shareholders may participate in such audit or examination. The Company agrees
that it will not agree to any audit or revision that would result in taxable
income to the Shareholders, without the Shareholders' approval, unless the
Company promptly pays such liability.
SECTION IX.
CONFIDENTIALITY AND SECURITY
9.1 CONFIDENTIALITY
(a) The parties acknowledge that information, documents
and materials regarding each other have heretofore been exchanged under a
confidentiality understanding. The provisions of this Section IX reflect the
understanding with respect to, and shall govern, all such exchanges and the
permitted use and disclosure by a party or its Affiliate hereafter of any
confidential information and trade secrets of the other party, regardless of
when acquired. Each party hereto hereby agrees that all information, documents
and materials the party ("Recipient") received heretofore and receives or
obtains hereafter from any other party or its Affiliate ("Owner") shall be
considered valuable assets of the Owner and shall at all times be treated by
the Recipient and the officers, directors, employees and agents of the
Recipient as confidential
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information or trade secrets of the Owner if so identified as such or which
under the circumstances surrounding disclosure ought to be treated as
confidential information or trade secrets of the Owner. Each party hereto, as
a Recipient, hereby agrees that it shall not hereafter (and shall use
commercially reasonable efforts to ensure that its Affiliates, officers,
directors, employees and consultants do not) in any manner, directly or
indirectly (i) transmit, disclose or otherwise communicate or make available
any such confidential information or trade secrets to any third party, or (ii)
use the same for its own account or for the benefit of any third party, other
than as permitted by this Agreement; or (iii) make any copies of any such
confidential information or trade secrets except as is necessary to perform its
obligations or exercise its rights hereunder. The parties each agree not to
reverse engineer or reverse compile the computer software of any other party
hereto.
(b) Each party hereto, as a Recipient, hereby shall take
all commercially reasonable actions necessary or desirable, including with
respect to its officers, directors, employees and consultants having access to
the confidential information or trade secrets of the Owner, to satisfy its
obligations to protect and maintain the confidentiality and security of such
confidential information or trade secrets, including the source code of the
Software.
(c) It is recognized and acknowledged between the parties
hereto that the covenants respecting confidentiality set forth in this Section
IX hereof are essential elements of this Agreement and shall continue after the
Closing or the termination of this Agreement for any reason. Each party
further acknowledges that the Owner of the confidential information and trade
secrets may have no adequate remedy at law if the Recipient shall violate the
terms thereof. In such event, the Owner shall have the right, in addition to
any other rights and remedies it may have, to obtain in any court of competent
jurisdiction injunctive relief or other equitable relief with regard to any
breach or threatened breach thereof or otherwise specifically enforce the
provisions of this Agreement without proof of actual damages.
(d) The parties each agree as follows:
(i) Confidential information or trade secret of
the Owner that is disclosed to Recipient or to which Recipient obtains access
shall not be disclosed by Recipient to others, except to directors, officers,
employees and consultants of the Recipient having a need to know in connection
with the consideration and/or consummation of the transactions contemplated
herein and Recipient shall be responsible for such other person's compliance
with the confidentiality obligations of this Section IX.
(ii) The Recipient, when receiving such
confidential information or trade secrets from the Owner, shall protect such
confidential information and trade secrets with the same degree of care that
Recipient regularly employs to safeguard its own confidential information or
trade secret of like importance from unauthorized use or disclosure.
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(iii) The rights and obligations of the parties
with respect to all such confidential information and trade secrets of the
Owner that is disclosed and subject to this Agreement shall survive termination
of this Agreement and shall remain in effect for a period of five (5) years
from the date of this Agreement; provided, however, that the expiration of the
above five (5) years shall not affect any rights of the parties with respect to
patents, trademarks, copyrights and trade secrets and trade secrets shall be
protected as long as they may be legally protected or constitute a trade
secret.
(iv) Any portion of such Owner's confidential
information or trade secret that:
(A) is rightfully received from a third
party, who has a lawful right to disclose it, without accompanying markings or
disclosure restrictions;
(B) is independently developed by
employees of the Recipient who have not had access to such confidential
information or trade secret;
(C) is or becomes publicly available
through no wrongful act of the Recipient;
(D) is already known by the Recipient as
evidenced by documentation bearing a date prior to the first date of disclosure
by the Owner; or
(E) is approved for release in writing
by the President of the Owner;
is not entitled to the protection provided in this Section IX, except for
patent, trademark and copyright protection as provided by law.
(e) Confidential information and trade secrets of Company
have been and will be used by Buyer only in connection with its evaluation of
Company and the decision to acquire the capital stock of Company and
confidential information and trade secrets of Buyer have been and will be used
by them and the Shareholder only in furtherance of the acquisition as
contemplated herein.
(f) Notwithstanding the foregoing, nothing herein shall
restrict the right of either party to disclose such confidential information or
trade secret that is disclosed pursuant to a judicial or administrative order,
but only to the extent so ordered, provided, however, that the party receiving
such order shall notify the other party of such order in sufficient time to
permit such other party to intervene in response to such order.
(g) All such confidential information and trade secrets
and copies thereof of Owner shall remain the property of the Owner. All such
written confidential information and
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trade secrets, and any copies thereof, shall be promptly returned to the Owner
upon written request, or destroyed at the Owner's options. All reports and
other documents prepared by a Recipient containing any such confidential
information or trade secrets shall be destroyed at the Owner's written request
and the Recipient shall so certify to Owner upon Owner's request that it has
been destroyed. The restrictions on disclosure and use shall survive the
return and destruction of such written confidential information and trade
secrets, reports and other documents and the Closing of the transactions
contemplated by this Agreement.
(h) Upon the Closing, all trade secrets and confidential
information owned by Company shall be deemed to be owned by Buyer as of the
Closing for purposes of this Agreement, including this Section IX.
(i) Notwithstanding the foregoing, nothing in this
Section IX shall restrict the disclosure of any confidential information in any
registration statement filed with the Commission in contemplation of the Public
Offering, including the prospectus which is a part thereof, and the public
distribution of the prospectus, including preliminary prospectuses and
registration statement.
SECTION X.
INDEMNIFICATION
10.1 INDEMNIFICATION BY THE SHAREHOLDERS.
(a) The Shareholders hereby agree, jointly and severally,
to indemnify and hold Buyer and Company, including the successor of the
Business (collectively "Buyer" for purposes of this Section X only) harmless at
all times from and after the Closing, against and in respect of the following:
(i) All losses, liabilities, costs and damages,
including without limitation, interest, penalties and fines, resulting from any
(a) breach of a representation or warranty of the Shareholders set forth herein
or (b) non-fulfillment of any agreement or covenant, on the part of the
Shareholders set forth herein or of any condition precedent (except for the
third party consents) as set forth in this Agreement.
(ii) All expenses, including reasonable attorney
fees, arising from or incurred in connection with suits, proceedings, decrees
or judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 10.1 are collectively referred to as "Buyer
Losses".
(b) The period during which Buyer must give notice in
writing to the Shareholders of claims for indemnification hereunder shall
expire on the second anniversary of the
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Closing except that such period shall be extended to the applicable statute of
limitations (i) plus thirty (30) days with respect to claims for unpaid taxes
and failure to file required tax reports, including related interest, penalties
and fines ("Tax Claims"), (ii) with respect to claims regarding the ownership
of capital stock of the Company (including warrants, options and convertible
securities) or regarding the ownership by the Shareholders of the Company
Shares, (iii) for breaches of Section IX, and (iv) for breaches of any covenant
or obligation which first arises after the Closing.
(c) Interest at the prime rate as quoted in The Wall
Street Journal shall accrue on all amounts to be indemnified from the date of
the Closing to the date of payment by the Shareholders, or if payment of an
Buyer Loss is made after the Closing by Buyer, from the date of such payment by
Buyer to the date of indemnification by the Shareholders.
(d) The total liability of each Shareholder under this
Section IX shall not exceed the consideration received or to be received by
such Shareholder pursuant to Section II and such liability shall be prorated to
each Shareholder based upon the Shareholder's percentage ownership of all of
the capital stock outstanding immediately prior to the Closing.
(e) In the event that any third party asserts an action
or claim as to which Buyer is entitled to indemnification hereunder, Buyer
shall notify the Shareholders in writing of any such asserted liability with
reasonable promptness, and the Shareholders shall have a right to compromise or
defend any such matter involving such asserted liability, through counsel of
its own choosing who shall be subject to the approval of the Buyer, which
approval will not be unreasonably withheld, at the expense of the Shareholders;
provided, however, that the Shareholders shall indemnify Buyer against any
costs and damages resulting from the failure of the Shareholders to defend or
pay such claims. In the event the Shareholders shall notify Buyer in writing
promptly of the intention of the Shareholders to do so, Buyer shall cooperate
with the Shareholders and their counsel in the compromising of or the defending
against any such liabilities or claims, at the expense of the Shareholders and
provide the Shareholders with reasonable access to the books and records of
Company to the extent necessary for the compliance with any document request
and the reasonable defense of such claim.
(f) Buyer shall be entitled to payment hereunder only if
and to the extent the aggregate Buyer Losses under this Agreement exceed
Thirty-Five Thousand Dollars ($35,000).
(g) The amount of any Buyer Losses shall be reduced by
amounts received by the Buyer under any policy of insurance maintained by
Company prior to the Closing. Amounts received from any such policy of
insurance after the receipt of payment of any Buyer Losses from the
Shareholders shall be promptly reimbursed to the Shareholders.
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<PAGE> 30
10.2 INDEMNIFICATION BY BUYER.
(a) Buyer hereby agrees to indemnify and hold the
Shareholders harmless at all times from and after the Closing, against and in
respect of the following:
(i) All losses, liabilities, costs and damages,
including without limitation, interest, penalties and fines, resulting from any
(a) breach of a representation or warranty of Buyer set forth herein or (b)
non-fulfillment of any agreement or covenant, on the part of Buyer set forth
herein, (c) guarantees of any of the Shareholders not released pursuant to
Paragraph 13.2 hereof, (d) operation of the Company after the Closing except to
the extent resulting from negligent acts or omissions of the applicable
Shareholder after the Closing date or (e) the Shareholders making the
338(h)(10) election pursuant to Paragraph 3.8 hereof.
(ii) All expenses, including reasonable attorney
fees, arising from or incurred in connection with suits, proceedings, decrees
or judgments incident to any of the foregoing.
All losses, liabilities, costs, damages and expenses for which indemnification
is provided in this paragraph 10.2 are collectively referred to as "Shareholder
Losses".
(b) The period during which the Shareholders must give
notice in writing to Buyer of claims for indemnification hereunder shall expire
on the second anniversary of the Closing except that such period shall be
extended to the applicable statute of limitations (i) for breaches of Section
IX, (ii) for breaches of any covenant or obligation which first arises after
the Closing; or (iii) plus thirty (30) days with respect to claims for unpaid
taxes and failure to file required tax reports, including related interest,
penalties, and fines.
(c) Interest at the prime rate as quoted in The Wall
Street Journal shall accrue on all amounts to be indemnified from the date of
the Closing to the date of payment by Buyer, or if payment of a Shareholder
Losses is made after the Closing by the Shareholder, from the date of such
payment by any Shareholder to the date of indemnification by Buyer.
(d) The total liability of Buyer under this Section X
shall not exceed the consideration received or to be received by the
Shareholders pursuant to Section II.
(e) In the event that any third party asserts an action
or claim as to which the Shareholders are entitled to indemnification
hereunder, the Shareholders shall notify Buyer in writing of any such asserted
liability with reasonable promptness, and Buyer shall have a right to
compromise or defend any such matter involving such asserted liability, through
counsel of its own choosing who shall be subject to the approval of the
Shareholders, which approval will not be unreasonably withheld, at the expense
of Buyer; provided, however, that Buyer shall indemnify the Shareholders
against any costs and damages resulting from the failure of Buyer to defend or
pay such claims. In the event Buyer shall notify the Shareholders in writing
promptly of the
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<PAGE> 31
intention of Buyer to do so, the Shareholders shall cooperate with Buyer and
its counsel in the compromising of or the defending against any such
liabilities or claims, at the expense of Buyer and provide Buyer with
reasonable access to the books and records of the Company to the extent
necessary for the compliance with any document request and the reasonable
defense of such claim.
(f) The Shareholders shall be entitled to payment
hereunder only if and to the extent the aggregate of Shareholder Losses under
this Agreement exceed Thirty-Five Thousand Dollars ($35,000), provided that the
foregoing shall not be applicable to the Shareholders loss arising out of a
breach of paragraphs 8.4 and 13.2.
(g) The amount of any Shareholder Losses shall be reduced
by amounts received by the Shareholders under any policy of insurance. Amounts
received from any such policy of insurance after the receipt of payment of any
Shareholder Losses from Buyer shall be promptly reimbursed to Buyer.
10.3 REIMBURSEMENT. Buyer or Shareholders, as the case may be,
shall be reimbursed promptly for any Shareholder Losses or Buyer Losses for
which it is to be indemnified under paragraph 10.1 or 10.2. Buyer and the
Shareholders shall have the right to set off and deduct any Buyer Losses or
Shareholder Losses, as the case may be, against the amount of any obligation of
such person however arising to the other person. In the event of any dispute
as to the right to set off or deduction of any amount or the amount of the
Buyer or Shareholder Loss, the dispute shall be resolved as provided in
paragraph 10.5. If Shareholder reimburses Buyer for a breach of the warranties
and representations set forth in paragraph 3.7, Buyer shall assign all such
uncollected receivables to the Shareholders without further consideration.
10.4 CLAIMS. Should any claim be made by a person not a party to
this Agreement with respect to any matter to which the foregoing indemnity
relates for which the indemnifying party has not elected to compromise or
defend as set forth in paragraph 10.1(e) or 10.2(e), the party to be
indemnified, on not less than fifteen (15) days' notice to the other, may make
settlement of such claim, and such settlement shall be binding on the
Shareholders and Buyer for the purposes of this Section X; provided, however,
that if within said fifteen (15) day period the indemnifying party shall have
requested the other party to contest any such claim at the expense of the
indemnifying party and has provided reasonable assurances of the ability of the
indemnifying party to pay such expenses and other losses should such occur, the
indemnified party will promptly comply and the indemnifying party shall have
the right to defend on its own behalf with counsel of its own choosing at its
expense. Any payment or settlement resulting from such contest, together with
the total expense thereof, shall be binding on the Shareholders and Buyer for
the purposes of this Section X. Failure to give notice shall not constitute a
defense, in whole or in part, to any claim by the Buyer except and only to the
extent that such failure to do so shall result in material prejudice to the
indemnifying party.
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<PAGE> 32
10.5 RESOLUTION OF DISPUTES. In the event of any dispute between
Buyer and the Shareholders over any claim for indemnification under this
Section X and the parties are unable to resolve such dispute, either party may
submit the dispute to binding arbitration as hereinafter provided. The
arbitration shall be in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") then in effect. The arbitration shall
be held before three arbitrators, unless the amount in dispute is less than Two
Hundred Thousand Dollars ($200,000), in which event the arbitration shall be
held before one arbitrator. In the event the arbitration is to be held before
three arbitrators, the Shareholders and Buyer shall each appoint one arbitrator
within thirty (30) days of the receipt of notice by the party commencing the
arbitration which includes a copy of the petition filed with the AAA. The
arbitrators shall select the third arbitrator. In the event the two
arbitrators fail to do so within fifteen (15) days of their appointment or in
the event a party hereto fails to designate an arbitrator or in the event only
one arbitrator is to be appointed, such arbitrator(s) shall be appointed by the
AAA. The arbitrator(s) shall be knowledgeable in the business of software
distribution. All decisions by the arbitrators shall be by majority vote of
the arbitrators. The award of the arbitrator(s) shall be binding on the
parties hereto and such awards may be entered in any applicable court. The
arbitration and all hearings in connection therewith shall be held in Georgia.
The arbitrator(s) shall have no authority to award punitive damages or any
other awards other than as herein contemplated. Notwithstanding the foregoing,
the parties hereto may seek in a court proceeding a restraining order, or a
preliminary or permanent injunction as permitted by law or equity whenever
applicable to enjoin the unauthorized use of the confidential information or
trade secret of a party hereto or as otherwise provided herein. All parties
hereto agree to service by mail in any such proceedings.
SECTION XI.
COVENANT NOT TO COMPETE
(a) For a period of five (5) years following the Closing,
Shareholder, Donald M. Rogers, agrees that he will not, directly or indirectly,
including through an Affiliate, own, manage, operate, control, be engaged in,
or participate in the ownership, management, operation, or control of or be
connected in any manner or have any other direct or indirect financial interest
in any business, firm, person, partnership, corporation, or concern which is
engaged in any business of the type and character which is competitive with the
Business which is being conducted by the Company on the Closing Date in the
United States. The Shareholder acknowledges that the Business is conducted
throughout the United States and the Business is the development, marketing
and/or supporting of podiatric software practice management systems and related
software services to podiatric practices.
(b) Notwithstanding the covenants contained in
subparagraph (a), the Shareholders shall not be prohibited from owning less
than 5% of any class of equity securities of a company which is listed on a
recognized stock exchange or for which prices are quoted on the National
Association of Securities Dealers Automated Quotation System.
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(c) During the non-compete period set forth in
subparagraph (a), each Shareholder in any capacity will not suggest, urge or
persuade any user of the Software not to purchase or not to do business with
Buyer or the successor of the Business or solicit the employment of any
employee of Company or its successor.
(d) Each state of the United States and each month of
time covered by this covenant not to compete shall be deemed a severable unit,
and should any court determine that the inclusion of all such states or months
would render any such undertaking unreasonable or unenforceable for any reason,
those units which are necessary in the judgment of the court to be deleted in
order to render such undertaking reasonable and enforceable shall be deemed
free of such non-compete undertaking but such undertaking shall remain in full
force and effect as to each other unit of territory or time.
(e) Each Shareholder agrees that in addition to any other
rights and remedies available to Buyer for any breach by a Shareholder of his
obligations under this Section XI, Buyer shall be entitled to enforcement of
such obligations hereunder by court injunction or other equitable remedy and
the Shareholders in such proceeding will not urge that Buyer has an adequate
remedy at law.
SECTION XII.
TERMINATION AND ABANDONMENT
12.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
at any time and the acquisition of the Company Shares as herein contemplated
abandoned at any time prior to the Closing without liability of any party to
any other party, except for breaches of warranties, representations, and
covenants set forth in this Agreement which are within the control of the
defaulting or non-performing party (the effectiveness of the SB Registration
Statement and the S4 Registration Statement shall be deemed as not being in the
control of Buyer), under the following circumstances:
(a) The mutual written agreement of Buyer, Company, and
the Shareholders;
(b) By Buyer if the Closing has not occurred before March
30, 1997 because all conditions to the obligations of Buyer have not been
satisfied or waived or because the Shareholders have not made all required
deliveries pursuant to Section VI;
(c) By the Shareholders if the Closing has not occurred
before March 30, 1997 because all conditions to the obligations of the
Shareholders have not been satisfied or waived or because Buyer has not made
all required deliveries pursuant to Section VII; and
(d) Any party may terminate by written notice to the
other if any action or proceeding shall have been instituted before any court
or other governmental body or, to the knowledge of the party giving such
notice, shall have been threatened formally in writing by any
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<PAGE> 34
public authority with requisite jurisdiction, to restrain or prohibit the
transactions contemplated by this Agreement or to subject one or more of the
parties or their directors or their officers to liability on the grounds that
it or they have breached any law or regulation or otherwise acted improperly in
connection with such proposed transactions ("Governmental Objection"), and such
action or proceeding shall not have been dismissed or such written threat shall
not have been withdrawn or rescinded before March 30, 1997.
12.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is
terminated and abandoned as provided in this Section XII, each party will, at
the request of the other, return all documents, work papers, and other material
of the requesting party, including all copies thereof, relating to the
transactions contemplated by this Agreement, whether so obtained before or
after the execution of this Agreement, to the party furnishing the same,
provided, however, that Section IX shall not apply to any document, work paper,
material, or any other information which is published in any publication for
public distribution or filed as public information with any governmental
authority (including in the SB or S4 Registration Statements) or is otherwise
in the public domain.
SECTION XIII.
MISCELLANEOUS PROVISIONS
13.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES. The respective
representations, warranties and covenants of the Shareholders and Buyer
contained herein or in any certificates or other documents delivered prior to
or on the Closing shall not be deemed waived or otherwise affected by any
investigations made by any party hereto. Each and every representation,
warranty and covenant of the Shareholders and Buyer, and the indemnification
provisions set forth in Section X hereof, shall survive the Closing and remain
operative in full force and effect as provided in Section X. The updating of
the Disclosure Schedule on or before the Closing is for information purposes
only and shall not modify in any way the warranties and representations set
forth herein and in the Disclosure Schedule delivered at the time of the
execution of this Agreement.
13.2 PAYMENT OF CERTAIN INDEBTEDNESS. Within thirty (30) days of
the Closing, Buyer (or its successor) shall discharge in full certain
indebtedness of the Company heretofore guaranteed by the Shareholders or any
Shareholder and obtain a release of all such Shareholder's guaranties of such
indebtedness provided that such indebtedness can be discharged without a
penalty or other similar special charge. Buyer (or its successor) shall use
reasonable commercial efforts to obtain the release of the Shareholders from
any other guarantees of obligations of the Company as disclosed in the
Disclosure Schedule.
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13.3 HEADINGS. The paragraph captions and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
part of this Agreement or to affect its meaning or interpretation.
13.4 FURTHER ASSURANCES. The parties hereto shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement, including
requests made after the Closing.
13.5 FORCE MAJEURE. A party hereto shall not be liable for failure
or delay in performing any of the party's obligations hereunder if such failure
or delay is occasioned by compliance with any governmental regulation, request
or order, or by circumstances beyond the reasonable control of the party so
failing or delaying, including, but not limited to, Acts of God, war,
insurrection, fire, flood, accident, earthquakes, labor strikes, or inability
to obtain materials, supplies, power or equipment necessary to enable such
party to perform its obligations hereunder. Each party shall (a) promptly
notify the other in writing of any such event of force majeure, the expected
duration thereof and its anticipated effect on the ability of such party to
perform its obligations hereunder, and (b) make reasonable efforts to remedy
any such event of force majeure.
13.6 CUMULATIVE REMEDIES. Except as herein provided and subject to
any applicable limitation herein provided, the parties shall have all remedies
for breaches of this Agreement available to them provided by law or equity.
13.7 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement between the parties hereto regarding the acquisition of the Company
Shares by Buyer and related matters as set forth in this Agreement. No
representations or agreements, whether written or oral, other than those
contained or referenced herein, shall be binding on the parties. This
Agreement may not be amended or modified except in a writing signed by all of
the parties hereto.
13.8 SPECIFIC PERFORMANCE. This Agreement may be specifically
enforceable in accordance with applicable principles of law and equity. The
parties hereby acknowledge that it is impossible to measure the monetary
damages which would result from a party's failure to perform any obligation
imposed upon such party by this Agreement. Therefore, if any party hereto
should institute an action or proceeding to enforce the provisions hereof, any
other party against whom such action or proceeding is thereby brought hereby
waives the claim or defense that such party has an adequate remedy at law, and
such person shall not urge in any action or proceeding the claim or defense
that an adequate remedy at law exists.
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<PAGE> 36
13.9 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be given in writing to the address of the
party set forth below their signature to this Agreement or to such other last
authorized address/telecopier number of the intended recipient provided in
writing to the party giving such notice, and shall be deemed to have been duly
given on (i) the date of receipt if personally delivered or delivered by
overnight courier, (ii) five (5) business days after posting if transmitted by
postage prepaid registered or certified mail (return receipt requested), or
(iii) the date of transmission if transmitted by telecopy (with a copy sent
postage prepaid registered or certified mail returned receipt requested) to the
party to whom such notice or communication is being given. Any party hereto
may change such party's address or the person to whom notice is given for
purposes hereof by written notice to the other parties. Such notices are
effective only upon receipt.
13.10 NON-WAIVER OF DEFAULT. Any failure by any party hereto at any
time or from time to time to enforce and/or require strict compliance with any
term or condition of this Agreement shall not constitute a waiver of such term
or condition. All waivers hereunder must be in writing executed by the party
waiving the right. The consummation of the transactions with knowledge of a
breach of a warranty, representation or covenant shall not constitute a waiver
of any such warranty, representation or covenant.
13.11 PARTIAL INVALIDITY. If any term or provision of this
Agreement, not essential to the basic purposes of the transactions contemplated
herein, shall be held to be illegal, invalid or unenforceable by a court or
arbitrator of competent jurisdiction, it is the intention of the parties hereto
that (i) the remaining terms hereof shall constitute the agreement with respect
to the subject matter hereof, (ii) all such remaining terms shall remain in
full force and effect and shall be deemed to constitute the entirety of this
Agreement as though such illegal, invalid or unenforceable provision had never
been part hereof, and (iii) such illegal, invalid, or unenforceable provision
shall be construed as closely as possible to the parties' original intent in
order to render such provision legal, valid, or enforceable, as applicable.
13.12 DUPLICATE ORIGINALS. For the convenience of the parties
hereto, any number of counterparts hereof may be executed, and such
counterparts, taken together, shall be deemed one and the same original.
13.13 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Shareholders and Buyer
and their successors and assigns. Buyer may on or prior to the Closing
designate a subsidiary as the party to acquire the Company Shares; provided,
however, Buyer shall remain liable to the Shareholders for any breach of
Buyer's warranties, representations and covenants contained herein.
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13.14 FEES AND EXPENSES. Each party hereto shall pay all expenses
which that party has incurred, including attorneys' and accountants' fees, in
connection with this Agreement and the transactions contemplated hereby, except
that any expenses of the Shareholders paid by the Company shall be deducted
from the net worth calculation as of the closing without reduction or offset,
except as otherwise agreed by the parties in writing.
13.15 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Georgia (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect and performance.
13.16 COUNTERPARTS AND EXHIBITS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The Disclosure
Schedule is made a part of this Agreement.
13.17 PUBLICITY. The Shareholders shall make no public announcement
of the entering into of this Agreement or the terms and conditions hereof
without the prior written consent of Buyer thereto. The Shareholders
acknowledge that Buyer will be required or may deem it desirable to make and,
as part of the proposed public offerings, will make public disclosure of the
execution of this Agreement and the terms and conditions hereof, including in
the SB and S4 Registration Statements. With respect to any disclosure prior to
the Closing, Buyer shall provide the Shareholders with a copy of any such
disclosure promptly after it is made and, to the extent practical, will review
any proposed press release with Company before it is released. After the
Closing, the parties shall have no obligations to the other under this
paragraph 13.16.
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<PAGE> 38
BUYER:
INFOCURE CORPORATION
By:
---------------------------------------------------
James K. Price, Executive Vice President
ADDRESS FOR NOTICE:
Address: 2970 Clairmont Road,
Suite 950 Atlanta, Georgia 30329
Telecopy No.: 404-636-7525
Attention: Frederick L. Fine, Chief Executive
Officer
SHAREHOLDERS:
------------------------------------------------------
Name: Donald M. Rogers
ADDRESS FOR NOTICE:
Address: 3050 Brightwood Lane
Marietta, Georgia 30067
Telecopy No.: 770-221-9992
------------------------------------------------------
Name: Deborah L. Rogers
ADDRESS FOR NOTICE:
Address: 3050 Brightwood Lane
Marietta, Georgia 30067
Telecopy No.: 770-221-9992
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<PAGE> 39
------------------------------------------------------
Name: Betty J. Reece
ADDRESS FOR NOTICE:
Address: 78 Whitlock Drive
Marietta, Georgia 30064
Telecopy No.: 770-221-9992
35
<PAGE> 1
EXHIBITS 10.12 AND 10.13
FORM OF AGREEMENT
FOR FINE AND PRICE
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st
day of December, 1996 between AMERICAN MEDCARE CORPORATION, a Delaware
corporation ("Company"), and ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT/DUTIES.
(a) The Company shall employ Executive as an executive during
the term of his employment as set forth in this Agreement and Executive hereby
accepts such employment. Executive's initial position shall be ______________ .
(b) Executive shall have such powers and duties as assigned to
him by the Board of Directors [President] of the Company from time to time.
(c) Executive shall keep the Board of Directors [President] of
the Company timely advised of all significant developments and opportunities and
shall timely consult with the Board of Directors [President] on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors [Chairman and President]
of the Company.
(d) Executive will use his best efforts to perform his duties
in accordance with the applicable business plans and budgets and policies in
effect.
<PAGE> 2
(e) Executive agrees that he will at all times faithfully and
to the best of his ability and experience faithfully perform all of the duties
that may be required of him pursuant to the terms of this Agreement. Executive
shall devote his full business time to the performance of his obligations
hereunder.
2. COMPENSATION.
(a) Base Salary. During the term of his employment, including
any extension thereof pursuant to the Agreement, the Company will pay to
Executive a base salary ("Base Salary") of $ per year, payable in arrears in
equal semi-monthly payments. In the event of a disability, to the extent
payments are received under an employer-sponsored disability program, the
payments hereunder are to be reduced by an amount equal to such disability
payments.
(b) Incentive Compensation. During the term of Executive's
employment hereunder, including any extension thereof, in addition to the Base
Salary as provided in paragraph 2(a), Executive will be eligible for annual
incentive compensation ("Incentive Compensation") pursuant to a program
established by the Board of Directors in its sole discretion, from time to time,
provided that the objectives of the program are met. The Incentive Compensation
shall be pursuant to a program based upon the achieving certain revenue and/or
profit goals and/or other goals ("Goals") of the Company and/or of the business
unit for which Executive has responsibilities. Upon the establishment of the
program and Goals, the parties hereto shall enter into an agreement setting
forth the Incentive Compensation, which agreement shall be attached hereto as
Exhibit A and shall constitute a part of this Agreement.
(c) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
(d) Employee Benefit Program. Executive shall be eligible to
participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including eligibility. It
is understood that the Company reserves the right to modify and rescind any
program or adopt new programs in its sole discretion. The Company may, in its
sole discretion, maintain key man life insurance on the life of Executive and
designate the Company as the beneficiary. Executive agrees to execute any
documents necessary to effect such policy.
(e) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(f) Vacation. Executive shall be entitled to weeks of vacation
for each full year of service. Vacations shall be taken at such times as not to
materially interfere with
2
<PAGE> 3
the business of the Company. The vacation time must be taken within the time
period specified in the program or as otherwise mutually agreed in writing,
otherwise it expires to the extent not used as of December 31.
3. TERM. The term of the employment of Executive under this Agreement
shall be for a period of five (5) years ("Initial Term") commencing on the date
hereof and ending on the fifth (5th) anniversary thereof, subject to earlier
termination as provided in Paragraph 4. The term of employment shall continue
after the Initial Term under this Agreement, subject to earlier termination as
provided in Paragraph 4, for additional one-year terms unless it is terminated
at the end of the Initial Term or as of any anniversary of the Initial Term, as
the case may be, by either party upon sixty (60) days prior written notice. If
the employment of Executive continues thereafter, absent a written agreement,
the employment shall be at will and the provisions of this Agreement shall be of
no force and effect with respect to such subsequent period, except for the
provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the Company
may terminate the employment of Executive "for cause" (as hereinafter defined)
at any time upon written notice effective immediately. The term "for cause"
shall mean (i) the continued failure by Executive substantially to perform his
duties with the Company in a reasonably professional manner other than due to
total disability or death for a period of thirty (30) days after a written
demand for substantial performance is delivered to Executive by the Board of
Directors [or Chairman or President] of the Company, which demand identifies the
manner in which the Board [or Chairman or President] believes Executive has not
substantially performed his duties, (ii) the unauthorized dissemination of
material trade secrets or other material proprietary property of the Company or
its parent or subsidiaries of its parent, (iii) the commission of a felony or
any other crime involving moral turpitude or the pleading of nolo contendere to
any such act, (iv) the commission of any act or acts of dishonesty when such
acts are intended to result or result, directly or indirectly, in gain or
personal enrichment of Executive or any related person or affiliated the Company
or are intended to cause harm or damage to the Company or its parent or
subsidiaries of its parent, (v) the illegal use of controlled substances, (vi)
the use of alcohol so as to have a material adverse effect on the performance of
his duties, (vii) the misappropriation or embezzlement of assets of the Company
or its parent or subsidiaries of its parent, (viii) the making of disparaging
remarks regarding the Company or its parent or subsidiaries of its parent or the
products or services of any such person to suppliers and/or customers of the
Company, its parent or subsidiaries of its parent, or (ix) the breach of any
other material term or provision of this Agreement to be performed by Executive
which have not been cured within thirty (30) days of receipt of written notice
of such breach.
(2) Upon termination for cause the Company shall have no
further obligation to pay any compensation to Executive for periods after the
effective date of the termination for cause, except for Base Salary which
accrued as of the termination date. In
3
<PAGE> 4
addition, the right to exercise any vested stock option shall terminate on the
effective date of the termination of employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate upon his
death or, ten (10) business days after written notice by the Company of
termination, upon or during the continuance of the total disability (as
hereinafter defined) of Executive.
(2) Upon termination upon death or upon or during total
disability, the Company shall have no further obligation to pay any compensation
for periods after the effective date of such termination, except for Base Salary
and Incentive Compensation which accrued as of the termination date. To the
extent stock options have vested as of such termination date, they shall
continue to be exercisable for a period of twelve (12) months thereafter as set
forth in the stock option agreements not to exceed the stated expiration date of
the stock option.
(3) The term "total disability" means the inability of
Executive to substantially perform his duties hereunder for a continuous period
of thirty (30) days unless extended in writing by the Company. Total disability
shall be deemed to commence upon the expiration of such continuous thirty (30)
day period. In the event of any dispute as to the "total disability" of the
Executive, the matter shall be resolved by the decision of a single physician,
serving as an arbitrator, mutually selected or appointed in accordance with the
rules of the American Arbitration Association, Atlanta, Georgia. The decision of
the arbitrator shall be binding on all parties hereto. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
(c) Change In Control. In the event of a Change in Control (as
hereinafter defined) of the Company and the Executive elects, in his sole
discretion, to terminate his employment hereunder as of a date within six (6)
months after the Change in Control, Executive shall give the Company two (2)
weeks prior written notice of such termination and Executive shall be entitled
to receive, and the Company shall pay, on the date of the termination of
employment an amount equal to the Executive's then annual base salary rate.
The term "Change in Control" means:
(i) The acquisition (other than from the Company) by any
person, entity or "group" within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 ("34 Act") (excluding,
for this purpose, the Company, its parent or its subsidiaries, or any
employee benefit plan of the Company, its parent or its subsidiaries)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 34 Act) of more than 50% of either the then outstanding
shares of common stock of the Company or of the combined voting power
of the Company's then outstanding voting securities entitled to vote
generally in the election of directors; or
4
<PAGE> 5
(ii) Individuals who, as of the date hereof, constitute the
board of directors of the Company ("Incumbent Board") cease for any
reason to constitute at least a majority of the board of directors,
provided that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual is a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a merger,
consolidation or other reorganization in each case, with respect to
which persons who were the shareholders of the Company and optionees
immediately prior to such merger, consolidation or other
reorganization, immediately thereafter, do not own more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the merged, consolidated or reorganized Company's then
outstanding voting securities, or of the sale of all or substantially
all of the assets of the Company; provided, however, in such event the
Change in Control will be deemed to have occurred immediately prior to
the merger, consolidation or other reorganization.
The term "Change in Control" shall not include any change in the Board
of Directors of the Company as provided in subparagraph (ii) above or any change
in ownership as provided in subparagraph (iii) above resulting from or arising
out of the merger of the Company and InfoCure Corporation.
(d) Termination by Company. In the event of the termination of
the employment of the Executive by the Company at any time during the term of
this Agreement, other than for cause, Executive shall be entitled to receive,
and the Company shall pay, on the date of the termination of employment an
amount equal to the Executive's then annual base salary rate.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on the
date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will", then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Company for use in the United States ("Territory")
other than with the Company and its parent and subsidiaries of its parent. This
covenant not to compete shall not prohibit (i) ownership by Executive of not
more than one percent (1%) of the equity securities of companies listed on any
United States stock exchanges or traded over the counter or (ii)
5
<PAGE> 6
engagements which do not involve, directly or indirectly, the development,
distribution or marketing of competitive products or services by entities
engaged in such competitive businesses. The software programs and services
currently marketed by the Company are practice management software products and
services for use by health care providers, including the utilization of EDI
services by such health care providers.
The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in the
Territory and each month of time covered by this covenant not to compete shall
be deemed a severable unit and should any court determine that the inclusion of
all states, cities and counties or months would render any such undertaking
unreasonable or unenforceable for any reason, those units which are necessary in
the judgment of the court to be deleted in order to render such an undertaking
reasonable and enforceable shall be deemed free of such non-compete undertaking,
but such undertaking shall remain in full force and effect as to every other
unit of territory and time.
6. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions and
copyrights, a copy of which is attached hereto as Exhibit B.
7. SPECIFIC PERFORMANCE. Because of his knowledge and experience,
Executive agrees that the Company shall be entitled to specific performance or
an injunction or other similar relief in addition to all other rights and
remedies it might have for any violation of the undertakings set forth in
Paragraphs 5 and 6 of this Agreement without the posting of a bond or other
security and without the proof of actual damages.
8. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt when delivered by hand or by express mail, overnight
courier or other similar method or by facsimile transmission (provided a copy is
also sent by registered or certified mail), or five (5) days after deposit of
the notice in the U.S. Mail, if mailed by certified or registered mail, with
postage prepaid addressed to the respective party as set forth below, which
address may be changed by written notice to the other party:
(a) If to the Company:
American Medcare Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: Board of Directors [President]
6
<PAGE> 7
(b) If to Executive:
--------------------
--------------------
--------------------
9. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of its business; provided, however, such assignment shall not relieve
the Company of its obligations hereunder.
10. ENTIRE AGREEMENT. This Agreement is intended by the parties hereto
to constitute the entire understanding of the parties with respect to the
employment of Executive by the Company and supersedes all prior agreements and
understandings oral or written. All prior agreements between Executive and the
Company or any subsidiary are null and void, as of the date hereof, except for
such accrued liabilities that are recorded as a liability as of such date on the
financial books and records of such company.
11. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise specifically
provided, all disputes arising under this Agreement shall be submitted to and
settled by arbitration. Arbitration shall be by one (1) arbitrator selected in
accordance with the rules of the American Arbitration Association, Atlanta,
Georgia ("AAA") by the AAA. The hearings before the arbitrator shall be held in
Atlanta, Georgia and shall be conducted in accordance with the rules existing at
the date thereof of the AAA to the extent not inconsistent with this Agreement.
The decision of the arbitrator shall be final and binding as to any matters
submitted to them under this Agreement. All costs and expense incurred in
connection with any such arbitration proceeding and those incurred in any civil
action to enforce the same shall be borne by the party against which the
decision is rendered.
12. AMENDMENTS. This Agreement may not be amended or modified except in
a writing signed by both parties.
13. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
14. GOVERNING LAW. This Agreement shall be deemed to be made in and in
all respects shall be interpreted, construed and governed by and in accordance
with the laws of the State of Georgia.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMERICAN MEDCARE CORPORATION
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
EXECUTIVE
---------------------------------------------------
Name:
------------------------------------
8
<PAGE> 9
EXHIBIT A
INCENTIVE COMPENSATION
9
<PAGE> 10
EXHIBIT B
EMPLOYMENT AGREEMENT REGARDING
DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS
10
<PAGE> 1
EXHIBITS 10.12 AND 10.13
FORM OF AGREEMENT
FOR FINE AND PRICE
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st
day of December, 1996 between AMERICAN MEDCARE CORPORATION, a Delaware
corporation ("Company"), and ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT/DUTIES.
(a) The Company shall employ Executive as an executive during
the term of his employment as set forth in this Agreement and Executive hereby
accepts such employment. Executive's initial position shall be ______________ .
(b) Executive shall have such powers and duties as assigned to
him by the Board of Directors [President] of the Company from time to time.
(c) Executive shall keep the Board of Directors [President] of
the Company timely advised of all significant developments and opportunities and
shall timely consult with the Board of Directors [President] on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors [Chairman and President]
of the Company.
(d) Executive will use his best efforts to perform his duties
in accordance with the applicable business plans and budgets and policies in
effect.
<PAGE> 2
(e) Executive agrees that he will at all times faithfully and
to the best of his ability and experience faithfully perform all of the duties
that may be required of him pursuant to the terms of this Agreement. Executive
shall devote his full business time to the performance of his obligations
hereunder.
2. COMPENSATION.
(a) Base Salary. During the term of his employment, including
any extension thereof pursuant to the Agreement, the Company will pay to
Executive a base salary ("Base Salary") of $ per year, payable in arrears in
equal semi-monthly payments. In the event of a disability, to the extent
payments are received under an employer-sponsored disability program, the
payments hereunder are to be reduced by an amount equal to such disability
payments.
(b) Incentive Compensation. During the term of Executive's
employment hereunder, including any extension thereof, in addition to the Base
Salary as provided in paragraph 2(a), Executive will be eligible for annual
incentive compensation ("Incentive Compensation") pursuant to a program
established by the Board of Directors in its sole discretion, from time to time,
provided that the objectives of the program are met. The Incentive Compensation
shall be pursuant to a program based upon the achieving certain revenue and/or
profit goals and/or other goals ("Goals") of the Company and/or of the business
unit for which Executive has responsibilities. Upon the establishment of the
program and Goals, the parties hereto shall enter into an agreement setting
forth the Incentive Compensation, which agreement shall be attached hereto as
Exhibit A and shall constitute a part of this Agreement.
(c) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
(d) Employee Benefit Program. Executive shall be eligible to
participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including eligibility. It
is understood that the Company reserves the right to modify and rescind any
program or adopt new programs in its sole discretion. The Company may, in its
sole discretion, maintain key man life insurance on the life of Executive and
designate the Company as the beneficiary. Executive agrees to execute any
documents necessary to effect such policy.
(e) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(f) Vacation. Executive shall be entitled to weeks of vacation
for each full year of service. Vacations shall be taken at such times as not to
materially interfere with
2
<PAGE> 3
the business of the Company. The vacation time must be taken within the time
period specified in the program or as otherwise mutually agreed in writing,
otherwise it expires to the extent not used as of December 31.
3. TERM. The term of the employment of Executive under this Agreement
shall be for a period of five (5) years ("Initial Term") commencing on the date
hereof and ending on the fifth (5th) anniversary thereof, subject to earlier
termination as provided in Paragraph 4. The term of employment shall continue
after the Initial Term under this Agreement, subject to earlier termination as
provided in Paragraph 4, for additional one-year terms unless it is terminated
at the end of the Initial Term or as of any anniversary of the Initial Term, as
the case may be, by either party upon sixty (60) days prior written notice. If
the employment of Executive continues thereafter, absent a written agreement,
the employment shall be at will and the provisions of this Agreement shall be of
no force and effect with respect to such subsequent period, except for the
provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the Company
may terminate the employment of Executive "for cause" (as hereinafter defined)
at any time upon written notice effective immediately. The term "for cause"
shall mean (i) the continued failure by Executive substantially to perform his
duties with the Company in a reasonably professional manner other than due to
total disability or death for a period of thirty (30) days after a written
demand for substantial performance is delivered to Executive by the Board of
Directors [or Chairman or President] of the Company, which demand identifies the
manner in which the Board [or Chairman or President] believes Executive has not
substantially performed his duties, (ii) the unauthorized dissemination of
material trade secrets or other material proprietary property of the Company or
its parent or subsidiaries of its parent, (iii) the commission of a felony or
any other crime involving moral turpitude or the pleading of nolo contendere to
any such act, (iv) the commission of any act or acts of dishonesty when such
acts are intended to result or result, directly or indirectly, in gain or
personal enrichment of Executive or any related person or affiliated the Company
or are intended to cause harm or damage to the Company or its parent or
subsidiaries of its parent, (v) the illegal use of controlled substances, (vi)
the use of alcohol so as to have a material adverse effect on the performance of
his duties, (vii) the misappropriation or embezzlement of assets of the Company
or its parent or subsidiaries of its parent, (viii) the making of disparaging
remarks regarding the Company or its parent or subsidiaries of its parent or the
products or services of any such person to suppliers and/or customers of the
Company, its parent or subsidiaries of its parent, or (ix) the breach of any
other material term or provision of this Agreement to be performed by Executive
which have not been cured within thirty (30) days of receipt of written notice
of such breach.
(2) Upon termination for cause the Company shall have no
further obligation to pay any compensation to Executive for periods after the
effective date of the termination for cause, except for Base Salary which
accrued as of the termination date. In
3
<PAGE> 4
addition, the right to exercise any vested stock option shall terminate on the
effective date of the termination of employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate upon his
death or, ten (10) business days after written notice by the Company of
termination, upon or during the continuance of the total disability (as
hereinafter defined) of Executive.
(2) Upon termination upon death or upon or during total
disability, the Company shall have no further obligation to pay any compensation
for periods after the effective date of such termination, except for Base Salary
and Incentive Compensation which accrued as of the termination date. To the
extent stock options have vested as of such termination date, they shall
continue to be exercisable for a period of twelve (12) months thereafter as set
forth in the stock option agreements not to exceed the stated expiration date of
the stock option.
(3) The term "total disability" means the inability of
Executive to substantially perform his duties hereunder for a continuous period
of thirty (30) days unless extended in writing by the Company. Total disability
shall be deemed to commence upon the expiration of such continuous thirty (30)
day period. In the event of any dispute as to the "total disability" of the
Executive, the matter shall be resolved by the decision of a single physician,
serving as an arbitrator, mutually selected or appointed in accordance with the
rules of the American Arbitration Association, Atlanta, Georgia. The decision of
the arbitrator shall be binding on all parties hereto. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
(c) Change In Control. In the event of a Change in Control (as
hereinafter defined) of the Company and the Executive elects, in his sole
discretion, to terminate his employment hereunder as of a date within six (6)
months after the Change in Control, Executive shall give the Company two (2)
weeks prior written notice of such termination and Executive shall be entitled
to receive, and the Company shall pay, on the date of the termination of
employment an amount equal to the Executive's then annual base salary rate.
The term "Change in Control" means:
(i) The acquisition (other than from the Company) by any
person, entity or "group" within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 ("34 Act") (excluding,
for this purpose, the Company, its parent or its subsidiaries, or any
employee benefit plan of the Company, its parent or its subsidiaries)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the 34 Act) of more than 50% of either the then outstanding
shares of common stock of the Company or of the combined voting power
of the Company's then outstanding voting securities entitled to vote
generally in the election of directors; or
4
<PAGE> 5
(ii) Individuals who, as of the date hereof, constitute the
board of directors of the Company ("Incumbent Board") cease for any
reason to constitute at least a majority of the board of directors,
provided that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual is a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a merger,
consolidation or other reorganization in each case, with respect to
which persons who were the shareholders of the Company and optionees
immediately prior to such merger, consolidation or other
reorganization, immediately thereafter, do not own more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the merged, consolidated or reorganized Company's then
outstanding voting securities, or of the sale of all or substantially
all of the assets of the Company; provided, however, in such event the
Change in Control will be deemed to have occurred immediately prior to
the merger, consolidation or other reorganization.
The term "Change in Control" shall not include any change in the Board
of Directors of the Company as provided in subparagraph (ii) above or any change
in ownership as provided in subparagraph (iii) above resulting from or arising
out of the merger of the Company and InfoCure Corporation.
(d) Termination by Company. In the event of the termination of
the employment of the Executive by the Company at any time during the term of
this Agreement, other than for cause, Executive shall be entitled to receive,
and the Company shall pay, on the date of the termination of employment an
amount equal to the Executive's then annual base salary rate.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on the
date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will", then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Company for use in the United States ("Territory")
other than with the Company and its parent and subsidiaries of its parent. This
covenant not to compete shall not prohibit (i) ownership by Executive of not
more than one percent (1%) of the equity securities of companies listed on any
United States stock exchanges or traded over the counter or (ii)
5
<PAGE> 6
engagements which do not involve, directly or indirectly, the development,
distribution or marketing of competitive products or services by entities
engaged in such competitive businesses. The software programs and services
currently marketed by the Company are practice management software products and
services for use by health care providers, including the utilization of EDI
services by such health care providers.
The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in the
Territory and each month of time covered by this covenant not to compete shall
be deemed a severable unit and should any court determine that the inclusion of
all states, cities and counties or months would render any such undertaking
unreasonable or unenforceable for any reason, those units which are necessary in
the judgment of the court to be deleted in order to render such an undertaking
reasonable and enforceable shall be deemed free of such non-compete undertaking,
but such undertaking shall remain in full force and effect as to every other
unit of territory and time.
6. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions and
copyrights, a copy of which is attached hereto as Exhibit B.
7. SPECIFIC PERFORMANCE. Because of his knowledge and experience,
Executive agrees that the Company shall be entitled to specific performance or
an injunction or other similar relief in addition to all other rights and
remedies it might have for any violation of the undertakings set forth in
Paragraphs 5 and 6 of this Agreement without the posting of a bond or other
security and without the proof of actual damages.
8. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt when delivered by hand or by express mail, overnight
courier or other similar method or by facsimile transmission (provided a copy is
also sent by registered or certified mail), or five (5) days after deposit of
the notice in the U.S. Mail, if mailed by certified or registered mail, with
postage prepaid addressed to the respective party as set forth below, which
address may be changed by written notice to the other party:
(a) If to the Company:
American Medcare Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: Board of Directors [President]
6
<PAGE> 7
(b) If to Executive:
--------------------
--------------------
--------------------
9. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of its business; provided, however, such assignment shall not relieve
the Company of its obligations hereunder.
10. ENTIRE AGREEMENT. This Agreement is intended by the parties hereto
to constitute the entire understanding of the parties with respect to the
employment of Executive by the Company and supersedes all prior agreements and
understandings oral or written. All prior agreements between Executive and the
Company or any subsidiary are null and void, as of the date hereof, except for
such accrued liabilities that are recorded as a liability as of such date on the
financial books and records of such company.
11. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise specifically
provided, all disputes arising under this Agreement shall be submitted to and
settled by arbitration. Arbitration shall be by one (1) arbitrator selected in
accordance with the rules of the American Arbitration Association, Atlanta,
Georgia ("AAA") by the AAA. The hearings before the arbitrator shall be held in
Atlanta, Georgia and shall be conducted in accordance with the rules existing at
the date thereof of the AAA to the extent not inconsistent with this Agreement.
The decision of the arbitrator shall be final and binding as to any matters
submitted to them under this Agreement. All costs and expense incurred in
connection with any such arbitration proceeding and those incurred in any civil
action to enforce the same shall be borne by the party against which the
decision is rendered.
12. AMENDMENTS. This Agreement may not be amended or modified except in
a writing signed by both parties.
13. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
14. GOVERNING LAW. This Agreement shall be deemed to be made in and in
all respects shall be interpreted, construed and governed by and in accordance
with the laws of the State of Georgia.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMERICAN MEDCARE CORPORATION
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
EXECUTIVE
---------------------------------------------------
Name:
------------------------------------
8
<PAGE> 9
EXHIBIT A
INCENTIVE COMPENSATION
9
<PAGE> 10
EXHIBIT B
EMPLOYMENT AGREEMENT REGARDING
DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS
10
<PAGE> 1
EXHIBIT 10.16
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the
____day of ______________, 1997 between INFOCURE CORPORATION, a Delaware
corporation ("Company"), and Donald M. Rogers ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT/DUTIES. (a) The Company shall employ Executive as an
executive during the term of his employment as set forth in this Agreement and
Executive hereby accepts such employment. Executive's initial position shall be
President of DR Software, Inc. ("Subsidiary") and shall have day to day
responsibility for the Subsidiary.
(b) Executive shall have such powers and duties as assigned to him
by the President of the Company and Board of Directors of Subsidiary from time
to time.
(c) Executive shall keep the President of the Company and the
Board of Directors of the Subsidiary timely advised of all significant
developments and opportunities and shall timely consult with the President of
the Company and the Board of Directors of the Subsidiary on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors of Subsidiary and the
President of the Company.
(d) Executive will use commercially reasonable efforts to perform
his duties during normal working hours in accordance with the applicable
business plans and budgets and policies in effect.
1
<PAGE> 2
(e) Executive agrees that he will at all times faithfully and to
the best of his ability and experience faithfully perform all of the duties that
may be required of him pursuant to the terms of this Agreement. Executive shall
devote his full business time to the performance of his obligations hereunder.
2. COMPENSATION.
(a) Base Salary. During the term of his employment, including
any extension thereof pursuant to the Agreement, the Company will pay to
Executive a base salary ("Base Salary") of $110,000 per year, payable in arrears
in equal semi-monthly payments. The Base Salary rate shall increase as of the
first anniversary of this Agreement and each subsequent anniversary by the
increase of the CPI for all Uban Consumers, All Items, U.S. City Average for the
then most recent 12 months as published by the U.S. Bureau of Labor Statistics.
In the event of a disability, to the extent payments are received under an
employer-sponsored disability program, the payments hereunder are to be reduced
by an amount equal to such disability payments.
(b) Incentive Compensation. During the term of Executive's
employment hereunder, including any extension thereof, in addition to the Base
Salary as provided in paragraph 2(a), Executive will be eligible for annual
incentive compensation ("Incentive Compensation") pursuant to a program
established by the Board of Directors in its sole discretion, from time to time,
provided that the objectives of the program are met. The Incentive Compensation
shall be pursuant to a program based upon the achieving certain revenue and/or
profit goals and/or other goals ("Goals") of the Company and/or of the business
unit for which Executive has responsibilities. Upon the establishment of the
program and Goals, the parties hereto shall enter into an agreement setting
forth the Incentive Compensation, which agreement shall be attached hereto as
Exhibit A and shall constitute a part of this Agreement.
(c) Stock Options. The Company shall grant to Executive on the
date hereof a stock option for an aggregate of shares of Common Stock, par value
$.001, of the Company ("Common Stock") at its fair market value on the date
hereof. Attached hereto as Exhibit B is a copy of the Company's Stock Option
Plan, which is subject to shareholder approval, and Exhibit C, which is the form
of stock option agreement. The Company intends to file a registration statement
on Form S-8 to cover the shares to be issued pursuant to the Company's Stock
Option Plan.
(d) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
(e) Business Allowance. There shall be established a business
expense allowance of $6,000 per year for each twelve-month period of this
Agreement (prorated for portions of a year) for such business expenses incurred
by the Executive in his sole discretion
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which are not otherwise authorized under the Company's policies. Executive may
incur, and the Company shall pay, such business expenses as designated by the
Executive not to exceed in each twelve-month period the annual business expense
allowance in the aggregate.
(f) Employee Benefit Program. Executive shall be eligible to
participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including eligibility. It
is understood that the Company reserves the right to modify and rescind any
program or adopt new programs in its sole discretion. The Company may, in its
sole discretion, maintain key man life insurance on the life of Executive and
designate the Company as the beneficiary. Executive agrees to execute any
documents necessary to effect such policy. The Company shall use commercially
reasonable efforts to provide Executive with medical and hospital coverage which
is equivalent to that which is currently in effect for employees of DR Software
for 12 months. The parties acknowledge that the Company intends to implement
uniform employee benefits throughout the Company and its subsidiaries at
reasonable costs and thus such programs will not be identical to the current
programs; provided, however, the Company will make no change that will exclude
the Executive, his spouse and members of his family from having coverage.
(g) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(h) Vacation. Executive shall be entitled to four (4) weeks of
vacation for each full year of service. Vacations shall be taken at such times
as not to materially interfere with the business of the Company. The vacation
time must be taken within the time period specified in the program or as
otherwise mutually agreed in writing, otherwise it expires to the extent not
used as of each December 31.
(i) Purchase of Motor Vehicle. If Executive is currently being
provided the right to use a motor vehicle owned or leased by the Company or any
subsidiary, Executive may purchase the motor vehicle at its net book value or
assume the lease within thirty (30) days of the date of this Agreement.
3. TERM. The term of the employment of Executive under this
Agreement shall be for a period of two (2) years ("Initial Term") commencing on
the date hereof and ending on the second (2nd) anniversary thereof, subject to
earlier termination as provided in Paragraph 4. The term of employment shall
continue after the Initial Term under this Agreement, subject to earlier
termination as provided in Paragraph 4, for additional one-year terms unless it
is terminated at the end of the Initial Term or as of any anniversary of the
Initial Term, as the case may be, by either party upon sixty (60) days prior
written notice. If the employment of Executive continues thereafter, absent a
written agreement, the employment shall be at will and the provisions of this
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Agreement shall be of no force and effect with respect to such subsequent
period, except for the provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the Company
may terminate the employment of Executive "for cause" (as hereinafter defined)
at any time upon written notice effective immediately. The term "for cause"
shall mean (i) the continued failure by Executive substantially to perform his
duties as provided in paragraph 1, in a reasonably professional manner other
than due to total disability or death for a period of thirty (30) days after a
written demand for substantial performance is delivered to Executive by the
Board of Directors or Chairman or President of the Company, which demand
identifies the manner in which the Board or Chairman or President believes
Executive has not substantially performed his duties, (ii) the unauthorized
dissemination of material trade secrets or other material proprietary property
of the Company or its parent or subsidiaries of its parent, (iii) the commission
of a felony or any other crime involving moral turpitude or the pleading of nolo
contendere to any such act, (iv) the commission of any act or acts of dishonesty
when such acts are intended to result or result, directly or indirectly, in gain
or personal enrichment of Executive or any related person or affiliated the
Company or are intended to cause harm or damage to the Company or its parent or
subsidiaries of its parent, (v) the illegal use of controlled substances, (vi)
the use of alcohol so as to have a material adverse effect on the performance of
his duties, (vii) the misappropriation or embezzlement of assets of the Company
or its parent or subsidiaries of its parent, (viii) the making of disparaging
remarks regarding the Company or its parent or subsidiaries of its parent or the
products or services of any such person to suppliers and/or customers of the
Company, its parent or subsidiaries of its parent, or (ix) the breach of any
other material term or provision of this Agreement to be performed by Executive
which have not been cured within thirty (30) days of receipt of written notice
of such breach.
(2) Upon termination for cause the Company shall have no
further obligation to pay any compensation to Executive for periods after the
effective date of the termination for cause, except for Base Salary which
accrued as of the termination date. In addition, the right to exercise any
vested stock option shall terminate on the effective date of the termination of
employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate upon his death
or, ten (10) business days after written notice by the Company of termination,
upon or during the continuance of the total disability (as hereinafter defined)
of Executive.
(2) Upon termination upon death or upon or during total
disability, the Company shall have no further obligation to pay any compensation
for periods after the effective date of such termination, except for Base Salary
and Incentive Compensation which accrued as of
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the termination date. To the extent stock options have vested as of such
termination date, they shall continue to be exercisable for a period of twelve
(12) months thereafter as set forth in the stock option agreements not to exceed
the stated expiration date of the stock option.
(3) The term "total disability" means the inability of
Executive to substantially perform his duties hereunder for a continuous period
of thirty (30) days unless extended in writing by the Company. Total disability
shall be deemed to commence upon the expiration of such continuous thirty (30)
day period. In the event of any dispute as to the "total disability" of the
Executive, the matter shall be resolved by the decision of a single physician,
serving as an arbitrator, mutually selected or appointed in accordance with the
rules of the American Arbitration Association, Atlanta, Georgia. The decision of
the arbitrator shall be binding on all parties hereto. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
(c) Termination by Company without Cause.
In the event the Company terminates the employment of the
Executive, except for cause, prior to the expiration of term of this Agreement
as set forth in paragraph 3 hereof, the Company will pay Executive, as its sole
and exclusive liability hereunder, an amount equal to six (6) months of the
Executive's then current monthly base salary. Payment shall be made within 5
days of such termination.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on the
date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will", then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Company for use in the United States ("Territory")
other than with the Company and its parent and subsidiaries of its parent. This
covenant not to compete shall not prohibit (i) ownership by Executive of not
more than one percent (1%) of the equity securities of companies listed on any
United States stock exchanges or traded over the counter or (ii) engagements
which do not involve, directly or indirectly, the development, distribution or
marketing of competitive products or services by entities engaged in such
competitive businesses. The software programs and services currently marketed by
the Company are practice management software products and services for use by
health care providers, including the utilization of EDI services by such health
care providers.
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The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in the
Territory and each month of time covered by this covenant not to compete shall
be deemed a severable unit and should any court determine that the inclusion of
all states, cities and counties or months would render any such undertaking
unreasonable or unenforceable for any reason, those units which are necessary in
the judgment of the court to be deleted in order to render such an undertaking
reasonable and enforceable shall be deemed free of such non-compete undertaking,
but such undertaking shall remain in full force and effect as to every other
unit of territory and time.
6. NON-SOLICITATION OF CUSTOMERS.
Executive agrees that during the period of one year
immediately following termination of his employment for any reason with the
Company by himself or by the Company, the Executive shall not on his own behalf
or on behalf of any other person, including any other corporation, solicit,
contact, call upon, communicate with or attempt to communicate with any customer
or prospective customer of the Company or any representative of any customer or
prospective customer of the Company with a view to the sale (licensing or lease)
of any software program or service competitive or potentially competitive with
any software program or service sold, licensed, leased, provided or under
development by the Company during the period of two years immediately preceding
termination of his employment with the Company for any reason provided that the
restrictions set forth in this paragraph 6 shall apply only to customers or
prospects of the Company or representative thereof with which the Executive had
contact during such two year period. The actions prohibited by this paragraph 6
shall not be engaged in by the Executive directly or indirectly.
7. NON-SOLICITATIONS OF EMPLOYEES.
Executive agrees that, during his employment and for a period
of one year following termination of his employment with the Company for any
reason by himself or by the Company, the Executive will not, directly or
indirectly, solicit or in any manner encourage employees of the Company to leave
its employ for an engagement in any capacity by another person.
8. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions and
copyrights, a copy of which is attached hereto as Exhibit D.
9. SPECIFIC PERFORMANCE. Because of his knowledge and experience,
Executive agrees that the Company shall be entitled to specific performance or
an injunction or other similar relief in addition to all other rights and
remedies it might have for any violation of the
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undertakings set forth in Paragraphs 5, 6 and 7 of this Agreement without the
posting of a bond or other security and without the proof of actual damages.
10. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given upon receipt when delivered by hand or by express
mail, overnight courier or other similar method or by facsimile transmission
(provided a copy is also sent by registered or certified mail), or five (5) days
after deposit of the notice in the U.S. Mail, if mailed by certified or
registered mail, with postage prepaid addressed to the respective party as set
forth below, which address may be changed by written notice to the other party:
(a) If to the Company:
InfoCure Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: President
(b) If to Executive:
-----------------------------
-----------------------------
-----------------------------
11. BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of its business; provided, however, such assignment shall not relieve
the Company of its obligations hereunder.
12. ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to constitute the entire understanding of the parties with respect to the
employment of Executive by the Company and supersedes all prior agreements and
understandings oral or written. All prior agreements between Executive and the
Company or any subsidiary are null and void, as of the date hereof, except for
such accrued liabilities that are recorded as a liability as of such date on the
financial books and records of such company.
13. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise
specifically provided, all disputes arising under this Agreement shall be
submitted to and settled by arbitration. Arbitration shall be by one (1)
arbitrator selected in accordance with the rules of the American
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Arbitration Association, Atlanta, Georgia ("AAA") by the AAA. The hearings
before the arbitrator shall be held in Atlanta, Georgia and shall be conducted
in accordance with the rules existing at the date thereof of the AAA to the
extent not inconsistent with this Agreement. The decision of the arbitrator
shall be final and binding as to any matters submitted to them under this
Agreement. All costs and expense incurred in connection with any such
arbitration proceeding and those incurred in any civil action to enforce the
same shall be borne by the party against which the decision is rendered.
14. AMENDMENTS. This Agreement may not be amended or modified
except in a writing signed by both parties.
15. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
16. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INFOCURE CORPORATION
By: ----------------------------------------
Name: ---------------------------------
Title: ---------------------------------
EXECUTIVE
--------------------------------------------
Name: Donald M. Rogers
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EXHIBIT A
INCENTIVE COMPENSATION
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EXHIBIT B
STOCK OPTION PLAN
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EXHIBIT C
STOCK OPTION AGREEMENT
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EXHIBIT D
EMPLOYMENT AGREEMENT REGARDING
DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS
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<PAGE> 1
EXHIBIT 10.17
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the ____
day of ________________________________, 1997 between INFOCURE CORPORATION, a
Delaware corporation ("Company"), and Donald M. Rogers ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT/DUTIES. (a) The Company shall employ Executive as
an executive during the term of his employment as set forth in this Agreement
and Executive hereby accepts such employment. Executive's initial position
shall be President of DR Software, Inc. ("Subsidiary") and shall have day to
day responsibility for the Subsidiary.
(b) Executive shall have such powers and duties as
assigned to him by the President of the Company and Board of Directors of
Subsidiary from time to time.
(c) Executive shall keep the President of the Company and
the Board of Directors of the Subsidiary timely advised of all significant
developments and opportunities and shall timely consult with the President of
the Company and the Board of Directors of the Subsidiary on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors of Subsidiary and the
President of the Company.
<PAGE> 2
(d) Executive will use commercially reasonable efforts to
perform his duties during normal working hours in accordance with the
applicable business plans and budgets and policies in effect.
(e) Executive agrees that he will at all times faithfully
and to the best of his ability and experience faithfully perform all of the
duties that may be required of him pursuant to the terms of this Agreement.
Executive shall devote his full business time to the performance of his
obligations hereunder.
2. COMPENSATION.
(a) Base Salary. During the term of his employment,
including any extension thereof pursuant to the Agreement, the Company will pay
to Executive a base salary ("Base Salary") of $110,000 per year, payable in
arrears in equal semi-monthly payments. The Base Salary rate shall increase as
of the first anniversary of this Agreement and each subsequent anniversary by
the increase of the CPI for all Uban Consumers, All Items, U.S. City Average
for the then most recent 12 months as published by the U.S. Bureau of Labor
Statistics. In the event of a disability, to the extent payments are received
under an employer-sponsored disability program, the payments hereunder are to
be reduced by an amount equal to such disability payments.
(b) Incentive Compensation. During the term of
Executive's employment hereunder, including any extension thereof, in addition
to the Base Salary as provided in paragraph 2(a), Executive will be eligible
for annual incentive compensation ("Incentive Compensation") pursuant to a
program established by the Board of Directors in its sole discretion, from time
to time, provided that the objectives of the program are met. The Incentive
Compensation shall be pursuant to a program based upon the achieving certain
revenue and/or profit goals and/or other goals ("Goals") of the Company and/or
of the business unit for which Executive has responsibilities. Upon the
establishment of the program and Goals, the parties hereto shall enter into an
agreement setting forth the Incentive Compensation, which agreement shall be
attached hereto as Exhibit A and shall constitute a part of this Agreement.
(c) Stock Options. The Company shall grant to Executive
on the date hereof a stock option for an aggregate of ____________________
shares of Common Stock, par value $.001, of the Company ("Common Stock") at its
fair market value on the date hereof. Attached hereto as Exhibit B is a copy
of the Company's Stock Option Plan, which is subject to shareholder approval,
and Exhibit C, which is the form of stock option agreement. The Company
intends to file a registration statement on Form S-8 to cover the shares to be
issued pursuant to the Company's Stock Option Plan.
(d) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
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(e) Business Allowance. There shall be established a
business expense allowance of $6,000 per year for each twelve-month period of
this Agreement (prorated for portions of a year) for such business expenses
incurred by the Executive in his sole discretion which are not otherwise
authorized under the Company's policies. Executive may incur, and the Company
shall pay, such business expenses as designated by the Executive not to exceed
in each twelve- month period the annual business expense allowance in the
aggregate.
(f) Employee Benefit Program. Executive shall be
eligible to participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including eligibility.
It is understood that the Company reserves the right to modify and rescind any
program or adopt new programs in its sole discretion. The Company may, in its
sole discretion, maintain key man life insurance on the life of Executive and
designate the Company as the beneficiary. Executive agrees to execute any
documents necessary to effect such policy. The Company shall use commercially
reasonable efforts to provide Executive with medical and hospital coverage
which is equivalent to that which is currently in effect for employees of DR
Software for 12 months. The parties acknowledge that the Company intends to
implement uniform employee benefits throughout the Company and its subsidiaries
at reasonable costs and thus such programs will not be identical to the current
programs; provided, however, the Company will make no change that will exclude
the Executive, his spouse and members of his family from having coverage.
(g) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(h) Vacation. Executive shall be entitled to four (4)
weeks of vacation for each full year of service. Vacations shall be taken at
such times as not to materially interfere with the business of the Company.
The vacation time must be taken within the time period specified in the program
or as otherwise mutually agreed in writing, otherwise it expires to the extent
not used as of each December 31.
(i) Purchase of Motor Vehicle. If Executive is currently
being provided the right to use a motor vehicle owned or leased by the Company
or any subsidiary, Executive may purchase the motor vehicle at its net book
value or assume the lease within thirty (30) days of the date of this
Agreement.
3. TERM. The term of the employment of Executive under this
Agreement shall be for a period of two (2) years ("Initial Term") commencing on
the date hereof and ending on the second (2nd) anniversary thereof, subject to
earlier termination as provided in Paragraph 4. The term of employment shall
continue after the Initial Term under this Agreement, subject to earlier
termination as provided in Paragraph 4, for additional one-year terms unless it
is terminated at the end of the Initial Term or as of any anniversary of the
Initial Term, as the case may be, by either party upon sixty (60) days prior
written notice. If the employment of Executive continues thereafter, absent a
written agreement, the employment shall be at will and the provisions of this
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Agreement shall be of no force and effect with respect to such subsequent
period, except for the provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the
Company may terminate the employment of Executive "for cause" (as hereinafter
defined) at any time upon written notice effective immediately. The term "for
cause" shall mean (i) the continued failure by Executive substantially to
perform his duties as provided in paragraph 1, in a reasonably professional
manner other than due to total disability or death for a period of thirty (30)
days after a written demand for substantial performance is delivered to
Executive by the Board of Directors or Chairman or President of the Company,
which demand identifies the manner in which the Board or Chairman or President
believes Executive has not substantially performed his duties, (ii) the
unauthorized dissemination of material trade secrets or other material
proprietary property of the Company or its parent or subsidiaries of its
parent, (iii) the commission of a felony or any other crime involving moral
turpitude or the pleading of nolo contendere to any such act, (iv) the
commission of any act or acts of dishonesty when such acts are intended to
result or result, directly or indirectly, in gain or personal enrichment of
Executive or any related person or affiliated the Company or are intended to
cause harm or damage to the Company or its parent or subsidiaries of its
parent, (v) the illegal use of controlled substances, (vi) the use of alcohol
so as to have a material adverse effect on the performance of his duties, (vii)
the misappropriation or embezzlement of assets of the Company or its parent or
subsidiaries of its parent, (viii) the making of disparaging remarks regarding
the Company or its parent or subsidiaries of its parent or the products or
services of any such person to suppliers and/or customers of the Company, its
parent or subsidiaries of its parent, or (ix) the breach of any other material
term or provision of this Agreement to be performed by Executive which have not
been cured within thirty (30) days of receipt of written notice of such breach.
(2) Upon termination for cause the Company shall
have no further obligation to pay any compensation to Executive for periods
after the effective date of the termination for cause, except for Base Salary
which accrued as of the termination date. In addition, the right to exercise
any vested stock option shall terminate on the effective date of the
termination of employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate
upon his death or, ten (10) business days after written notice by the Company
of termination, upon or during the continuance of the total disability (as
hereinafter defined) of Executive.
(2) Upon termination upon death or upon or during
total disability, the Company shall have no further obligation to pay any
compensation for periods after the effective date of such termination, except
for Base Salary and Incentive Compensation which accrued as of
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<PAGE> 5
the termination date. To the extent stock options have vested as of such
termination date, they shall continue to be exercisable for a period of twelve
(12) months thereafter as set forth in the stock option agreements not to
exceed the stated expiration date of the stock option.
(3) The term "total disability" means the
inability of Executive to substantially perform his duties hereunder for a
continuous period of thirty (30) days unless extended in writing by the
Company. Total disability shall be deemed to commence upon the expiration of
such continuous thirty (30) day period. In the event of any dispute as to the
"total disability" of the Executive, the matter shall be resolved by the
decision of a single physician, serving as an arbitrator, mutually selected or
appointed in accordance with the rules of the American Arbitration Association,
Atlanta, Georgia. The decision of the arbitrator shall be binding on all
parties hereto. Executive agrees to submit medical records requested and to
submit to such examination and testing requested by such physician.
(c) Termination by Company without Cause.
In the event the Company terminates the employment of
the Executive, except for cause, prior to the expiration of term of this
Agreement as set forth in paragraph 3 hereof, the Company will pay Executive,
as its sole and exclusive liability hereunder, an amount equal to six (6)
months of the Executive's then current monthly base salary. Payment shall be
made within 5 days of such termination.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on
the date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will", then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Company for use in the United States ("Territory")
other than with the Company and its parent and subsidiaries of its parent.
This covenant not to compete shall not prohibit (i) ownership by Executive of
not more than one percent (1%) of the equity securities of companies listed on
any United States stock exchanges or traded over the counter or (ii)
engagements which do not involve, directly or indirectly, the development,
distribution or marketing of competitive products or services by entities
engaged in such competitive businesses. The software programs and services
currently marketed by the Company are practice management software products and
services for use by health care providers, including the utilization of EDI
services by such health care providers.
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The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in
the Territory and each month of time covered by this covenant not to compete
shall be deemed a severable unit and should any court determine that the
inclusion of all states, cities and counties or months would render any such
undertaking unreasonable or unenforceable for any reason, those units which are
necessary in the judgment of the court to be deleted in order to render such an
undertaking reasonable and enforceable shall be deemed free of such non-compete
undertaking, but such undertaking shall remain in full force and effect as to
every other unit of territory and time.
6. NON-SOLICITATION OF CUSTOMERS.
Executive agrees that during the period of one year
immediately following termination of his employment for any reason with the
Company by himself or by the Company, the Executive shall not on his own behalf
or on behalf of any other person, including any other corporation, solicit,
contact, call upon, communicate with or attempt to communicate with any
customer or prospective customer of the Company or any representative of any
customer or prospective customer of the Company with a view to the sale
(licensing or lease) of any software program or service competitive or
potentially competitive with any software program or service sold, licensed,
leased, provided or under development by the Company during the period of two
years immediately preceding termination of his employment with the Company for
any reason provided that the restrictions set forth in this paragraph 6 shall
apply only to customers or prospects of the Company or representative thereof
with which the Executive had contact during such two year period. The actions
prohibited by this paragraph 6 shall not be engaged in by the Executive
directly or indirectly.
7. NON-SOLICITATIONS OF EMPLOYEES.
Executive agrees that, during his employment and for a period
of one year following termination of his employment with the Company for any
reason by himself or by the Company, the Executive will not, directly or
indirectly, solicit or in any manner encourage employees of the Company to
leave its employ for an engagement in any capacity by another person.
8. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions
and copyrights, a copy of which is attached hereto as Exhibit D.
9. SPECIFIC PERFORMANCE. Because of his knowledge and
experience, Executive agrees that the Company shall be entitled to specific
performance or an injunction or other similar relief in addition to all other
rights and remedies it might have for any violation of the
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<PAGE> 7
undertakings set forth in Paragraphs 5, 6 and 7 of this Agreement without the
posting of a bond or other security and without the proof of actual damages.
10. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given upon receipt when delivered by hand or by express
mail, overnight courier or other similar method or by facsimile transmission
(provided a copy is also sent by registered or certified mail), or five (5)
days after deposit of the notice in the U.S. Mail, if mailed by certified or
registered mail, with postage prepaid addressed to the respective party as set
forth below, which address may be changed by written notice to the other party:
(a) If to the Company:
InfoCure Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: President
(b) If to Executive:
_________________________________
_________________________________
_________________________________
11. BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of its business; provided, however, such assignment shall not relieve
the Company of its obligations hereunder.
12. ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to constitute the entire understanding of the parties with respect to
the employment of Executive by the Company and supersedes all prior agreements
and understandings oral or written. All prior agreements between Executive and
the Company or any subsidiary are null and void, as of the date hereof, except
for such accrued liabilities that are recorded as a liability as of such date
on the financial books and records of such company.
13. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise
specifically provided, all disputes arising under this Agreement shall be
submitted to and settled by arbitration. Arbitration shall be by one (1)
arbitrator selected in accordance with the rules of the American
7
<PAGE> 8
Arbitration Association, Atlanta, Georgia ("AAA") by the AAA. The hearings
before the arbitrator shall be held in Atlanta, Georgia and shall be conducted
in accordance with the rules existing at the date thereof of the AAA to the
extent not inconsistent with this Agreement. The decision of the arbitrator
shall be final and binding as to any matters submitted to them under this
Agreement. All costs and expense incurred in connection with any such
arbitration proceeding and those incurred in any civil action to enforce the
same shall be borne by the party against which the decision is rendered.
14. AMENDMENTS. This Agreement may not be amended or modified
except in a writing signed by both parties.
15. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
16. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INFOCURE CORPORATION
By: _________________________________
Name:____________________________
Title:___________________________
EXECUTIVE
_____________________________________
Name: M. Wayne George
8
<PAGE> 9
EXHIBIT A
INCENTIVE COMPENSATION
9
<PAGE> 10
EXHIBIT B
STOCK OPTION PLAN
10
<PAGE> 11
EXHIBIT C
STOCK OPTION AGREEMENT
11
<PAGE> 12
EXHIBIT D
EMPLOYMENT AGREEMENT REGARDING
DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS
12
<PAGE> 1
EXHIBIT 10.18
EXHIBIT D
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the ____
day of ________________, 1997 between INFOCURE CORPORATION, a Delaware
corporation ("Company"), and Marc Kloner ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT/DUTIES. (a) The Company shall employ Executive as
an executive during the term of his employment as set forth in this Agreement
and Executive hereby accepts such employment. Executive's initial position
shall be Chief Scientist of the Dental Division of the Company and President of
KComp Management Systems, Inc. ("Subsidiary") and shall have accountability
for the operating performance of the Dental Division. Additional
responsibilities will include assisting the Company with organization
restructuring, national marketing projects and acquisitions.
(b) Executive shall have such powers and duties as
assigned to him by the President of the Company and Board of Directors of
Subsidiary from time to time.
(c) Executive shall keep the President of the Company and
the Board of Directors of the Subsidiary timely advised of all significant
developments and opportunities and shall timely consult with the President of
the Company and the Board of Directors of the Subsidiary on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors of Subsidiary and the
President of the Company.
<PAGE> 2
(d) Executive will use commercially reasonable efforts to
perform his duties during normal working hours in accordance with the
applicable business plans and budgets and policies in effect from time to time
as approved by the Board of Directors of Subsidiary.
(e) Executive agrees that he will at all times to the
best of his ability and experience faithfully perform all of the duties that
may be required of him pursuant to the terms of this Agreement. Executive
shall devote his full business time to the performance of his obligations
hereunder.
2. COMPENSATION.
(a) Base Salary.
(i) During the term of his employment, including
any extension thereof pursuant to this Agreement, the Company will pay
to Executive a base salary ("Base Salary") of $110,000 per year,
payable in arrears in equal semi-monthly payments at the Company's
normal pay periods. The Base Salary rate shall increase as of the
first anniversary of this Agreement and each subsequent anniversary by
the increase of the Consumer Price Index for All Urban Consumers (base
years 1982-1984 = 100), All Items, Los Angeles-Anaheim-Riverside for
the then most recent 12 months published by the U.S. Department of
Labor, Bureau of Labor Statistics (the "Index"). If the Index is
changed so that the base year differs, then the Index shall be
converted in accordance with the conversion factor published by the
U.S. Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised, then the government index or computation with
which it is replaced shall be used to obtain substantially the same
result as if the Index had not been discontinued or revised. In the
event of a disability, to the extent payments are received under an
employer-sponsored disability program, the payments hereunder are to
be reduced by an amount equal to such disability payments.
(b) Incentive Compensation.
(i) During the term of Executive's employment
hereunder, including any extension thereof, in addition to the Base
Salary as provided in paragraph 2(a)(i), Executive will be eligible
for annual incentive compensation ("Incentive Compensation") as set
forth hereinafter. Executive's Incentive Compensation shall be based
upon the Operating Income from operations of the "Dental Division" of
the Company. Initially the Dental Division shall consist only of the
Subsidiary.
(ii) The Incentive Compensation shall be a
percentage of the Operating Income as defined in the Stock Purchase
Agreement dated February 14, 1997. The fiscal year of the Dental
Division shall be the year ending each January 31. The Base Amount is
to be adjusted from time to time as set forth in subparagraph (b)(iii)
and thereafter the Incentive Compensation will be based upon the then
applicable Adjusted Base Amount. If
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<PAGE> 3
the Operating Income of the Subsidiary is less than $427,000 ("Base
Amount"), no Incentive Compensation will be earned unless an
additional business(es) has been acquired and has been included in the
Dental Division and the combined Operating Income exceeds the then
applicable Adjusted Base Amount (as hereinafter defined). To the
extent that the Operating Income of the Dental Division exceeds the
Base Amount or Adjusted Base Amount, as the case may be, during a
fiscal year, Executive shall receive Incentive Compensation for each
fiscal year calculated as follows:
<TABLE>
<CAPTION>
Range of Increase in
Operating Income Above
Base Amount or
Adjusted Base Amount Incentive Compensation
--------------------- ----------------------
<S> <C>
Less than $500,001 20% of amounts above
the Base Amount or
Adjusted Base Amount
More than $500,000 but less 10% of amounts
than $1,000,001 over $500,000
More than $1,000,000 5% of amounts
over $1,000,000
</TABLE>
(iii) The Base Amount is to be adjusted to reflect
any acquisition or disposition of businesses of the Dental Division of
the Company, in whole or in part, in good faith. The Base Amount as
adjusted from time to time is herein referred to as the "Adjusted Base
Amount." In the event an acquisition or disposition of a business
occurs during a fiscal year, the annual Adjusted Base Amount shall be
prorated for such year but the full annual Adjusted Base Amount shall
be used for all other periods.
(iv) In addition, if the Dental Division of the
Company acquires any additional business(es), the Executive is
entitled to additional Incentive Compensation equal to 5% of the
Operating Income of all such other business(es) (excluding the
Subsidiary) comprising the Dental Division of the Company during the
twelve months immediately following such acquisition, not to exceed
the Adjusted Base Amount established for such additional business(es).
(v) All business engaged in the development and
marketing of dental practice management software systems which are
hereafter acquired by Company with the assistance of Executive shall
be included in the Dental Division. Dental practice management
systems include all dental specialties excluding oral surgery and
orthodontics.
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<PAGE> 4
(c) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
(d) Business Allowance. There shall be established a
business expense allowance of $6,000 per year for each twelve-month period of
this Agreement (prorated for portions of a year) for such business expenses
incurred by the Executive in his sole discretion which are not otherwise
authorized under the Company's policies. Executive may incur, and the Company
shall pay, such business expenses as designated by the Executive not to exceed
in each twelve-month period the annual business expense allowance in the
aggregate.
(e) Employee Benefit Program. Executive shall be
eligible to participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including eligibility.
It is understood that the Company reserves the right to modify and rescind any
program or adopt new programs in its sole discretion. The Company may, in its
sole discretion, maintain key man life insurance on the life of Executive and
designate the Company as the beneficiary. Executive agrees to execute any
documents necessary to effect such policy. The Company shall use commercially
reasonable efforts to provide Executive with medical and hospital coverage
which is equivalent to that which is currently in effect for employees of the
Subsidiary for 12 months. The parties acknowledge that the Company intends to
implement uniform employee benefits throughout the Company and its subsidiaries
at reasonable costs and thus such programs will not be identical to the current
programs; provided, however, the Company will make no change that will exclude
the Executive, his spouse and members of his family from having coverage.
(f) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(g) Vacation. Executive shall be entitled to four (4)
weeks of vacation for each full year of service. For the period from the date
of this Agreement through December 31, 1997, Executive shall be entitled to
vacation equal to the prorated portion of such four (4) weeks (calculated as 4
times the fraction of the number of days in 1997 from the date of this
Agreement divided by 365). Vacations shall be taken at such times as not to
materially interfere with the business of the Company. The vacation time must
be taken within the time period specified in the program or as otherwise
mutually agreed in writing, otherwise it expires to the extent not used as of
each December 31.
3. TERM. The term of the employment of Executive under this
Agreement shall be for a period of two (2) years ("Initial Term") commencing on
the date hereof and ending on the second (2nd) anniversary thereof, subject to
earlier termination as provided in paragraph 4. The term of employment shall
automatically continue after the Initial Term under this Agreement,
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<PAGE> 5
subject to earlier termination as provided in paragraph 4, for additional
one-year terms unless it is terminated at the end of the Initial Term or as of
any anniversary of the Initial Term, as the case may be, by either party upon
sixty (60) days prior written notice. If the employment of Executive continues
thereafter, absent a written agreement, the employment shall be at will and the
provisions of this Agreement shall be of no force and effect with respect to
such subsequent period, except for the provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the
Company may terminate the employment of Executive "for cause" (as hereinafter
defined) at any time upon written notice effective immediately. The term "for
cause" shall mean (i) the continued failure by Executive substantially to
perform his duties as provided in paragraph 1, in a reasonably professional
manner (other than due to total disability or death) for a period of thirty
(30) days after a written demand for substantial performance is delivered to
Executive by the Board of Directors or Chairman or President of the Company,
which demand identifies the manner in which the Board or Chairman or President
believes Executive has not substantially performed his duties, (ii) the
unauthorized dissemination of material trade secrets or other material
proprietary property of the Company or its parent or subsidiaries of its
parent, (iii) the conviction of a felony or any other crime involving moral
turpitude or the pleading of nolo contendere to any such act, (iv) the
commission of any act or acts of dishonesty when such acts are intended to
result or result, directly or indirectly, in financial gain or personal
enrichment of Executive or any related person or affiliated company or are
intended to cause harm or damage to the Company or its parent or subsidiaries
of its parent, (v) the illegal use of controlled substances, (vi) the use of
alcohol so as to have a material adverse effect on the performance of his
duties, (vii) the misappropriation or embezzlement of assets of the Company or
its parent or subsidiaries of its parent, (viii) the making of disparaging
remarks regarding the Company or its parent or subsidiaries of its parent or
the products or services of any such person to suppliers and/or customers of
the Company, its parent or subsidiaries of its parent, or (ix) the breach of
any other material term or provision of this Agreement to be performed by
Executive which has not been cured within thirty (30) days of his receipt of
written notice of such breach.
(2) Upon termination for cause the Company shall
have no further obligation to pay any compensation to Executive for periods
after the effective date of the termination for cause, except for Base Salary
which accrued as of the termination date. In addition, the right to exercise
any vested stock option shall terminate on the effective date of the
termination of employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate
upon his death or, ten (10) business days after written notice by the Company
of termination, upon or during the continuance of the total disability (as
hereinafter defined) of Executive.
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<PAGE> 6
(2) Upon termination upon death or upon or during
total disability, the Company shall have no further obligation to pay any
compensation for periods after the effective date of such termination, except
for Base Salary (together with any expense reimbursement, accrued unused
vacation, and the accrued auto allowance per paragraph 2(c)) and Incentive
Compensation which accrued as of the termination date.
(3) The term "total disability" means the
inability of Executive to substantially perform his duties hereunder for a
continuous period of thirty (30) days unless extended in writing by the
Company. Total disability shall be deemed to commence upon the expiration of
such continuous thirty (30) day period. In the event of any dispute as to the
"total disability" of the Executive, the matter shall be resolved by the
decision of a single physician, serving as an arbitrator, mutually selected or
appointed in accordance with the rules of the American Arbitration Association,
Atlanta, Georgia. The decision of the arbitrator shall be binding on all
parties hereto. Executive agrees to submit medical records requested and to
submit to such examination and testing requested by such physician.
(c) Termination by Company without Cause.
In the event the Company terminates the employment of
the Executive, except for cause, prior to the expiration of term of this
Agreement as set forth in paragraph 3 hereof, the Company will pay Executive,
as its sole and exclusive liability hereunder, an amount equal to six (6)
months of the Executive's then current monthly base salary. Payment shall be
made within 5 days of such termination.
(d) Termination by Executive.
Executive may terminate this Agreement (i) at any
time and for any reason upon written notice, and (ii) upon the breach of any
material term or provision of this Agreement to be performed by the Company
which has not been cured within thirty (30) days (but only five (5) business
days in the event of the Company's failure to pay monies due under this
Agreement) of the Company's receipt of written notice of such breach.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on
the date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will," then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Subsidiary for use in the United States ("Territory")
other than with the
6
<PAGE> 7
Company and its parent and subsidiaries of its parent. This covenant not to
compete shall not prohibit (i) ownership by Executive of not more than one
percent (1%) of the equity securities of companies listed on any United States
stock exchanges or traded over the counter or (ii) engagements which do not
involve, directly or indirectly, the development, distribution or marketing of
competitive products or services by entities engaged in such competitive
businesses. The software programs and services currently marketed by the
Subsidiary are practice management software products and services for use by
health care providers, including the utilization of EDI services by such health
care providers. This paragraph 5(a) shall terminate in the event Executive
terminates this Agreement pursuant to paragraph 4(d)(ii).
The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in
the Territory and each month of time covered by this covenant not to compete
shall be deemed a severable unit and should any court determine that the
inclusion of all states, cities and counties or months would render any such
undertaking unreasonable or unenforceable for any reason, those units which are
necessary in the judgment of the court to be deleted in order to render such an
undertaking reasonable and enforceable shall be deemed free of such non-compete
undertaking, but such undertaking shall remain in full force and effect as to
every other unit of territory and time.
6. NON-SOLICITATION OF CUSTOMERS.
Executive agrees that during the period of one year
immediately following termination of his employment for any reason with the
Company by himself or by the Company, the Executive shall not on his own behalf
or on behalf of any other person, including any other corporation, solicit,
contact, call upon, communicate with or attempt to communicate with any
customer or prospective customer of the Company or any representative of any
customer or prospective customer of the Company with a view to the sale
(licensing or lease) of any software program or service competitive or
potentially competitive with any software program or service sold, licensed,
leased, provided or under development by the Company or any subsidiary during
the period of two years immediately preceding termination of his employment
with the Company or any subsidiary of the Company for any reason provided that
the restrictions set forth in this paragraph 6 shall apply only to customers or
prospects of the Company or representative thereof with which the Executive had
contact during such two-year period. The actions prohibited by this paragraph
6 shall not be engaged in by the Executive directly or indirectly. This
paragraph 6 shall terminate in the event Executive terminates this Agreement
pursuant to paragraph 4(d)(ii).
7. NON-SOLICITATION OF EMPLOYEES.
Executive agrees that, during his employment and for a period
of one year following termination of his employment with the Company for any
reason by himself or by the Company, the Executive will not, directly or
indirectly, solicit or in any manner encourage
7
<PAGE> 8
employees of the Company or any subsidiary to leave its employ for an
engagement in any capacity by another person. This paragraph 7 shall terminate
in the event Executive terminates this Agreement pursuant to paragraph
4(d)(ii).
8. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions
and copyrights, a copy of which is attached hereto as Exhibit A.
9. SPECIFIC PERFORMANCE. Because of his knowledge and
experience, Executive agrees that the Company shall be entitled to specific
performance or an injunction or other similar relief in addition to all other
rights and remedies it might have for any violation of the undertakings set
forth in paragraphs 5, 6 and 7 of this Agreement without the posting of a bond
or other security and without the proof of actual damages.
10. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given upon receipt when delivered by hand or by express
mail, overnight courier or other similar method or by facsimile transmission
(provided a copy is also sent by registered or certified mail), or five (5)
days after deposit of the notice in the U.S. Mail, if mailed by certified or
registered mail, with postage prepaid addressed to the respective party as set
forth below, which address may be changed by written notice to the other party:
(a) If to the Company:
InfoCure Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: President
(b) If to Executive:
Marc Kloner
21058 Mendenhall Court
Topanga, California 90212
11. BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of
8
<PAGE> 9
its business; provided, however, such assignment shall not relieve the Company
of its obligations hereunder.
12. ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to constitute the entire understanding of the parties with respect to
the employment of Executive by the Company and supersedes all prior agreements
and understandings oral or written. All prior agreements between Executive and
the Company or any subsidiary are null and void, as of the date hereof, except
for such accrued liabilities that are recorded as a liability as of such date
on the financial books and records of such company.
13. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise
specifically provided, all disputes arising under this Agreement shall be
submitted to and settled by arbitration. Arbitration shall be by one (1)
arbitrator selected in accordance with the rules of the American Arbitration
Association, Atlanta, Georgia ("AAA") by the AAA. The hearings before the
arbitrator shall be held in Atlanta, Georgia and shall be conducted in
accordance with the rules existing at the date thereof of the AAA to the extent
not inconsistent with this Agreement. The decision of the arbitrator shall be
final and binding as to any matters submitted to them under this Agreement.
All costs and expense incurred in connection with any such arbitration
proceeding and those incurred in any civil action to enforce the same shall be
borne by the party against which the decision is rendered.
14. AMENDMENTS. This Agreement may not be amended or modified
except in a writing signed by both parties.
15. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
16. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INFOCURE CORPORATION
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
9
<PAGE> 10
EXECUTIVE
----------------------------------------------
Name: Marc Kloner
10
<PAGE> 1
EXHIBIT 10.21
January 14, 1997
Rodman & Renshaw, Inc.
Cruttenden Roth Incorporated
As Representatives of the Several
Underwriters
Two World Financial Center - Tower B
225 Liberty Street, 30th Floor
New York, New York 10281
Ladies and Gentlemen:
In order to induce Rodman & Renshaw, Inc. ("Rodman"), Cruttenden Roth
Incorporated and the several underwriters (the "Underwriters") to enter into an
underwriting agreement with respect to the public offering (the "Offering") of
approximately 2,000,000 shares (the "Shares") of the common stock, par value
$.001 per share (the "Common Stock"), issued by InfoCure Corporation (the
"Company"), the undersigned, as the beneficial owner of securities which will
be converted into Common Stock of the Company, agrees as herein set forth.
The undersigned agrees for the benefit of the Company and the
Underwriters that, for a period of 180 days (the "Lock-Up Period") subsequent
to the date that the Securities and Exchange Commission (the "Commission")
declares effective the Registration Statement (the "Registration Statement") on
Form SB-2 filed with the Commission for the registration of the Shares under
the Securities Act of 1933 (the "Act"), the undersigned will not, without the
prior written consent of Rodman, on behalf of the Underwriters, offer, pledge,
sell, transfer, assign, contract to sell, grant any option for the sale of,
sell or otherwise dispose of, directly or indirectly, either pursuant to Rule
144 under the Act or otherwise, any shares of the Common Stock of the Company
or any security or other instrument which by its terms is convertible into,
exercisable for or exchangeable for shares of Common Stock, beneficially owned
by the undersigned (within the meaning of Rule 13d-3 under the Securities
Exchange
<PAGE> 2
Rodman & Renshaw, Inc.
January 14, 1997
Page 2
Act of 1934 (the "Exchange Act") except with respect to Shares being sold in
connection with the Offering or their being a beneficial owner of such Shares.
Gifts of the Common
Stock will be permitted provided that the recipient of such gift agrees in
writing as a condition precedent to such gift to be bound by the term thereof.
The undersigned agrees for the benefit of the Company and the
Underwriters that, prior to the effective date of the Registration Statement,
the undersigned will not, without the prior written consent of Rodman, on
behalf of the Underwriters, offer, pledge, sell, transfer, assign, contract to
sell, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, either pursuant to Rule 144 of the regulations under the Act, or
otherwise, any shares of the Common Stock of the Company, or any security or
other instrument which by its terms is convertible into, exercisable for, or
exchangeable for shares of Common Stock, beneficially owned by the undersigned
(within the meaning of Rule 13d-3 under the Exchange Act)) on the date hereof
or hereafter acquired without first requiring any such offering or acquiring
parties to execute and deliver to you an agreement in substantially the form of
this agreement.
Further, the undersigned agrees for the benefit of the Company and the
Underwriters that, for a period of two years subsequent to the date that the
Commission declares effective the Registration Statement, the undersigned will
not publicly offer or sell any shares of Common Stock of the Company
beneficially owned by the undersigned and acquired by the undersigned in a
transaction pursuant to Rule 145(a), as promulgated under the Act, except in
accordance with the volume limitations set forth in Rule 144(e), as promulgated
under the Act, regardless of whether the undersigned is deemed to be an
affiliate within the meaning of Rule 145(c), as promulgated under the Act.
Notwithstanding the foregoing, the undersigned may offer, pledge, sell,
transfer, assign, contract to sell, or otherwise dispose of such shares of
Common Stock in one or more transactions not involving a public offering or
sale provided that the pledgee, purchaser, assignee, or other transferee of
such shares agrees, as a condition precedent to such transfer, in a writing
addressed to Rodman, and in substantially the form hereof, to the limitations
applicable to public offers and sales of such shares set forth in this
paragraph.
In order to enable you to enforce the aforesaid covenants, the
undersigned hereby consents to the placing of restrictive legends upon, and
stop-transfer orders with the transfer agent of the Company's securities with
respect to, any shares of Common Stock registered in the undersigned name or
beneficially owned by the undersigned.
<PAGE> 3
Rodman & Renshaw, Inc.
January 14, 1997
Page 3
The Company agrees to instruct the transfer agent to place such
legends and stop transfer orders and not to authorize the transfer agent to
transfer any shares without the consent of Rodman, on behalf of the
Underwriters as set forth herein.
The undersigned understands that the Company and the Underwriters will
rely upon this letter if they proceed with the Offering.
The provisions of this agreement shall be binding upon the undersigned
and the successors, assigns, heirs, and personal representatives of the
undersigned.
Very truly yours,
________________________________________
(Signature)
________________________________________
(Print Name of Stockholder)
________________________________________
(Print Name of Signatory)
________________________________________
(Print Title of Signatory, if
necessary)
Dated: _______________________________
<PAGE> 1
EXHIBIT 10.22
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT ("Agreement") is entered into as of this
19th day of November, 1996 by and among MDP Corporation, a Georgia corporation
("MDP"), Jonathan J. Oscher ("Oscher"), American Medcare Corporation, a Delaware
corporation ("AMC"), International Computer Solutions, Inc., a Georgia
corporation ("ICS"), Robert L. Fine ("R. Fine"), W.K. Price ("W. Price"),
Frederick L. Fine ("F. Fine"), James K. Price ("J. Price") and William A. Baker
("Baker"), (R. Fine, W. Price, F. Fine, J. Price and Baker collectively referred
to as the "Paying ICS Shareholders").
WHEREAS, MDP, ICS and the Paying ICS Shareholders have entered into the
Clearinghouse Services Agreement ("Services Agreement") dated August 31, 1992;
WHEREAS, Oscher, ICS and Newport Capital, Inc., a Georgia corporation
("Newport") have entered into a Shares Disposition Agreement ("Shares
Agreement") dated August 31, 1992;
WHEREAS, Newport has merged into AMC and AMC has succeeded to the
rights and obligations of Newport under the Shares Agreement; and
WHEREAS, the parties hereto desire to terminate the Services Agreement
and the Shares Agreement upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. TERMINATION. Subject to the terms of this Agreement, the Services
Agreement, and the Shares Agreement (collectively "Terminated Agreements"),
terminate on November 30, 1996. Upon the termination of the Terminated
Agreements, the parties shall have no further obligations or liabilities to the
other pursuant to or otherwise related to the Terminated Agreements, known or
unknown, fixed or contingent, except as herein specifically provided. Any
clearinghouse services provided by MDP hereafter for ICS shall be as mutually
agreed hereafter in writing.
2. PAYMENTS. ICS shall pay MDP $263,111.20, of which $25,000.00 is
payable upon the execution of this Agreement and the balance upon the
consummation of the Public Offering, as hereafter defined. The term "Public
Offering" means the underwritten public offering of common stock of AMC or its
successor. Payment is to be made by check by ICS on each such date. ICS shall
give MDP prior written notice of the date of the consummation of the Public
Offering, which is expected to be approximately February 15, 1997, but could be
subject to delays.
3. RETURN OF STOCK. Oscher hereby assigns and transfers 3,521,405
shares of common stock of AMC (collectively "AMC Shares") to AMC. Oscher
represents that the AMC
<PAGE> 2
Shares are free of all liens, security interests and rights of others.
Delivery of said Shares to AMC shall be not later than twenty (20) days prior to
the closing date of the Public Offering, i.e., February 15, 1996, or such later
date as may be the case, in order that American Stock Transfer can process the
transfer prior to the closing date.
4. TERMINATION OF THIS AGREEMENT.
(a) In the event that the Public Offering is not consummated
as set forth in subparagraph (b), this Agreement shall be null and void, of no
effect and the parties shall continue their relationship as set out in the
Terminated Agreements and the $25,000.00 payment by ICS to MDP shall be applied
to the outstanding principal balance reducing said balance as of November 30,
1996 to approximately $238,111.20, as set out in Exhibit A attached.
(b) The parties recognize that the Public Offering by AMC or
its successor entity could be postponed or delayed. In the event that the Public
Offering is not consummated on or before June 30, 1997, it shall be presumed
that the Public Offering will not occur in the near future and this Agreement
shall be null and void as set forth in subparagraph (a) above, unless the
underwriter managing the Public Offering has set a definite date for the
consummation of the Public Offering. Upon termination of this Agreement as set
forth in subparagraph (a) above, AMC shall reissue the 3,521,405 of AMC shares
to Oscher, which were transferred to it pursuant to paragraph 3, in the event
the shares have been transferred by Oscher to AMC.
(c) Within ten (10) days after the closing of the public
offering, Oscher shall execute a quitclaim deed to R. Fine and W. Price
releasing their respective parcels of real estate from the guaranty in the
Terminated Agreements. R. Fine and W. Price shall prepare the quitclaim deed at
their expense.
5. FURTHER ASSURANCES. The parties hereto shall do and perform or cause
to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
the other party hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement.
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties hereto regarding the termination of the Terminated
Agreements and related matters. No representations or agreements, whether
written or oral, other than those contained or referenced herein, shall be
binding on the parties.
7. SPECIFIC PERFORMANCE. This Agreement may be specifically enforceable
in accordance with applicable principles of law and equity. The parties hereby
acknowledge that it is impossible to measure the monetary damages which would
result from a party's failure to perform any obligation imposed upon such party
by this Agreement. Therefore, if any party hereto should institute an action or
proceeding to enforce the provisions hereof, any other party against whom such
action or proceeding is thereby brought hereby waives the claim or defense that
such party has an adequate remedy at law, and such person shall not urge in any
action or proceeding the claim or defense that an adequate remedy at law exists.
2
<PAGE> 3
8. AUTHORITY. Each party represents to all other parties that such
party has the authority to enter into this Agreement and that the execution,
delivery and performance of this Agreement by such party has been duly and
validly authorized, constitutes a legal, valid and binding obligation of such
party and is enforceable in accordance with its terms.
9. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect and performance.
10. COUNTERPARTS AND EXHIBITS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MDP CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
Jonathan J. Oscher
AMERICAN MEDCARE CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
INTERNATIONAL COMPUTER
SOLUTIONS, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
PAYING ICS SHAREHOLDERS:
------------------------------------------
Robert L. Fine
------------------------------------------
W.K. Price
3
<PAGE> 4
------------------------------------------
Frederick L. Fine
------------------------------------------
James K. Price
------------------------------------------
William A. Baker
4
<PAGE> 1
EXHIBIT 10.23
INFOCURE CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the ____
day of ____________________, 1997 between INFOCURE CORPORATION, a Delaware
corporation ("Company"), and Brad E. Schraut ("Executive").
WHEREAS, the Company, through its subsidiaries, has developed and is
marketing computer software programs and related services in the health care
industry and continues to develop and market such software programs and related
services;
WHEREAS, the Company agrees to employ Executive as an executive to
provide the services set forth herein; and
WHEREAS, Executive agrees to provide such services in accordance with
the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made and
of other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT/DUTIES. (a) The Company shall employ Executive as an
executive during the term of his employment as set forth in this Agreement and
Executive hereby accepts such employment. Executive's initial position shall be
President of Rovak, Inc. ("Subsidiary") and shall have day to day responsibility
for the Subsidiary.
(b) Executive shall have such powers and duties as assigned to
him by the President of the Company and Board of Directors of Subsidiary from
time to time.
(c) Executive shall keep the President of the Company and the
Board of Directors of the Subsidiary timely advised of all significant
developments and opportunities and shall timely consult with the President of
the Company and the Board of Directors of the Subsidiary on all significant
policies and contracts. Executive's powers and duties are subject to the
supervision and instructions of the Board of Directors of Subsidiary and the
President of the Company.
(d) Executive will use his best efforts to perform his duties
in accordance with the applicable business plans and budgets and policies in
effect.
(e) Executive agrees that he will at all times faithfully and
to the best of his ability and experience faithfully perform all of the duties
that may be required of him pursuant to the terms of this Agreement. Executive
shall devote his full business time to the performance of his obligations
hereunder.
<PAGE> 2
2. COMPENSATION.
(a) Base Salary. During the term of his employment, including
any extension thereof pursuant to the Agreement, the Company will pay to
Executive a base salary ("Base Salary") of $110,000 per year, payable in arrears
in equal semi-monthly payments. The Base Salary rate shall increase as of the
first anniversary of this Agreement and each subsequent anniversary by the
increase of the CPI for all Uban Consumers, All Items, U.S. City Average for the
then most recent 12 months as published by the U.S. Bureau of Labor Statistics.
In the event of a disability, to the extent payments are received under an
employer-sponsored disability program, the payments hereunder are to be reduced
by an amount equal to such disability payments.
(b) Incentive Compensation. During the term of Executive's
employment hereunder, including any extension thereof, in addition to the Base
Salary as provided in paragraph 2(a), Executive will be eligible for annual
incentive compensation ("Incentive Compensation") pursuant to a program
established by the Board of Directors in its sole discretion, from time to time,
provided that the objectives of the program are met. The Incentive Compensation
shall be pursuant to a program based upon the achieving certain revenue and/or
profit goals and/or other goals ("Goals") of the Company and/or of the business
unit for which Executive has responsibilities. Upon the establishment of the
program and Goals, the parties hereto shall enter into an agreement setting
forth the Incentive Compensation, which agreement shall be attached hereto as
Exhibit A and shall constitute a part of this Agreement.
(c) Stock Options. The Company shall grant to Executive on the
date hereof a stock option for an aggregate of shares of Common Stock, par value
$.001, of the Company ("Common Stock") at its fair market value on the date
hereof. Attached hereto as Exhibit B is a copy of the Company's Stock Option
Plan, which is subject to shareholder approval, and Exhibit C, which is the form
of stock option agreement.
(d) Automobile Allowance. Executive shall receive an
automobile allowance of $1,000 per month and operating costs when operated for
business purposes. The automobile allowance is payable semi-monthly together
with the Base Salary of the Executive.
(e) Business Allowance. There shall be established a business
expense allowance of $6,000 per year for each twelve-month period of this
Agreement (prorated for portions of a year) for such business expenses incurred
by the Executive in his sole discretion which are not otherwise authorized under
the Company's policies. Executive may incur, and the Company shall pay, such
business expenses as designated by the Executive not to exceed in each
twelve-month period the annual business expense allowance in the aggregate.
(f) Employee Benefit Program. Executive shall be eligible to
participate in all employee benefit programs, including medical and
hospitalization programs, now or hereafter made available to its employees,
subject to the terms and conditions of such programs, including
2
<PAGE> 3
eligibility. It is understood that the Company reserves the right to modify and
rescind any program or adopt new programs in its sole discretion. The Company
may, in its sole discretion, maintain key man life insurance on the life of
Executive and designate the Company as the beneficiary. Executive agrees to
execute any documents necessary to effect such policy. The Company shall use
commercially reasonable efforts to provide Executive with medical and hospital
coverage which is equivalent to that which is currently in effect for employees
of Rovak for 12 months. The parties acknowledge that the Company intends to
implement uniform employee benefits throughout the Company and its subsidiaries
at reasonable costs and thus such programs will not be identical to the current
programs.
(g) Expenses. Executive shall be reimbursed for expenses
reasonably incurred in the performance of his duties hereunder in accordance
with the policies of the Company then in effect.
(h) Vacation. Executive shall be entitled to four (4) weeks of
vacation for each full year of service. Vacations shall be taken at such times
as not to materially interfere with the business of the Company. The vacation
time must be taken within the time period specified in the program or as
otherwise mutually agreed in writing, otherwise it expires to the extent not
used as of each December 31.
(i) Purchase of Motor Vehicle. If Executive is currently being
provided the right to use a motor vehicle owned or leased by the Company or any
subsidiary, Executive may purchase the motor vehicle at its net book value or
assume the lease within thirty (30) days of the date of this Agreement.
3. TERM. The term of the employment of Executive under this
Agreement shall be for a period of two (2) years ("Initial Term") commencing
on the date hereof and ending on the second (2nd) anniversary thereof, subject
to earlier termination as provided in Paragraph 4. The term of employment shall
continue after the Initial Term under this Agreement, subject to earlier
termination as provided in Paragraph 4, for additional one-year terms unless it
is terminated at the end of the Initial Term or as of any anniversary of the
Initial Term, as the case may be, by either party upon sixty (60) days prior
written notice. If the employment of Executive continues thereafter, absent a
written agreement, the employment shall be at will and the provisions of this
Agreement shall be of no force and effect with respect to such subsequent
period, except for the provisions of paragraphs 5, 6, and 7.
4. EARLY TERMINATION.
(a) For Cause. (1) Notwithstanding the foregoing, the Company
may terminate the employment of Executive "for cause" (as hereinafter defined)
at any time upon written notice effective immediately. The term "for cause"
shall mean (i) the continued failure by Executive substantially to perform his
duties with the Company in a reasonably professional manner other than due to
total disability or death for a period of thirty (30) days after a written
3
<PAGE> 4
demand for substantial performance is delivered to Executive by the Board of
Directors or Chairman or President of the Company, which demand identifies the
manner in which the Board or Chairman or President believes Executive has not
substantially performed his duties, (ii) the unauthorized dissemination of
material trade secrets or other material proprietary property of the Company or
its parent or subsidiaries of its parent, (iii) the commission of a felony or
any other crime involving moral turpitude or the pleading of nolo contendere to
any such act, (iv) the commission of any act or acts of dishonesty when such
acts are intended to result or result, directly or indirectly, in gain or
personal enrichment of Executive or any related person or affiliated the Company
or are intended to cause harm or damage to the Company or its parent or
subsidiaries of its parent, (v) the illegal use of controlled substances, (vi)
the use of alcohol so as to have a material adverse effect on the performance of
his duties, (vii) the misappropriation or embezzlement of assets of the Company
or its parent or subsidiaries of its parent, (viii) the making of disparaging
remarks regarding the Company or its parent or subsidiaries of its parent or the
products or services of any such person to suppliers and/or customers of the
Company, its parent or subsidiaries of its parent, or (ix) the breach of any
other material term or provision of this Agreement to be performed by Executive
which have not been cured within thirty (30) days of receipt of written notice
of such breach.
(2) Upon termination for cause the Company shall
have no further obligation to pay any compensation to Executive for periods
after the effective date of the termination for cause, except for Base Salary
which accrued as of the termination date. In addition, the right to exercise any
vested stock option shall terminate on the effective date of the termination of
employment for cause.
(b) Termination Upon Death or Disability.
(1) The employment of Executive shall terminate
upon his death or, ten (10) business days after written notice by the Company of
termination, upon or during the continuance of the total disability (as
hereinafter defined) of Executive.
(2) Upon termination upon death or upon or
during total disability, the Company shall have no further obligation to pay any
compensation for periods after the effective date of such termination, except
for Base Salary and Incentive Compensation which accrued as of the termination
date. To the extent stock options have vested as of such termination date, they
shall continue to be exercisable for a period of twelve (12) months thereafter
as set forth in the stock option agreements not to exceed the stated expiration
date of the stock option.
(3) The term "total disability" means the
inability of Executive to substantially perform his duties hereunder for a
continuous period of thirty (30) days unless extended in writing by the Company.
Total disability shall be deemed to commence upon the expiration of such
continuous thirty (30) day period. In the event of any dispute as to the "total
disability" of the Executive, the matter shall be resolved by the decision of a
single physician, serving as an arbitrator, mutually selected or appointed in
accordance with the rules of the
4
<PAGE> 5
American Arbitration Association, Atlanta, Georgia. The decision of the
arbitrator shall be binding on all parties hereto. Executive agrees to submit
medical records requested and to submit to such examination and testing
requested by such physician.
(c) Termination by Company without Cause.
In the event the Company terminates the employment
of the Executive, except for cause, prior to the expiration of term of this
Agreement as set forth in paragraph 3 hereof, the Company will pay Executive, as
its sole and exclusive liability hereunder, an amount equal to six (6) months of
the Executive's then current monthly base salary. Payment shall be made within 5
days of such termination.
5. COVENANT NOT TO COMPETE.
(a) Executive agrees that for the period commencing on
the date hereof and ending one (1) year after the expiration of the term of his
employment under this Agreement (and if employment is continued thereafter "at
will", then after termination of his employment with the Company or its parent
or subsidiaries of its parent for any reason thereafter), Executive will not,
alone or with others, directly or indirectly, own, manage, operate, join,
control, participate in the ownership, management, operation or control of, be
employed by, consult with, advise or be connected in any other manner with any
business which develops, distributes or markets software programs and/or
services which compete with the software programs and services of the kind
currently marketed by the Company for use in the United States ("Territory")
other than with the Company and its parent and subsidiaries of its parent. This
covenant not to compete shall not prohibit (i) ownership by Executive of not
more than one percent (1%) of the equity securities of companies listed on any
United States stock exchanges or traded over the counter or (ii) engagements
which do not involve, directly or indirectly, the development, distribution or
marketing of competitive products or services by entities engaged in such
competitive businesses. The software programs and services currently marketed by
the Company are practice management software products and services for use by
health care providers, including the utilization of EDI services by such health
care providers.
The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
(b) Each city and county of each state and each state in
the Territory and each month of time covered by this covenant not to compete
shall be deemed a severable unit and should any court determine that the
inclusion of all states, cities and counties or months would render any such
undertaking unreasonable or unenforceable for any reason, those units which are
necessary in the judgment of the court to be deleted in order to render such an
undertaking reasonable and enforceable shall be deemed free of such non-compete
undertaking, but such undertaking shall remain in full force and effect as to
every other unit of territory and time.
5
<PAGE> 6
6. DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS. Executive
shall execute simultaneously with the execution of this Agreement the standard
employee agreement of the Company regarding discoveries, patents, inventions and
copyrights, a copy of which is attached hereto as Exhibit D.
7. SPECIFIC PERFORMANCE. Because of his knowledge and experience,
Executive agrees that the Company shall be entitled to specific performance or
an injunction or other similar relief in addition to all other rights and
remedies it might have for any violation of the undertakings set forth in
Paragraphs 5 and 6 of this Agreement without the posting of a bond or other
security and without the proof of actual damages.
8. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given upon receipt when delivered by hand or by express
mail, overnight courier or other similar method or by facsimile transmission
(provided a copy is also sent by registered or certified mail), or five (5)
days after deposit of the notice in the U.S. Mail, if mailed by certified or
registered mail, with postage prepaid addressed to the respective party as set
forth below, which address may be changed by written notice to the other party:
(a) If to the Company:
InfoCure Corporation
2970 Clairmont Road, Suite 950
Atlanta, Georgia 30329
Attention: President
(b) If to Executive:
--------------------------------------------
--------------------------------------------
--------------------------------------------
9. BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon and enforceable by Executive and his estate, personal
representatives and heirs, and by the Company and its successors and assigns.
This Agreement and the payments hereunder may not be assigned, pledged or
otherwise hypothecated by Executive. This Agreement may be assigned by the
Company to any subsidiary of the Company or of its parent, if any, and to any
successor of its business; provided, however, such assignment shall not relieve
the Company of its obligations hereunder.
10. ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to constitute the entire understanding of the parties with respect to the
employment of Executive by the
6
<PAGE> 7
Company and supersedes all prior agreements and understandings oral or written.
All prior agreements between Executive and the Company or any subsidiary are
null and void, as of the date hereof, except for such accrued liabilities that
are recorded as a liability as of such date on the financial books and records
of such company.
11. BINDING ARBITRATION/ATTORNEY FEES. Except as otherwise
specifically provided, all disputes arising under this Agreement shall be
submitted to and settled by arbitration. Arbitration shall be by one (1)
arbitrator selected in accordance with the rules of the American Arbitration
Association, Atlanta, Georgia ("AAA") by the AAA. The hearings before the
arbitrator shall be held in Atlanta, Georgia and shall be conducted in
accordance with the rules existing at the date thereof of the AAA to the extent
not inconsistent with this Agreement. The decision of the arbitrator shall be
final and binding as to any matters submitted to them under this Agreement. All
costs and expense incurred in connection with any such arbitration proceeding
and those incurred in any civil action to enforce the same shall be borne by
the party against which the decision is rendered.
12. AMENDMENTS. This Agreement may not be amended or modified
except in a writing signed by both parties.
13. WAIVERS. The failure of either party to insist upon a strict
performance of any provision hereof shall not constitute a wavier of such
provision. All waivers must be in writing.
14. GOVERNING LAW. This Agreement shall be deemed to be made in
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INFOCURE CORPORATION
By: --------------------------------------------
Name: ----------------------------------
Title: -----------------------------------
EXECUTIVE
--------------------------------------------
Name: Brad E. Schraut
7
<PAGE> 8
EXHIBIT A
INCENTIVE COMPENSATION
8
<PAGE> 9
EXHIBIT B
STOCK OPTION PLAN
9
<PAGE> 10
EXHIBIT C
STOCK OPTION AGREEMENT
10
<PAGE> 11
EXHIBIT D
EMPLOYMENT AGREEMENT REGARDING
DISCOVERIES, PATENTS, INVENTIONS AND COPYRIGHTS
11
<PAGE> 1
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
INFOCURE CORPORATION
We consent to the use of the reports of BDO Seidman, LLP included herein
regarding the following corporations:
InfoCure Corporation dated February 18, 1997
American Medcare Corporation dated April 12, 1996 (except for Notes 11
and 13, as to which the date is December 20, 1996 and Note 15, as to
which the date is February 18, 1997)
KComp Management Systems Inc. dated November 15, 1996
Millard-Wayne, Inc. dated February 15, 1997
Health Care Division (a division of Info Systems of North Carolina,
Inc.) dated November 8, 1996
Rovak, Inc. dated February 17, 1997
DR Software, Inc. dated February 17, 1997.
We also consent to the reference to our firm under the heading "Experts" in
the Prospectus.
BDO Seidman, LLP
Atlanta, Georgia
February 20, 1997
