<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------------
FORM 10-KSB
---------------
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from February 1, 1997 to December 31, 1997
COMMISSION FILE NUMBER: 011-12799
INFOCURE CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 58-2271614
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1765 THE EXCHANGE
SUITE 450
ATLANTA, GEORGIA 30339
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 221-9990
---------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, par value $.001 per share The American Stock Exchange
---------------
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Registrant's revenues for the fiscal year ended December 31, 1997 were
$15.8 million.
The aggregate market value of the voting and non-voting stock held by non-
affiliates of the Registrant, based upon the closing sales price for the Common
Stock on March 23, 1998 as reported by The American Stock Exchange, was
approximately $56.7 million. The shares of Common Stock held by each officer
and director and by each person known to the company who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 23, 1998, Registrant
had outstanding 6,132,414 shares of Common Stock.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held June 17, 1998 is incorporated by reference in
Part III of this Form 10-KSB to the extent stated herein.
================================================================================
<PAGE>
PART I
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED THEREUNDER. FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS RELATING TO THE COMPANY'S ABILITY TO COMPLETE FUTURE ACQUISITIONS OF
BUSINESSES AND TO INTEGRATE ACQUIRED COMPANIES, EXPECTED TRENDS IN THE HEALTH
CARE INDUSTRY, EXPECTED INCREASES IN REVENUES DERIVED FROM MAINTENANCE, SUPPORT
AND EDI SERVICES AND THE COMPANY'S ABILITY TO INCREASE SALES, MARKETING AND
PRODUCT DEVELOPMENT EXPENDITURES TO LEVELS REQUIRED FOR THE COMPANY TO COMPETE
IN ITS MARKET. OTHER FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT,"
"ANTICIPATE," "ESTIMATE," "CONTINUE," "PLANS," AND "INTENDS." ALTHOUGH THE
COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE AND
THEREFORE THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. A DISCUSSION OF CERTAIN
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE FORWARD-
LOOKING STATEMENTS IS SET FORTH HEREIN IN "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PRO FORMA COMBINED FINANCIAL CONDITION AND PRO FORMA COMBINED RESULTS OF
OPERATIONS-RISK FACTORS THAT MAY AFFECT FUTURE RESULTS" AND ELSEWHERE IN THIS
REPORT.
ITEM 1. BUSINESS.
THE COMPANY
InfoCure Corporation ("InfoCure" or the "Company") is a leading provider of
practice management software products and related services for physician and
dental practices, management service organizations ("MSOs"), independent
physician alliances ("IPAs"), physician hospital organizations ("PHOs") and
other managed care organizations ("MCOs") involved in the integrated delivery of
patient care. InfoCure's practice management software products and related
services seek to improve the profitability of its health care customers by
increasing efficiencies, improving the scope and quality of administrative,
clinical and financial data and accelerating the processing and collection of
payments. The Company licenses its products to targeted medical and dental
specialty practice groups and believes that it is the dominant provider of
medical software products to practitioners in the following specialty practice
areas: podiatry, orthopedics, orthodontics, oral surgery and anesthesia
services. InfoCure has an installed customer base of over 24,000 health care
providers who maintain practices in all 50 states. In addition to providing
information technology products and solutions, the Company provides
comprehensive hardware and software installation, maintenance and support
services, system training services and electronic data interchange ("EDI")
services for the electronic processing of patient billing statements and
insurance claims.
Through its strategy of addressing the needs of targeted specialty
practices, the Company believes that it can best achieve its objective of
improving its customers' profitability. The Company has addressed this strategy
through the acquisition of practice management software companies whose
principal customers are within the Company's targeted practices, including
podiatrists, orthodontists, oral surgeons and anesthesiologists. Through the
Company's recent acquisition of seven companies, the Company believes that it is
the leading provider of practice management systems to health care providers in
these specialties.
INDUSTRY BACKGROUND
In the last decade, the escalation of health care costs has led to
increased pressure on health care providers to contain operating expenses.
Changes in the health care reimbursement systems have served to shift the
2
<PAGE>
financial risk of delivering health care from payors to providers. Many health
care providers now participate in complex practice management organizations and
reimbursement arrangements, resulting in multiple transactions, complex
information exchanges and numerous communications between providers and payors.
These trends generally have served to increase the complexity of information
processing for health care practitioners. However, significant increases in
computer processing capabilities and the emergence of alternative methods of
transmitting electronic information have made advanced computer solutions a
critical component in the effort of health care practitioners to reduce costs
and increase efficiencies.
The Company believes that the increased use of information technologies to
automate the recording, tracking, retrieval and reporting of practice management
data, and to facilitate the exchange of financial and patient information, can
improve the profitability of health care providers. Initial computer solutions
for health care providers concentrated principally on patient billing and
collection functions as well as practice management accounting. More recent
computer solutions automated the functions of processing and collecting third-
party payor claims and increased the capabilities of health care providers to
record, track and retrieve medical records and clinical data. Through its
software products, the Company seeks to provide these benefits as well as
additional functions that improve efficiencies, including management of patient-
flow processes, processing payments through EDI and subscriptions to practice
management information services. Through EDI, the Company's systems automate the
processes of verifying insurance coverage, implementing claims and assuring
rapid payment and collection. By processing claims electronically, office-based
providers are able to reduce staff time and contain costs. EDI typically
improves the provider's accounts receivable turnover which increases practice
cash flow.
Many smaller practice management software companies are finding it more
difficult and expensive to continually develop and enhance or upgrade their
software products to maintain technological competitiveness. Likewise, smaller
physician practices are less able to continually acquire and maintain the
advanced computer software solutions and frequent enhancements offered by many
practice management software companies. Nationwide, there are numerous practice
management software companies that focus their sales efforts on particular
medical specialties within defined geographical regions. Because the rising
costs to maintain technological competitiveness and because of the fragmented
nature of the practice management software industry, the Company believes that
significant opportunities exist to increase its market share of installed
customers in its targeted specialty practice areas through acquisitions of
complementary business, products and services.
BUSINESS STRATEGIES
The Company's objective is to enhance its position as a leading provider of
practice management software products and related services to targeted specialty
practice groups and to focus on increasing the profitability of its customers.
The Company's principal strategies to achieve these objectives are:
. Target Specialty Practice Areas. The Company will seek to expand its customer
base, and thereby increase the percentage of customers that it serves, within
targeted specialty practice areas. Through targeted specialty practice areas,
the Company believes that it can utilize an enhanced knowledge of its existing
customers to provide information technology systems and services that more
specifically address the needs of these specialists. To date, the Company has
targeted the following specialty practitioners: podiatrists, orthodontists, oral
surgeons, and anesthesiologists. The Company believes that it is the leading
provider of information technology products and services to health care
providers in these targeted specialty areas. The Company will focus its research
and development efforts on developing advanced information technology products
and services for these specialty areas, and seeks to increase its customer base
through products that address the special needs of these practice areas.
Additionally, the Company will seek to expand the range of its targeted
specialty practice areas through future acquisitions of companies that sell to
other specialty practices.
3
<PAGE>
. Expand Through Strategic Acquisitions. The Company was organized through the
combination of six companies in July 1997 and since that date has completed
seven additional acquisitions. Through these combinations, the Company now has
an installed customer base of over 24,000 health care providers who maintain
practices in all 50 states. The Company will continue its efforts to expand this
customer base primarily through strategic acquisitions, with a goal of acquiring
companies that have a customer base in the Company's targeted practice areas, as
well as companies that offer advanced technological solutions and talented
executive, development and sales personnel.
. Increase Revenues Through Sales to the Company's Existing Customer Base. The
Company intends to increase its revenues primarily through sales to its existing
customer base. Through the knowledge of the needs of its targeted specialty
practice areas, the Company seeks to develop enhanced software capabilities and
additional value-added products and services that seeks to make its customers
more profitable. These value-added products and services include (i) software
products that provide enhanced medical record creation, retrieval and review;
(ii) software products that record and retrieve physician notes and file
entries; (iii) services and system that utilize EDI for claims processing,
including software systems and information services that will provide immediate
payment authorization, customer statements and direct payment; (iv) information
services that provide health care practitioners with advanced data, and reports
regarding, among other things, trends within their specialty practice area,
treatment procedures, available pharmaceutical solutions and methods to reduce
costs.
. Transition Customers to Advanced Technologies. The Company utilizes the
knowledge gained through its recent acquisitions to migrate many of its existing
customers to newer or advanced technologies. Through its acquisition strategy,
the Company's research and development group is capable of obtaining and
integrating the most efficient and advanced information technology solutions
within targeted specialty practice areas. Through this knowledge, the Company
focuses its marketing and selling activities to upgrade and transition many of
its existing customers to newer client/server and networking technologies and
advanced information services.
. Develop Enhanced Information Services Offerings. The Company intends to
utilize its position as a leading provider in specialty practice areas to
develop and disseminate a database of medical and practice management
information statistics and reports that will be designed to increase
productivity and efficiencies of targeted specialty practitioners and thereby
enhance their potential profitability. The Company believes that this database
will provide physicians and dentists with valuable information that can be used
to track productivity or to negotiate with third-party payors.
. Enhance the Company's Marketing Efforts. The Company attempts to increase
sales by focusing on enhanced marketing efforts directed specifically at the
Company's customer base. The Company seeks to design specific marketing
initiatives that provide practitioners within the Company's targeted specialty
practice groups with a greater volume of information and a heightened awareness
of ways the practitioner may use the Company's products and services to reduce
costs, increase revenues and enhance profitability. The marketing initiatives
will include customer seminars, customer group meetings, on-line availability of
information and printed product distribution initiatives.
PRODUCTS AND SERVICES
GENERAL
The Company offers its products and services through three divisional
groups: the Vertical Systems Division; the Enterprise Systems Division; and the
Information Systems Division.
The Vertical Systems Division ("VSD") offers Microsoft based practice
management software and related services to selected practices in specific
healthcare specialties including anesthesiology, oral surgery, podiatry, and
orthodontics. The Company believes it has a leadership position in each of the
specialty markets that the VSD serves.
4
<PAGE>
The Enterprise Systems Division ("ESD") markets practice management
software products for the IBM AS/400 platform, as well as related services, to
MSOs, IPAs, PHOs and other MCOs. The Company believes it is the largest supplier
of practice management software to independent private practices with AS/400
technology in the United States.
The Information Systems Division ("ISD") is a newly formed division that
has been created to offer electronic commerce services to the Company's VSD and
ESD customers, such as patient statement processing, electronic claims
forwarding, electronic eligibility and pre-certification, and electronic
remittance advice. The Company believes that its customers do not have access to
adequate practice management data such as clinical outcome analysis, practice
performance benchmarks and measurements of quality of care. Through the
Company's significant market share in its targeted specialties, the Company
believes it has access to large volumes of clinical, financial and other
provider information. The Company believes that it has a unique opportunity to
provide an alternative data source for the comprehensive reporting and analysis
of clinical outcome data, practice performance benchmarks and quality of care
measurements. ISD has developed a data warehouse and Internet practice
management product that it intends to use for the aggregation and delivery of
this type of data to its existing and new customers. The Company intends to
offer its data services only to its customers and believes that it is currently
positioned to be the only supplier of this data exclusively for individual
healthcare providers.
PRACTICE MANAGEMENT SOFTWARE PRODUCTS
The practice management software products offered by the Company provide
doctors with comprehensive office management software designed to automate the
administrative, financial, practice management and clinical requirements of an
office based practice. The Company's systems support one to hundreds of users,
allowing the Company to address the needs of both small and large practices. The
Company's principal products operate on Microsoft WindowsNT or IBM AS/400 based
platforms.
The Company's products perform specific financial tasks such as creating
patient statements, maintaining and storing patient demographic and insurance
related information, processing insurance forms for payment, printing refund
checks for forwarding to patients and assisting in the processing of patient and
insurance collections. The Company's practice management products also generate
financial reports that detail patient and insurance receivables, provide
comprehensive practice performance data and deliver detailed analysis of patient
clinical information. The Company's products assist administrative functions by
(i) integrating patient records into word processing programs; (ii) automating
and managing the patient scheduling process; (iii) providing information reports
that detail the source of patient additions from specific referral sources; (iv)
managing the storage and retrieval of patient clinical records and history, in
addition to patient treatment planning; and (v) linking hospitals to forward or
extract data to or from the hospital's information system.
In addition to its practice management software products, the Company has
developed ancillary products that enhance both the profitability and
productivity of the healthcare provider's office. These products include: voice
activated medical records which translates dictation directly into the Company's
software thereby permitting the creation of accurate patient clinical reports in
seconds; digital record keeping technologies that allow a practice to store and
merge radiographic and photographic images with correspondence and clinical
medical records; scanning systems that use optical scanning technology to
automate routine data entry tasks; interfaces with outside medical laboratories
to automate independent lab test requisition and results reporting processes;
and data mining tools that allow a practice access to the underlying data in its
system to assist in analyzing practice profitability and clinical trends.
The Company also has developed software and communications programs that
work in conjunction with its practice management products to allow its customers
to send and receive data electronically to insurance carriers. These systems
automate such tasks as insurance claim submission for reimbursement, patient
eligibility for covered services, pre-certification of certain procedures to
ensure payment by the carrier and electronic claim remittance which
automatically posts an explanation of benefits into the practice management
system. Other software functions submit patient billing data electronically for
the creation, printing and mailing of patient statements. Additionally, the
system creates billing reports and delivers them to the practitioner for review.
5
<PAGE>
CUSTOMER SUPPORT AND SERVICES
In addition to its software products, the Company offers various services,
including software maintenance and support, 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 product 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 March 15, 1998,
the Company had 183 full-time employees engaged in customer support and EDI
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.
As of March 15, 1998, the Company operated ten regional customer training,
support and service facilities in: Atlanta, Georgia (two facilities); Charlotte,
North Carolina; Lake Elmo and Rochester, Minnesota; Los Angeles, California;
Miami, Florida; Saginaw, Michigan; Pittsburgh, Pennsylvania; and Ridgefield,
Connecticut. Annual customer meetings are held at various times during the year,
and newsletters are distributed to the Company's customers on a periodic basis.
PRODUCT DEVELOPMENT
As of March 15, 1998, the Company engaged 60 employees who perform
specialty product development services for the Company, and are responsible for
designing, programming and developing new products, testing and implementing new
technologies, designing and delivering the Company's specialty information
services, and implementing all product quality and control initiatives. The
Company's research and development efforts for the foreseeable future will
principally involve the integration of the various technologies now owned by the
Company as a result of the Company's recent acquisitions, and the development of
integrated, advanced product offerings that will reduce the total number of
software systems and hardware platforms used by the Company's customers. Through
these efforts, the Company seeks to develop advanced software systems that will
serve the special needs of the Company's targeted specialty practice groups.
During 1997, the Company's research and development expenditures were $798,000,
and the Company anticipates that research and development expenditures will
increase as a percentage revenues in the foreseeable future.
SALES AND MARKETING
The Company believes that its fundamental strength lies in its diverse base
of installed customers. The Company believes that its existing customers will
require additional products and services from the Company as a result of the
impact of managed care on health care providers. Therefore, an important element
of the Company's sales and marketing strategy is 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.
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. In addition, the
Company targets new customers through industry seminars, trade shows, direct
telephone and mail campaigns and advertisements in various publications. As of
March 15, 1998, the Company marketed its products through a direct sales force
consisting of 34 sales representatives located in: Atlanta, Georgia; Lake Elmo,
Minnesota; Los Angeles, California; Miami, Florida; and Saginaw, Michigan.
To address the complex needs of larger potential customers, in 1997 the
Company formed an executive sales group that is currently directed by the
Company's Vice President of Sales. Senior divisional and corporate management
also assist in sales and marketing initiatives to larger and more technically
advanced potential customers.
6
<PAGE>
CUSTOMERS
As of March 15, 1998, the Company had installed practice management systems
serving approximately 24,000 health care providers that maintain practices in
all 50 states. The Company has customers engaged in all major medical and dental
specialties and subspecialties but has its largest concentration of customers in
podiatry, anesthesiology, orthopedics, orthodontics and oral surgery. No single
customer accounted for more than 3.0% of revenue during fiscal 1996 or 1997.
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. 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 customers' 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.
(a division of Misys, plc), 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 "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Risk
Factors that May Affect Future Results-Competition."
PRODUCT PROTECTION
The Company regards its software as proprietary. The Company relies
principally on copyright law and trade secret protection to protect its
proprietary software. 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. 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 software
usually is furnished in object code only, although source code licenses are
granted in a limited number of situations. 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 "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Risk Factors that May Affect Future Results-Dependence on
Proprietary Software; Risk of Infringement."
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 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. It is unclear to what extent the Company's
7
<PAGE>
Digital Record Keeping System, when marketed with the Company's practice
management applications, would be deemed to be a medical device subject to FDA
regulation. 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,
the FDA has initiated agency rulemaking which may 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.
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 could have a material
adverse effect on the Company's ability to market its Digital Record Keeping
System.
The Health Insurance Portability and Accountability Act of 1996, signed
into law by the President on August 21, 1996 required that the Department of
Health and Human Services ("HHS") study security provisions relating to
electronic data transmission and make recommendations to Congress by August 21,
1997, regarding the development of standards to protect the privacy of
individually identifiable health information. If Congress does not enact
legislation by August 21, 1999, adopting standards for the privacy of health
information, HHS must do so by regulation no later than February 21, 2000. The
law also provides penalties for knowingly obtaining or disclosing individually
identifiable health information. The Company cannot predict what impact, if
any, such security provisions might have on its results of operations, financial
condition, or business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Risk Factors that May Affect Future
Results-Uncertainty in Health Care Industry; Government Regulation."
HUMAN RESOURCES
As of March 15, 1998, the Company employed 390 persons, including 50
in marketing and sales, 183 in customer support and EDI services, 60 in product
development and technical services and 97 in administration, finance and
management. None of the Company's employees is subject to a collective
bargaining arrangement.
IMPACT OF YEAR 2000
The Company's management has evaluated the Year 2000 impact on the
Company's internal financial and operational systems. The Company has undertaken
remedial measures based upon this evaluation, including consolidation and
modification of several of its software products in order to achieve Year 2000
compliance and purchasing new financial accounting systems software. The Company
anticipates that the installation of its new information systems and changes to
its remaining information systems in order to make them Year 2000 compliant will
be completed by December 31, 1998. The Company currently does not expect that
the year 2000 will cause operational problems or result in the Company incurring
costs material to the Company's financial condition or results of operations.
However, delays in implementing or updating these internal information systems
or a failure to fully identify all year 2000 dependencies in the Company's
internal information systems could have material adverse consequences, including
an adverse impact on the Company's ability to communicate with or provide
services to its customers and its ability to invoice its customers for its
services. In addition, the Company faces risks to the extent that suppliers of
products, services and systems purchased by the Company and others with whom the
Company transacts business do not have business systems or products that comply
with the year 2000 requirements. In the event any such third party is unable to
timely provide the Company with products, services or systems due to such third
party's Year 2000 noncompliance, the Company's operating results could be
materially adversely affected. Furthermore, there can be no assurance that these
or other factors relating to Year 2000 issues, including litigation, will not
have a material adverse effect on the Company's business, results of operations
or financial condition.
8
<PAGE>
ITEM 2. PROPERTIES.
The Company currently leases 13 facilities, having an aggregate of
approximately 97,000 square feet and located in: Atlanta, Georgia (four
facilities); Lake Elmo and Rochester, Minnesota; Los Angeles, California;
Charlotte, North Carolina; Pittsburgh, Pennsylvania; Saginaw, Michigan; Miami,
Florida; Ridgefield, Connecticut and Cincinnati, Ohio. 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.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. The Company
is not currently a party to any legal proceeding for which an adverse outcome
would be expected to have a material adverse effect on the Company's business,
results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the year ended December 31, 1997.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock of the Company is traded on the American Stock Exchange
under the symbol "INC." The Common Stock commenced trading on the American
Stock Exchange on July 10, 1997, in connection with the underwritten initial
public offering of shares of the Company's Common Stock at an initial price to
the public of $5.50 per share. The following table sets forth the high and low
closing sale prices of the Common Stock for the periods indicated, as reported
on the American Stock Exchange.
<TABLE>
<CAPTION>
Fiscal Period HIGH LOW
- --------------------------------------------------------------- ------ --------
<S> <C> <C>
Second Quarter (July 10, 1997 through July 31, 1997)......... $5-5/8 $ 4-1/2
Third Quarter (August 1, 1997 through October 31, 1997)...... 7-5/8 3-15/16
Fourth Quarter (November 1, 1997 through December 31, 1997).. 9-1/2 7-3/8
</TABLE>
On March 25, 1998, the last reported sale price for the Common Stock was
$12-5/16 per share. As of March 25, 1998, there were approximately 600
stockholders of record of the Common Stock based on transfer agent reports.
On February 9, 1998, the Company issued 850,000 shares of Convertible,
Redeemable Preferred Stock, Series A (the "Preferred Stock") for $10.00 per
share in a private placement. There is no public market for the 850,000 issued
and outstanding shares of Company's Preferred Stock.
The Company has never declared or paid any cash dividends on its Common
Stock or its Preferred Stock and does not anticipate paying any cash dividends
in the foreseeable future. The Company's existing credit facility generally
prohibits the Company from making any dividends, distributions or other payments
with respect to its capital stock. However, the credit agreement allows the
Company to pay dividends on capital stock that may be issued to the provider of
EDI services to the Company only under certain limited circumstances and
provided that such dividend payment does not result in a default by the Company
under the terms of the credit agreement.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS.
OVERVIEW
InfoCure was founded in November 1996 to acquire certain healthcare
practice management systems. On July 10, 1997, the Company completed the
contemporaneous acquisition of (i) American MedCare Corporation ("AMC") (the
parent of International Computer Solutions, Inc. ("ICS"), Health Care Division,
Inc. ("HCD") and Millard-Wayne, Inc. ("Millard-Wayne"); (ii) DR Software, Inc.;
(iii) KComp Management Systems, Inc. ("KComp"); and (iv) Rovak, Inc. ("Rovak").
AMC owned ICS for all of the accounting periods presented herein. AMC acquired
HCD effective December 3, 1996 and Millard-Wayne effective July 10, 1997. The
foregoing companies are referred to herein as the "Founding Companies."
In October and November 1997, InfoCure acquired all of the capital stock of
SoftEasy, Inc. ("SoftEasy"), certain health care assets and assumed health care
liabilities of Commercial Computers, Inc. ("CCI") and all of the assets, subject
to the assumption of certain liabilities, of Professional On-Line Computers,
Inc. ("POLCI"). For certain accounting purposes, the consummation of each of
these acquisitions occurred effective as of October 1, 1997. Effective November
1, 1997, the Company acquired all the outstanding stock, subject to the
assumption of certain liabilities, of PACE Financial Corporation ("PACE").
Effective December 1, 1997, the Company acquired the assets, and assumed certain
liabilities of, the orthodontic business unit of HALIS Services, Inc. ("OPMS").
The acquisitions described in this paragraph are collectively referred to herein
as the "Recent Acquisitions."
Prior to the acquisition of the Founding Companies, InfoCure conducted no
significant operations and generated no revenue. Accordingly, AMC has been
identified as the accounting acquiror, and the AMC acquisition was accounted for
as a combination at historical cost for accounting purposes. The acquisitions
10
<PAGE>
of the remaining Founding Companies and the Recent Acquisitions were accounted
for as purchases at estimated fair value for accounting purposes.
The consolidated balance sheets as of January 31, 1997 are inclusive of AMC
and its subsidiaries, ICS and HCD. The consolidated balance sheets as of
December 31, 1997 are inclusive of all of the Founding Companies and Recent
Acquisitions. The consolidated statements of operations for the year ended
January 31, 1997 are inclusive of AMC and its subsidiary, ICS, and HCD from and
after December 3, 1996. The consolidated statements of operations for the eleven
months ended December 31, 1997 are inclusive of (i) AMC and its subsidiaries,
ICS and HCD for the entire period presented; (ii) Millard-Wayne, Rovak, DR
Software and KComp from and after July 10, 1997; (iii) SoftEasy, CCI and POLCI
from and after October 1, 1997; (iv) PACE from and after November 1, 1997; and
(v) OPMS from and after December 1, 1997.
The Company's revenue is derived primarily from the sale, installation,
maintenance and support of practice management software systems to health care
providers. Systems and software sales include revenues from system and
hardware, training and other services provided during initial and upgrade
installations. Maintenance, support and EDI sales include revenue from software
and hardware maintenance contracts, training, telephone support, providing
customers with updates and enhancements developed by the Company and EDI
services. The Company's primary focus is on the sale of enhanced systems, add-
on modules and EDI services to its current installed customer base.
The Company recognizes revenues in accordance with the provision of AICPA
Statement of Position No. 91-1 "Software Revenue Recognition." Revenues from
software sales are recognized upon shipment where the Company has no material
post-shipment customer obligations. Hardware sales are recognized upon
shipment. Revenues from support and maintenance contracts are recognized
ratably over the contract period, which typically is one full quarter or a full
year. Revenues from other services are recognized as the services are provided.
For fiscal years beginning after December 31, 1997, the Company will be required
to recognize the revenues in accordance with AICPA Statement of Position No. 97-
2, Software Revenue Recognition. The adoption of SOP 97-2 is not expected to
have a significant impact on the Company's financial statements.
Cost of hardware and other items purchased for resale includes the costs
incurred to purchase hardware, forms, third-party software and other items for
resale in connection with sales of new systems and software. The cost required
to perform maintenance and support services generally is reported in selling,
general and administrative expenses.
Selling, general and administrative expenses include salaries,
administrative expenses, product development expenses, product maintenance and
support expenses, variable commissions and bonuses, advertisement and
promotional marketing materials, travel, telephone charges, rents, insurance and
other administrative expenses.
Depreciation and amortization expenses are derived primarily from the
amortization of the excess of the fair value of the consideration paid by the
Company over the fair value of the net assets acquired from the Founding
Companies and the Recent Acquisitions, defined as "goodwill." The Company had
gross goodwill totaling $17.4 million as of December 31, 1997 reflecting all the
Company's acquisitions, which is currently being amortized over its estimated
useful life of 15 years. The pro forma effect of this amortization expense is
estimated to be approximately $1.1 million per year, after giving effect to the
restructuring charge described below. Amortization also includes the
amortization cost of property, equipment and software. Property and equipment
are assigned lives of three to five years. Software costs represent the
intangible asset associated with enhancements and new modules for the Company's
software products. Such costs are expensed until technological feasibility is
achieved. Costs incurred after achievement of technological feasibility and
before general release are capitalized and amortized over a four year life.
Due to the Company's dramatic growth through acquisitions, year-to-year
comparisons of the historical results of the Company's operations have been
affected primarily by the addition of acquired companies. In most instances,
these dollar increases in the various revenues and expense components of the
Company's results are due primarily to growth from acquisitions. Neither the
magnitude nor the source of such year-to-year changes is necessarily indicative
of changes that will occur in the future. Even assuming that the Company
continues an aggressive acquisition program, the Company's existing operations
are now substantially larger, so new acquisitions are likely to have a declining
percentage impact on the future results of the
11
<PAGE>
Company's operations. By way of example, additional similar-size acquisitions
will contribute an increasingly smaller percentage to the Company's overall
revenues and expenses. Recent changes in the Company's senior management,
overall organization, and business plans reflect the Company's understanding
that the development of existing operations have become increasingly important
to its future growth and profitability.
CHANGE IN FISCAL YEAR
The Company historically has reported its financial statements on a fiscal
year ending on January 31. The Company has elected to change the Company's
fiscal year to a year ending on December 31. This Report on Form 10-KSB reports
the Company's financial statements as of and for the transitional period of
eleven months ended December 31, 1997 and the fiscal year ended January 31,
1997.
RESTRUCTURING CHARGE
Effective December 1, 1997, the Company adopted a plan to restructure its
operations by consolidating existing facilities and acquired operations. In
connection with this plan, management also reevaluated the Company's investment
in goodwill and capitalized software in light of the Company's proposed
consolidation of product lines, current market conditions and the restructuring
plan. Management determined that based on an analysis of projected undiscounted
future cash flows, the Company is required to write-down approximately $7.8
million, representing approximately $6.3 million impairment of goodwill
associated with prior acquisitions and $1.5 million of capitalized software for
discontinued products. In connection with the restructuring plan, the Company
also recorded costs and accrued liabilities of approximately $461,000 to close
redundant facilities and cancel leases and other contracts, approximately $2.6
million to reflect the recognition of contingent consideration that is earned or
deemed payable under the terms of certain acquisition agreements for acquired
companies that are affected by the restructuring plan and approximately $296,000
for other asset write-downs and costs associated with the restructuring plan.
The aggregate amount of the restructuring charge is $11.1 million and is
recorded under the Company's operating expenses. The restructuring plan, which
is anticipated to be completed by the second quarter of 1998, also included
termination of certain redundant staff positions. Details of this element of the
restructuring plan were finalized and communicated in the first quarter of 1998.
Accordingly, compensation costs, including severance and other termination
benefits, and other future costs, which are estimated at $1 million, will be
recognized in the first quarter of 1998. For a more detailed discussion of this
restructuring charge, see Note 4 to the Consolidated Financial Statements
herein.
RESULTS OF OPERATIONS
ELEVEN MONTHS ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED JANUARY 31, 1997
Revenues. Total revenues for the eleven months ended December 31, 1997
were $15.8 million compared to total revenues of $2.5 million for the twelve
months ended January 31, 1997. This increase primarily reflects additional
revenues derived from the acquisition of the Founding Companies and the Recent
Acquisitions. Revenues for periods prior to July 10, 1997 include only revenues
of the Company's predecessor, AMC, and its consolidated subsidiaries. Systems
and software revenues were $8.5 million for the eleven months ended December 31,
1997, or 54.2% of total revenues for that period, while maintenance and support
revenues were $7.2 million, or 45.8% of total revenues for the period. The
Company anticipates that maintenance and support revenues generally will
increase as a percentage of total revenues in the long-term if the Company is
able to expand and retain its installed customer base.
Cost of Hardware and Other Items Purchased for Resale. Cost of hardware and
other items purchased for resale increased to $4.1 million, or 26.0% of total
revenues, for the eleven months ended December 31, 1997 compared to $474,000, or
19.0% of total revenues for the year ended January 31, 1997. The dollar volume
increase in this cost primarily reflects the additional total cost resulting
from the acquisition of the Founding Companies and the Recent Acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $9.2 million, or 58.4% of total revenues
for the eleven months ended December 31, 1997, compared to $2.5 million, or
100.0% of total revenues for the year ended January 31, 1997. The increase in
selling, general and administrative expenses reflects primarily the increases in
expenditures for marketing, administrative personnel and other selling and
administrative costs in support of the combined operations of the Founding
Companies and the Recent Acquisitions. The Company intends to increase its
sales and marketing expenditures in future periods in order to continue to
promote the Company's product offerings. This increase also reflects increases
in product development expense, which consists of personnel costs incurred to
conduct the Company's product development effort. Management believes that
significant continuing investments in product development are required to
compete effectively in the Company's industry. As a consequence, the Company
12
<PAGE>
has increased, and intends to continue to increase, expenditures on product
development primarily through the employment of additional development personnel
and the acquisition of related computing systems, software and tools for those
personnel.
Depreciation and Amortization. Depreciation and amortization expenses were
$946,000, or 6.0% of total revenues for the eleven months ended December 31,
1997 compared to $111,000, or 4.4% of total revenues for the year ended January
31, 1997. Increased depreciation and amortization expense represents primarily
the significant increase in goodwill resulting from the acquisition of the
Founding Companies and the Recent Acquisitions.
Asset Impairment and Restructuring Cost. The Company incurred a cost of
$11.1 million associated with the restructuring plan discussed above.
Loss from Operations. Loss from operations was $9.6 million, or 61.0% of
revenues, for the eleven months ended December 31, 1997 as compared to the loss
from operations of $560,000, or 22.0% of revenues, for the year ended January
31, 1997. The loss from operations results primarily from the costs associated
with the restructuring plan.
Interest Expense. Interest expense increased to $276,000 for the eleven
months ended December 31, 1997, compared to $83,000 for the year ended January
31, 1997. Interest expense generally relates to the indebtedness incurred to
complete the Company's acquisitions.
Income Tax Benefit. The Company realized an income tax benefit in the
amount of $1.2 million and $0.9 million for the eleven months ended December 31,
1997 and the year ended January 31, 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had total cash and cash equivalents of
$1.4 million and a working capital deficit of $3.2 million. During the eleven
months ended December 31, 1997, the Company used $1.5 million of cash in
operating activities, representing principally increases in accounts receivable
and reductions in accounts payable and accrued expenses and depreciation,
amortization expenses and restructuring costs of $11.1 million. During this
period, cash used in investing activities was $8.8 million, representing
primarily cash used for acquisitions of $8.5 million and deferred acquisition
costs of $0.4 million. During the eleven months ended December 31, 1997, the
Company generated cash from financing activities of $11.5 million, including
$6.0 million net proceeds from the Company's initial public offering and $5.4
million net proceeds from long-term debt.
In November 1997, the Company obtained a secured credit facility, with an
aggregate availability of $10.0 million, from FINOVA Capital to be used
primarily for acquisitions and working capital. This facility has a five-year
term and bears interest at an annual rate of prime plus 1.25% to 2.00% depending
on the Company achieving certain debt service ratios. At December 31, 1997 the
rate was 10.5% per annum. As of December 31,1997, the outstanding and otherwise
committed balance under this facility was $7.2 million. In February 1998, FINOVA
Capital increased the Company's secured credit facility to $30.0 million with
other material terms remaining unchanged. As of March 27, 1998, the outstanding
and otherwise committed balance under this facility was $28.6 million.
The Company believes that its operating cash flow, combined with
availability of funds under its credit facility, will be sufficient to fund the
Company's working capital requirements through at least 1998, but will not be
sufficient to permit the Company to consummate all of the acquisitions currently
under negotiation or preliminary discussion. The Company's ability to
consummate future acquisitions will be determined by the Company's ability to
obtain additional sources of capital. Consequently, the Company will seek
additional sources of financing which may include borrowings and the sale of
equity and/or debt securities. The sale of equity securities, including
securities convertible into equity securities, may result in further dilution to
existing stockholders. No assurance can be given that additional sources of
capital will be available to the Company on terms acceptable to the Company, or
at all.
RECENT EVENTS
On February 9, 1998, the Company completed the private placement of 850,000
shares of its Convertible Redeemable Preferred Stock, Series A, resulting in
gross proceeds to the Company of $8.5 million and net proceeds of approximately
$7.8 million after payment of selling commissions to the placement agent for the
offering and other expenses of the offering. As additional compensation, the
Company granted to the placement agent a warrant to acquire 100,000 shares of
the Company's common stock at an exercise price of $9.00 per share.
On February 24, 1998, the Company acquired the assets, subject to the
assumption of certain liabilities of Micro-Software Designs, Inc. ("MSD"),
pursuant to the terms of an asset purchase agreement dated as of February 19,
1998. The aggregate consideration consisted of $12.5 million in cash, $2.7
million in shares of the Company's common stock and the assumption of
liabilities totalling $723,000. An additional cash payment of up to $4.4 million
will be paid on the achievement by the former MSD operations of net income
targets during the 24-month period commencing January 1, 1998.
On March 2, 1998, the Company acquired all of the outstanding capital stock
of Medical Software Integrators, Inc. ("MSI") pursuant to the terms of a stock
purchase agreement dated as of February 26, 1998. The aggregate consideration
consisted of $5.8 million in cash and $1.4 million in shares of the Company's
common stock. An additional contingent payment of up to $2.2 million will be
paid upon the achievement by the former MSI operations of net income targets
during the 24-month period commencing January 1, 1998. This additional
contingent payment will be made in shares of the Company's common stock.
13
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 requires companies to display,
with the same prominence as other financial statements, the components of other
comprehensive income. SFAS No. 130 requires that an enterprise classify items
of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. SFAS No. 130 is effective for the Company's fiscal year ending
December 15, 1998. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company does not expect that
SFAS No. 130 will require significant revisions of prior disclosures.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
131 requires that an enterprise disclose certain information about operating
segments. SFAS No. 131 is effective for financial statements for the Company's
fiscal year ending December 31, 1998. The Company will evaluate the need for
such disclosures at that time.
The American Institute of Certified Public Accountants has issued Statement
of Position 97-2, "Software Revenue Recognition." SOP 97-2 supersedes SOP 91-1
and is effective for the Company for transactions entered into after December
31, 1997. The Company will adopt SOP 97-2 in the first quarter of 1998. The
adoption of the standards is not expected to have a significant impact on the
Company's consolidated financial statements.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
LIMITED COMBINED OPERATING HISTORY
The current business of InfoCure was effectively created on July 10, 1997
through the combination of the Founding Companies and has conducted operations
for only a limited period of time. The Founding Companies and the Subsequent
Acquisitions were previously operated 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. The Company had unaudited pro forma combined net income (loss)
including restructuring costs of $(7.4) million and $1.4 million for the years
ended December 31, 1997 and January 31, 1997, respectively. The pro forma
combined financial results of the Company cover periods prior to the Combination
and the Subsequent Acquisitions and include estimates and certain adjustments to
operating expenses considered by management to be appropriate. These net
adjustments total $(1.9) million and $(1.7) million for the eleven months ended
December 31, 1997 and the year ended January 31, 1997, respectively. Such pro
forma combined financial results may not be indicative of the Company's future
financial condition or operating results. The inability of the Company to
successfully integrate its acquisitions and reduce operating expenses at levels
reflected in the unaudited pro forma combined financial statements could have a
material adverse effect on the Company's business, results of operations and
financial condition and could negatively impact the Company's ability to acquire
other companies or otherwise execute its business strategy.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
As part of its strategy to increase its installed customer base, the
Company intends to acquire additional companies that provide 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 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, and risks
associated with unanticipated events or liabilities, some or all of which could
have a material adverse effect on the Company's business, results of operations
and financial condition. Customer dissatisfaction or performance problems at a
single acquired company could have an adverse effect on the reputation of the
Company.
14
<PAGE>
RISKS RELATED TO COMPLETED AND PROPOSED ACQUISITIONS
The companies acquired by InfoCure to date generally have similar
operations, including the development, marketing and servicing of practice
management software systems for health care providers. Integration of the
management and operations (including product development, installation of
information and software systems, client services, marketing plans and
activities, employee hiring and training, and expansion strategy) of such
companies is a time consuming process, and there can be no assurance that the
process will result in the achievement of any of the anticipated synergies and
other benefits expected to be realized including those indicated in the
Company's pro forma combined statements of operations. The inability of
management to successfully integrate the acquired operations of the Founding
Companies, Subsequent Acquisitions and future acquisitions could have a material
adverse effect on the business and operating results of the Company.
The Company expects to incur costs covering the costs associated with the
acquisitions, the costs of restructuring the operations of companies acquired,
and for other related costs principally in the quarter in which such
acquisitions were consummated. In general, such costs are expected to include:
(i) the direct costs of acquisitions, including fees to financial advisors,
legal counsel and independent auditors; (ii) the costs of integrating the
operations of the companies acquired; (iii) the elimination of overlapping
operations and products (including research and development in process) and (iv)
other related items. Subsequent acquisitions can result in decisions by the
Company to terminate the use of software products or personnel acquired or
obtained as a result of prior acquisitions, as well as the loss of potential
customers resulting in substantial charges for discontinued products, impairment
of goodwill, and employee terminations and termination of leases and other
contracts. In December 1997, the Company incurred a restructuring charge of
$11.1 million, related to prior acquisitions. No assurance can be given that the
Company will not incur similar future charges. Moreover, additional
unanticipated expenses may be incurred in connection with the integration of the
business of the Company and its acquisitions.
NEED FOR FUTURE ACQUISITION FINANCING
The Company currently intends to finance future acquisitions through
existing cash reserves, the unused portion of the Company's credit facility
with FINOVA Capital and future cash flows. In addition, the Company may issue
shares of its Common Stock for all or a substantial portion of the consideration
to be paid. In order to provide additional sources of cash, the Company will be
required to obtain additional capital. The Company currently anticipates that it
will seek additional capital through a combination of the issuance of debt or
equity securities and new or expanded bank credit facilities. No assurance can
be given that the Company will be successful in its efforts to obtain additional
capital, or that capital will be available on terms acceptable to the Company,
or at all.
DIFFICULTIES IN MANAGING GROWTH
The expected continued growth of the Company will 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 significant 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 effect on the Company's
business, results of operations and financial condition.
The success of the Company is dependent to a significant degree on its
ability to attract, motivate and retain highly skilled sales, marketing and
technical personnel, including software programmers and system architects
skilled in product development and advanced computer languages. The Company
believes that there is a shortage of, and significant competition for, personnel
with the advanced technological executive or marketing skills necessary to
perform the services required by the Company. The Company expects that the
competition for such personnel will intensify, particularly for technical
personnel, as the software industry confronts the anticipated increase in demand
for systems and/or software upgrades resulting from the Year 2000 problem. The
loss of key personnel or the inability to hire or retain qualified personnel
could have a material adverse effect on the Company's business, results of
operations and financial condition. Although the Company has been successful to
date in attracting and retaining skilled personnel, an inability to hire such
additional qualified personnel could impair the Company's ability to achieve its
growth strategy. Further, due to recent acquisitions, the Company must train and
manage an evolving employee base, requiring an increase in the level of
responsibility for both existing and new management personnel. There can be no
assurance that the Company will be able to assimilate new employees
successfully. Accordingly, there can be no assurance that the Company will be
successful in retaining current employees or hiring new employees.
15
<PAGE>
SALES CYCLES AND RECOGNITION OF REVENUE
The revenues and operating results of the Company have in the past varied,
and may in the future vary, significantly from quarter to quarter as a result of
a number of factors, including the volume and timing of systems sales and
installations, and length of sales cycles and installation efforts. The timing
of revenues from systems sales is difficult to forecast because the Company's
sales cycle may vary depending upon factors such as the size of the health care
organization, the size of the transaction, the changing business plans of the
customer, the effectiveness of customers' management, and general economic
conditions. In addition, because revenue is recognized at various points during
the installation process, the timing of revenue recognition varies considerably
based on a number of factors, including availability of personnel, availability
of the customers' resources and complexity of the needs of the customers'
organization. The Company's initial contact with a potential customer depends
in significant part on the customers' decision to replace, expand or
substantially modify its existing information systems, or modify or add business
processes or lines of business. How and when to implement, replace, expand or
substantially modify an information system, or modify or add business processes
or lines of business, are major decisions for health care organizations. Often,
the size of the health care organization bears a direct relation to the length
of the organization's decision-making process, with larger organization taking
longer to reach a purchasing decision. Accordingly, sales cycles for the
Company's systems vary widely. During the sales cycle and the installation
cycle, the Company expends substantial time, effort and funds preparing a
contract proposal and negotiating the contract. Because a significant
percentage of each of the Company's expenses are (and the Company's expenses are
expected to be) relatively fixed, a variation in the timing of systems sales and
installations can cause significant variations in operating results from quarter
to quarter. Any significant or ongoing failure by the Company to effectively
manage the sales process to achieve sufficient levels of system sales to
maintain an adequate backlog could have a material adverse effect on the
Company's business, financial condition and results of operations. The
Company's future operating results may fluctuate as a result of these and other
factors, such as customer purchasing patterns, and the timing of new product and
service introductions and product upgrade releases.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter. Factors such as changes in customer purchasing patterns, competition,
the timing of the recognition of licensing revenues, the timing of, and costs
related to, any new product introductions, the length of sales cycles, time
required to install the Company's products, levels of advertising and
promotional expenditures, seasonality and charges associated with completed
acquisitions or other events could contribute to variability of quarterly
results of operations. 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 the Company's
short-term results of operations accurately. Additionally, a high percentage of
the Company's expenses are relatively fixed, including costs of personnel, and
are not susceptible to rapid reduction.
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 secrets, 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, 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 business, results of operations and financial condition.
16
<PAGE>
RAPID TECHNOLOGICAL CHANGE AND DEPENDENCE ON NEW PRODUCT DEVELOPMENT
The market for the Company's products and services is characterized by
technological advances and rapid changes in customer demands, 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, including products incorporating more advanced
technologies, 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 currently devotes significant
resources to the development of enhancements to its existing products and the
migration of its installed customer base to improve 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.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
must accept four digit entries to distinguish twenty-first century dates from
twentieth century dates. As a result, over the next two years, computer systems
and/or software used by many companies must be upgraded to be Year 2000
compliant. Significant uncertainty exists in the software industry concerning
the potential consequences that may result from the failure of software as a
result of Year 2000 non-compliance. The Company believes that the latest
versions of its products are Year 2000 compliant. The Company is in the process
of determining the extent to which its earlier software products and new
products recently acquired by the Company as implemented in the Company's
installed customer base are Year 2000 compliant, as well as the impact of any
non-compliance on the Company and its customer. The Company does not currently
believe that the effects of any Year 2000 non-compliance in the Company's
installed customer base will result in a material adverse impact on the Company.
However, the Company's investigation has been conducted through sampling of its
older products and new products recently acquired by the Company and no
assurance can be given that such products are Year 2000 compliant, or can be
made to be Year 2000 compliant. Consequently, no assurance can be given that the
Company will not be exposed to potential claims as a result of Year 2000
non-compliance.
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. (a division of Misys, plc), IDX Systems
Corporation, Physician Computer Network, Inc., Medical Manager Corporation,
Quality Systems, Inc., Reynolds and Reynolds, Inc. (Health Care 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 business, results of operations and financial condition.
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
17
<PAGE>
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 business, results of operations and financial condition. Even
unsuccessful claims could result in the expenditure of funds in litigation, as
well as diversion of management time and resources. Additionally, such failures
or errors and any resulting claim may result in the loss of, or delay in, market
acceptance of the Company's products.
CONSOLIDATION OF HEALTH CARE INDUSTRY
Many health care providers are consolidating to create larger health care
delivery enterprises with greater regional market power. As a result, these
enterprises have greater bargaining power, which may lead to price erosion of
the Company's products. The Company's inability to maintain prices for its
systems and services at current levels could have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the Company believes that once a health care provider has chosen a
particular health care information system vendor, such provider will continue to
rely on that vendor for its future information system requirements. The
Company's inability to make initial sales of its information systems to health
care providers that are replacing or substantially modifying their health care
information systems could have a material adverse effect on the Company's
business, results of operations and financial condition.
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 business, results of operations
and financial condition.
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. 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 to be a medical device subject to FDA
regulation. 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 pre-market notification applications and otherwise comply
with the requirements of the FDC Act applicable to medical devices. Recently,
the FDA has initiated agency rulemaking which may exempt certain medical image
management devices from pre-market 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 product.
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 could have a material
adverse effect on the Company's ability to market its Digital Record Keeping
System.
The Health Insurance Portability and Accounting Act of 1996, signed into
law by the President on August 21, 1996 requires that the Department of Health
and Human Services ("HHS") study security provisions relating to electronic data
transmission and make recommendations to Congress by August 21, 1997, regarding
the development of standards to protect the privacy of individually identifiable
health information. If Congress does not enact legislation by August 21, 1999,
adopting standards for the privacy of health information, HHS must do so by
18
<PAGE>
regulation no later than February 21, 2000. The law also provides penalties for
knowingly obtaining or disclosing individually identifiable health information.
The Company cannot predict what impact, if any, such security provisions might
have on its business, results of operations and financial condition.
VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has been highly volatile at
relatively low trading volumes since the Company's initial public offering and
has been and will continue to be subject to significant fluctuations in response
to quarterly variations in operating results, announcements following the
acquisitions of technological innovations or new products by the Company or its
competitors, changes in prices of the Company's or its competitors' products and
services, changes in product mix, changes in revenue and revenue growth rates
for the Company as a whole or for geographic areas or business units, and other
events or factors. Statements or changes in opinions, ratings or earnings
estimates made by brokerage firms or industry analysts relating to the markets
in which the Company expects to do business or relating to the Company, have
resulted, and could in the future result, in an immediate adverse effect on the
market price of the Common Stock. Statements by financial or industry analysts
regarding the impact on the Company's net income per share resulting from the
acquisitions and the extent to which such analysts expect potential business
synergies to impact reported results in future periods can be expected to
contribute to volatility in the market price of the Company's Common Stock. In
addition, the stock market has from time to time experienced extreme price and
volume fluctuations which have particularly affected the market price for the
securities of many health care information systems companies and which often
have been unrelated to the operating performance of these companies. These
broad market fluctuations may adversely affect the market price of the Common
Stock.
SEASONALITY
The revenues of the Company have historically followed seasonal patterns.
The Company believes that quarterly results of operations will continue to be
subject to significant fluctuations and that the Company's results of operations
for any particular quarter or fiscal year may not be indicative of results of
operations for future periods. There can be no assurance that future seasonal
and quarterly fluctuations will continue and will not have a material adverse
effect on the Company's business, results of operations and financial condition.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE:
----
<S> <C>
Report of Independent Certified Public Accountants........ 20
Consolidated Balance Sheets as of December 31, 1997
and January 31, 1997...................................... 21
Consolidated Statements of Operations for the eleven
months ended December 31, 1997 and the year ended
January 31, 1997.......................................... 22
Consolidated Statements of Stockholders' Equity for
the eleven months ended December 31, 1997 and
the year ended January 31, 1997........................... 23
Consolidated Statements of Cash Flows for the eleven
months ended December 31, 1997 and the year ended
January 31, 1997.......................................... 24
Notes to Consolidated Financial Statements................ 25
</TABLE>
19
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors of
InfoCure Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of InfoCure
Corporation and its subsidiaries (See Note 1) as of December 31, 1997 and
January 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the eleven months ended December 31,
1997 and the year ended January 31, 1997. 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
InfoCure Corporation and its subsidiaries at December 31, 1997 and January 31,
1997, and the consolidated results of their operations and their cash flows for
the eleven months ended December 31, 1997 and the year ended January 31, 1997 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Atlanta,Georgia
March 18, 1998
20
<PAGE>
INFOCURE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, January 31,
1997 1997
- -----------------------------------------------------------------------------------------------------------------------
ASSETS (Note 8)
CURRENT
<S> <C> <C>
Cash and cash equivalents $ 1,406,193 $ 198,735
Accounts receivable - trade, net of allowance of
$51,000 and $35,000 4,935,768 318,405
Other receivables 233,082 -
Inventory 437,371 -
Deferred tax assets (Note 12) 556,000 -
Prepaid expenses and other current assets 511,110 62,364
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 8,079,524 579,504
PROPERTY AND EQUIPMENT, net of accumulated depreciation (Note 5) 1,327,796 94,157
GOODWILL, net of accumulated amortization of $404,888 and $53,508 (Notes 3 and 4) 17,013,526 2,015,309
CAPITALIZED ACQUISITION COSTS AND OTHER INTANGIBLE ASSETS (Note 6) 1,027,249 622,260
DEFERRED TAX ASSET (Note 12) 1,906,000 871,000
OTHER ASSETS 196,993 -
- -----------------------------------------------------------------------------------------------------------------------
$ 29,551,088 $ 4,182,230
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,693,624 $ 483,730
Accrued restructuring costs (Note 4) 3,172,066 -
Accrued expenses (Note 7) 1,084,070 358,671
Deferred revenue and customer deposits 3,388,284 814,383
Current portion of long-term debt (Note 8) 2,001,393 49,529
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 11,339,437 1,706,313
LONG-TERM DEBT, less current portion (Note 8) 6,960,200 792,752
OTHER LIABILITIES (Note 9) 6,518,968 1,511,533
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 24,818,605 4,010,598
- -----------------------------------------------------------------------------------------------------------------------
COMMITMENTS (Note 10)
STOCKHOLDERS' EQUITY (Note 11)
Common stock 5,761 54,965
Stock purchase warrant - 80,000
Additional paid-in capital 16,662,910 3,452,453
Deficit (11,820,284) (3,250,786)
Treasury stock and accrued stock repurchase, at cost (115,904) (165,000)
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,732,483 171,632
- ----------------------------------------------------------------------------------------------------------------------
$29,551,088 $4,182,230
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN MONTHS Year
ENDED Ended
DECEMBER 31, January 31,
-----------------------------------------
1997 1997
- ------------------------------------------------------------------------------------------------------------
Revenue
<S> <C> <C>
Systems and software sales $ 8,540,032 $1,075,679
Maintenance, support and other 7,215,040 1,418,884
- ------------------------------------------------------------------------------------------------------------
Total revenue 15,755,072 2,494,563
- ------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of hardware and other items purchased for resale 4,074,504 474,201
Selling, general and administrative expenses 9,198,405 2,469,249
Depreciation and amortization 946,087 110,635
Asset impairment and restructuring costs (Note 4) 11,136,027 -
- ------------------------------------------------------------------------------------------------------------
Total operating expenses 25,355,023 3,054,085
- ------------------------------------------------------------------------------------------------------------
Loss from operations (9,599,951) (559,522)
OTHER INCOME (EXPENSE)
Interest expense (275,822) (82,900)
Other income, net 69,216 5,516
- ------------------------------------------------------------------------------------------------------------
LOSS BEFORE TAXES (9,806,557) (636,906)
INCOME TAX (BENEFIT) (NOTE 12) (1,237,059) (891,000)
============================================================================================================
NET INCOME (LOSS) $(8,569,498) $ 254,094
============================================================================================================
BASIC LOSS PER SHARE $ (1.96)
=======================================================================================
DILUTED LOSS PER SHARE (1.96)
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'S EQUITY
<TABLE>
<CAPTION>
Number of
Shares Value
----------------------- --------------------- Accrued Stock Additional
Common Treasury Common Treasury Stock Purchase Paid-in
Stock Stock Stock Stock Repurchase Warrant Capital Deficit
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
at January 31, 1996 41,577,788 (228,489) $ 41,578 $(100,000) $ $ 500,000 $ 1,445,247 $(3,504,880)
Issuance of common stock 13,387,440 - 13,387 - - - 1,417,206 -
Cancellation of warrant - - - - - (500,000) 450,000 -
Issuance of warrant - - - - - 80,000 - -
Issuance of stock options - - - - - - 30,000 -
Capital contribution - - - - - - 110,000 -
Pending repurchase of
common stock - - - - (65,000) - - -
Net income - - - - - - - 254,094
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE,
at January 31, 1997 54,965,228 (228,489) 54,965 (100,000) (65,000) 80,000 3,452,453 (3,250,786)
Issuance of common stock 800,000 - 800 - - - 279,200 -
Stock repurchase (114,933) - (115) - 65,000 - (64,885) -
Conversion of common stock
upon formation of Company
(Note 1) (52,661,993) 228,489 (52,662) 100,000 - - (49,509) -
Issuance of common stock,
net of related expenses in
conjunction with :
Initial public offering 1,400,000 - 1,400 - - - 5,727,064 -
Acquisition of Founding
Companies 907,585 - 908 - - - 4,990,811 -
Payment of debt and other
obligations 276,716 - 277 - - - 1,521,662 -
Exercise of warrants 111,296 - 111 - - (80,000) 201,159 -
Recent Acquisitions 76,748 - 77 - - - 577,315
Issuance of stock options and
a warrant - - - - - - 27,640 -
Purchase of treasury stock - (21,073) - (115,904) - - - -
Net loss - - - - - - - (8,569,498)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE,
at December 31, 1997 5,760,647 (21,073) $ 5,761 $(115,904) $ - $ - $16,662,910 $(11,820,284)
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
1997 1997
==================================================================================================
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $(8,569,498) $ 254,094
Adjustments to reconcile net loss to
cash used for operating activities:
Asset impairment and restructuring costs 11,136,027 -
Depreciation and amortization 946,087 110,635
Allowance for doubtful accounts 16,000 (55,086)
Compensatory stock options 27,500 30,000
Option cancellation expense - 110,000
Deferred tax benefit (1,237,059) (891,000)
Changes in current assets and liabilities-net of
effects of acquisitions:
Accounts receivable (1,414,850) 47,975
Inventory, prepaid expenses and other current assets (396,262) (43,526)
Accounts payable and accrued expenses (1,889,773) (312,703)
Deferred revenue (116,150) (99,165)
- --------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,497,978) (848,776)
- --------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Net cash paid for acquisition of Founding Companies (3,745,113) (150,000)
Net cash paid for acquisition of Recent Acquisitions (4,795,408) -
Property and equipment expenditures (146,404) (16,941)
Cash paid for capitalized acquisition costs
and other intangible assets (401,950) (229,141)
Proceeds from collection of notes and other receivables 375,201 -
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,713,674) (396,082)
- --------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of common stock 6,008,464 1,320,402
Proceeds from exercise of a warrant 121,270 -
Net borrowings under acquisition credit facility 7,188,095 -
Principal payments on long-term debt (1,782,815) (76,507)
Repurchase of common stock warrant - (50,000)
Purchase of treasury stock (115,904) -
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 11,419,110 1,193,895
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,207,458 (50,963)
CASH AND CASH EQUIVALENTS, beginning of year 198,735 249,698
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 1,406,193 $ 198,735
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
InfoCure Corporation ("InfoCure") was founded in November 1996 to develop,
market and service practice management systems for use by health care providers
throughout the United States. On July 10, 1997, InfoCure closed an initial
public offering of its common stock (the "Offering") and simultaneously acquired
the following six operating companies: (i) International Computer Solutions,
Inc. ("ICS"), (ii) Health Care Division, Inc. ("HCD"), (iii) Millard-Wayne, Inc.
("Millard-Wayne"), (iv) KComp Management Systems, Inc. ("KComp"), (v) DR
Software, Inc. ("DR Software") and (vi) Rovak, Inc. ("Rovak") (collectively the
"Founding Companies"). American Medcare Corporation ("AMC"), a holding company
and parent of ICS, HCD, and Millard-Wayne, originally incorporated on January
11, 1983, was merged with and into InfoCure at the time the Offering became
effective and is considered a predecessor company to InfoCure and the accounting
acquiror of all the Companies. All outstanding shares of AMC were converted into
approximately 3.0 million shares of InfoCure Common Stock concurrently with the
consummation of the Offering. The aggregate consideration paid for the Founding
Businesses was approximately $3.7 million in cash and 907,000 shares of
Common Stock for an aggregate value of $8.7 million, including fees and other
acquisition related costs.
Subsequent to the consummation of the Offering and the acquisition of the
Founding Companies, InfoCure acquired (the "Recent Acquisitions") substantially
all the assets or all the outstanding equity securities of the following
companies: (i) Professional On-Line Computer, Inc. ("POLCI"); (ii) Commercial
Computers, Inc. ("CCI"); (iii) SoftEasy Software, Inc. ("SoftEasy"); (iv) Pace
Financial Corporation ("PACE"); and (v) the orthodontic business unit of HALIS
Services, Inc. ("OPMS"). POLCI, CCI and SoftEasy were acquired with effect from
October 1, 1997, PACE was acquired with effect from November 1, 1997 and OPMS
was acquired with effect from December 1, 1997. Aggregate consideration for
these acquisitions was approximately 77,000 shares of Common Stock and $11.7
million cash and debt, for an aggregate value of $12.4 million. All the
acquisitions, the Founding Businesses as well as the Recent Acquisitions, have
been accounted for using the purchase method of accounting.
InfoCure, the Founding Companies and the Recent Acquisitions are referred to
collectively as the Company. The Company changed its fiscal reporting period to
December 31 effective February 1, 1997.
The accompanying financial statements have been presented on a consolidated
basis for the eleven months ended December 31, 1997 including InfoCure, and its
wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. The accompanying consolidated financial
statements include AMC (InfoCure's predecessor) and its subsidiaries ICS and HCD
for the period from February 1, 1997; the Founding Businesses for the period
from July 11, 1997 and the Subsequent Acquisitions from their respective dates
of acquisition.
For the year ended January 31, 1997, the accompanying financial statements
present the consolidated financial position, results of operations and cash
flows of AMC and its wholly owned subsidiaries ICS and, with effect from
December 3, 1996, HCD, which was acquired as of that date.
25
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 reported period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Revenue from software licenses is recognized upon sale and shipment. Revenue
from the sale of systems is recognized when the system has been installed and
when the related client training has been completed. Amounts billed in advance
of installation and pending completion of remaining significant obligations are
deferred. Revenue from support and maintenance contracts is recognized as the
services are performed ratably over the contract period, which typically does
not exceed one year. Revenue from other services is recognized as they are
provided.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity dates of three
months or less from the date of purchase to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
The Company's credit concentrations are limited due to the wide variety of
customers in the health care industry and the geographic areas into which the
Company's systems and services are sold.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is the amount at which the instrument
could be exchanged in a current transaction between willing parties. The
carrying amounts of the Company's financial instruments included in the
accompanying consolidated balance sheets are not materially different from their
fair values as of December 31, 1997 and January 31, 1997.
INVENTORIES
Inventory consists primarily of peripheral computer equipment and computer forms
and supplies. Inventory is accounted for on the first-in, first-out basis and
reported at the lower of cost or market.
26
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 primarily accelerated methods
for income tax purposes. Substantial betterments to property and equipment are
capitalized and repairs and maintenance are expensed as incurred.
CAPITALIZED SOFTWARE COSTS
Software development costs are expensed as incurred prior to establishing the
technological feasibility of a product. For the period between the establishment
of technological feasibility and the time a product is available for general
release, such costs are capitalized. Capitalized software costs are amortized
using the straight-line method over the estimated lives of the related products
(generally 48 months).
GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, which represents the excess of
cost over the fair value of assets acquired in business acquisitions accounted
for under the purchase method. All goodwill is amortized on a straight line
basis over an estimated useful life of 15 years. Capitalized acquisition costs
include fees and other expenses incurred in connection with the Company's
acquisition program. As acquisitions are completed, such costs are included in
the Company's total investment to be allocated appropriately. Other intangible
assets consist primarily of deferred loan costs which are being amortized over
the life of the respective loans at rates which approximate the interest method.
ASSET IMPAIRMENT
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,
effective for years beginning after December 15, 1995, requires that long-lived
assets and certain intangibles to be held and used by the Company be reviewed
for impairment. The Company periodically assesses whether there has been a
permanent impairment of its long-lived assets, in accordance with SFAS No. 121.
A write-down of assets due to impairment was required for the eleven months
ended December 31, 1997 in the amount of approximately $7.8 million (Note 4).
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.
RESTRUCTURING COSTS
The Company records the costs of consolidating existing Company facilities into
acquired operations, including the external costs and liabilities to close
redundant Company facilities and severance and relocation costs related to the
Company's employees, in accordance with Emerging Issues Task Force ("EITF")
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in
Restructuring).
27
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EARNINGS PER SHARE
The Company has adopted the provisions of SFAS No. 128, Earnings Per Share,
which is effective for fiscal years ending after December 15, 1997. Basic
earnings per share for the eleven months ended December 31, 1997 is calculated
based upon the weighted average number of common shares outstanding during the
period. Diluted earnings per share includes the dilutive effect of common stock
equivalents. Earnings per share for the year ended January 31, 1997 has not been
presented as it is not considered meaningful due to the acquisitions of the
Founding Businesses and the Company's initial public offering in conjunction
with the formation of the Company during the period ended December 31, 1997.
Weighted average number of shares outstanding used in computing EPS for the
eleven months then ended were 4,383,087. Diluted EPS have not been presented
because the impact of the assumed exercise of the Company's stock options and
warrants would have been anti-dilutive. The assumed exercise of the Company's
options and warrants may have a dilutive effect in the future.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the current
year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
FAS No. 130, Reporting Comprehensive Income, is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purposes financial statements. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company has addressed the
requirements of SFAS No. 130 and no material impact on the financial statements
is expected.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting information about operating segments in
annual financial statements and interim financial reports issued to
shareholders. Generally, certain financial information is required to be
reported on the basis that is used internally for evaluating performance of and
allocation of resources to operating segments. The Company has not yet
determined to what extent the standard will impact its current practice of
reporting operating segment information.
SOP 97-2, Software Revenue Recognition, is effective for fiscal years beginning
after December 15, 1997. This Statement provides guidance on applying generally
accepted accounting principles in recognizing revenue on software transactions
and establishes certain criteria for revenue recognition. The Company estimates
that the revenue recognition criteria stated in the pronouncement will have no
material impact on the financial statements.
3. BUSINESS COMBINATIONS
In December 1996, AMC, the predecessor to the Company, acquired certain assets
and assumed certain liabilities of HCD (formerly a division of InfoSystems of
North Carolina, Inc. ("ISI")). Aggregate consideration was $1.7 million
comprised of $150,000 cash and a $1.55 million note payable to ISI.
As described in Note 1, the Company, in conjunction with the July 10, 1997
closing of its initial public offering, acquired the six Founding Companies. The
Recent Acquisitions, also described in Note 1, included POLCI, CCI and SoftEasy,
acquired with effect from October 1, 1997; PACE, acquired with effect from
November 1, 1997; and OPMS, acquired with effect from December 1, 1997.
28
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All of the companies acquired have long-term marketing rights to and/or
ownership of licensed software in various segments of the healthcare industry.
All of the acquisitions of the Company and its predecessor have been accounted
for under the purchase method of accounting and the acquired companies' results
of operations from the respective acquisition dates are included in the
accompanying consolidated financial statements.
The following unaudited pro forma information presents the consolidated results
of operations of the Company as if the acquisitions had occurred as of February
1, 1996. The pro forma information is not necessarily indicative of what would
have occurred had the acquisitions been made as of February 1, 1996, nor is it
indicative of future results of operations. The pro forma amounts give effect to
appropriate adjustments for the fair value of the assets acquired, reductions in
personnel costs and other operating expenses not assumed as part of the
acquisitions, amortization of intangibles, interest expense and income taxes.
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
Pro Forma Amounts 1997 1997
------------------------------------------------------------------------------------
(000'S OF DOLLARS, EXCEPT SHARE
DATA)
(UNAUDITED)
<S> <C> <C>
Revenues $32,442 $35,871
Net income (loss) (7,350) 1,447
Earnings (loss) per share (1.28)
The pro forma amounts for net income and earnings per share for the eleven
months ended December 31, 1997 include the impact of asset impairment and
restructuring charges as described in Note 4. Pro forma earnings per share for
the year ended January 31, 1997 are not considered meaningful and have not been
presented.
</TABLE>
The following tables summarize the fair valued of the assets acquired,
liabilities assumed and consideration given in connection with the foregoing
acquisitions:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
1997 1997
-------------------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $ 3,218,513 $ 154,358
Property and equipment 1,216,574 60,000
Goodwill 21,644,540 1,926,717
Capitalized software 1,717,956 -
Other assets 1,321,316 8,902
Deferred revenue (2,690,051) (432,324)
Accounts payable (933,630) (14,305)
Notes payable (1,650,173) -
Other liabilities (2,744,090) (3,348)
-------------------------------------------------------------------------------------
Net assets acquired $21,100,955 $1,700,000
=====================================================================================
</TABLE>
29
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These acquisitions were funded as follows:
<TABLE>
<S> <C> <C>
Common stock $ 5,569,111 $ -
Note payable and other payables 6,991,323 1,550,000
Cash 8,540,521 150,000
------------------------------------------------------------------------------------
Total consideration $21,100,955 $1,700,000
====================================================================================
</TABLE>
In addition to the foregoing consideration, various of the acquisition
agreements provided for additional purchase consideration based on attaining
certain revenue or operating income goals. The additional consideration will be
accounted for as compensation expense if and when earned. Maximum contingent
consideration payable originally aggregated $4.7 million. As more fully
described in Note 4, the Company's restructuring plans affect certain of the
acquired companies such that portions of the contingent consideration related
thereto was deemed earned and payable as of December 31, 1997. Accordingly,
approximately $2.5 million of such consideration is included as part of the
Company's restructuring costs for the eleven months ended December 31, 1997, in
settlement of contingent consideration obligations related to all the companies
affected. Remaining contingent consideration payable aggregates $1.0 million at
December 31, 1997.
Subsequent to year end the Company executed and closed agreements to acquire
certain assets and assume certain liabilities of Micro-Software Designs, Inc.,
located in Ridgefield, Connecticut, and all of the outstanding equity securities
of Medical Software Integrators, Inc., located in Atlanta, Georgia. The
acquisitions will be accounted for using the purchase method of accounting.
Aggregate consideration for these acquisitions is approximately $22.7 million,
payable approximately $18.5 million in cash, funded by the Company's acquisition
credit facility (Note 8), and the balance in common stock.
4. IMPAIRMENT OF ASSETS AND RESTRUCTURING COSTS
Effective December 1, 1997, the Company determined to restructure through a plan
to consolidate existing facilities and acquired operations. This restructuring
plan enables the Company to more effectively leverage its present and planned
acquisitions, streamline its offering of products and services and respond more
effectively to changing market conditions. In connection therewith, management
also reevaluated the Company's investment in goodwill and capitalized software
in light of current market conditions and the restructuring plan. Management
determined that based on current market conditions and an analysis of projected
undiscounted future cash flows calculated in accordance with the provisions of
SFAS 121, the carrying amount of certain long-lived assets, principally of Rovak
and DR Software may not be recoverable. The resultant impairment of long-lived
assets due principally to the impact of the Company's new acquisitions (Note 3)
and changing technology, has necessitated a write-down of approximately $7.8
million as follows: (i) $3.5 million and $2.8 million of goodwill representing
the excess of cost over net assets of the acquisition of Rovak and DR Software,
respectively, acquired in July 1997 and (ii) $1.5 million of capitalized
software related to products whose future utility is diminished based on market
conditions. The estimated fair values of these long-lived assets have been
determined by calculating the present value of estimated expected future cash
flows using a discount rate commensurate with the risks involved.
In connection with effecting the consolidation and restructuring, the Company
has also recorded costs and accrued liabilities to close redundant facilities,
cancel leases and other executory contracts and recognize contingent
consideration earned or deemed as payable under terms of certain acquisition
agreements for acquired companies affected by the consolidation and
restructuring.
30
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asset impairment and restructuring costs for the eleven months ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Cost related to: Amount
-------------------------------------------------------------------------------------
<S> <C>
Write off of goodwill $ 6,360,063
Write off of capitalized software development costs 1,460,943
Facility closure and consolidation 460,808
"Earn-out" compensation for contingent consideration earned
or deemed payable to former stockholders or entities affected
by the consolidation and restructuring 2,558,169
Other asset write downs and costs 296,044
-------------------------------------------------------------------------------------
Total asset impairment and restructuring costs $11,136,027
=====================================================================================
</TABLE>
The restructuring plan, which is anticipated to be completed by the second
quarter of 1998, also included termination of certain redundant staff positions.
Details of this element of the restructuring plan were finalized and
communicated in the first quarter of 1998. Accordingly, compensation costs,
including severance and other termination benefits, and other future costs,
related to the restructuring are not reflected in the foregoing table. Such
costs, which are estimated at $1 million, will be recognized in the first
quarter of 1998 in accordance with EITF No. 94-3.
5. PROPERTY AND EQUIPMENT
Major classes of property and equipment consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31, January 31,
(Years) 1997 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Office and computer equipment 3-5 $1,382,547 $441,464
Furniture and fixtures 5-7 416,372 240,898
Equipment under capital lease
obligations 3-5 161,732 -
Leasehold improvements 3-5 76,029 -
--------------------------------------------------------------------------------------
2,036,680 682,362
Less accumulated depreciation 708,884 588,205
--------------------------------------------------------------------------------------
$1,327,796 $ 94,157
======================================================================================
</TABLE>
Depreciation expense was $163,152 and $37,156 for the eleven months ended
December 31, 1997 and the year ended January 31, 1997, respectively. In
connection with the restructuring plan described in Note 4, the Company will
dispose of property and equipment, primarily office and computer equipment, with
a net book value of approximately $155,000. Accrued restructuring costs include
provision for the anticipated loss on this disposal.
31
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. CAPITALIZED ACQUISITION COSTS AND OTHER INTANGIBLES
Capitalized acquisition costs and other intangibles consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, January 31,
1997 1997
------------------------------------------------------------------------------------
<S> <C> <C>
Capitalized costs of future acquisitions $ 611,880 $ 521,871
Loan costs 299,879 -
Capitalized software development costs 150,000 698,367
Other - 84,874
------------------------------------------------------------------------------------
1,061,759 1,305,112
Less accumulated amortization 34,510 682,852
------------------------------------------------------------------------------------
$1,027,249 $ 622,260
====================================================================================
</TABLE>
As described in Note 4, approximately $1.5 million of capitalized software was
written off during the eleven month period ended December 31, 1997. Amortization
of capitalized software charged to operations was approximately $253,000 and
$16,000 for the eleven months ended December 31, 1997 and the year ended January
31, 1997, respectively.
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, January 31,
1997 1997
------------------------------------------------------------------------------------
<S> <C> <C>
Compensation $ 586,962 $ 82,371
Professional fees 169,000 30,000
Interest 85,174 75,182
Taxes, other than income 24,450 84,503
Accrued stock repurchase - 65,000
Other 218,484 21,615
------------------------------------------------------------------------------------
$1,084,070 $358,671
====================================================================================
</TABLE>
32
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, January 31,
1997 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Note payable, Finova Capital (1) $7,188,095 $ -
Note payable, remainder of purchase price
for acquisitions (2) 1,207,132 -
Notes payable to stockholders; interest
varies between 7% and 10%; maturing at
various dates through 2001 339,783 -
Notes paid in 1997 - 831,599
Other notes payable 226,583 10,682
-----------------------------------------------------------------------------------
8,961,593 842,281
Less current portion 2,001,393 49,529
-----------------------------------------------------------------------------------
$6,960,200 $792,752
===================================================================================
</TABLE>
(1) The Company has a $10 million credit facility with Finova Capital for the
purpose of funding its acquisition program and for working capital. The credit
line is collateralized by substantially all of the Company's assets and the
accounts receivable, cash flows and assets of future acquisition companies. This
facility has a five-year term and bears interest at an annual rate of prime plus
1.25% to 2.00% depending on the Company achieving certain debt service ratios.
At December 31, 1997 the rate was 10.5% per annum. Subsequent to December 31,
1997 the available credit under this facility was increased to $30 million with
other material terms unchanged.
(2) The note payable for the remainder of the purchase price for a certain
acquisition is due in two installments: $603,566 was due and paid on January 1,
1998 and the remainder is due October 1, 2000. The interest rate is 6% per
annum.
As of December 31, 1997, future maturities of these obligations are as follows:
Year Amount
----------------------------------------------------------------
1998 $2,001,393
1999 1,534,547
2000 2,072,945
2001 1,598,865
2002 1,753,843
----------------------------------------------------------------
Total $8,961,593
================================================================
33
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. OTHER LONG-TERM LIABILITIES
At December 31, 1997, other long term liabilities consists primarily of
approximately $6.3 million representing the balance payable in connection with
the acquisition of PACE effective November 1, 1997. This amount was paid from
advances on the long-term acquisition credit facility subsequent to year end
(NOTE 8). At January 31, 1997, the Company had a note payable to ISI in the
approximate amount of $1.5 million relating to the purchase of HCD. In
connection with the Company's Offering, this note was paid in full by the
issuance of approximately 181,000 shares of Common Stock with a fair value of
approximately $1,000,000 and the balance in cash.
10. COMMITMENTS
OPERATING LEASES
The Company leases its office facilities and certain equipment under operating
leases having terms ranging from one to five years.
Future minimum rentals, by year and in the aggregate, under noncancellable
operating leases with remaining term of more than one year are as follows:
Year Amount
----------------------------------------------------------
1998 $ 519,614
1999 421,895
2000 258,317
2001 298,342
2002 258,164
----------------------------------------------------------
Total $1,756,332
==========================================================
Rent expense was approximately $468,000 and $140,000 for the eleven months ended
December 31, 1997 and the year ended January 31, 1997, respectively.
EMPLOYEE BENEFIT PLAN
Subsequent to year end, the Company implemented a qualified 401(k) savings plan
("the Plan") covering all employees meeting certain age and years of service
eligibility 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 may also provide profit-sharing contributions at its
sole discretion. Employees become fully vested in any employer contributions
after five years of service.
During the eleven months ended December 31, 1997, the companies comprising the
Founding Companies and the Recent Acquisitions had separate benefit plans for
employee retirement. As of January 31, 1998, all previous plans were rolled into
the newly adopted plan. Contributions to employee benefit plans for the eleven
months ended December 31, 1997 and the year ended January 31, 1997 were $34,000
and $ 0, respectively.
34
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCKHOLDERS' EQUITY
COMMON STOCK
In connection with the formation of the Company and concurrent with completion
of its initial public offering, all of the approximately 52 million outstanding
shares of AMC common stock were converted into approximately 3 million
shares of the Company's Common Stock. The Company had 15,000,000 shares of $.001
par value Common Stock and 2,000,000 shares of $.001 par value Preferred Stock
authorized at December 31, 1997. Shares of Common Stock issued and outstanding
were 5,760,647 and 5,739,574, respectively, at December 31, 1997.
CONVERTIBLE REDEEMABLE PREFERRED STOCK
Subsequent to December 31, 1997, the Company completed the sale of 850,000
shares of its Convertible Redeemable Preferred Stock in a private placement for
$8.5 million which netted the Company $7.8 million after commissions and
offering expenses. These proceeds will be used primarily for funding future
acquisitions and related expenses.
Shares of the Redeemable Preferred Stock are convertible into shares of Common
Stock. Until February 6, 1999, the shares can be converted into that number of
Common Stock shares determined by dividing the initial price of $10.00 per share
by a conversion price of $8.50. On February 6, 1999, the conversion price will
be reset for the lesser of $8.50 per share or the trailing 30-day average
closing price of the Common Stock, subject to a minimum of $6.75 per share.
STOCK COMPENSATION PLANS
The Company has stock option plans that provide for the granting of incentive
and non-qualified options to purchase the Company's common stock to selected
officers, other key employees, directors, and consultants. These plans include
the InfoCure Corporation 1996 Stock Option Plan, the InfoCure Corporation
Length-of-Service Nonqualified Stock Option Plan, and the InfoCure Corporation
Directors Stock Option Plan. The Company also assumed the stock options of AMC,
its predecessor, which were outstanding at July 10, 1997. Such options were
converted at the same rate used in connection with the conversion of AMC's
common stock.
Under the InfoCure Corporation 1996 Stock Option Plan, 800,000 shares of common
stock of the Company were reserved for option grants to directors, officers,
other key employees, and consultants. All options under this plan were granted
during the 11-month period ending December 31, 1997. Employees of the Company
may be granted Incentive Stock Options (ISOs) within the dollar limitations
under Section 422(d) of the Internal Revenue Code. The exercise price of all
ISOs shall not be less than the fair market value of the Company's stock as of
the option grant date (110% of such value for 10% shareholders). Options
granted to directors and consultants must be nonqualified stock options.
Options vest ratably over the four year period beginning on the grant date.
35
<PAGE>
Under the InfoCure Corporation Length-of-Service Nonqualified Stock Option Plan,
150,000 shares of common stock of the Company were reserved for issuance to
employees of the Company. Approximately 50,000 shares are available for grant
under this plan after December 31, 1997. Employees are granted nonqualified
stock options based on years of service with the Company and are fully vested
four years from the grant date. The exercise price of options issued pursuant
to this plan shall be no less than the fair market value of the Company's stock
as of the grant date.
Under the InfoCure Corporation Directors Stock Option Plan, 100,000 shares of
common stock of the Company were reserved for issuance as nonqualified stock
options to Directors of the Company who are not employees of the Company. Upon
appointment to the Board of Directors, a director receives an option grant of
10,000 shares and may receive an additional option grant of 2,500 shares on each
anniversary date. One-half of the options granted pursuant to this plan vests
after one year of service following the grant date and the other one-half vests
after two years of service following the grant date.
In October, 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, Accounting for Stock-Based Compensation, effective for InfoCure
beginning February 1, 1996. SFAS 123 defines a "fair value method" of
accounting for employee stock options. It also allows accounting for such
options under the "intrinsic value method" in accordance with Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations. If a company elects to use the intrinsic
value method, then pro forma disclosures of earnings and earnings per share are
required as if the fair value method of accounting was applied. The effects of
applying SFAS 123 in the pro forma disclosures are not necessarily indicative of
future amounts because the pro forma disclosures do not take into account the
amortization of the fair value of awards prior to 1995. Additionally, InfoCure
is expected to grant additional awards in future years.
The Company has elected to account for its stock options under the intrinsic
value method as outlined in APB 25. The fair value method requires use of
option valuation models, such as The Black-Scholes option valuation model, to
value employee stock options, upon which a compensation expense is based. The
Black-Scholes option valuation model was not developed for use in valuing
employee stock options. Instead, this model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because InfoCure's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, it is management's
opinion that the existing models do not necessarily provide a reliable measure
of the fair value of its employee stock options. Under the intrinsic value
method, compensation expense is only recognized if the exercise price of the
employee stock option is less than the market price of the underlying stock on
the date of grant.
In accordance with SFAS 123, the fair value for the Company's employee stock
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for the 11 month-period
ended December 31, 1997 and the year ended January 31, 1997.
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
1997 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 5.7-6.2% 7.5%
Dividend yield 0% 0.0%
Volatility factor 19.71% 0.0%
Weighted average expected life (in years) 5 5 - 10
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information, excluding earnings per share for year ended January 31, 1997
which are not considered meaningful, follows:
36
<PAGE>
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
1997 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income
As reported $(8,569,498) $254,094
Pro forma (8,673,825) 14,388
Earnings per share
As reported $(1.96)
Pro forma $(1.98)
</TABLE>
A summary of stock option activity, and related information for the 11-month
period ended December 31, 1997 and the year ended January 31, 1997 follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
<S> <C> <C>
Outstanding at February 1, 1996 238,640 $12.78
Granted 138,710 4.05
Exercised (29,830) .02
Forfeited or canceled (178,980) 16.76
Outstanding at January 31, 1997 168,540 3.63
Granted 948,400 4.23
Exercised - -
Forfeited or canceled (2,983) 1.67
Outstanding at December 31, 1997 1,113,957 $4.15
Options exercisable at January 31, 1997 36,542 $1.74
Options exercisable at December 31, 1997 68,236 $2.91
</TABLE>
The weighted average fair value of options granted during the 11-month period
ended December 31, 1997 and for the year ended January 31, 1997 were $1.34 and
$.11, respectively.
WARRANT
The Company has issued to an investment advisory firm a warrant to acquire
110,000 shares of common stock at $5.50 per share in exchange for assistance
in securing its acquisition line of credit. An executive/director is associated
with this investment advisory firm.
37
<PAGE>
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED Year Ended
DECEMBER 31, January 31,
1997 1997
------------------------------------------------------------------------------------
<S> <C> <C>
Current:
Federal $ - $ -
State 75,000 5,000
------------------------------------------------------------------------------------
Total current 75,000 5,000
------------------------------------------------------------------------------------
Deferred
Federal (1,345,059) (195,000)
State (252,000) (30,000)
------------------------------------------------------------------------------------
Total deferred (1,597,059) (225,000)
------------------------------------------------------------------------------------
Change in deferred tax asset valuation allowance 285,000 (671,000)
------------------------------------------------------------------------------------
Net income tax expense (benefit) $(1,237,059) $(891,000)
====================================================================================
</TABLE>
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>
DECEMBER 31, January 31,
1997 1997
------------------------------------------------------------------------------------
<S> <C> <C>
Current:
Deferred tax assets
Allowance for doubtful accounts $ 93,000 $ 14,000
Accrued restructuring costs 309,000 -
Accrued expenses 154,000 11,000
------------------------------------------------------------------------------------
556,000 25,000
------------------------------------------------------------------------------------
Noncurrent:
Deferred tax assets (liabilities)
Basis difference of capitalized software
costs, property and equipment and other assets 1,543,000 (40,000)
Net operating loss carryforwards 648,000 911,000
------------------------------------------------------------------------------------
2,191,000 871,000
------------------------------------------------------------------------------------
Subtotal 2,747,000 896,000
Valuation allowance (285,000) -
------------------------------------------------------------------------------------
Net deferred tax asset (liability) $2,462,000 $ 896,000
====================================================================================
</TABLE>
-29-
<PAGE>
The Company's effective income tax rate varied from the U.S. federal statutory
rate as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS Year
ENDED Ended
DECEMBER 31, January 31,
1997 1997
------------------------------------------------------------------------------------
<S> <C> <C>
Expected tax expense (benefit) $(3,334,000) $(217,000)
Increase (decrease) in income taxes resulting from:
State income taxes (513,000) 21,000
Nondeductible goodwill 2,167,000 -
Other nondeductible goodwill 139,000 (14,000)
Other, net 18,941 (10,000)
Change in deferred tax asset valuation allowance 285,000 (671,000)
------------------------------------------------------------------------------------
Net income tax expense $(1,237,059) $(891,000)
====================================================================================
</TABLE>
As of December 31, 1997, the Company and its subsidiaries have net operating
loss carryforwards for federal income tax purposes of approximately $ 1,707,000
which expire at various dates to 2012. A valuation allowance in the amount of
$285,000 has been recorded related to net operating loss carryforwards of an
acquired subsidiary which may be subject to limitations.
13. SUPPLEMENTAL CASH
FLOW INFORMATION
Cash payments for interest amounted to $266,000 and $42,000 for the eleven
months ended December 31, 1997 and the year ended January 31, 1997,
respectively. The Company made cash payments for income taxes of approximately
$5,000 and $-0- for the eleven months ended December 31, 1997 and the year ended
January 31, 1997, respectively.
During the eleven months ended December 31, 1997, the Company issued Common
Stock with an aggregate fair value of approximately $5.6 million and incurred
notes payable and other liabilities of approximately $7.0 million in connection
with acquisition of the Founding Companies and the Recent Acquisitions. During
the year ended January 31, 1997, the Company acquired certain assets and assumed
certain liabilities of HCD for consideration of a note in the amount of
$1,550,000 and cash of $150,000. (Note 3)
During the year ended January 31, 1997, the Company issued stock and a warrant
with an aggregate value of approximately $190,000 for services rendered to the
Company.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
39
<PAGE>
PART III
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, not later than 120 days after the end of its
fiscal year. Accordingly, certain information required by Part III has been
omitted under Item E of the General Instructions for Form 10-KSB. Only those
sections of the definitive Proxy Statement which specifically address the items
set forth herein are incorporated by reference.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this item is incorporated by reference from the
information contained in the Company's definitive Proxy Statement for the 1998
Annual Meeting of Stockholders (the "1998 Proxy Statement") under the captions
"Election of Directors" and "Executive Officers."
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this item is hereby incorporated by reference
to the Company's 1998 Proxy Statement under the caption "Executive
Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is hereby incorporated by reference
to the Company's 1998 Proxy Statement under the caption "Security Ownership of
Certain Beneficial Owners and Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is hereby incorporated by reference
to the Company's 1998 Proxy Statement under the caption "Certain Transactions."
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed as part of, or are incorporated
by reference into, this report on Form 10-KSB:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------
<C> <S>
2.1(1) Plan and Agreement of Merger dated July 9, 1997 between InfoCure Corporation and
American Medcare Corporation ("AMC")
3.1(1) Amended Certificate of Incorporation of the Company
3.2(1) Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended Certificate of Incorporation and
Bylaws of the Company defining rights of the holders of Common Stock of the Company
4.2(1) Specimen Certificate for shares of Common Stock
4.3(2) Certificate and Statement of Issuance, Designation, Preferences and Rights of
Convertible Redeemable Preferred Stock, Series A of InfoCure Corporation
4.4 Specimen Certificate for Shares of Preferred Stock, Series A
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------
<C> <S>
10.1(1) InfoCure Corporation 1996 Stock Option Plan
10.2(1) Form of Incentive Stock Option Agreement of Company
10.3(1) Stock Purchase Agreement among Company and the shareholders of Rovak, Inc. dated
February 1, 1997
10.4(1) Stock Purchase Agreement among the Company and the shareholders of Millard-Wayne, Inc.
dated February 11, 1997
10.5(1) Stock Purchase Agreement among the Company and the shareholders of KComp Management
Systems, Inc. dated February 12, 1997
10.6 [Reserved]
10.7(1) Stock Purchase Agreement among the Company and the shareholders of DR software dated
February 11, 1997
10.8(1) Asset Purchase Agreement between AMC and Info Systems of North Carolina, Inc. dated
December 3, 1996
10.9(1) Promissory Note of AMC dated December 3, 1996 payable to Info Systems of North
Carolina, Inc.
10.10(1) Management Agreement between HCD and Info Systems of North Carolina, Inc. dated
December 31, 1996
10.11 [Reserved]
10.12(1) Form of Employment Agreement between the Company and Frederick L. Fine dated March, 1997
10.13(1) Form of Employment Agreement between the Company and James K. Price dated March, 1997
10.14(1) Employment Agreement between the Company and R. Ernest Chastain dated November 1996
10.15(1) Employment Agreement between the Company and Michael E. Warren dated September 1994
10.16(1) Form of Employment Agreement between the Company and Donald M. Rogers
10.17(1) Form of Employment Agreement between the Company and M. Wayne George
10.18(1) Form of Employment Agreement between the Company and Mark Kloner
10.18(1) AMC 1996 Stock Option Plan
10.20(1) Form of Incentive Stock Option Agreement of AMC
10.21(1) Form of Lock-up Agreement
10.22(1) Termination Agreement among MDP Corporation, Jonathan J. Oscher, AMC, ICS and certain
shareholders of AMC dated November 19, 1996
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------
<C> <S>
10.23(1) Form of Employment Agreement between the Company and Brad Schraut
10.24(1) Letter Amendment dated March 3, 1997 between the Company and Rovak, Inc.
10.25(1) Letter of Intent between Finova and the Company
10.26(1) Amendment dated May 5, 1997 among the Company and the Shareholders of Rovak, Inc.
10.27(1) Draft of Plan of Merger dated May 5, 1997 among the Company, CMA Corporation, the
Shareholders of KComp and KComp Management Systems, Inc.
10.28(1) Amendment dated May 5, 1997 among the Company and Shareholders of DR Software
10.29(1) Amendment dated May 5, 1997 among AMC and Shareholders of Millard-Wayne, Inc.
10.30(3) Plan of Merger among InfoCure, EDC, KComp, Inc. and the Shareholders of KComp, Inc.
dated as of May 12, 1997
10.31(1) Form of Letter Agreement between InfoCure and DR Software
10.32(1) Form of Letter Agreement between Millard-Wayne and AMC
10.33(1) Form of Letter Agreement between KComp and the Company
10.34(4) Form of Agreement and Plan of Merger (Rovak)
10.35(5) Form of Amendment to Agreement and Plan of Merger (Rovak)
10.36 Stock Purchase Agreement among Company and the Shareholders of SoftEasy Software, Inc.
dated October 17, 1997
10.37 Asset Purchase Agreement among Company and Shareholders of Commercial Computers, Inc.
dated November 14, 1997
10.38(6) Asset Purchase Agreement among Company and Shareholders of Professional On-line
Computer, Inc. dated November 18, 1997
10.39(7) Asset Purchase Agreement among Company, Halis Services, Inc., Orthodontic Practice
Management Systems, Inc. and Halis, Inc. dated December 31, 1997
10.40(8) Stock Purchase Agreement among Company and Shareholders of Pace Financial Corporation
dated January 29, 1998
10.41(9) Asset Purchase Agreement among Company and Shareholders of Micro-Sofware Designs, Inc.
dated February 19, 1998
10.42(10) Stock Purchase Agreement among Company and Shareholders of Medical Software
Integrators, Inc. dated February 26, 1998
10.43 Second Amended and Restated Loan Agreement among the Company, its subsidiaries and
FINOVA Capital Corporation dated February 24, 1998
10.44 Third Amended and Restated Term Note dated February 24, 1998
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------------
<C> <S>
10.45 Third Amended and Restated Acquisition Loan Note dated February 24, 1998
10.46 Fourth Amended and Restated Term Note dated March 2, 1998
10.47 Fourth Amended and Restated Acquisition Loan Note dated March 2, 1998
10.48 InfoCure Corporation 1997 Directors' Stock Option Plan
10.49 InfoCure Corporation Length-of-Service Nonqualified Stock Option Plan
10.50 Infocure Corporation Employee Stock Purchase Plan
10.51 Form of Employment Agreement between the Company and Richard E. Perlman dated December 1997
10.52 Letter Agreement between Compass Partners, L.L.C. and AMC dated June 12, 1996
10.53 Lease Agreement between Highwoods/Forsyth Limited Partnership, a North Carolina Limited
Partnership, d/b/a Highwoods Anderson and InfoCure Corporation commencing December 1,
1997
21.1 List of Subsidiaries
23.1 Consent of BDO Seidman, LLP
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- -----------
(1) Incorporated by reference to Exhibit of the same number filed with the
Company's Registration Statement on Form SB-2 (Registration No. 333-18923).
(2) Incorporated by reference to Exhibit of the same number filed with the
Company's Registration Statement on Form S-8 (Registration No. 333-48829).
(3) Incorporated by reference to Exhibit 10.14 filed with the Company's
Registration Statement on Form S-4 (Registration No. 333-20571).
(4) Incorporated by reference to Exhibit 10.19 filed with the Company's
Registration Statement on Form S-4 (Registration No. 333-30887).
(5) Incorporated by reference to Exhibit 10.20 filed with the Company's
Registration Statement on Form S-4 (Registration No. 333-30887).
(6) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
Report on Form 8-K on December 11, 1997.
(7) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
Report on Form 8-K on January 15, 1997.
(8) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
Report on Form 8-K on February 23, 1998.
(9) Incorporated by reference to Exhibit 2.1 filed with the Company's Current
Report on Form 8-K on March 11, 1998.
(10) Incorporated by reference to Exhibit 2.2 filed with the Company's Current
Report on Form 8-K on March 11, 1998.
(b) Reports on Form 8-K. The Company filed the following report on Form 8-K
during the quarter ended December 31, 1997:
(i) Report on Form 8-K with respect to the Company's acquisition of
Professional On-Line Computer, Inc. ("POLCI"), Commercial Computers, Inc. and
SoftEasy Software, Inc. filed December 11, 1997. Financial Statements of the
Company and POLCI were provided in the Company's Report on Form 8-K/A filed
February 9, 1998.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 31st day of
March, 1998.
INFOCURE CORPORATION
By: /s/ Frederick L. Fine
-------------------------------------
Frederick L. Fine
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frederick L. Fine and Richard E. Perlman, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Report on Form
10-KSB, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Frederick L. Fine
- ---------------------------------------- President; Chief Executive March 31, 1998
Frederick L. Fine Officer (Principal Executive
Officer); Director
/s/ Richard E. Perlman
- ---------------------------------------- Chairman of the Board; Chief March 31, 1997
Richard E. Perlman Financial Officer; Treasurer
(Principal Financial and
Accounting Officer); Director
/s/ James K. Price
- ---------------------------------------- Executive Vice President; March 31, 1998
James K. Price Secretary; Director
/s/ Michael E. Warren
- ---------------------------------------- Vice President; Director March 31, 1998
Michael E. Warren
/s/ James D. Elliott
- ---------------------------------------- Director March 31, 1998
James D. Elliott
/s/ Ronald M. Vagle
- ---------------------------------------- Director March 31, 1997
Ronald M. Vagle
/s/ Raymond H. Welsh
- ---------------------------------------- Director March 31, 1997
Raymond H. Welsh
</TABLE>
44
<PAGE>
EXHIBIT 4.4
SEE TRANSFER RESTRICTIONS ON REVERSE SIDE
NUMBER SHARES
1
----
INFOCURE CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
AUTHORIZED CONVERTIBLE REDEEMABLE PREFERRED STOCK, SERIES A, 2,000,000 SHARES,
PAR VALUE $.001
This Certifies that SPECIMEN **************************************** is
--------------------------------------------------
the registered holder of (***)*************************************************
- --------------------------------------------------------------------------------
************************************************************************* Shares
- -------------------------------------------------------------------------
OF THE CONVERTIBLE REDEEMABLE PREFERRED STOCK, SERIES A, OF INFOCURE CORPORATION
WHICH ARE FULLY PAID AND NONASSESSABLE AND WHICH ARE transferable only on the
books of the Corporation by the holder hereof in person or by Attorney upon
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this 9th day of February A.D. 1998
--- -------------- --
- ----------------------------- ---------------------------
PRESIDENT SECRETARY
<PAGE>
EXHIBIT 10.36
-------------
STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is effective as of the close of business on the 30th day of
September, 1997, by and between INFOCURE CORPORATION, a Delaware corporation
("PURCHASER"), HAL M. SEGAL, an individual ("Hal") and BART C. SEGAL, an
individual ("Bart") ("SELLERS").
RECITALS:
I. SELLERS desire to sell to PURCHASER and PURCHASER desires to purchase
all of the issued and outstanding capital stock of SoftEasy Software, Inc., a
Pennsylvania corporation.
NOW, THEREFORE, THE PARTIES HERETO, EACH INTENDING TO BE BOUND, AGREE AS
FOLLOWS:
ARTICLE 1. SALE AND PURCHASE OF STOCK AND ADJUSTMENTS.
------------------------------------------
SELLER agrees to sell and PURCHASER agrees to purchase all of the issued
and outstanding capital stock (the "Stock") of SoftEasy Software, Inc.
("COMPANY"), on the terms and subject to the conditions hereinafter set forth,
for the total purchase price ("Acquisition Price") of Seven Hundred Thousand and
No/100 Dollars ($700,000.00), Five Hundred Thousand and No/100 Dollars
($500,000.00) payable at closing, as set forth in Article 8, and subject to the
Net Worth Adjustment, set forth in Paragraph 1.1. hereinbelow, and Two Hundred
Thousand and No/100 Dollars ($200,000.00) earn out, subject to the Gross Profit
Adjustment set forth in Paragraph 1.2. hereinbelow.
<PAGE>
1.1 Net Worth Adjustment.
--------------------
If the net worth (assets of COMPANY less liabilities of COMPANY) of the
COMPANY at closing is more than 0, the Acquisition Price shall be increased by
the difference between the actual net worth and 0. If the net worth of the
SELLER at closing is less then 0, the Acquisition Price shall be reduced by the
difference between 0 and the actual net worth. Reductions in the Acquisition
Price will be made in cash with respect to Hal and in PURCHASER stock with
respect to Bart in the proportions set forth in Section 8.4. Increase in the
Acquisition Price shall be made in cash to Hal and in stock to Bart in the
proportions set forth in Section 8.4. PURCHASER stock shall be valued at the
InfoCure Corporation initial public offering price. The net worth shall be
calculated in accordance with GAAP consistently applied on an accrual basis.
For purposes of this Article 1.1. the Net Worth Adjustment shall be
computed and paid as follows:
Within sixty days of the closing, SELLERS shall prepare and submit to
PURCHASER a balance sheet reflecting all of the assets and liabilities of the
COMPANY, prepared in a manner consistent with the past practices of COMPANY in
accordance with generally accepted accounting principals ("Closing Date Balance
Sheet"). No later than the date that is sixty (60) days after the date of
receipt by PURCHASER of the proposed Closing Date Balance Sheet, PURCHASER shall
submit in writing to SELLERS and COMPANY any and all proposed adjustments.
PURCHASER shall allow SELLERS access to the books and records of COMPANY during
normal business hours to review and prepare the Closing Date Balance Sheet. No
-2-
<PAGE>
later than the date that is thirty (30) days after the date of receipt by
SELLERS of PURCHASER's proposed adjustments, SELLERS shall notify PURCHASER
whether or not they accept the proposed adjustments and which, if any, they
reject. Thereafter, for a period not to exceed thirty (30) days, PURCHASER and
SELLERS will attempt in good faith to reach agreement on the Closing Date
Balance Sheet. Failing agreement within such time period, the parties shall
submit the accounting issues in dispute to binding arbitration to an accountant
who shall serve as arbitrator, to be agreed upon between the parties. Payment
shall be made within ten (10) days after a final determination of the Closing
Date Balance Sheet.
1.2 Gross Profit Adjustment.
-----------------------
1.2.1. During the initial 12 month period and the following 13th
through the 24th month, following consummation of the stock purchase pursuant to
this Agreement, SELLERS shall be entitled to an additional purchase price (Earn
Out), not to exceed $100,000.00 for each 12 month period computed as follows:
For purposes of this Article 1, Gross Profit shall mean Revenues less
Direct Costs. Revenues herein shall mean sales of products or services less
returns, allowances and discounts. Direct Costs shall mean the costs associated
with reproduction and packaging of software and the cost of equipment, supplies
and accessories purchased for resale.
For purposes of the Gross Profit adjustment computation, Gross Profit of
COMPANY shall be deemed to be the percentage of the combined Gross Profits of
COMPANY and DR Software, Inc. for fiscal 1996 represented by the Gross Profits
of COMPANY calculated as follows:
-3-
<PAGE>
Gross Profit of COMPANY for 1996
- --------------------------------
Gross Profit of COMPANY and DR Software, = COMPANY Percent Inc. for 1996
1.2.2. The COMPANY Percent shall be multiplied by the combined Gross
Profit of COMPANY and DR Software for each 12 month period of the Earn Out. To
the extent the product of such multiplication (Gross Profit of COMPANY) exceeds
$500,000.00, SELLERS shall be entitled to additional Earn Out compensation of
$0.66 for each $1.00 of Gross Profit of COMPANY in excess of $500,000.00.
1.2.3. To the extent the Earn Out for the first 12 month period is
less than $100,000.00, the difference between $100,000.00 and the amount of the
actual Earn Out shall be added to the maximum achievable Earn Out for the second
12 month period so that any deficiency in the Earn Out for the first 12 month
period may be made up in the second 12 month period.
1.2.4. To the extent that the amount of Gross Profit for the first 12
month period would entitle the SELLERS to an Earn Out payment in excess of
$100,000.00, the amount of such excess Gross Profit shall be carried forward to
the second 12 month period and added to the Gross Profits for the second 12
months.
1.2.5. PURCHASER shall provide SELLERS within thirty (30) days after
receipt of financial statements from its accounting firm, but no later than 120
days after the end of each of the first two 12 month periods of this Agreement,
computations sufficient for SELLERS to derive Gross Profits of the COMPANY and
DR Software, Inc., SELLERS percent as defined
-4-
<PAGE>
herein and the Earn Out amount, if any, pursuant to Article 1.2.2. SELLERS shall
have thirty (30) days to object to said computation. In the case of an
objection, the parties hereto shall negotiate in good faith to achieve
resolution. In the event resolution of SELLERS objection(s) is not resolved
within sixty (60) days of receipt of said objection, either party may submit the
matter for binding arbitration, pursuant to the rules of the American
Arbitration Association (AAA), to a single arbitrator, experienced in matters of
this kind. Arbitration shall occur in Atlanta, Georgia.
1.2.6. In the event an additional business or businesses are combined
with the COMPANY or DR Software, Inc., the parties shall mutually agree on an
adjustment to the COMPANY Percent on a basis comparable to the basis to
determine the COMPANY's Percent set forth hereinabove.
1.2.7. The aforesaid Gross Profit adjustment (Earn Out) expires after
24 months, said expiration period commencing upon consummation of this
transaction. Said expiration period shall not be extended.
1.2.8. Payments of the Earn Out, if any, to the SELLERS shall be made
as follows:
Hal: 25% of payments due, payable in cash.
---
Bart: 75% of payment due, payable 50% in cash and 50% in PURCHASER stock.
----
Shares to be issued under the Earn Out shall be valued at the InfoCure
Corporation initial public offering price.
-5-
<PAGE>
Earn Out payments for each 12 month period shall be made to SELLERS within
fifteen (15) days after receipt by PURCHASER of SELLERS written notification
that SELLERS have no objection(s) to the computations and Earn out payment
amount or within ten days after resolution of any objections or within ten days
after a final determination by an arbitrator.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLERS.
-----------------------------------------
SELLERS hereby represent and warrant to PURCHASER as follows:
2.1. Authority.
---------
The execution, delivery and performance of this Agreement shall be validly
authorized by COMPANY's Board of Directors and by COMPANY's shareholders prior
the Closing (defined below). The execution and delivery of this Agreement do
not, and the consummation of the transactions described herein will not result
in or constitute: (1) a default, breach or violation of the Articles of
Incorporation or By-Laws of COMPANY, or any agreement to which SELLERS or
COMPANY is a party or by which any of their properties are bound; or (2) an
event which would permit any party to terminate any agreement or to accelerate
the maturity of any indebtedness or obligation of COMPANY or (3) the creation or
imposition of any lien, charge or encumbrance on any of COMPANY's property or on
the Stock of COMPANY.
2.2. Organization, Standing, Power and Qualification of COMPANY.
----------------------------------------------------------
COMPANY is a corporation duly organized, validly existing and in good
standing under the law of the State of Pennsylvania, has all the corporate
powers necessary to own the properties it now owns and to carry on its business,
as now conducted, and is qualified and in good standing in all Jurisdictions in
which the nature of its business or its properties requires qualification.
COMPANY does not own,
-6-
<PAGE>
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, business trust or other entity. SELLERS have
delivered to PURCHASER complete and correct copies of the Articles of
Incorporation of COMPANY, as amended to the date hereof which are attached as
EXHIBIT B.
2.3. Capital Structure.
-----------------
The authorized capital stock of COMPANY consists of 10,000 shares of common
stock with no par value, of which as of the Closing Date 10,000 shares were
outstanding. This common stock is the only class of capital stock of COMPANY
issued and outstanding, and COMPANY has no outstanding warrants, rights,
options, calls, commitments or other arrangements evidencing the right to
acquire any shares of its capital stock. All outstanding shares of COMPANY
common stock are validly issued, fully paid and non-assessable, and all of the
shares are owned, beneficially and of record, by SELLERS.
2.4. Valid Transfer.
--------------
At the Closing, SELLERS will convey to PURCHASER the Stock free of any
liens, claims, charges, encumbrances or assessments of any nature.
2.5. Financial Statements.
--------------------
EXHIBIT C to this Agreement contains COMPANY's compiled balance sheets as
of December 31st, 1994, 1995, 1996, and the related statements of income and of
changes in financial position for the three years ending on those dates.
SELLERS submission to PURCHASER regarding financial aspects of COMPANY have not
been reviewed or audited.
-7-
<PAGE>
2.6. Absence of Specified Changes.
----------------------------
Except, as may be disclosed in the Exhibits to this Agreement, since
December 31st, 1996, there has been no:
2.6.1. Material adverse change in the financial condition,
liabilities, assets, earnings, business or prospects of COMPANY;
2.6.2. Transaction by COMPANY except in the ordinary course of
business as conducted on that date;
2.6.3. Capital expenditures or commitments by COMPANY exceeding, in
the aggregate, $10,000.00;
2.6.4. Commitment involving the expenditure by COMPANY of $10,000.00
or more;
2.6.5. Failure to maintain in full force and effect substantially the
same level and types of insurance coverage as in effect on that date, or any
destruction, damage to, or loss of any asset of COMPANY (whether or not covered
by insurance) that materially and adversely affects the financial condition,
business or prospects of COMPANY;
2.6.6. Change in accounting methods of practices by COMPANY,
including any change in depreciation or amortization policies or rates;
2.6.7. Declaration, setting aside, or payment of a dividend or other
distribution in respect of the common stock of COMPANY, or any direct or
indirect redemption, purchase or other acquisition by COMPANY of any of its
shares of common stock, except S corporation distributions;
-8-
<PAGE>
2.6.8. Revaluation by COMPANY of any of its assets or any write down
of the value of any inventory;
2.6.9. Sale, assignment or transfer of any tangible or intangible
asset of COMPANY, including any rights to industrial or intellectual property,
except in the ordinary course of business;
2.6.10. Mortgage, pledge or other encumbrance of any tangible or
intangible asset of COMPANY;
2.6.11. Amendment, expiration or termination of any contract or
license to which COMPANY is a party, except in the ordinary course of business;
2.6.12. Loan by COMPANY to any person or entity or guaranty by
COMPANY of any loan;
2.6.13. Increase of more than 10% in the salary or other compensation
payable or to become payable by COMPANY to any of its officers, directors or
employees, or the declaration, payment or commitment or obligation of any kind
for the payment by COMPANY of a bonus or other additional salary or compensation
to any such person;
2.6.14. Any labor trouble adversely affecting COMPANY's business of
its assets;
2.6.15. Waiver or release of any material right or claim of COMPANY,
except in the ordinary course of business;
-9-
<PAGE>
2.6.16. Issuance or sale by COMPANY of any shares of its common stock
or of any other equity security or of any security convertible into or
exchangeable for capital stock of COMPANY;
2.6.17. Borrowing of money except indebtedness which may be prepaid
without penalty or premium on not more than 30 days' notice;
2.6.18. Amendment of COMPANY's Articles of Incorporation or By-Laws;
or
2.6.19. Loss or termination of any maintenance customer or other
customer which has generated monthly revenue on a continuing basis.
2.7. Absence of Proceedings.
----------------------
No action at law or in equity, and no investigations or proceedings of any
kind are now pending or threatened to liquidate or dissolve COMPANY or to
declare any of the corporate rights, powers or privileges of COMPANY to be null
and void or otherwise in full force and effect.
2.8. Absence of Undisclosed Liabilities.
----------------------------------
COMPANY has no liability or obligation of any nature, accrued, absolute or
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against in COMPANY's balance sheet as of July 31st, 1997, or EXHIBIT
D to this Agreement, or disclosed in other exhibits to this Agreement.
2.9. Tax Returns and Audits.
----------------------
Within the time and manner prescribed by law, COMPANY has filed all
federal, state, local and foreign tax returns required
-10-
<PAGE>
by law which returns are true and correct in all material respects, and has paid
all taxes, assessments and penalties, if any, due and payable. COMPANY has not
received any notice of assessment or proposed assessment for additional taxes,
interest or penalties in an amount material to it and there are no present
disputes as to taxes of any nature paid or payable by COMPANY. The COMPANY's
tax returns for the years 1994, 1995 and 1996 are attached as EXHIBIT E.
---------
2.10. Assets of COMPANY.
-----------------
2.10.1. Real Property. EXHIBIT F to this Agreement contains a
-------------
complete list of each parcel of real property owned by or leased to COMPANY.
EXHIBIT F also contains a description of all buildings, fixtures or other
improvements located on the real properties and a list of all policies of title
insurance to COMPANY for the properties. All leases listed in EXHIBIT F are
valid and in full force and effect and there does not exist any default or event
that now or with lapse of time would constitute a default under any of the
leases. Except as set out in encumbrance or security agreement, all real
property owned or leased by COMPANY is in good condition and repair, and COMPANY
has not been threatened with any action or proceeding under any occupational
safety and health, building, zoning or environmental ordinance, law or
regulation applicable to the property and the property conforms fully to all
laws, regulations and ordinances.
-11-
<PAGE>
2.10.2. Tangible Personal Property. The books and records of COMPANY
--------------------------
contain a complete and accurate description, and specify the location of all
trucks, automobiles, machinery, computer equipment and all other tangible
personal property owned, in the possession of, or used by COMPANY in its
business that is subject to any lease, security agreement or other security
arrangement or is other than in the possession of COMPANY. Each of the items of
personal property subject to a lease or other agreement described in EXHIBIT G
is in good operating condition and repair, and there exists no condition which
interferes with its economic value or use.
2.10.3. Accounts Receivable. EXHIBIT H contains an accounts
-------------------
receivable aging summary, which is an accurate summary of COMPANY's accounts
receivable as of July 31st, 1997. All accounts receivable of COMPANY shown on
the balance sheet of COMPANY as of July 31st, 1997, reflects adequate reserves
for doubtful accounts and trade discounts, and the reserves are reasonable and
appropriate under current circumstances and business practices and are on a
basis consistent with prior years. The amount of the accounts receivable of
COMPANY existing on the date of the Closing, less the reserves for doubtful
accounts and trade discounts (which reserves shall be reasonable and appropriate
under circumstances and business practices then existing and on a basis
consistent with COMPANY's July 31st, 1997 balance sheet), shall be paid to
COMPANY within 90 days after the Closing.
2.10.4. Trade Names, Trademarks, Service Marks, Patents and
---------------------------------------------------
Copyrights. EXHIBIT I to this Agreement contains a schedule of trade names,
- ----------
trademarks, service marks, patents and copyrights owned by COMPANY or in which
COMPANY has rights or
-12-
<PAGE>
licenses, together with a brief description of each. Except as set out in
EXHIBIT I, COMPANY is not a party to any license, agreement or arrangement,
whether as licensor, licensee or otherwise, with respect to any trade names,
trademarks, service marks, patents and copyrights necessary for COMPANY' s
business as now conducted and the actual and contemplated use thereof does not
conflict with or infringe upon or otherwise violate any rights of others.
2.10.5. Computer Software. EXHIBIT J to this Agreement contains a
-----------------
list of all of COMPANY's computer software programs and related documentation
and materials which are owned by COMPANY and used by COMPANY in the operation of
its business. Except as set forth in EXHIBIT J, COMPANY is the sole owner and
original developer of all such software programs and materials, and the actual
and contemplated use thereof does not conflict with or infringe upon or
otherwise violate any rights of others.
2.10.6. Title to Assets. COMPANY has good and marketable title to
---------------
all its assets, whether real, personal, mixed, tangible or intangible. The
assets are free and clear of restrictions on or conditions to transfer or
assignment and free and clear of mortgages, liens, pledges, charges,
encumbrances, claims, easements, rights of way, covenants, conditions or
restrictions except those disclosed in EXHIBITS F, G or I, which restrictions,
in any event, do not interfere with the normal use of the asset involved.
2.11. Rights Under Licenses.
---------------------
EXHIBIT K to this Agreement contains a list of all license agreements under
which COMPANY has obtained rights to use or to permit its customers to use
computer software programs or data owned by others. All the license agreements
are in full force
-13-
<PAGE>
and effect, and COMPANY is not in default under any of them now has it knowledge
of any claim either that it is in default or that there is a claim that events
have occurred, which, with the giving of notice or passage of time, would become
events of default.
2.12. Existing Employment Contracts and Benefits.
------------------------------------------
EXHIBIT L to this Agreement contains a list of all employment contracts and
collective bargaining agreements, and all pension, bonus, profit sharing, stock
option, health and life insurance policies and benefits and other agreements
providing for employee remuneration or benefits to which COMPANY is a party or
is bound; all the contracts and arrangements are in full force and effect, and
COMPANY is not in default under any of them nor has it knowledge of any claim
that it is in default or that there is a claim that events have occurred, which,
with the giving of notice or passage of time, would become events of default.
With respect to pension and profit-sharing benefits, EXHIBIT L contains (1) a
list of each employee pension or profit-sharing plan maintained by COMPANY for
any of its employees or not maintained by COMPANY, but to which COMPANY is
required to contribute, true and correct copies of which employee benefit plans
have been furnished to PURCHASER and (2) with respect to each plan, the most
recent statement of each separate investment fund created thereunder,
including information with respect to each plan, the most recent statement of
each separate investment fund created under each employee pension or profit-
sharing plan is in full compliance with the requirements of the Employee
Retirement Income Security Act of 1974 ("ERISA"). No employee pension or
profit-sharing plan maintained by COMPANY which is subject to title IV of ERISA
has been terminated by the plan administrator or by the Pension Benefit Guaranty
Corporation; no
-14-
<PAGE>
proceedings to terminate any plan have been instituted within the meaning of
Subtitle C of title IV; and no reportable event within the meaning of Section
4043 of Subtitle C has occurred with respect to any plan. Each employee pension
or profit-sharing plan is fully funded, and the assets of the separate
investment fund created thereunder are at least equal to the vested interests of
the participants of the investment fund. The trust created under each employee
pension or profit-sharing fund is a "qualified" trust within the meaning of
Section 401 of the U.S. Internal Revenue Code.
2.13. Labor Relations; Employees.
--------------------------
COMPANY employs a total of approximately seven (7) employees, and enjoys a
good employer-employee relationship with all employees. Except as set forth in
EXHIBIT L, (1) COMPANY has paid in full to, or accrued on behalf of, all
employees all wages, salaries, commissions, bonuses and other direct
compensation for services performed by them to the Closing Date an all amounts
required to be reimbursed to the employees; (2) COMPANY will not, by reason of
anything done prior to the Closing, be liable to any employees for "severance
pay" or any other payments; (3) COMPANY is in substantial compliance with all
Federal, State, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(4) there is no unfair labor practice compliant against COMPANY pending before
the National Labor Relations Board or any comparable state, local or foreign
agency; (5) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving COMPANY; (6) no representation
question exists respecting the employees of COMPANY; (7) no grievance which
might have an adverse effect on COMPANY or the conduct of its business nor any
-15-
<PAGE>
arbitration proceeding arising out of or under collecting bargaining agreements
is pending and no claim therefore has been asserted and (8) no collective
bargaining agreement is currently being negotiated by COMPANY.
2.14. Identification of Personnel and Compensation.
--------------------------------------------
EXHIBIT M lists the names and addresses of all officers and directors of
COMPANY, stating the compensation payable to each.
2.15. Insurance Policies.
------------------
EXHIBIT N contains a list of all insurance policies of COMPANY, specifying
the insurer, amount of coverage and type of insurance under each. Each policy
is in full force and effect and all premiums are currently paid. The policies
insure COMPANY and its properties and businesses adequately and in reasonable
amount against losses and risks.
2.16. Other Contracts.
---------------
EXHIBIT O contains a complete and accurate list of all agreements not
listed in other Exhibits, requiring the performance by COMPANY of any obligation
for a period of time extending more than one year from the Closing Date or
calling for COMPANY to pay a consideration of more than $1,000.00.
2.17. Compliance With Laws.
--------------------
The business of COMPANY has not, and as presently conducted, does not
violate any Federal, State, local or foreign laws, regulations or orders, the
violation of which would have a material adverse effect upon COMPANY nor has
COMPANY received any notice of any violation which remains uncorrected.
-16-
<PAGE>
2.18. Litigation.
----------
Except as set forth in EXHIBIT P there is no suit action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending, or to the best of SELLERS knowledge, threatened against or affecting
COMPANY, its business, assets, or financial condition. If the matters set forth
in EXHIBIT P were decided adversely, they would not result in a material adverse
change in the business, assets or financial condition of COMPANY. SELLERS have
cause to be made available to PURCHASER all relevant court papers and other
documents relating to matters set forth in EXHIBIT P. COMPANY is not in default
with respect to any order, writ, injunction or decree of any Federal, State,
local or foreign court, department, agency or instrumentality to which it is
subject or by which it is bound. All orders, writs, injunctions and decrees are
set out in EXHIBIT P.
---------
2.19. Identification of Depositories and Authority.
--------------------------------------------
EXHIBIT Q lists the names and addresses of all banks in which COMPANY has
an account, deposit or safe deposit box and the signatories thereunder.
2.20. Governmental Consents.
---------------------
Except as set out in EXHIBIT R, no consent, authorization or approval of,
or filing with, any Federal, State, local or other governmental department,
commission, board, agency or instrumentality is required to be made or obtained
by SELLERS or COMPANY in connection with the sale of the Stock contemplated by
this Agreement.
2.21. Outstanding Debt.
----------------
EXHIBIT S contains a complete and accurate list of all of COMPANY's
agreements for borrowed money. COMPANY is not in
-17-
<PAGE>
default in the payment of the principal or interest on any indebtedness, and no
event has occurred or is continuing under the provisions of any agreement
evidencing or relating to any indebtedness which with the lapse of time or the
giving or notice, or both, would entitle the holder of the indebtedness to cause
any portion of the principal amount of the indebtedness to become due or payable
prior to the scheduled due date.
2.22. Brokers and Finders.
-------------------
None of the SELLERS, 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 PURCHASER or COMPANY or the Shareholders.
2.23. No Untrue Statements.
--------------------
No statements (including representations and warranties) contained in this
Agreement (including in the exhibits attached hereto and documents described as
having been provided to PURCHASER 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 contain not misleading.
2.24. Investment Representations.
--------------------------
2.24.1. Bart is acquiring the common stock of PURCHASER for his 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.
-18-
<PAGE>
2.24.2. Bart has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and economic risks
of this particular investment and that an investment in the common stock of
PURCHASER involves numerous risks, including the risks set forth with
PURCHASER's Registration Statement on Form SB-2. No. 333-18923 ("SB Registration
Statement").
2.24.3. Bart agrees that the certificate or certificates representing
the common stock of PURCHASER 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
PURCHASER that registration is not required.
2.24.4. In making this decision to acquire the common stock of
PURCHASER, Bart has been given the opportunity to discuss the business,
management and financial affairs of PURCHASER with officers of PURCHASER 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 PURCHASER and an investment in the common
stock of PURCHASER and Bart desires no further information for such evaluation.
2.24.5. Bart acknowledges that no representations were made by
PURCHASER to the Shareholders with respect to the business, management or
financial affairs of PURCHASER except as set forth in Article 3 of this
Agreement.
-19-
<PAGE>
2.24.6. Each SELLER acknowledges the PURCHASER 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 SELLERS.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
PURCHASER represents and warrants to SELLER as follows:
3.1. Organization and Standing of PURCHASER.
--------------------------------------
PURCHASER is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
3.2. Authority and Authorization of PURCHASER.
----------------------------------------
PURCHASER has the corporate power to execute and deliver this Agreement and
to incur and perform its obligations and has taken all necessary corporate
action to enable it to fully perform its obligations.
3.3. Investment Intent of PURCHASER.
------------------------------
PURCHASER represents that it is acquiring the Stock for its own account for
investment and not with a view to distribution.
3.4. PURCHASER's Authorized Shares.
-----------------------------
PURCHASER represents that it currently has available and during the Earn
Out period will continue to have available sufficient shares of its authorized
stock to issue shares to SELLERS as contemplated under Article 8.3 and the Earn
Out provisions set forth in Article 1.2 hereinabove and such shares when issued
will be fully paid and non-assessable.
-20-
<PAGE>
3.5. Capital Structure.
-----------------
The authorized capital stock of PURCHASER consists 15,000,000 shares of
Common Stock $.001 par value and 2,000,000 shares of Preferred Stock of which as
of the Closing Date 5,557,839 shares of Common Stock were outstanding. All
outstanding shares of PURCHASER's common stock are validly issued, fully paid
and non-assessable.
3.6. Absence of Proceedings.
----------------------
No action at law or in equity, and no investigations or proceedings of any
kind are now pending or threatened to liquidate or dissolve PURCHASER or to
declare any of the corporate rights, powers or privileges of PURCHASER to be
null and void or otherwise in full force and effect.
3.7. Compliance With Laws.
--------------------
The business of PURCHASER has not, and as presently conducted, does not
violate any Federal, State, local or foreign laws, regulations or orders, the
violation of which would have a material adverse effect upon PURCHASER nor has
COMPANY received any notice of any violation which remains uncorrected.
3.8. Litigation.
----------
Except as set forth in EXHIBIT P, there is no material suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending, or to the best of PURCHASER's knowledge, threatened
against or affecting PURCHASER, its business, assets, or financial condition.
If the matters set forth in EXHIBIT P were decided adversely, they would not
result in a material adverse change in the business, assets or financial
condition of PURCHASER. PURCHASER is not in default with respect to any order,
-21-
<PAGE>
writ, injunction or decree of any Federal, State, local or foreign court,
department, agency or instrumentality to which it is subject or by which it is
bound.
3.9. Governmental Consents.
---------------------
Except as set out in EXHIBIT V, no consent, authorization or approval of,
or filing with any Federal, State, local or other governmental department,
commission, board, agency or instrumentality is required to be made or obtained
by PURCHASER in connection with the sale of the stock contemplated by this
Agreement.
3.10. Brokers and Finders.
-------------------
The PURCHASER, nor any of its officers, directors, employees or agents have
not 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
SELLERS or COMPANY or the Shareholders.
3.11. No Untrue Statements.
--------------------
No statements (including representations and warranties) contained in this
Agreement and in the SB Registration Statement (including in the exhibits
attached hereto and documents described as having been provided to SELLERS
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 contain
not misleading.
ARTICLE 4. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
-----------------------------------------
PURCHASER and SELLER agree that from the date of this Agreement until the
Closing:
4.1. PURCHASER's Access to Information.
---------------------------------
PURCHASER' s counsel, representatives and agents shall have full access
-22-
<PAGE>
during normal business hours to all properties, books and records of COMPANY.
PURCHASER's representatives shall be furnished all data concerning the business,
finances and properties of COMPANY that they may reasonably request.
4.2. Board of Directors and Shareholders Approval.
--------------------------------------------
COMPANY shall submit this Agreement to its Board of Directors and
Shareholders, as soon as practicable, and PURCHASER shall submit the
transactions contemplated by this Agreement to its Board of Directors as soon as
practicable.
4.3. Financial Review.
----------------
SELLERS have, upon written request of PURCHASER and at PURCHASER's sole
cost and expense arranged for COMPANY's or PURCHASER's independent accountants
for a limited review of the financial statements of COMPANY in accordance with
AICPA Professional Standards Section AR100 and in accordance with specific
procedures established by PURCHASER. A report containing the results of the
limited review has been provided to PURCHASER at least ten (10) days prior to
Closing. The report included a COMPANY balance sheet together with related
statements of income and of changes in financial condition for a period
commencing on January 1st, 1997, through a date mutually agreed to by the
parties sufficient for the PURCHASER's review of COMPANY. The accountants' fee
for the limited reviews shall be paid by PURCHASER.
4.4. Conduct of Business in Normal Course.
------------------------------------
COMPANY shall (1) carry on its business in substantially the same manner as
previously operated; (2) preserve its business
-23-
<PAGE>
organization and existing business relationships intact and (3) refrain from
taking any of the actions described in Paragraph 2.6.
4.5. Governmental Authority.
----------------------
PURCHASER and COMPANY shall cooperate with each other in filing any
necessary notifications, applications, reports or other documents with any
Federal, State or local authorities having jurisdiction with respect to the
transactions described in this Agreement.
4.6. Changes in Compensation.
-----------------------
All changes, after the date hereof, in compensation payable to officers,
directors and employees of COMPANY shall be subject to approval by PURCHASER,
which approval shall not be unreasonably withheld.
ARTICLE 5. INFORMATION TO BE HELD IN CONFIDENCE.
------------------------------------
PURCHASER agrees that until the Closing, PURCHASER, its officers,
directors, employees and other representatives shall hold in strict confidence
and shall use information obtained in connection with this Agreement solely for
the purpose of evaluating COMPANY in connection with the purchase of the Stock,
except to the extent the information may be publicly available through no fault
of PURCHASER or required by law to be disclosed. Should the purchase of the
Stock not be consummated, PURCHASER shall return to COMPANY the information.
PURCHASER's obligations under this Article shall expire upon the Closing;
however, if the Closing does not occur. PURCHASER's obligations under this
Article shall survive the termination of this Agreement for a period of three
years from the date hereof.
-24-
<PAGE>
ARTICLE 6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO PURCHASE THE
--------------------------------------------------------------
STOCK.
- -----
The obligation of PURCHASER to purchase the Stock is subject to the
satisfaction at or before the Closing, or before the conditions set out below.
6.1. Accuracy of SELLERS Representations and Warranties.
--------------------------------------------------
The representations and warranties of SELLER set out in Article 2 shall be
as true and correct at the date of the Closing as though made at that time.
6.2. Performance by SELLERS.
----------------------
SELLERS shall have complied with all conditions required by this Agreement.
6.3. Board of Directors and Shareholders Approval.
--------------------------------------------
The Board of Directors of COMPANY, and the Shareholders of COMPANY, shall
have approved the transactions described in this Agreement.
6.4. Stockholders Equity.
-------------------
PURCHASER shall have received from SELLERS the report of the limited review
of COMPANY, as set forth in Paragraph 4.3, stating the stockholders equity of
COMPANY satisfactory to PURCHASER.
6.5. No Material Adverse Change.
--------------------------
During the period from July 31st, 1997, to the Closing, there shall not
have been any material adverse change in the financial condition or in the
results of operations of COMPANY, and COMPANY shall not have sustained any
material loss to its assets, whether or not insured, that materially affects
COMPANY's ability to conduct a material part of its business.
-25-
<PAGE>
6.6. Governmental Authorizations.
---------------------------
SELLERS and COMPANY shall have filed any information described in Paragraph
4.5. required by any governmental authority and shall have received any
necessary governmental consents or authorizations required by the transactions
described in this Agreement or the continuation of the business of COMPANY after
the Closing.
6.7. Opinion of SELLERS' Counsel.
---------------------------
PURCHASER shall have received from SELLERS an opinion of counsel, dated as
of the Closing, in form and substance satisfactory to PURCHASER and its counsel,
that (1) COMPANY is a corporation duly organized and validly existing and in
good standing under the laws of the State of Pennsylvania, and is not qualified
in any other state; (2) COMPANY has the necessary corporate power to own its
property and conduct its business as now operated; (3) the authorized capital
stock of COMPANY consists of ten thousand (10,000) shares of common stock, no
par value, of which all the shares are validly issued, fully paid, and non-
assessable; (4) to the knowledge of counsel there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements, or commitments obligating COMPANY to issue any additional shares of
its capital stock; (5) this Agreement is valid and binding on SELLERS, except as
limited by laws affecting the rights of creditors; (6) upon the transfer and
delivery of the Stock to PURCHASER, and assuming that PURCHASER is acquiring the
Stock in good faith without notice of any adverse claim, PURCHASER will become
the owner of all of the Stock free and clear of all liens, encumbrances, claims,
charges or restrictions; (7) to the best of counsel's knowledge, neither SELLERS
nor COMPANY are a party to any agreement or arrangement material to it which
would be violated, or under which any of its
-26-
<PAGE>
rights would be adversely affected in any material respect by the transactions
contemplated in this Agreement; (8) counsel does not know of any litigation
proceedings or governmental investigation pending or threatened against or
relating to COMPANY or its properties or business or the transact ions
contemplated by this Agreement (other than as set forth in the opinion or
EXHIBIT P) which, if adversely determined, would, in the opinion of counsel
result in liability that would have a material adverse effect on the COMPANY and
(9) nothing has come to the attention of counsel which would cause counsel to
believe that any of the representations or warranties contained in Article 2 is
false or misleading in any material respect.
6.8. Results of Investigations.
-------------------------
PURCHASER shall have received satisfactory results of the investigations of
COMPANY made under the provisions of Paragraph 4.1.
6.9. Absence of Litigation.
---------------------
No action, suit or proceeding before any court or any governmental
authority pertaining to the acquisition of the Stock by PURCHASER shall have
been instituted or threatened on or before the Closing.
6.10. Lender Approval.
---------------
PURCHASER shall have received approval of this transaction from its senior
lender.
ARTICLE 7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO SELL THE STOCK.
-------------------------------------------------------------
The obligation of SELLERS to sell the Stock is subject to the satisfaction,
at the time of Closing, of the conditions set out below.
-27-
<PAGE>
7.1. Accuracy of PURCHASER's Representations and Warranties.
------------------------------------------------------
The representations and warranties of PURCHASER set out in Article 3 shall
be true and correct at the date of the Closing as though made at that time.
7.2. Performance by PURCHASER.
------------------------
PURCHASER shall have performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement.
7.3. Board of Directors Approval.
---------------------------
The Board of Directors of PURCHASER shall have approved the transactions
described in this Agreement.
7.4. Governmental Authorizations.
---------------------------
PURCHASER shall have filed any information described in Paragraph 4.5
required by any governmental authority and shall have received any necessary
governmental consents or authorizations required by the transactions described
in this Agreement or the continuation of the business of COMPANY after the
Closing.
7.5. Opinion of PURCHASER's Counsel.
------------------------------
SELLERS shall have received from PURCHASER an opinion of counsel, dated as
of the Closing, in form and substance satisfactory to SELLERS and their counsel,
that (1) PURCHASER is a corporation duty organized and validly existing and in
good standing under the laws of Delaware; (2) PURCHASER has the corporate power
to execute and deliver this Agreement and to incur and perform its obligations
hereunder and (3) this Agreement is valid and binding on PURCHASER.
-28-
<PAGE>
7.6. Hal M. Segal Consulting Agreement.
---------------------------------
Hal M. Segal shall have received from PURCHASER an offer to enter into a
consulting capacity and a six month Consulting Agreement setting forth the terms
and conditions thereof satisfactory to Hal M. Segal.
7.7. Bart C. Segal Employment Agreement.
----------------------------------
Bart C. Segal shall have received from PURCHASER an offer to enter into
employment with PURCHASER for a two year term and an employment and incentive
compensation agreement setting forth the terms and conditions thereof
satisfactory to Bart C. Segal.
ARTICLE 8. THE CLOSING.
-----------
8.1. Time and Place.
--------------
The transfer of the Stock to PURCHASER by SELLERS shall take place at 3:00
p.m. local time, on October 14th, 1997, and be effective as of the close of
business on September 30th, 1997, at the offices of InfoCure Corporation, 2970
Clairmont Road, Suite 950, Atlanta, Georgia 30329 or at such other time and
place as SELLERS and PURCHASER shall mutually agree upon.
8.2. Delivery of the Shares at Closing.
---------------------------------
At the Closing, SELLERS shall deliver to PURCHASER against the payment
specified in Paragraph 8.3. below, certificates representing the Stock, duly
endorsed by the registered holder for transfer with signature guaranteed by a
bank or trust company.
8.3. Payment to SELLER by PURCHASER.
------------------------------
At the Closing, PURCHASER pay SELLERS the amount of $500,000.00,
$400,000.00 in cash less any escrow deposit, and 18,182 shares of PURCHASER
common stock. Payments to the SELLERS
-29-
<PAGE>
will be made as follows: Mr. Hal M. Segal, cash $225,000.00, $250 000.00 less
$25,000.00 escrow; Mr. Bart C. Segal, cash of $150,000.00 and 13,637 shares
(18,182 less 4,545 escrow shares). The cash proceeds shall be reduced
proportionately to account for the escrow deposit.
8.4. Escrow Deposit.
--------------
At the Closing PURCHASER shall deposit on behalf of SELLERS the
consideration of $50,000.00, $25,000.00 in InfoCure stock representing Bart's
escrow contribution and $25,000.00 cash representing Hal's escrow contribution
with a party to be named by PURCHASER, as escrow agent (the "Agent") under the
escrow agreement (the "Escrow Agreement") a copy of which is attached as EXHIBIT
T, as a source of funds for the indemnification set forth in Article 10. The
Escrow Agreement shall remain in effect for one year from the date of Closing.
Only claims over $5,000.00 shall be deemed material as contemplated in Article
10. and submitted by PURCHASER for indemnity against the escrow fund.
ARTICLE 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
Except for the representations and warranties set forth in Paragraph 2.5,
which shall continue without expiration, all representations and warranties made
in this Agreement shall be deemed to be continuing and shall survive the
Closing, but shall expire three (3) years after the date of the Closing with the
time for making a claim in respect to these matters to expire three (3) years
and six (6) months from the date of the Closing.
ARTICLE 10. INDEMNITY.
---------
10.1. Indemnity.
---------
SELLERS covenant and agree to indemnity PURCHASER against any and all
losses, damages, costs and expenses, including reasonable attorney's fees which
PURCHASER or COMPANY may sustain or incur, directly or indirectly, by reason of
any breach of the
-30-
<PAGE>
representations or warranties of SELLERS contained in Article 2 or breach of
SELLERS obligations under Article 11, it being understood that the
representations, warranties and obligations survive the Closing and expire three
(3) years after the date of the Closing (the loss, damage, cost, expense or fees
called a "Loss" or "Losses"), provided that SELLERS shall have received notice
of any Loss within three (3) years and six (6) months from the date of the
Closing. This right of indemnity shall be in addition to any other remedy
available as a matter of law on account of the transactions described herein,
including remedies available to purchasers of securities.
10.2. Source of Funds.
---------------
As a non-exclusive source of funds for SELLERS indemnity against a Loss as
set forth herein, at the Closing PURCHASER shall, on behalf of SELLERS, make the
Deposit with the Agent described in Paragraph 8.4. with directions to use the
funds as provided in the Escrow Agreement.
10.3. Participation in Defense.
------------------------
If any action or proceeding for which indemnity may be sought by PURCHASER
shall be brought against PURCHASER or COMPANY, SELLERS shall be entitled to
participate in the defense at their own expense and to settle any action on
terms as they shall see fit, provided that PURCHASER and COMPANY shall be
released from any liability by reason of the settlement, and provided further
that the amount of deposit remaining in Escrow is sufficient to pay for any
Loss, and SELLERS agree to the payment of the Loss. It is further understood
that SELLERS may participate in the defense of any action involving SELLERS
relevant to this Agreement provided that sufficient monies are in escrow to pay
for any loss.
-31-
<PAGE>
10.4. SELLER's Total Liability.
------------------------
The total liability of the SELLERS under this Article 10 indemnity shall
not exceed the consideration received or to be received by the SELLERS pursuant
to Article 1 hereinabove.
ARTICLE 11. OBLIGATIONS AFTER THE CLOSING.
-----------------------------
11.1. Tax Returns.
-----------
SELLERS shall file on behalf of COMPANY, a consolidated federal income tax
return for COMPANY' s financial reporting period of January 1st, 1997 through
the date of Closing of this Agreement, which shall include COMPANY's taxable
income or loss for the period ending as of the Closing Date, and SELLERS shall
file all other consolidated Federal, State and local tax returns required by law
for the COMPANY for the period then ending. SELLERS shall pay all taxes,
assessments and penalties, if any, with respect thereto. Such returns shall be
subject to approval by PURCHASER, which approval shall not be unreasonably
withheld.
11.2. SELLERS Access to Information.
-----------------------------
SELLERS shall have a right to access to, and to copy and use, all the
records of COMPANY relating to periods of time prior to the Closing for purposes
of preparation of tax returns, employee tax reports and customary accounting
functions. Additionally, PURCHASER agrees to make available to SELLERS, at
reasonable times and upon reasonable advance notice, relevant records and
personnel in connection with the preparation of a defense, or a negotiation or a
settlement, relating to any pending or threatened litigation or government
agency proceeding (including a tax audit) involving the conduct of COMPANY or
SELLER before the Closing.
-32-
<PAGE>
11.3. Tax Indemnity.
-------------
Subject to the provisions of Article 10, if PURCHASER or COMPANY is
assessed a deficiency by the Internal Revenue Service or the State of
Pennsylvania for the partial tax year ending September 30th, 1997, or any prior
year, which deficiency is assessed in respect of SELLERS, then Sellers shall
jointly and severally indemnify and hold harmless PURCHASER and COMPANY from the
Amount of tax, interest and any penalties. The provisions of this paragraph
shall survive the Closing until all claims are finally settled by the Internal
Revenue Service or are barred by the Applicable statute of limitations.
11.4. Covenant Not to Compete.
-----------------------
Hal and Bart agree that for the period commencing on the date hereof and
ending five (5) years thereafter, Hal and Bart 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 practice management software programs and/or services
which compete with the podiatry practice management software program and
services of the kind previously marketed by COMPANY, and podiatry practice
management software programs and services of the kind marketed by the DR
Software, Inc. division of InfoCure Corporation including those selling agents
of said division during the term of this Covenant not to Compete provision.
This covenant not to compete shall not prohibit (i) ownership by Hal or Bart 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.
-33-
<PAGE>
The term "territory" shall mean the United States of America.
The terms "distributes" and "markets" do not include distribution of
software programs by retail software outlets.
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 state,
cities and counties or months would render any such undertaking unreasonable or
enforceable for any reason, those units which are necessary in the judgment of
the court to be deleted in order to render such an undertaking reasonably
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.
ARTICLE 12. MISCELLANEOUS.
-------------
12.1. Publicity.
---------
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be jointly planned and
coordinated by PURCHASER and SELLERS. Neither shall act unilaterally in this
regard without the prior approval of the other, which approval shall not be
unreasonably withheld.
-34-
<PAGE>
12.2. Costs.
-----
SELLERS and PURCHASER represent that they have dealt with no broker or
finder in connection with any of the transactions contemplated by this
Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. Except as otherwise
provided in Paragraph 4.3, PURCHASER and SELLERS shall pay all costs and
expenses incurred or to be incurred by each in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement.
12.3. Headings.
--------
Subject headings of Sections are included for convenience only and shall
not affect the interpretation of any provisions.
12.4. Notices.
-------
Any notices or other communication under this Agreement shall be in writing
and shall be deemed to have been given on the date of service if personally
served or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail addressed as follows:
PURCHASER: InfoCure Corporation
Attention: Richard E. Perlman
2970 Clairmont Road
Suite 950
Atlanta, Georgia 30329
SELLERS: Hal M. Segal Bart C. Segal
One Franklin Town Blvd. 3202 Shawnee Green
Apartment 1108 Ambler, PA 19002
Philadelphia, PA 19103
12.5. Assignment and Successors.
-------------------------
Neither PURCHASER nor SELLERS may assign any rights or delegate any duties
hereunder.
-35-
<PAGE>
12.6. Binding Effect.
--------------
This Agreement shall be binding upon and inure to benefit of the successors
of the parties.
12.7. Governing Law.
-------------
This Agreement shall be governed by the laws of the State of Georgia.
12.8. Severability.
------------
Each provision of this Agreement is intended to be severable.
12.9. Amendment of Exhibits.
---------------------
EXHIBITS A through T may be amended by SELLERS at any time prior to the
Closing, provided, however, that PURCHASER shall have the right to terminate
this Agreement without obligation (except the obligation of confidentiality
under Article 5), if any amendment results in material change to SELLERS
representations and warranties.
12.10. Termination.
-----------
Either party shall have the right to terminate this Agreement if the
Closing does not occur by October 30th, 1997. PURCHASER's obligations under
Article 5 shall survive any termination.
/s/ Hal M. Segal FOR: [HAND WRITTEN] InfoCure Corporation
- --------------------
Hal M. Segal PURCHASER
/s/ Bart C. Segal By /s/Frederick L. Fine
- -------------------- --------------------
Bart C. Segal Its /s/President
--------------------
-36-
<PAGE>
EXHIBIT 10.37
-------------
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is entered into this 14th day of November, 1997, but
effective as of October 1, 1997 (the "Effective Date"), by and among CCI
Acquisition, Inc., a Florida corporation ("PURCHASER"), InfoCure Corporation, a
Delaware corporation and sole Shareholder of PURCHASER ("InfoCure"), Commercial
Computers, Inc., a Florida corporation ("SELLER"), Marjorie Willensky ("M.
Willensky") and Harvey Willensky ("H. Willensky") (M. Willensky and H. Willensky
sometimes referred to collectively as the "Shareholders"). PURCHASER, InfoCure,
SELLER and the Shareholders are referred to collectively as the "Parties."
RECITALS:
A. SELLER is in the business of selling and maintaining computer hardware
and software to medical providers (the "Health Care Business") and the aviation
industry.
B. SELLER desires to sell to PURCHASER and PURCHASER desires to purchase
substantially all of the assets of SELLER's Health Care Business. The parties
acknowledge that SELLER shall retain, and continue to operate, the aviation
portion of its business.
C. SELLER desires PURCHASER to assume and PURCHASER desires to assume the
Liabilities of SELLER's Health Care Business.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1. SALE AND PURCHASE OF ASSETS.
---------------------------
1.1 Sale and Purchase. SELLER agrees to sell and PURCHASER agrees to
-----------------
purchase the assets of SELLER's Health Care Business owned by the SELLER as of
the Effective Date or in which SELLER has any right, title or interest, on the
Closing Date, including, but not limited to, tangible and intangible personal
property, customer lists, all software, hardware and other intellectual property
used in connection with the Health Care Business, goodwill, furniture, fixtures,
and equipment, owned or used by SELLER in connection with its Health Care
Business and all profits (or losses) generated in the ordinary course of
business from the operation by SELLER of the Health Care Business between the
Effective Date and the Closing Date, all as specifically enumerated in EXHIBITS
--------
A, L, M and W attached hereto and all rights under all contracts referenced in
- - - - -
EXHIBITS B or E or relating to the customers disclosed in EXHIBIT B, and
- ---------- - ---------
hereinafter referred to as the "Assets."
/s/ MW
/s/ HW
<PAGE>
1.2 Specific Exclusions. Without expanding the property to be conveyed
-------------------
pursuant to Section 1.1 above, the parties agree that the following assets of
SELLER are specifically excluded from the purchase and sale hereunder:
1.2.1 The consideration delivered to SELLER pursuant to this
agreement for the Assets;
1.2.2 The right of the SELLER to enforce the obligations of PURCHASER
to pay or discharge the Liabilities and obligations of the SELLER assumed by
PURCHASER and all other rights of the SELLER under this Agreement;
1.2.3 The SELLER's articles of incorporation, corporate seals, minute
books, stock books, and other corporate records having exclusively to do with
the corporate organization and capitalization of the SELLER;
1.2.4 Shares of the capital stock of the SELLER, including shares
held by the SELLER as treasury shares;
1.2.5 SELLER's accounts receivable, including those of the Health
Care Business;
1.2.6 Those assets ("Shared Assets") relating to the aviation portion
of SELLER's business which are not utilized in the Health Care Business (other
than those certain assets owned by SELLER and leased to PURCHASER pursuant to
the Sublease and Facilities Sharing Agreement set forth on EXHIBIT X) and which
---------
are not set forth on EXHIBIT A; and
---------
1.2.7 SELLER's corporate name, Commercial Computers, Inc., subject to
PURCHASER's right to use such name in perpetuity pursuant to the Tradename
Restriction Agreement described on EXHIBIT U.
---------
1.3 Purchase Price. The total purchase price of the Assets is
--------------
$1,225,000.00, [HAND CHANGED TO $1,231,468.00, INITIALED MW,HW] subject to
Adjustments and Prorations as herein set forth, plus the Assumed Liabilities (as
hereinafter defined), payable as follows:
1.3.1 Delivery to SELLER at Closing of an unsecured promissory note
(the "Long-Term Note"), issued by PURCHASER and InfoCure, as co-makers, in the
principal amount of $612,500.00 (with all documentary stamps required by law
affixed thereto), bearing interest at six percent (6%) per annum, convertible
under certain circumstances, in whole or in part, into common capital stock of
PURCHASER as more particularly set forth in EXHIBIT A-1, prepayable without
-----------
penalty, but upon prior notice, with a maturity date three (3) years from the
date of Closing, and otherwise as substantially set forth on EXHIBIT A-1.
-----------
1.3.2 The balance of the Purchase Price constituting the sum of
$612,500.00 shall be made by delivery to SELLER at Closing of an unsecured
promissory note (the "Short-
-2-
/s/ MW
/s/ HW
<PAGE>
Term Note"), issued by PURCHASER and InfoCure, as co-makers, which shall be due
and payable on January 1, 1998, without demand, notice, protest or other notice
of any kind, all of which are hereby expressly waived, and shall be otherwise in
substantially the form of EXHIBIT A-2 attached
-----------
hereto.
1.4 Gross Profit Adjustment. For the six (6) month period beginning
-----------------------
October 1, 1997, and ending March 31, 1998, for every dollar of Gross Profit in
excess of $603,000.00, SELLER shall receive a multiple of five (5) times such
excess subject to a maximum payment (the "Earn-Out Payment") of $250,000.00.
For purposes of this paragraph "Gross Profit" shall be defined and calculated as
set forth on EXHIBIT A- 3 by BDO Seidman, L.L.P. (the "Accountants"). Fifty
------------
percent (50%) of the Earn-Out Payment, if any, due to SELLER shall be made by
PURCHASER on or before June 30, 1998, by delivery of a certified check or wire
transfer of funds to an account specified by SELLER. The other fifty percent
(50%) of the Earn-Out Payment shall be paid to SELLER by delivery of a
promissory note in the face amount of such fifty percent (50%) of the Earn-Out
Payment and providing terms identical in the form of the Long-Term Note, which
note shall be dated as of March 31, 1998. In the event SELLER disagrees with
PURCHASER's calculation of the Earn-Out Payment, SELLER shall have the right,
upon reasonable notice, to examine PURCHASER's books and records relating to the
Assets and Assumed Liabilities.
1.5 Net Worth Adjustment. If the Net Worth of SELLER at Closing is
--------------------
greater than zero (0), the Purchase Price shall be increased by the difference
between the actual Net Worth and zero (0). If the Net Worth of SELLER at
Closing is less than zero (0) the Purchase Price shall be reduced by the
difference between zero (0) and the actual Net Worth. Increases or reductions,
as the case may be, in the Purchase Price shall be made in equal portions to the
Short-Term and Long-Term Notes. For purposes of this paragraph "Net Worth"
shall be based upon a calculation of the net worth of the Health Care Business
being acquired by PURCHASER as of the opening of business on October 1, 1997,
prepared by the Accountants in the manner described in EXHIBIT A-4. In order to
-----------
ensure the parties hereto that both the Earn-Out and the Net Worth portions of
the Purchase Price are computed by the Accountants in accordance with this
Agreement in a fair and disinterested manner, the parties agree as follows:
Each party shall have the right to examine during normal business hours such
books and records of the other party as may be reasonably necessary in order to
verify any determination of the Accountants under this Agreement. If any party
disagrees with any such determination, then that party may submit, at its sole
expense, within thirty (30) days, an alternate determination prepared by a
certified public accountant, which the other party may accept or reject in its
reasonable discretion. If the other party rejects the alternate determination,
then the contesting party shall be entitled to submit such dispute to a
certified public accountant acceptable to both parties who shall determine the
accuracy and correctness of the Accountant's original determination. Both
parties shall each bear one-half (1/2) of the expenses of such certified public
accountant. Any additional amounts payable by a party as a result of the other
party's alternate determination shall be made within fifteen (15) days following
the acceptance of such alternate determination or the resolution of such
dispute, as the case may be.
-3-
/s/ MW
/s/ HW
<PAGE>
1.6 Prorations. In addition, in calculating "Net Worth", appropriate
----------
prorations will be made as of the Effective Date for all utilities, personal
property taxes and other operating expenses for the premises, and the entire
amount of all deposits and prepaid items relating to the Health Care Business or
Assets which will inure to the benefit of PURCHASER. The parties shall make a
good faith effort at Closing to calculate all post September 30, 1997 expenses
relating to the Health Care Business (and approved by PURCHASER on or before
Closing) that have been paid by SELLER, and SELLER shall be reimbursed in cash
at Closing for such expenses, subject to final adjustment upon calculation of
Net Worth as set forth in Paragraph 1.5 above. SELLER shall also tender to
PURCHASER at Closing all cash receipts received by SELLER from the operation of
the Health Care Business between October 1, 1997 and Closing relating to
services rendered and products sold after September 30, 1997. In addition,
SELLER shall transfer and assign all accounts receivable in existence as of
Closing which arose out of the operation of the Health Care Business between
October 1, 1997 and Closing relating to services rendered and products sold
after September 30, 1997.
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
as set forth on EXHIBIT C.
---------
1.8 Conditions of Tangible Personal Property. All tangible personal
----------------------------------------
property comprising the Assets are sold "AS IS" and "WHERE IS" as of the
Effective Date, ordinary wear and tear accepted to the Closing Date.
ARTICLE 2. INSTRUMENTS OF CONVEYANCE AND TRANSFER.
--------------------------------------
2.1 Instruments. On the Closing Date (as defined in Article 10.),
-----------
SELLER shall deliver to PURCHASER the bill of sale, licenses, endorsements,
assignments and other good and sufficient instruments of conveyance and
transfer, reasonably satisfactory in form and substance to PURCHASER and its
counsel, as shall be effective to vest in PURCHASER all right, title and
interest in and to the Assets. (A copy of the Bill of Sale, the Intellectual
Property Assignment, Conveyance Transfer and License Agreement and Assignment
and Assumption Agreement is attached as EXHIBITS D-1, D-2 and D-3,
------------ --- ---
respectively). Simultaneously with delivery, SELLER will take all additional
steps as may be requisite to put PURCHASER in possession and ownership of the
Assets and entitle PURCHASER to operating control of the Assets.
2.2 Acceleration. EXHIBIT E lists the Assets which cannot be assigned
------------ ---------
without an acceleration or change in the terms and conditions thereof or without
the consent of a third party. Except with regard to the consent from Execu-
Flow, failure to obtain an assignment of any Asset shall not be grounds for
termination of this Agreement by PURCHASER, or grounds for adjournment of the
Closing Date, provided SELLER (i) has, prior to the Closing Date employed a good
faith effort to secure the assignment of the Asset; (ii) at the Closing, SELLER
executes such documents, as reasonably requested by PURCHASER to transfer to
PURCHASER whatever right, title and interest SELLER is able to convey and (iii)
continues following Closing to reasonably assist in the transfer of such Assets
to PURCHASER.
-4-
/s/ MW
/s/ HW
<PAGE>
ARTICLE 3. ASSUMPTION OF LIABILITIES.
-------------------------
On the Closing Date PURCHASER agrees to assume only those liabilities of the
SELLER pertaining to SELLER's Health Care Business which are specifically listed
on EXHIBIT B (the "Assumed Liabilities") (a copy of the Assignment and
---------
Assumption Agreement is attached as EXHIBIT D-3). Under no circumstances shall
-----------
PURCHASER be responsible or liable for any liabilities not referenced on EXHIBIT
-------
B including, without limitation, the following:
- -
3.1 Equity Holders. Liabilities of the SELLER to its stockholders and
--------------
liabilities of the SELLER to any persons in connection with SELLER's equity
interests including, without limitation, liabilities for unpaid dividends,
except loans payable to Stockholder-Employees of SELLER as of October 1, 1997,
which are specifically assumed by PURCHASER and referenced on EXHIBIT B. To the
---------
extent Stockholder-Employee loans are payable on the books of SELLER, payments
made prior to the Closing shall be deemed to be made by SELLER in the ordinary
course of its business and to the extent the loans have not been paid in full at
the time of Closing it shall be assumed by PURCHASER and paid by PURCHASER,
without interest.
3.2 PURCHASER. Liabilities to PURCHASER as the PURCHASER of the Assets
---------
under this Agreement or in connection with any of the transactions contemplated
by this Agreement.
3.3 SELLER's Attorneys and Accountants. Liability of the SELLER or
----------------------------------
Shareholders to their attorneys or accountants in connection with this Agreement
or the transactions contemplated thereby not paid by SELLER prior to the
Closing Date.
3.4 Taxes. Any federal, state or local taxes arising out of the
-----
operation of SELLER's business (including the Health Care Business) through
and including September 30, 1997.
3.5 Non-Health Care Business and Other Liabilities. Liabilities relating to
----------------------------------------------
the aviation portion of SELLER's business (unless listed on EXHIBIT B.)
---------
3.6 Existing Employment Contracts and Benefits. Liabilities of SELLER
------------------------------------------
arising out of any of its existing employment contracts with its employees
and any benefits payable to such employees, except as set forth in EXHIBIT B.
---------
ARTICLE 4. INDEMNITY BY SELLER FOR LIABILITIES NOT ASSUMED.
-----------------------------------------------
All liabilities and obligations not assumed by PURCHASER shall be the sole
responsibility of, and shall be satisfied by SELLER, and SELLER shall indemnify
PURCHASER pursuant to Article 12. INDEMNIFICATION, subject to the limitations
set forth in Article 12.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.
---------------------------------------------------------
SELLER and Shareholders, jointly and severally, represent and warrant to
PURCHASER as of the Effective Date and as of the Closing Date the following:
-5-
/s/ MW
/s/ HW
<PAGE>
5.1 Organization, Standing and Power of SELLER. SELLER is a corporation
------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Florida and has corporate power to carry on its business as it is now
being conducted and is not qualified or licensed to do business as a foreign
corporation in any other jurisdiction. SELLER has not amended its Articles of
Incorporation or By-Laws since the date hereof to Closing.
5.2 Capital Structure. The authorized capital stock of SELLER on the
-----------------
Effective Date consists of five thousand (5,000) shares of common stock with par
value of One and No/100 Dollar ($1.00) each, of which as of the Effective Date
six hundred forty (640) shares were outstanding with unexercised stock options
for an additional zero (0) shares.
5.3 Authority. The execution, delivery and performance of this
---------
Agreement shall be duly and validly authorized and approved by SELLER's Board of
Directors and by the Shareholders prior to the Closing. The execution and
delivery of this Agreement does not, and the consummation of the transactions
described will not result in or constitute a default, breach or violation of the
Articles of Incorporation of SELLER, or the By-Laws of SELLER, or any agreement,
other than those disclosed in the exhibits, to which SELLER or either
Shareholder is a party or by which any of the Assets are bound or creation or
imposition of any lien, charge or encumbrance on any of the Assets. The
authorizations of the Directors and Shareholders shall be delivered at Closing.
5.4 Financial Statements. The financial statements and balance sheet of
--------------------
SELLER provided to PURCHASER have been prepared on a consistent basis throughout
the periods indicated, and present fairly the financial position of SELLER as of
the respective dates of the balance sheets included in the financial statements
and the results of SELLER's operations for the respective periods, copies of all
of which financial statements and balance sheets are attached hereto as EXHIBIT
-------
V.
- -
5.5 Valid Transfer. At the Closing SELLER will convey to PURCHASER all
--------------
right, title and interest in the Assets free of any liens, claims, charges,
encumbrances or assessments of any nature whatsoever except for liens or
encumbrances relating to such Assets which arise out of the Assumed Liabilities
set forth in EXHIBIT B.
---------
5.6 Absence of Specified Changes. Except as may be disclosed in the
----------------------------
exhibits to this Agreement, since September 1, 1997, there has been no:
5.6.1 Material adverse change in the Assumed Liabilities, other non-
Assumed Liabilities or Assets, of SELLER.
5.6.2 Transaction by SELLER except in the ordinary course of business
as conducted on that date.
5.6.3 Capital expenditures or commitments by SELLER for the Health
Care Business exceeding, in the aggregate, $5,000.00.
-6-
/s/ MW
/s/ HW
<PAGE>
5.6.4 Commitment exceeding $2,500.00 in the aggregate by SELLER for
the Health Care Business outside the ordinary course of business.
5.6.5 Failure to maintain in full force and effect substantially the
same level and types of insurance coverage as in effect on that date, or any
destruction, damage to, or loss of any Asset of SELLER (whether or not covered
by insurance) that materially and adversely affects the business or prospects of
SELLER's Health Care Business.
5.6.6 Sale, assignment or transfer of any tangible or intangible
Asset of SELLER, including any rights to industrial or intellectual property,
except in the ordinary course of business.
5.6.7 Mortgage, pledge or other encumbrance of any tangible or
intangible Asset of SELLER.
5.6.8 Amendment, expiration or termination of any contract or license
to which SELLER is a party for the Health Care Business, except in the ordinary
course of business.
5.6.9 Loan by SELLER to any person which is not reflected in the
financial statements delivered to PURCHASER and set forth in EXHIBIT V.
---------
5.6.10 Borrowing of money except indebtedness which may be prepaid
without penalty or premium on not more than thirty (30) days' notice.
5.6.11 Agreement by SELLER to take any of the actions described
above.
5.6.12 Waiver or release of any material right or claim of SELLER's
Health Care Business.
5.6.13 Material change in accounting methods or practices by SELLER.
5.6.14 Any labor trouble adversely affecting SELLER's Health Care
Business or the Assets.
5.7 Absence of Proceedings. No action at law or in equity, and no
----------------------
investigations or proceedings of any kind are now pending or threatened to
declare any of the corporate rights, powers or privileges of SELLER to be null
and void or otherwise than in full force and effect.
5.8 Absence of Undisclosed Liabilities. SELLER has no material
----------------------------------
liability or obligation of any nature, accrued, absolute or contingent or
otherwise, and whether due or to become due, that is not reflected or reserved
against in SELLER's balance sheet provided to PURCHASER and set forth in EXHIBIT
-------
V, except for those that (i) may have been incurred after the date of such
- -
balance sheet in the ordinary course of business or (ii) are not required by
generally accepted accounting principles to be included in a balance sheet or
the footnotes thereto.
-7-
/s/ MW
/s/ HW
<PAGE>
5.9 Tax Returns and Audits. Within the time and manner prescribed by
----------------------
law, SELLER has filed all federal, state, local and foreign tax returns required
by law, which returns are true and correct in all material respects, and has
paid all taxes, assessments, and penalties, if any, due and payable except as
may be set forth in EXHIBIT G. SELLER has neither given nor requested any
---------
waivers of statutes of limitations with respect to any tax matters. Tax returns
for the years 1996, 1995 and 1994 have previously been provided to PURCHASER.
5.10 Assets.
------
5.10.1 Real Property. SELLER leases the real property at which it
-------------
operates the Health Care Business, a copy of which lease is attached hereto as
EXHIBIT H.
- ---------
5.10.2 Tangible Personal Property. The books and records of SELLER
--------------------------
contain a complete and accurate description, and specify the location, of all
vehicles, machinery, computer equipment and all other tangible personal property
owned, in the possession of, or used by SELLER in its Health Care Business.
Except as set out in EXHIBIT I, none of the Assets is subject to any lease,
---------
security agreement or other security arrangement or is other than in the
possession of SELLER. Each of the items of personal property used by SELLER in
its Health Care Business is in good operating condition and repair, and there
exists no condition which interferes with its economic value or use.
5.10.3 Accounts Receivable. EXHIBIT J contains an accounts
------------------- ---------
receivable aging summary, which is an accurate summary of SELLER's Health Care
Business accounts receivable as of September 30, 1997.
5.10.4 Accounts Payable. EXHIBIT K contains an Accounts Payable
---------------- ---------
aging summary which is an accurate summary of SELLER's accounts payable as of
October 1, 1997.
5.10.5 Trade Names, Trademarks, Service Marks, Patents and
---------------------------------------------------
Copyrights. EXHIBIT L contains a schedule of trade names, trademarks, service
---------
marks, patents and copyrights owned by SELLER or in which SELLER has any rights
or licenses for its Health Care Business, together with a brief description of
each. Except as set out in EXHIBIT L, SELLER is not a party to any license,
---------
agreement or arrangement, whether as licensor, licensee or otherwise, with
respect to any trade names, trademarks, service marks, patents, or applications
for them, or any copyrights which are used by SELLER in its Health Care
Business. SELLER owns or has the right to use without restriction (and such is
transferable to PURCHASER) all trade names, trademarks, service marks, patents
and copyrights necessary for SELLER's Health Care Business as now conducted and
the actual use thereof does not conflict with or infringe upon or otherwise
violate any rights of others. All license agreements are in full force and
SELLER is not in default under any of them, nor does SELLER have any knowledge
of any claim that is in default or that an event of default has occurred, which,
with the giving of notice or passage of time, would become a default.
-8-
/s/ MW
/s/ HW
<PAGE>
5.10.6 Data Bases and Computer Software. EXHIBIT M contains a list
-------------------------------- ---------
of all of SELLER's data base and software programs and related documentation and
materials which are owned or used by SELLER and used by SELLER in the operation
of its Health Care Business. All such software programs and materials perform
in all material respects as intended and are free of catastrophic bugs or
defects. Except as set forth in EXHIBIT M, SELLER is the sole owner and
---------
original developer of all such software programs and materials, and the actual
use thereof does not conflict with or infringe upon or otherwise violate any
rights of others. The information utilized by SELLER in the construction of
SELLER's data base was lawfully obtained and SELLER has the lawful right to use
the information.
5.10.7 Title to and Adequacy of Assets. Except as may be set forth
-------------------------------
in the exhibits, SELLER has good and marketable title to all the Assets, whether
tangible or intangible. Except as provided in EXHIBITS E, I and L, the Assets
---------- - -
are free and clear of restrictions on or conditions to transfer or assignment
and free and clear of mortgages, liens, pledges, charges, encumbrances, claims,
easements, rights of way, covenants, conditions or restrictions. The Assets
constitute, in the aggregate, all of the property necessary for the conduct of
the Health Care Business in the manner in which and to the extent to which it is
currently being conducted (except for the Shared Assets).
5.11 Existing Employment Contracts and Benefits. EXHIBIT N contains a
------------------------------------------ ---------
list of all employment contracts (except those arising solely by operation of
law) and collective bargaining agreements, and all bonus, profit-sharing, stock
option, health and life insurance policies and benefits and other agreements
providing for employee remuneration or benefits to which SELLER is a party or is
bound, which the Parties agree PURCHASER or InfoCure is not assuming
responsibility hereunder. All employment contracts and arrangements are in full
force and effect, and SELLER is not in default under any of them nor has it
knowledge of any claim that it is in default or that there is a claim that
events have occurred, which, with the giving of notice or passage of time, would
become events of default. There are no pension or profit-sharing plans in
effect.
5.12 Labor Relations; Employees. SELLER employs a total of
--------------------------
approximately thirty (30) employees. Except as set forth in EXHIBIT N, (i)
---------
SELLER has paid in full to, or accrued on behalf of, all employees all wages,
salaries, commissions, bonuses and other direct compensation for all services
performed by them to the date thereof and all amounts required to be reimbursed
to such employees; (ii) upon termination of the employment of any employee,
SELLER will not, by reason of anything done prior to the Closing, be liable to
any employee for "severance pay" or any other payments in excess of four (4)
weeks compensation; (iii) SELLER is in substantial compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(iv) there is no unfair labor practice complaint pending against SELLER before
the National Labor Relations Board or any comparable state, local or foreign
agency; (v) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving SELLER; (vi) no labor representation
question is pending respecting the employees of SELLER; (vii) no grievance which
-9-
/s/ MW
/s/ HW
<PAGE>
might have an adverse effect on SELLER or the conduct of its business nor any
arbitration proceeding arising out of or under collective bargaining agreements
is pending and no claim therefor has been asserted and (viii) no collective
bargaining agreement is currently being negotiated by SELLER.
5.14 Insurance Policies. EXHIBIT O contains a list of all insurance
------------------ ---------
policies of SELLER, specifying the insurer, amount of coverage and type of
insurance. Each policy is in full force and all premiums are currently paid.
To the best of SELLER's knowledge and belief, the policy's coverage's are in
sufficient amounts to adequately insure the SELLER's properties and businesses
against losses.
5.15 Compliance With Laws. The Health Care Business of SELLER has not,
--------------------
and as presently conducted, does not violate any federal, state, local or
foreign laws, regulations or orders, the violation of which would have a
material adverse effect upon SELLER nor has SELLER received notice of any
violation which remains uncorrected.
5.16 Litigation. Except as set forth in EXHIBIT P, there is no suit,
---------- ---------
action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending, or to the best of SELLER's knowledge,
threatened against or affecting SELLER, its business, assets, or financial
condition. If the matters set forth in EXHIBIT P were decided adversely, they
---------
would not result in a material adverse change in the business, assets or
financial condition of SELLER. SELLER has caused to be made available to
PURCHASER all relevant court papers and other documents relating to matters set
forth in EXHIBIT P. SELLER is not in default with respect to any order, writ,
---------
injunction or decree of any federal, state, local or foreign court, department,
agency, or instrumentality to which it is subject or by which it is bound.
There are no such orders, writs, injunctions and decrees known to SELLER except
as described in EXHIBIT P.
---------
5.17 Governmental Consents. Except for those consents, authorizations
---------------------
or approvals required to be obtained by PURCHASER, and except as set out in
EXHIBIT Q, no consent, authorization or approval of, or filing with, any
- ---------
federal, state, local or other governmental department, commission, board,
agency or instrumentality is required to be made or obtained by SELLER in
connection with the sale of the Assets or assumption of the Liabilities.
5.18 Outstanding Debt. EXHIBIT R contains a complete and accurate list
---------------- ---------
of all of SELLER's agreements for borrowed money which affect or relate to
SELLER'S Health Care Business. SELLER is not in default in the payment of the
principal of or interest or premium on any such indebtedness.
5.19 Insider Transaction. Except as set forth on the financial
-------------------
statements described in EXHIBIT V, SELLER has not loaned or advanced any amount
---------
to any "Insider" nor has SELLER sold, transferred or leased any of the Assets
to, or entered into any agreement or arrangement with, any of its officers,
directors or stockholders or any "affiliate" or "associate" of any of its
officers, directors or stockholders (as such terms are defined in the rules and
regulation of the Securities and Exchange Commission under the Securities Act of
1933, as amended).
-10-
/s/ MW
/s/ HW
<PAGE>
5.20 Material Misstatements or Omissions. No representation, warranty
-----------------------------------
or statement of SELLER in this Agreement or in any document, certificate or
exhibit furnished under this Agreement or in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements or facts contained
therein not misleading, as of the time when made.
5.21 Broker's Fees. The SELLER has not engaged or entered into any
--------------
agreement with any broker or finder in connection with any of the transactions
contemplated by this Agreement involving the payment of any fee or compensation.
5.22 Other Material Contracts. EXHIBIT W contains a complete list of
------------------------ ---------
all other material contracts and agreements relating to the Health Care Business
which have not been previously disclosed on other exhibits, and all of which are
legally assignable to PURCHASER, or if not, appropriate consents have been
obtained, except as noted in EXHIBIT E.
---------
5.23 Investment Matters. With respect to its acquisition of the Long-
------------------
Term Note, and any shares of common stock of InfoCure issuable thereunder
(collectively the "Securities"), the SELLER and each Shareholder (collectively,
the "Investors") further, jointly and severally, represents and warrants to the
PURCHASER and InfoCure as follows:
5.23.1 By reason of his knowledge and experience in financial and
business matters in general, and investments in particular, he is able to
evaluate the merits and risks of an investment in the Securities;
5.23.2 Their respective income and net worth are such that each is
not now required, and does not contemplate in the future being required, to
dispose of any portion of any investment in the Securities to satisfy any
existing or contemplated undertaking;
5.23.3 In evaluating the merits and risks of an investment in the
Securities, each has relied upon the advice of its legal counsel, tax advisors
and investment advisors;
5.23.4 Each is able to bear the economic risk of an investment in the
Securities, including, without limiting, the generality of the foregoing, the
risk of losing part or all of the investment in the Securities, and the
inability to sell or transfer the Securities for an indefinite period of time or
at a price which would enable each to recoup its investment in the Securities;
5.23.5 Except with respect to the anticipated distribution by SELLER
of the Securities to the Shareholders and any subsequent sale pursuant to the
Rights Agreement described in Paragraph 5.23.8 below, the purchase of the
Securities is solely for its own account, for investment, and not with an intent
to sell or offer for sale in connection with the distribution of the Securities,
and no other person has any interest in or right with respect to the Securities,
nor has there been any agreement to give any person any such interest or right
in the future;
-11-
/s/ MW
/s/ HW
<PAGE>
5.23.6 Each Shareholder is an "accredited investor" as that term is
defined in Section 501 of Regulation D of the Securities Act of 1933, as amended
(the "Act");
5.23.7 PURCHASER and InfoCure have afforded each and their respective
advisors full and complete access to all information with respect to PURCHASER
and InfoCure and their business and financial condition that each deem necessary
in order to evaluate the merits and risks of an investment in the Securities;
and
5.23.8 Each has been advised that the Securities are deemed
"restricted securities" as that term is defined in Rule 144 promulgated under
the Act; provided, however, the parties acknowledge that the SELLER and
Shareholders have been granted certain registration rights relating to the
Securities as provided in that certain Agreement to Register Stock in the form
of EXHIBIT Y attached hereto.
---------
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND INFOCURE.
--------------------------------------------------------
PURCHASER and InfoCure, jointly and severally, represent and warrant to SELLER
as follows:
6.1 Organization and Standing of PURCHASER. PURCHASER is a corporation
--------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Florida.
6.2 Authority and Authorization of PURCHASER. PURCHASER has the
----------------------------------------
corporate power to execute this Agreement and perform its obligations and has
taken all necessary corporate action to enable it to fully perform its
obligations.
6.3 Broker's Fees. The PURCHASER has not engaged or entered into any
-------------
agreement with any broker or finder in connection with any of the transactions
contemplated by this Agreement involving the payment of any fee or compensation.
6.4 Financial Statements. InfoCure's filings with the Securities and
--------------------
Exchange Commission present fairly the financial position of InfoCure as of the
respective dates of such filings.
6.5 Authorized Stock. InfoCure currently has, and shall maintain at all
----------------
times until the Note is fully paid, authorized, but unissued common capital
stock in an amount sufficient for issuance to SELLER in the event of SELLER's
conversion of the Note into stock.
6.6 Commitments for Financing. Upon Closing, PURCHASER shall have
-------------------------
available, and shall maintain until payment is due, sufficient funds to pay the
Short-Term Note and all amounts payable at Closing.
ARTICLE 7. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
-----------------------------------------
PURCHASER and SELLER agree that from the Effective Date until the Closing.
-12-
/s/ MW
/s/ HW
<PAGE>
7.1 PURCHASER's Access to Information. PURCHASER's counsel,
---------------------------------
representatives and agents shall have full access, during normal business hours,
to all properties, books and records of SELLER's Health Care Business.
PURCHASER's representatives shall be furnished all data concerning the Health
Care Business and the Assets. All information obtained from SELLER by
PURCHASER, its officers, employees, servants and representatives, pursuant to,
and in negotiating, this Agreement shall be held in strict confidence and not
used for PURCHASER's own benefit except to consummate this Agreement; and, if
the transactions contemplated in this Agreement shall not be consummated, such
confidence shall be maintained and all such documents and all copies thereof
shall immediately hereafter be returned to SELLER.
7.2 Board of Directors and Shareholders Approval. SELLER shall submit
--------------------------------------------
this Agreement to its Board of Directors and Shareholders for approval, as soon
as practicable, and PURCHASER shall submit the transactions contemplated by this
Agreement to its Board of Directors or Executive Committee for approval as soon
as practicable.
7.3 Conduct of Business in Normal Course. SELLER shall (i) carry on its
------------------------------------
business in substantially the same manner as planned and previously operated;
(ii) preserve its business organization and existing business relationships
intact and (iii) refrain from taking any of the actions described in Paragraph
5.6.
7.4 Governmental Authorizations. PURCHASER and SELLER shall cooperate
---------------------------
with each other in filing any necessary notifications, applications, reports or
other documents with any federal, state or local authorities having jurisdiction
with respect to the transactions described in this Agreement.
7.5 Changes in Compensation. All material changes, after the Effective
-----------------------
Date, in compensation payable to officers, directors and employees of SELLER
shall be subject to approval by PURCHASER, which approval shall not be
unreasonably withheld.
7.6 Further Assurances. Each party shall execute and deliver
------------------
instruments and take other actions as the other party may reasonably require in
order to carry out the intent of this Agreement.
ARTICLE 8. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO
--------------------------------------------------
PURCHASE THE ASSETS AND ASSUME THE LIABILITIES.
- ----------------------------------------------
The obligation of PURCHASER to purchase the Assets and assume the Liabilities is
subject to the satisfaction, at or before the Closing, of the conditions set out
below unless the requirement has been waived in writing by PURCHASER.
8.1 Accuracy of SELLER's and Shareholders' Representations and
----------------------------------------------------------
Warranties. The representations and warranties of SELLER set out in Article 5.
- ----------
shall be as true on the Closing Date as though made at that time, and PURCHASER
shall have received a certificate signed by the Chairman of the Board or the
President of SELLER to that effect.
-13-
/s/ MW
/s/ HW
<PAGE>
8.2 Performance by SELLER. SELLER shall have substantially performed
----------------------
all the conditions of this Agreement unless the requirement has been waived,
in writing, by PURCHASER.
8.3 Board of Directors and Shareholders Approval. The Board of
--------------------------------------------
Directors and Shareholders of SELLER shall have approved the transactions
described in this Agreement. The resolutions approving the transactions shall be
delivered at Closing.
8.4 No Material Adverse Change. During the period from the Effective
---------------------------
Date to the Closing, there shall not have been any material adverse change in
the financial condition or in the results of operations of SELLER's Health Care
Business, and SELLER shall not have sustained any material loss or damage to the
Assets, whether or not insured, that materially affects SELLER's ability to
conduct a material part of its Health Care Business.
8.5 Governmental Authorizations. SELLER shall have obtained any
----------------------------
consents,or authorizations and made any filings listed EXHIBIT Q as required
---------
to be made by SELLER.
8.6 Receipt of Other Necessary Consents. Except as described on
-----------------------------------
EXHIBIT E, all other necessary consents or approvals of third parties to any of
- ---------
the transactions contemplated hereby, the absence of which would affect
PURCHASER's rights hereunder, shall have been obtained and shown by written
evidence reasonably satisfactory to the PURCHASER.
8.7 Opinion of SELLER's Counsel. PURCHASER shall have received from
---------------------------
SELLER an opinion of counsel, dated the Closing Date, in form and substance
reasonably satisfactory to PURCHASER and its counsel, that (i) SELLER is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida; (ii) SELLER has the necessary corporate power to own
its property and conduct its business as now operated; (iii) this Agreement is
valid and binding on SELLER and its Shareholders, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally; (iv) except as disclosed in the exhibits, to the best of
counsel's knowledge, SELLER is not a party to any agreement or arrangement
material to it which would be violated; (v) counsel does not know of any
litigation, proceeding or governmental investigation pending or threatened
against or relating to SELLER or its properties or business or the transactions
contemplated by this Agreement other than as set forth in the opinion or EXHIBIT
-------
P.
- --
8.8 Absence of Litigation. Other than as set forth in EXHIBIT P, no
----------------------
action, suit or proceeding before any court or any governmental body or
authority pertaining to the acquisition of the Assets by PURCHASER or materially
affecting the Assets shall have been instituted or threatened on or before the
Closing.
8.9 Employment of Key Personnel of SELLER. The personnel of SELLER
-------------------------------------
deemed to be critical or desirable to the operations of SELLER's businesses as
set forth on EXHIBIT S shall have executed a Covenants Agreement in the form
---------
of EXHIBIT Z satisfactory to PURCHASER.[SECTION DELETED BY HAND]
---------
-14-
/s/ MW
/s/ HW
<PAGE>
8.10 Sublease and Facilities Sharing Agreement. SELLER shall have
------------------------------------------
executed and delivered the Sublease and Facilities Sharing Agreement in
the form of EXHIBIT X.
---------
8.11 Tradename Restriction Agreement. SELLER shall have executed and
--------------------------------
delivered the Tradename Restriction Agreement in the form of EXHIBIT U.
---------
8.12 SELLER's Operating Income Performance. SELLER shall be on schedule
--------------------------------------
to generate $200,000.00 or more operating income for the year ending January
31st, 1998, and no material or adverse changes in its operations for performance
shall have occurred for the period through June 30th, 1997.
8.13 Noncompete Agreements. SELLER and Shareholder shall have
----------------------
each executed those certain Noncompete Agreements in the form attached hereto
as EXHIBIT T.
----------
ARTICLE 9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO SELL THE ASSETS.
---------------------------------------------------------------
The obligation of SELLER to sell the Assets is subject to the satisfaction, at
the time of Closing, of the conditions set out below.
9.1 Accuracy of PURCHASER's and InfoCure's Representations and Warranties.
---------------------------------------------------------------------
The representations and warranties of PURCHASER and InfoCure set out in
Article 6. shall be true on the Closing Date as though made at that time unless
the requirement has been waived in writing by SELLER.
9.2 Performance by PURCHASER. PURCHASER and InfoCure shall have
------------------------
complied with all conditions of this Agreement unless the requirement has been
waived in writing by SELLER.
9.3 Board of Directors Approval. The Board of Directors or the
---------------------------
Executive Committee of PURCHASER and InfoCure shall have approved the
transactions described in this Agreement. PURCHASER and InfoCure shall promptly
take all steps necessary to submit, and have approved, the transactions
described in this Agreement by its Board of Directors. The approvals shall be
delivered at Closing.
9.4 Governmental Authorizations. PURCHASER and InfoCure shall have
---------------------------
filed any information described in Paragraph 5.17, required by any governmental
authority and shall have received any necessary governmental consents or
authorizations required by the transactions described in this Agreement or the
continuation of the business of SELLER after the Closing. PURCHASER and
InfoCure shall promptly and in good faith make such filings and perform such
other acts, deeds, or things, which may be reasonably necessary to secure the
consents or authorizations.
9.5 Opinion of PURCHASER's and InfoCure's Counsel. SELLER shall have
---------------------------------------------
received from PURCHASER and InfoCure an opinion of PURCHASER's and InfoCure's
counsel, dated the Closing Date, in form and substance satisfactory to SELLER
and its counsel,
-15-
/s/ MW
/s/ HW
<PAGE>
that (i) PURCHASER is a corporation duly organized and validly existing and in
good standing under the laws of Florida; (ii) PURCHASER has the corporate power
to execute this Agreement and to perform its obligations; (iii) this Agreement
is valid and binding on PURCHASER and InfoCure and (iv) all government
authorizations have been obtained and performance of the Agreement will not
violate any law, judgment, decree, rule or regulation to which PURCHASER and
InfoCure are subject.
ARTICLE 10. THE CLOSING.
-----------
10.1 Time and Place. The transfer of the Assets and Liabilities to
--------------
PURCHASER by SELLER shall take place at 10:00 a.m. local time, on November 14,
1997 (the "Closing" or "Closing Date"), but shall be effective as of the close
of business on the Effective Date at the offices of Mishan, Sloto, Greenberg &
Hellinger, P.A., 200 South Biscayne Boulevard, Suite 2350, Miami, Florida, or at
such other time and place as SELLER and PURCHASER shall mutually agree upon.
10.2 Bill of Sale and Other Agreements. SELLER and Shareholders, as the
---------------------------------
case may be, shall at Closing supply the Bill of Sale and other documents as
provided in Article 2. or referenced in Article 8.
10.3 Payment to SELLER by PURCHASER. At the Closing, PURCHASER shall
------------------------------
deliver to SELLER the Short-Term Note and the Long-Term Note and any cash
required pursuant to this Agreement to be delivered at Closing.
ARTICLE 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the
------------------------------------------
representations and warranties set forth in Paragraphs 5.5 and 6.4, which shall
continue without expiration, all representations and warranties made in Article
5. shall be continuing and shall survive the Closing, but shall expire two (2)
years after the Closing Date, with the time for making a claim to expire
eighteen (18) months from the Closing Date.
ARTICLE 12. INDEMNIFICATION.
---------------
12.1 Indemnification. SELLER and Shareholders, jointly and severally,
---------------
on the one hand and PURCHASER, on the other, covenant and agree to indemnify the
other against any and all losses, damages, costs and expenses, including
reasonable attorney's fees which either may incur by reason of any loss suffered
by either in respect of a breach by the other of this Agreement (such loss,
damage, cost, expense or fees called a "Loss" or "Losses"). This indemnity
shall not require payment as a condition precedent to recovery.
12.2 Participation in Defense. If any proceeding in respect of which
-------------------------
indemnity may be sought by either party shall be brought against PURCHASER, on
the one hand, or SELLER or Shareholders, on the other, the party from whom
indemnity is requested shall be entitled to participate in the defense at its
own expense and to settle with the consent of the other party,
-16-
/s/ MW
/s/ HW
<PAGE>
which consent shall not be unreasonably withheld, any action provided that
PURCHASER, on the one hand, and SELLER or Shareholders, on the other, shall be
released from any liability by the settlement.
12.3 Indemnification of Directors, Officers, Shareholders and Employees.
------------------------------------------------------------------
PURCHASER, following the Closing, shall indemnify and hold harmless the SELLER
and its directors, officers, employees, shareholders and guarantors of SELLER,
from the obligations or Liabilities assumed by PURCHASER and from claims made
and/or suits instituted, including reasonable counsel fees, costs and expenses
incurred in defense. Provided, however, nothing shall be construed to obligate
PURCHASER to any tax, impost, assessment, fine and/or levy and/or penalties or
interest, imposed as an income tax against SELLER or its Shareholders on the
sale of the Assets.
ARTICLE 13. OBLIGATIONS AFTER THE CLOSING.
-----------------------------
31.1 Execution of Further Documents. From and after the Closing Date,
------------------------------
upon request of the PURCHASER, the SELLER and Shareholders shall, and the
Shareholders shall cause SELLER to execute, acknowledge and deliver all such
further acts, deeds, assignments, transfers, conveyance, powers of attorney and
assurances as may be required to convey and transfer to and vest in the
PURCHASER free and clear title to the Assets and as may be appropriate otherwise
to carry out the transactions contemplated by this Agreement.
13.2 PURCHASER shall assume and pay each and all of the following:
13.2.1 Any tax on sales of product made by SELLER to its customers,
between October 1, 1997, and including the Closing Date.
13.2.2 Documentary stamp taxes and intangible taxes, if any, on the
Short-Term Note and the Long-Term Note.
13.3 SELLER's Access to Information. SELLER shall have a right to have
------------------------------
access to and copy of all records of SELLER necessary for preparation of
employee tax returns, employee tax reports and customary accounting functions.
Additionally, PURCHASER agrees to make available to SELLER, at reasonable times
and upon reasonable advance notice, relevant records and personnel in connection
with the preparation of a defense or the participation in a defense, or a
negotiation or a settlement, relating to any pending, future, or threatened
litigation or government agency proceeding (including a tax audit) involving the
conduct of SELLER before the Closing.
13.4 Accounts Receivable. In the event that after the Closing Date
-------------------
PURCHASER shall receive a payment from any account debtor with respect to the
accounts receivables retained by SELLER, PURCHASER shall promptly endorse said
payment without recourse and promptly forward the remittance to SELLER. In the
event that after the Closing Date SELLER shall receive a payment from any
account debtor with respect to accounts receivables created on or
-17-
/s/ MW
/s/ HW
<PAGE>
after October 1, 1997, SELLER shall, and Shareholders shall cause SELLER to,
promptly endorse said payment without recourse and promptly forward the
remittance to PURCHASER.
13.5 Operation of Business. PURCHASER and InfoCure shall cause
---------------------
PURCHASER to continue to operate the Health Care Business in good faith through
at least March 31, 1998. The parties further agree that in calculating the
Earn-Out, full credit shall be given for sales during the six (6) month period
ending March 31, 1997, to (i) new customers of PURCHASER and (ii) existing
customers of SELLER as of the Closing Date, regardless of whether such sales are
booked by PURCHASER or any affiliate of PURCHASER or InfoCure.
ARTICLE 14. MISCELLANEOUS.
-------------
14.1 Publicity. All notices to third parties and all other publicity
---------
concerning the transactions and contemplated by this Agreement shall be jointly
planned and coordinated by PURCHASER and SELLER. Neither party shall act
unilaterally in this regard without the prior approval of the other, which
approval shall not be unreasonably withheld, except where required by federal
and state securities law.
14.2 Costs. SELLER and PURCHASER represent that they have dealt with no
-----
broker or finder in connection with any of the transactions contemplated by this
Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. PURCHASER and SELLER
shall pay all costs and expenses incurred or to be incurred by each in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. Costs and expenses incurred by
SELLER as provided herein, inclusive of SELLER's legal and accounting fees shall
be deemed incurred in the ordinary course of SELLER's business. Any legal and
accounting fees unpaid on the Closing Date shall not be assumed by PURCHASER.
14.3 Notices. Any notice, demand, request or other communication under
-------
this Agreement shall be in writing and shall be deemed to have been given on the
date of service if personally served or delivered by a nationally recognized
overnight courier service or on the fifth (5th) day after mailing if mailed by
certified mail, return receipt requested, addressed as follows:
To PURCHASER: CCI Acquisition, Inc.
c/o InfoCure Corporation
2970 Clairmont Road
Suite 950
Atlanta, Georgia 30329
Attention: James K. Price
-18-
/s/ MW
/s/ HW
<PAGE>
To SELLER: Commercial Computers, Inc.
7875 N.W. 12th Street
Suite 120
Miami, Florida 33126
Attn: Margie Willensky
14.4 Assignment and Successors. Neither PURCHASER nor SELLER may assign
--------------------------
any rights or delegate any duties hereunder, except that SELLER's Shareholders
shall succeed to SELLER's rights and obligations in the event of the liquidation
of SELLER; provided, however, no Shareholder of SELLER shall have any liability
to PURCHASER in excess of that sum received by the Shareholder in the
liquidation of SELLER.
14.5 Binding Effect. Subject to Paragraph 14.4, this Agreement shall be
---------------
binding upon and inure to the benefit of the successors of the parties.
14.6 Governing Law. This Agreement shall be construed in accordance
--------------
with, and governed by, the laws of the State of Florida.
14.7 Severability. Each provision of this Agreement is intended to be
-------------
severable.
14.8 Amendment of Exhibits. All exhibits may be amended by SELLER at
----------------------
any time prior to the Closing; provided, however, that PURCHASER shall have the
right to terminate this Agreement without obligation if any such amendment
results in a material adverse change to SELLER's representations and warranties.
14.9 Closing Delays. Any provision contained in this Agreement to the
--------------
contrary notwithstanding, either party, upon written notice to the other party,
may adjourn the Closing Date one (1) time only for a period not to exceed thirty
(30) days; provided, however, without the written consent of both parties, the
aggregate time of adjournments for both parties permitted pursuant to this
paragraph shall not exceed thirty (30) days and any number of adjourned days
noticed by SELLER pursuant to this paragraph shall not be subject to payment of
the pro rata increase sum provided for in Paragraph 10.4 of this Agreement.
14.10 Bulk Sales. The parties waive compliance with the Florida Bulk
----------
Sales Act or equivalent, if the Act be applicable. Nothing contained in this
paragraph shall be construed to be deemed a determination by either party that
the Act is applicable to the transactions contemplated by this Agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
-19-
/s/ MW
/s/ HW
<PAGE>
SELLER: PURCHASER:
Commercial Computers, Inc. CCI Acquisition, Inc.
By: /s/ Harvey Willensky By: /s/ Michael Warren
-------------------- ------------------
Its:President Its: Chief Financial Officer
--------- -----------------------
SHAREHOLDERS: INFOCURE:
InfoCure Corporation
/s/ Marjorie Willensky By: /s/ James K. Price
- ---------------------- ------------------
Marjorie Willensky Its: Executive Vice President
------------------------
/s/ Harvey Willensky
- --------------------
Harvey Willensky
-20-
/s/ MW
/s/ HW
<PAGE>
EXHIBIT 10.43
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED LOAN AGREEMENT
among
INFOCURE CORPORATION, POLCI ACQUISITION, INC.,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC.,
PACE FINANCIAL CORPORATION, MD ACQUISITION, INC.,
ROVAK, INC., KCOMP MANAGEMENT SYSTEMS, INC.,
SOFTEASY SOFTWARE, INC., CCI ACQUISITION, INC.,
HEALTH CARE DIVISION, INC., DR SOFTWARE, INC.,
MILLARD-WAYNE, INC., INTERNATIONAL COMPUTER SOLUTIONS, INC.
and
FINOVA CAPITAL CORPORATION
Dated as of February 24, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I.................................................................. 1
- ---------
DEFINITIONS AND DETERMINATIONS............................................. 1
- ------------------------------
1.1 DEFINITIONS....................................................... 1
-----------
1.2 TIME PERIODS...................................................... 20
------------
1.3 ACCOUNTING TERMS AND DETERMINATIONS............................... 21
-----------------------------------
1.4 REFERENCES........................................................ 21
----------
1.5 FINOVA'S DISCRETION............................................... 21
-------------------
1.6 BORROWER'S KNOWLEDGE.............................................. 21
--------------------
ARTICLE II................................................................. 22
- ----------
LOANS; TERMS OF PAYMENT; AND CONTINGENT OBLIGATION PAYMENT................. 22
- ----------------------------------------------------------
2.1 LOANS............................................................. 22
-----
2.1.1 TERM LOAN.................................................. 22
---------
2.1.2 ADVANCES OF THE ACQUISITION LOAN........................... 22
--------------------------------
2.2 USE OF PROCEEDS, NOTES AND REBORROWING............................ 23
--------------------------------------
2.2.1 USE OF PROCEEDS............................................ 23
---------------
2.2.2 NOTES...................................................... 23
-----
2.2.3 REBORROWING................................................ 23
-----------
2.3 INTEREST.......................................................... 24
--------
2.3.1 INTEREST RATES AND PAYMENT................................. 24
--------------------------
2.3.2 DEFAULT RATE............................................... 24
------------
2.3.3 INTEREST COMPUTATION....................................... 24
--------------------
2.3.4 MAXIMUM INTEREST........................................... 24
----------------
2.4 PRINCIPAL PAYMENTS................................................ 25
------------------
2.4.1 TERM LOAN.................................................. 25
---------
2.4.2 ACQUISITION LOAN........................................... 25
----------------
2.4.3 FINAL PAYMENT.............................................. 26
-------------
2.5 LATE CHARGES...................................................... 26
------------
2.6 PREPAYMENTS....................................................... 26
-----------
2.6.1 VOLUNTARY PREPAYMENTS...................................... 26
---------------------
2.6.2 MANDATORY PREPAYMENT...................................... 28
--------------------
2.7 LOAN AMENDMENT FEE................................................ 28
------------------
2.8 INTENTIONALLY OMITTED............................................. 28
---------------------
2.9 UNUSED COMMITMENT FEE............................................. 28
---------------------
2.10 PAYMENTS AFTER EVENT OF DEFAULT.................................. 29
-------------------------------
2.11 CONTINGENT OBLIGATION PAYMENT.................................... 29
-----------------------------
2.12 METHOD OF PAYMENT; GOOD FUNDS.................................... 29
-----------------------------
ARTICLE III................................................................ 29
- -----------
SECURITY................................................................... 29
- --------
ARTICLE IV................................................................. 30
- ----------
CONDITIONS OF CLOSING; ACQUISITIONS........................................ 30
- -----------------------------------
4.1 CLOSING........................................................... 30
-------
4.1.1 REPRESENTATIONS AND WARRANTIES............................. 30
------------------------------
4.1.2 MICRO-SOFTWARE ACQUISITION................................. 30
--------------------------
4.1.3 DELIVERY OF DOCUMENTS...................................... 30
---------------------
4.1.4 PERFORMANCE; NO DEFAULT.................................... 31
-----------------------
4.1.5 OPINIONS OF COUNSEL; DIRECTION FOR DELIVERY................ 31
-------------------------------------------
4.1.6 APPROVAL OF INSTRUMENTS AND SECURITY INTERESTS............. 32
----------------------------------------------
4.1.7 SECURITY INTERESTS......................................... 32
------------------
4.1.8 INTENTIONALLY OMITTED...................................... 32
---------------------
4.1.9 LICENSES................................................... 32
--------
<PAGE>
4.1.10 FINANCIAL STATEMENTS, REPORTS AND
---------------------------------
PROJECTIONS; INSPECTION................................... 32
-----------------------
4.1.11 MATERIAL ADVERSE EFFECT................................... 32
-----------------------
4.1.12 USE OF ASSETS............................................. 32
-------------
4.1.13 BROKER FEES............................................... 32
-----------
4.1.14 INSURANCE; SURVEY......................................... 33
-----------------
4.1.15 MINIMUM OPERATING CASH FLOW............................... 33
---------------------------
4.1.16 PAYMENT OF FEES AND EXPENSES.............................. 34
----------------------------
4.2 ACQUISITIONS...................................................... 34
------------
4.2.1 CONSUMMATION OF ACQUISITIONS............................... 34
----------------------------
4.2.2 CONSENT OF FINOVA.......................................... 34
-----------------
4.2.3 DELIVERY OF DOCUMENTS...................................... 34
---------------------
4.2.4 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS.............. 36
---------------------------------------------
4.2.5 OPINIONS OF COUNSEL........................................ 36
-------------------
4.2.6 LICENSES................................................... 36
--------
4.2.7 MATERIAL ADVERSE EFFECT.................................... 36
-----------------------
4.2.8 SECURITY INTEREST.......................................... 36
-----------------
4.2.9 ENVIRONMENTAL AUDIT........................................ 36
-------------------
4.2.10 INSURANCE; SURVEY........................................ 36
-----------------
4.2.11 PAYMENT OF FEES.......................................... 36
---------------
4.2.12 REPRESENTATIONS AND WARRANTIES........................... 36
------------------------------
4.2.13 PERFORMANCE; NO DEFAULT.................................. 37
-----------------------
ARTICLE V.................................................................. 37
- ---------
REPRESENTATIONS AND WARRANTIES............................................. 37
- ------------------------------
5.1 EXISTENCE AND POWER............................................... 37
-------------------
5.2 AUTHORITY......................................................... 37
---------
5.3 CAPITAL STOCK AND RELATED MATTERS................................. 37
---------------------------------
5.3.1 CAPITAL STOCK.............................................. 37
-------------
5.3.2 RESTRICTIONS............................................... 37
------------
5.4 BINDING AGREEMENTS................................................ 38
------------------
5.5 BUSINESS AND PROPERTY OF BORROWER................................. 38
---------------------------------
5.5.1 BUSINESS AND PROPERTY..................................... 38
---------------------
5.5.2 LICENSES.................................................. 38
--------
5.5.3 OPERATING AGREEMENTS...................................... 38
--------------------
5.5.4 FACILITY SITES............................................ 38
--------------
5.5.5 LEASES.................................................... 38
------
5.5.6 REAL ESTATE............................................... 39
-----------
5.5.7 OPERATION AND MAINTENANCE OF EQUIPMENT.................... 39
--------------------------------------
5.5.8 LICENSE AGREEMENTS........................................ 39
------------------
5.6 TITLE TO PROPERTY; LIENS.......................................... 39
------------------------
5.7 PROJECTIONS AND FINANCIAL STATEMENTS.............................. 39
------------------------------------
5.7.1 FINANCIAL STATEMENTS...................................... 39
--------------------
5.7.2 PROJECTIONS............................................... 40
-----------
5.8 LITIGATION........................................................ 40
----------
5.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING AGREEMENTS.... 40
--------------------------------------------------------------
5.10 TAXES............................................................ 40
-----
5.11 COMPLIANCE WITH APPLICABLE LAWS.................................. 41
-------------------------------
5.12 PATENTS, TRADEMARKS, FRANCHISES, AGREEMENTS...................... 41
-------------------------------------------
5.13 REGULATORY MATTERS............................................... 41
------------------
5.14 ENVIRONMENTAL MATTERS............................................ 41
---------------------
5.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS...................... 41
-------------------------------------------
5.15.1 INVESTMENT BORROWER ACT.................................. 41
-----------------------
ii
<PAGE>
5.15.2 HOLDING BORROWER ACT..................................... 41
--------------------
5.15.3 FOREIGN OR ENEMY STATUS.................................. 42
-----------------------
5.15.4 REGULATIONS AS TO BORROWING.............................. 42
---------------------------
5.16 MARGIN REGULATIONS............................................... 42
------------------
5.17 OTHER INDEBTEDNESS............................................... 42
------------------
5.18 NO MISREPRESENTATION............................................. 42
--------------------
5.19 EMPLOYEE BENEFIT PLANS........................................... 43
----------------------
5.19.1 NO OTHER PLANS........................................... 43
--------------
5.19.2 ERISA AND CODE COMPLIANCE AND LIABILITY.................. 43
---------------------------------------
5.19.3 FUNDING.................................................. 43
-------
5.19.4 PROHIBITED TRANSACTIONS AND PAYMENTS..................... 43
------------------------------------
5.19.5 NO TERMINATION EVENT..................................... 43
--------------------
5.19.6 ERISA LITIGATION......................................... 44
----------------
5.20 EMPLOYEE MATTERS................................................. 44
----------------
5.20.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES............. 44
--------------------------------------------
5.20.2 CLAIMS RELATING TO EMPLOYMENT............................ 44
-----------------------------
5.21 BURDENSOME OBLIGATIONS........................................... 44
----------------------
5.22 SUBSIDIARIES..................................................... 44
------------
5.23 REPRESENTATIONS AS TO THE POLCI ACQUISITION INSTRUMENTS,
--------------------------------------------------------
THE SOFTEASY ACQUISITION INSTRUMENTS, THE COMMERCIAL
----------------------------------------------------
ACQUISITION INSTRUMENTS, THE PACE ACQUISITION INSTRUMENTS,
----------------------------------------------------------
THE OPMS ACQUISITION INSTRUMENTS AND THE MICRO-SOFTWARE
-------------------------------------------------------
ACQUISITION INSTRUMENTS.......................................... 45
-----------------------
ARTICLE VI................................................................. 45
- ----------
AFFIRMATIVE COVENANTS...................................................... 45
- ---------------------
6.1 LEGAL EXISTENCE; GOOD STANDING.................................... 45
------------------------------
6.2 INSPECTION........................................................ 45
----------
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION........................ 45
------------------------------------------
6.3.1 MONTHLY STATEMENTS........................................ 45
------------------
6.3.2 QUARTERLY STATEMENTS; COMPLIANCE CERTIFICATE.............. 46
--------------------------------------------
6.3.3 ANNUAL STATEMENTS......................................... 46
-----------------
6.3.4 ACCOUNTANTS' CERTIFICATE.................................. 47
------------------------
6.3.5 AUDIT REPORTS............................................. 47
-------------
6.3.6 NOTICE OF DEFAULTS; LOSS.................................. 47
------------------------
6.3.7 NOTICE OF SUITS, ADVERSE EVENTS........................... 47
-------------------------------
6.3.8 REPORTS TO SHAREHOLDERS, CREDITORS AND
--------------------------------------
GOVERNMENTAL BODIES....................................... 48
-------------------
6.3.9 ERISA NOTICES AND REQUESTS................................ 48
--------------------------
6.3.10 OTHER INFORMATION........................................ 49
-----------------
6.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS.................. 49
------------------------------------------------
6.5 MAINTENANCE OF LICENSES, FRANCHISES AND OTHER AGREEMENTS.......... 50
--------------------------------------------------------
6.6 INSURANCE......................................................... 50
---------
6.6.1 MAINTENANCE OF INSURANCE................................... 50
------------------------
6.6.2 PROCEEDS................................................... 50
--------
6.7 FUTURE LEASES..................................................... 50
-------------
6.8 FUTURE ACQUISITIONS OF REAL ESTATE................................ 51
----------------------------------
6.9 ENVIRONMENTAL MATTERS............................................. 51
---------------------
6.9.1 COMPLIANCE................................................ 51
----------
6.10 COMPLIANCE WITH LAWS............................................. 51
--------------------
6.11 TAXES AND CLAIMS................................................. 51
----------------
6.12 MAINTENANCE OF PROPERTIES........................................ 52
-------------------------
6.13 GOVERNMENTAL APPROVALS........................................... 52
----------------------
6.14 REAFFIRMATIONS OF SUBORDINATION AGREEMENT........................ 52
-----------------------------------------
iii
<PAGE>
ARTICLE VII................................................................ 52
- -----------
NEGATIVE COVENANTS......................................................... 52
- ------------------
7.1 BORROWING......................................................... 52
---------
7.2 LIENS............................................................. 52
-----
7.3 MERGER AND ACQUISITION............................................ 52
----------------------
7.4 CONTINGENT LIABILITIES............................................ 53
----------------------
7.5 DISTRIBUTIONS..................................................... 53
-------------
7.6 CAPITAL EXPENDITURES.............................................. 53
--------------------
7.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY....................... 53
-------------------------------------------
7.8 INVESTMENTS, LOANS................................................ 54
------------------
7.9 FUNDAMENTAL BUSINESS CHANGES...................................... 54
----------------------------
7.10 FACILITY SITES................................................... 54
--------------
7.11 SALE OR TRANSFER OF ASSETS....................................... 54
--------------------------
7.12 AMENDMENT OF DOCUMENTS........................................... 55
----------------------
7.13 ACQUISITION OF ADDITIONAL PROPERTIES............................. 55
------------------------------------
7.14 ISSUANCE OF CAPITAL STOCK OR OTHER SIMILAR INTERESTS............. 55
----------------------------------------------------
7.15 TRANSACTIONS WITH AFFILIATES..................................... 55
----------------------------
7.16 COMPLIANCE WITH ERISA............................................ 55
---------------------
7.17 CURRENT RATIO.................................................... 56
-------------
7.18 SENIOR DEBT SERVICE COVERAGE RATIO............................... 56
----------------------------------
7.19 SUBSIDIARIES..................................................... 56
------------
ARTICLE VIII............................................................... 57
- ------------
DEFAULT AND REMEDIES....................................................... 57
- --------------------
8.1 EVENTS OF DEFAULT................................................. 57
-----------------
8.1.1 DEFAULT IN PAYMENT........................................ 57
------------------
8.1.2 BREACH OF COVENANTS....................................... 57
-------------------
8.1.3 BREACH OF WARRANTY........................................ 57
------------------
8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY....... 57
---------------------------------------------------
8.1.5 BANKRUPTCY................................................ 58
----------
8.1.6 JUDGMENTS................................................. 58
---------
8.1.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS.................. 58
----------------------------------------
8.1.8 COLLATERAL................................................ 58
----------
8.1.9 PLANS..................................................... 59
-----
8.1.10 CHANGE IN CONTROL........................................ 59
-----------------
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS............................ 59
--------------------------------------
8.3 REMEDIES ON DEFAULT............................................... 60
-------------------
8.3.1 ENFORCEMENT OF SECURITY INTERESTS......................... 60
---------------------------------
8.3.2 OTHER REMEDIES............................................ 60
--------------
8.4 APPLICATION OF FUNDS.............................................. 60
--------------------
8.4.1 EXPENSES................................................... 60
--------
8.4.2 BORROWERS' OBLIGATIONS..................................... 60
----------------------
8.4.3 SURPLUS.................................................... 60
-------
8.5 PERFORMANCE OF BORROWER'S OBLIGATIONS............................. 60
-------------------------------------
ARTICLE IX................................................................. 61
- ----------
CLOSING.................................................................... 61
- -------
ARTICLE X.................................................................. 61
- ---------
EXPENSES AND INDEMNITY..................................................... 61
- ----------------------
10.1 ATTORNEYS' FEES AND OTHER FEES AND EXPENSES..................... 61
-------------------------------------------
10.1.1 FEES AND EXPENSES FOR PREPARATION OF LOAN INSTRUMENTS.... 61
-----------------------------------------------------
10.1.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR
DEFENSE OF LOAN INSTRUMENTS.............................. 61
---------------------------
iv
<PAGE>
10.2 INDEMNITY....................................................... 62
---------
10.2.1 BROKERAGE FEES........................................... 62
--------------
10.2.2 GENERAL.................................................. 62
-------
10.2.3 OPERATION OF COLLATERAL; JOINT VENTURERS................. 62
----------------------------------------
10.2.4 ENVIRONMENTAL INDEMNITY.................................. 62
-----------------------
ARTICLE XI................................................................. 63
- ----------
MISCELLANEOUS.............................................................. 63
- -------------
11.1 NOTICES......................................................... 63
-------
11.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES......................... 64
---------------------------------------
11.3 FURTHER ASSURANCE............................................... 64
-----------------
11.4 TAXES AND FEES.................................................. 64
--------------
11.5 SEVERABILITY.................................................... 65
------------
11.6 WAIVER.......................................................... 65
------
11.7 MODIFICATION OF LOAN INSTRUMENTS................................ 65
--------------------------------
11.8 CAPTIONS........................................................ 65
--------
11.9 SUCCESSORS AND ASSIGNS.......................................... 65
----------------------
11.10 REMEDIES CUMULATIVE............................................ 65
-------------------
11.11 ENTIRE AGREEMENT; CONFLICT..................................... 65
--------------------------
11.12 APPLICABLE LAW................................................. 66
--------------
11.13 JURISDICTION AND VENUE......................................... 66
----------------------
11.14 WAIVER OF RIGHT TO JURY TRIAL.................................. 66
-----------------------------
11.15 TIME OF ESSENCE................................................ 66
---------------
11.16 ESTOPPEL CERTIFICATE........................................... 66
--------------------
11.17 CONSEQUENTIAL DAMAGES.......................................... 67
---------------------
11.18 COUNTERPARTS................................................... 67
------------
11.19 NO FIDUCIARY RELATIONSHIP...................................... 67
-------------------------
11.20 NOTICE OF BREACH BY FINOVA..................................... 67
--------------------------
11.21 JOINT AND SEVERAL OBLIGATIONS................................... 67
-----------------------------
11.22 CONTINUED EFFECTIVE; NO NOVATION................................ 67
--------------------------------
v
<PAGE>
LIST OF EXHIBITS TO LOAN AGREEMENT
Exhibit 1.1(A) - Existing Loan Instruments
Exhibit 2.1.1 - Notice of Borrowing
Exhibit 5.3.1 - Subsidiaries Capital Stock
Exhibit 5.5.1 - Business and Property
Exhibit 5.5.2 - Licenses
Exhibit 5.5.3 - Operating Agreements
Exhibit 5.5.4 - Facility Sites
Exhibit 5.5.5 - Leases
Exhibit 5.5.6 - Real Estate
Exhibit 5.5.8 - License Agreements
Exhibit 5.7.1 - Financial Statements
Exhibit 5.7.2 - Projections
Exhibit 5.8 - Litigation
Exhibit 5.12 - Intellectual Property
Exhibit 5.19.1 - Employee Benefit Plans
Exhibit 5.20.1 - Collective Bargaining
<PAGE>
SECOND AMENDED AND RESTATED LOAN AGREEMENT
------------------------------------------
This SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as of February 24,
1998, is among INFOCURE CORPORATION, a Delaware corporation ("InfoCure"), POLCI
ACQUISITION, INC., a Michigan corporation ("Polci"), ORTHODONTIC PRACTICE
MANAGEMENT SYSTEM, INC., a Georgia corporation ("OPMS"), PACE FINANCIAL
CORPORATION, an Ohio corporation ("Pace"), MD ACQUISITION, INC., a Connecticut
corporation ("MD Acquisition, Inc."), ROVAK, INC., a Minnesota corporation
("Rovak"), KCOMP MANAGEMENT SYSTEMS, INC., a California corporation ("KComp"),
SOFTEASY SOFTWARE, INC., a Pennsylvania corporation ("SoftEasy"), CCI
ACQUISITION, INC., a Florida corporation ("CCI Acquisition, Inc."), and HEALTH
CARE DIVISION, INC., a Georgia corporation ("HCD"), DR SOFTWARE, INC., a Georgia
corporation ("DR Software"), MILLARD-WAYNE, INC., a Georgia corporation
("Millard-Wayne"), INTERNATIONAL COMPUTER SOLUTIONS, INC., a Georgia corporation
("ICS"), and FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA").
PRELIMINARY STATEMENT:
---------------------
A. The Original Borrowers (as hereinafter defined), as original signatories
thereto or by joinder, and FINOVA entered into that certain Amended and Restated
Loan Agreement dated as of November 26, 1997 (as the same may have been amended
through the date hereof, the "Existing Amended and Restated Loan Agreement"),
which amended and restated the Loan Agreement dated as of October 29, 1997 among
certain of the Original Borrowers and FINOVA, as amended, pursuant to which the
Original Borrowers requested, and FINOVA made available to the Original
Borrowers, certain loan facilities, upon and subject to the terms and conditions
therein set forth.
B. The Original Borrowers, MD Acquisition, Inc. and FINOVA have agreed to
amend and restate in its entirety the Existing Amended and Restated Loan
Agreement without constituting a novation.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the Existing Amended and Restated Loan Agreement is
amended and restated in its entirety as follows:
ARTICLE I
---------
DEFINITIONS AND DETERMINATIONS
------------------------------
1.1 DEFINITIONS. As used in this Loan Agreement and in the other
-----------
Loan Instruments, unless otherwise expressly indicated herein or therein, the
following terms shall have the
1
<PAGE>
following meanings (such meanings to be applicable equally to both the singular
and plural forms of the terms defined):
Accountants: BDO Seidman, L.L.P. or any other independent certified public
-----------
accounting firm selected by Borrowers and reasonably satisfactory to FINOVA.
Accounting Changes: as defined in Section 1.3.
------------------
Accounts Decrease: for any period, the excess of the Eligible Accounts at the
-----------------
beginning of such period over the Eligible Accounts at the end of such period.
Accounts Increase: for any period, the excess of the Eligible Accounts at the
-----------------
end of such period over the Eligible Accounts at the beginning of such period.
Acquisition: an Asset Acquisition or an Equity Acquisition.
-----------
Acquisition Closing. the consummation of a Permitted Acquisition.
-------------------
Acquisition Closing Date: the date of an Acquisition Closing.
------------------------
Acquisition Instruments: the purchase agreement and all other documents and
-----------------------
instruments executed in connection with a Permitted Acquisition.
Acquisition Loan: the loans in the aggregate maximum amount of $20,000,000,
----------------
the proceeds of which are to be used solely for Permitted Acquisitions and
to pay related transaction costs.
Acquisition Loan Instruments: collectively, the following documents
----------------------------
to be executed and delivered in connection with a Permitted Acquisition:
(i) any amendments to the Loan Instruments and any Joinder to Loan
Agreement, Note, Mortgage, Security Agreement, Pledge Agreement,
Assignment of Leases, Environmental Certificate, Contribution
Agreement, Reaffirmation of Subordination Agreement, Master
Reaffirmation Agreement, UCC Financing Statements and other
agreements, documents and instruments required by FINOVA to (A)
reflect the effect of such Permitted Acquisition and (B) grant to
FINOVA a perfected first Lien, subject only to Permitted Prior Liens,
upon all Property of the applicable Target or acquired by InfoCure or
the applicable Acquisition Subsidiary upon the consummation of such
Permitted Acquisition;
(ii) an Assignment of Acquisition Instruments;
2
<PAGE>
(iii) a Seller's Consent with respect to such Permitted Acquisition if such
consent is required to the applicable Assignment of Acquisition
Instruments;
(iv) a Landlord's Consent executed by each Landlord under each Lease of
the applicable Target or assumed or executed by the applicable
Acquisition Subsidiary in connection with such Permitted Acquisition;
and
(v) such other instruments, agreements, documents, certificates, consents,
waivers and opinions as FINOVA may reasonably require in connection
with such Permitted Acquisition.
Acquisition Loan Note: a promissory note in the principal amount of
---------------------
$20,000,000 executed and delivered by Borrowers to FINOVA to evidence the
Acquisition Loan, and any notes issued in substitution thereof pursuant to this
Loan Agreement, in each case in form and substance satisfactory to FINOVA.
Acquisition Subsidiary: a wholly-owned subsidiary of InfoCure formed
----------------------
and organized after the Restatement Effective Date to consummate a Permitted
Acquisition which constitutes an Asset Acquisition in accordance with the terms
of this Loan Agreement, provided that such Subsidiary shall have executed and
delivered to FINOVA such Acquisition Loan Instruments and other documents and
instruments as FINOVA shall require to cause such Person to become a "Borrower"
under the Loan Instruments.
ADA: the Americans with Disabilities Act of 1990, as amended, any successor
---
statute thereto, and the rules and regulations issued thereunder, as in effect
from time to time.
Additional Closing: the disbursement of an Advance of the Acquisition Loan.
------------------
Additional Closing Date: the date of an Additional Closing.
-----------------------
Adjusted Debt Service: when determining whether an Advance of the Acquisition
---------------------
Loan shall be made to Borrowers to consummate an Acquisition (a "Requested
Advance"), for any period, the sum of the following, without duplication: (i)
Debt Service of Borrowers for such period, plus (ii) to the extent any Advance
----
of the Acquisition Loan was actually made after the first day of such period,
the interest and principal which would have been payable during such period with
respect to such Advance if such Advance had been made on the first day of such
period, plus (iii) the interest and principal which would have been payable
----
during such period with respect to the Requested Advance which shall be
requested by Borrowers to consummate such Acquisition if such Requested Advance
had been made on the first day of such period.
3
<PAGE>
Adjusted Operating Cash Flow: for any twelve-month period, the Operating Cash
----------------------------
Flow of Borrowers for such period, plus, without duplication, the sum of the
----
following:
(i) if an Acquisition Closing shall have occurred during such period, the
Operating Cash Flow of the Target which has been acquired by InfoCure
or the applicable Acquisition Subsidiary pursuant to the Permitted
Acquisition in respect of such Acquisition Closing, from the beginning
of such period until the date such Permitted Acquisition was
consummated, the calculation of which shall be reasonably satisfactory
to FINOVA;
(ii) when determining whether a proposed Acquisition will be a Permitted
Acquisition, the Operating Cash Flow for such period of the Target to
be acquired, as determined to the satisfaction of the FINOVA based on
financial and other information submitted to FINOVA by Borrowers, the
calculation of which shall be reasonably satisfactory to FINOVA;
(iii) for any portion of such period prior to the Original Closing Date, the
Operating Cash Flow of SoftEasy Seller and the Operating Cash Flow
attributable to the Property acquired by CCI Acquisition, Inc.
pursuant to the Commercial Acquisition Instruments from the beginning
of such period until the Original Closing Date, in each case the
calculation of which shall be reasonably satisfactory to FINOVA; and
(iv) such adjustments to the Operating Cash Flow of Borrowers and such
Target for such period as FINOVA reasonably deems appropriate, based
on information furnished to FINOVA by Borrowers, to take into account
reductions or increases in expenses for said period which would have
been effected if such Acquisition had been consummated at the
beginning of such period.
Advance: any advance of the Acquisition Loan.
-------
Affiliate: any Person that directly or indirectly, through one or more
---------
intermediaries, controls or is controlled by or is under common control with
another Person. The term "control" means possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or equity interests,
by contract or otherwise. For the purposes hereof any Person which owns or
controls, directly or indirectly, 10% or more of the securities or equity
interests, as applicable, whether voting or non-voting, of any other Person
shall be deemed to "control" such Person. Notwithstanding anything contained
herein to the contrary, FINOVA shall not be deemed to be an Affiliate of any
Borrower.
Applicable Margin: as defined in subsection 2.3.1.
-----------------
4
<PAGE>
Asset Acquisition: an acquisition of the Property of a Target.
-----------------
Assignment of Acquisition Instruments: an assignment of acquisition
-------------------------------------
instruments executed and delivered by InfoCure and/or the applicable Acquisition
Subsidiary in connection with a Permitted Acquisition, in form and substance
satisfactory to FINOVA.
Assignment of Leases: an assignment of leases executed by any of the
--------------------
Borrowers, in form and substance satisfactory to FINOVA.
Bankruptcy Code: the United States Bankruptcy Code, any successor
---------------
statute thereto, and the rules, regulations and legally binding policies
promulgated thereunder, as amended and in effect from time to time.
Base Rate: the per annum rate of interest announced or published publicly
---------
from time to time by Citibank, N.A. in New York, New York as its corporate base
(or equivalent) rate of interest, which rate shall change automatically without
notice and simultaneously with each change in such corporate base rate. The Base
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer by Citibank, N.A. in New York, New York.
Basic Financial Statements: as defined in subsection 6.3.3.
--------------------------
Borrower: any of the Borrowers.
--------
Borrowers: collectively, InfoCure, Rovak, CCI Acquisition, Inc., Polci, HCD,
---------
KComp, SoftEasy, DR Software, Millard-Wayne, ICS, OPMS, Pace, MD Acquisition,
Inc., each Acquisition Subsidiary and any Target acquired by InfoCure pursuant
to an Equity Acquisition.
Borrowers' Obligations: (i) any and all Indebtedness due or to become due,
----------------------
now existing or hereafter arising, of Borrowers to FINOVA pursuant to the terms
of this Loan Agreement, any other Loan Instrument or otherwise, including,
without limitation, the Contingent Obligation Payment required to be made by
Borrowers pursuant to Section 2.11, and (ii) the performance of the covenants of
Borrowers contained in the Loan Instruments.
Business Day: any day other than a Saturday, Sunday or other day on which
------------
banks in Phoenix, Arizona or New York, New York are required to close.
Capital Expenditures: payments that are made or liabilities that are incurred
--------------------
by any Borrower for the lease, purchase, improvement, construction or use of any
Property, the value or cost of which under GAAP is required to be capitalized
and appears on such Borrower's balance sheet in the category of property, plant
or equipment, without regard
5
<PAGE>
to the manner in which such payments or the instruments pursuant to which they
are made are characterized by such Borrower or any other Person.
Capitalized Lease: any lease of Property, the obligations for the rental of
-----------------
which are required to be capitalized in accordance with GAAP.
CCI Acquisition, Inc.: as defined in the Preamble of this Loan Agreement.
---------------------
Chief Financial Officer: the chief financial officer of each Borrower.
-----------------------
Closing Certificate: a Closing Certificate executed by Borrowers in form and
-------------------
substance satisfactory to FINOVA.
Code: the Internal Revenue Code of 1986, any successor statute thereto, and
----
the rules, regulations and legally binding policies promulgated thereunder, as
amended and in effect from time to time.
Collateral: (i) all existing and after-acquired Property of Borrowers,
----------
including, without limitation, all existing and after-acquired accounts,
equipment, inventory, investment property and general intangibles, (ii) the
Subsidiaries Capital Stock and (iii) all proceeds of the foregoing.
Commercial Acquisition: the acquisition by CCI Acquisition, Inc. of
----------------------
substantially all of the Property of Commercial Seller.
Commercial Acquisition Instruments: all agreements, documents and instruments
----------------------------------
executed and delivered by InfoCure, CCI Acquisition, Inc. and Commercial Seller
in connection with the Commercial Acquisition.
Commercial Seller: Commercial Computers, Inc., a Florida corporation.
-----------------
Commercial Subordinated Note: that certain Non-Negotiable Convertible
----------------------------
Promissory Note dated as of October 1, 1997 in the original principal amount of
$600,000 made by InfoCure and CCI Acquisition, Inc. payable to the order of
Commercial Seller.
Commercial Subordination Agreement: that certain Subordination Agreement
----------------------------------
dated as of November 14, 1997 among InfoCure, CCI Acquisition, Inc., Commercial
Seller and FINOVA.
Compliance Certificate: a Compliance Certificate executed by the Chief
----------------------
Financial Officer, in form and substance satisfactory to FINOVA.
Contingent Obligation Payment: as defined in Section 2.11.
-----------------------------
6
<PAGE>
Contribution Agreement: a contribution agreement among the Borrowers, in form
----------------------
and substance satisfactory to FINOVA.
COP Base Amount: as of any date, an amount equal to the difference of (i) the
---------------
Operating Cash Flow of Borrowers for the Fiscal Year of Borrowers ending January
31, 1998, less (ii) the Operating Cash Flow attributable to any Subsidiary,
profit-center or other material group of assets which, during the period from
the Original Closing Date to and including the COP Calculation Date, shall have
been sold or otherwise subject to a disposition in accordance with the terms of
this Loan Agreement, the calculation of which shall be reasonably satisfactory
to FINOVA.
COP Calculation Date: (i) the date on which the Contingent Obligation
--------------------
Payment is required to be made pursuant to Section 2.11 or (ii) if the
Contingent Obligation Payment is due as a result of the occurrence of any Market
Event or Market Refinancing Event, then, at FINOVA's option, the date on which
FINOVA shall have received notice of such Market Event or Market Refinancing
Event, as applicable, which Borrowers covenant and agree to provide no less than
thirty (30) days prior to the date on which such Market Event or Market
Refinancing Event, as applicable, occurs.
COP Default Event: shall mean (i) the occurrence of any Event of Default
-----------------
described in subsection 8.1.10 or (ii) the acceleration of Borrowers'
Obligations pursuant to Section 8.2.
COP Market Value: shall mean (i) if the Contingent Obligation Payment is
----------------
required to be paid on the COP Maturity Payment Date, the Operating Cash Flow of
Borrowers for the Fiscal Year of Borrowers ending on January 31, 2001, the
calculation of which shall be based upon financial statements delivered to
FINOVA by Borrowers pursuant to subsection 6.3.3 or (ii) if the Contingent
Obligation payment is required to be made on any other date, the greater of (A)
the Adjusted Operating Cash Flow of Borrowers for the twelve-month period ending
on the last day of the most recent month for which Borrowers shall have
delivered to FINOVA financial statements pursuant to subsection 6.3.1 or (B) the
annualized Adjusted Operating Cash Flow of Borrowers for the then current Fiscal
Year determined as of the last day of the most recent month for which Borrowers
shall have delivered to FINOVA financial statements pursuant to subsection
6.3.1, the calculation of which shall be based upon such financial statements
which cover the period from the beginning of the then current Fiscal Year of
Borrowers to the end of such most recent month.
COP Maturity Payment Date: the 30th day after the date on which Borrowers are
-------------------------
required to deliver audited financial statements for the Fiscal Year of
Borrowers ending on January 31, 2001 pursuant to subsection 6.3.3.
Debt Service: during any period, all payments of principal, interest,
------------
premium, loan fees and other charges with respect to Indebtedness for Borrowed
Money, which
7
<PAGE>
payments are required or permitted to be made pursuant to this Loan Agreement
and are due and payable during such period, excluding any payments made in
connection with unsecured inter-company loans by any Borrower to any other
Borrower permitted to be made pursuant to this Loan Agreement.
Default Rate: (i) with respect to the Term Loan, a rate equal to 14.5% per
------------
annum, (ii) with respect to the Acquisition Loan, a rate equal to the Base Rate,
plus the Applicable Margin then in effect, plus 5.0% per annum and (iii) with
- ---- ----
respect to any other amounts which may be owing by Borrowers to FINOVA pursuant
to this Loan Agreement, the other Loan Instruments or otherwise, a rate equal to
the greater of (i) and (ii) of this definition.
Default Rate Period: a period of time commencing on the date an Event of
-------------------
Default has occurred and ending on the date that such Event of Default is cured
or waived.
Discount Value: as defined in subsection 2.6.1(e)(ii).
--------------
Eligible Accounts: at any given time, the aggregate of the face amount of the
-----------------
accounts receivable of Borrowers, exclusive of any accounts receivable over 60
days past due.
Employee Benefit Plan: any employee benefit plan within the meaning of
---------------------
Section 3(3) of ERISA which (i) is maintained for employees of any Borrower or
any of its ERISA Affiliates or (ii) has at any time within the preceding six
years been maintained for the employees of such Borrower or any of its current
or former ERISA Affiliates.
Environmental Certificate: an environmental certificate executed by
-------------------------
Borrowers, in form and substance satisfactory to FINOVA.
Environmental Laws: any and all federal, state and local laws that relate to
------------------
or impose liability or standards of conduct concerning public or occupational
health and safety or protection of the environment, as now or hereafter in
effect and as have been or hereafter may be amended or reauthorized, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C '9601 et seq.), the Hazardous Materials Transportation
------
Act (42 U.S.C. '1802 et seq.), the Resource Conservation and Recovery Act (42
------
U.S.C. '6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. '1251
------
et seq.), the Toxic Substances Control Act (15 U.S.C. '2601 et seq.), the Clean
- ------ ------
Air Act (42 U.S.C. '7901 et seq.), the National Environmental Policy Act (42
------
U.S.C. '4231, et seq.), the Refuse Act (33 U.S.C. '407, et seq.), the Safe
------ ------
Drinking Water Act (42 U.S.C. '300(f) et seq.), the Occupational Safety and
------
Health Act (29 U.S.C. '651 et seq.), and all rules, regulations, codes,
------
ordinances and guidance documents promulgated or published thereunder, and the
8
<PAGE>
provisions of any licenses, permits, orders and decrees issued pursuant to any
of the foregoing.
Equity Acquisition: an acquisition by InfoCure directly or through a wholly-
------------------
owned subsidiary of 100% of the capital stock or other equity interests of a
Target.
ERISA: the Employee Retirement Income Security Act of 1974, and any successor
-----
statute thereto, and the rules, regulations and legally binding policies
promulgated thereunder, as amended and in effect from time to time.
ERISA Affiliate: any Person who is a member of a group which is under common
---------------
control with any Borrower, who together with such Borrower is treated as a
single employer within the meaning of Section 414(b), (c) and (m) of the Code.
Event of Default: any of the Events of Default set forth in Section 8.1.
----------------
Excess Cash Flow: for any period, (i) the Operating Cash Flow of Borrowers
----------------
for such period, (ii) plus Accounts Decrease, if any, for such period, and (iii)
----
minus, the aggregate of the following for such period: (A) Debt Service, (B)
- -----
amounts actually paid by Borrowers with respect to Capital Expenditures
permitted to be incurred pursuant to this Loan Agreement, whether or not under
the definition "Capital Expenditures" such Capital Expenditures were deemed to
be made during such period, but excluding any such amounts paid from the
proceeds of Permitted Senior Indebtedness, and (C) Accounts Increase, if any.
Excess Interest: as defined in subsection 2.3.4.
---------------
Existing Acquisition Instruments: collectively, (i) the SoftEasy Acquisition
--------------------------------
Instruments, (ii) the Commercial Acquisition Instruments, (iii) the OPMS
Acquisition Instruments, (iv) the Pace Acquisition Instruments and (v) the Polci
Acquisition Instruments.
Existing Amended and Restated Loan Agreement: as defined in the Preliminary
--------------------------------------------
Statement of this Loan Agreement.
Existing Loan Instruments: collectively, the agreements, documents and
-------------------------
instruments set forth on EXHIBIT 1.1(A).
FINOVA: as defined in the Preamble to this Loan Agreement.
------
Fiscal Year: shall mean the fiscal year of Borrowers for financial accounting
-----------
purposes, which fiscal year ends on January 31.
Funding Date: the date of disbursement of any Advance of the Acquisition
------------
Loan.
9
<PAGE>
GAAP: generally accepted accounting principles as in effect from time to
----
time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or any
successor thereto.
Good Funds: United States Dollars available in Federal funds to FINOVA at or
----------
before 2:00 p.m., Phoenix time, on a Business Day.
Governmental Body: any foreign, federal, state, municipal or other
-----------------
government, or any department, commission, board, bureau, agency, public
authority or instrumentality thereof or any court or arbitrator.
Hazardous Materials: any hazardous, toxic, dangerous or other waste,
-------------------
substance or material defined as such in, regulated by or for purposes of any
Environmental Law.
HCD: as defined in the Preamble of this Loan Agreement.
---
ICS: as defined in the Preamble of this Loan Agreement.
---
Incipient Default: any event of condition which, with the giving of notice or
-----------------
the lapse of time, or both, would become an Event of Default.
Indebtedness: all liabilities, obligations and reserves, contingent or
------------
otherwise, which, in accordance with GAAP, would be reflected as a liability on
a balance sheet or would be required to be disclosed in a financial statement,
including, without duplication: (i) Indebtedness for Borrowed Money, (ii)
obligations secured by any Lien upon Property, (iii) guaranties, letters of
credit and other contingent obligations and (iv) liabilities in respect of
unfunded vested benefits under any Pension Plan or in respect of withdrawal
liabilities incurred under ERISA by any Borrower or any of its ERISA Affiliates
to any Multiemployer Plan.
Indebtedness for Borrowed Money: without duplication, all Indebtedness (i) in
-------------------------------
respect of money borrowed, (ii) evidenced by a note, debenture or other like
written obligation to pay money (including, without limitation, all of
Borrowers' Obligations and Permitted Senior Indebtedness), (iii) in respect of
rent or hire of Property under Capitalized Leases or for the deferred purchase
price of Property, (iv) in respect of obligations under conditional sales or
other title retention agreements and (v) all guaranties of any or all of the
foregoing.
InfoCure: as defined in the Preamble of this Loan Agreement.
--------
Initial Loan Instruments: collectively,
------------------------
(i) this Loan Agreement;
10
<PAGE>
(ii) the Notes;
(iii) a Contribution Agreement;
(iv) a Master Reaffirmation Agreement among the Borrowers as of the
Restatement Effective Date and FINOVA;
(v) a Reaffirmation of Subordination Agreement with respect to (a) each of
KComp Subordination Agreements, (b) the Commercial Subordination
Agreement and (c) the Polci Subordination Agreement;
(vi) a Security Agreement executed by MD Acquisition, Inc.;
(vii) a Pledge Agreement with respect to the capital stock of MD Acquisition,
Inc.;
(viii) a power of attorney executed by MD Acquisition, Inc.;
(ix) an Assignment of Leases executed by MD Acquisition, Inc.;
(x) an Environmental Certificate executed by MD Acquisition, Inc.;
(xi) Mortgages, if any;
(xii) an Assignment of Acquisition Instruments in connection with the Micro-
Software Acquisition;
(xiii) a Closing Certificate;
(xiv) a Solvency Certificate;
(xv) an initial notice of borrowing;
(xvi) such Uniform Commercial Code financing statements as FINOVA may require
in order to perfect the Security Interests; and
(xvii) such other instruments and documents as FINOVA reasonably may require
in connection with the transactions contemplated by this Loan
Agreement.
Instruments: collectively, (i) the Loan Instruments, (ii) the Acquisition
-----------
Instruments, (iii) the Existing Acquisition Instruments, (iv) the KComp Notes,
(v) the Commercial Subordinated Note, (vi) the Polci Subordinated Note, (vii)
the Micro-Software Acquisition Instruments and (viii) each subordination
agreement executed and delivered in connection with the transactions
contemplated by the Loan Instruments.
11
<PAGE>
Joinder to Loan Agreement: a joinder to this Loan Agreement pursuant to which
-------------------------
any Person shall become a "Borrower" hereunder.
KComp: as defined in the Preamble of this Loan Agreement.
-----
KComp Notes: shall mean, collectively, (i) that certain Promissory Note dated
-----------
July 9, 1997 in the original principal amount of $46,645.25 made by KComp
payable to the order of Marc Kloner, (ii) that certain Promissory Note dated
July 9, 1997 in the original principal amount of $60,141.92 made by KComp
payable to the order of John Mayne, (iii) that certain Promissory Note dated
July 9, 1997 in the original principal amount of $24,092.14 made by KComp
payable to the order of Mark Diamond and (iv) that certain Promissory Note dated
July 9, 1997 in the original principal amount of $119,120.69 made by KComp
payable to the order of Craig Bourne.
KComp Subordination Agreements: collectively, the subordination agreements
------------------------------
among KComp, FINOVA and each holder of the KComp Notes.
Landlord: a lessor under a Lease.
--------
Landlord Consent: a consent from a Landlord in form and substance
----------------
satisfactory to FINOVA.
Lease: any lease of real estate under which any Borrower is the lessee or
-----
sublessee.
Leasehold Property: any real estate which is the subject of a Lease.
------------------
License Agreements: all license agreements pursuant to which any Borrower is
------------------
licensed to use the computer software or similar Property of any other Person in
connection with the business of such Borrower.
Licenses: all licenses, permits, consents, approvals and authority issued by
--------
any Governmental Body in connection with the operation of the business of any
Borrower.
Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or security
----
interest of any kind, or the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or other title retention
agreement.
Loan Agreement: this Second Amended and Restated Loan Agreement and any
--------------
amendments or supplements hereto.
Loan Amendment Fee: as defined in Section 2.7.
------------------
12
<PAGE>
Loan Instruments: collectively, (i) the Initial Loan Instruments, (ii) the
----------------
Existing Loan Instruments and (iii) the Acquisition Loan Instruments, including,
without limitation, the Acquisition Loan Instruments executed and delivered in
connection with the Micro-Software Acquisition.
Loan Year: a period of time from the Original Closing Date or any anniversary
---------
of the Original Closing Date to the immediately succeeding anniversary of the
Original Closing Date.
Loans: collectively, the Term Loan and the Acquisition Loan.
-----
Make Whole Premium: as defined in subsection 2.6.1(e)(i).
------------------
Master Reaffirmation Agreement: a master reaffirmation agreement among
------------------------------
Borrowers and FINOVA executed and delivered in connection with a Permitted
Acquisition or otherwise, in each case in form and substance satisfactory to
FINOVA.
Material Adverse Effect: (i) a material adverse effect upon the business,
-----------------------
operations, Property, profits or condition (financial or otherwise) of the
Borrowers as a whole or upon the validity, enforceability or priority of the
Security Interests or (ii) a material impairment of the ability of the Borrowers
as a whole to perform their obligations under any Loan Instrument or of FINOVA
to enforce or collect any of Borrowers' Obligations.
Market Event: shall mean a sale or disposition of a Subsidiary or all or
------------
substantially all of the Property of any Borrower, in each case subject to the
applicable provisions of this Loan Agreement.
Market Refinancing Event: the prepayment, performance and satisfaction in
------------------------
full of all of Borrowers' Obligations (other than the making of the Contingent
Obligation Payment) pursuant to the applicable terms of this Loan Agreement.
Maximum Rate: as defined in subsection 2.3.4.
------------
MD Acquisition, Inc.: as defined in the Preamble of this Loan Agreement.
--------------------
Micro-Software Acquisition: the acquisition by MD Acquisition, Inc. of
--------------------------
substantially all of the Property of Micro-Software Seller pursuant to the
Micro-Software Acquisition Instruments.
Micro-Software Acquisition Instruments: that certain Asset Purchase Agreement
--------------------------------------
dated as of February 19, 1998 among Micro-Software Seller, MD Acquisition, Inc.
and InfoCure, and all other agreements, documents and instruments executed and
delivered pursuant thereto.
13
<PAGE>
Micro-Software Seller: collectively, Micro-Software Designs, Inc., a New York
---------------------
corporation, Joseph Walsh, an individual, and Sarah Walsh, an individual.
Millard-Wayne: as defined in the Preamble of this Loan Agreement.
-------------
Mortgage: a mortgage on a parcel of Real Estate in favor of FINOVA, in form
--------
and substance satisfactory to FINOVA.
Multiemployer Plan: any multiemployer plan as defined pursuant to Section
------------------
3(37) of ERISA to which any Borrower or any of its ERISA Affiliates makes, or
accrues an obligation to make contributions, or has made, or been obligated to
make, contributions within the preceding six years.
Multiplier: shall be equal to (i) seven (7) if the COP Calculation Date
----------
occurs during the period commencing on the Original Closing Date and ending on
the last day of Borrowers' Fiscal Year ending January 31, 1999, (ii) six (6) if
the COP Calculation Date occurs during the period commencing on February 1, 1999
and ending on the day immediately preceding the COP Maturity Payment Date and
(iii) five (5) if the COP Calculation Date occurs on the COP Maturity Payment
Date.
Notes: collectively, the Term Note and the Acquisition Loan Note.
-----
Operating Agreements: all right-of-entry agreements, access agreements,
--------------------
advertising contracts, equipment leases, agreements pursuant to which any Person
provides electronic data service to any Borrower, service contracts and similar
agreements relating to the operation of the business of any Borrower, excluding
the Leases.
Operating Cash Flow: for any period, the net income of each Borrower for such
-------------------
period:
(i) plus the sum of the following (without duplication), to the extent
----
deducted in determining such net income of such Borrower for such
period:
(A) losses from sales, exchanges and other dispositions of Property
not in the ordinary course of business;
(B) interest, fees and other charges paid or accrued on Indebtedness,
including, without limitation, interest on Capitalized Leases
that is imputed in accordance with GAAP;
(C) depreciation and amortization;
14
<PAGE>
(D) extraordinary and non-recurring losses not in the ordinary course
of business;
(E) casualty losses to the extent covered by casualty insurance;
(F) taxes accrued but not paid during such period; and
(G) any other non-cash item deducted in determining such net income;
(ii) minus the sum of the following (without duplication), to the extent
-----
included in determining such net income for such period:
(A) gains from sales, exchanges and other dispositions of Property
not in the ordinary course of business; and
(B) proceeds of any insurance other than business interruption
insurance.
Operating Lease: any lease which, under GAAP, is not required to be
---------------
capitalized.
OPMS: as defined in the Preamble of this Loan Agreement.
----
OPMS Acquisition: the acquisition by InfoCure of 100% of the issued and
----------------
outstanding capital stock of OPMS.
OPMS Acquisition Instruments: all agreements, documents and instruments
----------------------------
executed and delivered by InfoCure, OPMS and the seller thereunder in connection
with the OPMS Acquisition.
Original Borrowers: shall mean all of the Borrowers as of the Restatement
------------------
Effective Date other than MD Acquisition, Inc.
Original Closing Date: October 29, 1997.
---------------------
Pace: as defined in the Preamble of this Loan Agreement.
----
Pace Acquisition: the acquisition by InfoCure of 100% of the issued and
----------------
outstanding capital stock of Pace.
Pace Acquisition Instruments: all agreements, documents and instruments
----------------------------
executed and delivered by InfoCure, Pace and the seller thereunder in connection
with the Pace Acquisition.
15
<PAGE>
PBGC: the Pension Benefit Guaranty Corporation or any Governmental Body
----
succeeding to the functions thereof.
Pension Plan: any Employee Benefit Plan, other than a Multiemployer Plan,
------------
which is subject to the provisions of Part 3 of Title I of ERISA, Title IV of
ERISA, or Section 412 of the Code and which (i) is maintained for employees of
any Borrower or any of its ERISA Affiliates, or (ii) has at any time within the
preceding six years been maintained for the employees of any Borrower or any of
its current or former ERISA Affiliates.
Permitted Acquisitions: an Acquisition funded in whole or in part with the
----------------------
proceeds of an Advance of the Acquisition Loan.
Permitted Liens: any of the following Liens:
---------------
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges, which either are
(A) not delinquent or (B) being contested diligently and in good faith
by appropriate proceedings, and as to which the applicable Borrower
has set aside reserves on its books which are satisfactory to FINOVA;
(iv) statutory Liens, such as mechanic's, materialman's, warehouseman's,
carrier's or other like Liens, incurred in good faith in the ordinary
course of business, provided that the underlying obligations relating
to such Liens are paid in the ordinary course of business, or are
being contested diligently and in good faith by appropriate
proceedings and as to which the applicable Borrower has set aside
reserves on its books satisfactory to FINOVA, or the payment of which
obligations are otherwise secured in a manner satisfactory to FINOVA;
(v) zoning ordinances, easements, licenses, reservations, provisions,
covenants, conditions, waivers or restrictions on the use of Property
and other title exceptions, in each case, that are acceptable to
FINOVA;
(vi) Liens in respect of judgments or awards with respect to which no Event
of Default would exist pursuant to subsection 8.1.6; and
(vii) Liens to secure payment of insurance premiums (A) to be paid in
accordance with applicable laws in the ordinary course of business
relating to payment of worker's compensation, or (B) that are required
for the participation in any fund in connection with worker's
compensation,
16
<PAGE>
unemployment insurance, old-age pensions or other social security
programs.
Permitted Prior Liens: any of the following Liens:
---------------------
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and (iv) of the
definition of Permitted Liens that are accorded priority to the
Security Interests by law; and
(iii) the Permitted Liens described in clauses (v) and (vii) of the
definition of Permitted Liens, subject to the limitations set
forth therein.
Permitted Senior Indebtedness: Indebtedness, other than Borrowers'
-----------------------------
Obligations, incurred to purchase tangible personal property or Indebtedness
incurred to lease tangible personal property pursuant to Capitalized Leases,
provided that (i) such aggregate Indebtedness of the Borrowers existing as of
the Original Closing Date shall not in the aggregate exceed $150,000, (ii)
during any Loan Year after the Original Closing Date the aggregate amount of
such Indebtedness of the Borrowers at any one time outstanding during such Loan
Year shall not exceed $2,500,000 and payments made with respect to such
Indebtedness during such Loan Year shall not exceed $750,000 in the aggregate,
and (iii) no Event of Default exists at the time or will be caused as a result
of the incurrence of any Indebtedness described in clause (ii).
Permitted Senior Indebtedness Liens: Liens that secure Permitted Senior
-----------------------------------
Indebtedness, provided that each such Lien attaches only to the Property
purchased or leased with the proceeds of the Permitted Senior Indebtedness
incurred with respect to such Property.
Person: any individual, firm, corporation, business enterprise, trust,
------
association, joint venture, partnership, limited liability company or
partnership, Governmental Body or other entity, whether acting in an individual,
fiduciary or other capacity.
Pledge Agreement: a pledge agreement executed by InfoCure pursuant to which
----------------
FINOVA is granted a Lien upon any of the Subsidiaries Capital Stock, in form and
substance satisfactory to FINOVA.
Polci: as defined in the Preamble of this Loan Agreement.
-----
Polci Acquisition: the acquisition by Polci of substantially all of the
-----------------
Property of Polci Seller pursuant to the Polci Acquisition Instruments.
17
<PAGE>
Polci Acquisition Instruments: that certain Asset Purchase Agreement dated as
-----------------------------
of November 18, 1997 but effective as of October 1, 1997 among Polci Seller,
Polci, InfoCure, James R. Hegler Revocable Living Trust U/A/D June 15, 1990,
Phyllis J. Hegler Revocable Living Trust U/A/D June 15, 1990, Margery Roberts,
as Personal Representative of the Estate of Edward Roberts, and James R. Helger,
and all other documents and instruments executed and delivered pursuant thereto.
Polci Seller: Professional On-Line Computer, Inc., a Michigan corporation.
------------
Polci Subordination Agreement: that certain Subordination Agreement of even
-----------------------------
date herewith among Polci, InfoCure, the James R. Hegler Revocable Living Trust
U/A/D June 15, 1990, and FINOVA.
Polci Subordinated Note: that certain Promissory Note dated as of October 1,
-----------------------
1997 in the original principal amount of $89,733 made by Polci and InfoCure
payable to the order of the James R. Hegler Revocable Living Trust U/A/D June
15, 1990.
Prepayment Premium: as defined in subsection 2.6.1(b).
------------------
Principal Balance: the unpaid principal balance of the Loans or any specified
-----------------
portion thereof outstanding from time to time.
Property: all types of real, personal or mixed property and all types of
--------
tangible or intangible property.
Qualified Depository: a member bank of the Federal Reserve System having a
--------------------
combined capital and surplus of at least $100,000,000.
Reaffirmation of Subordination Agreement: a reaffirmation of subordination
----------------------------------------
agreement executed by the applicable Borrowers and such other Persons as
required by FINOVA, in form and substance satisfactory to FINOVA.
Real Estate: any real estate which is owned, beneficially or otherwise, by
-----------
any Borrower.
Reinvestment Yield: as defined in subsection 2.6.1(e)(iv).
------------------
Remaining Scheduled Payment Amount: as defined in subsection 2.6.1(e)(iii).
----------------------------------
Restatement Effective Date: the date on which the Restatement Closing shall
--------------------------
have occurred.
Restatement Closing: this Loan Agreement being deemed to becoming effective
-------------------
pursuant to Section 4.1.
18
<PAGE>
Rovak: as defined in the Preamble of this Loan Agreement.
-----
Securities Act: the Securities Act of 1933, the Securities Exchange Act of
--------------
1934, any successor statute thereto, and the rules, regulations and legally
binding policies of the Securities Exchange Commission promulgated thereunder,
as amended and in effect from time to time.
Security Interests: the Liens in the Collateral granted to FINOVA pursuant to
------------------
the Loan Instruments and any other document or instrument now or hereafter
executed by any Borrower or any other Person which purports to grant a Lien on
the Property of such Borrower or such other Person in favor of FINOVA.
Seller's Consent: a consent to an Assignment of Acquisition Instruments, in
----------------
form and substance reasonably satisfactory to FINOVA, to be executed by the
seller of the Property which is the subject of a Permitted Acquisition.
Senior Debt Service: during any period, all payments of principal, interest,
-------------------
premium, loan fees and other charges with respect to Borrowers' Obligations,
which payments are required or permitted to be made pursuant to this Loan
Agreement and are due and payable during such period.
Senior Debt Service Coverage Ratio: the ratio of (i) consolidated Adjusted
----------------------------------
Operating Cash Flow for the twelve-month period ending on the last day of any
quarter less any payments made during such twelve-month period with respect to
Capital Expenditures to (ii) Senior Debt Service of Borrowers for such twelve-
month period.
SoftEasy: as defined in the Preamble of this Loan Agreement.
--------
SoftEasy Seller: collectively, Hal M. Segal, an individual, and Bart C Segal,
---------------
an individual.
SoftEasy Acquisition: the acquisition by InfoCure of all of the equity
--------------------
interests of SoftEasy.
SoftEasy Acquisition Instruments: all agreements and other documents executed
--------------------------------
and delivered in connection with the SoftEasy Acquisition.
Solvency Certificate: a solvency certificate executed by Borrowers, in form
--------------------
and substance satisfactory to FINOVA.
Stated Rate: as defined in subsection 2.3.4.
-----------
Subsidiaries: all of the Borrowers except InfoCure.
------------
19
<PAGE>
Subsidiaries Capital Stock: all of the issued and outstanding capital stock
--------------------------
of the Subsidiaries and all warrants, options and other rights to purchase
capital stock of the Subsidiaries.
Subsidiary: any of the Subsidiaries.
----------
Target: (i) any other Person engaged in business activities primarily
------
related to the business activities of the then existing Borrowers or (ii) a
business unit or asset group of any other Person which is used in business
activities primarily related to the business activities of the then existing
Borrowers, in each case acquired or proposed to be acquired in an Acquisition.
Termination Event: (i) a "Reportable Event" described in Section 4043 of
-----------------
ERISA and the regulations issued thereunder; or (ii) the withdrawal of any
Borrower or any of its ERISA Affiliates from a Pension Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2); or
(iii) the termination of a Pension Plan, the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA; or (iv) the institution of proceedings
to terminate, or the appointment of a trustee with respect to, any Pension Plan
by the PBGC; or (v) any other event or condition which would constitute grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; or (vi) the partial or complete
withdrawal of any Borrower or any of its ERISA Affiliates from a Multiemployer
Plan; or (vii) the imposition of a lien pursuant to Section 412 of the Code or
Section 302 of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA; or (ix) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
Term Loan: the term loan in the aggregate amount of $10,000,000 to be made by
---------
FINOVA to Borrowers pursuant to this Loan Agreement.
Term Note: a promissory note in the principal amount of $10,000,000 executed
---------
and delivered by Borrowers to FINOVA to evidence the Term Loan, and any notes
issued in substitution thereof pursuant to the terms of this Loan Agreement, in
each case in form and substance satisfactory to FINOVA.
Unused Commitment Fee: as defined in Section 2.9.
---------------------
Weighted Average Life to Maturity: as defined in subsection 2.6.1(e)(v).
---------------------------------
1.2 TIME PERIODS. In this Loan Agreement and the other Loan Instruments, in
------------
the computation of periods of time from a specified date to a later specified
date, (i) the word
20
<PAGE>
"from" means "from and including," (ii) the words "to" and "until" each mean
"to, but excluding" and (iii) the words "through," "end of" and "expiration"
each mean "through and including." Unless otherwise specified, all references
in this Loan Agreement and the other Loan Instruments to (i) a "month" shall be
deemed to refer to a calendar month, (ii) a "quarter" shall be deemed to refer
to a calendar quarter and (iii) a "year" shall be deemed to refer to a calendar
year.
1.3 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms not
-----------------------------------
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made and all financial statements required to be delivered
pursuant hereto shall be prepared in accordance with GAAP as in effect at the
time of such interpretation, determination or preparation, as applicable. In
the event that any Accounting Changes (as hereinafter defined) occur and such
changes result in a change in the method of calculation of financial covenants,
standards or terms contained in this Loan Agreement, then Borrowers and FINOVA
agree to enter into negotiations to amend such provisions of this Loan Agreement
so as to reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of Borrower shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
For purposes hereof, "Accounting Changes" shall mean (i) changes in generally
accepted accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants (or any successor
thereto) or other appropriate authoritative body and (ii) changes in accounting
principles as approved by the Accountants.
1.4 REFERENCES. All references in this Loan Agreement to "Article,"
----------
"Section," "subsection," "subparagraph," "clause" or "Exhibit," unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
1.5 FINOVA'S DISCRETION. Whenever the terms "satisfactory to FINOVA,"
-------------------
"determined by FINOVA," "acceptable to FINOVA," "FINOVA shall elect," "FINOVA
shall request," "at the option or election of FINOVA," or similar terms are used
in the Loan Instruments, except as otherwise specifically provided therein, such
terms shall mean satisfactory to, at the election or option of, determined by,
acceptable to or requested by FINOVA, in its sole and unlimited discretion.
1.6 BORROWER'S KNOWLEDGE. Any statements, representations or warranties in
--------------------
the Loan Instruments that are based upon the knowledge or best knowledge of a
Borrower or an officer thereof shall be deemed to have been made after due
inquiry by the officer making such statements, representations or warranties on
behalf of such Borrower or himself or herself, as applicable, with respect to
the matter in question, and no Borrower shall be imputed with knowledge of any
fact or circumstance unless an executive officer of such Borrower shall have or
should have had actual knowledge of such fact or circumstance.
21
<PAGE>
ARTICLE II
----------
LOANS; TERMS OF PAYMENT; AND CONTINGENT OBLIGATION PAYMENT
----------------------------------------------------------
2.1 LOANS.
-----
2.1.1 TERM LOAN. The Term Loan shall consist of a term loan from FINOVA
---------
to Borrowers in the aggregate amount of $10,000,000. Borrowers agree and
acknowledge that on the Restatement Effective Date, the Term Loan shall be
deemed to have been fully disbursed and, on such date, the Principal Balance
of the Term Loan shall be equal to $9,972,500.00, such amount constituting (i)
all of the loans outstanding under the Existing Loan Agreement as of the
Restatement Effective Date, plus (ii) a portion of the Term Loan to be
----
disbursed on the Restatement Effective Date in an amount equal to
$2,141,881.14, less (iii) $27,500, the amount of principal repaid by Borrowers
----
under the Existing Loan Agreement.
2.1.2 ADVANCES OF THE ACQUISITION LOAN.
--------------------------------
(a) FINOVA shall from time to time, on or before February 24,
1999, make Advances of the Acquisition Loan to Borrowers provided (i)
at no time shall the aggregate amount of such Advances of the
Acquisition Loan exceed $20,000,000 and (ii) the terms and conditions
set forth in paragraph (b) of this subsection 2.1.2 shall have been
satisfied with respect to each Advance of the Acquisition Loan made
after the Restatement Effective Date. FINOVA shall have no obligation
to make Advances of the Acquisition Loan subsequent to February 24,
1999.
(b) CONDITIONS TO ADVANCES OF THE ACQUISITION LOAN. The obligation
----------------------------------------------
of FINOVA to make any Advances of the Acquisition Loan shall be
subject to the satisfaction of each of the following conditions:
(i) no Event of Default shall exist or be created by the
disbursement of such Advance of the Acquisition Loan;
(ii) each Advance of the Acquisition Loan shall be in a
minimum amount of $500,000 and integral multiples of $100,000
in excess of that amount;
(iii) FINOVA shall have received not less than thirty (30)
days prior to the proposed Funding Date, a description of the
operations history and relevant market information with
respect to the applicable Target, a discussion of competition
and information regarding key personnel with respect to such
Target, and such other financial statements, reports,
22
<PAGE>
projections and information with respect to the operations of
such Target as FINOVA shall require;
(iv) FINOVA shall have received a Notice of
Borrowing/Disbursement Request from Borrowers in the form of
EXHIBIT 2.1.2 with respect to each requested Advance no later
than 12:00 p.m., Chicago time, at least two (2) Business Days
in advance of the proposed Funding Date with respect to such
Advance, which Funding Date shall be on a Business Day;
(v) all of the terms and conditions of Section 4.2 shall
have been satisfied with respect to the subject Acquisition;
(vi) the ratio of (A) the Adjusted Operating Cash Flow of
Borrowers for the twelve-month period ending on the last day
of the most recent month preceding the applicable Funding Date
for which Borrowers have delivered to FINOVA the financial
statements and other information reasonably necessary to
enable FINOVA to make such calculation less any payments made
----
during such twelve-month period with respect to Capital
Expenditures to (B) Adjusted Debt Service of Borrowers for
such twelve-month period, shall be greater than 1.50;
(vii) on the applicable Funding Date the representations and
warranties of Borrowers set forth in the Loan Instruments
shall be true and correct when made and at and as of the time
of such Funding Date, except to the extent that such
representations and warranties expressly relate to an earlier
date; and
(viii) FINOVA shall have received a certificate executed by
the Chief Financial Officer that the Borrowers are not
prohibited by the Subordinated Loan Instruments from incurring
the Indebtedness in connection with such Advance of the
Acquisition Loan or from consummating such Acquisition.
2.2 USE OF PROCEEDS, NOTES AND REBORROWING.
-------------------------
2.2.1 USE OF PROCEEDS. The proceeds of the Loans shall be used solely
---------------
for Permitted Acquisitions and to pay related transaction costs.
2.2.2 NOTES. The Term Loan and the Acquisition Loan shall be evidenced
-----
by the Term Note and the Acquisition Loan Note, respectively.
2.2.3 REBORROWING. Borrowers may not reborrow all or any portion of the
-----------
Term Loan or the Acquisition Loan which is repaid or prepaid.
23
<PAGE>
2.3 INTEREST.
--------
2.3.1 INTEREST RATES AND PAYMENT. Except as provided in subsection
--------------------------
2.3.2, (i) the Principal Balance of the Term Loan shall bear interest at a
rate equal to nine and one half percent (9.5%) per annum and (ii) the
Principal Balance of the Acquisition Loan shall bear interest (A) until March
31, 1999, at the Base Rate then in effect from time to time plus 1.0% and (B)
----
thereafter, at the Base Rate then in effect from time to time plus the
----
Applicable Margin. As used in this Loan Agreement, the "Applicable Margin"
shall be determined on the first day of each quarter (the "Determination
Date") commencing with March 1, 1999 and shall mean the percentage set forth
opposite the applicable Senior Debt Service Coverage Ratio as calculated as of
the last day of the second quarter preceding such quarter:
Senior Debt
Service Coverage Ratio Applicable Margin
---------------------- -----------------
greater than or equal to 3.25 0.50%
greater than or equal to 2.75, 0.75%
but less than 3.25
greater than or equal to 2.25, 0.90%
but less than 2.75
less than 2.25 1.00%
Interest shall be payable monthly in arrears on the first Business Day of
each month commencing with the first month following the Original Closing
Date.
2.3.2 DEFAULT RATE. During a Default Rate Period, Borrowers'
------------
Obligations shall bear interest at the Default Rate.
2.3.3 INTEREST COMPUTATION. Interest shall be computed on the basis of
--------------------
a year consisting of 360 days and charged for the actual number of days during
the period for which interest is being charged. In computing interest, the
date of funding shall be included and the date of payment shall be excluded.
2.3.4 MAXIMUM INTEREST. Notwithstanding any provision to the contrary
----------------
contained herein or in any other Loan Instrument, FINOVA shall not collect a
rate of interest on any obligation or liability due and owing by Borrowers to
FINOVA in excess of the maximum contract rate of interest permitted by
applicable law ("Excess Interest"). FINOVA and Borrowers agree that the
interest laws of the State of Arizona shall govern
24
<PAGE>
the relationship among them and understand and believe that the transactions
contemplated by the Loan Instruments comply with the usury laws of the
State of Arizona, but in the event of a final adjudication to the contrary,
Borrowers shall be obligated to pay, nunc pro tunc, to FINOVA only such
-------------
interest as then shall be permitted by the laws of the state found to
govern the contract relationship among FINOVA and Borrowers. If any Excess
Interest is provided for or determined by a court of competent jurisdiction
to have been provided for in this Loan Agreement or any other Loan
Instrument, then in such event (i) no Borrower shall be obligated to pay
such Excess Interest, (ii) any Excess Interest collected by FINOVA shall
be, at FINOVA's option, (A) applied to the Principal Balance of the Loans
in such manner as FINOVA may elect or to accrued and unpaid interest not in
excess of the maximum rate permitted by applicable law (the "Maximum Rate")
or (B) refunded to the payor thereof, (iii) the interest rates provided for
herein (the "Stated Rate") shall be automatically reduced to the Maximum
Rate and the Loan Instruments shall be deemed to have been, and shall be,
modified to reflect such reduction and (iv) no Borrower shall have any
action against FINOVA for any damages arising out of the payment or
collection of such Excess Interest; provided, however, that if at any time
-------- -------
thereafter the Stated Rate is less than the Maximum Rate, Borrowers shall,
to the extent permitted by law, continue to pay interest at the Maximum
Rate until such time as the total interest received by FINOVA is equal to
the total interest which FINOVA would have received had the Stated Rate
been (but for the operation of this provision) the interest rate payable.
Thereafter, the interest rate payable shall be the Stated Rate unless and
until the Stated Rate again exceeds the Maximum Rate, in which event the
provisions contained in this subsection 2.3.4 shall again apply.
2.4 PRINCIPAL PAYMENTS.
------------------
2.4.1 TERM LOAN. The Principal Balance of the Term Loan shall be
---------
payable by Borrowers, jointly and severally, in fifty-five (55) consecutive
monthly installments on the first Business Day of each month commencing on
the first Business Day of April, 1998. Each of the first fifty-four (54)
installments shall be in the amount of $181,318.18, and the last
installment shall be in the amount of the then remaining Principal Balance
of the Term Loan.
2.4.2 ACQUISITION LOAN. The Principal Balance of the Acquisition Loan
----------------
shall be payable by Borrowers, jointly and severally, in fifty-five (55)
consecutive monthly installments on the first Business Day of each month
commencing on the first Business Day of April, 1998 (the "First Payment
Date"). Each of the first fifty-four (54) installments shall be in an
amount equal to (i) the Principal Balance of the Acquisition Loan as of the
last day of the month immediately preceding the month in which such
installment is payable divided by (ii) the difference of (a) 60 less (b)
---------- ----
the number of full months which shall have passed since the First Payment
Date (not including the month in which such installment is to be made), and
the last installment shall be in the amount of the then remaining Principal
Balance of the Acquisition Loan.
25
<PAGE>
2.4.3 FINAL PAYMENT. The then remaining Principal Balance of the Term
-------------
Loan and the Acquisition Loan, if any, and any other sums which then are
due and payable pursuant to the terms of the Loan Instruments, shall be due
and payable on October 28, 2002.
2.5 LATE CHARGES. If a payment of principal or interest to be made
------------
pursuant to this Loan Agreement or the payment of the Contingent Obligation
Payment becomes past due for a period in excess of five (5) days, Borrowers
shall pay on demand to FINOVA a late charge of 5.0% of the amount of such
overdue payment.
2.6 PREPAYMENTS.
-----------
2.6.1 VOLUNTARY PREPAYMENTS. Borrowers may at any time and from time to
---------------------
time voluntarily prepay all or any portion of the Principal Balance, subject
to the following terms and conditions:
(a) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF PREPAYMENTS. Not less
------------------------------------------------------
than 20 days prior to the date upon which Borrowers desire to make any
such voluntary prepayment, Borrowers shall deliver to FINOVA notice of
their intention to prepay, which notice shall state the prepayment date
and the amount of the Principal Balance to be prepaid. No partial
prepayment of the Principal Balance shall be in an amount less than
$100,000 or integral multiples of $100,000 in excess thereof. A
prepayment of the Principal Balance shall not be made more frequently
than once each month. If Borrowers deliver to FINOVA a notice of
prepayment and fail to make such prepayment, Borrowers shall reimburse
FINOVA on demand for any loss, cost and/or expense incurred by FINOVA as
a result of FINOVA's reliance on such notice.
(b) PREPAYMENT PREMIUM. Any prepayment of the Principal Balance
------------------
(other than a prepayment made pursuant to subsection 2.6.2(a)) shall be
accompanied by a payment (a "Prepayment Premium") of (i) 3% of the amount
prepaid during the first Loan Year; (ii) 2% of the amount prepaid during
the second Loan Year; and (iii) 1% of the amount prepaid during the
third, fourth or fifth Loan Years.
(c) ADDITIONAL PAYMENTS. Concurrently with any prepayment pursuant
-------------------
to this subsection 2.6.1, Borrowers shall pay to FINOVA accrued and
unpaid interest on the Principal Balance which is being prepaid to the
date on which FINOVA is in receipt of Good Funds, and any other sums
which are due and payable pursuant to the terms of any of the Loan
Instruments.
(d) APPLICATION OF VOLUNTARY PREPAYMENTS. Prepayments of the
------------------------------------
Principal Balance pursuant to this subsection 2.6.1 shall be applied to
the payment
26
<PAGE>
of the Loans in such manner as FINOVA shall determine in its sole and
absolute discretion.
(e) MAKE WHOLE PREMIUM. In addition to the premiums calculated
------------------
pursuant to (b) above, any prepayment of the Term Loan (including,
without limitation, any prepayment made pursuant to subsection 2.6.2(a))
shall be accompanied by a payment equal to the Make Whole Premium. The
following definitions shall apply in calculating the Make Whole Premium:
(i) "Make Whole Premium" means the positive difference, if any,
------------------
between (A) the Discounted Value immediately prior to any
prepayment of that portion of the Principal Balance of the Term
Loan which is being prepaid and (B) the Principal Balance of the
Term Loan, or portion thereof, being prepaid as of the date of
any such prepayment.
(ii) "Discounted Value" means the amount determined by
----------------
discounting the Remaining Scheduled Payment Amounts from their
respective due dates to the date of the prepayment of the Term
Loan, at a discount factor equal to the Reinvestment Yield.
(iii) "Remaining Scheduled Payment Amount" means the amount of
----------------------------------
each scheduled payment of the Principal Balance of and interest
on the Term Loan that would be due on or after the date of a
prepayment of the Term Loan if no prepayment of the Term Loan
were made prior to its scheduled due date.
(iv) "Reinvestment Yield" means the sum of (A) the rates shown
------------------
under the column heading "Ask YLD" for "Govt. Bonds & Notes" in
the "Treasury Bonds, Notes & Bills" section of The Wall Street
Journal, Western Edition, published on the Business Day prior to
the date of any proposed prepayment of the Term Loan for the
government bond or note with a maturity date having the closest
matching maturity to the Weighted Average Life to Maturity, or,
if there is more than one government bond or note with a maturity
date having the closest matching maturity to the Weighted Average
Life to Maturity, the highest of the rates shown in the "Ask YLD"
column for any such bond or note, plus (B) two percent (2%).
----
(v) "Weighted Average Life to Maturity" means the number of
---------------------------------
years (calculated to the nearest one-twelfth year) obtained by
dividing (A) the sum of the products obtained by multiplying each
remaining scheduled payment of principal under the Term Loan by
the number of years (calculated to the nearest one-twelfth) which
will elapse between the date of a prepayment of the Term Loan and
the scheduled due date of such
27
<PAGE>
remaining scheduled principal payments, by (B) the outstanding
Principal Balance of the Term Loan on such prepayment date.
2.6.2 MANDATORY PREPAYMENT.
--------------------
(a) EXCESS CASH FLOW PAYMENTS. Until Borrowers' Obligations are paid
-------------------------
and performed in full, for each Fiscal Year of Borrowers commencing with
the Fiscal Year of Borrowers ending January 31, 1999, Borrowers shall pay
to FINOVA an amount equal to 25% of the Excess Cash Flow for such Fiscal
Year provided that the Operating Cash Flow of Borrowers for such Fiscal
Year shall have been less than or equal to the Operating Cash Flow of
Borrowers for the immediately preceding Fiscal Year of Borrowers. Each
such payment shall be made within thirty (30) days after the date that
Borrowers are required to deliver to FINOVA the financial statements for
such Fiscal Year pursuant to subsection 6.3.3. Each Borrower agrees that
it will not take any actions primarily intended to decrease the amount
payable under this subsection 2.6.2(a) in anticipation of the calculation
referred to herein.
(b) Concurrently with any payment of the Principal Balance received by
FINOVA resulting from the exercise by FINOVA of any remedy available to
FINOVA subsequent to the occurrence of an Event of Default and the
acceleration of Borrowers' Obligations, Borrowers jointly and severally
shall pay to FINOVA a prepayment premium in an amount equal to the
prepayment premium which would be payable if such payment was made
pursuant to subsection 2.6.1.
(c) Prepayments received by FINOVA pursuant to this subsection 2.6.2
shall be applied in the following order of priority to the payment of:
(i) any and all sums which are due and payable pursuant to the terms of
the Loan Instruments, except the Principal Balance and accrued and unpaid
interest thereon, (ii) accrued and unpaid interest on the portion of the
Principal Balance being prepaid, (iii) any other accrued and unpaid
interest which is unpaid and (iv) the installments of the Principal
Balance in accordance with subsection 2.6.1(d).
2.7 LOAN AMENDMENT FEE. Borrowers shall pay to FINOVA on the Restatement
------------------
Effective Date a loan amendment fee of $200,000 (the "Loan Amendment Fee"),
which shall be deemed fully earned on the Restatement Effective Date, and shall
be in addition to any loan or similar fee paid to FINOVA by Borrowers pursuant
to the Existing Amended and Restated Loan Agreement or otherwise.
2.8 INTENTIONALLY OMITTED.
---------------------
2.9 UNUSED COMMITMENT FEE. Borrowers shall pay to FINOVA a fee (the
---------------------
"Unused Commitment Fee") on the first Business Day of each month, commencing
with the month of
28
<PAGE>
January, 1998 through and including December, 1998, in an amount equal to the
product of (i) the amount by which (a) for the months of January and February of
1998, $10,000,000, and (b) thereafter, $20,000,000, exceeds the daily average
outstanding Principal Balance of the Acquisition Loan during the immediately
preceding month, multiplied by (ii) one-half of one percent (0.5%) per annum.
---------- --
2.10 PAYMENTS AFTER EVENT OF DEFAULT. All payments received by FINOVA
-------------------------------
during the existence of an Event of Default shall be applied in accordance with
Section 8.4.
2.11 CONTINGENT OBLIGATION PAYMENT. Borrowers hereby jointly and
-----------------------------
severally agree to pay to FINOVA, at the time specified herein, a payment (the
"Contingent Obligation Payment") computed in the manner set forth in this
Section 2.11. The Contingent Obligation Payment shall be paid in one
installment and shall be equal to 2.0% of the product of (i) the Multiplier then
in effect multiplied by (ii) the amount by which (A) the COP Market Value
---------- --
calculated as of the COP Calculation Date exceeds (B) the COP Base Amount
calculated as of the COP Calculation Date. Subject to the proviso contained at
the end of this sentence, Borrowers shall make the Contingent Obligation Payment
to FINOVA in Good Funds on the earlier of (a) the date on which a Market
Refinancing Event shall have occurred and (b) the COP Maturity Payment Date;
provided, however, Borrowers shall make the Contingent Obligation Payment to
- -------- -------
FINOVA in Good Funds, if FINOVA so elects, on (x) the date of, and
simultaneously with, the occurrence of a Market Event or (y) on or before the
fifth (5th) day after the occurrence of any COP Default Event.
2.12 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made pursuant to
-----------------------------
the Loan Instruments by Borrowers shall be made by wire transfer of Good Funds
to the account of FINOVA at Citibank, N.A., 399 Park Avenue, New York, New York,
ABA 021000089, Credit: FINOVA Capital Corporation, Credit Account No. 40701338,
Reference: InfoCure Loan, Attn: Mary Kay Ross, or to such other account as
FINOVA shall notify Borrowers.
ARTICLE III
-----------
SECURITY
--------
Borrowers' Obligations shall be secured by a Lien upon all of the Collateral,
which at all times shall be superior and prior to all other Liens, except
Permitted Prior Liens.
29
<PAGE>
ARTICLE IV
----------
CONDITIONS OF CLOSING; ACQUISITIONS
-----------------------------------
4.1 CLOSING. This Loan Agreement shall not be deemed to be effective,
-------
and FINOVA shall not be obligated to disburse the unused portion of the Term
Loan or make the initial Advance of the Acquisition Loan, until all of the
following conditions precedent shall have been satisfied in a manner
satisfactory to FINOVA:
4.1.1 REPRESENTATIONS AND WARRANTIES. On the Restatement Effective
------------------------------
Date the representations and warranties of each Borrower set forth in the
Instruments to which such Borrower is a party shall be true and correct.
4.1.2 MICRO-SOFTWARE ACQUISITION. (i) FINOVA shall have received
--------------------------
evidence that immediately prior to or contemporaneously with the disbursement
of the Loans requested by Borrowers on the Restatement Effective Date, the
Micro-Software Acquisition shall have been consummated in accordance with the
terms of the Micro-Software Acquisition Instruments and as a result thereof
(A) MD Acquisition, Inc. shall have acquired good and marketable title to all
of the Property to be acquired by MD Acquisition, Inc. pursuant to the terms
of the Micro-Software Acquisition Instruments, free and clear of all Liens and
(B) any Indebtedness to be assumed by MD Acquisition, Inc. pursuant to the
terms of the Micro-Software Acquisition Instruments shall be in an amount and
otherwise satisfactory to FINOVA and (ii) none of the parties to the Micro-
Software Acquisition Instruments shall have failed to perform any material
obligation or covenant required by any of the Micro-Software Acquisition
Instruments to be performed or complied with by it on or before the
Restatement Effective Date.
4.1.3 DELIVERY OF DOCUMENTS. The following shall have been delivered to
---------------------
FINOVA, each duly authorized and executed, where applicable, and in form and
substance satisfactory to FINOVA:
(a) the Loan Instruments;
(b) good standing certificates for each Borrower from each of the
states in which such Borrower is organized and qualified to do business,
each dated a recent date prior to the Original Closing Date;
(c) copies of (i) the articles of incorporation of each Borrower,
together with all current and proposed amendments thereto, certified by
the Secretary of State of the state in which each such Person is
organized as of a recent date prior to the Original Closing Date; (ii)
the by-laws of each Borrower, together with all current and proposed
amendments thereto, certified by the corporate secretary of each
Borrower, (iii) copies of resolutions adopted by the board of directors
of each Borrower, each authorizing the execution and delivery by each
such Borrower of the Instruments to which such Borrower
30
<PAGE>
is a party and the consummation of the transactions contemplated thereby,
certified as of the Original Closing Date by the corporate secretary of
such Borrower;
(d) signature and incumbency certificates of the officers of each
Borrower;
(e) certified copies or executed originals of each of the following:
(1) the Polci Acquisition Instruments, the Commercial Acquisition
Instruments, the SoftEasy Acquisition Instruments, the OPMS
Acquisition Instruments, the Pace Acquisition Instruments and the
Micro-Software Acquisition Instruments;
(2) the Leases;
(3) the Licenses;
(4) the material License Agreements;
(5) the material Operating Agreements; and
(6) all instruments and documents evidencing Permitted Senior
Indebtedness existing as of the Restatement Effective Date;
(f) a Landlord Consent from each Landlord under each Lease;
(g) such other agreements, instruments, documents, certificates,
consents, waivers and opinions as FINOVA reasonably may request; and
(h) certificates representing 100% of the issued and outstanding
capital stock of the Subsidiaries and executed stock powers in form and
substance reasonably acceptable to FINOVA.
4.1.4 PERFORMANCE; NO DEFAULT. Each Borrower shall have performed
-----------------------
and complied with all agreements and conditions contained in the Instruments
to be performed by or complied with by such Person prior to or at the Closing,
and no Event of Default or Incipient Default shall then exist or result from
the making of any Advance on the Restatement Effective Date.
4.1.5 OPINIONS OF COUNSEL; DIRECTION FOR DELIVERY. FINOVA shall
-------------------------------------------
have received (i) an opinion dated the Restatement Effective Date from (A)
Morris, Manning & Martin, counsel to the Borrowers, and (B) from O'Connell
Flahtery & Attmore, LLP, counsel to the Micro-Software Seller, in each case
addressed to FINOVA, in such form and covering such matters as FINOVA may
require, and (ii) a copy of a letter in form and substance satisfactory to
FINOVA from the Borrowers addressed to the counsel set
31
<PAGE>
forth in (A) directing such counsel to deliver to FINOVA the foregoing opinion
described on (A).
4.1.6 APPROVAL OF INSTRUMENTS AND SECURITY INTERESTS. FINOVA shall
----------------------------------------------
have received evidence that the approval or consent shall have been obtained
from all Governmental Bodies and all other Persons whose approval or consent
is required to enable Borrowers to (i) enter into and perform their respective
obligations under the Instruments to which each such Person is a party and
(ii) grant the Security Interests to FINOVA.
4.1.7 SECURITY INTERESTS. All filings of Uniform Commercial Code
------------------
financing statements, all recordings of Mortgages and all other filings and
actions necessary to perfect and maintain the Security Interests as first,
valid and perfected Liens in the Property covered thereby, subject only to
Permitted Prior Liens, shall have been filed or taken and FINOVA shall have
received such UCC, state and federal tax Lien, pending suit, judgment and
other Lien searches as it deems necessary to confirm the foregoing.
4.1.8 INTENTIONALLY OMITTED.
---------------------
4.1.9 LICENSES. FINOVA shall have received evidence that (i) each
--------
Borrower is the licensee of all Licenses necessary for the operation of its
business and (ii) such Licenses are in full force and effect as of the
Restatement Effective Date and no event has occurred which could result in the
termination, revocation or non-renewal of any such License.
4.1.10 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS; INSPECTION.
---------------------------------------------------------
FINOVA shall have received the financial statements described in EXHIBIT
5.7.1 and the projections described in EXHIBIT 5.7.2. Each Borrower shall
have arranged for representatives of FINOVA to visit and inspect its
offices and properties.
4.1.11 MATERIAL ADVERSE EFFECT. No event shall have occurred since
-----------------------
July 31, 1997 which has had or could have a Material Adverse Effect. No
litigation or governmental proceedings or investigation shall be pending,
which in the opinion of FINOVA could, if adversely determined, have a
Material Adverse Affect.
4.1.12 USE OF ASSETS. FINOVA shall be satisfied that each Borrower at
-------------
all times shall be entitled to the use and quiet enjoyment of all Property
necessary for the continued ownership and operation of the business conducted
by such Borrower, including, without limitation, the use of equipment,
fixtures, Licenses, offices and means of ingress and egress thereto, necessary
for the operation of such business.
4.1.13 BROKER FEES. If the services of a broker or other agent have
-----------
been used in connection with the Loans, all fees owed to such broker or agent
shall have been paid by Borrowers and FINOVA shall have received evidence of
such payment.
32
<PAGE>
4.1.14 INSURANCE; SURVEY.
-----------------
(a) BUSINESS AND FLOOD INSURANCE. At least three (3) Business
----------------------------
Days prior to the Restatement Effective Date Borrowers shall have
delivered to FINOVA evidence satisfactory to FINOVA (i) of flood
insurance with respect to each parcel of Real Estate other than a
parcel as to which Borrowers have supplied FINOVA evidence that such
parcel is not in a flood hazard area and (ii) that all insurance
coverage required pursuant to Section 6.6 is in full force and effect
and all premiums then due thereon have been paid in full.
(b) REAL ESTATE; LEASEHOLD PROPERTY. FINOVA shall have received
-------------------------------
an ALTA mortgagee's policy of title insurance (ALTA Revised 1987 Form)
in favor of FINOVA with respect to each parcel of Real Estate, issued
by a title company and in an amount showing that the applicable
Borrower has good and marketable title to each such parcel of Real
Estate and insuring that the Mortgage covering such parcel constitutes
a valid Lien on such Borrower's interest in such parcel, subject only
to Permitted Prior Liens. Each policy shall insure over all survey
and other general exceptions contained therein and shall include such
affirmative endorsements as may be required by FINOVA, including,
without limitation, comprehensive endorsement no. 1, contiguity (if
applicable), usury, doing business, variable rate, tie-in,
restrictions (where applicable), encroachment (where applicable), 3.1
zoning (including parking), last dollar, tax parcel, survey, location,
access and future advances. FINOVA shall have received copies of and
found satisfactory the provisions of each document referred to in each
such policy.
(c) PREMIUMS. FINOVA shall have received evidence that all
--------
premiums with respect to such title insurance have been paid by
Borrowers.
(d) SURVEY. FINOVA shall have received an "as-built" survey of
------
each parcel of Real Estate dated not earlier than 45 days prior to the
Restatement Effective Date, certified to FINOVA and the title company
as being drawn in compliance with the American Land Title Association
and American Congress on Surveying and Mapping Standards (as adopted
in 1962), containing a flood plain certification and showing no
matters or exceptions which are not Permitted Liens and otherwise in
sufficient detail as to permit the elimination of any survey
exceptions to the title policies described above.
4.1.15 MINIMUM OPERATING CASH FLOW. FINOVA shall have received
---------------------------
satisfactory evidence that the consolidated Operating Cash Flow of Borrowers
for the twelve month period ending January 31, 1998 was not less than
$4,000,000.
33
<PAGE>
4.1.16 PAYMENT OF FEES AND EXPENSES. Borrowers shall have paid the
----------------------------
Loan Fee and all fees and expenses described in subsection 10.1.1 incurred
in connection with the Loans.
4.2 ACQUISITIONS. The right of InfoCure or any Acquisition Subsidiary
------------
to make an Acquisition (other than the Micro-Software Acquisition), and the
obligation of FINOVA to make any Advance of the Acquisition Loan (other than any
Advance thereof on the Restatement Effective Date), shall be subject to the
satisfaction of all of the following conditions in a manner, form and substance
satisfactory to FINOVA:
4.2.1 CONSUMMATION OF ACQUISITIONS. Prior to or concurrently with
----------------------------
each Acquisition Closing, FINOVA shall have received evidence that (i) such
Acquisition is in accordance with the terms of the applicable Acquisition
Instruments, (ii) if such Acquisition is an Asset Acquisition, (a) the
applicable Acquisition Subsidiary will acquire concurrently with the
Acquisition Closing good and marketable title to all of the Property which is
being purchased pursuant to such Acquisition Instruments, free and clear of
all Liens except Permitted Liens and (b) any Indebtedness to be assumed by
such Acquisition Subsidiary pursuant to the terms of such Acquisition
Instruments shall be in an amount and on terms satisfactory to FINOVA, (iii)
if such Acquisition is an Equity Acquisition, (a) the Property owned by the
applicable Target and the capital stock or other equity interests which are
the subject of such Acquisition shall be free and clear of all Liens except
Permitted Liens, (b) any Indebtedness to be assumed by Infocure or the
applicable Acquisition Subsidiary pursuant to the terms of such Acquisition
Instruments shall be in an amount and on terms satisfactory to FINOVA and (c)
FINOVA shall be satisfied that adequate provision has been made to protect
InfoCure or the applicable Acquisition Subsidiary against the assumption of
material undisclosed liabilities and (iv) any consent, authorization or
approval which is required from any Governmental Body or other Person as a
condition to the consummation of such Acquisition, the failure to obtain which
would prevent InfoCure or the applicable Acquisition Subsidiary from operating
the business which is the subject of such Acquisition, shall have been
obtained.
4.2.2 CONSENT OF FINOVA. FINOVA shall have approved and consented
-----------------
to such Acquisition, it being understood that FINOVA's decision to consent
to such Acquisition shall be based upon, inter alia, FINOVA's (i)
----- ----
evaluation and approval of the business and financial condition of the
applicable Target and (ii) review and approval of the Acquisition Instruments
in connection with the proposed Acquisition.
4.2.3 DELIVERY OF DOCUMENTS. The following shall have been
---------------------
delivered to FINOVA, each duly authorized and executed, where applicable,
and in form and substance satisfactory to FINOVA:
(a) the applicable Acquisition Loan Instruments;
34
<PAGE>
(b) such certificates of incumbency and good-standing as FINOVA
may reasonably require in connection with such Acquisition and copies
of resolutions adopted by the board of directors of the Target,
InfoCure or the applicable Acquisition Subsidiary, as applicable,
authorizing the execution and delivery by such Person of the
Acquisition Instruments and Acquisition Loan Instruments to which such
Person is a party and the consummation of the transactions
contemplated thereby, certified as of the Funding Date by the
corporate secretary of such Person;
(c) certified or executed original copies of each of the
following, the terms and conditions of all of which shall be
reasonably satisfactory to FINOVA:
(i) the applicable Acquisition Instruments;
(ii) the Leases of the Target or those assumed or entered
into by the applicable Acquisition Subsidiary in connection
with such Acquisition and related Landlord's Consents;
(iii) the Licenses of the Target or those assumed or
entered into the applicable Acquisition Subsidiary in
connection with such Acquisition;
(iv) the material License Agreements of the Target or
those assumed or entered into by the applicable Acquisition
Subsidiary in connection with such Acquisition; and
(v) the material Operating Agreement of the Target or
those assumed or entered into the applicable Acquisition
Subsidiary in connection with such Acquisition;
(d) a Landlord Consent from each Landlord under each Lease
referenced in paragraph (c) above; and
(e) Pay-off letters from the holders of Indebtedness to be paid
on the applicable Funding Date;
(f) such other instruments, documents, certificates, consents,
waivers and opinions as FINOVA reasonably may request; and
(g) certificates representing 100% of the issued and outstanding
capital stock of the Target or the applicable Acquisition Subsidiary,
as applicable, and executed stock powers in form acceptable to FINOVA.
35
<PAGE>
4.2.4 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS. FINOVA shall
---------------------------------------------
have received such financial statements, reports and projections with
respect to the operation of the business which is the subject of the
Acquisition as FINOVA reasonably may require.
4.2.5 OPINIONS OF COUNSEL. FINOVA shall have received such
-------------------
opinions of counsel as FINOVA reasonably may require in connection with
such Acquisition and the Liens to be granted to FINOVA upon the Property
acquired in connection therewith.
4.2.6 LICENSES. FINOVA shall have received evidence that (i) the
--------
Target or the applicable Acquisition Subsidiary is the licensee of all
Licenses assumed or entered into by such Person in connection with such
Acquisition and (ii) such Licenses are in full force and effect as of the
applicable Funding Date and no event has occurred which could result in the
termination, revocation or non-renewal of any such License.
4.2.7 MATERIAL ADVERSE EFFECT. No event shall have occurred since
-----------------------
the Original Closing Date which has had or could have a Material Adverse
Effect. No litigation or governmental proceedings or investigation shall
be pending, which in the opinion of FINOVA could, if adversely determined,
have a Material Adverse Affect.
4.2.8 SECURITY INTEREST. FINOVA shall have received evidence
-----------------
that it has or will acquire upon the Acquisition Closing Date a perfected
first Lien on all of the Property which is the subject of such Acquisition,
subject only to Permitted Prior Liens.
4.2.9 ENVIRONMENTAL AUDIT. FINOVA shall have received an
-------------------
Environmental Audit with respect to any real estate of the Target or which
is being acquired by the applicable Acquisition Subsidiary pursuant to such
Acquisition and, at the request of FINOVA, any real estate which is the
subject of a Lease of the Target or which is being assumed or entered into
by the applicable Acquisition Subsidiary in connection with such
Acquisition.
4.2.10 INSURANCE; SURVEY. Borrowers shall deliver to FINOVA (i) such
-----------------
title and other insurance with respect to each parcel of real estate being
acquired in connection with such Acquisition as is required pursuant to
subsection 4.1.14 and (ii) a recent survey of each such parcel in
sufficient detail to permit the elimination of survey exceptions to each
title policy.
4.2.11 PAYMENT OF FEES. Borrowers shall have paid all fees and
---------------
expenses described in subsection 10.1.1 incurred in connection with such
Acquisition and the Advance made in connection therewith.
4.2.12 REPRESENTATIONS AND WARRANTIES. On each Acquisition Closing
------------------------------
Date the representations and warranties of each Borrower set forth in the
Instruments to which such Person is a party shall be true and correct when
made and at and as of the time of
36
<PAGE>
the Acquisition Closing, except to the extent that such representations and
warranties expressly relate to an earlier date.
4.2.13 PERFORMANCE; NO DEFAULT. Each Borrower shall have performed
-----------------------
and complied with all agreements and conditions contained in the
Instruments to be performed by or complied with by such Person prior to or
at the applicable Acquisition Closing, and no Event of Default or Incipient
Default shall exist after giving effect to such Acquisition.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrowers represent and warrant to FINOVA as follows:
5.1 EXISTENCE AND POWER. Each Borrower is a corporation duly formed,
-------------------
validly existing and in good standing under the laws of the state of its
incorporation, and each Borrower has all requisite power and authority to own
its Property and to carry on its business as now conducted and as proposed to be
conducted following the Original Closing Date, and is in good standing and
authorized to do business in each jurisdiction in which the failure so to
qualify would be a Material Adverse Effect.
5.2 AUTHORITY. Each Borrower has full power and authority to enter into,
---------
execute, deliver and carry out the terms of the Instruments to which it is a
party and to incur the obligations provided for therein, all of which have been
duly authorized by all proper and necessary action and are not prohibited by the
organizational instruments of such Borrower.
5.3 CAPITAL STOCK AND RELATED MATTERS.
---------------------------------
5.3.1 CAPITAL STOCK. There is set forth in EXHIBIT 5.3.1 a complete
-------------
description of the Subsidiaries Capital Stock, all of which are validly
issued, fully paid and non-assessable, and have been issued and sold in
compliance with all applicable federal and state laws, rules and regulations,
including, without limitation, all so-called "Blue-Sky" laws. The Subsidiaries
Capital Stock is owned beneficially and of record by InfoCure, free and clear
of all Liens except the Security Interests.
5.3.2 RESTRICTIONS. No Borrower (i) is a party to and has no knowledge
------------
of any agreements restricting the transfer of Subsidiaries Capital Stock,
except the Loan Instruments, (ii) has issued any rights which can be
convertible into or exchangeable or exercisable for any of Subsidiaries
Capital Stock, or any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character
relating to, any of Subsidiaries Capital Stock or any securities convertible
into
37
<PAGE>
or exchangeable or exercisable for any of Subsidiaries Capital Stock and (iii)
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any of Subsidiaries Capital Stock or any
convertible rights or options with respect thereto. No Borrower is required to
file, and no Borrower has filed, pursuant to the Securities Act, a
registration statement relating to any class of debt or equity securities,
other than the registration statement filed by InfoCure as Registration Number
333-1892, effective as of July 10, 1997.
5.4 BINDING AGREEMENTS. This Loan Agreement and the other Instruments,
------------------
when executed and delivered, will constitute the valid and legally binding
obligations of each Borrower to the extent such Borrower is a party thereto,
enforceable against such Borrower in accordance with their respective terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and (ii)
equitable principles (whether or not any action to enforce such document is
brought at law or in equity).
5.5 BUSINESS AND PROPERTY OF BORROWER.
---------------------------------
5.5.1 BUSINESS AND PROPERTY. Each Borrower is the owner of all Property
---------------------
and the holder of all Leases, Licenses and Operating Agreements necessary to
conduct its business as now conducted. No Borrower engages or proposes to
engage in any business or activity other than as set forth in EXHIBIT 5.5.1.
5.5.2 LICENSES. There is set forth in EXHIBIT 5.5.2 a description of
--------
all Licenses which have been issued or assigned to the Borrowers. All of such
Licenses are in full force and effect and have been duly issued in the name
of, or validly assigned to, the applicable Borrower, no default or breach
exists thereunder and each Borrower has full power and authority thereunder to
conduct its business.
5.5.3 OPERATING AGREEMENTS. There is set forth in EXHIBIT 5.5.3 a
--------------------
description of all material Operating Agreements with respect to the
businesses of the Borrowers. All of such Operating Agreements are in full
force and effect and no event has occurred which could result in the
cancellation or termination of any such Operating Agreement or the imposition
thereunder of any liability upon any Borrower which could have a Material
Adverse Effect.
5.5.4 FACILITY SITES. There is set forth in EXHIBIT 5.5.4 the location
--------------
of the chief executive office of each Borrower and all other locations of such
Borrower's Property.
5.5.5 LEASES. There is set forth in EXHIBIT 5.5.5 a list of all Leases,
------
together with a complete and accurate address of each parcel of Leasehold
Property. Each Lease is in full force and effect, there has been no material
default in the performance of any of its terms or conditions by any party
thereto, and no claims of default have been asserted with respect thereto.
38
<PAGE>
5.5.6 REAL ESTATE. There is set forth in EXHIBIT 5.5.6 a complete and
-----------
accurate address and legal description of each parcel of Real Estate. The
present and contemplated use of the Leasehold Property and the Real Estate is
in compliance with all applicable zoning ordinances and regulations and other
laws and regulations, the violation of which could have a Material Adverse
Effect.
5.5.7 OPERATION AND MAINTENANCE OF EQUIPMENT. No Borrower owning or
--------------------------------------
operating any equipment necessary for the operation of its business has used,
operated or maintained the same in a manner which now or hereafter could
result in the cancellation or termination of the right of such Borrower to use
or make use of the same or which could result in any material liability of
such Borrower for damages in connection therewith. All of the equipment and
other tangible personal property owned by each Borrower is, in all material
respects, in good operating condition and repair (subject to normal wear and
tear) and has been used, operated and maintained in substantial compliance
with all applicable laws, rules and regulations.
5.5.8 LICENSE AGREEMENTS. There is set forth in EXHIBIT 5.5.8 a
------------------
description of all material License Agreements with respect to the businesses
of the Borrowers. All of such License Agreements are in full force and effect
and no event has occurred which could result in the cancellation or
termination of any such License Agreement or the imposition thereunder of any
liability upon any Borrower which could have a Material Adverse Effect.
5.6 TITLE TO PROPERTY; LIENS. Each Borrower has (i) good and marketable
------------------------
title to all of its Property, except (A) any License which cannot be transferred
without the consent of a Governmental Body and (B) the portion thereof
consisting of a leasehold estate and (ii) a valid leasehold estate in each
portion of its Property which consists of a leasehold estate. All of such
Property is free and clear of all Liens, except Permitted Liens. Upon the
proper filing with the appropriate Governmental Bodies of the Mortgages and
appropriate Uniform Commercial Code financing statements, the applicable Loan
Instruments will create valid and perfected Liens in the Property described
therein, subject only to Permitted Prior Liens.
5.7 PROJECTIONS AND FINANCIAL STATEMENTS.
------------------------------------
5.7.1 FINANCIAL STATEMENTS. Borrowers have delivered to FINOVA the
--------------------
financial statements described in EXHIBIT 5.7.1 pertaining to the operations
of the Borrowers. Such financial statements present fairly in all material
respects the results of operations of the business of each Borrower for the
periods covered thereby and the financial condition of such Borrower as of the
dates indicated therein. All of such financial statements have been prepared
in conformity with GAAP, subject to normal year-end adjustments and the
absence of footnotes. Since July 31, 1997, there has been no change which has
had or could have a Material Adverse Effect. Borrowers also have delivered to
FINOVA a pro-forma balance sheet of each Borrower as of the Restatement
Effective Date. Such pro-forma balance sheets, which assume the consummation
of the
39
<PAGE>
transactions contemplated by the Instruments, present fairly in all material
respects the anticipated financial condition of each Borrower as of the
Restatement Effective Date.
5.7.2 PROJECTIONS. Borrowers have delivered to FINOVA the projections
-----------
described in EXHIBIT 5.7.2 of the future operations of each Borrower. Such
projections represent the best estimates of the Borrowers as of the
Restatement Effective Date of the Borrowers' future financial performance.
5.8 LITIGATION. There is set forth in EXHIBIT 5.8 a description of all
----------
actions and suits, arbitration proceedings and claims pending or, to the best
knowledge of Borrowers, threatened against any Borrower or maintained by any
Borrower at law or in equity or before any Governmental Body. None of the
matters set forth in such EXHIBIT 5.8, if adversely determined, could have a
Material Adverse Effect.
5.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING AGREEMENTS. Except
--------------------------------------------------------------
as otherwise disclosed herein, no Borrower is in default under any agreement to
which such Person is a party or by which such Person or any of the Property of
such Person is bound, the effect of which default could have a Material Adverse
Effect. No authorization, consent, approval or other action by, and no notice
to or filing with, any Governmental Body or any other Person which has not
already been obtained, taken or filed, as applicable, is required (i) for the
due execution, delivery or performance by any Borrower of any of the Instruments
to which such Borrower is a party or (ii) as a condition to the validity or
enforceability of any of the Instruments to which any Borrower is a party or any
of the transactions contemplated thereby or the priority of the Security
Interests, except for certain filings to establish and perfect the Security
Interests. No provision of any mortgage, indenture, contract, agreement,
statute, rule, regulation, judgment, decree or order binding on any Borrower or
affecting the Property of any Borrower conflicts with, or requires any consent
which has not already been obtained under, or would in any way prevent the
execution, delivery or performance of the terms of any of the Instruments or
affect the validity or priority of the Security Interests. The execution,
delivery or performance of the terms of the Instruments will not constitute a
default under, or result in the creation or imposition of, or obligation to
create, any Lien upon the Property of any Borrower pursuant to the terms of any
such mortgage, indenture, contract or agreement, other than the Loan
Instruments.
5.10 TAXES. Each Borrower has filed all tax returns required to be filed,
-----
and has paid, or made adequate provision for the payment of, all taxes shown to
be due and payable on such returns or in any assessments made against any such
Person, and no tax Liens have been filed and no claims are being asserted in
respect of such taxes which are required by GAAP to be reflected in the
financial statements of any Borrower and are not so reflected therein. The
charges, accruals and reserves on the books of each Borrower with respect to all
federal, state, local and other taxes are considered by the management of each
such Person to be adequate, and there is no unpaid assessment which is or might
be due and payable by any such Person or create a Lien against any such Person's
Property, except such assessments as are being contested in good faith and by
appropriate proceedings diligently conducted, and for which adequate
40
<PAGE>
reserves have been set aside in accordance with GAAP. None of the tax returns
of any Borrower are under audit.
5.11 COMPLIANCE WITH APPLICABLE LAWS. No Borrower is in default in respect
-------------------------------
of any judgment, order, writ, injunction, decree or decision of any Governmental
Body, which default could have a Material Adverse Effect. Except as otherwise
provided herein, each Borrower is in compliance in all material respects with
all applicable statutes and regulations, including, without limitation, all
Environmental Laws, ERISA, ADA and all laws and regulations relating to unfair
labor practices, equal employment opportunity and employee safety, of all
Governmental Bodies, a violation of which could have a Material Adverse Effect.
No condemnation, eminent domain or expropriation has been commenced or, to the
best knowledge of Borrowers, threatened against the Property of any Borrower.
5.12 PATENTS, TRADEMARKS, FRANCHISES, AGREEMENTS. There is set forth on
-------------------------------------------
EXHIBIT 5.12 a description of all patents, patent applications, trademarks,
trademark applications, copyrights and copyright applications owned or used by
any Borrower. Each Borrower owns, possesses or has the right to use all
patents, trademarks, service marks, tradenames, copyrights, franchises and
rights with respect thereto, necessary for the conduct of its business, without
any known conflict with the rights of others and, in each case, free of any
Liens.
5.13 REGULATORY MATTERS. Each Borrower (i) has duly and timely filed all
------------------
reports, statements of account and other filings which are required to be filed
by such Borrower under any applicable law, rule or regulation of any
Governmental Body, the non-filing of which could have a Material Adverse Effect,
and (ii) is in compliance with all such laws, rules and regulations, the
noncompliance with which could have a Material Adverse Effect.
5.14 ENVIRONMENTAL MATTERS. To the best of Borrowers' knowledge, each
---------------------
Borrower is in compliance with all applicable Environmental Laws and no portion
of the Real Estate or Leasehold Property has been used as a land fill. To the
best of Borrowers' knowledge there currently are not any known Hazardous
Materials generated, manufactured, released, stored, buried or deposited over,
beneath, in or on (or used in the construction and/or renovation of) the Real
Estate or Leasehold Property in violation of applicable Environmental Laws.
5.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS. No Borrower or any
-------------------------------------------
Affiliate of such Borrower is:
5.15.1 INVESTMENT BORROWER ACT. An "investment company," or a company
-----------------------
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.15.2 HOLDING BORROWER ACT. A "holding company," or a "subsidiary
--------------------
company" of a "holding company," or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company," as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended.
41
<PAGE>
5.15.3 FOREIGN OR ENEMY STATUS. (i) An "enemy" or an "ally of an enemy"
-----------------------
within the meaning of Section 2 of the Trading with the Enemy Act, (ii) a
"national" of a foreign country designated in Executive Order No. 8389, as
amended, or of any "designated enemy country" as defined in Executive Order
No. 9095, as amended, of the President of the United States of America, in
each case within the meaning of such Executive Orders, as amended, or of any
regulation issued thereunder, (iii) a "national of any designated foreign
country" within the meaning of the Foreign Assets Control Regulations or of
the Cuban Assets Control Regulations of the United States of America (Code of
Federal Regulations, Title 31, Chapter V, Part 515, Subpart B, as amended), or
(iv) an alien or a representative of any alien or foreign government within
the meaning of Section 310 of Title 47 of the United States Code.
5.15.4 REGULATIONS AS TO BORROWING. Subject to any statute or
---------------------------
regulation which regulates the incurrence of any Indebtedness for Borrowed
Money, including, without limitation, statutes or regulations relative to
common or interstate carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services.
5.16 MARGIN REGULATIONS. None of the transactions contemplated by this
------------------
Loan Agreement or any of the other Instruments, including the use of the
proceeds of the Loan, will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U and X, and Borrower
does not own or intend to carry or purchase any "margin security" within the
meaning of such Regulation U or G.
5.17 OTHER INDEBTEDNESS. After giving effect to the Restatement Closing,
------------------
on the Restatement Effective Date no Borrower shall have any Indebtedness for
Borrowed Money, except (i) Borrowers' Obligations, (ii) Permitted Senior
Indebtedness, (iii) unsecured inter-company loans by any Borrower to any other
Borrower to the extent permitted under Section 7.1, (iv) Indebtedness for
Borrowed Money evidenced by the KComp Notes, (v) Indebtedness for Borrowed Money
evidenced by the Commercial Subordinated Note and (vi) Indebtedness for Borrowed
Money evidenced by the Polci Subordinated Note.
5.18 NO MISREPRESENTATION. To the best of Borrowers' knowledge neither
--------------------
this Loan Agreement nor any other Loan Instrument, certificate, information or
report furnished or to be furnished by or on behalf of any Borrower to FINOVA in
connection with any of the transactions contemplated hereby or thereby, contains
or will contain a misstatement of material fact, or omits or will omit to state
a material fact required to be stated in order to make the statements contained
herein or therein, taken as a whole, not misleading in the light of the
circumstances under which such statements were made. There is no fact, other
than information known to the public generally, known to or reasonably foreseen
by Borrowers after diligent inquiry, that could have a Material Adverse Effect
that has not expressly been disclosed to FINOVA in writing.
42
<PAGE>
5.19 EMPLOYEE BENEFIT PLANS.
----------------------
5.19.1 NO OTHER PLANS. No Borrower or any of its ERISA Affiliates
--------------
maintains or contributes to, or has any obligation under, any Employee Benefit
Plan other than those identified on EXHIBIT 5.19.1. Borrowers have provided
FINOVA accurate and complete copies of all material contracts, agreements and
documents described on EXHIBIT 5.19.1.
5.19.2 ERISA AND CODE COMPLIANCE AND LIABILITY. Each Borrower and each
---------------------------------------
of its ERISA Affiliates is in compliance with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with
respect to all Employee Benefit Plans except where failure to comply would not
result in a material liability to such Borrower and except for any required
amendments for which the remedial amendment period as defined in Section
401(b) of the Code has not yet expired. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 401(a) of the Code.
No material liability has been incurred by any Borrower or any of its ERISA
Affiliates which remains unsatisfied for any taxes or penalties with respect
to any Employee Benefit Plan or any Multiemployer Plan.
5.19.3 FUNDING. No Pension Plan has been terminated, nor has any
-------
accumulated funding deficiency (as defined in Section 412 of the Code) been
insured (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has any Borrower or any of its
ERISA Affiliates failed to make any contributions or to pay any amounts due
and owing as required by Section 412 of the Code, Section 302 of ERISA or the
terms of any Pension Plan prior to the due dates of such contributions under
Section 412 of the Code or Section 302 of ERISA, nor has there been any event
requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or 4068 of ERISA
with respect to any Pension Plan.
5.19.4 PROHIBITED TRANSACTIONS AND PAYMENTS. No Borrower or any of its
------------------------------------
ERISA Affiliates has: (i) engaged in a nonexempt "prohibited transaction" as
such term is defined in Section 406 of ERISA or Section 4975 of the Code; (ii)
incurred any liability to the PBGC which remains outstanding other than the
payment of premiums and there are no premium payments which are due and
unpaid; (iii) failed to make a required contribution or payment to a
Multiemployer Plan; or (iv) failed to make a required installment or other
required payment under Section 412 of the Code.
5.19.5 NO TERMINATION EVENT. No Termination Event has occurred or is
--------------------
reasonably expected to occur.
43
<PAGE>
5.19.6 ERISA LITIGATION. No material proceeding, claim, lawsuit and/or
----------------
investigation is existing or, to the best knowledge of Borrowers, threatened
concerning or involving any (i) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by any Borrower
or any of its ERISA Affiliates, (ii) Pension Plan or (iii) Multiemployer Plan.
5.20 EMPLOYEE MATTERS.
----------------
5.20.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES. (i) None of the
--------------------------------------------
employees of any Borrower is subject to any collective bargaining agreement,
(ii) except as described in EXHIBIT 5.20.1, no petition for certification or
union election is pending with respect to the employees of any Borrower and no
union or collective bargaining unit has sought such certification or
recognition with respect to the employees of any Borrower and (iii) there are
no strikes, slowdowns, work stoppages, unfair labor practice complaints,
grievances, arbitration proceedings or controversies pending or, to the best
knowledge of Borrowers, threatened against any Borrower by any of such
Borrower's employees, other than employee grievances or controversies arising
in the ordinary course of business that could not in the aggregate have a
Material Adverse Effect.
5.20.2 CLAIMS RELATING TO EMPLOYMENT. No Borrower nor, to Borrowers'
-----------------------------
best knowledge, any shareholder or employee of any Borrower, is subject to any
employment agreement or non-competition agreement with any former employer or
any other Person which agreement could have a Material Adverse Effect due to
(i) any information which any Borrower would be prohibited from using under
the terms of such agreement or (ii) any legal considerations relating to
unfair competition, trade secrets or proprietary information.
5.21 BURDENSOME OBLIGATIONS. After giving effect to the transactions
----------------------
contemplated by the Instruments (i) no Borrower (A) will be a party to or be
bound by any franchise, agreement, deed, lease or other instrument, or be
subject to any restriction, which is so unusual or burdensome so as to cause, in
the foreseeable future, a Material Adverse Effect and (B) intends to incur, or
believes that it will incur, debts beyond its ability to pay such debts as they
become due, and (ii) each Borrower (A) owns and will own Property, the fair
saleable value of which is (I) greater than the total amount of its liabilities
(including contingent liabilities) and (II) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured, and (B) has and will have capital that is not
unreasonably small in relation to its business as presently conducted and as
proposed to be conducted. Borrowers do not presently anticipate that future
expenditures needed to meet the provisions of federal or state statutes, orders,
rules or regulations will be so burdensome so as to have a Material Adverse
Effect.
5.22 SUBSIDIARIES. As of the Restatement Effective Date, (i) InfoCure has
------------
no subsidiaries other than Rovak, CCI Acquisition, Inc., Polci, HCD, KComp,
SoftEasy, DR
44
<PAGE>
Software, Millard-Wayne, ICS, OPMS, Pace and MD Acquisition, Inc. and (ii) no
Borrower (other than InfoCure) has any subsidiaries.
5.23 REPRESENTATIONS AS TO THE POLCI ACQUISITION INSTRUMENTS, THE SOFTEASY
---------------------------------------------------------------------
ACQUISITION INSTRUMENTS, THE COMMERCIAL ACQUISITION INSTRUMENTS, THE PACE
- -------------------------------------------------------------------------
ACQUISITION INSTRUMENTS, THE OPMS ACQUISITION INSTRUMENTS AND THE MICRO-SOFTWARE
- --------------------------------------------------------------------------------
ACQUISITION INSTRUMENTS. To the best knowledge of Borrowers, the
- -----------------------
representations and warranties made by the Polci Seller, the SoftEasy Seller,
the Commercial Seller, the Micro-Software Seller and the sellers under the Pace
Acquisition Instruments and the OPMS Acquisition Instruments pursuant to the
Polci Acquisition Instruments, the SoftEasy Acquisition Instruments, the
Commercial Acquisition Instruments, the Micro-Software Acquisition Instruments,
the Pace Acquisition Instruments and the OPMS Acquisition Instruments,
respectively, are true and correct as of the Restatement Effective Date and no
default exist thereunder.
ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------
Until all of Borrowers' Obligations are paid and performed in full each
Borrower agrees that it will:
6.1 LEGAL EXISTENCE; GOOD STANDING. Maintain its existence and its good
------------------------------
standing in the jurisdiction of its formation and its qualification in each
jurisdiction in which the failure so to qualify could have a Material Adverse
Effect.
6.2 INSPECTION. Permit representatives of FINOVA at any time to (i) visit
----------
its offices, (ii) examine its books and records and Accountants' reports
relating thereto, (iii) make copies or extracts therefrom, (iv) discuss its
affairs with its employees, (v) examine and inspect its Property and (vi) meet
and discuss its affairs with the Accountants, and such Accountants, as a
condition to their retention by the applicable Borrower, are hereby irrevocably
authorized by such Borrower to fully discuss and disclose all such affairs with
FINOVA.
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a standard system
------------------------------------------
of accounting in accordance with GAAP and furnish to FINOVA:
6.3.1 MONTHLY STATEMENTS. As soon as available and in any event within
------------------
30 days after the close of each month:
(a) a consolidated balance sheet of Borrowers and the consolidating
balance sheet of each Borrower as of the end of such month, and
(b) the consolidated statements of operations and Operating Cash Flow
of Borrowers and the consolidating statements of operations and
Operating Cash
45
<PAGE>
Flow of each Borrower for such month and for the period from the
beginning of the then current year to the end of such month, setting
forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding year,
all in reasonable detail, containing such information as FINOVA reasonably may
require, and certified by the Chief Financial Officer as complete and correct,
subject to normal year-end adjustments.
6.3.2 QUARTERLY STATEMENTS; COMPLIANCE CERTIFICATE. As soon as
--------------------------------------------
available and in any event within 45 days after the close of each quarter of
each year:
(a) the consolidated balance sheet of Borrowers and the consolidating
balance sheet of each Borrower as of the end of such quarter, and
(b) the consolidated statements of operations of Borrowers, the
consolidated statements of Operating Cash Flow of Borrowers and the
consolidating statements of operations and Operating Cash Flow for
each Borrower for such quarter and for the period from the beginning
of the then current year to the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding period in the preceding year, and showing a comparison
with the budget for such period,
all in reasonable detail, containing such information as FINOVA reasonably may
require, and certified by the Chief Financial Officer as complete and
correct, subject to normal year-end adjustments. Each such financial
statement shall be accompanied by a Compliance Certificate.
6.3.3 ANNUAL STATEMENTS. As soon as available and in any event within
-----------------
90 days after the close of each Fiscal Year:
(a) the audited consolidated balance sheet of Borrowers as of the end
of such Fiscal Year, the audited consolidated statements of
operations, cash flows and stockholders' equity of Borrowers
(collectively, the "Basic Financial Statements"), the audited
consolidating balance sheet of each Borrower as of the end of such
Fiscal Year, the audited consolidating statements of operations, cash
flows and stockholders' equity for each Borrower for such Fiscal Year,
the audited statements of the consolidated and consolidating Operating
Cash Flow for Borrowers for such Fiscal Year, setting forth in each
case in comparative form the corresponding figures for the preceding
Fiscal Year,
(b) an opinion of the Accountants which shall accompany the Basic
Financial Statements, which opinion shall be unqualified as to going
concern and scope of audit, stating that (i) the examination by the
Accountants in connection
46
<PAGE>
with such Basic Financial Statements has been made in accordance with
generally accepted auditing standards, (ii) such Basic Financial
Statements have been prepared in conformity with GAAP and in a manner
consistent with prior periods, and (iii) such Basic Financial
Statements fairly present in all material respects the financial
position and results of operations of the Borrowers, and
(c) a letter from the Accountants stating that the statements of
Operating Cash Flow were computed in accordance with the requirements
of this Loan Agreement.
6.3.4 ACCOUNTANTS' CERTIFICATE. Simultaneously with the delivery of the
------------------------
certified Basic Financial Statements required by subsection 6.3.3, copies of a
certificate of the Accountants stating that (i) they have checked the
computations delivered in compliance with subsection 6.3.3, and (ii) in making
the examination necessary for their audit of the Basic Financial Statements
for such Fiscal Year, nothing came to their attention of a financial or
accounting nature that caused them to believe that (A) applicable Borrower was
not in compliance with the terms, covenants, provisions or conditions of any
of the Loan Instruments, or (B) there shall have occurred any condition or
event which would constitute an Event of Default, or, if so, specifying in
such certificate all such instances of non-compliance and the nature and
status thereof.
6.3.5 AUDIT REPORTS. Promptly upon receipt thereof, a copy of each
-------------
report, other than the reports referred to in subsection 6.3.3, including any
so-called "Management Letter" or similar report, submitted to any Borrower by
the Accountants in connection with any annual, interim or special audit made
by the Accountants of the books of such Borrower.
6.3.6 NOTICE OF DEFAULTS; LOSS. Prompt written notice if: (i) any
------------------------
Indebtedness of such Borrower is declared or shall become due and payable
prior to its declared or stated maturity, or called and not paid when due,
(ii) an event has occurred that enables the holder of any note, or other
evidence of such Indebtedness, certificate or security evidencing any such
Indebtedness to declare such Indebtedness due and payable prior to its stated
maturity, (iii) there shall occur and be continuing an Incipient Default or
Event of Default, accompanied by a statement setting forth what action the
Borrower proposes to take in respect thereof, or (iv) any event shall occur
which has or could have a Material Adverse Effect, including the amount or the
estimated amount of any loss or depreciation or adverse effect.
6.3.7 NOTICE OF SUITS, ADVERSE EVENTS. Prompt written notice of: (i)
-------------------------------
any citation, summons, subpoena, order to show cause or other order naming any
Borrower a party to any proceeding before any Governmental Body which could
have a Material Adverse Effect and include with such notice a copy of such
citation, summons, subpoena, order to show cause or other order, (ii) any
lapse or other termination of any license, permit, franchise, agreement or
other authorization issued to any Borrower by any
47
<PAGE>
Governmental Body or any other Person that is material to the operation of the
Business of such Borrower, (iii) any refusal by any Governmental Body or any
other Person to renew or extend any such license, permit, franchise, agreement
or other authorization and (iv) any dispute between any Borrower and any
Governmental Body or any other Person, which lapse, termination, refusal or
dispute referred to in clauses (ii) and (iii) above or in this clause (iv)
could have a Material Adverse Effect.
6.3.8 REPORTS TO SHAREHOLDERS, CREDITORS AND GOVERNMENTAL BODIES.
----------------------------------------------------------
(a) Promptly upon becoming available, copies of all financial
statements, reports, notices and other statements sent or made
available generally by any Borrower to its shareholders or members, of
all regular and periodic reports and all registration statements and
prospectuses filed by such Borrower with any securities exchange or
with the Securities and Exchange Commission or any Governmental Body
succeeding to any of its functions, and of all statements generally
made available by such Borrower or others concerning material
developments in the business of such Borrower.
(b) Promptly upon becoming available, copies of any periodic or
special reports filed by such Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of such Borrower, or if copies
thereof are requested by FINOVA, and copies of any material notices
and other communications from any Governmental Body or Person which
specifically relate to such Borrower.
6.3.9 ERISA NOTICES AND REQUESTS.
--------------------------
(a) With reasonable promptness, and in any event within 30 days after
occurrence of any of the following such Borrower will give notice of
and/or deliver to FINOVA copies of: (i) the establishment of any new
Employee Benefit Plan, Pension Plan or Multiemployer Plan; (ii) the
commencement of contributions to any Employee Benefit Plan, Pension
Plan or Multiemployer Plan to which any Borrower or any of its ERISA
Affiliates was not previously contributing or any increase in the
benefits of any existing Employee Benefit Plan, Pension Plan or
Multiemployer Plan; (iii) each funding waiver request filed with
respect to any Employee Benefit Plan and all communications received
or sent by any Borrower or any of its ERISA Affiliates with respect to
such request; and (iv) the failure of any Borrower or any of its ERISA
Affiliates to make a required installment or payment under Section 302
of ERISA or Section 412 of the Code by the due date.
(b) Promptly and in any event within 10 days of becoming aware of the
occurrence of or forthcoming occurrence of any (i) Termination Event
or (ii) "prohibited transaction", as such term is defined in Section
406 of ERISA or
48
<PAGE>
Section 4975 of the Code, in connection with any Pension Plan or any
trust created thereunder such Borrower will deliver to FINOVA a notice
specifying the nature thereof, what action the applicable Borrower or
its ERISA Affiliate has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto.
(c) With reasonable promptness but in any event within 10 days after
the occurrence of any of the following, such Borrower will deliver to
FINOVA copies of: (i) any favorable or unfavorable determination
letter from the Internal Revenue Service regarding the qualification
of an Employee Benefit Plan under Section 401(a) of the Code; (ii) all
notices received by any Borrower or any of its ERISA Affiliates of the
PBGC's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (iii) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed
by such Borrower or any of its ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan; and (iv) all
notices received by such Borrower or any of its ERISA Affiliates from
a Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA. Such Borrower
promptly will notify FINOVA in writing in the event any Borrower or
any of its ERISA Affiliates files or intends to file a notice of
intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA.
6.3.10 OTHER INFORMATION.
-----------------
(a) Prompt notice of any change in the location of any Property of
any Borrower which is material to or necessary for the continued
operation of such Borrower's business, any change in the name of any
Borrower, any sale or purchase of Property outside the regular course
of business of any Borrower, and any change in the business or
financial affairs of any Borrower, which change could have a Material
Adverse Effect.
(b) Promptly upon request therefor, such other information and reports
relating to the past, present or future financial condition,
operations, plans and projections of Borrowers as FINOVA reasonably
may request from time to time.
6.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS. Timely file all
------------------------------------------------
material reports, applications, documents, instruments and information required
to be filed pursuant to all rules, regulations or requests of any Governmental
Body or other Person having jurisdiction over the operation of the business of
such Borrower, including, but not limited to, such of the Loan Instruments as
are required to be filed with any such Governmental Body or other Person
pursuant to applicable rules and regulations promulgated by such Governmental
Body or other Person.
49
<PAGE>
6.5 MAINTENANCE OF LICENSES, FRANCHISES AND OTHER AGREEMENTS. Maintain in
--------------------------------------------------------
full force and effect at all times, and apply in a timely manner for renewal of,
all Licenses, trademarks, tradenames, License Agreements and Operating
Agreements necessary for the operation of its business, the loss of any of which
could have a Material Adverse Effect.
6.6 INSURANCE.
---------
6.6.1 MAINTENANCE OF INSURANCE. Maintain in full force and effect at
------------------------
all times such property, casualty, business interruption and other insurance
required by FINOVA, all of which shall be written by insurers, contain terms
and be in amounts and forms satisfactory to FINOVA, including public liability
insurance, flood insurance required pursuant to this Loan Agreement, workmen's
compensation, builders' risk, fire and extended coverage and flood insurance,
with a standard mortgagee clause endorsed thereon in favor of FINOVA which
shall provide, among other things, that the policies may not be cancelled
without 30 days' prior notice to the FINOVA. Deliver to FINOVA, from time to
time as FINOVA may reasonably request, evidence of compliance with this
subsection 6.6.1.
6.6.2 PROCEEDS. Each Borrower hereby directs all insurers under all
--------
policies of insurance to pay all proceeds payable thereunder directly to
FINOVA and each Borrower hereby authorizes FINOVA to collect all such proceeds
subject to such Borrower's rights as described below in this subsection 6.6.2
to receive certain proceeds. Each Borrower irrevocably appoints FINOVA (and
all officers, employees or agents designated by FINOVA) as such Borrower's
true and lawful attorney and agent in fact for the purpose of and with power
to make, settle and adjust claims under such policies of insurance, endorse
the name of such Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and to make all
determinations and decisions with respect to such policies of insurance. Each
Borrower acknowledges that such appointment as attorney and agent in fact is a
power, coupled with an interest, and therefore is irrevocable. Borrowers shall
notify FINOVA promptly of any loss, damage, destruction or other casualty to
the Collateral in excess of $20,000. If the proceeds of a casualty do not
exceed $50,000 and no Event of Default exists such proceeds shall be paid to
the applicable Borrower and applied to repair or replace the Property which is
the subject of such casualty. If the proceeds of a casualty exceed $50,000 or
an Event of Default exists, at the option of the FINOVA, such proceeds shall
be applied to the (i) payment of Borrowers' Obligations in accordance with
Section 8.4 or (ii) repair or replacement of the Collateral. In the event the
proceeds are to be applied to the repair or replacement of Collateral, the
Collateral shall be repaired or replaced so as to be of at least equal value
and substantially the same character as prior to such loss, damage,
destruction or other casualty.
6.7 FUTURE LEASES. Deliver to FINOVA, concurrently with the execution by
-------------
any Borrower, as lessee, of any Lease, an executed copy thereof and a Landlord's
Consent to the assignment of such Lease pursuant to an Assignment of Leases.
50
<PAGE>
6.8 FUTURE ACQUISITIONS OF REAL ESTATE. Deliver to FINOVA concurrently
----------------------------------
with the (i) execution by any Borrower of any contract relating to the purchase
by such Borrower of real estate, an executed copy of such contract and (ii)
closing of the purchase of such real estate (A) a first mortgage or deed of
trust in favor of FINOVA on such real estate, in form and substance satisfactory
to FINOVA, (B) a lender's policy of title insurance, in such form and amount and
containing such endorsements as shall be satisfactory to FINOVA, (C) an
ALTA/ACSM survey of such real estate and (D) such other documents and assurances
with respect to such real estate as FINOVA may require.
6.9 ENVIRONMENTAL MATTERS.
---------------------
6.9.1 COMPLIANCE. At all times comply with, and be responsible for, its
----------
obligations under all Environmental Laws applicable to the Real Estate, the
Leasehold Property and any other Property owned by any Borrower or used by
such Borrower in the operation of its business. Borrowers shall at their sole
cost and expense (i) comply in all respects with (A) any notice of any
violation or administrative or judicial complaint or order having been filed
against any such Person, any portion of any Leasehold Property or any other
Property owned by such Person or used by such Person in the operation of its
business alleging violations of any law, ordinance and/or regulation requiring
such Person to take any action in connection with the release, transportation
and/or clean-up of any Hazardous Materials, and (B) any notice from any
Governmental Body or any other Person alleging that such Person is or may be
liable for costs associated with a response or clean-up of any Hazardous
Materials or any damages resulting from such release or transportation, or
(ii) diligently contest in good faith by appropriate proceedings any demands
set forth in such notices, provided (A) reserves in an amount satisfactory to
FINOVA to pay the costs associated with complying with any such notice are
established by such Person and (B) no Lien would or will attach to the
Property which is the subject of any such notice as a result of any compliance
by such Person which is delayed during any such contest. Promptly upon receipt
of any notice described in the foregoing clause (i), Borrowers shall deliver a
copy thereof to FINOVA.
6.10 COMPLIANCE WITH LAWS. Comply with all federal, state and local laws,
--------------------
ordinances, requirements and regulations and all judgments, orders, injunctions
and decrees applicable to any Borrower and its operations, the failure to comply
with which could have a Material Adverse Effect.
6.11 TAXES AND CLAIMS. Pay and discharge all taxes, assessments and
----------------
governmental charges or levies imposed upon it or upon its income or profits, or
upon any Property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien (other than
a Permitted Lien) upon the Property of any Borrower, provided that so long as no
Lien has attached to the Property of any Borrower as a result of any of the
foregoing, no Borrower shall be required by this Section 6.11 to pay any such
amount if the same is being contested diligently and in good faith by
appropriate proceedings and as to which the applicable Borrower has set aside
reserves on its books satisfactory to FINOVA.
51
<PAGE>
6.12 MAINTENANCE OF PROPERTIES. Maintain all of its Properties necessary
-------------------------
in the operation of its business in good working order and condition.
6.13 GOVERNMENTAL APPROVALS. Upon the exercise by FINOVA of any power,
----------------------
right or privilege pursuant to the provisions of any of the Loan Instruments
requiring any consent, approval or authorization of any Governmental Body
(including, without limitation, transfers of Licenses), promptly execute and
cause the execution of all applications, certificates, instruments and other
documents that FINOVA may be required to obtain for such consent, approval or
authorization.
6.14 REAFFIRMATIONS OF SUBORDINATION AGREEMENT. Borrowers shall use their
-----------------------------------------
best efforts to obtain and deliver to FINOVA, on or before the thirtieth (30th)
day after the Restatement Effective Date, a reaffirmation of subordination with
respect to each subordination agreement executed and delivered in connection
with the Existing Loan Agreement, in each case in form and substance reasonably
satisfactory to FINOVA.
ARTICLE VII
-----------
NEGATIVE COVENANTS
------------------
Until all of Borrowers' Obligations are paid and performed in full, no
Borrower shall:
7.1 BORROWING. Create, incur, assume or suffer to exist any liability for
---------
Indebtedness for Borrowed Money except (i) Borrowers' Obligations, (ii)
Permitted Senior Indebtedness, (iii) Indebtedness for Borrowed Money evidenced
by the KComp Notes, (iv) Indebtedness for Borrowed Money evidenced by the
Commercial Subordinated Note, (v) Indebtedness for Borrowed Money evidenced by
the Polci Subordinated Note and (vi) unsecured inter-company loans by any
Borrower to any other Borrower, provided that the obligations of each obligor of
such Indebtedness shall: (A) be evidenced by promissory notes which shall have
been pledged to FINOVA as security for Borrowers' Obligations, (B) if required
by FINOVA, be subordinated in right of payment to Borrowers' Obligations on
terms and conditions acceptable to FINOVA and (C) have such other terms and
provisions as FINOVA may reasonably require.
7.2 LIENS. Create, incur, assume or suffer to exist any Lien upon any of
-----
its Property, whether now owned or hereafter acquired, except Permitted Liens.
7.3 MERGER AND ACQUISITION. Consolidate with or merge with or into any
----------------------
Person, or acquire directly or indirectly all or substantially all of the
capital stock, equity interests or Property of any Person, except (i) Permitted
Acquisitions and (ii) any Subsidiary may merge with or into any other
Subsidiary, provided that (A) no Event of Default or Incipient Default would
exist after giving effect to any such merger, (B) FINOVA shall have received 45
days' prior written notice of any such merger, (C) Borrowers shall have executed
and delivered to
52
<PAGE>
FINOVA such instruments and documents as FINOVA shall require to preserve the
validity and priority of the Security Interests in the Property transferred to
the surviving Subsidiary in connection with any such merger and (D) FINOVA shall
have received such other instruments and documents in connection with any such
merger as FINOVA shall require, including, without limitation, certified copies
of the related plan of merger and certificates of merger.
7.4 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently agree
----------------------
to purchase, become liable in respect of any letter of credit, or otherwise
become liable upon the obligation of any Person, except liabilities arising from
the endorsement of negotiable instruments for deposit or collection, the posting
of bonds to secure performance to the extent necessary in connection with its
business and similar transactions in the ordinary course of business.
7.5 DISTRIBUTIONS. Make any dividends, distributions or other shareholder
-------------
expenditures with respect to its capital stock or other equity interests or
apply any of its Property to the purchase, redemption or other retirement of, or
set apart any sum for the payment of, or make any other distribution by
reduction of capital or otherwise in respect of, any of such capital stock or
equity interests, except (i) if no Event of Default exists or would be created
thereby, any Subsidiary may make dividends or other distributions to InfoCure,
(ii) InfoCure may be required to redeem a portion its capital stock pursuant to
mandatory redemption rights or obligations which are exerciseable or enforceable
only after the indefeasible payment and performance in full of Borrowers'
Obligations, (iii) during the period from the Original Closing Date to the first
anniversary of the Original Closing Date, InfoCure may redeem capital stock of
InfoCure issued to MDP Corporation provided that (A) the price of such
redemption shall (1) not exceed $150,000 in the aggregate and (2) be offset
against amounts otherwise owing by MDP Corporation to InfoCure and (B) no
Incipient Default or Event of Default exists or would be created by the
consummation of any such redemption, and (iv) InfoCure may pay dividends on
capital stock issued to the provider of electronic data services to InfoCure,
provided that (A) no Incipient Default or Event of Default exists or would be
created by the payment of such dividends, (B) such dividends shall not exceed
$200,000 in the aggregate during any year and (C) after giving effect to any
such payment of dividends the ratio of (1) the consolidated Operating Cash Flow
of Borrowers for the twelve month period ending on the last day of the most
recent quarter for which FINOVA shall have received financial statements, less
----
any payments made during such twelve month period with respect to Capital
Expenditures, to (2) the sum of, for such twelve month period, Debt Service of
Borrowers, plus the amount of any dividends paid by InfoCure during such period,
----
shall not be less than 1.10.
7.6 CAPITAL EXPENDITURES. Make or incur any Capital Expenditures (other
--------------------
than Permitted Acquisitions and payments made by any Borrower in connection with
the development of computer software in connection with the business of such
Borrower) in any year if the aggregate amount of Capital Expenditures of
Borrowers for such year would exceed $1,250,000.
7.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY. Make any voluntary or
-------------------------------------------
optional payment or prepayment of any Indebtedness for Borrowed Money other than
(i)
53
<PAGE>
Borrowers' Obligations, (ii) KComp may make regularly scheduled payments of
interest and principal of the Indebtedness for Borrowed Money evidenced by the
KComp Notes, provided that no Event of Default or Incipient Default exists or
would be created by the making of any such payment, (iii) without duplication,
InfoCure and CCI Acquisition, Inc. may make regularly scheduled payments of
interest and principal of the Indebtedness for Borrowed Money evidenced by the
Commercial Subordinated Note, provided that no Event of Default or Incipient
Default exists or would be created by the making of any such payment and (iv)
without duplication, InfoCure and Polci may make regularly scheduled payments of
interest and principal of the Indebtedness for Borrowed Money evidenced by Polci
Subordinated Note, provided that no Event of Default or Incipient Default exists
or would be created by the making of any such payment.
7.8 INVESTMENTS, LOANS. At any time purchase or otherwise acquire, hold or
------------------
invest in the capital stock of, or any other interest in, any Person, or make
any loan or advance to, or enter into any arrangement for the purpose of
providing funds or credit to, or make any other investment, whether by way of
capital contribution or otherwise, in or with any Person, including, without
limitation, any Affiliate, except (i) investments in direct obligations of, or
instruments unconditionally guaranteed by, the United States of America or in
certificates of deposit issued by a Qualified Depository, (ii) investments in
commercial or finance paper which, at the time of investment, is rated "A" or
better by Moody's Investors Service, Inc., or Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc., respectively, or at the equivalent rate by any of
their respective successors, (iii) any interests in any money market account
maintained, at the time of investment, with a Qualified Depository, the
investments of which, at the time of investment, are restricted to the types
specified in clause (i) above, and (iv) InfoCure may make investments in
Acquisition Subsidiaries. All investments permitted pursuant to clauses (i),
(ii) and (iii) of this Section 7.8 shall have a maturity not exceeding one year.
7.9 FUNDAMENTAL BUSINESS CHANGES. Materially change the nature of its
----------------------------
business.
7.10 FACILITY SITES. Change the locations of its chief executive office or
--------------
other Property used in the operation of its business unless (i) FINOVA shall
have received at least thirty (30) days' prior written notice thereof, (ii) the
applicable Borrower shall have complied with all applicable laws, rules and
regulations and shall have received all required consents and approvals from any
Governmental Body, (iii) FINOVA shall have received satisfactory evidence that
such change could not reasonably be expected to affect adversely the operations
or business prospects of the applicable Borrower and (iv) the applicable
Borrower shall have executed and delivered to FINOVA any documents FINOVA may
reasonably require in order to maintain the validity and priority of the
Security Interests, including, without limitation, UCC financing statements and
amendments.
7.11 SALE OR TRANSFER OF ASSETS. Sell, lease, assign, transfer or
--------------------------
otherwise dispose of any Property (other than in the ordinary course of
business) except for the sale or disposition of (i) Property which is not
material to or necessary for the continued operation of its business
54
<PAGE>
and (ii) obsolete or unusable items of equipment which promptly are replaced
with new items of equipment of like function and comparable value to the
obsolete or unusable items of equipment when the same were new or not obsolete
or unusable, provided such replacement items of equipment shall become subject
to the Security Interests.
7.12 AMENDMENT OF DOCUMENTS. Amend or modify (i) its articles of
----------------------
incorporation except (A) if required by law or (B) InfoCure may amend its
articles of incorporation in connection with the issuance of additional capital
stock permitted under Section 7.14, (ii) any of the KComp Notes, (iii) the
Commercial Subordinated Note, (iv) the Polci Note, (v) any of the Existing
Acquisition Instruments, (vi) any of the Micro-Software Acquisition Instruments
or (vii) any Acquisition Instruments.
7.13 ACQUISITION OF ADDITIONAL PROPERTIES. (i) Enter into an agreement
------------------------------------
with respect to a proposed Acquisition unless such agreement provides that the
only remedy against the Borrower entering into such agreement in the event of
default by such Borrower thereunder is liquidated damages in an amount not to
exceed 5% of the purchase price or (ii) acquire any additional Property except
(A) such Property as is necessary to or useful in the operation of its business,
provided such acquisitions shall be subject to the conditions and limitations
set forth in this Loan Agreement, and (B) acquisitions of Property as are
permitted pursuant to Section 7.3.
7.14 ISSUANCE OF CAPITAL STOCK OR OTHER SIMILAR INTERESTS. Issue or sell,
----------------------------------------------------
permit to be issued or sold, or otherwise consent to the transfer of, any
additional capital stock or equity interests or any interests convertible into
or exercisable for any such capital stock or additional equity interests, except
(i) the issuance of capital stock of InfoCure, provided that InfoCure shall not
be required to pay dividends, redeem such capital stock or make other
distributions with respect thereto except as permitted under Section 7.5 and
(ii) the convertible rights granted pursuant to the Commercial Long-Term
Subordinated Note.
7.15 TRANSACTIONS WITH AFFILIATES. Sell, lease, assign, transfer or
----------------------------
otherwise dispose of any Property to any Affiliate of any Borrower, lease
Property, render or receive services or purchase assets from any such Affiliate,
or otherwise enter into any contractual relationship with any such Affiliate,
except for transactions among the Borrowers which shall have been fully
disclosed to FINOVA in writing.
7.16 COMPLIANCE WITH ERISA.
---------------------
(i) Permit the occurrence of any Termination Event which would
result in a liability to any Borrower or any of its ERISA Affiliates in
excess of $50,000;
(ii) Permit the present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities by more than $50,000;
55
<PAGE>
(iii) Permit any accumulated funding deficiency in excess of
$50,000 (as defined in Section 302 of ERISA and Section 412 of the Code)
with respect to any Pension Plan, whether or not waived;
(iv) Fail to make any contribution or payment to any Multiemployer
Plan which any Borrower or any of its ERISA Affiliates may be required to
make under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a liability
in excess of $50,000;
(v) Engage, or permit any Borrower or any of its ERISA Affiliates
to engage, in any "prohibited transaction" as such term is defined in
Section 406 of ERISA or Section 4975 of the Code for which a civil penalty
pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of
the Code in excess of $50,000 is imposed;
(vi) Permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee Benefit
Plan which establishment or amendment could result in liability to any
Borrower or any of its ERISA Affiliates or increase the obligation of any
Borrower or any of its ERISA Affiliates to a Multiemployer Plan which
liability or increase, individually or together with all similar liabilities
and increases, is material to any Borrower or any of its ERISA Affiliates; or
(vii) Fail, or permit any of its ERISA Affiliates to fail, to establish,
maintain and operate each Employee Benefit Plan in compliance in all material
respects with ERISA, the Code and all other applicable laws and regulations
and interpretations thereof.
7.17 CURRENT RATIO. Permit the consolidated current assets of Borrowers
-------------
as of the last day of any quarter to be less than the consolidated current
liabilities of Borrowers as of such day less the amount of deferred revenues of
----
Borrowers as of such day as accurately reflected on the financial statements of
Borrowers in accordance with GAAP.
7.18 SENIOR DEBT SERVICE COVERAGE RATIO. Permit the Senior Debt Service
----------------------------------
Coverage Ratio as of the last day of any quarter to be less than 1.50.
7.19 SUBSIDIARIES. Create or permit to exist any subsidiary, other than
------------
(i) the Subsidiaries of InfoCure as of the Restatement Effective Date and (ii)
Acquisition Subsidiaries, provided that each such Acquisition Subsidiary shall
have executed and delivered all agreements, documents and instruments required
by FINOVA to (A) cause such Acquisition Subsidiary to be a "Borrower" under this
Loan Agreement and the other Loan Instruments and (B) grant a first Lien in
favor of FINOVA on all of the Property of such Acquisition Subsidiary.
56
<PAGE>
ARTICLE VIII
------------
DEFAULT AND REMEDIES
--------------------
8.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
-----------------
constitute an Event of Default under the Loan Instruments:
8.1.1 DEFAULT IN PAYMENT. If Borrowers shall fail to pay all or any
------------------
portion of Borrowers' Obligations when the same become due and payable,
including, without limitation, the failure of Borrowers to make the payment
of the Contingent Obligation Payment required pursuant to Section 2.11.
8.1.2 BREACH OF COVENANTS.
-------------------
(a) If any Borrower shall fail to observe or perform any covenant
or agreement made by or on behalf of any Borrower contained in Section
6.1, 6.2, 6.5, 6.6, 6.9 and 6.11 or in Article VII;
(b) If any Borrower shall fail to observe or perform any covenant or
agreement (other than those referred to in subparagraph (a) above or
specifically addressed elsewhere in this Section 8.1) made by such Person
in any of the Loan Instruments to which such Person is a party, and such
failure shall continue for a period of 30 days after written notice of
such failure is given by FINOVA.
8.1.3 BREACH OF WARRANTY. If any representation or warranty made by
------------------
or on behalf of any Borrower in or pursuant to any of the Loan Instruments
or in any instrument or document furnished in compliance with the Loan
Instruments shall prove to be false or misleading in any material respect
on the date as of which made.
8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY. If (i)
---------------------------------------------------
any Borrower at any time shall be in default (as principal or guarantor or
other surety) in the payment of any principal of or premium or interest on any
Indebtedness for Borrowed Money (other than Borrowers' Obligations) beyond the
grace period, if any, applicable thereto and the aggregate amount of such
payments then in default beyond such grace period shall exceed $100,000 or
(ii) any default shall occur in respect of any issue of Indebtedness for
Borrowed Money of any Borrower (other than Borrowers' Obligations) outstanding
in a principal amount of at least $100,000, or in respect of any agreement or
instrument relating to any such issue of Indebtedness for Borrowed Money, and
such default shall continue beyond the grace period, if any, applicable
thereto or (iii) any Borrower at any time shall be in default under the KComp
Notes, the Commercial Subordinated Note or the Polci Note.
57
<PAGE>
8.1.5 BANKRUPTCY.
----------
(a) If any Borrower shall (i) generally not be paying its debts
as they become due, (ii) file, or consent, by answer or otherwise, to the
filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy or insolvency under the
laws of any jurisdiction, (iii) make an assignment for the benefit of
creditors, (iv) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers for such Borrower, or for
any substantial part of the Property of such Borrower or (v) be
adjudicated insolvent.
(b) If any Governmental Body of competent jurisdiction shall enter an
order appointing, without consent of such Borrower, a custodian,
receiver, trustee or other officer with similar powers with respect to
such Borrower, or with respect to any substantial part of the Property
belonging to any such Person, or if an order for relief shall be entered
in any case or proceeding for liquidation or reorganization or otherwise
to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of
any Borrower or if any petition for any such relief shall be filed
against any Borrower and such petition shall not be dismissed or stayed
within 60 days.
8.1.6 JUDGMENTS. If the aggregate amount of all judgments or awards
---------
against the Borrowers exceeds $50,000 at any one time outstanding, excluding
judgments or awards (i) for which there is full insurance and with respect to
which the insurer has assumed responsibility in writing, (ii) for which there
is full indemnification (upon terms and by credit worthy indemnitors which are
satisfactory to FINOVA) or (iii) which have not been discharged in full or
stayed pending appeal.
8.1.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS. If (i) any
----------------------------------------
Governmental Body shall (A) revoke, terminate, suspend or adversely modify any
License of any Borrower, the non-continuation of which could have a Material
Adverse Effect, or (B) enter a final order or decision to suspend, revoke,
terminate or adversely modify any such License or (ii) there shall exist any
violation or default in the performance of, or a material failure to comply
with any agreement, or condition or term of any License or License Agreement,
which violation, default or failure could have a Material Adverse Effect, or
any such License or License Agreement shall cease to be in full force and
effect, or (iii) any Operating Agreement or License Agreement shall expire or
be revoked or terminated and not replaced by a substitute acceptable to FINOVA
within 30 days after the date of such expiration, revocation or termination,
and such expiration, revocation or termination and non-replacement could have
a Material Adverse Effect.
8.1.8 COLLATERAL. If any material portion of the Collateral shall be
----------
seized or taken by a Governmental Body or Person, or Borrowers shall fail
to maintain or cause to be maintained the Security Interests and priority
of the Loan Instruments as against
58
<PAGE>
any Person, or the title and rights of any Borrower to any material portion of
the Collateral shall have become the subject matter of litigation which
could reasonably be expected to result in impairment or loss of the
security provided by the Loan Instruments.
8.1.9 PLANS. If an event or condition specified in subsection 6.3.11
-----
hereof shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other such
events or conditions, any Borrower or any of its ERISA Affiliates shall incur,
or in the opinion of FINOVA be reasonably likely to incur, a liability to a
Plan or Multiemployer Plan or the PBGC (or any of them) which, in the
reasonable judgment of FINOVA, could have a Material Adverse Effect.
8.1.10 CHANGE IN CONTROL. If at any time (i) InfoCure ceases to own
-----------------
and control all of the issued and outstanding capital stock and options,
warrants and other rights to acquire capital stock of each other Borrower or
(ii) any Person or any Persons acting together which would constitute a
"group" (a "Group") for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor provision
thereto, other than a Group whose nominees constitute a majority of the board
of directors of InfoCure as of the Original Closing Date, together with any
Affiliates or "Related Persons" (as defined in Rule 13d-3 od the Securities
and Exchange Commission under the Exchange Act or any successor provision
thereto) thereof, shall beneficially own 50% or more of the aggregate voting
power of all classes of capital stock of InfoCure entitled to vote generally
in the election of directors of InfoCure or (iii) any Person or Group, other
than any Person or Group whose nominees constituted a majority of the board of
directors of InfoCure as of the Original Closing Date, together with any
Affiliates or Related Persons thereof, shall succeed in having sufficient of
its or their nominees elected to the board of directors of InfoCure, such that
such nominees, when added to any existing director remaining on the board of
directors of InfoCure after such election who is an Affiliate or a Related
Person of such Group, shall constitute a majority of the board of directors of
InfoCure.
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS. Upon the occurrence of:
--------------------------------------
(a) any Event of Default described in clauses (ii), (iii), (iv) and
(v) of subsection 8.1.5(a) or in 8.1.5(b), all of Borrowers' Obligations at
that time outstanding automatically shall mature and become due, and
(b) any other Event of Default, FINOVA, at any time (unless such Event
of Default shall have been waived in writing or remedied), at its option,
without further notice or demand may declare all of Borrowers' Obligations
due and payable, whereupon Borrowers' Obligations immediately shall mature
and become due and payable,
all without presentment, demand, protest or notice (other than the declaration
referred to in clause (b) above), all of which hereby are waived.
59
<PAGE>
8.3 REMEDIES ON DEFAULT. If Borrowers' Obligations have been
-------------------
accelerated pursuant to Section 8.2, FINOVA, at its option, may:
8.3.1 ENFORCEMENT OF SECURITY INTERESTS. Enforce or cause to be
---------------------------------
enforced any of the rights or remedies accorded to FINOVA under the Loan
Instruments.
8.3.2 OTHER REMEDIES. Enforce or cause to be enforced any of the
--------------
rights or remedies accorded to FINOVA at equity or law, by virtue of
statute or otherwise.
8.4 APPLICATION OF FUNDS. Any funds received by FINOVA pursuant to the
--------------------
exercise of any rights accorded to FINOVA pursuant to, or by the operation of
any of the terms of, any of the Loan Instruments, including, without limitation,
insurance proceeds, condemnation proceeds or proceeds from the sale of
Collateral, shall be applied to Borrowers' Obligations in the following order of
priority:
8.4.1 EXPENSES. First, to the payment of (i) all fees and expenses
--------
actually incurred, including, without limitation, court costs, fees of
appraisers, title charges, costs of maintaining and preserving the Collateral,
costs of sale, and all other costs incurred by FINOVA, in exercising any
rights accorded to FINOVA pursuant to the Loan Instruments or by applicable
law, including, without limitation, reasonable attorney's fees, and (ii) all
Liens superior to the Liens of FINOVA except such superior Liens subject to
which any sale of the Collateral may have been made.
8.4.2 BORROWERS' OBLIGATIONS. Next, to the payment of Borrowers'
----------------------
Obligations in such manner as FINOVA shall determine.
8.4.3 SURPLUS. Any surplus, to the Person or Persons entitled
-------
thereto.
8.5 PERFORMANCE OF BORROWER'S OBLIGATIONS. If any Borrower fails to (i)
-------------------------------------
maintain in force and pay for any insurance policy or bond which any Borrower is
required to provide pursuant to any of the Loan Instruments, (ii) keep the
Collateral free from all Liens except for Permitted Liens, (iii) pay when due
all taxes, levies and assessments on or in respect of the Collateral, except as
otherwise permitted pursuant to the terms hereof, (iv) make all payments and
perform all acts on the part of such Borrower to be paid or performed in the
manner required by the terms hereof and by the terms of the other Loan
Instruments with respect to any of the Collateral, including, without
limitation, all expenses of protecting, storing, warehousing, insuring, handling
and maintaining the Collateral, (v) keep fully and perform promptly any other of
the obligations of such Borrower hereunder or under any of the other Loan
Instruments, and (vi) keep fully and perform promptly the obligations of such
Borrower with respect to any issue of Indebtedness for Borrowed Money secured by
a Permitted Prior Lien, then FINOVA may (but shall not be required to) procure
and pay for such insurance policy or bond, place such Collateral in good repair
and operating condition, pay, contest or settle such Liens or taxes or any
judgments based thereon or otherwise make good any other aforesaid failure of
such Borrower. Borrowers shall reimburse FINOVA immediately upon demand for all
reasonable
60
<PAGE>
sums paid or advanced on behalf of any Borrower for any such purpose, together
with reasonable and/or necessary costs and expenses (including reasonable
attorneys' fees) paid or incurred by FINOVA in connection therewith and interest
on all sums advanced from the date of advancement until repaid to FINOVA at the
Default Rate. All such sums advanced by FINOVA, with interest thereon,
immediately upon advancement thereof, shall be deemed to be part of Borrowers'
Obligations.
ARTICLE IX
----------
CLOSING
-------
The Restatement Effective Date shall be such date as the parties shall
determine, and the Closing shall take place on such date, provided all
conditions for the Closing as set forth in this Loan Agreement have been
satisfied or otherwise waived by FINOVA. The Closing shall take place at the
office of Katten Muchin & Zavis or such other place as the parties hereto shall
agree. Unless the Closing occurs on or before March 31, 1998, this Loan
Agreement shall terminate and be of no further force or effect and, except for
any obligations of Borrowers to FINOVA pursuant to Article X, none of the
parties hereto shall have any further obligation to any other party.
ARTICLE X
---------
EXPENSES AND INDEMNITY
----------------------
10.1 ATTORNEYS' FEES AND OTHER FEES AND EXPENSES. Whether or not any of the
-------------------------------------------
transactions contemplated by this Loan Agreement shall be consummated, subject
to the limitations set forth in subsection 10.1.1, Borrowers agree to pay to
FINOVA on demand all expenses incurred by FINOVA in connection with the
transactions contemplated hereby and in connection with any amendments,
modifications or waivers (whether or not the same become effective) under or in
respect of any of the Loan Instruments, including, without limitation:
10.1.1 FEES AND EXPENSES FOR PREPARATION OF LOAN INSTRUMENTS. All
-----------------------------------------------------
expenses, disbursements (including, without limitation, charges for required
mortgagee's title insurance, lien searches, reproduction of documents, long
distance telephone calls and overnight express carriers) and reasonable
attorneys' fees, actually incurred by FINOVA in connection with the (i)
preparation and negotiation of the Loan Instruments or any amendments,
modifications or waivers thereto or any documents delivered pursuant thereto
and (ii) administration of the Loan.
10.1.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF LOAN
-------------------------------------------------------------
INSTRUMENTS. Any expenses or other costs, including reasonable attorneys'
-----------
fees and expert witness fees, actually incurred by FINOVA in connection
with the enforcement
61
<PAGE>
or collection against any Borrower of any provision of any of the Loan
Instruments, and in connection with or arising out of any litigation,
investigation or proceeding instituted by any Governmental Body or any other
Person with respect to any of the Loan Instruments, whether or not suit is
instituted, including, but not limited to, such costs or expenses arising from
the enforcement or collection against any Borrower of any provision of any of
the Loan Instruments in workout or restructuring any state or federal
bankruptcy or reorganization proceeding.
10.2 INDEMNITY. Borrowers agree to indemnify and save FINOVA harmless of and
---------
from the following:
10.2.1 BROKERAGE FEES. The fees, if any, of brokers and finders engaged
--------------
by Borrower.
10.2.2 GENERAL. Any loss, cost, liability, damage or expense (including
-------
reasonable attorneys' fees and expenses) incurred by FINOVA in investigating,
preparing for, defending against, providing evidence, producing documents or
taking other action in respect of any commenced or threatened litigation,
administrative proceeding, suit instituted by any Person or investigation
under any law, including any federal securities law, the Bankruptcy Code, any
relevant state corporate statute or any other securities law, bankruptcy law
or law affecting creditors generally of any jurisdiction, or any regulation
pertaining to any of the foregoing, or at common law or otherwise, relating,
directly or indirectly, to the transactions contemplated by or referred to in,
or any other matter related to, the Loan Instruments.
10.2.3 OPERATION OF COLLATERAL; JOINT VENTURERS. Any loss, cost,
----------------------------------------
liability, damage or expense (including reasonable attorneys' fees and
expenses) incurred in connection with the ownership, operation or maintenance
of the Collateral, the construction of FINOVA and any Borrower as having the
relationship of joint venturers or partners or the determination that FINOVA
has acted as agent for any Borrower.
10.2.4 ENVIRONMENTAL INDEMNITY. Any and all claims, losses, damages,
-----------------------
response costs, clean-up costs and expenses suffered and/or incurred at any
time by FINOVA arising out of or in any way relating to the existence at any
time of any Hazardous Materials in, on, under, at, transported to or from, or
used in the construction and/or renovation of, any of the Real Estate or
Leasehold Property, or otherwise with respect to any Environmental Law, and/or
the failure of any Borrower to perform its obligations and covenants hereunder
with respect to environmental matters, including, but not limited to: (i)
claims of any Persons for damages, penalties, response costs, clean-up costs,
injunctive or other relief, (ii) costs of removal and restoration, including
fees of attorneys and experts, and costs of reporting the existence of
Hazardous Materials to any Governmental Body, and (iii) any expenses or
obligations, including attorneys' fees and expert witness fees, incurred at,
before and after any trial or other proceeding before any Governmental Body or
appeal therefrom whether or not taxable as costs,
62
<PAGE>
including, without limitation, witness fees, deposition costs, copying and
telephone charges and other expenses, all of which shall be paid by Borrowers
to FINOVA.
ARTICLE XI
----------
MISCELLANEOUS
-------------
11.1 NOTICES. All notices and communications under this Loan Agreement shall
-------
be in writing and shall be (i) delivered in person, (ii) sent by telecopy, or
(iii) mailed, postage prepaid, either by registered or certified mail, return
receipt requested, or by overnight express carrier, addressed in each case as
follows:
To Borrowers: c/o InfoCure Corporation
1765 The Exchange
Suite 400
Atlanta, Georgia 30339
Attention: Richard Perlman
Telecopy No.: (404) 636-7525
Copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attention: Richard L. Haury, Jr., Esq.
Telecopy No.: (404) 365-9532
To FINOVA: FINOVA Capital Corporation
311 South Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attention: Michael P. Keller
Assistant Vice President
Telecopy No.: (312) 322-7200
Copy to: FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, Arizona 85077
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
63
<PAGE>
Copy to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Stuart P. Shulruff, Esq.
Michael A. Jacobson, Esq.
Telecopy No.: (312) 902-1061
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a written notice to the other parties hereto. All
notices sent pursuant to the terms of this Section 11.1 shall be deemed received
(i) if personally delivered, then on the Business Day of delivery, (ii) if sent
by telecopy before 2:00 p.m. Phoenix time, on the day sent if a Business Day or
if such day is not a Business Day or if sent after 2:00 p.m. Phoenix time, then
on the next Business Day, (iii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iv) if sent by
registered or certified mail, on the earlier of the fifth Business Day following
the day sent or when actually received. Any notice by telecopy shall be
followed by delivery on the next Business Day by overnight, express carrier or
by hand.
11.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES. All covenants, agreements,
---------------------------------------
representations and warranties made in this Loan Agreement and in the
certificates delivered pursuant hereto shall survive the making by FINOVA of the
Loans and the execution and delivery to FINOVA of the Notes and of all other
Loan Instruments, and shall continue in full force and effect so long as any of
Borrowers' Obligations remain outstanding, unperformed or unpaid.
Notwithstanding the repayment of all amounts due under the Loan Instruments, the
cancellation of the Notes and the release and/or cancellation of any and all of
the Loan Instruments or the foreclosure of any Liens on the Collateral, the
obligations of Borrowers to indemnify FINOVA with respect to the expenses,
damages, losses, costs and liabilities described in Section 10.2 shall survive
until all applicable statute of limitations periods with respect to actions
which may be brought against FINOVA have run.
11.3 FURTHER ASSURANCE. From time to time, Borrowers shall execute and
-----------------
deliver to FINOVA such additional documents as FINOVA reasonably may require to
carry out the purposes of the Loan Instruments and to protect rights of FINOVA
thereunder, including, without limitation, using its best efforts in the event
any Collateral is to be sold to secure the approval by any Governmental Body of
any application required by such Governmental Body in connection with such sale,
and not take any action inconsistent with such sale or the purposes of the Loan
Instruments.
11.4 TAXES AND FEES. Should any tax (other than taxes based upon the net
--------------
income of any FINOVA), recording or filing fees become payable in respect of any
of the Loan Instruments, or any amendment, modification or supplement thereof,
Borrowers agree to pay the same on demand, together with any interest or
penalties thereon attributable to any delay by Borrowers in meeting any FINOVA
demand, and agrees to hold FINOVA harmless with respect thereto.
64
<PAGE>
11.5 SEVERABILITY. In the event that any provision of this Loan Agreement is
------------
deemed to be invalid by reason of the operation of any law, or by reason of the
interpretation placed thereon by any court or Governmental Body, as applicable,
this Loan Agreement shall be construed as not containing such provision and the
invalidity of such provision shall not affect the validity of any other
provisions hereof, and any and all other provisions hereof which otherwise are
lawful and valid shall remain in full force and effect.
11.6 WAIVER. No delay on the part of FINOVA in exercising any right, power
------
or privilege hereunder shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege hereunder shall preclude other
or further exercise thereof, or be deemed to establish a custom or course of
dealing or performance between the parties hereto, or preclude the exercise of
any other right, power or privilege.
11.7 MODIFICATION OF LOAN INSTRUMENTS. No modification or waiver of any
--------------------------------
provision of any of the Loan Instruments shall be effective unless the same
shall be in writing and signed by Borrowers and FINOVA, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Borrower in any case shall entitle
such Borrower to any other or further notice or demand in the same, similar or
other circumstances.
11.8 CAPTIONS. The headings in this Loan Agreement are for purposes of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
11.9 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and
----------------------
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
11.10 REMEDIES CUMULATIVE. All rights and remedies of the parties hereto,
-------------------
any other Loan Instruments or otherwise, shall be cumulative and non-exclusive,
and may be exercised singularly or concurrently. FINOVA shall not be required
to prosecute collection, enforcement or other remedies against any Borrower
before proceeding against any other Borrower or to enforce or resort to any
security, liens, collateral or other rights of FINOVA. One or more successive
actions may be brought against Borrower and/or any other Borrower, either in the
same action or in separate actions, as often as FINOVA deems advisable, until
all of Borrowers' Obligations are paid and performed in full.
11.11 ENTIRE AGREEMENT; CONFLICT. This Loan Agreement and the other Loan
--------------------------
Instruments executed prior or pursuant hereto constitute the entire agreement
among the parties hereto with respect to the transactions contemplated hereby or
thereby and supersede any prior agreements, whether written or oral, relating to
the subject matter hereof. In the event of a conflict between the terms and
conditions set forth herein and the terms and conditions set forth in any other
Loan Instrument, the terms and conditions set forth herein shall govern.
65
<PAGE>
11.12 APPLICABLE LAW. THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE
--------------
WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF ARIZONA.
11.13 JURISDICTION AND VENUE. BORROWERS HEREBY AGREE THAT ALL ACTIONS OR
----------------------
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY, OR
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF FINOVA
INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH
FINOVA SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION.
EACH BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY FINOVA IN ANY OF SUCH
COURTS IN THE STATE OF ARIZONA. EACH BORROWER WAIVES ANY CLAIM THAT MARICOPA
COUNTY, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR
BORROWER SET FORTH IN THIS SECTION 11.13 SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT BY OR FINOVA OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM TO THE
EXTENT SUCH FORUM HAS JURISDICTION OR THE TAKING BY FINOVA OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER JURISDICTION PERMITTED BY LAW, AND EACH BORROWER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
11.14 WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWERS ACKNOWLEDGE AND
-----------------------------
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
11.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
---------------
BORROWERS OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER LOAN
INSTRUMENTS.
11.16 ESTOPPEL CERTIFICATE. Within fifteen (15) days after FINOVA requests
--------------------
Borrowers to do so, Borrowers will execute and deliver to FINOVA a statement
certifying (i) that this Loan Agreement is in full force and effect and has not
been modified except as described in such statement, (ii) the date to which
interest and principal on the Note has been paid, (iii) the Principal Balance,
(iv) whether or not to its knowledge an Incipient Default or Event of Default
has occurred and is continuing, and, if so, specifying in reasonable detail each
such Incipient Default or Event of Default of which it has knowledge, (v)
whether to its knowledge it has any
66
<PAGE>
defense, setoff or counterclaim to the payment of the Note in accordance with
their terms, and, if so, specifying each defense, setoff or counterclaim of
which it has knowledge in reasonable detail (including where applicable the
amount thereof), and (vi) as to any other matter reasonably requested by FINOVA.
11.17 CONSEQUENTIAL DAMAGES. Neither FINOVA nor any agent or attorney of
---------------------
FINOVA shall be liable to Borrowers for consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Borrowers' Obligations.
11.18 COUNTERPARTS. This Loan Agreement may be executed by the parties
------------
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
11.19 NO FIDUCIARY RELATIONSHIP. No provision in this Loan Agreement or in
-------------------------
any other Loan Instrument, and no course of dealing among the parties hereto,
shall be deemed to create any fiduciary duty by FINOVA to Borrowers.
11.20 NOTICE OF BREACH BY FINOVA. Borrowers agree to give FINOVA written
--------------------------
notice of (i) any action or inaction by FINOVA or any agent or attorney of
FINOVA in connection with the Loan Instruments that may be actionable against
FINOVA or any agent or attorney of FINOVA or (ii) any defense to the payment of
Borrowers' Obligations for any reason, including, but not limited to, commission
of a tort or violation of any contractual duty implied by law.
11.21 JOINT AND SEVERAL OBLIGATIONS. The obligations of the Borrowers are
-----------------------------
joint and several obligations.
11.22 CONTINUED EFFECTIVE; NO NOVATION. Notwithstanding anything contained
--------------------------------
herein, the terms of this Loan Agreement are not intended to and do not serve to
effect a novation of Borrowers' Obligations. Instead, it is the express
intention of the parties hereto to reaffirm the indebtedness created under the
Existing Amended and Restated Loan Agreement which is evidenced by the notes
provided for therein and secured by the Collateral. Each Borrower acknowledges
and confirms that the liens and security interests granted pursuant to the Loan
Instruments secure the indebtedness, liabilities and obligations of such
Borrower to FINOVA under the Existing Amended and Restated Loan Agreement, as
amended and restated hereby, and that the term "Borrowers' Obligations" as used
in the Loan Instruments (or any other term used therein to described or refer to
the indebtedness, liabilities and obligations of Borrowers to FINOVA) includes,
without limitation, the indebtedness, liabilities and obligations of such
Borrower under the Notes to be delivered hereunder, and under the Existing
Amended and Restated Loan Agreement, as amended and restated hereby, as the same
may be further amended, modified, supplemented or restated from time to time.
The Loan Instruments and all agreements, instruments and documents executed or
delivered in connection with any of the foregoing shall each be deemed to be
amended to the extent necessary to give effect to the provisions of this Loan
Agreement. Cross-references in the Loan Instruments to particular
67
<PAGE>
section numbers in the Existing Amended and Restated Loan Agreement shall be
deemed to be cross-references to the corresponding sections, as applicable, of
this Loan Agreement.
[remainder of this page intentionally left blank]
68
<PAGE>
IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
INFOCURE CORPORATION, POLCI ACQUISITION, INC,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., PACE
FINANCIAL CORPORATION, MD ACQUISITION, INC., ROVAK,
INC., MILLARD-WAYNE, INC., KCOMP MANAGEMENT SYSTEMS,
INC., HEALTH CARE DIVISION, INC., DR SOFTWARE, INC.,
CCI ACQUISITION, INC., SOFTEASY SOFTWARE, INC., and
INTERNATIONAL COMPUTER SOLUTIONS, INC.
By: /s/ Frederick L Fine
-----------------------------------------
Name:
---------------------------------------
A duly authorized officer of each Borrower
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/Kim Harfield
----------------------------------------
Name: Kim Harfield
---------------------------------------
Title: Vice President
--------------------------------------
69
<PAGE>
EXHIBIT 10.44
THIRD AMENDED AND RESTATED TERM NOTE
------------------------------------
$10,000,000.00
PHOENIX, ARIZONA FEBRUARY 24, 1998
FOR VALUE RECEIVED, each of the undersigned, INFOCURE CORPORATION, a
Delaware corporation, PACE FINANCIAL CORPORATION, an Ohio corporation,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., a Georgia corporation, MD
ACQUISITION, INC., a Connecticut corporation, POLCI ACQUISITION, INC., a
Michigan corporation, ROVAK, INC., a Minnesota corporation, CCI ACQUISITION,
INC., a Florida corporation, KCOMP MANAGEMENT SYSTEMS, INC., a California
corporation, SOFTEASY SOFTWARE, INC., a Pennsylvania corporation, and HEALTH
CARE DIVISION, INC., MILLARD-WAYNE, INC., DR SOFTWARE, INC. and INTERNATIONAL
COMPUTER SOLUTIONS, INC., each a Georgia corporation (individually a "Maker" and
collectively the "Makers"), hereby jointly and severally promises to pay to the
order of FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), the
principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or, if less,
the aggregate unpaid amount of the Term Loan made by FINOVA pursuant to and in
accordance with the applicable provisions of that certain Second Amended and
Restated Loan Agreement dated as of February 24, 1998 (as the same may be
amended, modified, supplemented or restated from time to time, the "Loan
Agreement") among Makers and FINOVA, at the office of FINOVA at 1850 North
Central Avenue, Phoenix, Arizona 85004, or at such other place as the holder
hereof may appoint, plus interest thereon as set forth below.
This Third Amended and Restated Term Note (this "Note") (i) is in partial
substitution of that certain Second Amended and Restated Term Note dated as of
February 6, 1998 (the "Term Note") made by Makers (other than MD Acquisition,
Inc.) payable to the order of FINOVA in the original principal amount of
$2,200,000, (ii) is in partial substitution of that certain Second Amended and
Restated Acquisition Loan Note dated as of February 6, 1998 (the "Acquisition
Note" and, together with the Term Note, the "Original Notes") made by Makers
(other than MD Acquisition, Inc.) payable to the order of FINOVA in the original
principal amount of $7,800,000 and (iii) shall not constitute a novation of the
Indebtedness for Borrowed Money evidenced by the Original Notes or any of
Borrowers' Obligations.
This is delivered by Makers to FINOVA pursuant to and in accordance with
the applicable provisions of the Loan Agreement. All capitalized terms used but
not elsewhere defined herein shall have the respective meanings ascribed to such
terms in the Loan Agreement.
The Principal Balance of this Note from time to time outstanding shall bear
interest at the per annum rate of interest set forth in subsection 2.3.1 of the
Loan Agreement.
<PAGE>
Accrued and unpaid interest and the Principal Balance of this Note shall be
paid in the manner set forth in Section 2.3 and 2.4, respectively, of the Loan
Agreement.
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Note shall bear
interest at the Default Rate, which interest at such Default Rate shall be paid
by Makers to FINOVA immediately upon demand. In addition, if a payment of
principal or interest to be made pursuant to this Note becomes past due for a
period in excess of five (5) days, Makers shall pay on demand to FINOVA a late
charge of 5.0% of the amount of such overdue payment.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of any Event of Default,
without further notice or demand, the Principal Balance of this Note, and all
accrued and unpaid interest thereon, shall be and become immediately due and
payable in full. Failure to exercise this option by FINOVA shall not constitute
a waiver of the right to exercise the same in the event of any subsequent Event
of Default, and such failure shall not be deemed to establish a custom or course
of dealing or performance among Makers and FINOVA.
This Note shall or may be prepaid, in whole or in part, at the times and in
accordance with Section 2.6 of the Loan Agreement.
All funds received by FINOVA during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Makers pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by FINOVA until FINOVA is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, FINOVA shall not collect a rate of interest on any
obligation or liability due and owing by Makers to FINOVA in excess of the
maximum contract rate of interest permitted by applicable law ("Excess
Interest"). FINOVA and Makers agree that the interest laws of the State of
Arizona shall govern the relationship among them, but in the event of a final
adjudication to the contrary, Makers shall be obligated to pay, nunc pro tunc,
--------------
to FINOVA only such interest as then shall be permitted by the laws of the state
found to govern the contract relationship among FINOVA and Makers. If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Note, the Loan Agreement or any other Loan
Instrument, then in such event (i) no Maker shall be obligated to pay such
Excess Interest, (ii) any Excess Interest collected by FINOVA shall be, at
FINOVA's option, (A) applied to the Principal Balance or to accrued and unpaid
interest not in excess of the maximum rate permitted
-2-
<PAGE>
by applicable law (the "Maximum Rate") or (B) refunded to the payor thereof,
(iii) the interest rates provided for herein (the "Stated Rate") shall be
automatically reduced to the Maximum Rate and this Note, the Loan Agreement and
the other Loan Instruments, as applicable, shall be deemed to have been, and
shall be, modified to reflect such reduction, and (iv) no Maker shall have any
action against FINOVA for any damages arising out of the payment or collection
of such Excess Interest; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Rate, Makers shall, to the extent permitted
by law, continue to pay interest at the Maximum Rate until such time as the
total interest received by FINOVA is equal to the total interest which FINOVA
would have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again exceeds the
Maximum Rate, in which event the provisions contained in this paragraph again
shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Note or any part thereof, each Maker jointly and severally promises and
agrees to pay all costs of collection, including all court costs and reasonable
attorneys' fees.
Each Maker hereby waives presentment for payment, protest and demand and
notice of protest, demand, dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended from time to
time before, at or after maturity, without in any way affecting the liability of
Makers hereunder or any guarantor hereof.
EACH MAKER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY SUCH
MAKER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS NOTE OR ANY OR ALL OF THE
OTHER LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA,
MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF ARIZONA, OR, IF FINOVA INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH FINOVA SHALL INITIATE OR TO WHICH FINOVA SHALL REMOVE
SUCH ACTION, TO THE EXTENT SUCH COURT OTHERWISE HAS JURISDICTION. EACH MAKER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY FINOVA TO ANY OF SUCH COURTS,
AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH MAKER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 11.1 OF THE LOAN AGREEMENT. EACH MAKER WAIVES ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD ANY MAKER, AFTER BEING SO SERVED, FAIL TO APPEAR
OR
-3-
<PAGE>
ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE PERIOD
OF TIME PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH MAKER SHALL BE DEEMED
IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY FINOVA AGAINST SUCH
MAKER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
THE EXCLUSIVE CHOICE OF FORUM FOR MAKERS SET FORTH IN THIS PARAGRAPH SHALL NOT
BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY FINOVA, OF ANY JUDGMENT OBTAINED IN
ANY OTHER FORUM OR THE TAKING, BY FINOVA, OF ANY ACTION TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE JURISDICTION, AND EACH MAKER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
AND DECISIONS OF THE STATE OF ARIZONA. ALL FUNDS DISBURSED TO OR FOR THE BENEFIT
OF MAKERS WILL BE DEEMED TO HAVE BEEN DISBURSED IN PHOENIX, ARIZONA.
EACH MAKER ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS NOTE WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE,
SUCH MAKER AGREES THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or Loan
Agreement is sought.
This Note shall be binding upon each Maker and upon such Maker's successors
and assigns, and shall inure to the benefit of the successors and permitted
assigns of FINOVA.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed
thereon by any court or any Governmental Body, this Note shall be construed as
not containing such provision and the invalidity of such provision shall not
affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full
force and effect.
Time for the performance of Makers' obligations under this Note is of the
essence.
This Note is entitled to the benefit of certain collateral security, all as
more fully set forth in the Loan Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered by each Maker
by such Maker's duly authorized officer on the date first set forth above.
INFOCURE CORPORATION, a Delaware corporation, PACE
FINANCIAL CORPORATION, an Ohio corporation, MD
ACQUISITION, INC., a Connecticut corporation,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., a Georgia
corporation, POLCI ACQUISITION, INC., a Michigan
corporation, ROVAK, INC. a Minnesota corporation, CCI
ACQUISITION, INC., a Florida corporation, KCOMP
MANAGEMENT SYSTEMS, INC., a California corporation,
SOFTEASY SOFTWARE, INC., a Pennsylvania corporation, and
HEALTH CARE DIVISION, INC., MILLARD-WAYNE, INC., DR
SOFTWARE, INC. and INTERNATIONAL COMPUTER SOLUTIONS,
INC., each a Georgia corporation
By: /s/ James K. Price
------------------
Secretary
A duly authorized officer of each Maker
-5-
<PAGE>
EXHIBIT 10.45
THIRD AMENDED AND RESTATED ACQUISITION LOAN NOTE
------------------------------------------------
$20,000,000.00
PHOENIX, ARIZONA FEBRUARY 24, 1998
FOR VALUE RECEIVED, each of the undersigned, INFOCURE CORPORATION, a
Delaware corporation, PACE FINANCIAL CORPORATION, an Ohio corporation,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., a Georgia corporation, MD
ACQUISITION, INC., a Connecticut corporation, POLCI ACQUISITION, INC., a
Michigan corporation, ROVAK, INC., a Minnesota corporation, CCI ACQUISITION,
INC., a Florida corporation, KCOMP MANAGEMENT SYSTEMS, INC., a California
corporation, SOFTEASY SOFTWARE, INC., a Pennsylvania corporation, and HEALTH
CARE DIVISION, INC., MILLARD-WAYNE, INC., DR SOFTWARE, INC. and INTERNATIONAL
COMPUTER SOLUTIONS, INC., each a Georgia corporation (individually a "Maker" and
collectively the "Makers"), hereby jointly and severally promises to pay to the
order of FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), the
principal sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), or, if
less, the aggregate unpaid amount of the Acquisition Loan made by FINOVA
pursuant to and in accordance with the applicable provisions of that certain
Second Amended and Restated Loan Agreement dated as of February 24, 1998 (as the
same may be amended, modified, supplemented or restated from time to time, the
"Loan Agreement") among Makers and FINOVA, at the office of FINOVA at 1850 North
Central Avenue, Phoenix, Arizona 85004, or at such other place as the holder
hereof may appoint, plus interest thereon as set forth below.
This Third Amended and Restated Acquisition Loan Note (this "Note") (i) is
in partial substitution of that certain Second Amended and Restated Acquisition
Loan Note dated as of February 6, 1998 (the "Acquisition Note") made by Makers
(other than MD Acquisition, Inc.) payable to the order of FINOVA in the original
principal amount of $7,800,000, (ii) is in partial substitution of that certain
Second Amended and Restated Term Note dated as of February 6, 1998 (the "Term
Note" and, together with the Acquisition Note, the Original Notes) made by
Makers (other than MD Acquisition, Inc.) payable to the order of FINOVA in the
original principal amount of $2,200,000 and (iii) shall not constitute a
novation of the Indebtedness for Borrowed Money evidenced by the Original Notes
or any of Borrowers' Obligations.
This Note is delivered by Makers to FINOVA pursuant to and in accordance
with the applicable provisions of the Loan Agreement. All capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in the Loan Agreement.
The Principal Balance of this Note from time to time outstanding shall bear
interest at the per annum rate of interest set forth in subsection 2.3.1 of the
Loan Agreement.
<PAGE>
Accrued and unpaid interest and the Principal Balance of this Note shall be
paid in the manner set forth in Section 2.3 and 2.4, respectively, of the Loan
Agreement.
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Note shall bear
interest at the Default Rate, which interest at such Default Rate shall be paid
by Makers to FINOVA immediately upon demand. In addition, if a payment of
principal or interest to be made pursuant to this Note becomes past due for a
period in excess of five (5) days, Makers shall pay on demand to FINOVA a late
charge of 5.0% of the amount of such overdue payment.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of any Event of Default,
without further notice or demand, the Principal Balance of this Note, and all
accrued and unpaid interest thereon, shall be and become immediately due and
payable in full. Failure to exercise this option by FINOVA shall not constitute
a waiver of the right to exercise the same in the event of any subsequent Event
of Default, and such failure shall not be deemed to establish a custom or course
of dealing or performance among Makers and FINOVA.
This Note shall or may be prepaid, in whole or in part, at the times and in
accordance with Section 2.6 of the Loan Agreement.
All funds received by FINOVA during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Makers pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by FINOVA until FINOVA is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, FINOVA shall not collect a rate of interest on any
obligation or liability due and owing by Makers to FINOVA in excess of the
maximum contract rate of interest permitted by applicable law ("Excess
Interest"). FINOVA and Makers agree that the interest laws of the State of
Arizona shall govern the relationship among them, but in the event of a final
adjudication to the contrary, Makers shall be obligated to pay, nunc pro tunc,
--------------
to FINOVA only such interest as then shall be permitted by the laws of the state
found to govern the contract relationship among FINOVA and Makers. If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Note, the Loan Agreement or any other Loan
Instrument, then in such event (i) no Maker shall be obligated to pay such
Excess Interest, (ii) any Excess Interest collected by FINOVA shall be, at
FINOVA's option, (A) applied to the Principal Balance or to accrued and unpaid
interest not in excess of the maximum rate permitted
-2-
<PAGE>
by applicable law (the "Maximum Rate") or (B) refunded to the payor thereof,
(iii) the interest rates provided for herein (the "Stated Rate") shall be
automatically reduced to the Maximum Rate and this Note, the Loan Agreement and
the other Loan Instruments, as applicable, shall be deemed to have been, and
shall be, modified to reflect such reduction, and (iv) no Maker shall have any
action against FINOVA for any damages arising out of the payment or collection
of such Excess Interest; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Rate, Makers shall, to the extent permitted
by law, continue to pay interest at the Maximum Rate until such time as the
total interest received by FINOVA is equal to the total interest which FINOVA
would have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again exceeds the
Maximum Rate, in which event the provisions contained in this paragraph again
shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Note or any part thereof, each Maker jointly and severally promises and
agrees to pay all costs of collection, including all court costs and reasonable
attorneys' fees.
Each Maker hereby waives presentment for payment, protest and demand and
notice of protest, demand, dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended from time to
time before, at or after maturity, without in any way affecting the liability of
Makers hereunder or any guarantor hereof.
EACH MAKER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY SUCH
MAKER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS NOTE OR ANY OR ALL OF THE
OTHER LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA,
MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF ARIZONA, OR, IF FINOVA INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH FINOVA SHALL INITIATE OR TO WHICH FINOVA SHALL REMOVE
SUCH ACTION, TO THE EXTENT SUCH COURT OTHERWISE HAS JURISDICTION. EACH MAKER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY FINOVA TO ANY OF SUCH COURTS,
AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH MAKER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 11.1 OF THE LOAN AGREEMENT. EACH MAKER WAIVES ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD ANY MAKER, AFTER BEING SO SERVED, FAIL TO APPEAR
OR
-3-
<PAGE>
ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE PERIOD
OF TIME PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH MAKER SHALL BE DEEMED
IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY FINOVA AGAINST SUCH
MAKER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
THE EXCLUSIVE CHOICE OF FORUM FOR MAKERS SET FORTH IN THIS PARAGRAPH SHALL NOT
BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY FINOVA, OF ANY JUDGMENT OBTAINED IN
ANY OTHER FORUM OR THE TAKING, BY FINOVA, OF ANY ACTION TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE JURISDICTION, AND EACH MAKER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
AND DECISIONS OF THE STATE OF ARIZONA. ALL FUNDS DISBURSED TO OR FOR THE BENEFIT
OF MAKERS WILL BE DEEMED TO HAVE BEEN DISBURSED IN PHOENIX, ARIZONA.
EACH MAKER ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER TIES NOTE WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE,
SUCH MAKER AGREES THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or Loan
Agreement is sought.
This Note shall be binding upon each Maker and upon such Maker's successors
and assigns, and shall inure to the benefit of the successors and permitted
assigns of FINOVA.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed
thereon by any court or any Governmental Body, this Note shall be construed as
not containing such provision and the invalidity of such provision shall not
affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full
force and effect.
Time for the performance of Makers' obligations under this Note is of the
essence.
This Note is entitled to the benefit of certain collateral security, all as
more fully set forth in the Loan Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered by each Maker
by such Maker's duly authorized officer on the date first set forth above.
INFOCURE CORPORATION, a Delaware corporation, PACE
FINANCIAL CORPORATION, an Ohio corporation, ORTHODONTIC
PRACTICE MANAGEMENT SYSTEM, INC., a Georgia corporation,
MD ACQUISITION, INC., a Connecticut corporation, POLCI
ACQUISITION, INC., a Michigan corporation, ROVAK, INC. a
Minnesota corporation, CCI ACQUISITION, INC., a Florida
corporation, KCOMP MANAGEMENT SYSTEMS, INC., a
California corporation, SOFTEASY SOFTWARE, INC., a
Pennsylvania corporation, and HEALTH CARE DIVISION,
INC., MILLARD-WAYNE, INC., DR SOFTWARE, INC. and
INTERNATIONAL COMPUTER SOLUTIONS, INC., each a Georgia
corporation
By: /s/ James K. Price
------------------
Secretary
------------------
A duly authorized officer of each Maker
-5-
<PAGE>
EXHIBIT 10.46
FOURTH AMENDED AND RESTATED TERM NOTE
-------------------------------------
$10,000,000.00
PHOENIX, ARIZONA MARCH 2, 1998
FOR VALUE RECEIVED, each of the undersigned, INFOCURE CORPORATION, a
Delaware corporation, MEDICAL SOFTWARE INTEGRATORS, INC., a Georgia corporation,
("MSI"), PACE FINANCIAL CORPORATION, an Ohio corporation, ORTHODONTIC PRACTICE
MANAGEMENT SYSTEM, INC., a Georgia corporation, MD ACQUISITION, INC., a
Connecticut corporation, POLCI ACQUISITION, INC., a Michigan corporation, ROVAK,
INC., a Minnesota corporation, CCI ACQUISITION, INC., a Florida corporation,
KCOMP MANAGEMENT SYSTEMS, INC., a California corporation, SOFTEASY SOFTWARE,
INC., a Pennsylvania corporation, and HEALTH CARE DIVISION, INC., MILLARD-WAYNE,
INC., DR SOFTWARE, INC. and INTERNATIONAL COMPUTER SOLUTIONS, INC., each a
Georgia corporation (individually a "Maker" and collectively the "Makers"),
hereby jointly and severally promises to pay to the order of FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), the principal sum of TEN MILLION
AND NO/100 DOLLARS ($10,000,000.00), or, if less, the aggregate unpaid amount of
the Term Loan made by FINOVA pursuant to and in accordance with the applicable
provisions of that certain Second Amended and Restated Loan Agreement dated as
of February 24, 1998 (as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement") among Makers and FINOVA, at
the office of FINOVA at 1850 North Central Avenue, Phoenix, Arizona 85004, or at
such other place as the holder hereof may appoint, plus interest thereon as set
forth below.
This Fourth Amended and Restated Term Note (this "Note") (i) is in partial
substitution of that certain Third Amended and Restated Term Note dated as of
February 24, 1998 (the "Original Note") made by Makers (other than MSI) payable
to the order of FINOVA in the original principal amount of $10,000,000 and (ii)
shall not constitute a novation of the Indebtedness for Borrowed Money evidenced
by the Original Note or any of Borrowers' Obligations.
This is delivered by Makers to FINOVA pursuant to and in accordance with
the applicable provisions of the Loan Agreement. All capitalized terms used but
not elsewhere defined herein shall have the respective meanings ascribed to such
terms in the Loan Agreement.
The Principal Balance of this Note from time to time outstanding shall bear
interest at the per annum rate of interest set forth in subsection 2.3.1 of the
Loan Agreement.
Accrued and unpaid interest and the Principal Balance of this Note shall be
paid in the manner set forth in Section 2.3 and 2.4, respectively, of the Loan
Agreement.
<PAGE>
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Note shall bear
interest at the Default Rate, which interest at such Default Rate shall be paid
by Makers to FINOVA immediately upon demand. In addition, if a payment of
principal or interest to be made pursuant to this Note becomes past due for a
period in excess of five (5) days, Makers shall pay on demand to FINOVA a late
charge of 5.0% of the amount of such overdue payment.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of any Event of Default,
without further notice or demand, the Principal Balance of this Note, and all
accrued and unpaid interest thereon, shall be and become immediately due and
payable in full. Failure to exercise this option by FINOVA shall not constitute
a waiver of the right to exercise the same in the event of any subsequent Event
of Default, and such failure shall not be deemed to establish a custom or course
of dealing or performance among Makers and FINOVA.
This Note shall or may be prepaid, in whole or in part, at the times and in
accordance with Section 2.6 of the Loan Agreement.
All funds received by FINOVA during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Makers pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by FINOVA until FINOVA is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, FINOVA shall not collect a rate of interest on any
obligation or liability due and owing by Makers to FINOVA in excess of the
maximum contract rate of interest permitted by applicable law ("Excess
Interest"). FINOVA and Makers agree that the interest laws of the State of
Arizona shall govern the relationship among them, but in the event of a final
adjudication to the contrary, Makers shall be obligated to pay, nunc pro tunc,
--------------
to FINOVA only such interest as then shall be permitted by the laws of the state
found to govern the contract relationship among FINOVA and Makers. If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Note, the Loan Agreement or any other Loan
Instrument, then in such event (i) no Maker shall be obligated to pay such
Excess Interest, (ii) any Excess Interest collected by FINOVA shall be, at
FINOVA's option, (A) applied to the Principal Balance or to accrued and unpaid
interest not in excess of the maximum rate permitted by applicable law (the
"Maximum Rate") or (B) refunded to the payor thereof, (iii) the interest rates
provided for herein (the "Stated Rate") shall be automatically reduced to the
Maximum Rate
-2-
<PAGE>
and this Note, the Loan Agreement and the other Loan Instruments, as applicable,
shall be deemed to have been, and shall be, modified to reflect such reduction,
and (iv) no Maker shall have any action against FINOVA for any damages arising
out of the payment or collection of such Excess Interest; provided, however,
that if at any time thereafter the Stated Rate is less than the Maximum Rate,
Makers shall, to the extent permitted by law, continue to pay interest at the
Maximum Rate until such time as the total interest received by FINOVA is equal
to the total interest which FINOVA would have received had the Stated Rate been
(but for the operation of this provision) the interest rate payable. Thereafter,
the interest rate payable shall be the Stated Rate unless and until the Stated
Rate again exceeds the Maximum Rate, in which event the provisions contained in
this paragraph again shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Note or any part thereof, each Maker jointly and severally promises and
agrees to pay all costs of collection, including all court costs and reasonable
attorneys' fees.
Each Maker hereby waives presentment for payment, protest and demand and
notice of protest, demand, dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended from time to
time before, at or after maturity, without in any way affecting the liability of
Makers hereunder or any guarantor hereof.
EACH MAKER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY SUCH
MAKER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS NOTE OR ANY OR ALL OF THE
OTHER LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA,
MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF ARIZONA, OR, IF FINOVA INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH FINOVA SHALL INITIATE OR TO WHICH FINOVA SHALL REMOVE
SUCH ACTION, TO THE EXTENT SUCH COURT OTHERWISE HAS JURISDICTION. EACH MAKER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY FINOVA TO ANY OF SUCH COURTS,
AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH MAKER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 11.1 OF THE LOAN AGREEMENT. EACH MAKER WAIVES ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD ANY MAKER, AFTER BEING SO SERVED, FAIL TO APPEAR
OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE
PERIOD OF TIME PRESCRIBED BY LAW AFTER THE MAILING
-3-
<PAGE>
THEREOF, SUCH MAKER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY
BE ENTERED BY FINOVA AGAINST SUCH MAKER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR MAKERS
SET FORTH IN THIS PARAGRAPH SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
FINOVA, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY FINOVA, OF
ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH
MAKER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
AND DECISIONS OF THE STATE OF ARIZONA. ALL FUNDS DISBURSED TO OR FOR THE BENEFIT
OF MAKERS WILL BE DEEMED TO HAVE BEEN DISBURSED IN PHOENIX, ARIZONA.
EACH MAKER ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS NOTE WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE,
SUCH MAKER AGREES THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or Loan
Agreement is sought.
This Note shall be binding upon each Maker and upon such Maker's successors
and assigns, and shall inure to the benefit of the successors and permitted
assigns of FINOVA.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed
thereon by any court or any Governmental Body, this Note shall be construed as
not containing such provision and the invalidity of such provision shall not
affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full
force and effect.
Time for the performance of Makers' obligations under this Note is of the
essence.
This Note is entitled to the benefit of certain collateral security, all as
more fully set forth in the Loan Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered by each Maker
by such Maker's duly authorized officer on the date first set forth above.
INFOCURE CORPORATION, a Delaware corporation, MEDICAL
SOFTWARE INTEGRATORS, INC., a Georgia corporation, PACE
FINANCIAL CORPORATION, an Ohio corporation, MD
ACQUISITION, INC., a Connecticut corporation,
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., a Georgia
corporation, POLCI ACQUISITION, INC., a Michigan
corporation, ROVAK, INC. a Minnesota corporation, CCI
ACQUISITION, INC., a Florida corporation, KCOMP
MANAGEMENT SYSTEMS, INC., a California corporation,
SOFTEASY SOFTWARE, INC., a Pennsylvania corporation, and
HEALTH CARE DIVISION, INC., MILLARD-WAYNE, INC., DR
SOFTWARE, INC. and INTERNATIONAL COMPUTER SOLUTIONS,
INC., each a Georgia corporation
By: /s/ Frederick L. Fine
---------------------
Frederick L. Fine
-----------------
A duly authorized officer of each Maker
-5-
<PAGE>
EXHIBIT 10.47
FOURTH AMENDED AND RESTATED ACQUISITION LOAN NOTE
-------------------------------------------------
$20,000,000.00
PHOENIX, ARIZONA MARCH 2, 1998
FOR VALUE RECEIVED, each of the undersigned, INFOCURE CORPORATION, a
Delaware corporation, MEDICAL SOFTWARE INTEGRATORS, INC., a Georgia corporation
("MSI"), PACE FINANCIAL CORPORATION, an Ohio corporation, ORTHODONTIC PRACTICE
MANAGEMENT SYSTEM, INC., a Georgia corporation, MD ACQUISITION, INC., a
Connecticut corporation, POLCI ACQUISITION, INC., a Michigan corporation, ROVAK,
INC., a Minnesota corporation, CCI ACQUISITION, INC., a Florida corporation,
KCOMP MANAGEMENT SYSTEMS, INC., a California corporation, SOFTEASY SOFTWARE,
INC., a Pennsylvania corporation, and HEALTH CARE DIVISION, INC., MILLARD-WAYNE,
INC., DR SOFTWARE, INC. and INTERNATIONAL COMPUTER SOLUTIONS, INC., each a
Georgia corporation (individually a "Maker" and collectively the "Makers"),
hereby jointly and severally promises to pay to the order of FINOVA CAPITAL
CORPORATION, a Delaware corporation ("FINOVA"), the principal sum of TWENTY
MILLION AND NO/100 DOLLARS ($20,000,000.00), or, if less, the aggregate unpaid
amount of the Acquisition Loan made by FINOVA pursuant to and in accordance with
the applicable provisions of that certain Second Amended and Restated Loan
Agreement dated as of February 24, 1998 (as the same may be amended, modified,
supplemented or restated from time to time, the "Loan Agreement") among Makers
and FINOVA, at the office of FINOVA at 1850 North Central Avenue, Phoenix,
Arizona 85004, or at such other place as the holder hereof may appoint, plus
interest thereon as set forth below.
This Fourth Amended and Restated Acquisition Loan Note (this "Note") (i) is
in partial substitution of that certain Third Amended and Restated Acquisition
Loan Note dated as of February 24, 1998 (the "Original Note") made by Makers
(other than MSI) payable to the order of FINOVA in the original principal amount
of $20,000,000 and (ii) shall not constitute a novation of the Indebtedness for
Borrowed Money evidenced by the Original Note or any of Borrowers' Obligations.
This Note is delivered by Makers to FINOVA pursuant to and in accordance
with the applicable provisions of the Loan Agreement. All capitalized terms used
but not elsewhere defined herein shall have the respective meanings ascribed to
such terms in the Loan Agreement.
The Principal Balance of this Note from time to time outstanding shall bear
interest at the per annum. rate of interest set forth in subsection 2.3.1 of the
Loan Agreement.
Accrued and unpaid interest and the Principal Balance of this Note shall be
paid in the manner set forth in Section 2.3 and 2.4, respectively, of the Loan
Agreement.
<PAGE>
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Note shall bear
interest at the Default Rate, which interest at such Default Rate shall be paid
by Makers to FINOVA immediately upon demand. In addition, if a payment of
principal or interest to be made pursuant to this Note becomes past due for a
period in excess of five (5) days, Makers shall pay on demand to FINOVA a late
charge of 5.0% of the amount of such overdue payment.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of any Event of Default,
without further notice or demand, the Principal Balance of this Note, and all
accrued and unpaid interest thereon, shall be and become immediately due and
payable in full. Failure to exercise this option by FINOVA shall not constitute
a waiver of the right to exercise the same in the event of any subsequent Event
of Default, and such failure shall not be deemed to establish a custom or course
of dealing or performance among Makers and FINOVA.
This Note shall or may be prepaid, in whole or in part, at the times and in
accordance with Section 2.6 of the Loan Agreement.
All funds received by FINOVA during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Makers pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by FINOVA until FINOVA is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, FINOVA shall not collect a rate of interest on any
obligation or liability due and owing by Makers to FINOVA in excess of the
maximum contract rate of interest permitted by applicable law ("Excess
Interest"). FINOVA and Makers agree that the interest laws of the State of
Arizona shall govern the relationship among them, but in the event of a final
adjudication to the contrary, Makers shall be obligated to pay, nunc pro tunc,
--------------
to FINOVA only such interest as then shall be permitted by the laws of the state
found to govern the contract relationship among FINOVA and Makers. If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Note, the Loan Agreement or any other Loan
Instrument, then in such event (i) no Maker shall be obligated to pay such
Excess Interest, (ii) any Excess Interest collected by FINOVA shall be, at
FINOVA's option, (A) applied to the Principal Balance or to accrued and unpaid
interest not in excess of the maximum rate permitted by applicable law (the
"Maximum Rate") or (B) refunded to the payor thereof, (iii) the interest rates
provided for herein (the "Stated Rate") shall be automatically reduced to the
Maximum Rate
-2-
<PAGE>
and this Note, the Loan Agreement and the other Loan Instruments, as applicable,
shall be deemed to have been, and shall be, modified to reflect such reduction,
and (iv) no Maker shall have any action against FINOVA for any damages arising
out of the payment or collection of such Excess Interest; provided, however,
that if at any time thereafter the Stated Rate is less than the Maximum Rate,
Makers shall, to the extent permitted by law, continue to pay interest at the
Maximum Rate until such time as the total interest received by FINOVA is equal
to the total interest which FINOVA would have received had the Stated Rate been
(but for the operation of this provision) the interest rate payable. Thereafter,
the interest rate payable shall be the Stated Rate unless and until the Stated
Rate again exceeds the Maximum Rate, in which event the provisions contained in
this paragraph again shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Note or any part thereof, each Maker jointly and severally promises and
agrees to pay all costs of collection, including all court costs and reasonable
attorneys' fees.
Each Maker hereby waives presentment for payment, protest and demand and
notice of protest, demand, dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended from time to
time before, at or after maturity, without in any way affecting the liability of
Makers hereunder or any guarantor hereof.
EACH MAKER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY SUCH
MAKER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS NOTE OR ANY OR ALL OF THE
OTHER LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA,
MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF ARIZONA, OR, IF FINOVA INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH FINOVA SHALL INITIATE OR TO WHICH FINOVA SHALL REMOVE
SUCH ACTION, TO THE EXTENT SUCH COURT OTHERWISE HAS JURISDICTION. EACH MAKER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY FINOVA TO ANY OF SUCH COURTS,
AND HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER
PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH MAKER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT
TO SECTION 11.1 OF THE LOAN AGREEMENT. EACH MAKER WAIVES ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD ANY MAKER, AFTER BEING SO SERVED, FAIL TO APPEAR
OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE
PERIOD OF TIME PRESCRIBED BY LAW AFTER THE MAILING
-3-
<PAGE>
THEREOF, SUCH MAKER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY
BE ENTERED BY FINOVA AGAINST SUCH MAKER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR MAKERS
SET FORTH IN THIS PARAGRAPH SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
FINOVA, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY FINOVA, OF
ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH
MAKER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
AND DECISIONS OF THE STATE OF ARIZONA. ALL FUNDS DISBURSED TO OR FOR THE BENEFIT
OF MAKERS WILL BE DEEMED TO HAVE BEEN DISBURSED IN PHOENIX, ARIZONA.
EACH MAKER ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS NOTE WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE,
SUCH MAKER AGREES THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY
WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A
JURY.
This Note may not be changed or amended orally, but only by an instrument
in writing signed by the party against whom enforcement of the change or Loan
Agreement is sought.
This Note shall be binding upon each Maker and upon such Maker's successors
and assigns, and shall inure to the benefit of the successors and permitted
assigns of FINOVA.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed
thereon by any court or any Governmental Body, this Note shall be construed as
not containing such provision and the invalidity of such provision shall not
affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full
force and effect.
Time for the performance of Makers' obligations under this Note is of the
essence.
This Note is entitled to the benefit of certain collateral security, all as
more fully set forth in the Loan Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered by each Maker
by such Maker's duly authorized officer on the date first set forth above.
INFOCURE CORPORATION, a Delaware corporation, MEDICAL
SOFTWARE INTEGRATORS, INC., a Georgia corporation, PACE
FINANCIAL CORPORATION, an Ohio corporation, ORTHODONTIC
PRACTICE MANAGEMENT SYSTEM, INC., a Georgia corporation,
MD ACQUISITION, INC., a Connecticut corporation, POLCI
ACQUISITION, INC., a Michigan corporation, ROVAK, INC. a
Minnesota corporation, CCI ACQUISITION, INC., a Florida
corporation, KCOMP MANAGEMENT SYSTEMS, INC., a
California corporation, SOFTEASY SOFTWARE, INC., a
Pennsylvania corporation, and HEALTH CARE DIVISION,
INC., MILLARD-WAYNE, INC., DR SOFTWARE, INC. and
INTERNATIONAL COMPUTER SOLUTIONS, INC., each a Georgia
corporation
By: /s/ Frederick L. Fine
---------------------
Frederick L. Fine
-----------------
A duly authorized officer of each Maker
-5-
<PAGE>
EXHIBIT 10.48
-------------
INFOCURE CORPORATION
DIRECTORS STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company and its
stockholders by strengthening the Company's ability to attract and retain the
services of experienced and knowledgeable nonemployee directors and by
encouraging such directors to acquire an increased proprietary interest in the
Company.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the committee appointed by the Board pursuant to
Section 5.
2.4 COMMON STOCK means the common stock of the Company, $0.001 par value
per share, as defined in the Company's Articles of Incorporation, as the same
may be amended from time to time, and shall also mean any other stock or
securities (including any other share or securities of an entity other than the
Company) for or into which the outstanding shares of such stock are hereinafter
exchanged or changed.
2.5 COMPANY means InfoCure Corporation, a Delaware corporation, and any
successor to such organization.
2.6 ELIGIBLE DIRECTOR means a director of the Company who is not an
employee of the Company or a Parent or Subsidiary.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase one
Share upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE of each Share of Common Stock means the closing
"bid" price of a Share in the national securities market on which the Shares are
traded, on the trading day immediately preceding the day on which such value is
to be determined or, if such "bid" price is not available, the last sales price
on such day or, if no shares were traded on such day, on the next preceding day
on which the Shares were traded, as reported by the American Stock Exchange or
other reputable national quotation service. If at any
<PAGE>
time the Shares are not traded on a national securities exchange, Fair Market
Value shall be the value determined by the Board of Directors or Committee
administering the Plan, taking into consideration those factors affecting or
reflecting value which they deem appropriate.
2.10 OPTION means an option granted under this Plan to purchase Shares;
all Options granted under this Plan are intended by the Company to be
nonqualified options which are not entitled to special tax treatment under, and
do not satisfy the requirements of, Code Section 422.
2.11 OPTIONEE means grantee of an Option.
2.12 PARENT means any corporation which is a parent of the Company within
the meaning of Section 424(e) of the Code.
2.13 PLAN means the InfoCure Corporation Directors Stock Option Plan, as
amended from time to time.
2.14 SHARE means a share of the Common Stock of the Company.
2.15 STOCK OPTION GRANT CERTIFICATE means the written agreement or
instrument which sets forth the terms of an Option granted to an Eligible
Director under this Plan.
2.16 SUBSIDIARY means any corporation which is a subsidiary (within the
meaning of Section 424(f) of the Code) of the Company.
2.17 SURRENDERED SHARES means the Shares described in Section 9 which (in
lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 9.
SECTION 3.
SHARES SUBJECT TO OPTIONS
One Hundred Thousand (100,000) Shares of Common Stock shall be reserved for
issue under this Plan. Such Shares shall be reserved to the extent that the
Company deems appropriate from authorized but unissued Shares and from Shares
which have been reacquired by the Company. Furthermore, any Shares subject to
an Option which remain after the cancellation, expiration or exchange of such
Option thereafter shall again become available for use under this Plan, but any
Surrendered Shares which remain after the surrender of an Option under Section 9
shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before such
shareholder approval, any Options granted under this Plan before the date of
such approval automatically shall be granted subject to such approval. The Plan
shall continue in effect until it is terminated by action of the Board or the
Company's stockholders, but such termination shall not affect the terms of any
Options then outstanding.
-2-
<PAGE>
SECTION 5.
ADMINISTRATION
Plan shall be administered by the Committee, which shall consist of two (2)
or more directors appointed by the Board. The Committee, acting in its absolute
discretion, shall exercise such powers and take such action as expressly called
for under this Plan. The Committee shall have the power to interpret this Plan
and, subject to Section 14, to take such other action in the administration and
operation of the Plan as it deems equitable under the circumstances. The
Committee's actions shall be binding on the Company, on each affected Eligible
Director, and on each other person directly or indirectly affected by such
action.
SECTION 6.
ELIGIBILITY
Each Eligible Director shall be entitled to participate in the Plan and
shall be eligible to receive those grants of Options which shall be applicable
to such Eligible Director pursuant to the terms and conditions of Section 7.
SECTION 7.
GRANT OF OPTIONS
7.1 REGULAR GRANTS. An Option to purchase Ten Thousand (10,000) Shares
(as adjusted, pursuant to Section 12) shall automatically be granted to each
Eligible Director who is first appointed or elected to the Board of Directors.
Additional Options to purchase Two Thousand Five Hundred (2,500) Shares each
shall be granted to each Eligible Director on each anniversary of such
Director's first day of service as a Director of the Company. Eligible
Directors shall not be entitled to any payment of cash hereunder in lieu of
receiving Options. Each grant of an Option shall be evidenced by a Stock Option
Grant Certificate, and each Stock Option Grant Certificate shall incorporate
such other terms and conditions as the Committee, acting in its absolute
discretion, deems consistent with the terms of this Plan, including (without
limitation) a restriction on the number of Shares subject to the Option which
first become exercisable or subject to surrender during any calendar year. Any
Option granted to an Eligible Director shall, at his request, be issued to, in
the name and for the benefit of the entity through which such Eligible Director
has invested in the Company.
7.2 ADDITIONAL GRANTS. The Compensation Committee may, in its sole
discretion, make additional grants hereunder to Eligible Directors from time to
time.
SECTION 8.
TERMS AND CONDITIONS OF OPTIONS
8.1 EXERCISE PRICE. The Exercise Price for each Option granted shall be
the Fair Market Value of the underlying Common Stock as determined pursuant to
Section 2.9 hereof.
8.2 VESTING OF OPTIONS. Each Option granted under the Plan shall vest as
to fifty percent (50%) of the underlying shares upon the Optionee's completion
of one (1) year of service as a Director following the Date of Grant, and fifty
percent (50%) upon completion of the Optionee's second year of service as a
Director following the Date of Grant.
8.3 TERM OF OPTION. Each Option granted under the Plan shall include an
expiration date, which shall be set forth in the Stock Option Grant Certificate.
Unless otherwise provided in the Stock Option Grant Certificate, the termination
of service of an Optionee as a member of the Board by death or otherwise shall
-3-
<PAGE>
not accelerate or otherwise affect the number of Shares with respect to which an
Option may be exercised, and such Option may only be exercised with respect to
that number of Shares which could have been purchased under the Option had the
Option been exercised by the Optionee on the date that such Optionee ceased to
be a member of the Board by reason of such Optionee's death or for any other
reason.
Each Option granted under this Plan shall be exercisable in whole or
in part at such time or times as set forth in the related Stock Option Grant
Certificate, but no Stock Option Grant Certificate shall:
(a) make an Option exercisable before the date such Option is granted;
or
(b) make an Option exercisable after the earlier of the first to occur
of the following (at which time such option shall be deemed to have terminated):
(i) immediately at the time and on the date such Option is
exercised in full;
(ii) at 5:00 p.m., EST, on the date which is the tenth (10th)
anniversary of the date such Option is granted;
(iii) at 5:00 p.m., EST on the thirtieth day following the date
an Optionee ceases to be a member of the Board of Directors for any reason other
than his death or disability; or
(iv) at 5:00 p.m., EST on the ninetieth day following the date
that an Optionee ceases to be a member of the Board of Directors by reason of
his death or disability.
8.4 TIME AND MANNER OF OPTION EXERCISE. Any vested and exercisable Option
is exercisable in whole or in part at any time or from time to time prior to the
expiration of an Option by giving written notice, signed by the person
exercising the Option, to the Company stating the number of Shares with respect
to which the Option is being exercised, accompanied by payment in full of the
Exercise Price for the number of Shares to be purchased. The date and time upon
which the Company's Secretary or Treasurer shall have received both such notice
and payment shall be the date and time of exercise of the Option as to the
number of Shares described by the Optionee. No Option may be exercised at any
time with respect to a fractional share. Any Option of a deceased Optionee may
be exercised, to the extent vested at the time of such Optionee's death, by the
estate of such Optionee or by a person or persons whom the Optionee has
designated in writing filed with the Company, or, if no such designation has
been made, by the person or persons to whom the Optionee's rights have passed by
will or the laws of descent and distribution.
8.5 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price may be in
cash, by cashier's check, by personal check, or by promissory note of the
Optionee. The Committee may also provide in an exercise agreement upon exercise
of an Option that, in lieu of cash, all or any portion of the Exercise Price may
be paid by tendering to the Company Shares of Common Stock duly endorsed for
transfer and owned by the Optionee, to be credited against the Option price at
the Fair Market Value of such Shares on the date of exercise. A promissory note
tendered in payment of the Exercise Price shall be in a form designated by the
Committee, shall be signed by the Optionee (which signature shall be notarized
or guaranteed) and shall include substantially the following terms: interest on
the principal amount of the note shall accrue at a per annum rate equal to the
prime rate as announced from time to time by the principal bank of the Company,
or if the Company has no principal bank, that rate announced by the Wall Street
Journal as the prevailing "prime rate" of interest per annum; equal payments of
principal and interest shall be payable in installments for a period determined
by the Committee following exercise, and upon the expiration of such period the
entire unpaid principal amount, together with accrued by unpaid interest, shall
be due and payable; and the Optionee executing the note shall be personally
liable for timely payment of the unpaid principal balance and all accrued by
unpaid interest.
-4-
<PAGE>
8.6 TRANSFERABILITY. The right of any Optionee to exercise an Option
granted under the Plan shall, during the lifetime of such Optionee, be
exercisable only by such Optionee or by a person who obtained such Option
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the rules thereunder (a "QDRO"), and shall not be assignable or transferable
by such Optionee other than by will or by the laws of descent and distribution
or by a QDRO.
8.7 LIMITATION OF RIGHTS.
(a) LIMITATION AS TO SHARES. Neither the recipient of an Option under
the Plan nor an Optionee's successor or successors in interest shall have any
rights as a stockholder of the Company with respect to any Shares subject to an
Option granted to such person until the date of issuance of a stock certificate
for such Shares.
(b) LIMITATION AS TO DIRECTORSHIP. Neither the Plan, nor the granting
of an Option, nor any other action taken pursuant to the Plan shall constitute
or be evidence of any agreement or understanding, express or implied, that an
Eligible Director has a right to continue as a member of the Board for any
period of time or at any particular rate of compensation.
(c) REGULATORY APPROVAL AND COMPLIANCE. The Company shall not be
required to issue any certificate or certificates for Shares upon the exercise
of an Option granted under the Plan or to record as a holder of record of Shares
the name of the individual exercising an Option under the Plan, without
obtaining to the complete satisfaction of the Board the approval of all
regulatory bodies deemed necessary by the Board and without complying, to the
Board's complete satisfaction, with all rules and regulations under federal,
state, or local law deemed applicable by the Board. In addition, with respect
to persons subject to Section 16 of the Exchange Act, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan or
action by the Board or the Committee fail to comply, its shall deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
SECTION 9.
SURRENDER OF OPTIONS
9.1 GENERAL RULE. The Committee, in its absolute discretion may
incorporate a provision in a Stock Option Grant Certificate to allow an Optionee
to surrender his or her Option in whole or in part in lieu of the exercise in
whole or in part of that Option on any date that
(a) the Fair Market Value of the Shares subject to such Option exceeds
the Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise exercisable.
9.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Stock Option Grant Certificate to the Committee
(or to its delegate) together with a statement signed by the Optionee which
specifies the number of Shares ("Surrendered Shares") as to which the Optionee
surrenders his or her Option and how he or she desires payment be made for such
Surrendered Shares.
9.3 PAYMENT. An Optionee in exchange for his or her Surrendered Shares
shall receive a payment in cash or in Shares, or in a combination of cash and
Shares, equal in amount on the date such surrender is effected to the excess of
the Fair Market Value of the Surrendered Shares on such date over the Exercise
Price for the Surrendered Shares. The Committee acting in its absolute
discretion can approve or
-5-
<PAGE>
disapprove an Optionee's request for payment in whole or in part in cash and can
make that payment in cash or in such combination of cash and Shares as the
Committee deems appropriate. A request for payment only in Shares shall be
approved and made in Shares to the extent payment can be made in whole shares of
Shares and (at the Committee's discretion) in cash in lieu of any fractional
Shares.
9.4 RESTRICTIONS. Any Stock Option Grant Certificate which incorporates a
provision to allow an Optionee to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Committee deems necessary to satisfy the
conditions to the exemption under Rule 16b-3 (or any successor exemption) to
Section 16(b) of the Exchange Act.
SECTION 10.
SECURITIES REGISTRATION
Each Stock Option Grant Certificate may provide that, upon the receipt of
Shares as a result of the surrender or exercise of an Option, the Optionee
shall, if so requested by the Company, hold such Shares for investment and not
with a view of resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement satisfactory to the
Company to that effect. Each Stock Option Grant Certificate also may provide
that, if so requested by the Company, the Optionee shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Shares unless a registration statement shall be in effect with respect
to such Shares under the Securities Act of 1933, as amended ("1933 Act") and any
applicable state securities law or unless he or she shall have furnished to the
Company an opinion, in form and substance satisfactory to the Company, or legal
counsel acceptable to the Company, that such registration is not required.
Certificates representing the Shares transferred upon the exercise or surrender
of an Option granted under this Plan may at the discretion of the Company bear a
legend to the effect that such Shares have not been registered under the 1933
Act or any applicable state securities law and that such Shares may not be sold
or offered for sale in the absence of an effective registration statement as to
such Shares under the 1933 Act and any applicable state securities law or an
opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required.
SECTION 11.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
(a) The tenth (10th) anniversary of the effective date of this Plan
(as determined under Section 4 of this Plan), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Options have been
surrendered or exercised in full or no longer are exercisable; or
(b) The date on which all of the Shares reserved under Section 3 of
this Plan have (as a result of the surrender or exercise of Options granted
under this Plan) been issued or no longer are available for use under this Plan,
in which event this Plan also shall terminate on such date.
SECTION 12.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, the number of
Shares subject to Options granted under this Plan and the Exercise Price of such
Options shall be adjusted by the Board in an equitable manner to reflect any
change in the capitalization of the Company, including, but not limited to, such
changes as stock dividends or stock splits. Furthermore, the Board shall have
the right to adjust (in a manner which satisfies the requirements of Code
Section 424(a)) the number of Shares reserved under Section 3 of this Plan
-6-
<PAGE>
and the number of Shares subject to Options granted under this Plan and the
Exercise Price of such Options in the event of any corporate transaction
described in Code Section 424(a) which provides for the substitution or
assumption of such Options. If any adjustment under this Section creates a
fractional Share or a right to acquire a fractional Share, such fractional Share
shall be disregarded and the number of Shares reserved under this Plan and the
number subject to any Options granted under this Plan shall be the next lower
number of Shares, rounding all fractions downward. An adjustment made under
this Section by the Board shall be conclusive and binding on all affected
persons and, further, shall not constitute an increase in the number of Shares
reserved under Section 3 of this Plan.
SECTION 13.
SALE OR MERGER OF THE COMPANY
If the Company: (i) agrees to sell substantially all of its assets for
cash or property or for a combination of cash and property, (ii) agrees to any
merger, consolidation, reorganization, division or other transaction in which
Shares are converted into another security or into the right to receive
securities or property and such agreement does not provide for the assumption or
substitution of the Options granted under this Plan, or (iii) agrees to dissolve
or the Company liquidate its assets, then immediately following such time that
the Company manifests its agreement in writing to do any of the foregoing, at
the direction and discretion of the Board, or as is otherwise provided in the
Stock Option Grant Certificates, either (a) each Option shall be exercisable for
a period of thirty (30) days following delivery of written notice to each holder
of an Option (after which such Option shall expire), or (b) each Option may be
canceled unilaterally by the Company in exchange for the whole Shares (or,
subject to satisfying the conditions to the exemption under Rule 16b-3 or any
successor exemption to Section 16(b) of the Exchange Act, for the whole Shares
and the cash in lieu of a fractional Share) which each Optionee otherwise would
receive if he or she had the right to surrender his or her outstanding Option in
full under Section 9 of this Plan and he or she exercised that right exclusively
for Shares on a date fixed by the Board which comes before such sale or other
corporate transaction.
SECTION 14.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the shareholders of the Company: (i) to
increase the number of Shares reserved under Section 3, except as set forth in
Section 12, (ii) to extend the maximum life of the Plan under Section 11 or the
maximum exercise period under Section 9, (iii) to decrease the minimum Exercise
Price under Section 8, or (iv) to change the designation of Optionees eligible
for Options under Section 6. The Board also may suspend the granting of Options
under this Plan at any time and may terminate this Plan at any time; provided,
however, the Company shall not have the right to modify, amend or cancel any
Option granted before such suspension or termination unless: (a) the Optionee
consents in writing to such modification, amendment or cancellation, or (b)
there is a dissolution or liquidation of the Company or a transaction described
in Section 12 or Section 13 of this Plan.
SECTION 15.
MISCELLANEOUS
15.1 WITHHOLDING. The exercise or surrender of any Option granted under
this Plan shall constitute an Optionee's full and complete consent to whatever
action the Committee directs to satisfy the federal and state tax withholding
requirements, if any, which the Committee in its discretion deems applicable to
such exercise or surrender. In addition to and at the time of payment of the
Exercise Price, the Optionee shall pay to the Company in cash the full amount of
any federal, state and local income,
-7-
<PAGE>
employment or other taxes required to be withheld from the income of such
Optionee as a result of such exercise; provided, however, that in the discretion
of the Committee any Stock Option Grant Certificate may provide that all or any
portion of such tax obligations, together with additional taxes not exceeding
the actual additional taxes be owed by the Optionee as a result of such
exercise, may, upon the irrevocable election of the Optionee, be paid by
tendering to the Company whole Shares of Common Stock duly endorsed for transfer
and owned by the Optionee, or by authorizing the Company to withhold Shares of
Common Stock otherwise issuable upon exercise of the Option, in either case in
that number of Shares having a Fair Market Value on the date of exercise equal
to the amount of such taxes thereby being paid, in all cases subject to such
restrictions as the Committee may from time to time determine, including any
such restrictions as may be necessary or appropriate to satisfy the conditions
of the exemption set forth in Rule 16b-3 under the Exchange Act.
15.2 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Delaware.
-8-
<PAGE>
EXHIBIT 10.49
INFOCURE CORPORATION
LENGTH-OF-SERVICE NONQUALIFIED STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
granting Options to purchase Shares to Employees in order (a) to attract and
retain Employees, (b) to provide an additional incentive to each Employee to
work to increase the value of Shares, and (c) to provide each Employee with a
stake in the future of the Company which corresponds to the stake of each of the
Company's shareholders. This Plan does not provide for the grant of stock
options which qualify as incentive options under Section 422 of the Code.
SECTION 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the common stock of the Company, par value $.001 per
share.
2.5 COMPANY means InfoCure Corporation, a Delaware corporation, and any
successor to such organization.
2.6 EMPLOYEE means an employee of the Company, a Subsidiary or a Parent.
2.7 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.8 EXERCISE PRICE means the price which shall be paid to purchase one Share
upon the exercise of an Option granted under this Plan.
2.9 FAIR MARKET VALUE of each Share on any date means the price determined
below on the last business day immediately preceding the date of valuation:
(a) The closing sales price per Share, regular way, or in the absence
thereof the mean of the last reported bid and asked quotations, on such date on
the exchange having the greatest volume of trading in the Shares during the
thirty-day period preceding such date (or if such exchange was not open for
trading on such date, the next preceding date on which it was open); or
(b) If there is no price as specified in (a), the final reported sales
price per Share, or if not reported, the mean of the closing high bid and low
asked prices in the over-the-counter market for the Shares as reported by the
National Association of Securities Dealers Automatic Quotation System, or if not
so reported, then as reported by the National Quotation Bureau Incorporated, or
if such organization is not in existence, by an organization providing similar
services, on such date (or if such date is not a date for which such system or
organization generally provides reports, then on the next preceding date for
which it does so); or
<PAGE>
(c) If there also is no price as specified in (b), the price per Share
determined by the Board by reference to bid-and-asked quotations for the Shares
provided by members of an association of brokers and dealers registered pursuant
to Subsection 15(b) of the Exchange Act, which members make a market in the
Shares, for such recent dates as the Board shall determine to be appropriate for
fairly determining current market value; or
(d) If there also is no price as specified in (c), an amount per Share
determined in good faith by the Board based on such relevant facts, which may
include opinions of independent experts, as may be available to the Board.
2.10 OPTION means a nonqualified stock option granted under this Plan.
2.11 OPTIONEE means the grantee of an Option.
2.12 PARENT means any corporation which is a parent of the Company (within
the meaning of Code Section 424).
2.13 PLAN means the InfoCure Corporation Length-of-Service Stock Option
Plan, as amended from time to time.
2.14 SHARE means a share of the Common Stock of the Company.
2.15 STOCK OPTION GRANT means the written agreement or instrument which sets
forth the terms of an Option granted to an Employee under this Plan.
2.16 SUBSIDIARY means any corporation which is a subsidiary of the Company
(within the meaning of Code Section 424(f)).
2.17 SURRENDERED SHARES means the Shares described in Section 11.2 which (in
lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 11.
2.18 TERMINATION FOR CAUSE shall have the meaning set forth in an applicable
written Employment Agreement between the Optionee and the Company or, in the
absence thereof, shall mean a termination of employment by the Company for
either (i) an act of willful misconduct or gross neglect of duties by or on the
part of the employee which damages the Company's business, or (ii) employee's
conviction of a felony.
2.19 YEAR OF SERVICE means a twelve-month period during which an Employee
has been employed by the Company, a Parent or a Subsidiary. For purposes of
determining the number of Years of Service completed by an Employee, any time
during which an Employee was employed by a corporation which has been acquired
by the Company, through merger or otherwise, or by a company which has been the
target of an acquisition in which InfoCure acquired a Subsidiary, or a
predecessor of any such company, shall be treated as employment by the Company.
SECTION 3.
SHARES SUBJECT TO OPTIONS
One hundred fifty thousand (150,000) Shares of Common Stock shall be reserved
for issuance under this Plan. Such Shares shall be reserved, to the extent that
the Company deems appropriate, from authorized but unissued Shares, and from
Shares which have been reacquired by the Company. Furthermore, any Shares
subject to an Option which remain after the cancellation, expiration or exchange
of such Option thereafter shall again become available for use under this Plan,
but any Surrendered Shares which remain after the surrender of an Option under
Section 11 shall not again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be September 9, 1997, subject, however,
to the requirement that the Plan shall be approved by the holders of a majority
of shares of Common Stock of the Company within one year of such effective date.
-2-
<PAGE>
SECTION 5.
Committee
This Plan shall be administered by the Committee. The Committee acting in
its absolute discretion shall exercise such powers and take such action as
expressly called for under this Plan and, further, the Committee shall have the
power to interpret this Plan and (subject to Section 16) to take such other
action in the administration and operation of this Plan as the Committee deems
equitable under the circumstances. The Committee's actions shall be binding on
the Company, on each affected Employee, and on each other person directly or
indirectly affected by such actions. Notwithstanding anything else to the
contrary herein, the Board shall have the authority to assume the powers and
responsibilities outlined above with respect to the Committee, in whole or in
part.
SECTION 6.
ELIGIBILITY
Only Employees shall be eligible for the grant of Options under this Plan,
but no Employee shall have the right to be granted an Option under this Plan
merely as a result of his or her status as an Employee. Employees shall be
eligible for the grant of Options based on the number of Years of Service which
they have completed. Upon completion of each of his or her first five Years of
Service, an Employee shall be eligible to receive an Option to purchase 50
Shares. Upon completion of the Employee's sixth Year of Service, an Employee
shall be eligible to receive an Option to purchase 350 Shares. Upon completion
of each Year of Service after the sixth Year of Service, Employees shall be
eligible to receive an Option to purchase 100 Shares.
SECTION 7.
GRANT OF OPTIONS
The Committee, acting pursuant to the procedure established by the Board,
shall either grant Options under this Plan, or recommend to the Board that
Options be granted under this Plan. In accordance with the procedure
established by the Board, the Committee, or the Board, in its absolute
discretion, shall grant Options under this Plan from time to time to purchase
Shares and, further, shall have the right to grant new Options in exchange for
outstanding Options. Each grant of an Option shall be evidenced by a Stock
Option Grant and each Stock Option Grant shall:
1. specify that the Option is not intended to qualify as an incentive stock
option under Section 422 of the Code;
2. provide for four-year cliff vesting of the Option unless the Committee
selects a different vesting schedule; and
3. incorporate such other terms and conditions as the Committee or the
Board, acting in its absolute discretion, deems consistent with the terms
of this Plan, including (without limitation) a restriction on the number
of Shares subject to the Option which first become exercisable or subject
to surrender during any calendar year.
SECTION 8.
EXERCISE PRICE
The Exercise Price for each Share subject to an Option shall be no less than
the Fair Market Value of a Share on the date such Option is granted. The
Exercise Price shall be payable in full upon the exercise of any Option, and a
Stock Option Grant, at the discretion of the Committee or the Board, can provide
for the payment of the Exercise Price either in cash or in Shares acceptable to
the Committee or the Board, or in any combination of cash and Shares acceptable
to the Committee or the Board. Any payment made in Shares shall be treated as
equal to the Fair Market Value of such Shares on the date the properly endorsed
certificate for such Shares is delivered to the Committee or the Board.
Notwithstanding the above, and in the sole discretion of the Committee or the
Board, an Option may be exercised as to a portion or all (as determined by the
Committee or the Board) of the number of Shares specified in the Stock Option
Grant by delivery to the Company of a promissory note, such promissory note to
be executed by the Optionee and which shall include, with such other terms and
conditions as the Committee or the Board shall determine, provisions in a form
approved by the Committee or the Board under which (i) the balance of the
aggregate purchase price shall be payable in equal installments over such period
and shall bear interest at such rate (which shall not be less than the prime
bank loan rate
-3-
<PAGE>
as determined by the Committee or the Board) as the Committee or the Board shall
approve and (ii) the Optionee shall be personally liable for payment of the
unpaid principal balance and all accrued but unpaid interest.
SECTION 9.
EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in whole or in part
at such time or times as set forth in the related Stock Option Grant, but no
Stock Option Grant shall:
1. make an Option exercisable before the date such Option is granted; or
2. make an Option exercisable after the earlier of the:
(a) the date such Option is exercised in full;
(b) the date which is the tenth (10th) anniversary of the date such
Option is granted;
(c) thirty (30) days following termination of employment; or,
(d) in the case of a Termination for Cause only, the date of
termination of employment.
SECTION 10.
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee other
than by will or by the laws of descent and distribution, and such Option shall
be exercisable during an Employee's lifetime only by the Employee, as the case
may be. The person or persons to whom an Option is transferred by will or by
the laws of descent and distribution thereafter shall be treated as the
Employee.
SECTION 11.
SURRENDER OF OPTIONS
11.1 GENERAL RULE. The Committee or the Board, acting in its absolute
discretion, may incorporate a provision in a Stock Option Grant to allow an
Employee to surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
1. the Fair Market Value of the Shares subject to such Option exceeds
the Exercise Price for such Shares, and
2. the Option to purchase such Shares is otherwise exercisable.
11.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Stock Option Grant to the Committee or the
Board, together with a statement signed by the Employee which specifies the
number of Shares ("Surrendered Shares") as to which the Employee surrenders his
or her Option and how he or she desires payment be made for such Surrendered
Shares.
11.3 PAYMENT. In exchange for his or her Surrendered Shares, the Employee
shall receive a payment in cash or in Shares, or in a combination of cash and
Shares, equal in amount on the date such surrender is effected to the excess of
the Fair Market Value of the Surrendered Shares on such date over the Exercise
Price for the Surrendered Shares. The Committee or the Board, acting in its
absolute discretion, can approve or disapprove an Employee's request for payment
in whole or in part in cash and can make that payment in cash or in such
combination of cash and Shares as the Committee or the Board deems appropriate.
A request for payment only in Shares shall be approved and made in Shares to the
extent payment can be made in whole shares of Shares and (at the Committee's or
the Board's discretion) in cash in lieu of any fractional Shares.
-4-
<PAGE>
11.4 RESTRICTIONS. Any Stock Option Grant which incorporates a provision to
allow an Employee to surrender his or her Option in whole or in part also shall
incorporate such additional restrictions on the exercise or surrender of such
Option as the Committee or the Board deems necessary to satisfy the conditions
to the exemption under Rule 16b-3 (or any successor exemption) to Section 16(b)
of the Exchange Act.
SECTION 12.
SECURITIES REGISTRATION
Each Stock Option Grant may provide that, upon the receipt of Shares as a
result of the surrender or exercise of an Option, the Employee shall, if so
requested by the Company, hold such Shares for investment and not with a view of
resale or distribution to the public and, if so requested by the Company, shall
deliver to the Company a written statement satisfactory to the Company to that
effect. Each Stock Option Grant may also provide that, if so requested by the
Company, the Employee shall make a written representation to the Company that he
or she will not sell or offer to sell any of such Shares unless a registration
statement shall be in effect with respect to such Shares under the Securities
Act of 1933, as amended ("1933 Act"), and any applicable state securities law
or, unless he or she shall have furnished to the Company an opinion, in form and
substance satisfactory to the Company, of legal counsel acceptable to the
Company, that such registration is not required. Certificates representing the
Shares transferred upon the exercise or surrender of an Option granted under
this Plan may at the discretion of the Company bear a legend to the effect that
such Shares have not been registered under the 1933 Act or any applicable state
securities law and that such Shares may not be sold or offered for sale in the
absence of an effective registration statement as to such Shares under the 1933
Act and any applicable state securities law or an opinion, in form and substance
satisfactory to the Company, of legal counsel acceptable to the Company, that
such registration is not required.
SECTION 13.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
1. the tenth (10th) anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan), in which event this Plan
otherwise thereafter shall continue in effect until all outstanding
Options have been surrendered or exercised in full or no longer are
exercisable, or
2. the date on which all of the Shares reserved under Section 3 of this
Plan have (as a result of the surrender or exercise of Options
granted under this Plan) been issued or no longer are available for
use under this Plan, in which event this Plan also shall terminate on
such date.
SECTION 14.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the number of
Shares subject to Options granted under this Plan, and the Exercise Price of
such Options shall be adjusted by the Committee in an equitable manner to
reflect any change in the capitalization of the Company, including, but not
limited to, such changes as stock dividends or stock splits. Furthermore, the
Committee or the Board shall have the right to adjust the number of Shares
reserved under Section 3 of this Plan, and the number of Shares subject to
Options granted under this Plan, and the Exercise Price of such Options in the
event of any corporate transaction (including, without limitation, a merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation) described in Code Section 424(a) which provides for the
substitution or assumption of such Options. If any adjustment under this
Section 14 creates a fractional Share or a right to acquire a fractional Share,
such fractional Share shall be disregarded, and the number of Shares reserved
under this Plan and the number subject to any Options granted under this Plan
shall be the next lower number of Shares, rounding all fractions downward. An
adjustment made under this Section 14 by the Committee or the Board shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3 of this
Plan.
-5-
<PAGE>
SECTION 15.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash or
property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Options granted under this Plan, each Option shall become fully vested
and immediately exercisable.
SECTION 16.
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee or the Board from time to time to
the extent that the Committee or the Board deems necessary or appropriate;
provided, however, no such amendment shall be made absent the approval of the
shareholders of the Company (1) to increase the number of Shares reserved under
Section 3 except as set forth in Section 14, (2) to extend the maximum life of
the Plan under Section 13 or the maximum exercise period under Section 9, (3) to
decrease the minimum Exercise Price under Section 8, or (4) to change the
designation of Employees eligible for Options under Section 6. The Committee or
the Board also may suspend the granting of Options under this Plan at any time
and may terminate this Plan at any time; provided, however, the Company shall
not have the right to modify, amend or cancel any Option granted before such
suspension or termination unless (1) the Employee consents in writing to such
modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in Section 14 or Section
15 of this Plan.
SECTION 17.
Miscellaneous
18.1 SHAREHOLDER RIGHTS. No Employee shall have any rights as a shareholder
of the Company as a result of the grant of an Option to him or to her under this
Plan or his or her exercise or surrender of such Option pending the actual
delivery of Shares subject to such Option to such Employee.
18.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to an Employee under
this Plan shall not constitute a contract of employment and shall not confer on
an Employee any rights upon his or her termination of employment in addition to
those rights, if any, expressly set forth in the Stock Option Grant which
evidences his or her Option.
18.3 WITHHOLDING. The exercise or surrender of any Option granted under
this Plan shall constitute an Employee's or full and complete consent to
whatever action the Committee or the Board directs to satisfy the federal and
state tax withholding requirements, if any, which the Committee or the Board in
its discretion deems applicable to such exercise or surrender.
18.4 TRANSFER. The transfer of an Employee between or among the Company, a
Subsidiary or a Parent shall not be treated as a termination of his or her
employment under this Plan.
18.5 CONSTRUCTION. This Plan shall be construed under the laws of the State
of Delaware.
-6-
<PAGE>
EXHIBIT 10.50
INFOCURE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1.
PURPOSE
The purpose of the InfoCure Corporation Employee Stock Purchase Plan (the
"Plan") is to promote the interests of the Company by providing the opportunity
to purchase Shares to Employees in order to attract and retain Employees by
providing an incentive to work to increase the value of Shares and a stake in
the future of the Company which corresponds to the stake of each of the
Company's shareholders. The Plan is intended to be an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended
("Code"). The provisions of the Plan shall, accordingly, be construed so as to
comply with the requirements of Section 423 of the Code whenever possible.
SECTION 2.
DEFINITIONS
2.1 "AMEX" means the American Stock Exchange or its successor.
2.2 "Base Pay" means regular straight-time and overtime earnings received
from the Company, excluding payments for incentive compensation, bonuses and
other special payments.
2.3 "BOARD" means the Board of Directors of InfoCure Corporation
2.4 "COMMITTEE" means the Compensation Committee of the Board.
2.5 "COMPANY" means InfoCure Corporation, a Delaware corporation, and any
successor to such organization.
2.6 "CUSTODIAN" means such person or entity as the Committee shall
designate from time to time.
2.7 "EFFECTIVE DATE" means January 1, 1998, or such other date as the
Board or the Committee shall so choose. The Effective Date shall be subject to
shareholder approval pursuant to Section 17.
2.8 "EXERCISE DATE" means the last day of a Purchase Period.
2.9 "FAIR MARKET VALUE" means the closing "bid" price of the Shares in the
national securities market on which the Shares are traded, on the trading day
immediately preceding the day on which such value is to be determined or, if
such "bid" price is not available, the last sales price on such day or, if no
shares were traded on such day, on the next preceding day on which the Shares
were traded, as reported by AMEX or other reputable national quotation service.
If at any time the Shares are not traded on a national securities exchange, Fair
Market Value shall be the value determined by the Board of Directors or
Committee administering the Plan, taking into consideration those factors
affecting or reflecting value which they deem appropriate.
<PAGE>
2.10 "HOLDING PERIOD" means a period of twelve (12) calendar months
beginning on the Exercise Date during which (i) Shares by a Participant under
the Plan may not be sold, traded, transferred, pledged or otherwise hypothecated
and (ii) such Shares are held by the Company in the Participant's account.
Notwithstanding the foregoing, the Holding Period shall lapse in the event of a
sale of all or substantially all of the Company's assets or a merger of the
Company with or into another corporation.
2.11 "PARTICIPANT" means an employee of the Company or of a parent or
subsidiary of the Company who has enrolled in the Plan by completing a
Participation Form (as such term is defined in Section 5 hereof) with the Plan
Administrator. The terms parent and subsidiary have the meanings set forth in
Code Sections 424(e) and (f), respectively.
2.12 "PLAN ADMINISTRATOR" means such person or entity so designated by the
Board.
2.13 "PURCHASE PERIOD" means a calendar quarter period, beginning on
January 1, April 1, July 1, or October 1, with the first such Purchase Period
beginning concurrently with the Effective Date of the Plan.
2.14 "PURCHASE RIGHT" means a Participant's option to purchase shares of
Common Stock that is deemed to be granted to a Participant during a Purchase
Period pursuant to Section 7.
2.15 "SECTION 16(B) INSIDER" means those persons subject to the
requirements of Section 16(b) of the Securities Exchange Act of 1934, as
amended.
2.16 "SHARES" means the common stock, par value $0.001 per share, of
InfoCure Corporation, and any other stock or securities (including any other
share or securities of an entity other than InfoCure Corporation) for or into
which the outstanding shares of such common stock are hereinafter exchanged or
changed.
2.17 "TRADING DAY" refers to a day during which AMEX is available for
trading the Shares.
SECTION 3.
ELIGIBILITY
(a) Participation in the Plan is voluntary. All employees of the Company
who work at least twenty (20) hours per week, including officers and directors
who are employees but who are not members of the Committee, are eligible to
participate in the Plan. The employee's entry date in the Plan shall be the
first day of the Purchase Period immediately following the employee's first day
of employment by the Company.
(b) Notwithstanding any provision of the Plan to the contrary, no employee
may participate in the Plan if prior to the grant of Purchase Rights or if
following a grant of Purchase Rights under the Plan, the employee would own,
directly or by attribution, stock, Purchase Rights or other options to purchase
stock representing five percent (5%) or more of the total combined voting power
or value of all classes of the Company's stock as defined in Code Section
423(b)(3).
SECTION 4.
SECURITIES SUBJECT TO THE PLAN
The maximum number of Shares which may be granted and purchased under the
Plan may not exceed one hundred thousand (100,000) Shares (subject to adjustment
as provided in Section 15), which may be authorized but unissued shares, re-
acquired shares or shares bought on the open market. If any Purchase Right
granted shall expire or terminate for any reason without having been exercised
in full, the unpurchased Shares shall again become available for purposes of the
Plan, unless the Plan has been terminated.
-2-
<PAGE>
SECTION 5.
PARTICIPATION
Eligible employees become Participants in the Plan by completing a
"Participation Form," which either authorizes payroll deductions for the purpose
of participating in the Plan or indicates the employee's intent to participate
in the Plan by delivering a check to the Company at the end of a Purchase
Period, and filing such Participation Form with the Plan Administrator no later
than fifteen (15) days prior to the start date of a Purchase Period.
SECTION 6.
PAYROLL DEDUCTIONS AND ALTERNATIVE METHOD OF PAYMENT FOR SHARES
(a) In order to purchase Shares, a Participant may elect and indicate on
the Participation Form an amount he or she wishes to authorize the Company to
deduct at regular payroll intervals during the Purchase Period, expressed either
as (1) an integral percentage amount ranging from one percent (1%) to fifteen
percent (15%) of such Participant's Base Pay for the applicable payroll period,
with a minimum deduction of $10.00 per payday during the Purchase Period, or (2)
a dollar amount to be deducted pro rata at regular payroll intervals during the
Purchase Period, with a minimum deduction of $10.00 per payday and a maximum
dollar amount per payday to be set by the Committee. The Committee shall
determine from time to time whether method (1) or (2), or both, shall be
utilized. The Participation Form will include authorization for the Company to
make payroll deductions from the Participant's Base Pay. Alternatively, a
Participant may elect and indicate on the Participation Form an intent to
purchase Shares by delivery of a check to the Company at the end of the Purchase
Period.
(b) In lieu of utilizing the payroll deduction method described in
subsection (a) above, a Participant may elect and indicate on the Participation
Form and intent to purchase Shares by delivery of a check to the Company at the
end of the Purchase Period.
(c) Purchase Rights granted to a Participant under the Plan for any
calendar year may not represent Shares with a value in excess of twenty-five
thousand dollars ($25,000.00). The $25,000.00 limit is determined based upon
the Fair Market Value of the Shares subject to a Purchase Right as of the first
day (the grant date) of the Purchase Period during which such Purchase Rights
are granted. Participants will be notified if this limitation becomes
applicable to them.
(d) The amounts deducted from the Participant's Base Pay shall be credited
to a bookkeeping account established in the Participant's name under the Plan,
but no actual separate account will be established by the Company to hold such
amounts. There shall be no interest paid on the balance credited to a
Participant's account. Amounts deducted from the Participant's Base Pay may be
commingled with amounts deducted under the Plan for other Participants in a
separate account maintained by the Company. The amounts in such account be used
for its general corporate purposes prior to the purchase of Shares during a
Purchase Period.
(e) Payroll deductions shall begin on the first payday of each Purchase
Period, and shall end on the last payday of each Purchase Period. A Participant
on an approved leave of absence may continue participating in the Plan by making
cash payments to the Company within a normal pay period equal to the amount of
the normal payroll deduction had the leave of absence not occurred. The right of
a Participant on an approved leave of absence to continue participating in the
Plan shall terminate upon the expiration of twelve (12) weeks of leave, unless
the Participant's right to re-employment by the Company after a longer leave is
guaranteed by statute or contract, in which case termination of the right to
participate will occur upon the expiration of such extended period.
-3-
<PAGE>
(f) So long as a Participant remains an employee of the Company, payroll
deductions will continue in effect from Purchase Period to Purchase Period,
unless at least fifteen (15) calendar days prior to the first day of the next
succeeding Purchase Period the Participant:
(i) elects a different rate by filing a new Participation Form with the
Plan Administrator; or
(ii) withdraws from the Plan in accordance with Section 9 hereof.
SECTION 7.
GRANT OF PURCHASE RIGHTS
(a) Subject to the effective date provisions of Section 17, at 5:01 p.m.
Eastern Standard Time, on the last day of each Purchase Period (the Exercise
Date), each Participant who has not withdrawn from the Plan pursuant to Section
9 shall be deemed to have been granted a Purchase Right as of the first day of
the Purchase Period to purchase as many full and fractional Shares as can be
purchased with the balance credited to such Participant's account as of the
Exercise Date, or in the case of Participants who have indicated an intent to
purchase Shares by delivery of a check, the number of full and fractional Shares
having a Fair Market Value of six thousand two hundred fifty dollars
($6,250.00).
(b) The price at which each Purchase Right to purchase Shares shall be
exercised is the lower of:
(i) 85% of the Fair Market Value of the Shares on AMEX on the first
Trading Day of a Purchase Period; or
(ii) 85% of the Fair Market Value of the Shares on AMEX on the last
Trading Day of such Purchase Period.
(c) A Participant may not be granted a Purchase Right to purchase Shares
with a Fair Market Value exceeding six thousand two hundred fifty dollars
($6,250.00) for any particular Purchase Period. The Committee shall have the
power, exercisable at any time prior to the start of a Purchase Period, to
increase or decrease the dollar value maximum Purchase Right for that Purchase
Period, subject to the limitations set forth in Section 6(b). The maximum, as
thus adjusted, will continue in effect from Purchase Period to Purchase Period
until the Committee once again exercises its power to adjust the maximum.
SECTION 8.
EXERCISE OF PURCHASE RIGHTS
(a) Subject to the effective date provisions of Section 17, each
outstanding Purchase Right held by a Participant who has authorized payroll
deductions and not withdrawn from the Plan pursuant to Section 9 shall be deemed
automatically exercised as of 5:01 p.m. on the Exercise Date (the last day of
the Purchase Period). The exercise of the Purchase Right is accomplished by
applying the balance credited to each Participant's account as of the Exercise
Date to the purchase on the Exercise Date of whole and fractional Shares at the
purchase price in effect for the Purchase Period.
(b) Purchase Rights of Participants who have indicated an intent to
purchase Shares by delivery of a check to the Company will not be deemed
automatically exercised, but will be deemed to be exercised as of 5:01 p.m. on
the Effective Date only upon delivery of a check to the Company covering the
purchase price for all or a designated portion of the Shares subject to the
Purchase Right within three (3) business days following the Exercise Date. No
Participant shall be allowed to exercise a Purchase Right by delivery of a check
covering the price of a number of Shares having a Fair Market Value of less than
fifty dollars ($50.00).
-4-
<PAGE>
(c) Any amount in a Participant's account not applied to the purchase of
Shares for a Purchase Period will be held for the purchase of Shares in the next
Purchase Period.
(d) If the number of Shares for which Purchase Rights are exercised exceeds
the number of Shares available in any Purchase Period under the Plan, the Shares
available for exercise will be allocated by the Plan Administrator pro rata
among the Participants in such Purchase Period in proportion to the relative
amounts credited to their accounts. Any amounts not thereby applied to the
purchase of Shares under the Plan will be refunded to the Participants after the
end of the Purchase Period.
(e) Shares purchased by a Participant will be held in the Participant's
account pursuant to the Plan for the duration of the twelve-month Holding Period
applicable to such Shares. As promptly as practicable after completion of the
relevant Holding Period, the Company shall arrange for the delivery to the
Participant of a certificate representing the Shares purchased by the
Participant. Notwithstanding anything herein to the contrary, in the event that
the Company agrees to a transaction described in Section 14 hereof, the Holding
Period applicable to any Shares shall automatically terminate and the Company
shall arrange for the delivery to the Participant of a certificate representing
the Shares purchased by the Participant.
SECTION 9.
WITHDRAWAL AND TERMINATION OF PURCHASE RIGHTS
(a) A Participant who has authorized payroll deductions or indicated an
intention to purchase Shares by delivering a check to the Plan Administrator
pursuant to Section 6(b) may withdraw from the Plan during a Purchase Period by
providing written notice to the Plan Administrator on or before 5:00 p.m. of the
last business day of such Purchase Period. Such withdrawal will become
effective upon receipt by the Plan Administrator of such notice, payroll
deductions will cease as soon as is administratively feasible from the date of
such notice, and no additional payroll deductions will be made on behalf of such
Participant during the Purchase Period. Such notice shall be on a form (the
"Withdrawal Form") provided by the Plan Administrator for that purpose. The
Withdrawal Form will permit a Participant to elect to receive all accumulated
payroll deductions as a refund without penalty or to exercise such Participant's
outstanding Purchase Rights to purchase Shares on the following Exercise Date in
the amount of all payroll deductions withheld during the Purchase Period prior
to the Participant's withdrawal. In addition, any Participant who elects to
participate utilizing the provisions of Section 6(b) who fails to comply with
the requirements of Section 8(b) shall be deemed to have withdrawn from the
Plan.
(b) Any Participant who withdraws from the Plan or is deemed to have
withdrawn from the Plan pursuant to Section 9(a) will not be eligible to
rejoin the Plan until the second Purchase Period following the Purchase Period
of withdrawal. A Participant wishing to resume participation may re-enroll in
the Plan by completing and filing a new Participation Form for a subsequent
Purchase Period by following the applicable enrollment procedures.
(c) If a Participant ceases to be an employee of the Company for any reason
during a Purchase Period, his or her outstanding Purchase Right will immediately
terminate, and all sums previously collected from such Participant during such
Purchase Period under the terminated Purchase Right will be refunded to the
Participant.
SECTION 10.
RIGHTS AS SHAREHOLDER
(a) A Participant shall not become a shareholder with respect to Shares to
be purchased during a Purchase Period until the Purchase Right has been
exercised on the Exercise Date. Thus, a Participant shall
-5-
<PAGE>
have no right to any dividend or distribution made prior to the Exercise Date on
Shares purchased during the Purchase Period.
(b) The Custodian may impose upon, or pass through to, the Participant a
reasonable fee for the transfer of Shares in the form of stock certificates from
the Custodian to the Participant. It is the responsibility of each Participant
to keep his or her address current with the Company through the Plan
Administrator and with the Custodian.
SECTION 11.
SALE OF SHARES ACQUIRED UNDER THE PLAN
(a) Participants may sell the Shares they acquire under the Plan only in
compliance with the restrictions set forth below:
(i) Section 16(b) Insiders may be subject to certain restrictions in
connection with their transactions under the Plan and with respect to the sale
of Shares obtained under the Plan, including, but not limited to, the Company's
Insider Trading Policy, as the same may exist from time to time.
(ii) Shares obtained under the Plan by a Participant must comply with
the Company's Insider Trading Policy, as the same may exist from time to time.
(iii) No Participant purchasing Shares under the Plan shall be
entitled to sell such Shares prior to the expiration of the relevant Holding
Period, as defined in Section 2.10 hereof. For purposes of this restriction,
the Company may, at its option, include the following legend on any certificates
representing the Shares so purchased:
"The shares represented by this Certificate are subject to certain
restrictions on sale and disposition contained in the InfoCure Corporation
Employee Stock Purchase Plan, a copy of which is on file with the
Corporation."
(b) In order to insure compliance with the restrictions and requirements
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records. By executing
the Participation Form, each Participant acknowledges and agrees to the
Company's rights described in this Section 11(b).
(c) A Participant shall immediately inform the Plan Administrator in
writing if the Participant transfers any Shares purchased through the Plan
within two (2) years from the date of grant of the related Purchase Right. Such
transfer shall include disposition by sale, gift or other manner. The
Participant may be requested to disclose the manner of the transfer, the date of
the transfer, the number of Shares involved and the transfer price. By executing
the Participation Form, each Participant obligates himself or herself to provide
such information to the Plan Administrator and to abide by the absolute
prohibition on transferability of the Shares during the relevant Holding Period.
(d) The Company is authorized to withhold from any payment to be made to a
Participant, including any payroll and other payments not related to the Plan,
amounts of withholding and other taxes due in connection with any transaction
under the Plan, and a Participant's enrollment in the Plan will be deemed to
constitute his or her consent to such withholding.
-6-
<PAGE>
SECTION 12.
PLAN ADMINISTRATION
(a) The Plan shall be administered by the Committee. No member of the Board
will be eligible to participate in the Plan during his or her period of
Committee service.
(b) The Committee shall have the plenary power, subject to and within the
limited of the express provisions of the Plan:
(i) to determine the commencement and termination date of the offering
of Shares under the Plan; and
(ii) to interpret the terms of the Plan, establish and revoke rules for
the administration of the Plan and correct or reconcile any defect or
inconsistency in the Plan.
(c) The Committee may delegate all or part of its authority to administer
the Plan to the Plan Administrator, who may in turn delegate the day-to-day
operations of the Plan to the Custodian. The Custodian will establish and
maintain, as agent for the Participants, accounts for the purpose of holding the
Shares and/or cash contributions as may be necessary or desirable for the
administration of the Plan.
(d) The Board may waive or modify any requirement that a notice or election
be made or filed under the Plan a specified period in advance in an individual
case or by adoption of a rule or regulation under the Plan, without the
necessity of an amendment to the Plan.
SECTION 13.
TRANSFERABILITY
(a) Any account maintained by the Custodian for the benefit of a
Participant with respect to shares acquired pursuant to the Plan may only be in
the name of the Participant; provided, however, that the Participant may elect
to maintain such account with right of joint ownership with such Participant's
spouse. Such election may only be made on a form (the "Joint Account Form")
provided by the Company.
(b) Neither payroll deductions credited to a Participant's account nor any
Purchase Rights or other rights to acquire Shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of by Participants other
than by will or the laws of descent and distribution and, during the lifetime of
a Participant, Purchase Rights may be exercised only by the Participant.
SECTION 14.
MERGER OR LIQUIDATION OF THE COMPANY
In the event the Company merges with another corporation and the Company is
not the surviving entity, or in the event all or substantially all of the stock
or assets of the Company is acquired by another company, or in the event of
certain other similar transactions, the Committee may, in its sole discretion
and in connection with such transaction, cancel each outstanding Purchase Right
and refund all sums previously collected from Participants under the canceled
outstanding Purchase Rights, or, in its discretion, cause each Participant with
outstanding Purchase Rights to have his or her outstanding Purchase Right
exercised immediately prior to such transaction and thereby have the balance of
his or her account applied to the purchase of whole and fractional Shares
(subject to the maximum dollar limitation of Section 7(c)) at the purchase price
in effect for the Purchase Period, which would be treated as ending with the
effective date of such transaction. The balance of the account not so applied
will be refunded to the Participant. In the event of a merger in which the
Company is the surviving entity, each Participant is entitled to receive, for
each Share as to which such Participant's
-7-
<PAGE>
outstanding Purchase Rights are exercised, as nearly as reasonably may be
determined by the Committee, in its sole discretion, the securities or property
that a holder of one Share was entitled to receive upon the merger.
SECTION 15.
ADJUSTMENT FOR CHANGES IN CAPITALIZATION
To prevent dilution or enlargement of the rights of Participants under the
Plan, appropriate adjustments may be made in the event any change is made to the
Company's outstanding common stock by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change in the Shares effected
without the Company's receipt of consideration. Adjustments may be made to the
maximum number and class of securities issuable under the Plan, the maximum
number and class of securities purchasable per outstanding Purchase Right and
the number and class of securities and price per share in effect under each
outstanding Purchase Right. Any such adjustments may be made retroactively
effective to the beginning of the Purchase Period in which the change in
capitalization occurs, and any such adjustment will be made by the Committee in
its sole discretion.
SECTION 16.
AMENDMENT AND TERMINATION
The Committee may terminate or amend the Plan at any time, subject to the
following restrictions. First, the provisions of Sections 4, 5, 6, 7 and 8
which govern the formula for the automatic grant of Purchase Rights under the
Plan may not be amended more than once in any six (6) month period. Second, any
termination or amendment made to the Plan may not affect or change Purchase
Rights previously granted under the Plan without the consent of the affected
Participant, and any amendment that materially increases the benefits or number
of Shares under the Plan (except for certain allowable adjustments in the event
of changes to the Company's capital structure or for changes authorized by the
Plan to be made by the Committee or the Plan Administrator) or materially
modifies the eligibility requirements of the Plan shall be subject to
shareholder approval. If not sooner terminated by the Committee, the Plan shall
terminate at the time Purchase Rights have been exercised with respect to all
Shares reserved for grant under the Plan.
SECTION 17.
SHAREHOLDER APPROVAL AND EFFECTIVE DATE
The Plan is subject to the approval of shareholders of the Company holding
a majority of the shares of the Common Stock.
The Plan shall be deemed to have been adopted as of the Effective Date upon
the date of its approval by the shareholders of the Company. Until the Plan is
approved by the shareholders, no Purchase Rights shall be deemed granted or
exercised under Sections 7 and 8. Upon approval of the Plan by the Company's
shareholders, Purchase Rights shall be deemed granted and exercised as of the
appropriate dates in the Plan as of the Effective Date, and Shares purchased
shall be deemed purchased as of the applicable Exercise Date. In the event the
Plan is not approved by the shareholders on or before the date which is one year
from the Effective Date, the Plan shall be deemed not to have been adopted, and
all payroll deduction amounts withheld on behalf of Participants pursuant to
Section 6 shall be refunded to such Participants.
-8-
<PAGE>
SECTION 18.
NO EMPLOYMENT RIGHTS
Participation in the Plan will not impose any obligations upon the Company
to continue the employment of the Participant for any specific period and will
not affect the right of the Company to terminate such person's employment at any
time, with or without cause.
SECTION 19.
COSTS
Except as set forth in Section 10(b), costs and expenses incurred in the
administration of the Plan and the maintenance of accounts with the Custodian
may be shared by the Participant and the Company, to the extent provided in this
Section 19. Any brokerage fees and commissions for the purchase of Shares under
the Plan (including Shares purchased upon reinvestment of dividends and
distributions) will be shared equally by the Participant and the Company, but
any brokerage fees and commissions for the sale of Shares under the Plan by a
Participant will be borne by such Participant.
SECTION 20.
REPORTS
After the close of each Purchase Period, each Participant in the Plan will
receive a report from the Custodian indicating the amount of the Participant's
contributions to the Plan during the Purchase Period, the amount of the
contributions applied to the purchase of Shares for the Purchase Period, the
purchase price per share in effect for the Purchase Period and the amount of the
contributions (if any) carried over to the next Purchase Period.
SECTION 21.
GOVERNING LAW
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan will be determined in accordance with laws of
the State of Delaware, without giving effect to its principles of conflicts of
laws, and applicable federal law.
SECTION 22.
COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS
The Plan, the granting and exercising of Purchase Rights hereunder, and the
other obligations of the Company, the Plan Administrator and the Custodian under
the Plan will be subject to all applicable federal and state laws, rules, and
regulations, and to such approvals by any regulatory or governmental agency as
may be required. The Company may, in its discretion, postpone the issuance or
delivery of Shares upon exercise of Purchase Rights until completion of such
registration or qualification of such Shares or other required action under any
federal or state law, rule, or regulation, listing or other required action with
respect to any automated quotation system or stock exchange upon which the
Shares or other Company securities are designated or listed, or compliance with
any other contractual obligation of the Company, as the Company may consider
appropriate, and may require any Participant to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Shares in compliance with applicable laws, rules, and
regulations, designation or listing requirements, or other contractual
obligations.
-9-
<PAGE>
SECTION 23.
EFFECT OF PLAN
The provisions of the Plan shall, in accordance with its terms, be binding
upon and inure to the benefit of, all successors of each employee participating
in the Plan, including, without limitation, such employee's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such employee.
-10-
<PAGE>
EXHIBIT 10.51
-------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between INFOCURE
CORPORATION, INC., a Delaware corporation ("Company"), and RICHARD PERLMAN
("Executive") is hereby entered into as of the ________ day of December, 1997
(the "Effective Date").
WHEREAS, Company is engaged in the business of providing practice
management software products and related services that address the needs of
health care providers to manage and communicate administrative, practice
management and clinical applications designed to meet the information
requirements of the vast majority of medical specialties and office-based health
care practices in the United States (the "Business");
WHEREAS, Executive desires to be employed by Company and Company desires to
employ and assure itself of the continued services of Executive on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
1. Employment and Duties.
---------------------
A. Company shall employ Executive as Chairman of the Board and Chief
Financial Officer during the term of his employment as set forth in this
Agreement and Executive hereby accepts such employment. Executive shall report
to the President and Board of Directors of Company and shall have duties and
responsibilities as set forth on EXHIBIT A and/or as may be assigned, from time
---------
to time, by the President and Board of Directors of Company (the "Duties").
B. Executive shall use his best efforts to perform his duties in
accordance with any applicable business plans and budgets and policies in
effect.
C. Executive agrees that he shall 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.
D. Neither the foregoing nor any other provision of this Agreement is
intended or shall be construed as preventing Executive from devoting his time
and effort to charitable and community activities substantially to the same
extent as he has devoted time and effort prior to the effective date of this
Agreement provided that such involvement with charitable and community
activities does not materially interfere with the performance of his duties
under this Agreement.
2. Compensation.
------------
A. Base Salary. During the Term (as defined below), Company shall pay to
-----------
Executive a base salary ("Base Salary") of One Hundred Twenty Thousand Dollars
($120,000.00) per year, payable in arrears in equal semi-monthly payments. In
<PAGE>
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 this Agreement, in addition
----------------------
to the Base Salary as provided in Section 2.A. above, Executive shall be
eligible for annual incentive compensation (the "Incentive Compensation")
pursuant to a program established by Company's Board of Directors in its sole
and absolute discretion, from time to time, provided that the Goals (as defined
below) of said program are met by Executive. The Incentive Compensation program
shall be based upon the achieving of certain revenue and/or profit goals and/or
other goals (the "Goals") of Company. Upon the establishment of the program and
Goals, the parties agree to enter into an agreement setting forth the Incentive
Compensation program and Executive's eligibility to participate in said program,
which agreement shall be attached hereto as EXHIBIT B and shall constitute a
---------
part of this Agreement.
C. Employee Benefit Programs. Executive shall be eligible to participate
-------------------------
in all employee benefit programs; including medical and hospitalization
programs; employee stock option and bonus plans generally made available to
employees of Executive's employment status; now or hereafter made available,
subject to the terms and conditions of such programs, including eligibility. It
is understood that Company reserves the right to modify and rescind any program
or adopt new programs in its sole discretion. Company may, in its sole
discretion, maintain key man life insurance on the life of Executive and
designate Company as the beneficiary. Executive agrees to execute any documents
necessary to effect such policy.
D. Vacation. Executive shall accrue four (4) weeks of vacation during
--------
each calendar year during the term of this Agreement (with such vacation time
pro-rated for 1997). Vacation time shall be taken at such time as not to
materially interfere with the Business of Company and must be pre-approved by
Company. Vacation time may not be carried forward from one (1) calendar year to
another.
E. Automobile Allowance. Executive shall be entitled to receive an
--------------------
automobile allowance of One Thousand Dollars ($1,000.00) per month and operating
costs when operated for business purposes. The automobile allowance shall be
payable semi-monthly.
3. Term. The term of employment of Executive under this Agreement shall
----
be for a period of four (4) years (the "Term") commencing on the date hereof and
ending on the fourth (4th) anniversary thereof, subject to earlier termination
as provided in Section 4. If the employment of Executive continues thereafter,
absent a written agreement, the employment following the Term shall be at will
and the provisions of this Agreement shall be of no force and effect with
respect to any such subsequent period, except for the provisions of Sections 5.
through 10. below.
-2-
<PAGE>
4. Early Termination.
-----------------
A. For Cause.
---------
(i) Notwithstanding the foregoing, 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 (1) the
continued failure by Executive substantially to perform his duties with Company
in a reasonably professional manner other than due to a Total and Permanent
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
President of Company, which demand identifies the manner in which the Board of
Directors or President believes Executive has not substantially performed his
duties; (2) the unauthorized dissemination of Confidential Information (as
defined below) of Company or any of its subsidiaries; (3) the commission of a
felony or any other crime involving moral turpitude or the pleading of nolo
contendere to any such act; (4) the commission of any act of dishonesty when
such act is intended to result or results, directly or indirectly, in gain or
personal enrichment of Executive or any related person or affiliate of Executive
or is intended to cause harm or damage to Company or any of its subsidiaries;
(5) the illegal use of controlled substances; (6) the use of alcohol so as to
have a material adverse effect on the performance of his duties; (7) the
misappropriation or embezzlement of assets of Company or any of its
subsidiaries; (8) the making of material disparaging remarks regarding Company
or the products or services of any such person to suppliers and/or customers of
Company or any of its subsidiaries or (9) 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 receipt of written notice of such breach.
(ii) Upon termination of Executive's employment for cause,
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 thirtieth (30th) day
following the effective date of the termination of employment for cause.
B. Termination Upon Death or Total and Permanent Disability.
--------------------------------------------------------
(i) The employment of Executive shall terminate upon his death
or, ten (10) business days after written notice by Company of termination, upon
or during the continuance of the Total and Permanent Disability (as hereinafter
defined) of Executive.
(ii) Upon termination upon death or upon or during Executive's
Total and Permanent Disability, Company shall have no further obligation to pay
any compensation for periods after the effective date of such termination,
except for Base Salary which accrued as of the termination date. The term "Total
and Permanent Disability" means the suffering by Executive of a Disability for a
period (whether or not continuous) in excess of ninety (90) days, unless
extended in writing by Company. A Total and Permanent Disability shall be deemed
to commence upon the expiration of such ninety (90) day period.
-3-
<PAGE>
(iii) For purposes hereof, the terms "Disabled" or "Disability"
shall mean the suffering by Executive of a physical or mental condition
resulting from bodily injury, disease, or mental disorder which renders
Executive incapable of continuing each and every one of his or her usual and
customary duties in an efficient manner as an employee of Company, as determined
by the Board of Directors. No Disability shall be deemed to exist until
Executive shall be unable to perform such duties hereunder for seven (7)
consecutive days, and after such Disability continues for seven (7) consecutive
days, then the same shall be deemed to have existed from the first (1st) day of
such Disability. At the end of any Disability (other than a Disability that
results in a Total and Permanent Disability as defined below), Executive shall
return to work, and this Agreement shall continue as though such Disability had
not occurred.
If Executive desires to return to work at the end of any Disability, but
there is a dispute as to whether Executive is able to perform his or her duties
hereunder or if there is a dispute as to whether Executive is Disabled or has
suffered a Total and Permanent Disability, the issue shall be submitted to a
Board of Arbiters consisting of three (3) persons: one (1) physician who
specializes in the physical or mental condition which resulted in the Disability
(hereinafter referred to as a "Specialist") shall be appointed on behalf of
Company by the Board of Directors of Company (with Executive having no vote on
this question); the second (2nd) Specialist shall be appointed by Executive and
a third (3rd) Specialist shall be appointed by the two (2) Specialists so
appointed. If a dispute remains following the completion of this procedure, the
matter shall be determined as set forth in Section 16. below. If a majority of
the Specialists determine that Executive is able to perform his or her duties
hereunder on a full-time basis, Executive shall be permitted to return to work
under the provisions hereof. 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 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 Company two (2) weeks prior written
notice of such termination and Executive shall be entitled to receive, and
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 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, Company, any of subsidiaries, or any
employee benefit plan of Company or any of 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
Company or of the combined voting power of Company's then outstanding
voting securities entitled to vote generally in the election of directors;
or
-4-
<PAGE>
(ii) Individuals who, as of the date hereof, constitute the board of
directors of 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 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 of the shareholders of Company of a merger, consolidation
or other reorganization in each case, with respect to which persons who
were the shareholders of 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 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 Company as provided in subparagraph (ii) above.
D. Termination by Company Without Cause. In the event Company terminates
------------------------------------
the employment of the Executive, except for cause, prior to the expiration of
term of this Agreement as set forth in Section 3. hereof, Company shall pay
Executive, as its sole and exclusive liability hereunder, an amount equal to
twelve (12) months of the Executive's then current monthly base salary. Payment
shall be made within five (5) days of such termination.
5. Company Property. All records, designs, patents, business plans,
----------------
financial statements, manuals, memoranda, lists and other property delivered to
or compiled by Executive by or on behalf of Company or its representatives,
vendors or customers which pertain to the Business of Company shall be and
remain the property of Company, as the case may be, and be subject at all times
to its discretion and control.
6. Confidential Information.
------------------------
A. Company may disclose to Executive certain Confidential Information
(defined below). Executive acknowledges and agrees that Company has a
reasonable, competitive business interest in the Confidential Information and
the Confidential Information is the sole and exclusive property of Company (or a
third party providing such information to Company) and that Company or such
third party owns all worldwide rights therein under patent, copyright, trade
secret, confidential information, moral right or other property right.
Executive acknowledges and agrees that the disclosure of the Confidential
Information to Executive does not confer upon Executive any license, interest or
rights of any kind in or to the Confidential Information. Executive may use the
Confidential Information solely for the benefit of Company while Executive is
employed by Company. Except in the performance of services for Company,
-5-
<PAGE>
Executive shall hold in confidence and not reproduce, distribute, transmit,
reverse engineer, decompile, disassemble, or transfer, directly or indirectly,
in any form, by any means, or for any purpose, the Confidential Information or
any portion thereof. Executive agrees to return to Company, upon request by
Company, the Confidential Information and all materials relating thereto.
B. Executive acknowledges that his obligations with regard to the
Confidential Information shall remain in effect while Executive is engaged by
Company and for a period of two (2) years thereafter.
"Confidential Information" shall mean any confidential or proprietary
information possessed by Seller or relating to its business, including, without
limitation, any confidential "know-how," trade secrets, customer lists, details
of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel
acquisition plans; provided, however, that Executive shall not be restricted
from disclosing or using Confidential Information that: (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure; (ii) becomes available to Executive in a manner that is not in
contravention of applicable law from a source that is not bound by a
confidential relationship with Company or by a confidentiality or other similar
agreement; (iii) was known to Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Executive by Company or one of Company's or (iv) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, Executive shall
provide Company with prompt notice of such requirement so that Company may seek
an appropriate protective order prior to any such required disclosure by
Executive. Confidential Information may include, but not be limited to, future
business plans, licensing strategies, advertising campaigns, information
regarding customers, employees and independent contractors and the terms and
conditions of this Agreement.
7. Non-Solicitation.
----------------
A. Customers. During Executive's employment with Company and for a period
---------
of twelve (12) months thereafter (the "Restricted Period"), Executive shall not,
on his own behalf or on behalf of any person, firm, partnership, association,
corporation or business organization, entity or enterprise ("Other Entity"),
solicit, contact, call upon, communicate with or attempt to communicate with any
customer of Company, or any representative of any customer of Company, with a
view to providing products and/or services in the Business of Company provided
that the restrictions set forth in this Section 7.A. shall apply only to
customers of Company, or representatives of customers of Company, with which
Company had contact during the two (2) year period immediately preceding
termination of his employment with Company (or shorter period if Executive has
not then been engaged by Company for two (2) years).
-6-
<PAGE>
B. Employees/Independent Contractors. During the Restricted Period,
---------------------------------
Executive shall not, on his own behalf or on behalf of any Other Entity, recruit
or hire, or attempt to recruit or hire, any employees or independent contractors
of Company who were employed or engaged by Company, as the case may be, during
the one (1) year period prior to the termination of his employment with Company
(or shorter period if Executive has not then been engaged by Company for one (1)
year).
8. Non-Competition. During the Restricted Period, Executive shall not on
---------------
his own behalf or on behalf of any Other Entity, perform the duties and services
Executive performs for Company for any Other Entity in the Business (as defined
above) within the United States (the "Territory").
9. Acknowledgment. The parties hereto agree that: (i) the Restricted
--------------
Period and Territory contained in this Agreement are reasonably necessary for
the protection of Company's legitimate business interests and that the Territory
is the area in which Executive shall perform (or currently perform) services for
Company; (ii) by having access to information concerning employees, independent
contractors and customers of Company, Executive shall obtain a competitive
advantage as to such parties; (iii) Executive's covenants and agreements
contained in this Agreement are reasonably necessary to protect the interests of
Company in whose favor said covenants and agreements are imposed in light of the
nature of Company's Business and Executive's involvement in such Business; (iv)
the restrictions imposed by this Agreement are not greater than are necessary
for the protection of Company in light of the substantial harm that Company
shall suffer should Executive breach any of the provisions of said covenants or
agreements and (v) Executive's covenants and agreements contained in this
Agreement form material consideration for this Agreement, the Acquisition
Agreement and Executive's employment by Company.
10. Remedy for Breach. Executive agrees that the remedies at law of
-----------------
Company for any actual or threatened breach by Executive of the covenants
contained in Sections 6. through 8. of this Agreement would be inadequate and
that Company shall be entitled to specific performance of the covenants in such
paragraphs, including entry of an ex parte, temporary restraining order in state
or federal court, preliminary and permanent injunctive relief against activities
in violation of such paragraphs, or both, or other appropriate judicial remedy,
writ or order, in addition to any damages and legal expenses (including
attorney's fees) which Company may be legally entitled to recover. Executive
acknowledges and agrees that the covenants contained in Sections 6. through 8.
of this Agreement shall be construed as agreements independent of any other
provision of this or any other agreement between the parties hereto, and that
the existence of any claim or cause of action by Executive against Company,
whether predicated upon this or any other agreement, shall not constitute a
defense to the enforcement by Company of said covenants.
11. No Prior Agreements. Executive hereby represents and warrants to
-------------------
Company that the execution of this Agreement by Executive and Executive's
employment by Company and the
-7-
<PAGE>
performance of Executive's duties hereunder shall not violate or be a breach of
any agreement with a former employer, client or any other person or entity.
12. Assignment; Binding Effect. Executive understands that Executive has
--------------------------
been selected for employment by Company on the basis of Executive's personal
qualifications, experience and skills. Executive agrees, therefore, that
Executive cannot assign all or any portion of Executive's performance under this
Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 13. below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Executive has no oral representations, understandings or agreements
with Company or any of its officers, directors or representatives covering the
same subject matter as this Agreement. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between Company
and Executive. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between Company and Executive and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of Company and Executive,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To Company: InfoCure Corporation
Corporate Headquarters
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Frederick L.Fine
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
To Executive: Richard Perlman
_________________________
_________________________
With a copy to: Anderson, Kill & Olick
1251 Avenue of the Americas
New York City, New York 10020
Attention: Michael Stamm, Esq.
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. Mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
Agreement shall be enforced separately and independently of any other agreement
involving the parties hereto. The Section headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of the Agreement or of any part hereof.
16. Arbitration. Except as otherwise set forth in Sections 4.B.(iii) and
-----------
6. through 10., any dispute, controversy or claim arising out of, relating to or
in connection with, this Agreement, or the breach, termination or validity
thereof shall be finally settled by arbitration conducted in accordance with
this Section. The arbitration shall be conducted in accordance with the Rules
of the American Arbitration Association (the "AAA") in effect at the time of the
arbitration, except as they may be modified herein or by mutual agreement of the
parties. The seat of the arbitration shall be Atlanta, Georgia, and each party
hereto irrevocably submits to the jurisdiction of the arbitration panel in
Atlanta, Georgia. The arbitration shall be conducted by three (3) arbitrators.
The party initiating arbitration (the "Claimant") shall identify its arbitrator
within twenty (20) days of receipt of the Request and shall notify the Claimant
of such appointment in writing. If the Respondent fails to identify an
arbitrator within such twenty (20) day period, the arbitrator named in the
Request shall decide the controversy or claim as the sole arbitrator.
Otherwise, the two (2) arbitrators appointed by the parties shall appoint a
third (3rd) arbitrator within twenty (20) days after the Respondent has notified
Claimant of the appointment of the Respondent's arbitrator. When the third
(3rd) arbitrator has accepted the appointment, the two (2) party-appointed
arbitrators shall promptly notify the parties of the appointment. If the two
(2) arbitrators appointed by the parties fail or are unable to so appoint a
third (3rd) arbitrator, then the appointment of the third (3rd) arbitrator shall
be made by the AAA, which shall promptly notify the parties of the appointment.
The third (3rd) arbitrator shall act as chair of the panel. The arbitration
award shall be in writing and shall be final and binding on the parties. The
award may include an award of costs, including reasonable attorneys' fees and
disbursements. Judgment upon the award may be entered by any court having
jurisdiction thereof or having jurisdiction over the parties or their assets.
Notwithstanding the foregoing, the parties may apply to any court of competent
jurisdiction for an ex parte temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary, without
breach of this Section and without any abridgment of the powers of the
arbitrators.
-8-
<PAGE>
17. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Georgia.
18. Counterparts. This Agreement may be executed simultaneously in two
------------
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute, but one and the same instrument.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
InfoCure Corporation
By:______________________________
Its:__________________________
EXECUTIVE:
---------------------------------(SEAL)
Richard Perlman
-10-
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
-------------------
Overall Responsibility:
- ----------------------
-11-
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Compensation
----------------------
<PAGE>
EXHIBIT 10.52
[LETTERHEAD OF COMPASS PARTNERS, L.L.C. APPEARS HERE]
June 12, 1996
Mr. Frederick L. Fine
President and CEO
American Medcare Corporation
Corporate Headquarters
2970 Clairmont Road, Suite 1050
Atlanta, GA 30329
Dear Rick:
This will confirm the understanding between Compass Partners, L.L.C. ("Compass")
and American Medcare Corporation, its subsidiaries and affiliates ("American"),
as follows:
1. American hereby engages Compass to render advisory services regarding its
acquisition program and to obtain debt and/or equity capital necessary to
consummate the contemplated transactions.
2. The term of the engagement shall begin on the date of this letter and shall
end on September 15, 1996, unless extended in accordance with this
Agreement. The engagement shall be on an exclusive basis.
3. Compass accepts the engagement, and agrees to:
a. Provide general advisory services with respect to the identification
and selection of acquisition targets, including target profiling and
screening, financial analysis of acquisition candidates, transaction
feasibility analysis, and pricing of prospective transactions.
b. Advise management on transaction structure alternatives.
c. Assist in the planning and implementation of negotiating strategies.
d. Meet with targets, their accountants and counsel in connection with
American's efforts to obtain controlling interests in such targets.
e. Assist and oversee transaction closing.
f. Advise management on the major terms of required financings.
g. Preparation of a Descriptive Memorandum of American business inclusive
of the proposed acquisition targets.
h. Solicit qualified financing sources.
i. Advise management on financing structure alternatives and assist in
negotiations with financing sources.
j. Assist in the planning and implementation of negotiating strategies
with financing sources.
k. Assist in preparation and oversight of closing documentation.
<PAGE>
l. Assist in the design and implementation of a corporate compensation
and stock option plan.
4. For purposes of this Agreement:
"Transaction" means any transaction or series or combination of transactions,
other than in the ordinary course of business, whereby, directly or indirectly,
control of or a material interest in a target company or any of the target's
businesses or assets is transferred for "Consolidation."
"Consideration" means the aggregate value transferred, paid or received in a
Transaction, including, all cash and cash equivalents, the fair market value of
all equity securities or interests, net proceeds received from straight and
convertible debt obligations issued or issuable by an acquiring party in
connection with a Transaction, leased interests and any other assets (including
any purchase options), the principal amount of assumed liabilities, including
capitalized leases and pension liabilities, and any non-compete or earnout
contracts (if not determinable at closing, then according to the terms of the
earnout) assumed by the acquiring party in connection with a Transaction.
If the Transaction takes the form of an asset sale, the Consideration shall
equal the purchase price paid, plus all liabilities assumed, plus any cash or
the fair market value of any other assets retained by the seller, less any non-
contingent, undisputed, and fully liquidated liabilities ascribable to the
assets transferred retained by the Seller, provided however; that the amount of
the offset of retained liability shall not exceed the amount of any credit for
cash retained by the Seller. If the Transaction involves the issuance or
exchange of publicly-traded securities, the value of the securities will be
computed at the average closing price for the 30 days prior to the consummation
of the Transaction. If the Consideration consists of securities that have no
established public market, the value thereof shall be the fair market value on
the date payment is made. If the Consideration to be paid is computed in a
foreign currency, the value of such currency shall be converted into U.S.
dollars at the prevailing exchange rate on the dates on which such Consideration
is paid.
5. The term of Compass's engagement shall extend from the date hereof until
September 15, 1996, unless extended in accordance with the terms of this
agreement. The provisions of paragraphs 6 and 10 through 13, however,
shall survive any termination of this Agreement.
6. American agrees to pay Compass, as compensation for its services hereunder,
the following fees:
Initial Retainer
A. On execution of this Agreement, an initial retainer of $15,000.
-2-
<PAGE>
B. A grant of 350,000 shares, of the company's common stock with, at the
request of Compass, S8 registration rights or if S8 registration is
not requested other registration rights acceptable to Compass and
American. Compass shall have right to assign these shares to its
principals or employees.
Continuing Monthly Retainer: A monthly retainer of $5,000 per month for
the two month period commencing July 1, 1996. If American is negotiating
in good faith with a funding source(s), the monthly fee will continue until
a transaction is consummated or negotiations are terminated. If
negotiations are suspended the monthly retainer shall cease until such time
as negotiations resume. Monthly retainers will be billed on a monthly
basis and shall be payable within 10 days of receipt.
Transaction Fees: In addition, American agrees to pay Compass the
following fees for each Transaction of the type specified which is
consummated during the Term or within 12 months after the expiration of the
Term with a party identified by Compass during the Term:
A. Purchase of Merger: 2.5% of transaction consideration.
B. Financing:
i. Debt: 2% of the committed proceeds of any new debt financing.
ii. Subordinated Debt with equity conversion features or warrants:
5% of gross proceeds.
iii. Equity: 10% of gross proceeds (excluding a public offering and
the contemplated $1.5 million Norson's investment).
In addition, during the period that this agreement is in effect, on consummation
of a Transaction, American shall issue warrants to Compass to purchase common
stock equal to 1.75% of the common equity of American (based upon 65 million
shares outstanding) at an exercise price equal to the closing price of
American's common stock on June 12, 1996. However, if the value of the
transaction is less than or greater than $10 million, the percentage of the
common equity granted to Compass through its receipt of the warrants will be
decreased or increased proportionately as the difference bears to $10 million.
The warrants will be exercisable for a period of five years and will contain
terms and conditions which are customary for transactions of this kind. At the
request of Compass, the underlying shares covered by the warrants will contain
S8 registration rights or if S8 registration is not requested other registration
rights acceptable to Compass and American. Compass shall have the right to
assign these warrants to its principals or employees.
Compensation shall be payable for each Transaction in cash at closing.
-3-
<PAGE>
7. American shall reimburse Compass for out-of-pocket expenses incurred during
the Term. Expenses in excess of $1,000 per month will not be incurred
without the prior written approval of American. Expenses shall be billed
on a monthly basis and shall be payable on receipt.
8. American may terminate, or refuse to enter into, negotiations with any
party, whether or not introduced by Compass at any time and for any reason.
9. Compass shall use good faith diligent efforts, consistent with reasonable
business judgment and subject to market conditions, to secure funding
commitments to complete Transactions.
10. American shall indemnify and hold harmless Compass, its officers,
directors, employees, agents, affiliates and persons deemed to be in
control of Compass (collectively, the "Indemnified Parties") against any
losses, claims, damages or liabilities to which any Indemnified Party may
become subject arising out of or in connection with (a) actions taken or
omissions to be taken (including any untrue statements made or statements
omitted to be made) by American or (b) actions taken or omitted to be taken
by Compass in conformity with either (i) instructions of American or (ii)
actions taken or omitted to be taken by American; or (c) otherwise arising
out of or in connection with Compass's rendering of services hereunder
unless it is judicially determined that such losses, claims, damages, or
liabilities arose out of the gross negligence or willful misconduct of such
Indemnified Party.
11. American shall reimburse Compass for any legal or other expenses reasonably
incurred by it in connection with investigating, preparing to defend or
defending any lawsuits, claims, or other proceedings arising in any manner
out of or in connection with Compass's rendering of services hereunder.
12. American agrees that the indemnification and reimbursement commitments set
forth in Paragraph 10 and 11 shall apply whether or not such Indemnified
Party is a party to any such lawsuits, claims or other proceedings and that
such Indemnified Party is entitled to retain separate counsel of its choice
in connection with any of the matters to which such commitments relate.
13. American and Compass agree that if any indemnification or reimbursement
sought pursuant to Paragraph 11 is judicially determined to be unavailable,
American shall contribute to the amount paid or payable by the Indemnified
Party as a result of the losses, claims, liabilities, damages and expenses
for which such indemnification or reimbursement is held unavailable in such
proportion as is appropriate to reflect the relative benefits to American
on the one hand, and, Compass on the other, in connection with the
Transaction contemplated herein, subject to the limitation that in any
event aggregate contribution of all Indemnified parties to any losses,
claims, liabilities, damages, and expenses with respect to which
contribution is available hereunder shall not exceed the amount of fees
actually received by Compass hereunder. It is agreed that the
-4-
<PAGE>
relative benefits to Compass on the one hand, and, American on the other
hand, with respect to any Transaction or proposed Transaction contemplated
herein shall be deemed to be in the same proportion as (i) the total value
of the Transaction contemplated herein bears to the fee paid to Compass
with respect to such Transaction.
14. This Agreement supersedes all previous agreements between the parties.
This Agreement may not be amended or modified except in writing.
15. Any advice to be provided by Compass under this Agreement shall not be
disclosed by American to third parties without Compass's prior approval
which will not be unreasonably withheld, except as may be required by legal
process and excluding legal and accounting advisors employed by American.
16. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. This Agreement shall be binding on the
respective successors and assigns of the parties and of the Indemnified
Parties hereunder and their respective successors and assigns. Neither
Compass or American may assign any of its obligations hereunder without the
prior written consent of the other.
If the foregoing correctly sets forth our understanding, please so indicate in
the space provided below, whereupon this letter shall constitute a binding
agreement between us.
AGREED AND ACCEPTED:
Compass Partners, L.L.C. American Medcare Corporation
By: /s/Richard Perlman /s/Frederick L. Fine, President
___________________________ ____________________________
Richard Perlman, President Frederick L. Fine, President
Date: June 12, 1996 June 12, 1996
___________________________ ____________________________
-5-
<PAGE>
EXHIBIT 10.53
LEASE AGREEMENT
BETWEEN
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP,
A NORTH CAROLINA LIMITED PARTNERSHIP,
D/B/A HIGHWOODS ANDERSON
AND
INFOCURE CORPORATION
DEMISED PREMISES:
8,880 RSF
1765 The Exchange
Atlanta, Georgia
<PAGE>
OFFICE LEASE
THIS LEASE made as of the ___ day of ________, 1997, between
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP, A NORTH CAROLINA LIMITED PARTNERSHIP,
D/B/A HIGHWOODS ANDERSON, as landlord ("Landlord") and InfoCure Corporation, as
tenant ("Tenant").
WITNESSETH:
-----------
ARTICLE I
PREMISES AND TERM
-----------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain space known as Suite(s) 103 containing 1,954 rsf and Suite 400
containing 6,926 rsf ("Premises") described or shown on Exhibit "A" attached
hereto, in the building located at 1765 The Exchange ("Building"), Atlanta,
Georgia ("Property," as further described in Article 24), subject to the
provisions herein contained. The term ("Term") of this Lease shall commence on
the 1st day of December 1, 1997 ("Commencement Date"), and end on November 30,
2002 ("Expiration Date"), unless sooner terminated as provided herein. The
Commencement Date shall be subject to adjustment as provided in Article 4.
Landlord and Tenant agree that for purposes of this Lease the rentable area of
the Premises is 8,880 square feet and the rentable area of the Property is
90,325 square feet. The execution hereof is contingent upon the simultaneous
execution of that certain First Amendment to Lease by and between Landlord, as
successor in interest to Starwood Exchange Partners, L.P., and Tenant, as
successor in interest to DR Software, Inc., regarding that certain Lease
Agreement dated December 29, 1995 for certain premises located at 1765 The
Exchange, Suite 300, Atlanta, Georgia 30339.
ARTICLE 2
BASE RENT
---------
Tenant shall pay Landlord monthly Base Rent of Ten Thousand Three Hundred
Sixty Dollars ($10,360.00), in advance on or before the first day of each
calendar month during the Term, except that Base Rent for the first full I
calendar month for which Base Rent shall be due, shall be paid when Tenant
executes this Lease. If the Term commences on a day other than the first day of
a calendar month, or ends on a day other than the last day of a calendar month,
then the Base Rent for such month shall be prorated on the basis of I/30th of
the monthly Base Rent for each day of such month. (See Special Stipulations
Article 39 for the complete base rent schedule).
ARTICLE 3
ADDITIONAL RENT
---------------
(A) OPERATING EXPENSES. Tenant shall pay Landlord an amount equal to
Tenant's Prorata Share of Operating Expenses in excess of the Expense Stop which
will be defined as the 1998 Actual Operating Expenses ("Expense Stop") per
square foot of rentable area of the Property. The terms "Operating Expenses"
and "Tenant's Prorata Share" shall have the meanings specified in Article 24.
(B) MANNER OF PAYMENT. Operating Expenses shall be paid in the
following manner: The maximum annual increase in Controllable Expenses shall be
limited to six (6%) percent of the prior year's cost. For purposes of this
Lease, Controllable Expenses shall be defined as all Operating Expenses as
defined in Article 24(l) except (a), (b), (c), (h), (j) & (k).
-1-
<PAGE>
(i) Landlord may reasonably estimate in advance the amounts Tenant
shall owe for Operating Expenses for any full calendar year of the Term. In such
event, Tenant shall pay such estimated amounts, on a monthly basis, on or before
the first day of each calendar month, together with Tenant's payment of Base
Rent. Such estimate may be reasonably adjusted once per year by Landlord as set
forth in paragraph (ii) below.
(ii) Within 120 days after the end of each calendar year, Landlord
shall provide a statement (the "STATEMENT") TO Tenant showing: (a) the amount of
actual Operating Expenses for such calendar year, with a listing of amounts for
major categories of Operating Expenses, (b) any amount paid by Tenant towards
Operating Expenses during such calendar year on an estimated basis, (c) any
revised estimate of Tenant's obligations for Operating Expenses for the current
calendar year.
(iii) If the Statement shows that Tenant's estimated payments were
less than Tenant's actual obligations for Operating Expenses for such year,
Tenant shall pay the difference. If the Statement shows an increase in Tenant's
estimated payments for the current calendar year, Tenant shall pay the
difference between the new and former estimates, for the period from January I
of the current calendar year through the month in which the Statement is sent.
Tenant shall make such payments within thirty (30) days after Landlord sends the
Statement.
(iv) If the Statement shows that Tenant's estimated payments exceeded
Tenant's actual obligations for Operating Expenses, Tenant shall receive a
credit for the difference against payments of Rent next due. If the Term shall
have expired and no further Rent shall be due, Tenant shall receive a refund of
such difference, within thirty (30) days after Landlord sends the Statement.
(v) So long, as Tenant's obligations hereunder are not materially
adversely affected thereby, Landlord reserves the right to reasonably change,
from time to time, the manner or timing of the foregoing payments. No
reasonable delay by Landlord in providing the Statement (or separate statements)
shall be deemed a default by Landlord or a waiver of Landlord's right to require
payment of Tenant's obligations for actual or estimated Operating Expenses. In
no event shall a decrease in Operating Expenses ever decrease the monthly Base
Rent. Tenant acknowledges that, except as may be separately represented to
Tenant in writing signed by Landlord, the Expense Stop does not necessarily
reflect actual Operating Expenses.
(vi) The Budget for 1997 and the actual Operating Expenses for 1996
are set forth in Exhibit "D" and by this reference incorporated herein.
(D) PRORATION. If the Term commences other than on January 1, or ends
other than on December 31, Tenant's obligations to pay estimated and actual
amounts towards Operating Expenses for such first or final calendar years shall
be prorated to reflect the portion of such years included in the Term. Such
proration shall be made by multiplying the total estimated or actual (as the
case may be) Operating Expenses, for such calendar years, as well as the Expense
Stop amount, by a fraction, the numerator of which shall be the number of days
of the Term during such calendar year, and the denominator of which shall be
365.
(E) Landlord's Records. Landlord shall maintain records respecting
Operating Expenses and determine the same in accordance with sound accounting
and management practices, consistently applied. Although this Lease
contemplates the computation of Operating Expenses on a cash basis, Landlord
shall make reasonable and appropriate accrual adjustments to ensure that each
calendar year includes substantially the same recurring items. Landlord
reserves the right to change to a full accrual system of accounting so long as
the same is consistently applied and Tenant's obligations are not materially
adversely affected. Tenant or its representative shall have the right to examine
Such records upon reasonable prior notice specifying such records Tenant desires
to examine, during normal business hours at the place or places where such
records are normally kept by sending such notice no
-2-
<PAGE>
later than sixty (60) days following the furnishing of the Statement. Tenant
may take exception to matters included in Operating Expenses, or Landlord's
computation of Tenant's Prorata Share, by sending notice specifying such
exception and the reasons therefor to Landlord no later than sixty (60) days
after Landlord makes such records available for examination. Such Statement
shall be considered final, except as to matters to which exception is taken
after examination of Landlord's records in the foregoing manner and within the
foregoing times. Tenant acknowledges that Landlord's ability to budget and
incur ex expenses depend on the finality of such Statement, and accordingly
agrees that time is of the essence of this Paragraph. If Tenant takes exception
to any matter contained in the Statement as provided herein, Landlord shall
refer the matter to an independent certified public accountant, such accountant
having no prior affiliation with Tenant or Landlord whose certification as to
the proper amount shall be final and conclusive as between Landlord and Tenant.
Tenant shall promptly pay the cost of such certification unless such
certification determines that Tenant was overbilled by more than 3%. Pending
resolution of any such exceptions in the foregoing manner, Tenant shall continue
paying Tenant's Prorata Share of Operating Expenses in the amounts determined by
Landlord, subject to adjustment after any such exceptions are so resolved.
(F) RENT AND OTHER CHARGES. Base Rent, Operating Expenses, and any other
amounts which Tenant is or becomes obligated to pay Landlord under this Lease or
other agreement entered in connection herewith, are sometimes herein referred to
collectively as "Rent," and all remedies applicable to the non-payment of Rent
shall be applicable thereto. Rent shall be paid at any office maintained by
Landlord or its agent at the Property, or at such other place as Landlord may
designate.
ARTICLE 4
COMMENCEMENT OF TERM
--------------------
The Commencement Date set forth in Article I shall be delayed and Rent
shall be abated to the extent that Landlord fails: (i) to substantially complete
any improvements to the Premises required to be performed by Landlord under the
Work Agreement attached hereto as Exhibit "B" and made a part hereof, or (ii) to
------------
deliver possession of the Premises for any other reason, including but not
limited to holding over by prior occupants, except to the extent that Tenant,
its contractors, agents or employees in any way contribute to either such
failures. If Landlord so fails for a ninety (90) day initial grace period, or
such additional time as may be necessary due to fire or other casualty, strikes,
lock-outs or other labor troubles, weather conditions, shortages of material,
equipment or labor, governmental requirements, power shortages or outages, acts
or omissions of Tenant or other Persons, or other causes beyond Landlord's
reasonable control (collectively, "force majeure events"), Tenant shall have the
right to terminate this Lease by written notice to Landlord any time thereafter
up until Landlord substantially completes any such improvements and delivers the
Premises to Tenant, which written notice of Tenant shall specify that this Lease
shall terminate unless Landlord substantially completes any such improvements
and delivers the Premises to Tenant within thirty (30) days of the delivery date
of such written notice (which 30 day period shall be subject to extension for
force majeure events). Any such delay in the Commencement Date shall not
subject Landlord to liability for loss or damage resulting therefrom, and
Tenant's sole recourse with respect thereto shall be the abatement of Rent and
right to terminate this Lease described above. Upon any such termination,
Landlord and Tenant shall be entirely relieved of their respective obligations
hereunder, and any Security Deposit and Rent payments shall be returned to
Tenant. If the Commencement Date is delayed, the Expiration Date shall not be
similarly extended, unless Landlord shall so elect (in which case, the parties
shall confirm the same in writing). During, any period that Tenant shall be
permitted to enter the Premises prior to the Commencement Date other than to
occupy the same (e.g., to perform alterations or improvements), Tenant shall
comply with all terms and provisions of this Lease, except those provisions
requiring the payment of Rent. If Tenant shall be permitted to enter the
Premises prior to the Commencement Date for the purpose of occupying the same,
Rent shall commence on such date. Landlord shall permit early entry, provided
the Premises are legally available and Landlord has completed any work required
under this Lease or any separate agreement entered in connection herewith.
-3-
<PAGE>
ARTICLE 5
USE AND RULES
-------------
Tenant shall use the Premises for general office purposes and training, in
compliance with all applicable Laws, and without disturbing or interfering with
any other tenant or occupant of the Property. Tenant shall not use the Premises
in any manner so as to cause a cancellation of Landlord's insurance policies, or
an increase in the premiums thereunder. Tenant shall comply with all rules set
forth in EXHIBIT "C" attached hereto (the "RULES"). Landlord shall have the
------------
right to reasonably amend such Rules and supplement the same with other
reasonable Rules (not expressly inconsistent with this Lease) relating to the
Property, or the promotion of safety, care, cleanliness or, good order therein,
and all such amendments or new Rules shall be binding upon Tenant after five (5)
days' notice thereof to Tenant so long as such modifications do not materially,
adversely impact upon Tenant's use or access to the Premises. All Rules shall
be applied on a non-discriminatory basis, but nothing herein shall be construed
to give Tenant or any other Person (as defined in Article 24) any claim, demand
or cause of action against Landlord arising out of the violation of such Rules
by any other tenant, occupant, or visitor of the Property, or out of the
enforcement or waiver of the Rules by Landlord in any particular instance.
Subject to force majeure events, Tenant shall have twenty-four (24) hour access
to Building and Premises 365 days per year.
ARTICLE 6
SERVICES AND UTILITIES
----------------------
Landlord shall provide the following services and utilities (the cost of
which shall be included in Operating Expenses unless otherwise stated herein or
in any separate Exhibit hereto):
(A) Electricity for standard office lighting fixtures, and equipment and
accessories Customary for offices where: ( 1) the connected electrical load of
all of the same does not exceed an amount necessary for normal office use and
consistent with the floor plan attached as Exhibit "A" (or such lesser amounts
------------
as may be available, based on the safe and lawful capacity of the existing
electrical circuit(s) and facilities serving the Premises), (2) the electricity
will be at nominal 120 volts, single phase (or 110 volts, depending on available
service in the Building), and (3) the safe and lawful capacity of the existing
electrical circuit(s) serving the Premises is not exceeded.
(B) Heat and air-conditioning, to provide a temperature required, in
Landlord's reasonable opinion and customary in comparable office buildings in
Atlanta, Georgia and in accordance with applicable Law, for occupancy of the
Premises under normal business operations, from 8:00 a.m. until 6:00 p.m. Monday
through Friday, and Saturday 8:00 a.m. to 1:00 p.m., except on Holidays (as
defined in Article 25). Landlord shall not be responsible for inadequate air-
conditioning or ventilation to the extent the same occurs because Tenant uses
an), item of equipment consuming more than 500 watts at rated capacity (except
for normal office copiers) without providing adequate air-conditioning, and
ventilation therefor. After hours HVAC is available to Tenant, upon prior
written notice of twenty-four (24) hours, at Forty Dollars ($40) per hour.
(C) Water for drinking, lavatory and toilet purposes at those points of
supply provided for nonexclusive general use of tenants at the Property.
(D) Customary office cleaning and trash removal service on Monday through
Friday (or Sunday through Thursday), except on Holidays, in and about the
Premises.
(E) Operatorless passenger elevator service and freight elevator service in
common with Landlord and other tenants and their contractors, agents and
visitors.
-4-
<PAGE>
(F) Landlord shall seek to provide such extra utilities or services as
Tenant may from time to time request, if the same are reasonable and feasible
for Landlord to provide and do not involve modifications or additions to the
Property or existing Systems and Equipment (as defined IN ARTICLE 24), and if
Landlord shall receive Tenant's request within a reasonable period prior to the
time such extra utilities or services are required. Landlord may comply with
written or oral requests by any officer or employee of Tenant, unless Tenant
shall notify Landlord of, or Landlord shall request, the names of authorized
individuals (up to 3 for each floor on which the Premises are located) and
procedures for written requests. Tenant shall, for such extra utilities or
services, pay such charges as Landlord shall from time to time reasonably
establish. The initial cost for after-hour HVAC shall be $40 per hour. All
charges for such extra utilities or services shall be due at the same time as
the installment of Base Rent with which the same are billed, or if billed
separately, shall be due within twenty (20) days after such billing.
Landlord may install and operate meters or any other reasonable system for
monitoring or estimating any services or utilities used by Tenant in excess of
those required to be provided by Landlord under this Article (including a system
for Landlord's engineer to reasonably estimate any such excess usage). If such
system indicates such excess services or utilities, Tenant shall pay Landlord's
reasonable charges for installing and operating such system and any
supplementary air-conditioning, ventilation, heat, electrical or other systems
or equipment (or adjustments or modifications to the existing Systems and
Equipment), and Landlord's reasonable charges for such amount of excess services
or utilities used by Tenant. Such reasonable charges for utilities shall not be
marked up and shall reflect the cost for actual use incurred by the Tenant.
Landlord does not warrant that any services or utilities will be free from
shortages, failures, variations, or interruptions caused by repairs,
maintenance, replacements, improvements, alterations, changes of service,
strikes, lockouts, labor controversies, accidents, weather conditions, inability
to obtain services, fuel, steam, water or supplies, governmental requirements or
requests, or other causes beyond Landlord's reasonable control. None of the
same shall be deemed an eviction or disturbance of Tenant's use and possession
of the Premises or any part thereof, or render Landlord liable to Tenant for
abatement of Rent, or relieve Tenant from performance of Tenant's obligations
under this Lease. Landlord in no event shall be liable for damages by reason of
loss of profits, business interruption or other consequential damages.
ARTICLE 7
ALTERATIONS AND LIENS
---------------------
Tenant shall make no additions, changes, alterations or improvements in
which the cost exceeds $2,000.00 (the "Work") to the Premises or the Systems and
Equipment (as defined in Article 25) pertaining to the Premises without the
prior written consent of Landlord. Landlord may impose reasonable requirements
as a condition of such consent including without limitation the submission of
plans and specifications for Landlord's prior written approval, obtaining
necessary permits, posting bonds, obtaining insurance, prior approval of
contractors, subcontractor and suppliers, prior receipt of copies of all
contracts and subcontracts, contractor and subcontractor lien waivers,
affidavits listing all contractors, subcontractors and suppliers, affidavits
from engineers acceptable to Landlord stating that the Work will not adversely
affect the Systems and Equipment or the structure of the Property, and
requirements as to the manner and times in which such Work shall be done. All
Work shall be performed in a good and workmanlike manner in compliance with all
applicable governmental standards, rules and regulations and approval
requirements and all materials used shall be of a quality comparable to or
better than those in the Premises and Property and shall be in accordance with
plans and specifications approved by Landlord, and Landlord may require that all
such Work be performed under Landlord's supervision. For work costing in excess
of $2,000, Tenant shall pay Landlord a reasonable fee to cover Landlord's
overhead in reviewing Tenant's plans and specifications and performing any
supervision of the Work. If Landlord consents or supervises, the same shall not
be deemed a warranty as to the adequacy of the design, workmanship or quality
of, materials, and Landlord hereby expressly
-5-
<PAGE>
disclaims any responsibility or liability for the same. Landlord shall under no
circumstances have any obligation to repair, maintain or replace any portion of
the Work.
Tenant shall keep the Property and Premises free from any mechanic's,
materialman's or similar liens or other such encumbrances in connection with any
Work on or respecting the Premises not performed by or at the request of
Landlord, and shall indemnify and hold Landlord harmless from and against any
claims, liabilities, judgments, or costs (including; attorneys' fees) arising
out of the same or in connection therewith. Tenant shall give Landlord notice
at least twenty (20) days prior to the commencement of any Work on the Premises
(or such additional time as may be necessary under applicable Laws), to afford
Landlord the opportunity of posting and recording appropriate notices of non-
responsibility. Tenant shall remove any such lien or encumbrance by bond or
otherwise within thirty (30) days after written notice by Landlord, and if
Tenant shall fail to do so, Landlord may pay the amount necessary to remove such
lien or encumbrance, without being responsible for investigating the validity
thereof. The amount so paid shall be deemed additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing, contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Property or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Property or Premises arising in connection with any Work on or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Property and Premises.
ARTICLE 8
REPAIRS
-------
Except for customary cleaning and trash removal provided by Landlord under
Article 6, reasonable wear and tear, and damage covered under Article 9, Tenant
shall keep the Premises in good and sanitary condition, working order and repair
(including without limitation, carpet, wall-covering, doors, plumbing and other
fixtures, equipment, alterations and improvements whether installed by Landlord
or Tenant). In the event that any repairs, maintenance or replacements are
required, Tenant shall promptly arrange for the same either through Landlord for
such reasonable charges as Landlord may from time to time establish, or such
contractors as Landlord generally uses at the Property or such other contractors
as Landlord shall first approve in writing, and in a first class, workmanlike
manner approved by Landlord in advance in writing. If Tenant does not promptly
make such arrangements, Landlord may, but need not, make such repairs,
maintenance and replacements, and the costs incurred by Landlord therefore shall
be reimbursed by Tenant promptly after request by Landlord. Tenant shall
indemnify Landlord and pay for any repairs, maintenance and replacements to
areas of the Property outside the Premises, caused, in whole or in part, as a
result of moving any furniture, fixtures, or other property to or from the
Premises, or by Tenant or its employees, agents, contractors, or visitors
(notwithstanding anything to the contrary contained in this Lease), so long as
Landlord provides to Tenant upon Tenant's request customary materials necessary
to protect elevators (i.e. elevator pads). Except as provided in the preceding
sentence, or for damage covered under Article 9, Landlord shall keep the common
areas of the Property in good and sanitary condition, working order and repair
(the cost of which shall be included in Operating Expenses, as described in
Article 24, except as limited therein).
ARTICLE 9
CASUALTY DAMAGE
---------------
If the Premises or any common areas of the Property providing access
thereto shall be damaged by fire or other Casualty, Landlord shall use available
insurance proceeds to restore the same. Such restoration shall be to
substantially the condition prior to the casualty, except for modifications
required by zoning and building codes and
-6-
<PAGE>
other Laws or by any Holder (as defined in Article 24), any other modifications
to the common areas deemed desirable by Landlord (provided access to the
Premises is not materially impaired), and except that Landlord shall not be
required to repair or replace any of Tenant's furniture, furnishings, fixtures
or equipment, or any alterations or improvements in excess of any work performed
or paid for by Landlord under any separate agreement signed by the parties in
connection herewith. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or its visitors, or injury to Tenant's business resulting in
any way from such damage or the repair thereof. However, Landlord shall allow
Tenant a proportionate abatement of Rent during the time and to the extent the
Premises are unfit for occupancy for the purposes permitted under this Lease and
not occupied by Tenant as a result thereof (unless Tenant or its employees or
agents caused the damage). Notwithstanding the foregoing to the contrary,
Landlord may elect to terminate this Lease by notifying Tenant in writing of
such termination within sixty (60) days after the date of damage (such
termination notice to include a termination date providing at least ninety (90)
days for Tenant to vacate the Premises), if the Property shall be materially
damaged by Tenant or its employees or agents, or if the Property shall be
damaged by fire or other casualty or cause such that: (a) repairs to the
Premises and access thereto cannot reasonably be completed within 120 days after
the casualty without the payment of overtime or other premiums, (b) more than
25% of the Premises is affected by the damage, and fewer than 24 months remain
in the Term, or any material damage occurs to the Premises during the last 12
months of the Term, (c) any Holder (as defined in Article 24) shall require that
the insurance proceeds or any portion thereof be used to retire the Mortgage
debt or the damage is not fully covered by Landlord's insurance policies, or (d)
the cost of the repairs, alterations, restoration or improvement work would
exceed 25% of the replacement value of the Building, or the nature of such work
would make termination of this Lease necessary or convenient. Tenant agrees
that Landlord's obligation to restore, and the abatement of Rent provided
herein, shall be Tenant's sole recourse in the event of such damage, and waives
any other rights Tenant may have under any applicable Law to terminate the Lease
by reason of damage to the Premises or Property. Tenant acknowledges that this
Article represents the entire agreement between the parties respecting damage to
the Premises or Property.
ARTICLE 10
INSURANCE, SUBROGATION, AND WAIVER OF CLAIMS
--------------------------------------------
Tenant shall maintain during the Term comprehensive (or commercial) general
liability insurance, with limits of not less than $1,000,000 combined single
limit for personal injury, bodily injury or death, or property damage or
destruction (including loss of use thereof) for any one occurrence. Tenant
shall also maintain during the Term worker compensation insurance as required by
statute, and primary, noncontributory, "all-risk" property damage insurance
covering Tenant's personal property, business records, fixtures and equipment,
for damage or other loss caused by fire or other casualty or cause including,
but not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, explosion,
business interruption, and other insurable risks in amounts not less than the
full insurable replacement value of such property and full insurable value of
such other interests of Tenant (subject to reasonable deductible amounts).
Landlord shall, as part of Operating Expenses, maintain during the Term
comprehensive (or commercial) general liability insurance, with limits of not
less than $ 1,000,000 combined single limit for personal injury, bodily injury
or death, or property damage or destruction (including loss of use thereof) for
any one occurrence. Landlord shall also, as part of Operating Expenses,
maintain during the Term worker compensation insurance as required by statute,
and primary, non-contributory, extended coverage or "all-risk" property damage
insurance, in an amount equal to the full insurable replacement value of the
Property (exclusive of the costs of excavation, foundations and footings, and
such risks required to be covered by Tenant's insurance, and subject to
reasonable deductible amounts), or such other amount necessary to prevent
Landlord from being a co-insured, and such other coverage as Landlord shall deem
appropriate or that may be required by any Holder (as defined in Article 24).
-7-
<PAGE>
Tenant shall provide Landlord with certificates evidencing such coverage
(and, with respect to liability coverage, showing Landlord and such other
parties as Landlord may designate from time to time as additional insureds)
prior to the Commencement Date, which shall state that such insurance coverage
may not be changed or canceled without at least twenty (20) days' prior written
notice to Landlord, and shall provide renewal certificates to Landlord at least
twenty (20) days prior to expiration of such policies. Landlord may
periodically, but not more often than every two years, require that Tenant
reasonably increase the aforementioned coverage. Except as provided to the
contrary herein, any insurance carried by Landlord or Tenant shall be for the
sole benefit of the party carrying such insurance. Any insurance policies
hereunder may be "BLANKET POLICIES." All insurance required hereunder shall be
provided by responsible insurers and Tenant's insurer shall be reasonably
acceptable to Landlord. By this Article, Landlord and Tenant intend that their
respective property loss risks shall be borne by responsible insurance carriers
to the extent above provided, and Landlord and Tenant hereby agree to look
solely to, and seek recovery only from, their respective insurance carriers in
the event of a property loss to the extent that such coverage is agreed to be
provided hereunder. The parties each hereby waive all rights and claims against
each other for such losses, and waive all rights of subornation of their
respective insurers, provided such waiver of subrogation shall not affect the
right of the insured to recover thereunder. The parties agree that their
respective insurance policies are now, or shall be, endorsed such that said
waiver of subrogation shall not affect the right of the insured to recover
thereunder, so long as no material additional premium is charged therefor. By
this Article, Landlord and Tenant agree to look solely to, and seek recovery
only from, their respective insurance carriers in the event of a property loss.
The parties each hereby waive all rights and claims against each other for such
losses, and waive all rights of subrogation of their respective insurers,
provided such waiver shall not affect the right of the insured to recover
thereunder from its own insurance carrier.
ARTICLE 11
CONDEMNATION
------------
If the whole or any material part of the Premises or Property shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises or Property, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days' notice, provided such
notice is given no later than 180 days after the date of such taking,
condemnation, reconfiguration, vacation, deed or other instrument. Tenant shall
have reciprocal termination rights if the whole or any material part of the
Premises is permanently taken, or if access to the Premises is permanently
materially impaired. Landlord shall be entitled to receive the entire award or
payment in connection therewith, except that Tenant shall have the right to file
any separate claim available to Tenant for any taking of Tenant's personal
property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Term, and for moving expenses (so long as such claim does not
diminish the award available to Landlord or any Holder, and such claim is
payable separately to Tenant). All Rent shall be apportioned as of the date of
such termination, or the date of such taking, whichever shall first occur. If
any part of the Premises shall be taken, and this Lease shall not be so
terminated, the Rent shall be proportionately abated.
-8-
<PAGE>
ARTICLE 12
RETURN OF POSSESSION
--------------------
At the expiration or earlier termination of this Lease or Tenant's right of
possession, Tenant shall surrender possession of the Premises in the condition
required under Article 8, ordinary wear and tear excepted, and shall surrender
all keys, any key cards, and any parking stickers or cards, to Landlord, and
advise Landlord as to the combination of any locks or vaults then remaining in
the Premises, and shall remove all personal property. All improvements,
fixtures and other items in or upon the Premises (except personal property
belonging to Tenant), whether installed by Tenant or Landlord, shall be
Landlord's property and shall remain upon the Premises, all without
compensation, allowance or credit to Tenant. However, if prior to such
termination or within ten (10) days thereafter Landlord so directs by notice,
Tenant shall promptly remove such of the foregoing items as are designated in
such notice and restore the Premises to the condition prior to the installation
of such items; provided, Landlord shall not require removal of customary office
improvements installed pursuant to any separate agreement signed by both parties
in connection with entering into this Lease (except as expressly provided to the
contrary therein), or installed by Tenant with Landlord's written approval
(except as expressly required by Landlord in connection with granting such
approval). If Tenant shall fail to perform any repairs or restoration, or fail
to remove any items from the Premises required hereunder, Landlord may do so,
and Tenant shall pay Landlord the cost thereof upon demand. All property removed
from the Premises by Landlord pursuant to any provisions of this Lease or any
Law may be handled or stored by Landlord at Tenant's expense, and Landlord shall
in no event be responsible for the value, preservation or safekeeping thereof.
All property not removed from the Premises or retaken from storage by Tenant
within thirty (30) days after expiration or earlier termination of this Lease or
Tenant's right to possession, shall at Landlord's option be conclusively deemed
to have been conveyed by Tenant to Landlord as if by bill of sale without
payment by Landlord. Unless prohibited by applicable Law, Landlord shall have a
lien against such property for the costs incurret in removing and storing the
same.
ARTICLE 13
HOLDING OVER
------------
Tenant agrees it shall indemnify and save Landlord harmless against all
costs, claims, loss or liability resulting from delay by Tenant in surrendering
the Premises upon the expiration or sooner termination of the term of this
Lease, including, without limitation, any claims made by any succeeding tenant
founded on such delay. Tenant agrees that if possession of the Premises is not
Surrendered to Landlord upon tile Expiration Date or sooner termination of the
term of this Lease, then Tenant will pay Landlord for each month and for each
portion of any month during which Tenant holds over in the Premises after
expiration or sooner termination of the term of this Lease (the "Holdover
Period"), a sum (the "Holdover Rent") equal to one hundred fifty percent (150%)
times tile average of the monthly installments of Rent which was payable per
month under this Lease during tile six (6) months period preceding such
expiration or sooner termination of the term of this Lease, which Holdover Rent
shall be in addition to all other costs, claims, losses or liabilities which
Tenant has agreed to indemnify Landlord against pursuant to this Section. If
Landlord shall, at any time after the expiration or sooner termination of the
term hereof, proceed to remove Tenant from the Premises as a holdover tenant,
Tenant shall pay the Holdover Rent for the use and occupancy of the Premises
during any Holdover Period. Tenant's aforesaid obligations shall survive the
expiration or earlier termination of the term of this Lease. There shall be no
renewal of this Lease by operation of law.
ARTICLE 14
NO WAIVER
---------
-9-
<PAGE>
No provision of this Lease will be deemed waived by either party unless
expressly waived in writing signed by the waiving party. No waiver shall be
implied by delay or any other act or omission of either party. No waiver by
either party of any provision of this Lease shall be deemed a waiver of such
provision with respect to any subsequent matter relating to such provision, and
Landlord's consent or approval respecting any action by Tenant shall not
constitute a waiver of the requirement for obtaining Landlord's consent or
approval respecting any subsequent action. Acceptance of Rent by Landlord shall
not constitute a waiver of any breach by Tenant of any term or provision of this
Lease. No acceptance of a lesser amount than the Rent herein stipulated shall
be deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. The acceptance of Rent or of the performance of any other
term of provision from any Person other than Tenant, including any Transferee,
shall not constitute a waiver of Landlord's right to approve any Transfer.
ARTICLE 15
ATTORNEYS' FEES AND JURY TRIAL
------------------------------
In the event of any litigation between the parties, the prevailing party
shall be entitled to obtain, as part of tile judgment, all reasonable attorneys'
fees, actually incurred costs and expenses incurred in connection with such
litigation, except as may be limited by applicable Law. In the interest of
obtaining a speedier and less costly hearing of any dispute, the parties hereby
each irrevocably waive the right to trial by jury.
ARTICLE 16
PERSONAL PROPERTY TAXES, RENT TAXES AND OTHER TAXES
---------------------------------------------------
Tenant shall pay prior to delinquency all taxes, charges or other
governmental impositions assessed against or levied upon Tenant's fixtures,
furnishings, equipment and personal property located in the Premises, and any
Work to the Premises under Article 7. Whenever possible, Tenant shall cause all
such items to be assessed and billed separately from the property of Landlord.
In the event any such items shall be assessed and billed with the property of
Landlord, Tenant shall pay Landlord its share of such taxes, charges or other
governmental impositions within thirty (30) days after Landlord delivers a
statement and a copy of the assessment or other documentation showing the amount
of such impositions applicable to Tenant's property. Tenant shall pay any rent
tax or sales tax, service tax, transfer tax or value added tax, or any other
applicable tax on the Rent or services herein or otherwise respecting this
Lease.
ARTICLE 17
REASONABLE APPROVALS
--------------------
Whenever Landlord's approval or consent is expressly required under this
Lease (including Article 20) or any other agreement between the parties,
Landlord shall not unreasonably withhold or delay such approval or consent
(reasonableness shall be a condition to Landlord's enforcement of such consent
or approval requirement, and not a covenant), except for matters affecting the
structure, safety or security of the Property, or tile appearance of the
Property from any common or public areas.
-10-
<PAGE>
ARTICLE 18
SUBORDINATION. ATTORNMENT AND MORTGAGEE PROTECTION
--------------------------------------------------
This Lease is subject and subordinate to all Mortgages (as defined in
Article 24) now or hereafter placed upon the Property, and all other
encumbrances and matters of public record applicable to the Property. If any
foreclosure proceedings are initiated by any Holder or a deed in lieu is
granted, Tenant agrees, upon written request of any such Holder or any purchaser
at foreclosure sale, to attorn and pay Rent to such party and to execute and
deliver any instruments necessary or appropriate to evidence or effectuate such
attornment (provided such Holder or purchaser shall agree to accept this Lease
and not disturb Tenant's occupancy, so long as Tenant does not default and fail
to cure within the time permitted hereunder). However, in the event of
attornment, no Holder shall be: (i) liable for any act or omission of Landlord,
or subject to any offsets or defenses which Tenant might have against Landlord
(prior to such Holder becoming Landlord under such attornment), (ii) liable for
any security deposit or bound by any prepaid Rent not actually received by such
Holder, or (iii) bound by any future modification of this Lease not consented to
b such Holder. Any Holder may elect to make this Lease prior to the lien of its
Mortgage, by written notice to Tenant, and if the Holder of any prior Mortgage
shall require, this Lease shall be prior to any subordinate Mortgage. Tenant
agrees to give any Holder by certified mail, return receipt requested, a copy of
any notice of default served by Tenant upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by way of service on Tenant of
a copy of an assignment of leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the times permitted Landlord for cure under this Lease, any such Holder
whose address has been provided to Tenant shall have an additional period of
thirty (30) days in which to cure (or such additional time as may be required
due to causes beyond such Holder's control, including time to obtain possession
of the Property by power of sale or judicial action). Tenant shall execute such
documentation as Landlord may reasonably request from time to time, in order to
confirm the matters set forth in this Article in recordable form.
ARTICLE 19
ESTOPPEL CERTIFICATE
--------------------
Tenant shall from time to time, within twenty (20) days after written
request from Landlord, execute, acknowledge and deliver a statement (i)
certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified, is in full force and effect (or if this Lease is claimed not to
be in force and effect, specifying the ground therefor) and any dates to which
the Rent has been paid in advance, and the amount of any Security Deposit, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iii) certifying such other matters as Landlord may reasonably request, or
as may be requested by Landlord's current or prospective Holders, insurance
carriers, auditors, and prospective purchasers. Any such statement may be
relied upon by any such parties. If Tenant shall fail to execute and return
such statement within the time required herein, Tenant shall be deemed to have
agreed with the matters set forth therein.
ARTICLE 20
ASSIGNMENT AND SUBLETTING
-------------------------
(A) Transfers. Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed, as
further described below: (i) directly or indirectly assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, by operation of law or otherwise (ii)
sublet the Premises or any part thereof, or (iii) permit the use of the Premises
by any Persons (as defined in Article 24) other than Tenant, its affiliates or
subsidiaries, and its employees (all of the foregoing are hereinafter sometimes
referred to collectively as "Transfers" and any Person to whom any Transfer is
made or sought to be made is hereinafter sometimes referred to as a
"Transferee"). If Tenant shall desire
-11-
<PAGE>
Landlord's consent to any Transfer, Tenant shall notify Landlord in writing,
which notice shall include: (a) the proposed effective date (which shall not be
less than 30 nor more than 180 days after Tenant's notice), (b) the portion of
the Premises to be Transferred (herein called the "Subject Space"), (c) the
terms of the proposed Transfer and the consideration therefor, the name and
address of the proposed Transferee, and a copy of all documentation pertaining
to the proposed Transfer and (d) current financial statements of the proposed
Transferee certified by an officer, partner or owner thereof, and any other
reasonable information to enable Landlord to determine the financial
responsibility, character, and reputation of the proposed Transferee, nature of
such Transferee's business and proposed use of the Subject Space, and such other
information as Landlord may reasonably require. Any Transfer made without
complying with this Article shall, at Landlord's option, be null, void and of no
effect, or shall constitute a Default under this Lease. Whether or not Landlord
shall grant consent, Tenant shall pay $300.00 towards Landlord's review and
processing expenses, as well as any reasonable legal fees actually incurred by
Landlord, within thirty (30) days after written request by Landlord.
(B) Approval. Landlord will not unreasonably withhold or delay its consent
(as provided in Article 18) to any proposed Transfer of the Subject Space to the
Transferee on the terms specified in Tenant's notice. The parties hereby agree
that it shall be reasonable under this Lease and under any applicable Law for
Landlord to withhold consent to any proposed Transfer where one or more of the
following applies (without limitation as to other reasonable grounds for
withholding consent): (i) the Transferee is of a character or reputation or
engaged in a business which is not consistent with the quality of the Property,
or would be a significantly less prestigious occupant of the Property than
Tenant, (ii) the Transferee intends to use the Subject Space for purposes which
are not permitted under this Lease, (iii) the Subject Space is not regular in
shape with appropriate means of ingress and egress Suitable for normal renting
purposes, (iv) the Transferee is either a government (or agency or
instrumentality thereof) or an occupant of the Property, (v) the aggregate rent
payable by the Transferee is less than the aggregate rent for comparable space
in the Building charged by Landlord, (vi) the proposed Transferee does not have
a reasonable financial condition in relation to the obligations to be assumed in
connection with the Transfer, or (vii) Tenant has committed and failed to cure a
Default at the time Tenant requests consent to the proposed Transfer.
(C) TRANSFER PREMIUM. If Landlord consents to a Transfer, and as a
condition thereto which the parties hereby agree is reasonable, Tenant shall pay
Landlord fifty percent (50%) of any Transfer Premium derived by Tenant from such
Transfer. "TRANSFER PREMIUM" shall mean all rent, additional rent or other
consideration paid by such Transferee in excess of the Rent payable by Tenant
under this Lease (on a monthly basis during the Term, and on a per rentable
square foot basis, if less than all of the Premises is transferred), after
deducting the reasonable expenses incurred by Tenant for any changes,
alterations and improvements to the Premises, any other economic concessions or
services provided to the Transferee, and any customary brokerage commissions
paid in connection with the Transfer. If part of the consideration for such
Transfer shall be payable other than in cash, Landlord's share of such non-cash
consideration shall be in such form as is reasonably satisfactory to Landlord.
The percentage of the Transfer Premium due Landlord hereunder shall be paid
within ten (10) days after Tenant receives any Transfer Premium from the
Transferee. In the event that Tenant should transfer this Lease to, or permit
use of the Premises by, Tenant's affiliates or subsidiaries, the provisions of
this subparagraph shall not apply, provided that Tenant shall continue to be
liable under this Lease.
(D) Recapture. Notwithstanding anything to the contrary contained in this
Article, Landlord shall have the option by giving written notice to Tenant
within thirty (30) days after receipt of Tenant's written notice of any proposed
Transfer, to recapture the Subject Space. Such recapture notice shall cancel
and terminate this Lease with respect to the Subject Space as of the date stated
in Tenant's notice as the effective date of the proposed Transfer (or at
Landlord's option, shall cause the Transfer to be made to Landlord or its agent,
in which case the parties shall execute the Transfer documentation promptly
thereafter). If this Lease shall be canceled with respect to less than the
entire Premises, the Rent reserved herein shall be prorated on the basis of the
number of rentable square
-12-
<PAGE>
feet retained by Tenant in proportion to the number of rentable square feet
contained in the Premises, this Lease as so amended shall continue thereafter in
full force and effect, and upon request of either party, the parties shall
execute written confirmation of the same.
(E) TERMS OF CONSENT. If Landlord consents to a Transfer: (a) the terms
and conditions of this Lease, including among other things, Tenant's liability
for the Subject Space, shall in no way be deemed to have been waived or
modified, (b) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (c) no Transferee shall succeed to any rights
provided in this Lease or any amendment hereto to extend the Term of this Lease,
expand the Premises, or lease additional space, any such rights being deemed
personal to Tenant, (d) Tenant shall deliver to Landlord promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, and (e) Tenant shall furnish
upon Landlord's request a complete statement, certified by an independent
certified public accountant, or Tenant's chief financial officer, setting forth
in detail the computation of any Transfer Premium Tenant has derived and shall
derive from such Transfer. Landlord or its authorized representatives shall
have the right at all reasonable times to audit the books, records and papers of
Tenant relating to any Transfer, and shall have the right to make copies
thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall within thirty (30) days after demand pay the
deficiency, and if understated by more than 3%, Tenant shall pay Landlord's
costs of such audit. Any sublease hereunder shall be subordinate and subject to
the provisions of this Lease, and if this Lease shall be terminated during the
term of an sublease, Landlord shall have the right to: (i) treat such sublease
as canceled and repossess the Subject Space by any lawful means, or (ii) require
that such subtenant attorn to and recognize Landlord as its landlord under any
such sublease. If Tenant shall Default and fail to cure within the time
permitted for cure under Article 22(A), Landlord is hereby irrevocably
authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to
make all payments under or in connection with the Transfer directly to Landlord
(which Landlord shall apply towards Tenant's obligations under this Lease) until
such Default is cured.
(F) Certain Transfers. For purposes of this Lease, the term "Transfer"
shall also include the voluntary or involuntary filing of bankruptcy by or
against Tenant or reorganization by Tenant, dissolution or winding up of
Tenant's affairs. Notwithstanding the foregoing, the Tenant may assign this
Lease, without Landlord's consent, to: (i) a corporation that, either directly
or through one or more corporations, owns or controls a majority of the voting,
stock of Tenant; (ii) a corporation of which a majority of the voting stock is
owned or controlled by Tenant, either directly or through one or more
corporations; (iii) a corporation of which a majority of the voting stock is
directly or indirectly owned or controlled by the same corporation that directly
or indirectly owns or controls a majority of the voting stock of Tenant; or (iv)
a corporation in which Tenant is merged or consolidated in accordance with
applicable statutory provisions for merger and consolidation of corporations; so
long as, with regard to each of the foregoing, (a) this Lease is assumed by the
assignee or the liabilities of the corporations participating in such merger or
consolidation are assumed by the corporation surviving that merger or created by
that consolidation, as the case may be, (b) the assignee's or surviving
corporation's net worth is equal to or greater than the Tenant's, and (c) Tenant
gives Landlord thirty (30) days prior written notice thereof.
ARTICLE 21
RIGHTS RESERVED BY LANDLORD
---------------------------
Except to the extent expressly limited herein, Landlord reserves full
rights to reasonably control the Property (which rights may be exercised without
subjecting Landlord to claims for constructive eviction, abatement of Rent,
damages or other claims of any kind), including more particularly, but without
limitation, the following rights:
-13-
<PAGE>
(A) To change the name or street address of the Property; install and
maintain signs on the exterior and interior of the Property; retain at all
times, and use in appropriate instances, keys to all doors within and into the
Premises; grant to any Person the right to conduct any business or render any
service at the Property, whether or not it is the same or similar to the use
permitted Tenant by this Lease; and have access for Landlord and other tenants
of the Property to any mail chutes located on the Premises according to the
rules of the United States Postal Service. If change of address shall occur,
Landlord shall pay reasonable and actual cost of new stationery and business
cards for Tenant.
(B) To enter the Premises at reasonable hours for reasonable purposes with
reasonable notice to Tenant, including inspection and supplying cleaning service
or other services to be provided Tenant hereunder, to show the Premises to
current and prospective mortgage lenders, round lessors, insurers, and
prospective purchasers, tenants and brokers, at reasonable hours, and if Tenant
shall abandon the Premises at any time, or shall vacate the same during, the
last 3 months of the Term, to decorate, remodel, repair, or alter the Premises.
(C) To limit or prevent access to the Property, shut down elevator service,
activate elevator emergency controls, or otherwise take such action or
preventative measures deemed necessary by Landlord for the safety of tenants or
other occupants of tile Property or the protection of the Property and other
property located thereon or therein, in case of fire, invasion, insurrection,
riot, civil disorder, public excitement or other dangerous condition, or threat
thereof.
(D) To decorate and to make alterations, additions and improvements,
structural or otherwise, in or to tile Property or any part thereof, and any
adjacent building, structure, parking facility, land, street or alley (including
without limitation changes and reductions in corridors, lobbies, parking
facilities (so long as Tenant still has use of the minimal number of parking
spaces as provided in Article 35) and other public areas and tile installation
of kiosks, planters, sculptures, displays, escalators, mezzanines, and other
structures, facilities, amenities and features therein, and changes for the
purpose of connection with or entrance into or use of the Property in
conjunction with any adjoining or adjacent building or buildings, now existing
or hereafter constructed). In connection with such matters, or with any other
repairs, maintenance, improvements or alterations, in or about the Property,
Landlord may erect scaffolding and other structures reasonably required, and
during such operations may enter upon the Premises and take into and upon or
through the Premises, all materials required to make such repairs, maintenance,
alterations or improvements, and may close public entry ways, other public
areas, restrooms, stairways or corridors.
In connection with entering the Premises to exercise any of tile foregoing
rights, Landlord shall: (a) provide reasonable advance written or oral notice to
Tenant's on-site manager or other appropriate person (except in emergencies, or
for routine cleaning or other routine matters), and (b) take reasonable steps to
minimize any interference with Tenant's business.
ARTICLE 22
LANDLORD'S REMEDIES
-------------------
(A) Default. The occurrence of any one or more of the following events
shall constitute a "Default" by Tenant, which if not cured within any applicable
time permitted for cure below, shall give rise to Landlord's remedies set forth
in Paragraph (B), below: (i) failure by Tenant to make when due any payment of
Rent, unless such failure is cured within ten (10) days after written notice;
(ii) failure by Tenant to observe or perform any of the terms or conditions of
this Lease to be observed or performed by Tenant other than the payment of rent,
or as provided below, unless such failure is cured within thirty (30) days after
written notice, or such shorter period expressly provided elsewhere in this
Lease (provided, if the nature of Tenant's failure is such that more than ten
(10) days time is reasonably required in order to cure, Tenant shall not be in
default if Tenant commences to cure within such period
-14-
<PAGE>
and thereafter diligently seeks to cure such failure to completion); (iii)
failure by Tenant to comply with the Rules, unless such failure is cured within
ten (10) days after written notice (provided, if the nature of Tenant's failure
is such that more time is reasonably required in order to cure, Tenant shall not
be in Default if Tenant commences to cure within such period and thereafter
reasonably seeks to cure such failure to completion); (iv) vacation of all or a
substantial portion of the Premises for more than forty-five (45) consecutive
days, or the failure to take possession of the Premises within sixty (60) days
after the Commencement Date; (v) (a) making by Tenant or any guarantor of this
Lease ("GUARANTOR") of any general assignment for the benefit of creditors, (b)
filing by or against Tenant or any Guarantor of a petition to have Tenant or
such Guarantor adjudged a bankrupt or a petition for reorganization or
arrangement under any Law relating to bankruptcy (unless, in the case of a
petition flied against Tenant or such Guarantor, the same is dismissed within
sixty (60) days), (c) appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located on the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days, (d) attachment, execution or other judicial seizure of substantially
all of Tenant's assets located on the Premises or of Tenant's interest in this
Lease, (e) Tenant's or any Guarantor's convening of a meeting of its creditors
or any class thereof for the purpose of effecting a moratorium upon or
composition of its debts, or (f) Tenant's or any Guarantor's insolvency or
admission of an inability to pay its debts as they mature; (vi) any material
misrepresentation herein, or material misrepresentation or omission in any
financial statements or other materials provided by Tenant or any Guarantor in
connection with negotiating or entering this Lease or in connection with any
Transfer under Article 20; (vii) cancellation of any guaranty of this Lease by
any Guarantor; (viii) failure by Tenant to cure within any applicable times
permitted thereunder any default under any other lease for space at the Property
or any other buildings owned or managed by Landlord or its affiliates, now or
hereafter entered by Tenant (and any Default hereunder not cured within the time
permitted for cure herein shall, at Landlord's election, constitute a default
under any such other lease or leases). Failure by Tenant to comply with tile
same term or condition of this Lease oil three occasions during any twelve month
period shall cause any failure to comply with such term or condition during the
succeeding twelve month period, at Landlord's option, to constitute an incurable
Default, if Landlord has given Tenant written notice of each such failure within
ten (10) days after each such failure occurs. The notice and cure periods
provided herein are in lieu of, and not in addition to, any notice and cure
periods provided by Law.
(B) Remedies. If a Default occurs and is not cured within any applicable
time permitted under Paragraph (A), Landlord shall have the rights and remedies
hereinafter set forth, which shall be distinct, separate and cumulative with and
in addition to any other right or remedy allowed under any Law or, other
provisions of this Lease:
(i) Landlord may terminate this Lease, repossess the Premises by
detainer suit, summary proceedings or other lawful means, and recover as damages
a sum of money equal to: (a) any unpaid Rent as of the termination date
including interest at the Default Rate (as defined in Article 24), (b) any
unpaid Rent which would have accrued after the termination date through the time
of award including interest at the Default Rate, less such loss of Rent that
Tenant proves could have been reasonably avoided, (c) any unpaid Rent which
would have accrued after the time of award during the balance of the Term, less
such loss of Rent that could be reasonably avoided, and (d) any other amounts
necessary to compensate Landlord for all damages directly caused b), Tenant's
failure to perform its obligations under this Lease, including without
limitation all Costs of Reletting (as defined in Paragraph F). For purposes of
computing the amount of Rent herein that would have accrued after the time of
award, Tenant's Prorata Share of Operating Expenses and shall be projected,
based upon the average rate of increase, if any, in such items from the
Commencement Date through the time of award.
(ii) If applicable Law permits, Landlord may terminate Tenant's right
of possession and repossess the Premises by detainer suit, summary proceedings
or other lawful means, without terminating this Lease (and if Such Law permits,
and Landlord shall not have expressly terminated the Lease in writing, any
termination
-15-
<PAGE>
shall be deemed a termination of Tenant's right of possession only). In such
event, Landlord may recover: (a) any unpaid Rent as of the date possession is
terminated, including interest at the Default Rate, (b) any unpaid Rent which
accrues during the Term from the date possession is terminated through the time
of award (or which may have accrued from the time of any earlier award obtained
by Landlord through the time of award), including interest at the Default Rate,
less any Net Re-Letting Proceeds (as defined in Paragraph F) received by
Landlord during such period, and less such loss of Rent that Tenant proves could
have been reasonably avoided, and (c) any other amounts necessary to compensate
Landlord for all damages directly caused by Tenant's failure to perform its
obligations under this Lease, including without limitation, all Costs of
Reletting (as defined in Paragraph F). Landlord may bring suit for such amounts
or portions thereof, at any time or times as the same accrue or after the same
have accrued, and no suit or recovery of any portion due hereunder shall be
deemed a waiver of Landlord's right to collect all amounts to which Landlord is
entitled hereunder, nor shall the same serve as any defense to any subsequent
suit brought for any amount not theretofore reduced to judgment.
(C) MITIGATION OF DAMAGES. If Landlord terminates this Lease or Tenant's
right to possession, Landlord shall use reasonable efforts to mitigate
Landlord's damages, and Tenant shall be entitled to submit proof of such failure
to mitigate as a defense to Landlord's claims hereunder, if mitigation of
damages by Landlord is required by applicable Law. If Landlord has not
terminated this Lease or Tenant's right to possession, Landlord shall have no
obligation to mitigate, and may permit the Premises to remain vacant or
abandoned; in such case, Tenant may seek to mitigate damages by attempting to
sublease the Premises or assign this Lease (subject to Article 20).
(D) SPECIFIC PERFORMANCE, COLLECTION OF RENT AND ACCELERATION. Landlord
shall at all times have the rights and remedies (which shall be cumulative with
each other and cumulative and in addition to those rights and remedies available
under Paragraph (B) above, or any Law or other provision of this Lease), without
prior demand or notice except as required by applicable Law: (i) to seek any
declaratory, injunctive or other equitable relief, and specifically enforce this
Lease, or restrain or enjoin a violation or breach of any provision hereof, and
(ii) to sue for and collect any unpaid Rent which has accrued. Notwithstanding
anything to the contrary contained in this Lease, to the extent not expressly
prohibited by applicable Law, in the event of any Default by Tenant not cured
within any applicable time for cure hereunder, Landlord may terminate this Lease
or Tenant's right to possession and accelerate and declare that all Rent
reserved for the remainder of the Term shall be immediately due and payable to
the extent provided by law (in which event, Tenant's Prorata Share of Operating
Expenses, and for the remainder of the Term shall be projected based upon the
average rate of increase, if any, in such items from the Commencement Date
through the date of such declaration); provided, Landlord shall, after receiving
payment of the same from Tenant, be obligated to turn over to Tenant any actual
Net Re-Letting Proceeds thereafter received during the remainder of the Term, up
to the amount so received from Tenant pursuant to this provision.
(E) LATE CHARGES AND INTEREST. Tenant shall pay, as additional Rent, a
service charge of three hundred fifty dollars ($350.00) for bookkeeping and
administrative expenses, if Rent is not received within five (5) days after its
due date. In addition, any Rent paid more than five (5) days after due shall
accrue interest from the due date at the Default Rate (as defined in Article
25), until payment is received by Landlord. Such service charge and interest
payments shall not be deemed consent by Landlord to late payments, nor a waiver
of Landlord's right to insist upon timely payments at any time, nor a waiver of
any remedies to which Landlord is entitled as a result of the late payment of
Rent.
(F) Certain Definitions. "Net Re-Letting Proceeds" shall mean the total
amount of rent and other consideration paid by any Replacement Tenants, less all
Costs of Re-Letting, during a given period of time. "Costs of Re-Letting" shall
include without limitation, all reasonable costs and expenses incurred by
Landlord for any repairs, maintenance, changes, alterations and improvements to
the Premises, brokerage commissions, advertising costs, reasonable attorneys'
fees actually incurred, any customary free rent periods or credits, tenant
improvement
-16-
<PAGE>
allowances, take-over lease obligations and other customary, necessary or
appropriate economic incentives required to enter leases with Replacement
Tenants, and costs of collecting rent from Replacement Tenants. "Replacement
Tenants" shall mean any Persons (as defined in Article 24) to whom Landlord re-
lets the Premises or any portion thereof pursuant to this Article.
(G) OTHER MATTERS. No re-entry or repossession, repairs, changes,
alterations and additions, re-letting, acceptance of keys from Tenant, or any
other action or omission by Landlord shall be construed as an election by
Landlord to terminate this Lease or Tenant's right to possession, or accept a
surrender of the Premises, nor shall the same operate to release the Tenant in
whole or in part from any of Tenant's obligations hereunder, unless express
written notice of such intention is sent by Landlord or its agent to Tenant. To
the fullest extent permitted by Law, all rent and other consideration paid by
any Replacement Tenants shall be applied: first, to the Costs of Re-Letting
second, to the payment of any Rent theretofore accrued, and the residue, if any,
shall be held by Landlord and applied to the payment of other obligations of
Tenant to Landlord as the same become due (with any remaining residue to be
retained by Landlord). Rent shall be paid without any prior demand or notice
therefor (except as expressly provided herein) and without any deduction, set-
off or counterclaim, or relief from any valuation or appraisement laws. Tenant
hereby waives the right to interpose a counterclaim in any summary or other
proceeding instituted by Landlord against Tenant for unpaid Rent or other
Default under this Lease. Landlord may apply payments received from Tenant to
any obligations of Tenant then accrued, without regard to such obligations as
may be designated by Tenant. Landlord shall be under no obligation to observe
or perform any provision of this Lease on its part to be observed or performed
which accrues after the date of written notice of any Default by Tenant
hereunder not cured within the times permitted hereunder. The times set forth
herein for the curing of any defaults by Tenant are of the essence of this
Lease. Tenant hereby irrevocably waives any right otherwise available under any
Law to redeem or reinstate this Lease.
ARTICLE 23
LANDLORD'S RIGHT TO CURE
------------------------
If Landlord shall fail to perform any term or provision under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to any claims for damages of any kind, unless such
failure shall have continued for a period of thirty (30) days after written
notice thereof' by Tenant; provided, if the nature of Landlord's failure is such
that more than thirty (30) days are reasonably required in order to cure,
Landlord shall not be in default if Landlord commences to cure such failure
within such thirty (30) day period, and thereafter reasonably seeks to cure such
failure to completion. The aforementioned periods of time permitted for
Landlord to cure shall be extended for any period of time during which Landlord
is delayed in, or prevented from, curing due to fire or other casualty, strikes,
lock-outs or other labor troubles, shortages of equipment or materials,
governmental requirements, power shortages or outages, acts or omissions by
Tenant or other Persons, and other causes beyond Landlord's reasonable control.
If Landlord shall fail to cure within the times permitted for cure herein,
Landlord shall be subject to such remedies as may be available to Tenant
(subject to the other provisions of this Lease); provided, in recognition that
Landlord must receive timely payments of Rent and operate the Property, Tenant
shall have no right to withhold, set-off, or abate Rent.
ARTICLE 24
CAPTIONS, DEFINITIONS AND SEVERABILITY
--------------------------------------
The captions of the Articles and Paragraphs of this Lease are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation. If any term or provision of this Lease
shall be found invalid, void, illegal, or unenforceable with respect to any
particular Person by a court of competent jurisdiction, it shall not affect,
impair or invalidate any other terms or provisions hereof, or its enforceability
with
-17-
<PAGE>
respect to any other Person, the parties hereto agreeing that they would have
entered into the remaining portion of this Lease notwithstanding the omission of
the portion or portions adjudged invalid, void, illegal, or unenforceable with
respect to such Person.
(A) "Building" shall mean the structure identified in Article I of this
Lease.
(B) "Default Rate" shall mean twelve percent (12%) per annum, or the
highest rate permitted by applicable Law, whichever shall be less.
(D) "Holder" shall mean the holder of any Mortgage at the time in question,
and where such Mortgage is a ground lease, such term shall refer to the ground
lessor.
(E) "Holidays" shall mean all federal and state holidays, including New
Year's Day, President's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
(F) "Landlord" and "Tenant" shall be applicable to one or more Persons as
the case may be, and the singular shall include the plural, and the neuter shall
include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
(G) "Law" shall mean all federal, state, county and local governmental and
municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders
and other such requirements, applicable equitable remedies and decisions by
courts in cases where such decisions are considered binding precedents in the
state in which the Property is located, and decisions of federal courts applying
the Laws of such State.
(H) "Mortgage" shall mean all mortgages, deeds of trust, ground leases and
other such encumbrances now or hereafter placed upon the Property or Building,
or any part thereof, and all renewals, modifications, consolidations,
replacements or extensions thereof, and all indebtedness now or hereafter
secured thereby and all interest thereon.
(I) "Operating Expenses" shall mean all expenses, costs and amounts of
every kind and nature which Landlord shall pay during any calendar year any
portion of which occurs during the Term, because of or in connection with the
ownership, management, repair, maintenance, restoration and operation of the
Property, including without limitation, any amounts paid for: (a) utilities for
the Property, including but not limited to electricity, power, gas, steam, oil
or other fuel, water, sewer, lighting, heating, air conditioning and
ventilating, (b) permits, licenses and certificates necessary to operate, manage
and lease the Property, (c) insurance applicable to the Property, not limited to
the amount of coverage Landlord is required to provide under this Lease, (d)
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Property, (e) accounting, legal, inspection, consulting,
concierge and other services, (f) any equipment rental (or installment equipment
purchase or equipment financing agreements), or management agreements (including
the cost of any management fee actually paid thereunder and the fair rental
value of any office space provided thereunder, up to customary and reasonable
amounts), (g) wages, salaries, and other compensation and benefits (including
the fair value of any parking privileges provided) for all on-site persons
engaged in the day-to-day operation, but shall not include salaries and other
compensation of executive officers of Landlord, Building Manager, maintenance or
security of the Property, and employer's Social Security taxes, unemployment
taxes or insurance, and any other taxes which may be levied on such wages,
salaries, compensation and benefits, (h) payments under any easement, operating
agreement, declaration, restrictive covenant, or instrument pertaining to the
sharing of costs in any planned development, (i) operation,
-18-
<PAGE>
repair, and maintenance of all Systems and Equipment and components thereof
(including, replacement of components), janitorial service, alarm and security
service, window cleaning, trash removal, elevator maintenance, cleaning of
walks, parking facilities and building walls, removal of ice and snow,
replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies,
corridors, restrooms and other common or public areas or facilities, maintenance
and replacement of shrubs, trees, grass, sod and other landscaped items,
irrigation systems, drainage facilities, fences, curbs, and walkways, re-paving
and re-striping parking facilities, and roof repairs, j) Taxes and (k) costs and
expenses assessed against Landlord or the Property as part of the "North x
Northwest" Office Park. If the Property is not fully occupied during all or a
portion of any calendar year, Landlord may, in accordance with sound accounting
and management practices, determine the amount of variable Operating Expenses
(i.e. those items which vary according to occupancy levels that would have been
paid had the Property been fully occupied), and the amount so determined shall
be deemed to have been the amount of variable Operating; Expenses for such year.
If Landlord makes such an adjustment, Landlord shall make a comparable
adjustment for the Base Expense Year. Notwithstanding the foregoing, Operating
Expenses shall not, however, include:
(i) depreciation, interest and amortization on Mortgages, and other
debt costs or ground lease payments, if any; legal fees in connection with
leasing, tenant disputes or enforcement of leases; real estate brokers' leasing
commissions; improvement or alterations to tenant spaces; the cost of providing
any service directly to and paid directly by, any tenant; any costs expressly
excluded from Operating Expenses elsewhere in this Lease; costs of any items to
the extent Landlord receives reimbursement from insurance proceeds or from a
third party (such proceeds to be deducted from Operating Expenses in the year in
which received); and
(ii) capital expenditures, except those: (a) made primarily to reduce
Operating Expenses, or to comply with any Laws or other governmental
requirements, but only to the extent such expenditures accomplish such goal;
provided, however, that Landlord shall not be able to pass on Landlord's costs
which arise out of correcting a matter or item in the Building which is not in
compliance with governmental requirements as of the date of this Lease, or (b)
for reasonable replacements (as opposed to additions or new improvements) of
non-structural items located in the common areas of the Property required to
keep such areas in good condition; provided, all such permitted capital
expenditures (together with reasonable financing charges) shall be amortized for
purposes of this Lease over the shorter of: (i) their useful lives, (ii) the
period during which the reasonably estimated savings in Operating Expenses
equals the expenditures, or (iii) three (3) years.
(iii) those expenses listed in Article 42 and by this reference
incorporated herein.
(J) "Person" shall mean an individual, trust, partnership, joint venture,
association, corporation, and any other entity.
(K) "Property" shall mean the Building, and any common or public areas or
facilities, easements, corridors, lobbies, sidewalks, loading areas, driveways,
landscaped areas, skywalks, parking garages and lots, and any and all other
structures or facilities operated or maintained in connection therewith or for
the benefit of the Building, and all parcels or tracts of land on which all or
any portion of the Building or any of the other foregoing items are located, and
any fixtures, machinery, equipment, apparatus, Systems and Equipment, furniture
and other personal property located thereon or therein and used in connection
therewith, whether title is held by Landlord or its affiliates. Possession of
areas necessary for utilities, services, safety and operation of the Property,
including the System and Equipment (as defined in Article 24), fire stairways,
perimeter walls, space between the finished ceiling of the Premises and the slab
of the floor or roof of the Property there above, and the use thereof together
with the right to install, maintain, operate, repair and replace the Systems and
Equipment, including any of the same in, through, under or above the Premises in
locations that will not materially interfere with Tenant's use of the Premises,
are hereby excepted and reserved by Landlord, and not demised to Tenant.
-19-
<PAGE>
(L) "Rent" shall have the meaning specified therefor in Article 3(F).
(M) "Systems and Equipment" shall mean any plant, machinery, transformers,
duct work, cable, wires, and other equipment, facilities, and systems designed
to supply heat, ventilation, air conditioning and humidity or any other services
or utilities, or comprising or serving as any component or portion of the
electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or
fire/life/safety systems or equipment, or any other mechanical, electrical,
electronic, computer or other systems or equipment for the Property.
(N) "Taxes" shall mean all federal, state, county, or local governmental or
municipal taxes, fees, charges or other impositions of every kind and nature,
whether general, special, ordinary or extraordinary (including without
limitation, real estate taxes, general and special assessments, transit taxes,
water and sewer rents, taxes based upon the receipt of rent including gross
receipts or sales taxes applicable to the receipt of rent or service or value
added taxes (unless required to be paid by Tenant under Article 16), personal
property taxes imposed upon the fixtures, machinery, equipment, apparatus,
Systems and Equipment, appurtenances, furniture and other personal property used
in connection with the Property which Landlord shall pay during any calendar
year, any portion of which occurs during the Term (without regard to any
different fiscal year used by such government or municipal authority) because of
or in connection with the ownership, leasing and operation of the property.
Notwithstanding the foregoing, there shall be excluded from Taxes all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Property). If the
method of taxation of real estate prevailing at the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or heretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Property shall be included within the term
"Taxes," except that the same shall not include any enhancement of said tax
attributable to other income of Landlord. Any expenses incurred by Landlord in
attempting, to protest, reduce or minimize Taxes shall be included in Taxes in
the calendar year such expenses are paid. Tax refunds shall be deducted from
Taxes in the year they are received by Landlord, but if such refund shall relate
to taxes paid in a prior year of the Term, and the Lease shall have expired,
Landlord shall mail Tenant's Prorata Share of such net refund (after deducting
expenses and attorneys' fees), up to the amount Tenant paid towards Taxes during
such year, to Tenant's last known address. If Taxes for an period during the
Term or any extension thereof, shall be increased after payment thereof by
Landlord, for any reason including without limitation error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord upon
demand Tenant's Prorata Share of such increased Taxes. Tenant shall pay
increased Taxes whether Taxes are increased as a result of increases in the
assessment or valuation of the Property (whether based on a sale, change in
ownership or refinancing of the Property or otherwise), increases in the tax
rates, reduction or elimination of any rollbacks or other deductions available
under current law, scheduled reductions of any tax abatement, as a result of the
elimination, invalidity or withdrawal of any tax abatement, or for any other
cause whatsoever. Notwithstanding the foregoing, if any Taxes shall be paid
based on assessments or bills by a governmental or municipal authority using a
fiscal year other than a calendar year, Landlord may elect to average the
assessments or bills for the subject calendar year, based on the number of
months of such calendar year included in each such assessment or bill.
(O) "Tenant's Prorata Share" of Operating Expenses shall be the rentable
area of the Premises divided by the rentable area of the Property as set forth
in Article I on the last day of the calendar year for which Operating Expenses
are being determined, excluding any parking facilities. If the Property shall
contain tenants who do not participate in all or certain categories of Operating
Expenses on a prorata basis, Landlord may exclude the amount of Operating
Expenses, or such categories of the same, as the case may be, attributable to
such tenants, and exclude the rentable area of their premises, in computing
Tenant's Prorata Share. If the Property shall be part of or
-20-
<PAGE>
shall include a complex, development or group of buildings or structures
collectively owned or managed by Landlord or its affiliates or collectively
managed by Landlord's managing agent, Landlord may allocate Operating Expenses
within such complex, development or group, and between such buildings and
structures and the parcels on which they are located, in accordance with sound
accounting and management principles. In the alternative, Landlord shall have
the right to determine, in accordance with sound accounting and management
principles, Tenant's Prorata Share of Operating Expenses based upon the totals
of each of the same for all such buildings and structures, the land constituting
parcels on which the same are located, and all related facilities, including
common areas and easements, corridors, lobbies, sidewalks, elevators, loading
areas, parking facilities and driveways and other appurtenances and public
areas, in which event Tenant's Prorata Share shall be based on the ratio of the
rentable area of the Premises to the rentable area of all such buildings.
ARTICLE 25
CONVEYANCE BY LANDLORD AND LIABILITY
------------------------------------
(A) In case Landlord or any successor owner of the Property or the Building
shall convey or otherwise dispose of any portion thereof in which the Premises
are located, to another Person (and nothing herein shall be construed to
restrict or prevent such conveyance or disposition), such other Person shall
thereupon be and become landlord hereunder and shall be deemed to have fully
assumed and be liable for all obligations of this Lease to be performed by
Landlord which first arise after the date of conveyance, including tile return
of any Security Deposit, and Tenant shall attorn to such other Person, and
Landlord or such successor owner shall, from and after the date of conveyance,
be free of all liabilities and obligations hereunder not then incurred. The
liability of Landlord to Tenant for any default by Landlord under this Lease or
arising in connection herewith or with Landlord's operation, management,
leasing, repair, renovation, alteration, or any other matter relating to the
Property or the Premises, shall be limited to the interest of Landlord in the
Property (and the rental proceeds thereof). Tenant agrees to look solely to
Landlord's interest in tile Property (and tile rental proceeds thereof) for the
recovery of any judgment against Landlord, and Landlord shall not be personally
liable for any such judgment or deficiency after execution thereon. The
limitations of liability contained in this Article shall apply equally and inure
to the benefit of Landlord's present and future partners, beneficiaries,
officers, directors, trustees, shareholders, agents and employees, and their
respective partners, heirs, successors and assigns. Under no circumstances
shall any present or future general or limited partner of Landlord (if Landlord
is a partnership), or trustee or beneficiary (if Landlord or any partner of
Landlord is a trust) have any personal liability for tile performance of
Landlord's obligations under this Lease. Notwithstanding the foregoing to the
contrary, Landlord shall have personal liability for insured claims, beyond
Landlord's interest in the Property (and rental proceeds thereof), to the extent
of Landlord's liability insurance coverage available for such claims.
(B) In the event the Tenant claims or asserts that the Landlord has
violated or failed to perform a covenant of Landlord not to unreasonably
withhold or delay Landlord's consent or approval, or in any case where
Landlord's reasonableness in exercising its judgment is in issue, Tenant's sole
remedy shall be an action for specific performance, declaratory judgment or
injunction and in no event shall Tenant be entitled to any money damages for a
breach of such covenant and in no event shall Tenant claim or assert any claims
for money damages in any action or by way of set-off, defense or counterclaim
and Tenant hereby specifically waives the right to an), motley damages or other
remedies. Whenever Land[Landlord's consent or approval is required under this
Lease, and this Lease does not specify that such consent or approval shall not
be unreasonably withheld or delayed, Landlord may determine whether to grant or
withhold such consent or approval in its sole and absolute discretion,
regardless of whether such refusal to consent or approve may be deemed
arbitrary.
-21-
<PAGE>
(C) Whenever this Lease requires Landlord's consent or approval, Tenant
shall reimburse Landlord on demand as a condition to granting such consent or
approval any reasonable and customary costs actually incurred in connection with
reviewing the request for consent or approval, including, without limitation,
reasonable attorneys fees, not to exceed $500.
ARTICLE 26
INDEMNIFICATION
---------------
Except to the extent arising from the negligent acts of Landlord or
Landlord's agents or employees, Tenant shall defend, indemnify and hold harmless
Landlord from and against any and all claims, demands, liabilities, damages,
judgments, orders, decrees, actions, proceedings, fines, penalties, costs and
expenses, including without limitation, court costs and reasonable attorneys'
fees actually incurred arising from or relating to any loss of life, damage or
injury to person, property or business occurring in or from the Premises, or
caused by or in connection with any violation of this Lease or use of the
Premises or Property by, or any other act or omission of, Tenant, any other
occupant of the Premises, or any of their respective agents, employees,
contractors or guests. Without limiting the generality of the foregoing, Tenant
specifically acknowledges that the indemnity undertaking herein shall apply to
claims in connection with or arising out of any "Work" as described in Article
7, the installation, maintenance, use or removal of any "Lines" located in or
serving the Premises as described in Article 28, and the transportation, use,
storage, maintenance, generation, manufacturing, handling, disposal, release or
discharge of any "Hazardous Material" as described in Article 29 (whether or not
any of such matters shall have been therefor approved by Landlord), except to
the extent that any of the same arises from the negligent acts of Landlord or
Landlord's agents or employees.
ARTICLE 27
SAFETY AND SECURITY DEVICES, SERVICES AND PROGRAMS
--------------------------------------------------
The parties acknowledge that safety and security devices, services and
programs provided by Landlord, if any, while intended to deter crime and ensure
safety, may not in given instances prevent theft or other criminal acts, or
ensure safety of persons or property. The risk that any safety or security
device, service or program may not be effective, or may malfunction, or be
circumvented by a criminal, is assumed by Tenant with respect to Tenant's
property and interests, and Tenant shall obtain insurance coverage to the extent
Tenant desires protection against such criminal acts and other losses, as
further described in Article 10. Tenant agrees to cooperate in any reasonable
safety or security program developed by Landlord or required by Law.
ARTICLE 28
COMMUNICATIONS AND COMPUTER LINES
---------------------------------
Tenant may install, maintain, replace, remove or use any communications or
computer wires, cables and related devices (collectively the "Lines") at the
Property in or serving the Premises, provided: (a) Tenant shall obtain
Landlord's prior written consent, use an experienced and qualified contractor
approved in writing, by Landlord, and comply with all of the other provisions of
Article 7, (b) any such installation, maintenance, replacement, removal or use
shall comply with all Laws applicable thereto and good work practices, and shall
not interfere with the use of ally then existing Lines at the Property, (c) an
acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Property, as determined in
Landlord's reasonable opinion, (d) if Tenant at any time uses any equipment that
may create an electromagnetic field exceeding the normal insulation ratings of
ordinary twisted pair riser cable or cause radiation higher than normal
background radiation, the Lines therefor (including riser cables) shall be
appropriately insulated to prevent such excessive electromagnetic fields or
radiation, (e) as a condition to permitting the installation of new Lines,
Landlord may require that Tenant remove
-22-
<PAGE>
existing Lines located in or serving the Premises, and (f) Tenant shall pay all
costs in connection therewith. Landlord reserves the right to require that
Tenant remove any Lines located in or serving the Premises which are installed
in violation of these provisions, or which are at any time in violation of any
Laws or represent a dangerous or potentially dangerous condition (whether such
Lines were installed by Tenant or any other party), within three (3) business
days after written notice.
Landlord may (but shall not have the obligation to): (i) install new Lines
at the Property (ii) create additional space for Lines at the Property, and
(iii) reasonably direct, monitor and/or supervise the installation, maintenance,
replacement and removal of, the allocation and periodic re-allocation of
available space (if any) for, and the allocation of excess capacity (if any) on,
any Lines now or hereafter installed at the Property by Landlord, Tenant or any
other party (but Landlord shall have no right to monitor or control the
information transmitted through such Lines). Such rights shall not be in
limitation of other rights that may be available to Landlord by Law or
otherwise. If Landlord exercises any such rights, Landlord may charge Tenant for
the costs attributable to Tenant, or may include those costs and all other costs
in Operating Expenses under Article 24 (including without limitation, costs for
acquiring and installing Lines and risers to accommodate new Lines and spare
Lines, any associated computerized system and software for maintaining records
of Line connections, and the fees of any consulting engineers and other
experts); provided, any capital expenditures included in Operating Expenses
hereunder shall be amortized (together with reasonable finance charges) over the
period of time prescribed by Article 24.
Notwithstanding anything to the contrary contained in Article 12, Landlord
reserves the right to require that Tenant remove any or all Lines installed by
or for Tenant within or serving the Premises upon termination of this Lease,
provided Landlord notifies Tenant prior to or within thirty (30) days following
such termination. Any Lines not required to be removed pursuant to this Article
shall, at Landlord's option, become the property of Landlord (without payment by
Landlord). If Tenant fails to remove such Lines as required by Landlord, or
violates any other provision of this Article, Landlord may, after twenty (20)
days written notice to Tenant, remove such Lines or remedy such other violation,
at Tenant's expense (without limiting Landlord's other remedies available under
this Lease or applicable Law). Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents or employees,
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that the Tenant's use of any Lines will be free from the following
(collectively called "Line Problems"): (x) any eavesdropping or wire-tapping by
unauthorized parties, (y) any failure of any Lines to satisfy Tenant's
requirements, or (z) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of Lines by or for other tenants or occupants at the
Property, by any failure of the environmental conditions or the power supply for
the Property to conform to any requirements for the Lines or any associated
equipment, or any other problems associated with any Lines by any other cause.
Under no circumstances shall any Line Problems be deemed an actual or
constructive eviction of Tenant, render Landlord liable to Tenant for abatement
of Rent, or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of loss of
profits, business interruption or other consequential damage arising from any
Line Problems.
ARTICLE 29
HAZARDOUS MATERIALS
-------------------
Tenant shall not transport, use, store, maintain, generate, manufacture,
handle, dispose, release or discharge any "Hazardous Material" (as defined
below) upon or about the Property, or permit Tenant's employees, agents,
contractors, and other occupants of the Premises to engage in such activities
upon or about the Property. However, the foregoing provisions shall not
prohibit the transportation to and from and use, storage, maintenance and
handling within, the Premises of substances customarily used in offices (or Such
other business or activity expressly permitted to be undertaken in the Premises
under Article 5), provided: (a) such substances shall be used and maintained
only in
-23-
<PAGE>
such quantities as are reasonably necessary for such permitted use of the
Premises, strictly in accordance with applicable Law and the manufacturers'
instructions therefor, (b) such substances shall not be disposed of, released or
discharged on the Property, and shall be transported to and from the Premises in
compliance with all applicable Laws, and as Landlord shall reasonably require,
(c) if any applicable Law or Landlord's trash removal contractor requires that
any such substances be disposed of separately from ordinary trash, Tenant shall
make arrangements at Tenant's expense for such disposal directly with a
qualified and licensed disposal company at a lawful disposal site (subject to
scheduling and approval by Landlord), and shall ensure that disposal occurs
frequently enough to prevent unnecessary storage of such substances in the
Premises, and (d) any remaining such substances shall be completely, property
and lawfully removed from the Property upon expiration or earlier termination of
this Lease.
Tenant shall promptly notify Landlord of: (i) any enforcement, cleanup or
other regulatory action taken or threatened by any governmental or regulatory
authority with respect to the presence of any Hazardous Material on the Premises
or the migration thereof from or to other property, (ii) any demands or claims
made or threatened by any party against Tenant or the Premises relating to any
loss or injury resulting from any Hazardous Material, (iii) any release,
discharge or non-routine, improper or unlawful disposal or transportation of any
Hazardous Material on or from the Premises, and (iv) any matters where Tenant is
required by Law to give a notice to any governmental or regulatory authority
respecting any Hazardous Material on the Premises. Landlord shall have the
right (but not the obligation) to join and participate as a party in any legal
proceedings or actions affecting the Premises initiated in connection with any
environmental, health or safety Law. At such times as Landlord may reasonably
request, Tenant shall provide Landlord with a written list identifying any
Hazardous Material then used, stored, or maintained upon the Premises, the use
and approximate quantity of each such material, a copy of any material safety
data sheet ("MSDS") issued by the manufacturer therefor, written information
concerning the removal, transportation and disposal of the same, and such other
information as Landlord may reasonably require or as may be required by Law.
The term "Hazardous Material" for purposes hereof shall mean any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, state or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of an MSDS.
If any Hazardous Material is released, discharged or disposed of by Tenant
or any other occupant of the Premises, or their employees, agents or
contractors, on or about tile Property in violation of the foregoing provisions,
Tenant shall immediately, properly and in compliance with applicable Laws clean
up and remove the Hazardous Material from the Property and any other affected
property and clean or replace any affected personal property (whether or not
owned by Landlord), at Tenant's expense. Such clean up and removal work shall
be subject to Landlord's prior written approval (except in emergencies), and
shall include, without limitation, any testing investigation, and the
preparation and implementation of any remedial action plan required by any
governmental body having jurisdiction or reasonably required by Landlord. If
Tenant shall fail to comply with the provisions of this Article within five (5)
days after written notice by Landlord, or such shorter time as may be required
by Law or in order to minimize any hazard to Persons or property, Landlord may
(but shall not be obligated to) arrange for such compliance directly or as
Tenant's agent through contractors or other parties selected by Landlord, at
Tenant's expense (without limiting Landlord's other remedies under this Lease or
applicable Law). If any Hazardous Material is released, discharged or disposed
of on or about the Property and such release, discharge or disposal is not
caused by Tenant or other occupants of the Premises, or their employees, agents
or contractors, such release, discharge or disposal shall be deemed casualty
damage under Article 9 to the extent that the Premises or common areas serving
the Premises are affected thereby; in Such case, Landlord and Tenant shall have
the obligations and rights respecting such casualty damage provided under
Article 9. Landlord represents to the best of its knowledge that there are no
Hazardous Materials in the Premises as of the date of this Lease.
-24-
<PAGE>
ARTICLE 30
MISCELLANEOUS
-------------
(A) Each of the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, guardians, custodians, successors and assigns,
subject to the provisions of Article 20 respecting Transfers.
(B) Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant.
(C) This Lease shall be construed in accordance with the Laws of the State
of Georgia.
(D) All obligations or rights of either party arising during or
attributable to the period ending upon expiration or earlier ten-termination of
this Lease shall survive such expiration or earlier termination.
(E) Landlord agrees that, if Tenant timely pays the Rent and performs the
terms and provisions hereunder, and subject to all other terms and provisions of
this Lease, Tenant shall hold and enjoy the Premises during the Term, free of
all lawful claims by any Person acting by or through Landlord.
(F) This Lease does not grant any legal rights to "light and air" outside
the Premises nor any particular view visible from the Premises.
ARTICLE 31
OFFER
-----
The submission and negotiation of this Lease shall not be deemed an offer
to enter the same by Landlord, but the solicitation of such an offer by Tenant.
Tenant agrees that its execution of this Lease constitutes a firm offer to enter
the same which may not be withdrawn for a period of 30 days after delivery to
Landlord (or such other period as may be expressly provided in any other
agreement signed by the parties). During such period and in reliance on the
foregoing, Landlord may, at Landlord's option (and shall, if required by
applicable Law), deposit any security deposit and Rent, and proceed with any
plans, specifications, alterations or improvements, and permit Tenant to enter
the Premises, but such acts shall not be deemed an acceptance of Tenant's offer
to enter this Lease, and such acceptance shall be evidenced only by Landlord
signing and delivering this Lease to Tenant.
ARTICLE 32
NOTICES
-------
Except as expressly provided to the contrary in this Lease, every notice or
other communication to be given by either party to the other with respect hereto
or to the Premises or Property, shall be in writing and shall not be effective
for any purpose unless tile same shall be served personally or by national air
courier service, or United States certified mail, return receipt requested,
postage prepaid, addressed, if to Tenant, at the address first set forth in the
Lease, until the Commencement Date, and thereafter to the Tenant at the
Premises, and if to Landlord, Asset Manager at Highwoods Anderson, 2200 Century
Parkway, Suite 500, Atlanta, Georgia 30345-3203, or to such other place as
Landlord may from time to time designate in writing Tenant. Every notice or
other Communication hereunder shall be deemed to have been given as of the third
business day following the date of such mailing (or as of any earlier date
evidenced by a receipt from such national air courier service or the United
States Postal Service)
-25-
<PAGE>
or immediately if personally delivered. Notices not sent in accordance with the
foregoing shall be of no force or effect until received by the foregoing parties
at such addresses required herein.
ARTICLE 33
REAL ESTATE BROKERS
-------------------
Tenant represents that Tenant has dealt only with Hailey Realty Associates
and Carr Real Estate Services, Inc., (whose commission, if any, shall be paid by
Landlord pursuant to a separate agreement) as broker, agent or finder in
connection with this Lease and agrees to indemnify and hold Landlord harmless
from all damages, judgments, liabilities and expenses (including reasonable
attorneys' fees) arising from any claims or demands of any other broker, agent
or finder with whom Tenant has dealt for any commission or fee alleged to be due
in connection with its participation in the procurement of Tenant or the
negotiation with Tenant of this Lease.
ARTICLE 34
SECURITY DEPOSIT
----------------
Tenant shall deposit with Landlord the amount of $10,360.00 ("Security
Deposit"), upon Tenant's execution and submission of this Lease. The Security
Deposit shall serve as security for the prompt, full and faithful performance by
Tenant of the terms and provisions of this Lease. In the event that Tenant is
in Default hereunder and fails to cure within any applicable time permitted
under this Lease, or in the event that Tenant owes any amounts to Landlord upon
the expiration of this Lease, Landlord may use or apply the whole or any part of
the Security Deposit for the payment of Tenant's obligations hereunder. The use
or application of the Security Deposit or any portion thereof shall not prevent
Landlord from exercising any other right or remedy provided hereunder or under
any Law and shall not be construed as liquidated damages. In the event the
Security Deposit is reduced by such use or application, Tenant shall deposit
with Landlord within ten (10) days after written notice, an amount sufficient to
restore the full amount of the Security Deposit. Landlord shall not be required
to keep the Security Deposit separate from Landlord's general funds or pay
interest on the Security Deposit. Any remaining portion of the Security Deposit
shall be returned to Tenant within forty-five (45) days after Tenant has vacated
the Premises in accordance with Article 12.
ARTICLE 35
PARKING SPACES
--------------
Landlord hereby grants to Tenant and persons designated by Tenant the right
to use 32 spaces unreserved, surface parking spaces in the designated parking
area at the Property (the "Parking Area"). The term of such license shall
commence on the Lease Commencement Date and shall continue until the earlier to
occur of the Expiration Date under this Lease, or termination of this Lease.
The parking spaces hereunder shall be available to Tenant, its employees and
visitors on an unreserved "first-come, first-served" basis. Washing, waxing,
cleaning or servicing of any vehicle in the Parking Area is prohibited. Parking
spaces may be used only for parking automobiles, sport utility vehicles,
motorcycles and minivans.
Tenant shall at all times comply with all applicable ordinances, rules,
regulations, codes, laws, statutes and requirements of all federal, state,
county and municipal governmental bodies or their subdivisions respecting the
use of the parking spaces. Landlord reserves the right to adopt, modify and
enforce reasonable rules governing the use of the parking spaces from time to
time, including any key-card, sticker or other identification or entrance
system, and hours of operation. Landlord may refuse to permit any person who
violates such rules to park, and any violation of the rules shall subject the
car to removal from the Parking Area.
-26-
<PAGE>
Landlord shall have no liability whatsoever for any damage to vehicles or
other property located in the Parking Area, nor for any personal injuries or
death arising out of any matter relating to the Parking Area, and in all events,
Tenant agrees to look first to its insurance carrier and to request that
Tenant's employees look first to their respective insurance carriers for payment
of any losses sustained in connection with any use of the Parking Area. Tenant
hereby waives on behalf of its insurance carriers all rights of subrogation
against Landlord or Landlord's agents. Landlord reserves the right to assign a
reasonable number of specific spaces, and to reserve spaces for couriers,
visitors, compact or midget cars, handicapped persons and for other tenants,
guests of tenants or other parties, and Tenant and persons designated by Tenant
hereunder shall not park in any such assigned or reserved space, so long; as
Tenant still has the use of the minimum number of parking spaces as provided
herein. Landlord also reserves the right to close all or any portion of the
Parking Area in order to make repairs or perform maintenance services, or to
alter, modify, re-stripe or renovate the Parking Area, or if required by
casualty, strike, condemnation, act of God, governmental law or requirement or
other reason beyond Landlord's reasonable control, provided Landlord closes all
or substantially all of the Parking Area, Landlord will provide alternative
parking areas.
ARTICLE 36
CONSENT TO JURISDICTION
-----------------------
The shareholders of Tenant hereby consent and submit to the jurisdiction of
any court of record of Georgia State located in Cobb County, or of the United
States District Court for the Northern District of Georgia and agree that
service of process in any action or proceeding, brought by Landlord may be made
upon any or all shareholders by mailing a copy of the summons to such
shareholder(s) either at their respective addresses or at the Premises, by
registered or certified mail, return receipt requested. Notwithstanding the
foregoing, the residence of any shareholder of Tenant shall not be a basis for a
choice of venue or for a motion by a shareholder of Tenant for transfer of venue
or forum non conveniens pursuant to any rule of common law and/or any applicable
state or federal provision or statute, and each shareholder of Tenant and Tenant
hereby waives the right to choose venue or to move for transfer of venue or
forum non conveniens on the grounds that all individual shareholder of the
Tenant resides in a particular jurisdiction.
ARTICLE 37
ENTIRE AGREEMENT
----------------
This Lease, together with the Exhibits (WHICH COLLECTIVELY ARE HEREBY
INCORPORATED WHERE REFERRED TO HEREIN AND MADE A PART HEREOF AS THOUGH FULLY SET
FORTH), contains all tile terms and provisions between Landlord and Tenant
relating to the matters set forth herein and no prior or contemporaneous
agreement or understanding pertaining to the same shall be of any force or
effect, except any such contemporaneous agreement specifically referring to and
modifying this Lease, signed by both parties without limitation as to the
generality of the foregoing, Tenant hereby acknowledges and agrees that
Landlord's leasing agents and field personnel are only authorized to show the
Premises and negotiate terms and conditions for leases subject to Landlord's
final approval, and are not authorized to make any agreements, representations,
understandings or obligations, binding upon Landlord, respecting the condition
of the Premises or Property, suitability of the same for Tenant's business, or
any other matter, and no such agreements, representations, understandings or
obligations not expressly contained herein or in such contemporaneous agreement
shall be of any force or effect. Neither this Lease, nor any Exhibits or
Exhibits referred to above may be modified, except in writing signed-by both
parties.
-27-
<PAGE>
ARTICLE 38
SPECIAL STIPULATIONS
--------------------
Insofar as the special stipulations attached hereto and incorporated herein
conflict with any of the foregoing provisions, said special stipulations shall
control.
ARTICLE 39 A
BASE RENTAL
SUITE 103 (1,954 RSF)
---------------------
<TABLE>
<CAPTION>
Annual Base Rent Base Rent Per Month Annual
Period Per Rentable Square Foot (Based on 1,954 RSF) Base Rent
- ---------------------------------- ------------------------ -------------------- ----------
<S> <C> <C> <C>
12/01/97 - 11/31/98 $14.00 $2,279.66
$27,356.00 12/01/98 - 11/31/99 $14.42 $2,348.06 $28,176.68
12/01/99 - 11/31/00 $14.85 $2,418.08 $29,016.90
12/01/00 - 11/31/01 $15.30 $2,491.35 $29,896.20
12/01/01 - 11/31/02 $15.76 $2,566.25 $30,795.04
</TABLE>
ARTICLE 39B
BASE RENTAL
SUITE 400 (6,926 RSF)
---------------------
<TABLE>
<CAPTION>
Annual Base Rent Base Rent Per Month Annual
Period Per Rentable Square Foot (Based on 1,954 RSF) Base Rent
- ----------------------------------- ------------------------ -------------------- -----------
<S> <C> <C> <C>
12/01/97 - 11/31/98 $14.00 $8,080.33
$96,964.00 12/01/98 - 11/31/99 $14.42 $8,322.74 $ 99,872.92
12/01/99 - 11/31/00 $14.85 $8,570.93 $102,851.10
12/01/00 - 11/31/01 $15.30 $8,830.65 $105,967.80
12/01/01 - 11/31/02 $15.76 $9,096.15
$109,153.76
</TABLE>
ARTICLE 40
SECURITY
--------
Landlord is not responsible or liable for any thefts or criminal acts
incurred on the premises at any time for any reason.
ARTICLE 41
FIRST RIGHT OF OFFER
--------------------
Subject to Subsection B below, and subject to any expansion or renewal
options of any current tenant in the Building (a "PRIOR TENANT") Landlord hereby
grants to Tenant for the term of the Lease a right of first offer for the
remaining space on the third and fourth floor of the Building (collectively, the
"Rofo Space "), to be exercised in accordance with Subsection A below.
- ------------
A. If any ROFO Space becomes available for lease to anyone other than a Prior
Tenant, Landlord shall so notify Tenant ("LANDLORD'S ROFO NOTICE") identifying
------------------
the available ROFO Space (the "Subject ROFO Space"). Landlord's ROFO Notice may
------------------
be given up to sixteen (16) months in advance of such availability and shall
contain the terms upon which Landlord intends to offer the Subject ROFO Space
for lease to the market. Tenant shall notify
-28-
<PAGE>
Landlord within ten (10) days of receipt of Landlord's ROFO Notice whether it
desires to lease the Subject ROFO Space on the terms set forth in Landlord's
ROFO Notice. If Tenant does not notify Landlord within said I O-day period that
it will lease the Subject ROFO Space, Tenant shall be deemed to have refused the
Subject ROFO Space. After any refusal, Tenant shall have no further right of
first offer for such Subject ROFO Space and Landlord shall I be free to lease
such space to any party for any term. If Tenant exercises its right of first
offer with respect to the Subject ROFO Space, such space shall be added to the
Premises for all purposes of this lease for the remaining Term of the Lease (but
in no event less than [three (3)] years) on (a) the terms specified in
Landlord's ROFO Notice, and (b) the terms of this Lease to the extent that they
do not conflict with the terms specified in Landlord's ROFO Notice, except that
the terms of Landlord's ROFO Notice shall not apply during any Renewal Term, and
instead, the terms of the Lease applying to the remainder of the Premises during
the Renewal Term shall also apply to the Subject ROFO Space.
B. Tenant's right of first offer is subject to the conditions that: (i) on the
date that Tenant delivers its notice exercising its right of first offer, Tenant
is not in default under this Lease after the expiration of any applicable notice
and cure periods, and (ii) Tenant shall not have assigned the Lease, or sublet
any portion of the Premises under a sublease which is in effect at any time
during the period commencing with Tenant's delivery of its notice and ending on
the date the ROFO Space is added to the Premises.
C. Promptly after Tenant's exercise of its right of first offer, Landlord shall
execute and deliver to Tenant an amendment to the Lease to reflect changes in
the Premises, Base Rent, Tenant's Proportionate Share and any other appropriate
terms changed by the addition of the ROFO Space. Within 15 days thereafter,
Tenant shall execute and return the amendment.
ARTICLE 42
OPERATING EXPENSES
------------------
In further reference to Article 24 (I) (iii) operating expenses shall not
include the following:
* Interest and principal payments on mortgage debt;
* ground rental payments;
* the cost of capital improvements not otherwise allowed in Paragraph 1.4(j)
of the Lease;
* the costs of painting or decorating other than Common Areas, alterations to
the Premises or the premises of other tenants of the building, or work
furnished by Landlord without charge as an inducement for a tenant to lease
space (ie., free rent, improvement allowances);
* salaries and other compensation of executive officers of Landlord or Managing
Agent senior to the Building manager;
* income or franchise taxes or other such taxes unless imposed in lieu of
Property Taxes imposed or measured by the income of Landlord from the
operation of the Building;
* the cost of constructing, installing, operating or maintaining any special
service or facility such as an observatory, broadcasting facility luncheon
club, athletic or recreational club, cafeteria or dining facility;
* the costs associated with services or amenities not available to all tenants
or provided to any tenant to a materially greater extent or more favorable
manner than generally provided to other tenants;
* the costs of correcting latent defects and defects in construction or
renovation of the Building or its systems;
-29-
<PAGE>
* the costs (including fines and penalties), to comply with laws such as ADA
and environmental laws not otherwise Tenant's obligation as provided for in
Article 29, including without limitation, laws relating to the required phase
out of so-called "freon" as a coolant;
* the cost of any work performed or service provided for which fees are charged
or other compensation received;
* payments for rental items, the cost of which would constitute a capital
expenditure except where used to reduce or offset operating expenses if such
equipment were purchased;
* legal expenses incurred in connection with tenant leases including, without
limitation, negotiations with prospective tenants and enforcing provisions of
this Lease or other leases in the Building;
* costs for sculptures, paintings and other objects of art located in the
interior or on the exterior of the Building or immediately adjacent thereto;
* any fees and expenses paid to an agent which is related to Landlord to the
extent such fees or expenses are in excess of the customary market amounts
which would be paid in the absence of such a relationship;
* expenditures for repairs or maintenance which are covered by warranties,
guarantees or service contracts;
* any expenditure for which Landlord has been or is entitled to be reimbursed
by third parties such as insurance companies or would have been compensated
through proceeds of insurance had Landlord maintained insurance required
under this Lease;
* the cost of any alterations, additions or equipment replacements and tile
like which under generally accepted accounting or principals and practices
are properly classified as capital expenditures, except for those items which
reduce operating expenses;
* advertising, promotional and marketing expenses, or the cost of maintaining a
leasing or marketing office for the Building;
* real estate brokerage and leasing commissions;
* expenses in connection with repairs or other work occasioned by the exercise
of the right of eminent domain;
* damages incurred due to the gross negligence of the Landlord;
* debt costs or the costs of financing or refinancing;
* the costs, fines or penalties incurred due to violations by Landlord of any
governmental rule or authority;
* expenses incurred by Landlord, if any, in connection with the operation,
cleaning, repair, safety, management, security, maintenance or other services
of any kind provided to any portions of the Building which are leased or
designated to be used for retail, garage or storage purposes to the extent
such expenses are reimbursed or paid directly by any tenant or garage
operator;
* expenses incurred by Landlord, if any, in connection with any special
services or any garage operations, but to the extent such expenses are less
than any income Generated by such special services or garage operation;
* any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord; and
* Landlord's General partnership overhead not related to management of the
Building.
-30-
<PAGE>
ARTICLE 43
MONUMENT SIGN
-------------
Notwithstanding anything in the Lease to the contrary, Tenant shall have
the right to install and maintain, at Tenant's sole cost and expense, an
exterior monument sign at the entrance to the Property, the exact location being
mutually agreeable to Landlord and Tenant, identifying Tenant as a tenant of the
Property and of the Building. Such identification sign shall be consistent with
a first class, multi-tenant office building, shall not be obstructed by future
signs, and shall comply with all applicable governmental laws, rules,
ordinances, and regulations. Tenant, prior to installation of such
identification sign, shall submit the sign, including the style, color, letter
and materials, to Landlord for Landlord's approval, which approval shall not be
unreasonably withheld or delayed.
ARTICLE 44
EXTENSION OPTION WITHOUT ARBITRATION
------------------------------------
Subject to Subsections B and C below, Tenant may, at its option, extend the
Term of this Lease for the entire Premises for one period of five years (the
"Renewal Term" ) upon the same terms contained in this Lease, except for the
- ---------------
amount of Base Rent payable during the Renewal Term. Tenant shall have no
additional extension option.
A. The Base Rent during the Renewal Term should be the greater of (i) the
Base Rent applicable to the last day of the final Lease Year prior to the
applicable Renewal Term, or (ii) the then prevailing market rate for a
comparable term commencing, on the first day of the Renewal Term for tenants of
comparable size and creditworthiness for comparable space in the Building and
other first class office buildings in the vicinity of the Building as reasonably
determined by Landlord.
B. To exercise its option, Tenant must deliver, as set forth below, a
final, binding notice to Landlord not less than twelve (12) months prior to the
proposed commencement of the applicable Renewal Term. At some point between the
thirteenth (13th) and fourteenth (14th) months prior to the proposed
commencement of the applicable Renewal Term, Tenant shall deliver an initial,
non-binding notice to Landlord. Within fifteen (15) days of receipt of said
notice, Landlord shall calculate and inform Tenant of the Base Rent for the
Premises. Such calculation shall be final and shall not be recalculated at the
actual commencement of the Renewal Term, if any. Tenant shall give Landlord
final binding notice of intent to exercise its option to extend within fifteen
(15) days after receiving Landlord's calculation of Base Rent. If Tenant fails
to give either its initial non-binding notice or its final binding notice
timely, Tenant will be deemed to have waived its option to extend.
C. Tenant's option to extend this Lease is subject to the conditions that:
(i) on the date that Tenant delivers its final binding notice exercising, its
option to extend, Tenant is not in default under this Lease after the expiration
of any applicable notice and cure periods, and (ii) Tenant shall not have
assigned this Lease, or sublet any portion of the Premises under a sublease
which is in effect at any time during the final 12 months prior to the
applicable Renewal Term.
-31-
<PAGE>
This page intentionally left blank.
-32-
<PAGE>
LANDLORD:
HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., general partner
/s/ Gene Anderson
------------------
Gene Anderson, Sr. Vice President
11-21-97
---------------------------------
Date executed by Landlord
TENANT:
INFOCURE CORPORATION
By: /s/ Frederick L. Fine
--------------------------------
Name: Frederick L. Fine
---------------------------
Title: President
--------------------------
Witness: /s/ [Illegible]
---------------------------
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
Witness:
-----------------------------
-33-
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The subsidiaries of the Registrant are as follows:
1. POLCI Acquisition, Inc., a Michigan corporation
2. Orthodontic Practice Management System, Inc., a Georgia corporation
3. Pace Financial Corporation, an Ohio corporation
4. MD Acquisition, Inc., a Connecticut corporation
5. Rovak, Inc., a Minnesota corporation
6. KComp Management Systems, Inc., a California corporation
7. SoftEasy Software, Inc., a Pennsylvania corporation
8. CCI Acquisition, Inc., a Florida corporation
9. Health Care Division, Inc., a Georgia corporation
10. D.R. Software, Inc., a Georgia corporation
11. Millard-Wayne, Inc., a Georgia corporation
12. International Computer Solutions, Inc., a Georgia corporation
13. Medical Software Integrators, Inc., a Georgia corporation
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent, as independent public accountants, to the inclusion
in this Annual Report on Form 10-KSB of our report dated March 18, 1998, on the
financial statements of InfoCure Corporation (and to all references to our Firm)
and to the incorporation by reference of such report (and all references to our
Firm) in InfoCure Corporation's Registration Statement on Form S-8 (Registration
No. 333-48829).
/s/ BDO Seidman, LLP
--------------------------
BDO SEIDMAN, LLP
Atlanta, Georgia
March 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,406
<SECURITIES> 0
<RECEIVABLES> 4,987
<ALLOWANCES> 51
<INVENTORY> 437
<CURRENT-ASSETS> 8,080
<PP&E> 2,037
<DEPRECIATION> 709
<TOTAL-ASSETS> 29,551
<CURRENT-LIABILITIES> 11,339
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 4,726
<TOTAL-LIABILITY-AND-EQUITY> 29,551
<SALES> 15,755
<TOTAL-REVENUES> 15,755
<CGS> 4,075
<TOTAL-COSTS> 25,355
<OTHER-EXPENSES> (69)
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> (9,807)
<INCOME-TAX> (1,237)
<INCOME-CONTINUING> (9,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,569)
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
</TABLE>
