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As filed with the Securities and Exchange Commission on September 27, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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INFOCURE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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Delaware 7372 58-2271614
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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1765 The Exchange, Suite 500
Atlanta, Georgia 30339
(770) 221-9990
(Address, Including Zip Code and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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James A. Cochran
Senior Vice President-Finance and
Chief Financial Officer
1765 The Exchange, Suite 500
Atlanta, Georgia 30339
(770) 221-9990
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
Oby T. Brewer III, Esq. Michael L. Fantozzi, Esq.
Richard L. Haury, Jr., Esq. John R. Pomerance, Esq.
MORRIS, MANNING & MARTIN, L.L.P. MINTZ, LEVIN, COHN, FERRIS, GLOVSKY
1600 Atlanta Financial Center AND POPEO, P.C.
3343 Peachtree Road, N.E. One Financial Center
Atlanta, Georgia 30326 Boston, Massachusetts 02111
Telephone: (404) 233-7000 Telephone: 617-542-6000
Facsimile: (404) 365-9532 Facsimile: 617-542-2241
---------------------
Approximate date of commencement of proposed sale to the public: At the
effective time of the merger of Datamedic Holding Corp. with and into a
wholly-owned subsidiary of the Registrant, which shall occur as soon as
practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
========================================================================================================================
Title of Each Class of Amount to Proposed Maximum Proposed Maximum Amount of
Securities Registered be Offering Price Per Share Aggregate Offering Registration Fee
Registered(1) Price(2)
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Common stock, $.001 par value 1,255,478 N/A $171,422.20 $47.14
========================================================================================================================
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(1) Represents the estimated number of shares of common stock issuable by the
registrant to the holders of common stock and preferred stock of Datamedic
Holding Corp. in connection with the merger of Datamedic with and into a
wholly-owned subsidiary of the registrant. It does not include additional
shares of the registrant's common stock that may be issued by reason of the
exercise of options and warrants, and upon the conversion of convertible
debentures of Datamedic that are to be assumed by InfoCure in the merger.
Pursuant to Rule 416 of the Securities Act, this Registration Statement
covers such additional shares of the registrant's common stock, the number
of which is indeterminable as of the date hereof. Because such additional
shares of the registrant's common stock, if issued, will be issued for no
additional consideration, no additional registration fee is required.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act and computed pursuant to
Rule 457(f)(2), based on the sum of one-third of the par value of the
securities the registrant will receive in the merger due to the fact that
Datamedic has an accumulated capital deficit, calculated as the sum of (a)
$41,142.97 (one-third of (x) $.10, the par value per share of the Datamedic
common stock multiplied by (y) 1,234,289, the total number of shares of
Datamedic common stock issued and outstanding as of September 17, 1999)
plus (b) $130,279.23 (one third of (x) $.10, the par value per share of the
Datamedic preferred stock multiplied by (y) 3,908,377, the total number of
shares of Datamedic preferred stock issued and outstanding as of September
17, 1999).
------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to Section
8(a), may determine.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 1999
TO THE STOCKHOLDERS OF DATAMEDIC HOLDING CORP.
A MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
Datamedic Holding Corp.'s board of directors has unanimously approved a
merger which will result in the acquisition of Datamedic by InfoCure
Corporation, a publicly-traded company headquartered in Atlanta, Georgia.
In the merger, each share of Datamedic preferred stock and common stock
will be exchanged for a fraction of a share of InfoCure common stock, unless you
exercise appraisal rights under Delaware law. We will determine the fraction
immediately prior to completion of the merger according to the formula specified
in the merger agreement and described in this proxy statement-prospectus.
InfoCure common stock is traded on the Nasdaq National Market under the
symbol "INCX," and on ________________, 1999, InfoCure common stock closed at
$_____ per share.
The merger cannot be completed unless the holders of more than a
majority of Datamedic's preferred stock and common stock, voting together as a
single class, and 66-2/3% of Datamedic's preferred stock, voting as a single
class, adopt the merger agreement. Only stockholders who hold shares of
Datamedic at the close of business on ____________, 1999, will be entitled to
vote at the special meeting.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY
DETERMINED THE MERGER TO BE FAIR TO YOU AND IN YOUR BEST INTERESTS AND DECLARED
THE MERGER ADVISABLE. DATAMEDIC'S BOARD OF DIRECTORS APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS ITS ADOPTION BY YOU.
This proxy statement-prospectus provides you with detailed information
concerning InfoCure, Datamedic and the merger. Please give all of the
information contained in the proxy statement-prospectus your careful attention.
IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION
ENTITLED "RISK FACTORS" ON PAGE 9 OF THIS PROXY STATEMENT-PROSPECTUS.
The special meeting of Datamedic stockholders will be held on
______________, 1999 at ____ a.m. at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts.
Please use this opportunity to take part in the affairs of Datamedic by
voting on the adoption of the merger agreement. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy in the enclosed self-addressed stamped envelope. Returning the proxy does
NOT deprive you of your right to attend the meeting and to vote your shares in
person. YOUR VOTE IS VERY IMPORTANT.
We appreciate your interest in Datamedic and consideration of this
matter.
Frederick L. Fine. Stephen N. Kahane, M.D.
President and Chief Executive Officer President and Chief Executive
InfoCure Corporation Officer
Datamedic Holding Corp.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement-prospectus is dated ________, 1999 and was first
mailed to stockholders on or about _________1999.
The information in this proxy statement/prospectus is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
proxy statement/prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
<PAGE>
DATAMEDIC HOLDING CORP.
NOTICE OF SPECIAL MEETING OF DATAMEDIC STOCKHOLDERS
---------------------------------------------------
__________, ___________, 1999
AT _:00 A.M.
To Datamedic stockholders:
Notice is hereby given that a special meeting of stockholders of
Datamedic Holding Corp. will be held on __________, ___________, 1999 , at _:00
a.m. local time at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., One Financial Center, Boston, Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan
of Merger, dated September 3, 1999, by and among InfoCure Corporation, InfoCure
Systems, Inc., a wholly-owned subsidiary of InfoCure, Datamedic and certain
principal stockholders of Datamedic, pursuant to which Datamedic will merge with
and into InfoCure Systems and InfoCure Systems will survive the merger and
continue as a wholly-owned subsidiary of InfoCure. In the merger, each share of
Datamedic preferred stock and Datamedic common stock, par value $.10 per share,
will be exchanged for a fraction of a share of InfoCure common stock, par value
$.001 per share, unless the holder exercises appraisal rights under Delaware
law. The fraction will be determined immediately prior to completion of the
merger according to the formula specified in the merger agreement and described
in this proxy statement-prospectus. Adoption of the merger agreement will also
constitute approval of the merger and the other transactions contemplated by the
merger agreement.
2. To transact such other business as may properly come before the
special meeting or any adjournment thereof.
These items of business are described in the attached proxy
statement-prospectus. Only holders of record of Datamedic shares at the close of
business on _________, 1999, the record date, are entitled to vote on the
matters listed in this Notice of Special Meeting of Datamedic stockholders. You
may vote in person at the Datamedic special meeting even if you have returned a
proxy.
By Order of the Board of Directors
of Datamedic Holding Corp.
---------------------------------------
Stephen N. Kahane, M.D.
Chief Executive Officer and President
_____________, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE.
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TABLE OF CONTENTS
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SUMMARY............................................................................. 1
The Companies.................................................................. 1
The Merger..................................................................... 2
What You Will Receive in the Merger............................................ 2
A Portion of the InfoCure Shares Will Be Placed In Escrow...................... 3
Comparative Market Prices of Common Stock...................................... 3
InfoCure Will Assume the Datamedic Options, Warrants and
Convertible Debentures...................................................... 4
Reasons for the Merger......................................................... 4
Material Federal Income Tax Consequences of the Merger......................... 5
Accounting Treatment........................................................... 5
Termination of the Merger Agreement............................................ 5
Restrictions On Your Ability to Sell InfoCure Common Stock..................... 5
Special Meeting of Stockholders................................................ 6
Stockholder Vote Required to Approve the Merger................................ 6
Voting Agreement............................................................... 6
Voting Rights At the Special Meeting........................................... 6
Rights of Dissenting Stockholders.............................................. 7
Datamedic's Recommendation to Stockholders..................................... 7
Datamedic Stock Ownership...................................................... 7
Interests of Certain Persons in the Merger That May Be Different from Yours.... 7
Completion of the Merger....................................................... 7
Exchange of Stock Certificates................................................. 7
Conditions to Completion of the Merger......................................... 8
Differences in Stockholder's Rights............................................ 8
Listing of InfoCure Common Stock............................................... 8
Expenses....................................................................... 8
Who Can Help Answer Your Questions............................................. 8
RISK FACTORS........................................................................ 9
Risks Related to the Merger.................................................... 9
Risks Related to Infocure and Datamedic as a Combined Company.................. 12
Investment risks............................................................... 16
SELECTED HISTORICAL FINANCIAL DATA.................................................. 19
InfoCure Selected Historical Consolidated Financial Data....................... 19
Datamedic Selected Historical Consolidated Financial Data...................... 21
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA...................... 22
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS......................... 24
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COMPARATIVE PER SHARE DATA.......................................................... 33
THE SPECIAL MEETING................................................................. 35
Purpose........................................................................ 35
Date, Place and Time........................................................... 35
Record Date.................................................................... 35
Datamedic Stockholders Entitled To Vote........................................ 35
Vote Required; Voting at the Meeting........................................... 35
Voting of Proxies.............................................................. 36
Solicitation of Proxies........................................................ 36
Rights of Dissenting Stockholders.............................................. 37
Recommendation of the Board of Directors....................................... 38
Interests of Certain Datamedic Directors, Officers and
Affiliates in the Merger.................................................... 38
DESCRIPTION OF THE TRANSACTION...................................................... 40
The Merger..................................................................... 40
What You Will Receive in the Merger............................................ 40
Escrow Agreement............................................................... 41
Effect Of The Merger On Datamedic Options, Warrants
And Convertible Debentures.................................................. 42
Material Federal Income Tax Consequences of the Merger......................... 43
Background of and Reasons for the Merger....................................... 45
Representations and Warranties................................................. 49
Completion of the Merger....................................................... 50
Distribution of Infocure Stock Certificates.................................... 50
Conditions to Completion of the Merger......................................... 51
Indemnification................................................................ 51
Regulatory Approval............................................................ 52
Waiver, Amendment, and Termination............................................. 52
Conduct of Business Pending the Merger......................................... 52
Management and Operations After the Merger..................................... 53
Accounting Treatment........................................................... 53
Fees and Expenses.............................................................. 53
Resales of Infocure Common Stock............................................... 54
Voting Agreement............................................................... 54
MARKET PRICE AND DIVIDEND INFORMATION............................................... 56
RECENT CLOSING PRICES............................................................... 56
DIVIDEND INFORMATION................................................................ 56
NUMBER OF STOCKHOLDERS.............................................................. 56
BUSINESS OF INFOCURE................................................................ 57
BUSINESS OF DATAMEDIC............................................................... 58
PRINCIPAL STOCKHOLDERS.............................................................. 62
DATAMEDIC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................... 66
Results of Operations.......................................................... 66
Liquidity and Capital Resources................................................ 70
Year 2000 Compliance........................................................... 70
Quantitative and Qualitative Disclosure about Market Risk...................... 71
Certain Factors That May Affect Results of Operations.......................... 71
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS...................................... 73
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DESCRIPTION OF INFOCURE CAPITAL STOCK............................................... 78
OTHER MATTERS....................................................................... 78
EXPERTS............................................................................. 78
OPINIONS............................................................................ 78
WHERE YOU CAN FIND MORE INFORMATION................................................. 79
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.......................................... F-1
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APPENDICES:
Appendix A Agreement and Plan of Merger, dated September 3, 1999, by
and among Datamedic Holding Corp., certain principal
stockholders of Datamedic, InfoCure Systems, Inc. and
InfoCure Corporation
Appendix B Form of Escrow Agreement, to be executed at the completion
of the merger by and among Datamedic Holding corp., certain
principal stockholders of Datamedic, InfoCure Systems, Inc.,
InfoCure Corporation and SunTrust Bank, Atlanta
Appendix C Voting Agreement, dated September 3, 1999, by and between InfoCure
Corporation and certain stockholders of Datamedic
Appendix D Terms, Rights, Preferences and Privileges of Datamedic Holding Corp.
Preferred Stock
Appendix E Delaware Law Concerning Rights of Dissenting Stockholders
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SUMMARY
This summary highlights selected information from this proxy
statement-prospectus and may not contain all of the information that is
important to you. You should read this entire document and the other documents
we refer to carefully for a more complete understanding of the merger. In
particular, you should read the documents attached to this proxy
statement-prospectus, including the merger agreement, which is attached as
Appendix A, the escrow agreement, which is attached as Appendix B and the voting
agreement, which is attached as Appendix C. In addition, we incorporate
important business and financial information about InfoCure into this proxy
statement-prospectus by reference. You may obtain the information incorporated
into this proxy statement-prospectus by reference without charge by following
the instructions in the section entitled "Where You Can Find More Information"
on page 79 of this proxy statement-prospectus.
THE COMPANIES (see page 57 for InfoCure and page 58 for Datamedic)
INFOCURE CORPORATION
1765 The Exchange
Suite 500
Atlanta, Georgia 30339
(770) 221-9990 (phone)
(770) 857-1300 (fax)
InfoCure is a leading national provider of healthcare practice
management software products and services. Its wide range of practice management
software automates the administrative, financial and clinical information
management functions for physicians, dentists and other healthcare
practitioners. InfoCure also provides its customers with ongoing maintenance and
support, training, electronic data interchange, or "EDI," services and
electronic commerce services. InfoCure's goal is to become the leading provider
of practice management systems to targeted healthcare practice specialties.
These specialties include anesthesiology, dentistry, general medicine, emergency
medicine, oral and maxillofacial surgery, orthodontics, dermatology, pathology,
podiatry and radiology. InfoCure believes that its ability to offer
state-of-the-art software products that serve the specific needs of these
healthcare practice specialties and its ability to sell additional products and
services to its existing customer base will help it achieve this goal. As of
September 15, 1999, more than 13,000 customer sites had installed InfoCure
systems. These sites represent approximately 75,000 healthcare providers, and
InfoCure has systems installed in all 50 states.
For the year ended December 31, 1998, InfoCure generated revenues of
$93.8 million and a net loss available to common stockholders of $6.4 million.
On December 31, 1998, InfoCure had consolidated assets of approximately $137.5
million and consolidated stockholders' equity of $16.9 million.
DATAMEDIC HOLDING CORP.
95 Sawyer Road
Waltham, Massachusetts 02453
(781) 788-4800 (phone)
(781) 763-0129 (fax)
Datamedic provides an integrated family of software products to
ambulatory care providers for electronic medical record and practice management.
Datamedic's products provide physicians with the tools to manage patient
information to obtain complete, accurate documentation of patient visits and to
automatically extract critical data necessary to manage a patient's healthcare
needs. In addition, Datamedic offers a business management information system
offered to physician practices, management service organizations and physician
practice management organizations that enables these organizations to manage
their billing, scheduling and accounts receivables management. Datamedic has
developed specialized
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software relating to the areas of gastroenterology, emergency medicine, family
practice, primary care, oncology, ophthalmology, rehabilitation and renal
medicine. Datamedic also offers electronic data interchange services to
physicians. These services include the printing of patient statements and month
end reports, as well as providing system backup and electronic claims
assistance. The majority of Datamedic customers pay Datamedic a regular
maintenance and support fee for such services.
Datamedic, has amassed a large installed base of over 1,100 customers,
representing approximately 2,000 sites and over 10,000 physicians. This client
base is spread throughout the United States, but is particularly strong in the
northeast and in California.
For the year ended March 31, 1999, Datamedic generated revenue of $20.8
million and a net loss of $1.8 million. On March 31, 1999, Datamedic had
consolidated assets of $9.4 million and consolidated net capital deficiency of
approximately ($912,000).
THE MERGER (see page 40)
InfoCure will acquire Datamedic by means of the merger of Datamedic
with and into InfoCure Systems, Inc., a wholly-owned subsidiary of InfoCure.
After the merger, InfoCure Systems, Inc. will be the surviving corporation and
operating entity. The agreement and plan of merger is attached as Appendix A to
this proxy statement-prospectus. We encourage you to read the merger agreement
carefully. The merger agreement is more fully discussed on page 40 of this proxy
statement-prospectus.
WHAT YOU WILL RECEIVE IN THE MERGER (see page 40)
Each share of Datamedic preferred stock and common stock will be
exchanged for a fraction of a share of InfoCure common stock. This fraction will
be determined at the closing of the merger by dividing the adjusted number of
shares of InfoCure common stock, calculated in the manner described below, by
the number of shares of Datamedic common stock outstanding immediately prior to
the effective time, calculated on a fully diluted basis. The resulting fraction
is referred to as the "exchange ratio." The determination of Datamedic's common
stock on a "fully diluted basis" assumes (1) the payment of all accrued
dividends on the Datamedic preferred stock in shares of Datamedic common stock,
(2) the exercise of all Datamedic options and warrants, (3) the conversion of
all Datamedic convertible debentures and (4) the conversion of all shares of
Datamedic preferred stock, including accrued dividends, into shares of Datamedic
common stock.
The adjusted number of shares of InfoCure common stock is 1,191,626
plus a number determined by dividing the aggregate exercise price of all vested
Datamedic options and warrants outstanding at the effective time of the merger
by $21.3976 and minus a number determined by dividing the sum of the following
amounts by $21.3976:
. total expenses of Datamedic and its preferred stockholders incurred
in connection with the merger;
. costs incurred by Datamedic in connection with its existing
litigation;
. costs of continuing directors and officers liability insurance
coverage for directors and officers of Datamedic;
. the amount by which the total consolidated debt and accounts payable
of Datamedic exceeds $3,750,000 at closing; and
. the value of breaches of representations and warranties made by
Datamedic in the merger agreement exceeding $150,000.
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The following example illustrates the calculation of the exchange ratio
based on the following assumptions:
. expenses in connection with the merger, including costs of continuing
directors and officers liability insurance coverage for directors and
officers of Datamedic are $900,000;
. costs related to Datamedic's existing litigation are $400,000;
. Datamedic's total consolidated debt and accounts payable do not
exceed $3,750,000;
. there are no breaches of any representations and warranties by
Datamedic; and
. the aggregate exercise price of Datamedic's vested options and
warrants is $2,600,000.
Giving effect to these assumptions, the adjusted number of shares of
InfoCure common stock would be 1,252,381. This number is determined as 1,191,626
plus 121,509 shares (2,600,000 / 21.3976) and minus 60,754 shares (1,300,000 /
21.3976). Datamedic anticipates that the number of fully diluted shares of
Datamedic outstanding on the assumed merger closing date of November 30, 1999
will be approximately 10 million. The resulting exchange ratio in the example
thus is approximately .1252, which represents the number of shares of InfoCure
common stock to be issued in the merger for each outstanding share of Datamedic
common stock and for each share of common stock issuable upon conversion of
Datamedic's preferred stock. The actual exchange ratio will be determined at the
closing of the merger, and may be less than or greater than the exchange ratio
depicted in this example.
Holders of Datamedic common stock will receive that number of shares of
InfoCure common stock determined by multiplying the exchange ratio by the
number of shares of Datamedic common stock owned by them. Holders of Datamedic
preferred stock will receive that number of shares of InfoCure common stock
determined by multiplying the exchange ratio by the number of shares of
Datamedic common stock issuable at the effective time of the merger assuming the
conversion of their Datamedic preferred stock into shares of Datamedic common
stock and the payment of accrued preferred stock dividends in shares of
Datamedic common stock. InfoCure will not issue any fractional shares of common
stock. Rather, InfoCure will pay cash for any fractional share. The cash payment
will be in an amount equal to the fraction multiplied by $21.3976.
A PORTION OF THE INFOCURE SHARES WILL BE PLACED IN ESCROW (see page 41)
Approximately 8% of the shares of InfoCure common stock to be issued in
the merger will be withheld from certain principal stockholders of Datamedic,
and will be set aside in an escrow account. A portion of the escrow shares will
be held for a period ending on the earlier of (1) one year after the merger is
effective and (2) the publication of audited financial statements of InfoCure
for the first fiscal year-end following the effective time of the merger, as
security for certain claims that may be made against Datamedic in connection
with the merger. The remaining escrow shares will be held as security for
expenses incurred in defending, settling or pursuant to judgments obtained in
connection with Datamedic's existing litigation and will be released on the
earlier of (1) three years after the merger is effective and (2) the settlement
or adjudication of all such litigation. A copy of the escrow agreement is
attached hereto as Appendix B. We encourage you to read the escrow agreement
carefully.
COMPARATIVE MARKET PRICES OF COMMON STOCK (see page 56)
Shares of InfoCure common stock are traded on the Nasdaq National
Market under the symbol "INCX." The following table shows you the closing sales
prices for InfoCure common stock on September 7, 1999, the last trading day
before we announced the execution of the merger agreement, and on _______, 1999,
the latest practicable date before the mailing of this proxy
statement-prospectus. Since the Datamedic common and preferred stock are not
traded in any established market, no equivalent market price data is available
for Datamedic. However, the table shows you the "equivalent price per Datamedic
share" or the
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value you will receive in the merger for each share of Datamedic
capital stock you own. Although the exchange ratio cannot be determined until
immediately prior to the effective time of the merger, we computed the
equivalent price per Datamedic share at each date by multiplying the closing
sales price of a share of InfoCure common stock on that date by an assumed
exchange ratio of 0.1252, which assumes that the adjusted number of shares of
InfoCure common stock issued in connection with the merger is 1,252,381 and the
number of fully diluted Datamedic shares is 10 million.
Equivalent Price
InfoCure Per Datamedic
Common Stock Share
---------------- ------------------
September 7, 1999 $21.125 $2.6449
_____________, 1999 $_______ $_______
The market price of InfoCure common stock will fluctuate prior the
merger. We can provide no assurance as to what the market price of InfoCure
common stock will be when the merger is completed. You should obtain current
stock price quotations for InfoCure common stock.
INFOCURE WILL ASSUME THE DATAMEDIC OPTIONS, WARRANTS AND CONVERTIBLE DEBENTURES
(see page 42)
Datamedic has issued options and warrants exercisable for, and
subordinated debentures convertible into, shares of Datamedic common stock. When
the merger is effective, all outstanding options and warrants to purchase
Datamedic common stock will convert into options and warrants to purchase
InfoCure common stock, and all outstanding convertible debentures of Datamedic
will become convertible into shares of InfoCure common stock. The number of
shares of InfoCure common stock issuable upon exercise or conversion and the
exercise price and conversion price will each be adjusted to reflect the
exchange ratio. All other terms of the Datamedic convertible debentures,
warrants and options will remain the same.
REASONS FOR THE MERGER (see page 45)
Datamedic and InfoCure have identified several potential advantages of
the merger that they believe will benefit you, Datamedic and InfoCure.
We anticipate that the merger will benefit you by:
. Reducing your exposure to risks inherent in Datamedic's reliance on a
limited number of products and competition with larger companies with
more diversified product lines and greater financial resources;
. Providing you with investment liquidity through ownership of InfoCure
common stock, which is listed on the Nasdaq National Market; and
. Allowing you to participate in the potential for growth of the
combined company after the merger.
Datamedic anticipates that the merger will benefit it by:
. Enabling Datamedic to gain access to additional capital resources;
. Providing increased opportunity for the development of Datamedic's
product offerings, thereby augmenting Datamedic's competitive
position and maximizing value for stockholders of the combined
entity; and
. Providing Datamedic with the opportunity to capitalize on InfoCure's
relationships with its customers and vendors.
InfoCure anticipates that the merger will benefit it by:
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. Enabling InfoCure to obtain information systems for new healthcare
practice specialties, including ophthalmology, oncology and
gastroenterology;
. Enhancing InfoCure's product portfolio with the addition of
Datamedic's clinical products; and
. Allowing InfoCure to secure ownership of Datamedic's technology.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (see page 43)
We have structured the merger so that, in general, InfoCure, Datamedic
and their stockholders, respectively, will not recognize gain or loss for United
States federal income tax purposes in the merger, except for taxes payable
because of cash received by Datamedic stockholders instead of fractional shares.
However, tax matters are very complicated, and your tax consequences from the
merger will depend on your own situation, and the tax consequences described
above may not apply to all holders of Datamedic stock. Moreover, no legal
opinion is being rendered with respect to the tax consequences of the merger.
Therefore, you should consult your own tax advisors to determine the effect of
the merger on you under federal, state, local, and foreign tax laws.
ACCOUNTING TREATMENT (see page 53)
We intend to account for the merger as a pooling of interests business
combination. Under this method of accounting, following completion of the
merger, each of our historical recorded assets and liabilities will be carried
forward to the combined company at their recorded amounts. In addition, the
operating results of the combined company will include our operating results for
the entire fiscal year in which the merger is completed and our historical
reported operating results for prior periods will be combined and restated as
the operating results of the combined company. It is a condition of the merger
that InfoCure and Datamedic receive written confirmation from their respective
independent accountants to the effect that the merger qualifies for pooling of
interests accounting treatment.
TERMINATION OF THE MERGER AGREEMENT (see page 52)
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after Datamedic obtains your
approval, by:
. Datamedic or InfoCure, if the transaction is not completed by
December 31, 1999, or such later date as may be agreed to by
Datamedic and InfoCure; however, neither Datamedic nor InfoCure may
terminate the agreement if its breach is the reason the transaction
has not been completed;
. the mutual consent of Datamedic and InfoCure;
. Datamedic, if InfoCure breaches its representations, warranties or
obligations under the merger agreement in any material respect;
. InfoCure, if Datamedic breaches its representations, warranties or
obligations under the merger agreement and the breach has a material
adverse effect on Datamedic, as defined in the merger agreement.
RESTRICTIONS ON YOUR ABILITY TO SELL INFOCURE COMMON STOCK (see page 54)
All shares of InfoCure common stock received by you in connection with
the merger will be freely transferable, unless you are considered an "affiliate"
of Datamedic or InfoCure under the Securities Act. If you are considered an
affiliate of Datamedic or InfoCure, the shares of common stock received by you
in the
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merger may only be sold pursuant to an exemption under the Securities Act or
pursuant to an effective registration statement covering the resale of such
shares. InfoCure has agreed to file a registration statement promptly following
the effective time of the merger covering the resale of InfoCure common stock by
affiliates of Datamedic.
SPECIAL MEETING OF STOCKHOLDERS (see page 35)
The special meeting will be held at the offices of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, at _______ a.m., on
_______, 1999. At the special meeting, we will ask you to approve the merger and
the merger agreement.
In order for the special meeting to be held, a quorum must be present.
A quorum is present if a majority of the outstanding shares of each series
Datamedic preferred stock, considered independently, and a majority of the
outstanding shares of Datamedic common stock and preferred stock, considered
collectively, are represented at the special meeting either in person or by
proxy.
STOCKHOLDER VOTE REQUIRED TO APPROVE THE MERGER (see page 35)
The affirmative vote of the holders of 66-2/3% of all outstanding
shares of Datamedic's preferred stock, with the holders of each series of
preferred stock voting together as a single class, as well as the affirmative
vote of the holders of a majority of the outstanding shares of Datamedic
preferred stock and common stock, voting together as a single class, is required
to approve the merger agreement and the merger. In connection with the merger,
certain stockholders of Datamedic and their affiliates have agreed to vote their
shares in favor of the merger.
VOTING AGREEMENT (see page 54)
The holders of all of the shares of Datamedic preferred stock and the
holders who collectively own approximately _____% of the outstanding Datamedic
common and preferred stock, taken together as a class, have agreed to vote in
favor of the merger agreement and the merger.
VOTING RIGHTS AT THE SPECIAL MEETING (see page 35)
You are entitled to vote at the special meeting if you owned shares as
of the close of business on _______ 1999, the record date. As of the record
date, there were ________ shares of Datamedic common stock and ________ shares
of Datamedic preferred stock outstanding and such shares of Datamedic capital
stock were held by _____ holders of record. You will be entitled to one vote for
each share of Datamedic common stock and one vote for each share of Datamedic
preferred stock that you owned on the record date. You may vote either by
attending the special meeting and voting your shares or by completing the
enclosed proxy card and mailing it in the enclosed envelope.
Datamedic is seeking your proxy to use at the special meeting.
Datamedic and InfoCure have prepared this proxy statement-prospectus to assist
you in deciding how to vote. Whether or not you plan to attend the meeting,
please indicate on your proxy card how you want to vote. Then sign, date and
mail it as soon as possible so that your shares will be represented at the
special meeting. If you sign, date and mail your proxy card without indicating
how you wish to vote, your proxy will be counted as a vote FOR approval of the
merger agreement and the merger. If you fail to return your proxy card and fail
to vote at the meeting, the effect will be a vote AGAINST approval of the merger
agreement and the merger. If you sign a proxy, you may revoke it at any time
before the special meeting or by attending and voting at the special meeting.
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RIGHTS OF DISSENTING STOCKHOLDERS (see page 37)
Under Section 262 of the Delaware General Corporation Law, Datamedic
stockholders who do not vote in favor of the merger and who follow the
procedures prescribed under Delaware law may require Datamedic to pay the "fair
value" for their shares of Datamedic capital stock. A copy of Section 262 of the
Delaware General Corporation Law is attached hereto as Appendix E. We encourage
you to read Section 262 carefully.
DATAMEDIC'S RECOMMENDATION TO STOCKHOLDERS (see page 38)
Datamedic's board of directors unanimously approved the merger
agreement. The board believes that the proposed merger is in your best interest
and is in the best interest of Datamedic and recommends that you vote to approve
the merger agreement and the merger.
DATAMEDIC STOCK OWNERSHIP (see page 35)
On the record date, Datamedic's directors and executive officers and
affiliates owned _____% of the outstanding shares of Datamedic preferred stock,
and __________ shares, or approximately ______% of the outstanding shares of
Datamedic common stock and preferred stock, considered collectively. This number
does not include stock that the Datamedic directors and executive officers may
acquire through the exercise of stock options or warrants, or upon the
conversion of debentures.
On the record date and as of the date of this proxy
statement-prospectus, InfoCure's directors and executive officers owned no
shares of Datamedic capital stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT MAY BE DIFFERENT FROM YOURS
(see page 38)
When considering the recommendation of Datamedic's board of directors,
you should be aware that certain Datamedic directors and officers have interests
in the merger that are different from, or are in addition to, yours, including
the accelerated vesting of their options, bonuses and retirement obligations.
Your board of directors was aware of these interests and considered them in
approving and recommending the merger.
COMPLETION OF THE MERGER (see page 50)
The merger will become effective upon the filing of a certificate of
merger with the Delaware Secretary of State and the Georgia Secretary of State.
If the Datamedic stockholders approve the merger at the special meeting and all
required regulatory approvals are obtained, we currently anticipate that the
merger will be completed on or about November 30, 1999.
InfoCure and Datamedic cannot assure you that they can obtain the
necessary stockholder and regulatory approvals or that the other conditions to
consummation of the merger can or will be satisfied.
EXCHANGE OF STOCK CERTIFICATES (see page 50)
Promptly after the merger is completed, you will receive a letter and
instructions on how to surrender your Datamedic stock certificates in exchange
for InfoCure stock certificates. You will need to carefully review and complete
these materials and return them as instructed along with your stock certificates
for Datamedic capital stock. PLEASE DO NOT SEND DATAMEDIC, INFOCURE OR
INFOCURE's
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TRANSFER AGENT ANY STOCK CERTIFICATES UNTIL YOU RECEIVE THESE INSTRUCTIONS.
CONDITIONS TO COMPLETION OF THE MERGER (see page 51)
The merger will be completed only if certain conditions, including, but
not limited to the following, are met or waived, if waivable:
. Datamedic stockholders approve the merger at the special meeting;
. InfoCure and Datamedic receive written confirmation from their
respective independent accountants concerning the pooling of
interests accounting treatment of the merger;
. InfoCure has not breached any of its representations or obligations
under the merger agreement in any material respect;
. Datamedic has not breached any of its representations or obligations
under the agreement such that there is a material adverse effect on
Datamedic.
In addition to these conditions, the merger agreement, attached to this
proxy statement-prospectus as Appendix A, describes other conditions that must
be met before the merger may be completed.
DIFFERENCES IN STOCKHOLDERS' RIGHTS (see page 73)
When the merger is completed, you will automatically become an InfoCure
stockholder unless you exercise your dissenters rights. Your rights as a
Datamedic stockholder are governed by the Datamedic certificate of incorporation
and bylaws and Delaware law. The rights of InfoCure stockholders differ from the
rights of Datamedic stockholders in several important ways. Many of these have
to do with provisions in InfoCure's certificate of incorporation and bylaws.
LISTING OF INFOCURE COMMON STOCK
InfoCure has agreed to list the shares of InfoCure common stock to be
issued in connection with the merger on the Nasdaq National Market.
EXPENSES (see page 53)
If the merger is completed, InfoCure will pay its own costs and
expenses incurred in connection with the merger and will also pay the aggregate
of (i) the accounting and legal fees payable to Datamedic's accountants and
attorneys and the attorneys for Datamedic's preferred stockholders in connection
with the merger, and (ii) the fees payable by Datamedic to Broadview
International, L.L.C. in connection with the merger; except that the number of
shares of InfoCure common stock to be issued in connection with the merger shall
be reduced by, among other things, the number of shares equal to the sum of
those fees divided by $21.3976.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have any questions about the merger, please call Joseph D. Hill,
Datamedic's Chief Financial Officer, at 1-781-788-4800.
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RISK FACTORS
If the merger is consummated, you will receive shares of InfoCure
common stock in exchange for your shares of Datamedic capital stock. You should
be aware of particular risks and uncertainties that are applicable to an
investment in InfoCure common stock. Specifically, there are risks and
uncertainties relating to InfoCure's future financial results and that may cause
InfoCure's future earnings and financial condition to be less than InfoCure's
expectations.
RISKS RELATED TO THE MERGER
The Total Number of Shares of InfoCure Common Stock to Be Issued in the Merger
Will Not Change Despite Potential Changes in InfoCure's Stock Price Prior to the
Closing Date.
The number of shares of InfoCure common stock to be issued for each
share of Datamedic stock will not be adjusted in the event of fluctuation in the
market price of the InfoCure common stock. The specific dollar value of InfoCure
common stock to be received by you upon completion of the merger thus will
depend, in part, on the market value of the InfoCure common stock at the time of
completion of the merger. Accordingly, the value of the consideration that you
will receive if the merger occurs may decrease from the date you vote your
shares. The closing sale price of InfoCure common stock on The Nasdaq National
Market on September 7, 1999, the last trading day prior to the public
announcement of the proposed merger, was $21.125, and on _______, 1999, the most
recent practicable date prior to the printing of this proxy
statement-prospectus, was $____. However, neither Datamedic nor InfoCure can
assure you as to the market price of InfoCure common stock at any time before or
after the merger.
Neither InfoCure nor Datamedic will have the right to terminate the
merger agreement as a result of changes in InfoCure's common stock price. You
should obtain current market quotations for the InfoCure common stock.
InfoCure May Not Achieve the Benefits It Expects to Result from the Merger.
InfoCure cannot guarantee that it will realize the increases in
operating income that it anticipates from integrating Datamedic's operations and
InfoCure's operations as fully or as quickly as it expects. InfoCure may
encounter difficulties integrating Datamedic's operations, including, without
limitation:
. difficulty integrating the financial, operational and administrative
functions of Datamedic;
. difficulty integrating Datamedic's products;
. delays in realizing the benefits of InfoCure's strategies for
Datamedic's business;
. diversion of management's attention from existing operations;
. difficulty operating in markets in which InfoCure has little prior
experience;
. inability to retain key employees necessary to continue the
operations of Datamedic; or
. Datamedic's unknown liabilities, problems related to the year 2000,
software bugs or adverse litigation and claims.
Integrating the management and operations of Datamedic will be time
consuming, and InfoCure cannot guarantee that it will achieve any of the
anticipated synergies and other benefits expected to be realized from the
merger, including those reflected in InfoCure's unaudited pro forma combined
financial data.
The challenges and risks of integrating the organizations and
operations of Datamedic will be made greater because InfoCure is still
integrating several recent acquisitions. Moreover, InfoCure anticipates that it
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will make additional future acquisitions. The integration of multiple
acquisitions at the same time will place an even greater strain on InfoCure's
management resources and attention.
The Datamedic Board of Directors Did Not Obtain any Third Party Opinion that the
Number of InfoCure Shares to be Received in the Merger is Fair to the Datamedic
Stockholders.
The Datamedic Board of Directors did not seek or obtain any third party
fairness opinion or any valuation or appraisal of either Datamedic or InfoCure.
Therefore, in voting to approve the merger, the Datamedic stockholders will not
have the benefit of a third party opinion that the number of shares of InfoCure
common stock to be received by them in the merger is fair from a financial
viewpoint. The number of shares of InfoCure common stock to be received in the
merger was negotiated directly between representatives of InfoCure and
Datamedic, with Datamedic receiving the assistance of Broadview International,
L.L.C., who acted as a broker for Datamedic.
Certain of Datamedic's Officers and Directors Have Conflicts of Interest That
May Influence Them to Support or Approve the Merger.
The directors and officers of Datamedic participate in arrangements and
have continuing indemnification against liabilities that provide them with
interests in the merger that are different from, or are in addition to, your
interests. See "THE SPECIAL MEETING--INTERESTS OF CERTAIN DATAMEDIC DIRECTORS,
OFFICERS AND AFFILIATES IN THE MERGER," see page 38. As a result, these
directors and officers could be more likely to approve the merger agreement than
if they did not hold these interests. You should consider whether these
interests may have influenced these directors or officers to support or
recommend the merger.
You May Recognize Taxable Gain or Loss on Your Datamedic Shares.
Datamedic and InfoCure have structured the merger to qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended. If the merger fails to qualify as a tax-free reorganization,
you would generally recognize gain or loss on each Datamedic share surrendered
in the amount of the difference between your basis in such share and the fair
market value of the InfoCure shares and other consideration you receive in
exchange for such Datamedic share at the time of the merger.
The Merger May Not Receive Pooling of Interests Accounting Treatment.
Datamedic and InfoCure intend for the merger to qualify for pooling of
interests accounting treatment for financial reporting purposes. The failure of
the merger to qualify for pooling of interests accounting treatment for any
reason would harm InfoCure's reported earnings and, potentially, the price of
InfoCure's common stock. In order for the merger to be accounted for as a
pooling of interests, among other conditions that must be satisfied, (1) holders
of at least 90% of outstanding shares of Datamedic capital stock must approve
the merger and (2) no more than 10% of the consideration exchanged for
outstanding Datamedic capital stock may consist of cash. If these conditions are
not met, the merger will not receive pooling of interests treatment. Datamedic
and InfoCure cannot assure you that these conditions will be met.
In addition, to account for the merger as a pooling of interests,
InfoCure, Datamedic and their respective affiliates must meet the criteria for
pooling of interests accounting established in opinions published by the
Accounting Principles Board and interpreted by the Financial Accounting
Standards Board and the Securities and Exchange Commission ("SEC"). These
opinions are complex and the interpretation of them is subject to change.
Completion of the merger is conditioned, among other things, upon (1) the
receipt by Datamedic of a letter from its independent accountants that, subject
to customary qualifications, they concur
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with management's conclusion that no conditions exist that would preclude
Datamedic from being a party to a business combination for which the pooling of
interests method of accounting would be available and (2) receipt by InfoCure of
a letter from its independent accountants that, subject to customary
qualifications, they concur with management's conclusion that no conditions
exist that would preclude InfoCure from accounting for the merger as a pooling
of interests.
The availability of pooling of interests accounting treatment for the
merger also depends, in part, upon circumstances and events occurring after the
effective time of the merger. For example, affiliates of Datamedic and InfoCure
must not sell, or otherwise reduce their risk with respect to, any shares of
stock, except for a de minimus number as defined by certain SEC rules and
regulations, of either Datamedic or InfoCure from the period beginning 30 days
prior to the closing of the merger until the day that InfoCure publicly
announces financial results covering at least 30 days of combined operations of
Datamedic and InfoCure after the merger. If affiliates of Datamedic or InfoCure
sell their shares of InfoCure common stock during that time despite a
contractual obligation not to do so, the merger may not qualify for pooling of
interests accounting treatment.
A Portion of the Shares to Be Issued to Datamedic's Principal Stockholders Will
Be Held in an Escrow Account.
Approximately 8% of the shares of InfoCure common stock to be issued in
the merger will be withheld from certain principal stockholders of Datamedic,
and will be held in an escrow account by SunTrust Bank, Atlanta. A portion of
such shares will be held for a period ending on the earlier of (1) one year
after the merger is effective and (2) the publication of audited financial
statements of InfoCure for the first fiscal year-end following the effective
time of the merger as security for certain claims that may be made against
Datamedic in connection with the merger. The remaining escrow shares will be
held as security for expenses incurred in defending, settling or pursuant to
judgments obtained in connection with Datamedic's existing litigation and will
be released on the earlier of (1) three years after the merger is effective and
(2) the settlement or adjudication of all such litigation. If InfoCure
successfully asserts a claim for indemnification while the escrowed shares
remain in the escrow account, the principal stockholders may not receive all or
part of these escrowed shares.
Datamedic and InfoCure Will Incur Costs Associated with the Merger That Could
Harm the Combined Company's Financial Results and Could Reduce the Number of
Shares You Receive.
The merger will result in estimated transaction and restructuring costs
of approximately $5.7 million to InfoCure. InfoCure's and Datamedic's
transaction costs are estimated and the actual costs of the transaction may be
much larger. The combined company may incur additional charges in subsequent
quarters to reflect costs associated with the merger. In addition, the total
number of shares of InfoCure common stock that you and other Datamedic
stockholders receive in the merger will be adjusted to account for Datamedic's
costs related to the merger, such as legal and accounting fees. If the merger is
not completed, Datamedic and InfoCure will have incurred significant costs for
which they will have received no benefits.
The Issuance of InfoCure Common Stock and Datamedic's Operating Losses Will
Dilute InfoCure's Earnings Per Share.
Approximately 1.2 million shares of InfoCure common stock will be
issued pursuant to the terms of the merger agreement, representing approximately
4.2% of the total number of shares of InfoCure common stock that are outstanding
as of September 15, 1999. In addition, Datamedic continues to experience
operating losses, and in the quarter ending December 31, 1999, InfoCure expects
to incur an aggregate of $5.7 million in transaction and restructuring costs
related to the merger and other recent transactions. The estimated
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transaction costs related to the merger are principally professional fees and
aggregate approximately $1.4 million. The estimated restructuring charges result
from the joint plan formulated by InfoCure and Datamedic to eliminate
redundancies in staffing and consolidate existing and other acquired facilities.
Estimated InfoCure and Datamedic restructuring charges include $1.2 million of
severance and related termination benefits, $1.9 million of costs related to
closure of duplicative facilities and consolidation, and $1.0 million provision
for write-downs related to inventory and capitalized software development
associated with duplicative products. As a result, InfoCure's earnings per share
will be diluted which may negatively affect the market price of InfoCure common
stock.
Your Rights as a Datamedic Stockholder Differ from the Rights You Will Have as
an InfoCure Stockholder.
Following the merger, you will become a holder of InfoCure common
stock. Certain material differences exist between the rights of stockholders of
Datamedic under Datamedic's certificate of incorporation and bylaws, and the
rights of stockholders of InfoCure under InfoCure's certificate of incorporation
and bylaws, even though both Datamedic and InfoCure are Delaware corporations.
Failure to Complete the Merger Could Negatively Impact Datamedic's Future
Business and Operations.
If the merger is not completed for any reason, Datamedic may be subject
to a number of material risks, including the following:
. Datamedic may incur substantial operating losses and may need to
immediately and successfully establish new sources of financing, the
availability of which is uncertain;
. Potential customers may defer purchases of Datamedic products;
. Potential channel partners may refrain from entering into agreements
with Datamedic; and
. Employee turnover may increase.
The occurrence of any of these factors would likely result in serious harm to
Datamedic's business, results of operations and financial condition.
The Escrow Agent May Not Act in the Manner That the Principal Stockholders
Desire.
The merger agreement provides that SunTrust Bank, Atlanta will act as
the escrow agent in certain matters involving the shares of InfoCure common
stock to be held in escrow. Your approval of the merger agreement and the merger
also effectively constitutes acceptance of SunTrust Bank, Atlanta as escrow
agent to act as such in accordance with the merger agreement and the escrow
agreement by which it is bound. The escrow agent may not act in the manner the
principal Datamedic stockholders desire and any arbitration orders required to
be enforced by the escrow agent pursuant to the terms of the escrow agreement
could have the effect of reducing the consideration ultimately received by the
principal Datamedic stockholders in the merger.
RISKS RELATED TO INFOCURE AND DATAMEDIC AS A COMBINED COMPANY
The Financial Results of the Combined Company May Vary Significantly from
Quarter to Quarter.
InfoCure's operating results have varied significantly from quarter to
quarter in the past and it is expected that the combined company's operating
results will continue to vary from quarter to quarter in the future due to a
variety of factors, many of which are outside of its control. Factors that could
affect quarterly operating results include:
. Volume and timing of customer orders;
. Length of the sales cycle;
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. Customer budget constraints;
. Announcement or introduction of new products or product enhancements
by the combined company or its competitors;
. Changes in prices of the combined company's products and those of
the combined company's competitors;
. Market acceptance of new products;
. Mix of direct and indirect sales;
. Changes in the combined company's strategic relationships; and
. Changes in business strategy.
Furthermore, customers may defer or cancel their purchases of products
if they experience a downturn in their business or if there is a downturn in the
general economy. As a combined company, InfoCure will continue to determine its
investment and expense levels based on expected future revenues. A significant
portion of InfoCure's and Datamedic's expenses are not variable in the short
term and cannot be quickly reduced to respond to decreases in revenues.
Therefore, if revenues are below expectations, operating results and net income
are likely to be adversely and disproportionately affected. In addition, the
combined company may reduce prices or accelerate investment in research and
development efforts in response to competitive pressures or to pursue new market
opportunities. Any one of these activities may further limit the combined
company's ability to adjust spending in response to revenue fluctuations.
Revenues may not grow at historical rates in future periods, or they may not
grow at all. Because of this, the combined company may not maintain positive
operating margins in future quarters.
InfoCure May Face Claims Related to Year 2000 Problems with Its Products Which
May Result in Significant Costs and Uncertainties.
Many installed computer systems and software products are designed to
accept and process year codes with only two digits in their date fields. These
systems and products may not operate properly when required to distinguish dates
occurring on or after January 1, 2000 from dates in the 1900's. If InfoCure's
software products are not able to make this distinction, InfoCure's customers
may make claims against it which may result in significant costs and
uncertainty.
InfoCure believes that it has identified most of its year 2000
readiness issues. InfoCure has concluded tests for substantially all of its
products that InfoCure will continue to sell or support. InfoCure has determined
that a majority of these products are ready for the year 2000. With respect to
the rest of the products that InfoCure will continue to sell or support,
InfoCure believes that it can modify these products so that they will be ready
for the year 2000 by September 30, 1999, but InfoCure cannot guarantee that they
will be. InfoCure could experience delays or failures in developing or
implementing the required modifications. For older products that InfoCure no
longer sells or supports, InfoCure has attempted to notify all known users of
these products that these products generally are not ready for the year 2000 and
that InfoCure has no plans to make them ready for the year 2000. InfoCure cannot
guarantee that it will be able to contact all such users.
As part of InfoCure's effort to make InfoCure's products ready for the
year 2000 and to help InfoCure's customers make their systems that use
InfoCure's products ready for the year 2000, InfoCure has offered its customers
various alternative forms of products and assistance, including year 2000
information and diagnostic tools, software patches, product upgrades and
replacement products. InfoCure cannot guarantee that these tools, patches,
upgrades or replacement products will solve all material year 2000 problems with
its products or its customers' systems. In addition, InfoCure cannot guarantee
that claims will not be brought against it alleging that InfoCure harmed
customers by failing to provide all of the information, tools, patches, upgrades
or replacement products required to resolve all material year 2000 readiness
problems.
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InfoCure May Have Difficulties Managing Its Growth and Hiring and Retaining
Qualified Employees.
InfoCure's growth places a significant strain on its management and
operations. InfoCure's future growth will depend, in part, on its ability to
implement and expand financial control systems, train and manage its employee
base, and provide support and services to an increasing customer base. None of
InfoCure's officers has had significant experience in managing a large, public
company. InfoCure's success is dependent to a significant degree on its ability
to hire, retain and motivate sales, marketing and technical employees. InfoCure
believes that there is a shortage of, and significant competition for, personnel
with the advanced technological, managerial and marketing skills necessary in
InfoCure's business. InfoCure's ability to implement InfoCure's growth strategy
could be adversely affected by an inability to hire and retain additional
qualified personnel.
InfoCure's Growth May Be Limited by Difficulties Implementing InfoCure's
Acquisition Strategy.
Over the last three years, InfoCure has greatly expanded its
operations, placing considerable demand and strain on its administrative,
operational and financial personnel and systems. Further expansion may place
additional strains on its resources. To address these expansion issues, InfoCure
may have to make substantial expenditures and devote further management time and
resources to:
. improve or replace its management information, administrative,
operational, financial and other systems;
. develop and coordinate strategies, operations and product
development among its operations;
. maintain customer satisfaction;
. manage changing business conditions; and
. recruit, train and retain qualified consulting, technical, sales,
financial, marketing and management personnel.
InfoCure cannot assure you that its existing resources, systems and
space will be able to adequately support its further expansion. InfoCure's
failure to respond appropriately to growth and change would likely result in a
material adverse effect on the quality of its services, its ability to retain
key personnel and its business.
Competition Could Reduce Revenue from InfoCure's Products and Services.
Currently, the practice management systems industry in the United
States is characterized by a large number of relatively small,
regionally-focused companies and a few national vendors. It is anticipated that
additional competitors are likely to enter the practice management systems
market as it expands. Some of InfoCure's national competitors have greater
financial, development, technical, marketing and sales resources than InfoCure
has. As competition in the practice management systems industry intensifies,
InfoCure may be required to lower the prices InfoCure charges for InfoCure's
products and services. This may have a material adverse effect on future
results.
InfoCure Expects to Need Additional Capital for Acquisitions and InfoCure Cannot
Guarantee That This Capital Will Be Available to It.
InfoCure expects to finance future acquisitions, if any, through cash
from operations, InfoCure's credit facility or other indebtedness, issuances of
common stock or other securities, or any combination of these sources. InfoCure
cannot guarantee that capital will be available on terms acceptable to it, or at
all.
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InfoCure's Success Depends on InfoCure's Key Executives and the Loss of Any of
InfoCure's Executives Could Adversely Affect InfoCure's Future Results.
InfoCure's business depends on the continued efforts of InfoCure's
Chief Executive Officer, Frederick L. Fine, InfoCure's Chairman, Richard E.
Perlman and InfoCure's Executive Vice President, James K. Price. If any of these
persons becomes unable or unwilling to continue his role with it, or if InfoCure
is unable to attract or retain other qualified employees, future results could
be adversely impacted. Although InfoCure has entered into employment agreements
with Messrs. Fine, Perlman and Price and other key executives, InfoCure cannot
guarantee that any individual will continue in his present capacity with it for
any particular period of time.
The Consolidation of the Healthcare Industry Could Adversely Affect InfoCure's
Future Results.
Many healthcare providers are consolidating into larger practice groups
with greater market presence. As a result, these providers have greater
bargaining power which may lead to declining prices for InfoCure's products.
This could have an adverse effect on InfoCure's future results. In addition, the
consolidation of smaller practice groups may require the resulting larger group
to unify its practice management systems. InfoCure believes that once a
healthcare provider has chosen a particular practice management systems vendor,
it will rely on that vendor for its future practice management systems
requirements. Thus, the vendor with the broadest market share will have a
competitive advantage as consolidation continues. An inability to make initial
sales of practice management systems to healthcare providers prior to
consolidation or to maintain InfoCure's existing customer base subsequent to
consolidation may have a material adverse effect on future results.
Because InfoCure Has Only Limited Protection of Its Proprietary Rights and
Technology, Others May Copy Its Software or Services and Harm Its Ability to
Compete.
InfoCure relies primarily on a combination of statutory and common law
copyright, trademark and trade secret laws, customer licensing agreements,
employee and third-party nondisclosure agreements and other methods to protect
its proprietary rights and technology. These laws and contractual provisions
provide only limited protection. InfoCure has no patents or patent applications
pending, and only a limited number of registered copyrights and trademarks. It
may be possible for a third party to copy or otherwise obtain and use its
technology without authorization or to develop similar technology independently.
Also, the laws of certain countries in which InfoCure sells its products do not
offer as much protection of its proprietary rights as the laws of the United
States. Unauthorized copying or misuse of its products or proprietary rights
could have a material adverse effect on its business, operating results and
financial condition.
InfoCure May Not Be Successful in Avoiding Claims That It Infringes Others'
Proprietary Rights and Could Be Required to Pay Judgments or Licensing Fees.
Many patents, copyrights and trademarks have been issued in the general
areas of information and technology. InfoCure expects that software developers
will be increasingly subject to infringement claims as the number of products
and competitors providing products and services to the information technology
industry grows. Third parties may claim that InfoCure's current or future
products infringe their proprietary rights. Infringement claims, with or without
merit, could:
. result in costly litigation;
. require significant management resources;
. cause product shipment delays;
. require InfoCure to enter into unfavorable royalty or licensing
agreements; or
. cause InfoCure to discontinue the use of the challenged trade name,
service mark or technology.
-15-
<PAGE>
Consequently, infringement claims could have a material adverse effect on
InfoCure's business, operating results and financial condition.
InfoCure's Software May Contain Undetected Errors.
The software that InfoCure has developed and licensed to its customers
may contain undetected errors. Although InfoCure tests its software prior to its
installation, InfoCure may discover errors after the installation. The cost to
fix the errors or to develop the software further could be high. These errors
may subject InfoCure to product liability claims. InfoCure has not experienced
any product liability claims to date, but InfoCure may be subject to such claims
in the future. InfoCure has insurance that would cover certain of these claims;
however, a successful product liability claim brought against InfoCure could
have a material adverse effect on its business, operating results and financial
condition.
InfoCure May Be Subject to Changing Government Regulations.
The confidentiality of patient records and the circumstances under
which such information may be used or released are subject to increasing state
and federal regulation. Regulations governing electronic healthcare data
transmissions are evolving rapidly and are often unclear and difficult to apply.
The Health Insurance Portability and Accountability Act of 1996 mandates the
establishment of national standards for certain types of electronic healthcare
information transactions to ensure the integrity and confidentiality of such
information. InfoCure cannot guarantee that such standards will not materially
restrict the ability of its customers to obtain or disseminate patient
information through the use of InfoCure's products. Any material restriction on
the ability of healthcare providers to obtain or disseminate patient information
could adversely affect InfoCure's business and future results.
The U.S. Food and Drug Administration ("FDA") has jurisdiction 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.
InfoCure has not determined the extent to which its practice management software
products would be deemed to be medical devices subject to FDA regulation.
Noncompliance with applicable FDA requirements can result in such things as
fines, injunctions, suspension of production, revocation of approvals or
clearances previously granted, and criminal prosecution. FDA policies, or other
laws or regulations concerning the manufacture or marketing of healthcare
information systems, may increase the cost and time required to deliver new or
existing products and therefore may have a material adverse effect on future
results.
INVESTMENT RISKS
InfoCure's Stock Price Has Historically Been Volatile, Which May Make It More
Difficult for You to Resell Shares When You Want at Prices You Find Attractive.
The market price of InfoCure common stock has been volatile in the past
and may be volatile in the future. The market price of InfoCure's common stock
may be significantly affected by the following factors:
. Public announcements by companies in InfoCure's industry, including
announcements of acquisitions, strategic relationships, new
technologies and new products or product enhancements;
. General market conditions or market conditions specific to
particular industries;
. The combined company's technological innovations or those of its
competitors; and
. Quarterly variations in InfoCure's results of operations.
-16-
<PAGE>
In particular, the stock prices of many companies in the technology and
emerging growth sectors have fluctuated widely due to events unrelated to their
operating performance. These fluctuations may cause the market price of
InfoCure's common stock to decline below current levels.
InfoCure's Charter and Bylaws Have Anti-Takeover Provisions.
Provisions of InfoCure's certificate of incorporation and bylaws as
well as the Delaware General Corporation Law could make it more difficult for a
third party to acquire it, even if doing so would be beneficial to its
stockholders. InfoCure is subject to the provisions of Section 203 of the
Delaware General Corporation Law which restricts certain business combinations
with interested stockholders. The combination of these provisions may have the
effect of inhibiting a non-negotiated merger or other business combination.
The InfoCure board of directors has the authority to issue up to 2.0
million shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares, without stockholder action. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock could discourage or make difficult the acquisition of a majority
of its outstanding voting stock by a third party.
Certain provisions of InfoCure's certificate of incorporation and
bylaws and the Delaware law could delay or make more difficult a merger, tender
offer or proxy contest involving InfoCure. In addition, InfoCure's board of
directors is divided into three classes with only one class being elected each
year. Also, pursuant to InfoCure's stock incentive plan, all stock options
granted to employees automatically vest and become exercisable upon certain
triggering events leading up to a change of control. These factors may have the
effect of delaying or preventing a change of control.
Privately-Sold Shares Eligible for Public Resale Could Have a Negative Effect on
InfoCure's Stock Price.
As of September 15, 1999, InfoCure had 28.5 million shares of common
stock outstanding, and there were outstanding options to purchase approximately
7.3 million shares of InfoCure common stock under stock option plans. InfoCure
has issued shares in connection with acquisitions and investments and such
shares are available for resale pursuant to currently effective registration
statements previously filed by InfoCure with the SEC. Sales of substantial
amounts of these shares in the public market or the prospect of these sales
could adversely affect the market price of InfoCure common stock.
Forward-Looking Statements May Prove Inaccurate
This proxy statement-prospectus contains "forward-looking statements"
that involve risks and uncertainties, such as statements concerning: growth and
future operating results of Datamedic and InfoCure; the benefits of the merger
to Datamedic, InfoCure and Datamedic stockholders; the anticipated closing date
of the merger; anticipated difficulties in integrating Datamedic's operations
with that of InfoCure's; additional charges and estimated transaction costs that
the combined company may encounter; the parties intent to account for the merger
as a "pooling of interests" business combination; the potential fluctuation in
market price of InfoCure common stock; the exchange ratio of the merger; the
number of shares of Datamedic capital stock outstanding on the closing date of
the merger; the effects of consolidation of the healthcare industry; InfoCure's
ability to reduce salaries, expenses and overhead; anticipated federal tax
consequences resulting from the merger; compliance with antitrust laws;
InfoCure's ability to offer products that serve specific needs of healthcare
practice specialties; Datamedic's belief that its size and limited access to
capital resources may inhibit future growth; future customer benefits
attributable to Datamedic's or
-17-
<PAGE>
InfoCure's products; developments in Datamedic'sor InfoCure's markets and
strategic focus; new products and product enhancements; potential acquisitions
and the integration of acquired businesses, products and technologies; strategic
relationships; and future economic, business and regulatory conditions, future
levels of Datamedic's costs of goods sold, sales and marketing expenses,
research and development expenses, general and administrative expenses,
depreciation and amortization expenses and net loss; Datamedic's liquidity; and
InfoCure's and Datamedic's Year 2000 readiness.
Such forward-looking statements are generally accompanied by words such as
"project," "believe," "anticipate," "plan," "expect," "estimate," "intend,"
"believe," "should," "would," "could," or "may," or other words that convey
uncertainty of future events or outcomes. Although each of Datamedic and
InfoCure believes that such forward-looking statements are reasonable, neither
can assure you that such expectations will prove to be correct. Factors that
could cause actual results to differ materially from these forward-looking
statements are disclosed herein including, without limitation, in the "Risk
Factors" beginning on page 9. These factors and other cautionary statements
made in this document should be read as being applicable to all related
forward-looking statements whenever they appear in this document. Neither
Datamedic nor InfoCure undertakes any obligation to update any forward-looking
statements. References in this document to the terms "optimal" and "optimized"
and words to that effect are not necessarily intended to connote the
mathematically optimal solution, but may connote near-optimal solutions which
reflect practical considerations such as customer requirements as to response
time and precision of the results.
-18-
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
InfoCure Selected Historical Consolidated Financial Data
The selected historical consolidated financial data set forth below as
of January 31, 1995, 1996 and 1997 and for the two years ended January 31, 1996
have been derived from the audited supplemental consolidated financial
statements of American Medicare Corporation, the predecessor of InfoCure, not
included or incorporated by reference into this proxy statement-prospectus. The
selected historical consolidated financial data set forth below as of December
31, 1997 and 1998 and for the year ended January 31, 1997, the eleven months
ended December 31, 1997 and the year ended December 31, 1998 have been derived
from InfoCure's supplemental consolidated financial statements which are
incorporated by reference in this proxy statement-prospectus. These supplemental
consolidated financial statements have been audited by BDO Seidman, LLP whose
report on these supplemental consolidated financial statements is also
incorporated by reference in this proxy statement-prospectus. The selected
consolidated financial data as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 have been derived from InfoCure's unaudited supplemental
consolidated condensed financial statements, and in the opinion of InfoCure's
management, have been prepared on the same basis as the audited supplemental
consolidated financial statements and include all normal recurring adjustments
necessary for a fair presentation of the financial information. The information
presented gives retroactive effect to pooling of interests treatment for
acquisitions completed on or before August 31, 1999 and a 2-for-1 stock split in
August 1999. The results for the six months ended June 30, 1999, are not
necessarily indicative of future results. The following financial information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and InfoCure's supplemental
consolidated financial statements and related notes thereto provided in
InfoCure's Current Report on Form 8-K filed on September 24, 1999, incorporated
by reference in this proxy statement-prospectus.
In thousands, except per share data
<TABLE>
<CAPTION>
Eleven
Months
Ended Year Ended Six Months Ended
Year Ended January 31, December 31, December 31, June 30,
--------------------------------- ------------ ------------ -----------------
1995 1996 1997 1997 1998 1998 1999
Consolidated Statement of --------- -------- -------- ------------ ------------ ------- --------
Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........................ $24,337 $24,569 $26,889 $45,999 $93,780 $39,465 $81,425
Compensatory stock awards............ -- -- -- -- 6,447 -- 570
Purchased research and development... -- -- -- -- 9,000 -- --
Asset impairment, restructuring and..
special charges................. -- -- -- 11,136 1,874 1,874 --
Merger costs......................... -- -- -- -- 123 -- 385
Operating income (loss).............. (1,492) 521 1,394 (8,359) (2,417) 4,067 15,838
Net income (loss) after extraordinary
item available to common
stockholders.................... (1,632) 713 1,891 (7,375) (6,446) 1,491 5,285
Net income (loss) per share after
extraordinary item:
Basic:........................ $(0.55) $(0.37) $0.09 $0.24
Diluted:...................... (0.55) (0.37) 0.07 0.19
Shares used in computing net income
(loss) per share:
Basic......................... 13,401 17,201 16,631 21,902
Diluted:...................... 13,401 17,201 21,127 27,707
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
January 31, December 31, June 30,
------------------------------------ --------------------- ----------
Consolidated Balance Sheet Data: 1995 1996 1997 1997 1998 1999
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Total assets ................................ $ 7,473 $ 7,739 $ 13,336 $ 40,021 $137,521 $169,099
Long-term debt, less current portion ........ 2,243 2,310 3,817 9,600 70,733 24,560
Convertible, redeemable preferred
stock .................................. -- -- -- -- 8,501 --
Stockholders' equity
(capital deficit) ...................... (2,052) (1,749) 1,257 4,096 16,854 118,489
</TABLE>
-20-
<PAGE>
Datamedic Selected Historical Consolidated Financial Information
The selected historical financial data set forth below as of March 31,
1995, 1996 and 1997, and for each of the years in the two years ended March 31,
1996 have been derived from Datamedic's audited consolidated financial
statements not included in this proxy statement-prospectus. The selected
historical financial data set forth below as of March 31, 1998 and 1999, and for
each of the years in the three year-period ended March 31, 1999 have been
derived from Datamedic's consolidated financial statements which are included in
this proxy statement-prospectus. These consolidated financial statements have
been audited by KPMG LLP, whose report on these consolidated financial
statements is also included in this proxy statement-prospectus. The selected
historical financial data for the three months ended June 30, 1999 have been
derived from Datamedic's unaudited condensed consolidated financial statements,
and in the opinion of Datamedic's management, have been prepared on the same
basis as the audited consolidated financial statements and include all normal
recurring adjustments necessary for a fair presentation of the financial
information. The results for the three months ended June 30, 1999 are not
necessarily indicative of future results. The following financial information
should be read in conjunction with "Datamedic Management's Discussion and
Analysis of Financial Condition and Results of Operations," Datamedic's
consolidated financial statements and consolidated condensed financial
statements included in this proxy statement-prospectus.
In thousands, except per share data
<TABLE>
<CAPTION>
Three Months Ended
--------------------
Consolidated Statement of Year Ended March 31, June 30,
Operations Data: --------------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
--------- -------- -------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue .................................. $ 20,416 $ 21,174 $ 17,790 $ 19,191 $ 20,832 $ 4,948 $ 4,917
Operating loss(1) .............................. (1,654) (4,787) (9,143) (16,981) (1,710) (571) (334)
Net loss ....................................... 675 (5,335) (9,647) (17,274) (1,752) (597) (375)
Consolidated Balance Sheet March 31, June 30,
Data: -------------------------------------------------------- -----------
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- -----------
Total assets ................................... $ 16,090 $ 14,715 $ 13,194 $ 14,012 $ 9,416 $ 8,112
Long-term debt, less current portion ........... 3,435 5,469 618 1,014 667 747
Stockholders' equity (capital
deficit) .................................. 6,663 1,524 3,545 842 (912) (1,287)
</TABLE>
- -------------------------
(1) In March, 1998, Datamedic implemented a business and reorganization plan
which resulted in a restructuring charge to earnings of $1.9 million.
-21-
<PAGE>
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following tables present summary unaudited pro forma combined
financial information after giving effect to the proposed merger with Datamedic
under the pooling of interests method of accounting. The tables have been
derived from, or prepared on a basis consistent with, the unaudited pro forma
condensed combined financial statements included in this proxy
statement-prospectus. The selected pro forma combined financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, the unaudited pro forma condensed combined financial statements
and the notes thereto. See "Unaudited Pro Forma Condensed Combined Financial
Information." The following data are presented for illustrative purposes only
and are not necessarily indicative of the operating results or financial
position that would have occurred or that will occur after consummation of the
merger.
The pro forma condensed combined balance sheet gives effect to the
merger as if it had occurred on June 30, 1999, combining the balance sheet of
InfoCure as of June 30, 1999 with that of Datamedic as of June 30, 1999. The pro
forma condensed combined statements of operations give effect to the merger as
if it had occurred at the beginning of the earliest period presented. The pro
forma operating data combines the results of InfoCure for the year ended January
31, 1997, the eleven months ended December 31, 1997, the year ended December 31,
1998 and for the six months ended June 30, 1998 and 1999 with those of Datamedic
for each year in the three years ended March 31, 1999 and for the six months
ended September 30, 1998 and June 30, 1999. Consequently, the results of
Datamedic for the three months ended March 31, 1999 are included in the pro
forma condensed combined statement of operations for both the year ended
December 31, 1998 and the six months ended June 30, 1999. Datamedic's revenue
was approximately $5.9 million and net loss was approximately $357,000 for the
three months ended March 31, 1999.
<TABLE>
<CAPTION>
In thousands, except per share data
Eleven
Months
Year Ended Ended Year Ended Six Months Ended
January 31, December 31, December 31, June 30,
1997 1997 1998 1998 1999
------------ ------------ ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Systems and software ................................ $ 18,178 $ 33,162 $ 79,901 $ 36,044 $ 44,804
Maintenance, support and services ................... 26,501 32,028 72,926 38,495 47,413
--------- --------- --------- --------- ---------
Total revenue ........................................... 44,679 65,190 152,827 74,539 92,217
--------- --------- --------- --------- ---------
Operating expenses:
Hardware and other items purchased for
resale ........................................... 13,601 16,467 30,482 17,035 21,174
Selling, general and administrative ................. 36,376 56,735 95,372 43,685 50,258
Depreciation and amortization ....................... 2,451 4,276 8,630 4,248 4,692
Compensatory stock awards ........................... -- -- 6,447 -- 570
Purchased research and development .................. -- -- 9,000 -- --
Asset impairment and restructuring costs ............ -- 13,052 2,624 2,624 --
--------- --------- --------- --------- ---------
Merger costs ........................................ -- -- 123 -- --
Total operating expenses ................................ 52,428 90,530 152,678 67,592 77,079
--------- --------- --------- --------- ---------
Operating income (loss) ................................. (7,749) (25,340) 149 6,947 15,138
Other income (expense):
Interest, net ....................................... 695 775 8,610 3,910 2,494
Other, net .......................................... (31) (334) (195) (20) (38)
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item ................................... (8,413) (25,781) (8,266) 3,057 12,682
Income taxes (benefit) .................................. (4,323) (7,696) (2,445) 720 4,902
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item ................. (4,090) (18,085) (5,821) 2,337 7,780
Accretive dividend ...................................... -- -- 800 800 --
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary item
available to common stockholders ........................ $ (4,090) $ (18,085) $ (6,621) $ 1,537 $ 7,780
========= ========= ========= ========= =========
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Net income (loss) per share before extraordinary item:
<S> <C> <C> <C> <C> <C>
Basic ..................................... -- $ (1.23) $ (0.36) $ 0.09 $ 0.34
Diluted ................................... -- (1.23) (0.36) 0.07 0.27
Weighted average shares outstanding:
Basic ..................................... -- 14,653 18,453 17,883 23,155
Diluted ................................... -- 14,653 18,453 22,391 29,015
</TABLE>
June 30, 1999
-------------
Balance Sheet Data:
Current assets..................................... $ 71,848
Total assets....................................... 186,211
Current liabilities................................ 39,671
Long-term liabilities.............................. 26,398
Stockholders' equity............................... 120,142
-23-
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have
been prepared to give effect to InfoCure's proposed acquisition of all the
outstanding equity interests of Datamedic in exchange for approximately 1.2
million shares of InfoCure common stock. The exchange is calculated using an
exchange ratio of .1252 and assuming 8.5 million shares of Datamedic common
stock outstanding on a fully diluted basis as of the date of completion of the
merger (including the effect of conversion of all shares of Datamedic's
preferred stock and the issuance of common stock in lieu of any and all accrued
dividends thereon) and 1.5 million shares of Datamedic common stock issuable
upon exercise or conversion of options, warrants and convertible debentures
expected to be outstanding at November 30, 1999, the date the merger is expected
to close. The pro forma condensed combined financial statements included herein
reflects the anticipated use of the pooling of interests method of accounting,
after giving effect to the pro forma adjustments discussed in the accompanying
notes. Such financial statements have been prepared from, and should be read in
conjunction with, the supplemental consolidated financial statements and notes
thereto of InfoCure included in InfoCure's current report on Form 8-K filed on
September 24, 1999, incorporated herein by reference and the Datamedic
historical consolidated financial statements and notes thereto included
elsewhere in this proxy statement-prospectus. The unaudited pro forma condensed
combined financial statements also give retroactive effect, where applicable, to
acquisitions completed through August 31, 1999 and the 2-for-1 stock split
effective August 19, 1999.
The pro forma condensed combined balance sheet gives effect to the
merger as if it had occurred on June 30, 1999 combining the balance sheets of
InfoCure and Datamedic as of that date. The proforma condensed statements of
operations give effect to the merger as if it had occurred at the beginning of
the earliest period presented, combining the results of InfoCure for the year
ended January 31, 1997, the eleven months ended December 31, 1997, the year
ended December 31, 1998 and the six-month periods ended June 30, 1998 and 1999,
with those of Datamedic for each year in the three years ended March 31, 1999,
and the six months ended September 30, 1998 and June 30, 1999. The results of
Datamedic for the three months ended March 31, 1999 are included in the pro
forma condensed combined statement of operations for both the year ended March
31, 1999 and the six months ended June 30, 1999. Datamedic's revenue was
approximately $5.9 million and the net loss was approximately $357,000 for the
three months ended March 31, 1999.
The pro forma condensed combined statements of operations do not
include any potential cost savings. As discussed in the notes to the pro forma
condensed combined financial statements, InfoCure believes that it may be able
to reduce salaries and related costs and general and administrative expenses as
it eliminates duplication of overhead and, together with Datamedic, has
formulated a plan of restructuring to implement such savings. There can be no
assurance that the restructuring plan will be successful in effecting such cost
savings.
The pro forma condensed combined financial statement information is
unaudited and is not necessarily indicative of the consolidated results which
actually would have occurred if the merger had been consummated at the beginning
of the periods presented, nor does it purport to present that which may be
obtained in the future.
-24-
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
InfoCure Datamedic Adjustments Combined
--------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,717 $ 261 $ - $ 21,978
Accounts receivable, net 38,268 4,092 - 42,360
Inventory 4,345 726 - 5,071
Deferred tax asset 534 - 600 (D) 1,134
Prepaid expense and other current assets 1,280 25 - 1,305
--------------------------------------------------------------
Total current assets 66,144 5,104 600 71,848
Property and equipment, net 12,874 951 - 13,825
Goodwill, net 82,988 347 - 83,335
Deferred tax asset 2,755 - 8,400 (D) 11,155
Other assets 4,338 1,710 - 6,048
--------------------------------------------------------------
Total assets $ 169,099 $ 8,112 $ 9,000 $ 186,211
==============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ - $ 127 $ - $ 127
Note payable 328 - - 328
Accounts payable 2,448 3,983 - 6,431
Accrued expense 10,092 211 1,800 (A) 16,363
4,260 (C)
Income taxes payable 104 - - 104
Deferred revenue and customer deposits 10,858 3,079 - 13,937
Current portion of long-term debt 2,220 161 - 2,381
--------------------------------------------------------------
Total current liabilities 26,050 7,561 6,060 39,671
Long-term debt, less current portion 24,560 747 - 25,307
Other liabilities - 1,091 - 1,091
--------------------------------------------------------------
Total liabilities 50,610 9,399 6,060 66,069
--------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Class A convertible preferred stock - 43 (43) (B) -
Class B convertible preferred stock - 31 (31) (B) -
Class C convertible preferred stock - 317 (317) (B) -
Undesignated convertible preferred stock - - - -
Common stock 14 125 (124) (B) 15
Additional paid-in capital 137,087 32,119 515 (B) 169,721
Accumulated deficit (18,099) (33,922) (1,800) (A) (49,081)
(4,260) (C)
9,000 (D)
Deferred compensation (513) - - (513)
--------------------------------------------------------------
Total stockholders' equity 118,489 (1,287) 2,940 120,142
--------------------------------------------------------------
Total liabilities and stockholders' equity $ 169,099 $ 8,112 $ 9,000 $ 186,211
==============================================================
</TABLE>
-25-
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
(A) Records estimated merger costs for (1) the Datamedic merger and (2) other
1999 business combinations retroactively accounted for as poolings of
interests, which closed in the third quarter of 1999.
(B) Records the issuance of the InfoCure common stock in exchange for the
Datamedic shares.
(C) Records estimated restructuring charges as a result of the merger. Such
InfoCure and Datamedic restructuring costs include approximately $1.2
million of severance and related termination benefits, $1.9 million of
costs related to closure of duplicative facilities and facilities
consolidation, and $1.0 million for write-downs related to inventory and
capitalized software development associated with duplicative products.
The restructuring plan associated with the merger and other recent
transactions will consolidate existing facilities and other acquired
operations and enable the Company to more effectively leverage present and
planned operations. Management estimates that the restructuring plan will
yield annual savings of approximately $7.5 million, or approximately $4.7
million after income taxes. There can be no assurance that the anticipated
savings will be realized in these amounts, if at all.
(D) Adjustment to recognize the deferred tax asset arising from the
availability of net operating loss carryforwards of Datamedic to offset
future taxable income.
-26-
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION> Datamedic
Pro Forma Pro Forma
InfoCure Datamedic Adjustments Combined
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Systems and software $ 39,901 $ 4,903 $ - $ 44,804
Maintenance, support and services 41,524 5,889 - 47,413
-------------------------------------------------------------
Total revenue 81,425 10,792 - 92,217
-------------------------------------------------------------
Operating expense:
Hardware and other items purchased for resale 19,900 1,274 - 21,174
Selling, general and administrative 40,506 9,752 - 50,258
Depreciation and amortization 4,226 466 - 4,692
Compensatory stock awards 570 - - 570
Merger costs 385 - - 385
-------------------------------------------------------------
Total operating expense 65,587 11,492 - 77,079
-------------------------------------------------------------
Operating income (loss) 15,838 (700) - 15,138
Interest, net 2,462 32 - 2,494
Other, net (38) - - (38)
-------------------------------------------------------------
Income (loss) before income taxes and extraordinary item 13,414 (732) - 12,682
Provision (benefit) for income taxes 5,194 - (292) (D) 4,902
-------------------------------------------------------------
Net income (loss) before extraordinary item $ 8,220 $ (732) $ 292 $ 7,780
=============================================================
Net income per share before extraordinary item:
Basic $ 0.38 $ 0.34
=========== =============
Diluted $ 0.30 $ 0.27
=========== =============
Weighted average shares outstanding (E):
Basic 21,902 23,155
=========== =============
Diluted 27,707 29,015
=========== =============
</TABLE>
27
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
HSD Datamedic
HSD Pro Forma Pro Forma Pro Forma
InfoCure Acquisition Adjustments Subtotal Datamedic Adjustments Combined
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Systems and software $20,241 $ 12,583 $ - $32,824 $ 3,220 $ - $ 36,044
Maintenance, support and services 19,224 12,380 - 31,604 6,891 - 38,495
--------------------------------------------------------------------------------------
Total revenue 39,465 24,963 - 64,428 10,111 - 74,539
--------------------------------------------------------------------------------------
Operating expense:
Hardware and other items purchased
for resale 9,767 6,520 - 16,287 748 - 17,035
Selling, general and administrative 21,732 22,186 (9,496)(A) 34,422 9,263 - 43,685
Depreciation and amortization 2,025 3,278 (1,926)(B) 3,377 871 - 4,248
Asset impairment, restructuring
and special charges 1,874 750 - 2,624 - - 2,624
--------------------------------------------------------------------------------------
Total operating expense 35,398 32,734 (11,422) 56,710 10,882 - 67,592
--------------------------------------------------------------------------------------
Operating income (loss) 4,067 (7,771) 11,422 7,718 (771) - 6,947
Interest, net 1,084 (31) 2,788 (C) 3,841 69 - 3,910
Other, net (19) (1) - (20) - - (20)
--------------------------------------------------------------------------------------
Income (loss) before income taxes 3,002 (7,739) 8,634 3,897 (840) - 3,057
Provision (benefit) for income taxes 711 (2,953) 3,281 (D) 1,039 - (319)(D) 720
--------------------------------------------------------------------------------------
Net income (loss) 2,291 (4,786) 5,353 2,858 (840) 319 2,337
Accretive dividend 800 - - 800 - - 800
--------------------------------------------------------------------------------------
Net income (loss) available
to common stockholders $ 1,491 $ (4,786) $ 5,353 $ 2,058 $ (840) $ 319 $ 1,537
======================================================================================
Net income (loss) per share:
Basic $ 0.09 $ 0.09
======= =======
Diluted $ 0.07 $ 0.07
====== =======
Weighted average shares outstanding (E):
Basic 16,631 17,883
======= =======
Diluted 21,127 22,391
======= =======
</TABLE>
-28-
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
HSD Datamedic
HSD Pro Forma Pro Forma Pro Forma
InfoCure Acquisition Adjustments Subtotal Datamedic Adjustments Combined
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Systems and software $ 53,698 $ 18,440 $ - $ 72,138 $ 7,763 $ - $ 79,901
Maintenance, support and services 40,082 19,775 - 59,857 13,069 - 72,926
-----------------------------------------------------------------------------------
Total revenue 93,780 38,215 - 131,995 20,832 - 152,827
-----------------------------------------------------------------------------------
Operating expense:
Hardware and other items purchased
for resale 22,103 6,511 - 28,614 1,868 - 30,482
Selling, general and administrative 51,691 39,382 (15,361)(A) 75,782 19,660 - 95,372
Depreciation and amortization 4,959 5,045 (2,388)(B) 7,616 1,014 - 8,630
Purchased research and development 9,000 - - 9,000 - - 9,000
Compensatory stock awards 6,447 - - 6,447 - - 6,447
Asset impairment, restructuring
and special charges 1,874 750 - 2,624 - - 2,624
Merger cost 123 - - 123 - - 123
-----------------------------------------------------------------------------------
Total operating expense 96,197 51,688 (17,749) 130,136 22,542 - 152,678
-----------------------------------------------------------------------------------
Operating income (loss) (2,417) (13,473) 17,749 1,859 (1,710) - 149
Interest, net 3,740 (33) 4,861 (C) 8,568 42 - 8,610
Other, net (194) (1) - (195) - - (195)
-----------------------------------------------------------------------------------
Income (loss) before income taxes
and extraordinary item (5,963) (13,439) 12,888 (6,514) (1,752) - (8,266)
Provision (benefit) for income taxes (317) (5,107) 3,645 (D) (1,779) - (666)(D) (2,445)
-----------------------------------------------------------------------------------
Net income (loss) (5,646) (8,332) 9,243 (4,735) (1,752) 666 (5,821)
Accretive dividend 800 - - 800 - - 800
-----------------------------------------------------------------------------------
Net income (loss) available
to common stockholders $ (6,446) $ (8,332) $ 9,243 $ (5,535) $ (1,752) $ 666 $ (6,621)
===================================================================================
Net income (loss) per share:
Basic and diluted $ (0.37) $ (0.36)
======== ========
Weighted average shares outstanding (E):
Basic and diluted 17,201 18,453
======== ========
</TABLE>
-29-
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Datamedic
Pro Forma Pro Forma
InfoCure Datamedic Adjustments Combined
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Systems and software $ 25,659 $ 7,503 - $ 33,162
Maintenance, support and services 20,340 11,688 - 32,028
------------------------------------------------------------
Total revenue 45,999 19,191 - 65,190
------------------------------------------------------------
Operating expense:
Hardware and other items purchased for resale 10,860 5,607 - 16,467
Selling, general and administrative 30,522 26,213 - 56,735
Depreciation and amortization 1,840 2,436 - 4,276
Asset impairment and restructuring charges 11,136 1,916 - 13,052
------------------------------------------------------------
Total operating expense 54,358 36,172 - 90,530
------------------------------------------------------------
Operating income (loss) (8,359) (16,981) - (25,340)
Interest, net 482 293 - 775
Other, net (334) - - (334)
------------------------------------------------------------
Income (loss) before income taxes (8,507) (17,274) - (25,781)
Provision (benefit) for income taxes (1,132) - (6,564) (D) (7,696)
------------------------------------------------------------
Net income (loss) available to common stockholders $ (7,375) $(17,274) $ 6,564 $(18,085)
============================================================
Earnings per share:
Basic and Diluted $ (0.55) $ (1.23)
========== ==========
Weighted average shares outstanding (E):
Basic and Diluted 13,401 14,653
========== ==========
</TABLE>
30
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Datamedic
Pro Forma Pro Forma
InfoCure Datamedic Adjustments Combined
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Systems and software $ 12,378 $ 5,800 - $ 18,178
Maintenance, support and services 14,511 11,990 - 26,501
----------------------------------------------------------------
Total revenue 26,889 17,790 - 44,679
----------------------------------------------------------------
Operating expense:
Hardware and other items purchased for resale 7,838 5,763 - 13,601
Selling, general and administrative 17,070 19,306 - 36,376
Depreciation and amortization 587 1,864 - 2,451
----------------------------------------------------------------
Total operating expense 25,495 26,933 - 52,428
----------------------------------------------------------------
Operating income (loss) 1,394 (9,143) - (7,749)
Interest, net 191 504 - 695
Other, net (31) - - (31)
----------------------------------------------------------------
Income (loss) before income taxes 1,234 (9,647) - (8,413)
Provision (benefit) for income taxes (657) - (3,666) (D) (4,323)
----------------------------------------------------------------
Net income (loss) available to common stockholders $ 1,891 $ (9,647) $ 3,666 $ (4,090)
================================================================
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF
OPERATIONS
(A) Reflects reductions in compensation and certain other operating expenses
pursuant to applicable provisions of the agreement for InfoCure's purchase
of the assets of the Healthcare Systems Division ("HSD") of The Reynolds
and Reynolds Company that was effective in October, 1998.
(B) Reflects the purchase of HSD and its effect on (1) the reduction in
amortization expense for intangible assets not acquired and (2) the
increase in basis and application of uniform lives for fixed assets of
three to seven years.
(C) Records interest expense related to debt incurred to effect the purchase of
the HSD.
(D) Provides the effects of income taxes (1) on other pro forma adjustments and
(2) as though the companies filed consolidated tax returns.
(E) The weighted average number of shares used to calculate earnings per share
("EPS") for pro forma purposes included the following:
<TABLE>
<CAPTION>
Eleven Months Six Months Ended
Ended Year Ended June 30,
December 31, 1997 December 31, 1998 1998 -------- 1999
----------------- ----------------- ---- ----
<S> <C> <C> <C> <C>
Historical weighted average common shares
outstanding (adjusted for August 1999
2-for-1 stock split) .............................. 9,760,910 13,560,874 15,445,034 20,716,564
Shares assumed outstanding for the entire
period related to issuances for the 1999
pooled companies .................................. 3,640,054 3,640,054 1,185,592 1,185,592
Shares assumed to be issued for the
acquisition of Datamedic .......................... 1,252,381 1,252,381 1,252,381 1,252,381
---------- ---------- ---------- ----------
Weighted average shares-basic ..................... 14,653,345 18,453,309 17,883,007 23,154,537
InfoCure and Datamedic contingently issuable
shares ............................................ - (1) - (1) 4,508,148 5,860,151
---------- ---------- ---------- ----------
Weighted average shares-diluted ................... 14,653,345 18,453,309 22,391,155 29,014,688
========== ========== ========== ==========
</TABLE>
- ------------------------
(1) The impact of the assumed exercise of contingently issuable shares would be
antidilutive for the eleven months ended December 31, 1997 and for the year
ended December 31, 1998 and, accordingly, have not been presented.
-32-
<PAGE>
COMPARATIVE PER SHARE DATA
The pro forma condensed combined balance sheets give effect to the
merger as if it had occurred on June 30, 1999, combining the balance sheets of
InfoCure at December 31, 1998 and June 30, 1999 with that of Datamedic as of
March 31, 1999 and June 30, 1999, respectively. The pro forma condensed combined
statements of operations give effect to the merger as if it had occurred at the
beginning of the earliest period presented, combining the results of InfoCure
for the year ended January 31, 1997, the eleven months ended December 31, 1997,
the year ended December 31, 1998 and the six months ended June 30, 1998 and 1999
with those of Datamedic for each year in the three-year period ended March 31,
1999 and the six months ended September 30, 1998 and June 30, 1999,
respectively. Consequently, the results of Datamedic for the three months ended
March 31, 1999 are included in the pro forma condensed combined statement of
operations for both the year ended December 31, 1998 and the six months ended
June 30, 1999. Datamedic's revenue was approximately $5.9 million and net loss
was approximately $357,000 for the three months ended March 31, 1999. (See also
the pro forma combined condensed financial statements.)
The table below summarizes the following information:
. unaudited historical per share data of InfoCure and Datamedic;
unaudited pro forma combined per share data for each share of
. InfoCure common stock held immediately after the merger, giving
effect to the merger under the pooling of interests method of
accounting and as if the merger had been consummated as of the
beginning of the periods presented; and
. unaudited equivalent pro forma combined per share data for each
share of Datamedic common stock held immediately prior to the
merger. This information has been calculated by multiplying the pro
forma combined per share data of InfoCure Common Stock by an
assumed exchange ratio of 0.1252.
For purposes of this table, and consistent with InfoCure's historical
financial statements, per share data for the year ended January 31, 1997 is not
considered meaningful and has not been presented.
You should read this table with the selected financial information and
the pro forma financial statements included in this proxy statement-prospectus.
You should also read the historical financial statements of InfoCure and
Datamedic, which are included in this proxy statement-prospectus, in the case of
Datamedic, or which we have incorporated by reference into this proxy
statement-prospectus in the case of InfoCure. This pro forma data is not
necessarily indicative of what our results of operations or financial position
would have been if the merger had actually been consummated as of the beginning
of the periods presented. It is also not necessarily indicative of the future
operating results or financial position of the combined company. Neither
Datamedic nor InfoCure has paid cash dividends on its common stock. Accordingly,
no cash dividends per share data is presented below.
<TABLE>
<CAPTION>
Eleven Months Six Months Ended
Ended Year Ended June 30,
December 31, 1997 December 31, 1998 1998 1999
----------------- ----------------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) per share before extraordinary item--basic:
Historical-InfoCure ....................................... $ (0.55) $(0.37) $ 0.09 $ 0.38
Pro forma combined ........................................ (1.23) (0.36) 0.09 0.34
Historical-Datamedic ...................................... (13.78) (1.40) (0.67) (0.59)
Equivalent pro forma combined per
Datamedic share (1) ..................................... (0.15) (0.04) 0.01 0.04
Net income (loss) per share before extraordinary item--diluted:
Historical-InfoCure ....................................... (0.55) (0.37) 0.07 0.30
Pro forma combined ........................................ (1.23) (0.36) 0.07 0.27
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
Eleven Months June 30,
Ended Year Ended --------------------
December 31, 1997 December 31, 1998 1998 1999
----------------- ----------------- -------- --------
<S> <C> <C> <C> <C>
Historical-Datamedic........................................... (13.78) (1.40) (0.67) (0.59)
Equivalent pro forma combined per
Datamedic share (1).......................................... (0.15) (0.04) 0.01 0.03
</TABLE>
December 31, 1998 June 30, 1999
----------------- -------------
Book value per common share:
Historical-InfoCure (2) ................. $ 0.90 $ 4.16
Pro forma combined (2) .................. 0.94 4.04
Historical-Datamedic (2) ................ (0.73) (1.03)
Equivalent pro forma combined per
Datamedic share (1) ................... .12 0.51
Tangible book value per common share:
Historical-InfoCure (2) ................. (3.34) 1.09
Pro forma combined (2) .................. (3.05) 1.09
Historical-Datamedic (2) ................ (1.12) (1.38)
- -----------------------
(1) The equivalent Datamedic pro forma combined per share amounts are
calculated by multiplying the pro forma combined per share amounts by an
assumed exchange ratio of 0.1252.
(2) The historical and tangible book value per common share is computed by
dividing total stockholders' equity (excluding intangibles for tangible
book value amounts) by the number of shares of common stock outstanding
at the end of the period. The pro forma combined book value per share is
computed by dividing pro forma stockholders' equity (excluding
intangibles for tangible book value amounts) by the pro forma number of
shares of common stock outstanding at the end of the respective periods.
-34-
<PAGE>
THE SPECIAL MEETING
PURPOSE
InfoCure and Datamedic are furnishing this proxy statement-prospectus
to Datamedic stockholders in connection with the solicitation of proxies by
Datamedic's board of directors. The Datamedic board of directors will use the
proxies at the special meeting of stockholders of Datamedic to be held on
_____________, 1999 and at any adjournment or postponement thereof.
At the special meeting, you will be asked to vote upon the proposal to
approve the agreement and plan of merger attached to this proxy
statement-prospectus as Appendix A and to authorize the merger of Datamedic into
a wholly-owned subsidiary of InfoCure.
DATE, PLACE AND TIME
The special meeting of Datamedic's stockholders will be held on
_________ __, 1999, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., One Financial Center, Boston, Massachusetts, commencing at _____
a.m., local time.
RECORD DATE
The Datamedic board of directors fixed the close of business on
___________, 1999 as the record date for the special meeting. Accordingly, only
holders of Datamedic capital stock of record at the close of business on
________, 1999, will be entitled to notice of, and to vote at, the special
meeting.
DATAMEDIC STOCKHOLDERS ENTITLED TO VOTE
As of _________, 1999, there were outstanding _________ shares of
Datamedic common stock and _________ shares of Datamedic preferred stock and
such shares of Datamedic capital stock were held by ____ holders of record. Each
share of Datamedic capital stock entitles the holder thereof to one vote.
As of ________, 1999, directors and executive officers of Datamedic may
be deemed to be beneficial owners of ______% of the outstanding shares of
Datamedic preferred stock and ______% of the outstanding shares of Datamedic
common stock and preferred stock, taken together as a single class.
VOTE REQUIRED; VOTING AT THE MEETING
The holders of a majority of each series of Datamedic's preferred
stock, considered independently, and the holders of a majority of the
outstanding shares of Datamedic common stock and preferred stock, voting
together as a single class, is necessary for a quorum to exist at the special
meeting.
Approval of the agreement and plan of merger and authorization of the merger
requires:
. the affirmative vote of the holders of a 66-2/3% of all outstanding
shares of Datamedic's preferred stock, with the holders of each
series voting together as a single class, and
. the affirmative vote of the holders of a majority of the outstanding
shares of Datamedic preferred stock and common stock, voting
together as a single class.
-35-
<PAGE>
The holders of all of the shares of Datamedic preferred stock and
holders who collectively own approximately ___ % of the outstanding shares of
Datamedic common and preferred stock taken together as a class, have agreed to
vote in favor of the merger agreement and the merger.
On the record date, Datamedic's directors and executive officers and
affiliates owned _____% of the outstanding shares of Datamedic preferred stock,
and __________ shares, or approximately ______% of the outstanding shares of
Datamedic common stock and preferred stock, considered collectively. This number
does not include stock that the Datamedic directors and executive officers may
acquire through the exercise of stock options or warrants, or upon the
conversion of debentures.
On the record date and as of the date of this proxy
statement-prospectus, InfoCure's directors and executive officers owned no
shares of Datamedic capital stock.
VOTING OF PROXIES
All properly executed proxies received before the vote at the special
meeting, and not revoked, will be voted in accordance with the instructions
indicated on the proxies. If no instructions are indicated, such proxies will be
voted FOR the proposal to approve the merger agreement and the merger, and the
proxy holder may vote the proxy in its discretion as to any other matter which
may properly come before the meeting.
Any abstention will have the same effect as a vote AGAINST the approval
of the merger agreement and the merger.
A Datamedic stockholder who has given a proxy solicited by Datamedic's board of
directors may revoke it by
. giving written notice of revocation to the Secretary of Datamedic,
. delivering a later dated proxy to the Secretary of Datamedic, or
. attending the special meeting and voting in person.
Any written notice of revocation or subsequent proxy must be sent so as
to be delivered at or before the taking of the vote at the special meeting to
Datamedic Inc., 95 Sawyer Road, Waltham, Massachusetts 02453, Attention: Joseph
D. Hill, Secretary.
SOLICITATION OF PROXIES
The expenses of the solicitation of proxies for the special meeting
will be borne by Datamedic, except that InfoCure will pay expenses incurred in
connection with filing, printing and mailing this proxy statement-prospectus and
the forms of proxy to the Datamedic stockholders.
In addition to solicitation by mail, directors, officers and key
employees of Datamedic may solicit proxies in person or by telephone, telegram
or other means of communication. These persons will receive no additional
compensation for solicitation of proxies, but may be reimbursed for reasonable
out-of-pocket expenses.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXIES. A TRANSMITTAL
FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES FOR SHARES OF
DATAMEDIC WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION OF THE
MERGER.
-36-
<PAGE>
RIGHTS OF DISSENTING STOCKHOLDERS
By virtue of Section 262 of the Delaware General Corporation Law (the
"DGCL"), if holders of Datamedic capital stock exercise appraisal rights in
connection with the merger, any shares of Datamedic stock as to which such
appraisal rights are exercised will not be converted into the right to receive
shares of InfoCure common stock but instead will be converted into the right to
receive such consideration as may be determined to be due with respect to such
dissenting shares pursuant to the DGCL.
THE FOLLOWING SUMMARY OF THE PROVISIONS OF SECTION 262 OF THE DGCL IS NOT
INTENDED TO BE A COMPLETE STATEMENT OF THE PROVISIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 OF THE DGCL, A COPY OF
WHICH IS ATTACHED HERETO AS APPENDIX E AND IS INCORPORATED HEREIN BY REFERENCE.
If the merger is approved by the required vote of Datamedic's
stockholders, each holder of Datamedic capital stock who (1) files written
notice with Datamedic of an intention to exercise rights to appraisal of his
shares prior to the Meeting and (2) does not vote in favor of the merger and who
follows the procedures set forth in Section 262 will be entitled to have his
Datamedic stock purchased by the surviving corporation for cash at the fair
market value of the shares of Datamedic stock. The fair market value of shares
of Datamedic stock will be determined by the Delaware Court of Chancery,
exclusive of any element of value arising from the merger. The shares of
Datamedic capital stock with respect to which holders have perfected their
appraisal demand in accordance with Section 262 and have not effectively
withdrawn or lost such appraisal rights are referred to in this proxy
statement/prospectus as the "dissenting shares".
Within ten days after the effective date of the merger, InfoCure, as
the surviving corporation in the merger, must mail a notice to all stockholders
who have complied with (1) and (2) above notifying such stockholders of the
effective date of the merger. Within 120 days after the effective date such
holders of stock may file a petition in the Delaware Court of Chancery for the
appraisal of their shares, provided such holders may within 60 days of the
effective date withdraw their demand for appraisal. Within 120 days of the
effective time, the holders of dissenting shares may also, upon written request,
receive from the surviving corporation a statement setting forth the aggregate
number of shares with respect to which demands for appraisals have been
received.
If any holder of Datamedic capital stock who demands the appraisal and
purchase of the holder's shares under Section 262 fails to perfect, or
effectively withdraws or loses the right to such purchase, the shares of the
holder will be converted into a right to receive a number of shares of InfoCure
common stock in accordance with the terms of the merger agreement. Dissenting
shares lose their status as dissenting shares if:
. the merger is abandoned;
. the shares are transferred prior to their submission for the
required endorsement;
. the dissenting stockholder fails to make a timely written demand for
appraisal;
. the dissenting shares are voted in favor or the merger;
. neither Datamedic nor the stockholder files a complaint or
intervenes in a pending action within 120 days after mailing of the
approval notice; or,
. the stockholder delivers to InfoCure, as the surviving corporation,
a written withdrawal of the stockholder's demand for appraisal of
the dissenting shares.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS, IN WHICH EVENT A
DATAMEDIC STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION WITH RESPECT
TO THE HOLDER'S DISSENTING SHARES IN
-37-
<PAGE>
ACCORDANCE WITH THE MERGER AGREEMENT. IN VIEW OF THE COMPLEXITY OF THE
PROVISIONS OF SECTION 262 OF THE DGCL, DATAMEDIC STOCKHOLDERS WHO ARE
CONSIDERING OBJECTION TO THE MERGER SHOULD CONSULT THEIR OWN LEGAL ADVISORS.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of Datamedic has unanimously determined that the
terms of the merger agreement and the merger are in the best interests of
Datamedic and the Datamedic stockholders. Accordingly, the Datamedic board of
directors recommends that Datamedic stockholders vote FOR the proposal to
approve the merger agreement and the merger.
INTERESTS OF CERTAIN DATAMEDIC DIRECTORS, OFFICERS AND AFFILIATES IN THE MERGER
When considering the recommendation of the Datamedic board of
directors, you should be aware that certain Datamedic directors and officers
have interests in the merger that are different from, or are in addition to,
yours. Your board of directors was aware of these interests and considered them
in approving and recommending the merger.
Stock Options Accelerated Upon the Closing of the Merger. At the
closing of the merger, the vesting under stock options held by Stephen Kahane,
Joseph Hill, David Fetterolf and John Schafer, all current officers of
Datamedic, and Gerald Christopher and Peter Fetterolf, current members of the
Datamedic board of directors, will fully accelerate as set forth below:
Option Shares
Name Accelerated Exercise Price
- ---- ----------- --------------
Stephen Kahane ................................. 233,560 $ 2.25
President, Chief Executive Officer and
Director
Joseph Hill .................................... 51,630 2.25
Vice President and Chief Financial Officer
David Fetterolf ................................ 60,600 2.25
President, Physicians' Office Division
John Schafer ................................... 51,630 2.25
Vice President of Product Development
Gerald Christopher ............................. 51,630 2.25
Chairman of the Board of Directors
Peter Fetterolf ................................ 38,730 2.25
Director
All of the foregoing acceleration arrangements were pursuant to the terms of
pre-existing agreements with such parties.
Management Bonus Payments Upon the Closing of the Merger. Pursuant to a
Management Bonus Plan approved by the Datamedic board of directors in April
1998, at the closing of the merger the following officers and directors of
Datamedic will be entitled to receive the following bonuses if they remain
employees of Datamedic until such date:
-38-
<PAGE>
Name Bonus
---- -----
Stephen Kahane.................................. $235,000
Joseph Hill..................................... $60,000
David Fetterolf ................................ $80,000
John Schafer ................................... $60,000
Gerald Christopher.............................. $60,000
Assumption of Retirement Agreements. Upon consummation of the merger,
InfoCure will assume Datamedic's obligations to Henry Kilroy, a former executive
vice president of Datamedic and a current member of Datamedic's board of
directors, under a Consulting and Salary Continuation Agreement dated February
1990. Under this agreement, Mr. Kilroy will receive a retirement benefit of
$87,004 annually and medical, dental and life insurance benefits. These payments
and benefits will continue until March 31, 2010, with Mr. Kilroy receiving a 5%
annual cost of living adjustment.
InfoCure will also assume Datamedic's obligations to Peter Fetterolf,
the former Chairman of Datamedic and a current member of the Datamedic board of
directors, under an Employment Agreement dated February 1997. Under the
agreement, until December 31, 2001 Mr. Fetterolf will receive a retirement
benefit of $131,250 per year (75% of his salary prior to his retirement). After
December 31, 2001, Mr. Fetterolf will receive $87,500 per year, subject to an
annual cost of living adjustment. These payments will end upon the earliest of
(i) December 28, 2006; (ii) the sale of Datamedic's assets resulting in
consideration to the Datamedic's stockholders of at least $30 per share or (iii)
Datamedic's initial public offering. Under the agreement, Mr. Fetterolf is
entitled to receive payments at least through August 28, 2001. During the
retirement benefit payment period, Mr. Fetterolf will also be entitled to
supplemental health insurance.
Assumption of Bonus Obligation. InfoCure will also assume Datamedic's
obligation to pay accrued bonuses to Mr. Kilroy and Mr. Fetterolf in the amount
of $70,000 and $89,500, respectively. These bonuses were awarded to Mr. Kilroy
and Mr. Fetterolf in connection with the April 1994 sale of Datamedic's managed
practice services business.
Assumption of Debenture. Mr. Kilroy holds a Datamedic five year 10%
convertible subordinated debenture in the principal amount of $7,500. Mr. Kilroy
has the option to convert this debenture into 1,500 shares of Datamedic common
stock upon the consummation of the merger. If Mr. Kilroy does not elect to
convert the debenture, it will be assumed by InfoCure. See "THE MERGER AGREEMENT
- - EFFECT OF THE MERGER ON DATAMEDIC OPTIONS, WARRANTS AND CONVERTIBLE
SUBORDINATED DEBENTURES".
Assumption of Employment Agreements. InfoCure will assume Datamedic's
obligations to Dr. Kahane, Mr. Hill, Mr. David Fetterolf and Mr. Schafer under
the employment agreements described below and in "Business of
Datamedic--Executive Compensation."
Under Mr. Hill's employment agreement, Mr. Hill is eligible to receive
six months of salary and benefits coverage pursuant to an employment agreement
with Datamedic if his employment is terminated without cause following the
merger. If Mr. Hill is not employed on a full-time basis with a salary equal to
or greater than $140,000 at the end of his initial six-month severance period,
he is entitled to an additional three months of salary and benefits coverage.
Under both Mr. David Fetterolf's and Mr. Schafer's employment
agreements with Datamedic, each of Mr. David Fetterolf and Mr. Schafer is
eligible to receive a monthly salary for a period of six months if his
employment is terminated without cause. If either is employed prior to the end
of the six month severance period, that individual's severance payments will
cease effective with the commencement of his new
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employment.
At the closing of the merger, InfoCure may enter into new employment
agreements with Dr. Kahane and Mr. Hill. The terms of each of these employment
agreements have not yet been finalized.
Indemnification and Insurance. The Merger Agreement provides that after
the effective time of the merger, the Surviving Corporation will honor the
obligations of Datamedic that existed prior to September 3, 1999 to indemnify
Datamedic's present and former directors and officers and their heirs, executors
and assigns.
For three years after the effective time of the merger, the Surviving
Corporation has agreed to indemnify and hold harmless, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Articles of
Incorporation or Bylaws, each present or former director or officer of Datamedic
or any of its subsidiaries (including his or her heirs, executors and assigns)
against any costs, expenses and amounts paid in settlement of any claim, action,
suit, proceeding or investigation arising out of any act or omission in his or
her capacity as a director, or officer which occurred before the effective time
of the merger.
Further, the Surviving Corporation has agreed to maintain in effect
three-year tail, directors' and officers' liability insurance covering those
individuals who are currently covered by Datamedic's directors, officers and
company liability insurance policies.
DESCRIPTION OF THE TRANSACTION
The following information describes material aspects of the merger.
This description is only a summary of the terms and conditions of the merger
agreement. It is qualified in its entirety by the Appendices hereto, including
the text of the merger agreement, which is attached as Appendix A to this proxy
statement-prospectus and is incorporated herein by reference. You are urged to
read the Appendices in their entirety.
THE MERGER
The merger agreement provides for the acquisition of Datamedic by
InfoCure pursuant to the merger of Datamedic with and into a wholly-owned
subsidiary of InfoCure. The InfoCure subsidiary will be the surviving
corporation resulting from the merger.
WHAT YOU WILL RECEIVE IN THE MERGER
Each share of Datamedic preferred stock and common stock will be
exchanged for a fraction of a share of InfoCure common stock. This fraction will
be determined at the closing of the merger by dividing the adjusted number of
shares of InfoCure common stock, calculated in the manner described below, by
the number of shares of Datamedic common stock outstanding immediately prior to
the effective time, calculated on a fully diluted basis. The resulting fraction
is referred to as the "exchange ratio." The determination of Datamedic's common
stock on a "fully diluted basis" assumes (1) the payment of all accrued
dividends on the Datamedic preferred stock in shares of Datamedic common stock,
(2) the exercise of all Datamedic options and warrants, (3) the conversion of
all Datamedic convertible debentures and (4) the conversion of all shares of
Datamedic preferred stock, including accrued dividends, into shares of Datamedic
common stock.
The adjusted number of shares of InfoCure common stock is 1,191,626
plus a number determined by dividing the aggregate exercise price of all vested
Datamedic options and warrants outstanding at the effective time of the merger
by $21.3976 and minus a number determined by dividing the sum of the following
amounts by $21.3976:
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. total expenses of Datamedic and the preferred stockholders incurred
in connection with the merger;
. costs incurred by Datamedic in connection with its existing
litigation;
. costs of continuing errors and omissions insurance coverage for
directors and officers of Datamedic;
. the amount by which the total consolidated debt and accounts payable
of Datamedic exceeds $3,750,000 at closing; and
. the value of breaches of representations and warranties made by
Datamedic in the Merger Agreement exceeding $150,000.
The following example illustrates the calculation of the exchange ratio
based on the following assumptions:
. expenses in connection with the merger, including costs of
continuing directors and officers insurance coverage for directors
and officers of Datamedic are $900,000;
. costs related to Datamedic's existing litigation are $400,000;
. Datamedic's total consolidated debt and accounts payable do not
exceed $3,750,000;
. there are no breaches of any representations and warranties by
Datamedic; and
. the aggregate exercise price of the vested options and warrants is
$2,600,000.
Giving effect to these assumptions, the adjusted number of shares of
InfoCure common stock would be 1,252,381. This number is determined as 1,191,626
plus 121,509 shares (2,600,000 / 21.3976) and minus 60,754 shares (1,300,000 /
21.3976). Datamedic anticipates that the number of fully diluted shares of
Datamedic outstanding on the assumed merger closing date of November 30, 1999
will be approximately 10 million. The resulting exchange ratio in the example
thus is approximately .1252, which represents the number of shares of InfoCure
common stock to be issued in the merger for each outstanding share of Datamedic
common stock and for each share of common stock issuable upon conversion of
Datamedic's preferred stock. The actual exchange ratio will be determined at the
closing of the merger, and may be less than or greater than the exchange ratio
depicted in this example.
Holders of Datamedic common stock will receive that number of shares of
InfoCure common stock determined by multiplying the exchange ratio by the
number of shares of Datamedic common stock owned by them. Holders of Datamedic
preferred stock will receive that number of shares of InfoCure common stock
determined by multiplying the exchange ratio by the number of shares of
Datamedic common stock issuable at the effective time of the merger assuming the
conversion of their Datamedic preferred stock into shares of Datamedic common
stock and the payment of accrued preferred stock dividends in shares of
Datamedic common stock shares. InfoCure will not issue any fractional shares of
common stock. Rather, InfoCure will pay cash for any fractional share. The cash
payment will be in an amount equal to the fraction multiplied by $21.3976.
ESCROW AGREEMENT
Approximately 8% of the adjusted shares of InfoCure common stock to be
issued in the merger will be withheld from certain principal stockholders of
Datamedic and will be set aside in an escrow account as security for claims that
may be made against Datamedic in connection with the merger. A portion of such
shares (the "General Escrow Shares") will be held for a period ending on the
earlier of (1) one year after the merger is effective and (2) the publication of
audited financial statements of InfoCure for the first fiscal year-end following
the effective time of the merger (the "General Escrow Termination Date"). The
remaining escrow shares (the "Special Escrow Shares") will be held as security
for expenses incurred in defending, settling or pursuant to judgments obtained
in connection with Datamedic's existing litigation and will be
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released on the earlier of (1) three years after the merger is effective and (2)
the settlement or adjudication of all such litigation. A copy of the escrow
agreement is attached hereto as Appendix B. We encourage you to read the escrow
agreement.
__________________, will serve as the stockholder representative under
the escrow agreement. The stockholder representative will act on behalf of the
principal stockholders of Datamedic with respect to the indemnification
provisions of the merger agreement and the terms and conditions of the escrow
agreement.
At any time after InfoCure has published financial results covering at
least 30 days of combined operations of InfoCure and the surviving corporation,
the stockholder representative shall have the right to substitute cash in an
amount equal to the product of the number of shares of InfoCure common stock
then in escrow multiplied by the average per share closing price of InfoCure
common stock as quoted on Nasdaq in the 20 day trading period ending on the day
before the effective date of the merger (the "InfoCure Average Share Price").
If InfoCure becomes entitled to payment for an indemnification claim
with respect to a breach of Datamedic's representations and warranties, the
claim will be paid by distributing to InfoCure, either General Escrow Shares or
any cash substituted therefor. The number of General Escrow Shares to be
distributed in connection with any such claim will be equal to the dollar amount
of such claim divided by the InfoCure Average Share Price. If any such
indemnification claim is pending and unresolved on the General Escrow
Termination Date, the escrow agent will retain the disputed amount until the
claim is resolved and deliver the balance of the General Escrow Shares to the
principal stockholders. Upon resolution of the claim, the balance of the General
Escrow Shares, if any, held in escrow and not used to satisfy the claim, will be
returned.
If InfoCure becomes entitled to payment for expenses incurred in
defending, settling or pursuant to judgments obtained in connection with
Datamedic's existing litigation, such expenses will be paid by distributing to
InfoCure either Special Escrow Shares or any cash substituted therefor. The
number of Special Escrow Shares to be distributed in connection with such
expenses will be equal to the dollar amount of such expenses divided by the
InfoCure Average Share Price.
Any and all cash dividends on shares of InfoCure common stock held in
escrow will be retained in escrow until the escrow is distributed. The principal
stockholders will have the right to vote their shares held in their escrow
account.
EFFECT OF THE MERGER ON DATAMEDIC OPTIONS, WARRANTS AND CONVERTIBLE DEBENTURES
Options
When the merger is effective, each option granted under Datamedic's
stock option plans that is outstanding, whether or not exercisable, will convert
into an option to purchase InfoCure common stock. InfoCure will assume each
option in accordance with the terms of Datamedic's stock option plans and the
stock option agreement that evidences the option and will deliver InfoCure
common stock upon the exercise of each option. After the merger becomes
effective:
. InfoCure and its compensation committee will be substituted for
Datamedic and the committee of Datamedic's board of directors
administering Datamedic's plan;
. Each option assumed by InfoCure may be exercised only for shares of
InfoCure common stock;
. The number of shares of InfoCure common stock subject to the option
will be equal to the number of shares of Datamedic common stock
subject to the option immediately before the merger is
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completed multiplied by the exchange ratio and rounding up to the
nearest whole share; and
. The per share exercise price of each option will be adjusted by
dividing it by the exchange ratio and rounding up to the nearest
cent.
Notwithstanding the foregoing, each Datamedic option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code.
Warrants
When the merger is effective, each warrant to purchase Datamedic common
stock will convert into a warrant to purchase InfoCure common stock. InfoCure
will assume each warrant in accordance with the terms of the Warrant and will
deliver InfoCure common stock upon the exercise of the warrant. After the merger
becomes effective:
. Each warrant assumed by InfoCure may be exercised only for shares of
InfoCure common stock;
. The number of shares of InfoCure common stock subject to the warrant
will be equal to the number of shares of Datamedic common stock
subject to the warrant immediately before the merger is completed
multiplied by the exchange ratio and rounding up to the nearest
whole share; and
. The per share exercise price of each warrant will be adjusted by
dividing it by the exchange ratio and rounding up to the nearest
cent.
Convertible Subordinated Debentures
When the merger is effective, each convertible debenture granted under
the respective debenture instrument that is outstanding, will convert into a
debenture for InfoCure common stock. InfoCure will assume each debenture in
accordance with the terms of the respective debenture instrument that evidences
the debenture and will deliver InfoCure common stock upon the conversion of the
debenture. After the merger becomes effective:
. Each debenture assumed by InfoCure may be converted only into shares
of InfoCure common stock;
. The number of shares of InfoCure common stock subject to the
debenture will be equal to the number of shares of Datamedic common
stock subject to the debenture immediately before the merger is
completed multiplied by the exchange ratio and rounding up to the
nearest whole share; and
. The conversion price of each debenture will be adjusted by dividing
it by the exchange ratio and rounding up to the nearest cent.
For information with respect to stock options, warrants and convertible
subordinated debentures held by Datamedic's management, See "THE SPECIAL
MEETING--INTERESTS OF CERTAIN DATAMEDIC OFFICERS, DIRECTORS AND AFFILIATES IN
THE MERGER."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
InfoCure and Datamedic have not and do not intend to seek a ruling from
the Internal Revenue Service as to the federal income tax consequences of the
merger. Moreover, neither InfoCure nor Datamedic will obtain any written legal
opinion of counsel relating to the federal income tax consequences of the
merger.
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Therefore, each stockholder of Datamedic should consult his, her, or its
own tax advisor with respect to the tax consequences of the merger.
The following is a discussion of the anticipated federal income tax
consequences of the merger to stockholders of Datamedic. This discussion does
not address, among other matters:
. state, local, or foreign tax consequences of the merger;
. federal income tax consequences to Datamedic stockholders who are
subject to special rules under the Internal Revenue Code, such as
foreign persons, tax-exempt organizations, insurance companies,
financial institutions, dealers in stocks and securities, persons
who hold such stock as part of a "straddle" or "conversion
transaction" for federal income tax purposes, and persons who do not
own such stock as a capital asset;
. federal income tax consequences affecting shares of Datamedic common
stock acquired upon the exercise of stock options, stock purchase
plan rights, or otherwise as compensation;
. the tax consequences to holders of warrants, options, or other
rights to acquire shares of such stock;
. the tax consequences to holders who are not citizens or residents of
the United States;
. the tax consequences to InfoCure and Datamedic resulting from any
required change in accounting methods; and
. the tax consequences to InfoCure and Datamedic of any income and
deferred gain recognized pursuant to Treasury Regulations issued
under Section 1502 of the Internal Revenue Code.
Assuming that the merger is completed in accordance with the merger
agreement, it is anticipated that the following federal income tax consequences
will occur:
. The merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and each of InfoCure and
Datamedic will be a party to the reorganization within the meaning
of Section 368(b) of the Code.
. No gain or loss will be recognized by the stockholders of Datamedic
as a result of the exchange of all of the shares of Datamedic
capital stock that they own solely for InfoCure common stock
pursuant to the merger.
. The aggregate tax basis of InfoCure common stock to be received by
the stockholders of Datamedic (who exchange all of their Datamedic
capital stock solely for InfoCure common stock in the merger) will
be the same as the aggregate tax basis of the Datamedic capital
stock surrendered in exchange therefor.
. The holding period of the InfoCure common stock to be received by
stockholders of Datamedic (who exchange all of their Datamedic
capital stock solely for InfoCure common stock in the merger) will
include the holding period of the Datamedic capital stock
surrendered in exchange therefor, provided the Datamedic shares were
held as a capital asset by the stockholders of Datamedic on the date
of the exchange.
. The payment of cash to stockholders of Datamedic in lieu of
fractional share interests of InfoCure common stock will be treated
for federal income tax purposes as if the fractional shares were
distributed as part of the exchange and then were redeemed by
InfoCure. These cash payments will be treated as having been
received as distributions in full payment in exchange for the
InfoCure common stock redeemed, and will give rise to taxable gain
or loss subject to the provisions and limitations of Section 302 of
the Internal Revenue Code.
. Where solely cash is received by a stockholder of Datamedic in
exchange for Datamedic capital stock pursuant to the exercise of
dissenters' rights, such cash will be treated as having been
received in redemption of such holder's Datamedic capital stock and
will give rise to taxable gain or loss subject to the provisions and
limitations of Section 302 of the Internal Revenue Code.
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A successful Internal Revenue Service challenge to the reorganization
status of the merger generally would result in Datamedic stockholders (who
exchange all of their Datamedic capital stock solely for InfoCure common in the
merger) recognizing gain or loss equal to the difference between the fair market
value of the InfoCure common stock received in the merger and such Datamedic
stockholders' tax basis in their Datamedic capital stock surrendered in the
merger.
The foregoing discussion is not intended to be a complete analysis or
description of all potential United States federal income tax consequences or
any other consequences of the merger. Tax consequences of the merger may vary
depending upon the particular circumstances of each stockholder of Datamedic.
Accordingly, stockholders of Datamedic are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger, including
the applicability and effect of state, local, and foreign tax laws.
BACKGROUND OF AND REASONS FOR THE MERGER
Background to the Merger.
The healthcare practice management systems is undergoing a period of rapid
consolidation favoring large scale providers that can quickly develop new and
diverse software applications and provide enhanced services to healthcare
practitioners. Datamedic believes that its smaller size relative to that of many
of its competitors and its limited access to capital resources may inhibit its
future growth in revenues and profitability. Accordingly, for a period of time
the Datamedic board of directors had considered various alternative means of
increasing Datamedic's capital resources through a possible combination, whether
through sale, merger or joint venture, with a strong partner in the healthcare
systems industry which could provide Datamedic with additional capital resources
as well as a competitive advantage. In addition, several unsolicited indications
of interest in Datamedic as a strategic acquisition compelled the Datamedic
board of directors' inclination to consider a variety of strategic alternatives.
In October 1998, Datamedic engaged Broadview International, L.L.C. to serve as
Datamedic's financial advisor.
On November 11, 1998, Mr. Richard Perlman, InfoCure's Chairman, Mr.
Frederick Fine, InfoCure's President and Chief Executive Officer, and Mr. James
Price, InfoCure's Executive Vice President met with Dr. Stephen Kahane,
Datamedic's President and Chief Executive Officer at an industry conference in
New York City. At the meeting, among other things, the representatives described
their respective business operations, product technology and recent historical
financial results. The parties agreed to engage in further discussion regarding
ways in which the two companies could work together.
On December 29, 1998, the same group along with Mr. Joseph Hill,
Datamedic's Chief Financial Officer, met in Atlanta, Georgia. The group reviewed
in more detail the nature of Datamedic's technology and product offerings, as
well as Datamedic's customer base and sales distribution partners. A more
detailed review of InfoCure's operation was completed and included more
information about InfoCure's business, customers and products. In addition,
attendees of the meeting held preliminary discussions about the possibility of a
combination of the two companies and described briefly what each company could
contribute to a combination.
In mid-January, 1999, Mr. Don Rogers, Mr. Wes Campell, Mr. Lance
Cornell, Ms. Clarissa Windham, Ms. Jane Houghton, Mr. Fine, and Mr. Price met at
Datamedic's offices in Waltham, Massachusetts with Dr. Kahane and Mr. Hill and
representatives of Broadview, as well as Datamedic's Vice President of Product
Development, Mr. John Schafer, to discuss further the nature of Datamedic's
technology and product offerings, Datamedic's customer base and its sales
distribution partners.
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On February 12, 1999, during a conference call among Mr. Price, Mr.
Perlman, Mr. Fine, Dr. Kahane, Mr. Seth Seigle and Mr. Alec Ellison, InfoCure
expressed its decision not to proceed at that time with discussions regarding
the proposed combination, but did express a continuing interest particularly in
the ophthalmologic division of Datamedic. No further talks followed for a period
of time.
In early May 1999, a representative of Broadview contacted Mr. Price to
relay Datamedic's interest in proceeding with discussions as they related to the
practice management software segment of Datamedic.
On May 19, 1999, InfoCure submitted a preliminary proposal of certain
financial terms for a transaction with Datamedic. This preliminary offer was
rejected by Datamedic and the two parties held further discussions during the
next several weeks regarding both Datamedic's existing technology portfolio and
future product offerings currently in development. During this period, the
parties held further discussions regarding a number of important aspects of a
possible merger, including material financial terms and related organizational
issues. In late May 1999, discussions were concluded without resolution. No
substantial discussions or meetings were held again until early July 1999.
In early July, 1999 Mr. Price called Dr. Kahane to express a continuing
interest in Datamedic. Dr. Kahane was interested and requested that discussions
continue with regard to a potential merger transaction involving the entire
company as opposed to any one operating division.
On July 8, 1999, InfoCure submitted a proposal of certain financial
terms for the merger of Datamedic with InfoCure. Datamedic's board of directors
reviewed the offer with Dr. Kahane and Mr. Hill and provided them authority to
negotiate a final letter of intent to merge with InfoCure. A final letter of
intent was signed on July 16, 1999.
During the second half of July 1999, representatives of InfoCure and
Datamedic exchanged due diligence request lists and representatives of both
companies and their advisors participated in a series of meetings in Waltham,
Massachusetts, Hauppauge, New York and Atlanta, Georgia, as well as numerous
telephone calls to conduct reciprocal legal, business, accounting and financial
due diligence.
On July 26, 1999, Mr. Rogers, Mr. Campbell, Mr. Fine, Ms. Windham and
Ms. Houghton visited Datamedic's offices in Waltham, Massachusetts and
Hauppauge, New York to review financial and operational issues associated with
the due diligence activity.
On July 27, 1999, InfoCure's counsel delivered a first draft of the
merger agreement to Datamedic and its counsel. On July 31, 1999, Datamedic and
its counsel provided written comments on this draft to InfoCure and its counsel
and, during the following month, InfoCure and Datamedic and their counsel
continued to negotiate the provisions of the merger agreement.
On August 25, 1999, Mr. Perlman, Mr. Fine and Mr. Price gave
presentations to members of the Datamedic board of directors, both in person and
via telephone conference call, at the offices of Broadview in New York. The
presentations were designed to further introduce the Datamedic board members to
InfoCure, its vision and its leadership.
On August 26, 1999, Mr. Perlman, Mr. Price and InfoCure's lawyers met
with Dr. Kahane, Mr. Hill and Datamedic's lawyers in Boston, Massachusetts to
discuss timing of the transaction and further negotiate terms and conditions of
the transaction.
On August 31, 1999, the Datamedic board of directors held a special
telephone meeting at which the Datamedic board of directors reviewed the terms
of the merger agreement, the voting agreement and the
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escrow agreement and considered the factors set forth below under the heading
"--DATAMEDIC'S REASONS FOR THE MERGER." After consideration, the Datamedic board
unanimously approved the merger agreement and the merger, subject to the
approval of the Datamedic stockholders.
On September 3, 1999, the InfoCure board members were briefed on the
status of discussion between InfoCure and Datamedic and reviewed the relevant
financial, accounting and legal considerations of the proposed transaction as
contemplated by the merger agreement. After due consideration, the InfoCure
board unanimously approved the merger agreement and the related matters
described in this document.
Following the approval of the merger by the InfoCure board and the
Datamedic board, on September 3, 1999, InfoCure and Datamedic executed the
merger agreement. On September 8, 1999, InfoCure and Datamedic issued a joint
press release prior to the opening of trading on the Nasdaq National Market.
Datamedic's Reasons for the Merger.
The Datamedic board of directors has determined that the merger is in
the best interests of Datamedic and its stockholders and has unanimously
approved the merger agreement. In reaching its determination, the Datamedic
board of directors considered a number of factors, without assigning any
relative weights to such factors, including, but not limited to, the following:
. Datamedic's need to gain access to additional resources. Although
Datamedic believed it has the ability to operate profitably in the
future and generate sufficient cash flow to service its short-term
obligations, Datamedic believed its limited access to capital
resources may inhibit its growth in revenues and profitability.
. The effect on the Datamedic stockholders of Datamedic continuing as
an independent entity compared to the effect of a combination with
InfoCure. The Datamedic board determined that an integration of
Datamedic with InfoCure, given InfoCure's greater marketing, sales
and financial resources, may provide a better opportunity for the
long-term success of Datamedic's product offerings and thereby
maximize value for the Datamedic stockholders.
. The synergies that existed between InfoCure's business and
operations and Datamedic's business and operations. InfoCure and
Datamedic share similar types of customers and technologies. They
also share a similar vision, strategy and philosophy of doing
business in the physician office market place. As a result, the
combination provides the combined entity with the opportunity to
capitalize on the parties' respective existing relationships with
customers and vendors in order to cross-market their respective
products and services.
. The financial performance and condition, businesses and prospects of
Datamedic and InfoCure, including, but not limited to, information
with respect to the historical stock prices of InfoCure and the
respective operating performances of Datamedic and InfoCure.
. The terms of the merger agreement, including the form and amount of
the consideration to be received by the Datamedic stockholders, the
terms and structure of the merger, and the size and nature of the
escrow. The Datamedic board of directors deemed it significant that
the merger would provide the stockholders of Datamedic with InfoCure
common stock for which there is an active and liquid trading market,
in exchange for their Datamedic capital stock, for which there is no
established trading market or other means to readily achieve
liquidity.
. That the merger is expected to be a tax-free transaction to the
Datamedic stockholders and is expected to qualify as a pooling of
interests transaction for accounting and financial reporting
purposes.
. That the merger affords the Datamedic stockholders the opportunity
to reduce the exposure inherent in Datamedic's reliance on a few
products and services in a relatively discrete market,
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and the difficulties Datamedic faces in competing against larger
companies with more diversified product lines and greater financial
resources.
In reaching its conclusion, the Datamedic board of directors also
considered the following factors, which it believed did not favor entering into
the merger agreement:
. A combination with InfoCure could prevent it from seeking other
avenues of maximizing the value of the Datamedic capital stock,
including pursuing an initial public offering of the Datamedic
common stock or seeking a business combination with a third party
that offered greater value to the Datamedic stockholders.
. The merger could prevent Datamedic from maximizing the value of the
Datamedic capital stock by pursuing its existing strategic plan as
an independent entity and that, after the merger, the holders of
Datamedic capital stock who receive shares of InfoCure common stock
in the merger will have to rely on the operating success of InfoCure
to maximize the value of their investment.
. All of the consideration that would be received by the Datamedic
stockholders in the merger would consist of InfoCure common stock,
rather than cash, and holders of Datamedic preferred stock would be
forced to relinquish certain preferential rights. See "--EFFECT OF
THE MERGER ON RIGHTS OF STOCKHOLDERS."
. The merger could adversely affect Datamedic's existing relationships
with customers and partners.
In reaching its conclusions set forth above, the Datamedic board was
aware of the potential benefits to be realized by its officers and directors in
the merger, including those described below under the caption "INTERESTS OF
CERTAIN PERSONS IN THE MERGER," but did not believe any of those benefits to be
different in any material way from those to be realized by other Datamedic
stockholders in the merger.
Other than those considerations described above which the Datamedic
board of directors believed did not favor entering into the Merger Agreement,
the Datamedic board of directors did not identify any particular risks or
adverse effects on non-affiliated Datamedic stockholders.
The foregoing discussion of certain information and factors deemed
material by the Datamedic board in considering the merger agreement and the
merger is not intended to be exhaustive but is believed to include all material
factors considered by the Datamedic board of directors.
THE BOARD OF DIRECTORS OF DATAMEDIC HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS TO THE STOCKHOLDERS OF DATAMEDIC THAT YOU
APPROVE THE MERGER AGREEMENT AND THE MERGER.
InfoCure's Reasons for the Merger.
In adopting the merger agreement and the merger, InfoCure's board of
directors considered a number of factors concerning the benefits of the merger.
Without assigning any relative or specific weights to the factors, InfoCure's
board of directors considered the following material factors, among others:
. Datamedic's strong positions in oncology and ophthalmology, two new
specialties that InfoCure wanted to enter, in addition to the
existing major market share Datamedic has in the emergency medicine
and general medicine segments.
. Datamedic's existing customer base.
. Datamedic's $20,000,000 in revenues of which recurring revenue is
estimated to exceed $10,000,000 annually.
. Datamedic's proprietary practice management and clinical software.
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. Datamedic's in-house processing operations, which can be
economically consolidated with InfoCure's existing operations.
InfoCure's board of directors determined that the merger was in the
best interests of InfoCure and its stockholders, and unanimously approved the
proposed merger on September 3, 1999.
REPRESENTATIONS AND WARRANTIES
Both parties made a number of representations and warranties in the
merger agreement regarding aspects of our respective businesses, financial
condition, structure and other facts pertinent to the merger.
Datamedic's representations and warranties include representations as to:
. Datamedic's and all subsidiaries' corporate organization, good
standing, corporate power
. Datamedic's corporate power and authority to enter into the merger
agreement
. Datamedic's capitalization
. Datamedic's financial statements
. Datamedic's books and records
. real property interests of Datamedic
. condition and sufficiency of assets of Datamedic
. Datamedic's accounts receivable
. Datamedic's inventory
. Datamedic's liabilities
. Datamedic's taxes
. material adverse changes in Datamedic's business since June 30, 1999
. Datamedic employee benefit matters
. Datamedic's compliance with legal requirements and governmental
authorizations
. legal proceedings or orders involving Datamedic
. absence of certain changes and events since June 30, 1999
. Datamedic's material contracts
. Datamedic's insurance
. environmental matters that apply to Datamedic
. Datamedic employees
. Datamedic's government contracts
. Datamedic's intellectual property rights
. certain payments
. Datamedic's relationships with related persons
. Datamedic's brokers or finders
. labor relations matters and compliance affecting Datamedic
. disclosure
InfoCure's representations and warranties include representations as to:
. InfoCure's corporate organization
. authorization of the merger agreement by InfoCure
. absence of restrictions and conflicts to InfoCure consummating the
merger
. InfoCure's capitalization
. InfoCure's filings and reports with the Securities and Exchange
Commission
. Litigation involving InfoCure
. disclosure
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. Absense of any proceedings to prevent, delay or make the merger
illegal
. InfoCure's brokers or finders
. InfoCure's tax representations.
COMPLETION OF THE MERGER
Subject to the conditions and the obligations of the parties to effect
the merger, the merger will be completed on the date and at the time specified
in the Certificate of Merger to be filed with each of the Delaware Secretary of
State and the Georgia Secretary of State.
InfoCure and Datamedic agree to exercise their respective best efforts
to cause the closing to take place on or before November 30, 1999. However,
unexpected delays can occur.
InfoCure and Datamedic cannot assure you that Datamedic will be able to
obtain necessary stockholder approval, that they will be able to obtain any
regulatory approvals required for the merger or that they will be able to
satisfy other conditions to completion of the merger. Either Datamedic's or
InfoCure's board of directors may terminate the merger agreement if the merger
is not completed by December 31, 1999, unless it is not completed because of the
breach of the merger agreement by the party seeking termination. See
"--CONDITIONS TO COMPLETION OF THE MERGER" and "--WAIVER, AMENDMENT, AND
TERMINATION."
DISTRIBUTION OF INFOCURE STOCK CERTIFICATES
Promptly after the merger is completed, you will be mailed a letter of
transmittal and instructions for the exchange of the certificates representing
shares of Datamedic capital stock for certificates representing shares of
InfoCure common stock.
You should not send in your certificates until you receive a letter of
transmittal and instructions.
After you surrender to the exchange agent certificates for Datamedic
capital stock with a properly completed letter of transmittal, the exchange
agent will mail you a certificate or certificates representing the number of
shares of InfoCure common stock to which you are entitled and a check for the
amount to be paid in lieu of any fractional share, without interest, if any,
together with all undelivered dividends or distributions in respect of the
shares of InfoCure common stock, without interest thereon, if any. InfoCure will
not be obligated to deliver the consideration to you, as a former Datamedic
stockholder, until you have surrendered your Datamedic capital stock
certificates.
Whenever a dividend or other distribution is declared by InfoCure on
InfoCure common stock with a record date after the date on which the merger was
completed, the declaration will include dividends or other distributions on all
shares of InfoCure common stock that may be issued in the merger. However,
InfoCure will not pay any dividend or other distribution that is payable after
the completion of the merger to you until you surrender the certificate. If your
Datamedic stock certificate has been lost, stolen, or destroyed, the exchange
agent will issue the shares of InfoCure common stock and any cash in lieu of
fractional shares upon your submission of an affidavit claiming the certificate
to be lost, stolen, or destroyed, the posting of a bond in such amount as
InfoCure may reasonably direct as indemnity against any claim that may be made
against InfoCure with respect to the certificate, and submission of any other
documents necessary to effect the exchange of the shares represented by the
certificate.
At the time the merger is completed, the stock transfer books of
Datamedic will be closed to Datamedic's stockholders and no transfer of shares
of Datamedic capital stock by any stockholder will
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thereafter be made or recognized. If certificates for shares of Datamedic
capital stock are presented for transfer after the merger is completed, they
will be canceled and exchanged for shares of InfoCure common stock, a check for
the amount due in lieu of fractional shares, if any, and any undelivered
dividends on the InfoCure common stock.
CONDITIONS TO COMPLETION OF THE MERGER
In addition to any required regulatory approvals, the merger will be
completed only if certain conditions, including, but not limited to the
following, are met or waived, if waivable:
. Datamedic stockholders approve the merger at the special meeting;
. InfoCure and Datamedic receive written confirmation from their
respective independent accountants concerning the pooling of
interests accounting treatment of the merger;
. InfoCure has not breached any of its representations or obligations
under the merger agreement in any material respect;
. Datamedic has not breached any of its representations or obligations
under the agreement such that there is a material adverse effect on
Datamedic;
. the shares of InfoCure common stock to be issued in the merger must
be approved for listing on the Nasdaq National Market;
. Datamedic and InfoCure receive opinions of counsel in forms
reasonably satisfactory to each;
. the absence of any law or order or any action taken by any court,
governmental, or regulatory authority of competent jurisdiction
prohibiting or restricting the merger or making it illegal;
. In addition to these conditions, the merger agreement, attached to
this proxy statement-prospectus as Appendix A, describes other
conditions that must be met before the merger may be completed.
InfoCure and Datamedic cannot assure you as to when or if all of the
conditions to the merger can or will be satisfied or waived by the party
permitted to do so. If the merger is not effected on or before December 31,
1999, except as described otherwise in this proxy statement-prospectus or the
merger agreement, the board of directors of either Datamedic or InfoCure may
terminate the agreement and plan of merger and abandon the merger. See
"--WAIVER, AMENDMENT, AND TERMINATION."
INDEMNIFICATION
Under the merger agreement, if the merger is completed, the principal
stockholders of Datamedic have agreed to severally, in proportion to each
principal stockholder's relative percentage ownership interest, indemnify
InfoCure against losses resulting from:
. the inaccuracy or breach of any representation or warranty of
Datamedic made in the merger agreement;
. the breach or failure to perform any covenant or agreement of
Datamedic or the principal stockholders made in the merger
agreement; and
. the pending litigation matters disclosed in the merger agreement.
The principal stockholders of Datamedic will not have liability to
InfoCure in connection with the breach of any representations and warranties
unless written notice asserting an indemnification claim is given prior to the
earlier of (1) one year after the effective time of the merger and (2) the
publication of audited consolidated financial statements of InfoCure for the
year ended December 31, 1999. However, InfoCure may seek indemnity for the
pending litigation matters at any time during the three year period following
the effective time of the merger. The principal stockholders of Datamedic will
have no liability with respect to these matters until the total of all losses
exceeds $300,000, in which event the stockholders shall be obligated
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to indemnify InfoCure for all such losses in excess of $300,000. In no event
will the aggregate liability of the principal stockholders exceed the aggregate
value of the shares of InfoCure common stock deposited in the escrow except for
claims relating to fraud or willful misrepresentations.
REGULATORY APPROVAL
Datamedic and InfoCure are not aware of any material governmental
approvals or actions that are required to complete the merger. Should, however,
any such approval or action be required, InfoCure and Datamedic have agreed that
they will seek such approval or action.
InfoCure and Datamedic believe that the merger can be effected in
compliance with the federal and state antitrust laws; however, there can be no
assurance that a challenge to the completion of the merger on antitrust grounds
will not be made or that, if such a challenge were made, InfoCure and Datamedic
would prevail or would not be required to accept certain adverse conditions in
order to complete the merger.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by law, the boards of directors of InfoCure and
Datamedic may agree in writing to amend the merger agreement, whether before or
after Datamedic's stockholders have approved it. In addition, before or at the
time the merger becomes effective, either Datamedic or InfoCure, or both, may
waive any default in the performance of any term of the merger agreement by the
other party or may waive or extend the time for the compliance or fulfillment by
the other party of any and all of its obligations under the merger agreement. In
addition, either InfoCure or Datamedic may waive any of the conditions precedent
to its obligations under the merger agreement, unless a violation of any law or
governmental regulation would result. To be effective, a waiver must be in
writing and signed by an authorized officer of Datamedic or InfoCure, as the
case may be.
At any time before the merger becomes effective, the boards of
directors of InfoCure and Datamedic may agree to terminate the merger agreement.
In addition, the merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after Datamedic obtains your
approval, by:
. Datamedic or InfoCure, if the transaction is not completed by
December 31, 1999, or such later date as may be agreed to by
Datamedic and InfoCure; however, neither Datamedic nor InfoCure may
terminate the agreement if its breach is the reason the transaction
has not been completed;
. Datamedic, if InfoCure breaches its representations, warranties or
obligations under the merger agreement in any material respect; and
. InfoCure, if Datamedic breaches its representations, warranties or
obligations under the merger agreement and the breach has a material
adverse effect on Datamedic, as defined in the merger agreement.
If the merger is terminated, the merger agreement will become void and have no
effect.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement obligates Datamedic to use its reasonable efforts
to maintain and preserve its business organization and to retain the services of
its officers and key employees and maintain relationships with customers,
suppliers and other third parties to the end that their goodwill and ongoing
business shall not be impaired in any material respect, and imposes certain
limitations on the operations of Datamedic and its subsidiaries. These items are
listed in Section 5.2 of the merger agreement which is attached as Appendix A to
this proxy statement-prospectus.
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Datamedic has also agreed that neither it nor any of its
representatives will directly or indirectly solicit, or participate in
negotiations with respect to, any proposal for the acquisition of Datamedic by a
third party other than InfoCure.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The merger will not change the present management team or board of
directors of InfoCure. Information concerning the management of InfoCure is
included in the documents incorporated by reference in this proxy
statement-prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
InfoCure Systems, Inc. will be the surviving corporation resulting from
the merger and will remain a wholly-owned subsidiary of InfoCure. InfoCure
Systems will continue to be governed by the laws of the State of Georgia.
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a pooling of
interests. Under the pooling of interests method of accounting, the recorded
amounts of the assets and liabilities of Datamedic will be carried forward at
their previously recorded amounts, and the consolidated financial statements of
InfoCure for all periods presented will be restated to include the financial
condition and results of operations of Datamedic.
In order for the merger to qualify for pooling of interests accounting
treatment, 90% or more of the outstanding Datamedic capital stock must be
exchanged for InfoCure common stock with substantially similar terms. There are
certain other criteria that must be satisfied in order for the merger to qualify
as a pooling of interests. Some of the criteria cannot be satisfied until after
the merger is completed. In addition, at the closing of the merger, InfoCure and
Datamedic shall have received written confirmation from their respective
independent accountants regarding the appropriateness of pooling of interests
accounting for the merger under Accounting Principles Board Opinion No. 16,
"Business Combinations," if the merger is completed in accordance with the
merger agreement.
Certain conditions will be imposed on the exchange of Datamedic capital
stock for InfoCure common stock in the merger by affiliates of Datamedic.
Certain restrictions will also be imposed on the transferability of the InfoCure
common stock received by those affiliates in the merger. These conditions and
restrictions will be imposed in order, among other things, to ensure the
availability of pooling of interests accounting treatment. For information
concerning these conditions and restrictions, see "--RESALES OF INFOCURE COMMON
STOCK."
FEES AND EXPENSES
If the merger is completed, InfoCure will pay its own costs and
expenses incurred in connection with the merger and will also pay the aggregate
of (i) the accounting and legal fees payable to Datamedic's accountants and
attorneys and the attorneys for the preferred stockholders in connection with
the merger and (ii) the fees payable by Datamedic to Broadview International,
L.L.C. in connection with the merger; except that the number of shares of
InfoCure common stock to be issued in connection with the merger shall be
reduced by, among other things, the number of shares equal to the sum of the
aforementioned expenses of Datamedic divided by $21.3976.
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RESALES OF INFOCURE COMMON STOCK
InfoCure common stock to be issued to you in the merger will be
registered under the Securities Act. All shares of InfoCure common stock
received by you in the merger will be freely transferable after the merger
provided you are not considered to be an "affiliate" of Datamedic or InfoCure.
"Affiliates" generally are defined as persons or entities who control, are
controlled by, or are under common control with Datamedic or InfoCure at the
time of the special meeting (generally, executive officers, directors, and 10%
or greater stockholders).
Rule 145 under the Securities Act restricts the sale of InfoCure common
stock received in the merger by affiliates of Datamedic and certain of their
family members and related entities. Under the rule, during the first 12-month
period after the merger is completed, affiliates of Datamedic or InfoCure may
resell publicly the InfoCure common stock they receive in the merger but only
within certain limitations as to the amount of InfoCure common stock they can
sell in any three-month period and as to the manner of sale. After the one-year
period, affiliates of Datamedic who are not affiliates of InfoCure may resell
their shares without restriction. InfoCure must continue to satisfy its
reporting requirements under the Securities Exchange Act, in order for
affiliates to resell shares of InfoCure common stock received in the merger
under Rule 145. Affiliates also would be permitted to resell InfoCure common
stock received in the merger pursuant to an effective registration statement
under the Securities Act or an available exemption from the registration
requirements of the Securities Act. This proxy statement-prospectus does not
cover any resales of InfoCure common stock received by persons who may be deemed
to be affiliates of Datamedic or InfoCure. InfoCure has agreed to file a
registration statement on Form S-3 promptly following the effective time of the
merger covering the resale of InfoCure common stock by each person who may be
deemed to be an affiliate of Datamedic.
The SEC's guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of InfoCure and Datamedic by
their affiliates in connection with the merger. The SEC's guidelines indicate
that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if such affiliates do not dispose of any of the shares of the
corporation they own, or shares of a corporation they receive in connection with
a merger, during the period beginning 30 days before the merger is completed and
ending when financial results covering at least 30 days of post-merger
operations of the combined companies have been published.
Each person who may be deemed to be an affiliate of Datamedic has
executed and delivered to InfoCure an agreement intended to ensure compliance
with the Securities Act, and to preserve the ability of the merger to be
accounted for as a pooling of interests. Each Datamedic affiliate has agreed not
to sell, pledge, transfer, or otherwise dispose of any Datamedic capital stock
held by the affiliate except as contemplated by the merger agreement or the
affiliate agreement. In addition, each Datamedic affiliate must agree not to
sell, pledge, transfer or otherwise dispose of any InfoCure common stock
received in the merger except in compliance with the Securities Act, and the
applicable rules, and until such time as financial results covering 30 days of
combined operations of InfoCure and Datamedic have been published. Prior to
publication of such results, InfoCure will not transfer on its books any shares
of InfoCure common stock received by an affiliate of Datamedic in the merger.
The stock certificates representing InfoCure common stock issued to affiliates
in the merger will bear a legend summarizing these restrictions on transfer.
VOTING AGREEMENT
The holders of all of the shares of Datamedic preferred stock and
holders of ___% of the outstanding shares of Datamedic's common stock and
preferred stock, taken together as a class, have agreed to vote in favor of the
merger agreement and the merger. The voting agreement terminates upon the
earlier to occur of
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(1) the termination of the merger agreement in accordance with its terms and (2)
the effective time of the merger.
On the record date, Datamedic's directors and executive officers and
affiliates owned _____% of the outstanding shares of Datamedic preferred stock,
and __________ shares, or approximately ______% of the outstanding shares of
Datamedic common stock and preferred stock, considered collectively. This number
does not include stock that the Datamedic directors and executive officers may
acquire through the exercise of stock options or warrants, or upon the
conversion of debentures.
On the record date and as of the date of this proxy
statement-prospectus, InfoCure's directors and executive officers owned no
shares of Datamedic capital stock.
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MARKET PRICE AND DIVIDEND INFORMATION
InfoCure's common stock is traded on The Nasdaq National Market under
the symbol "INCX." The following table sets forth the range of high and low
closing sales prices reported on The Nasdaq National Market for InfoCure common
stock for the periods indicated:
HIGH LOW
---- ---
YEAR ENDING DECEMBER 31, 1999
Third Quarter (September 15, 1999) .............. $ 28.75 $ 18.50
Second Quarter .................................. 26.47 12.25
First Quarter ................................... 18.00 10.56
YEAR ENDED DECEMBER 31, 1998
Fourth Quarter .................................. 16.37 5.81
Third Quarter ................................... 8.47 6.37
Second Quarter .................................. 8.09 5.47
First Quarter ................................... 8.53 4.12
YEAR ENDED DECEMBER 31, 1997
Fourth Quarter .................................. 4.75 2.87
Third Quarter (beginning July 10, 1997) ......... 2.81 3.94
There has been no established public trading market for Datamedic capital stock.
RECENT CLOSING PRICES
The closing sales price per share of InfoCure common stock on The
Nasdaq National Market was (i) $21.125 on September 7, 1999, the last trading
day before we approved the merger agreement and (ii) $______ on ______________,
1999, the latest practicable day before the mailing of this proxy-statement
prospectus.
Because the market price of InfoCure common stock is subject to
fluctuation, the market value of the shares of InfoCure common stock that you
will receive in the merger may increase or decrease prior to and following the
merger. YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR INFOCURE COMMON
STOCK. NEITHER DATAMEDIC NOR INFOCURE CAN ASSURE YOU AS TO THE FUTURE PRICES FOR
INFOCURE COMMON STOCK.
DIVIDEND INFORMATION
InfoCure has never paid any cash dividends on its stock, and
anticipates that it will continue to retain any earnings for the foreseeable
future for use in the operation of their respective businesses.
NUMBER OF STOCKHOLDERS
As of ________________, there were ______ stockholders of record who
held shares of InfoCure capital stock and as of _______, 1999, there were ___
stockholders of record who held shares of Datamedic capital stock.
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BUSINESS OF INFOCURE
InfoCure is a leading national provider of healthcare practice
management software products and services. Its wide range of practice management
software automates the administrative, financial and clinical information
management functions for physicians, dentists and other healthcare
practitioners. InfoCure also provides its customers with ongoing maintenance and
support, training, electronic data interchange, or "EDI," services and
electronic commerce services. InfoCure's goal is to become the leading provider
of practice management systems to targeted healthcare practice specialties.
These specialties include anesthesiology, dentistry, general medicine, emergency
medicine, oral and maxillofacial surgery, orthodontics, dermatology, pathology,
podiatry and radiology. InfoCure believes that its ability to offer
state-of-the-art software products that serve the specific needs of these
healthcare practice specialties and its ability to sell additional products and
services to its existing customer base will help it achieve this goal. As of
September 15, 1999, more than 13,000 customer sites had installed InfoCure
systems. These sites represent approximately 75,000 healthcare providers, and
InfoCure has systems installed in all 50 states.
The principal executive offices of InfoCure are located at 1765 The
Exchange, Suite 500, Atlanta, Georgia 30339, and its telephone number at such
address is (770) 221-9990. Additional information with respect to InfoCure and
its subsidiaries is included in documents incorporated by reference in this
proxy statement-prospectus. See "WHERE YOU CAN FIND MORE INFORMATION."
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BUSINESS OF DATAMEDIC
Datamedic provides an integrated family of software products to
ambulatory care providers for electronic medical record and practice management.
Datamedic's main software products are CHARTstation, PMstation and CHARTnote.
CHARTstation is a software package that provides physicians with the
tools to manage patient information to obtain complete, accurate documentation
of patient visits and to automatically extract critical data necessary to manage
a patient's healthcare needs. CHARTstation allows physicians and other
healthcare personnel to use pen-based and/or speech-based input to create
digitally encoded patient notes at the point-of-care. Moreover, Datamedic has
developed software that can be used in specific medical disciplines. For
example, Datamedic has developed specialized software relating to the areas of
gastroenterology, emergency medicine, family practice, internal medicine,
oncology, ophthalmology, rehabilitation and renal medicine. Datamedic is
currently developing specialized software to be used in other medical
disciplines, including alternative medicine.
In a cost-conscious healthcare environment, CHARTstation allows for the
real-time capture and storage of data necessary for protocol implementation,
outcome assessment, and disease management programs. It also enables physicians
and healthcare providers to (i) reduce costs for medical transcription and other
documentation management, (ii) streamline billing procedures and (iii) improve
the overall quality and consistency of patient care.
PMstation is a full-featured, multi-specialty, Windows-based business
management information system offered to physician practices, management service
organizations and physician practice management organizations that enables these
organizations to manage their billing, scheduling and accounts receivables
management. While CHARTstation and PMstation can be used individually, together
they provide a complete information management solution for physicians and
healthcare organizations that span from individual physician practices to large
medical institutions.
CHARTnote is a Windows-based software module that enables organizations
to embed and integrate an electronic medical records system within their own
applications. CHARTnote allows software application vendors to quickly and
easily integrate clinical documentation and data collection facilities into
their own products. The module is database-independent and supports general
medicine as well as numerous specialties.
Finally, to complement its products, Datamedic also offers electronic
data interchange services to physicians. These services include the printing of
patient statements and month end reports, as well as providing system backup and
electronic claims assistance. The majority of Datamedic customers pay Datamedic
a regular maintenance and support fee for such services.
Datamedic has amassed a large installed base of over 1,100 customers,
representing approximately 2,000 sites and over 10,000 physicians. This client
base is spread throughout the United States, but is particularly strong in the
northeast and in California.
The Company concentrates on two specific areas of the ambulatory care
market:
. large medical institutions
. independent practice
With respect to large medical institutions, Datamedic provides products
and services to consolidators of office practices through a direct sales force
of two sales representatives and one telemarketer. Datamedic
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has also entered into agreements to partner with vendors who sell to large
health systems.
In the independent practice area, Datamedic provides products and
services to office practices ranging in size from 1 to 25 physicians. Datamedic
sells hardware, software and training services to these independent physician
practices primarily through two telephone-based sales forces and resellers.
As of September 1, 1999, Datamedic employed approximately 174 people in
four offices. Datamedic's two principal offices are as follows:
. Waltham, Massachusetts (headquarters and location of operations in
the large medical institution market); and
. Hauppauge, New York (independent practices operations).
Datamedic also maintains small offices in Milwaukee, WI and Pleasanton,
CA for back-office support of clients.
Executive Officers of Datamedic Joining InfoCure
Following the merger, Dr. Kahane and Mr. Hill may become executive
officers of InfoCure Systems. The following is a brief summary of the
backgrounds of Dr. Kahane and Mr. Hill.
Stephen N. Kahane, M.D. Dr. Kahane, age 42, joined Datamedic as
President and Chief Executive Officer in September 1996. Prior to joining
Datamedic, Dr. Kahane co-founded Clinical Information Advantages, Inc., an
electronic medical record company which was acquired by Datamedic in 1992. Dr.
Kahane holds a B.S. (1973) and an M.D. (1983) degree from Emory University, and
an M.S. in Computer Science from the Whiting School of Engineering, Johns
Hopkins University (1987). Dr. Kahane has been a director of Datamedic since
1995.
Joseph Hill, Mr. Hill, age 37, has been the Chief Financial Officer of
Datamedic since March 1997. From March 1992 until March 1997, Mr. Hill was the
Chief Financial Officer of the Process Business Group of Marcam Corporation, a
$250 million application software engineering and marketing firm. Mr. Hill
served as President of Marcam Argentina, a subsidiary of the Marcam Corporation,
between 1994 and 1997. Mr. Hill holds a B.S. in Business Administration from
Bryant College and an M.S. in Finance from Bentley College.
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Executive Compensation
Summary Compensation Table
The following table presents certain information concerning the
compensation paid or accrued for services rendered to Datamedic in all
capacities during the year ended March 31, 1999, for Dr. Kahane and Mr. Hill who
will both become executive officers of InfoCure Systems.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation(1)
------------------- ---------------
Securities All
Underlying Other
Name and Principal Position Salary Bonus Options(#) Compensation
- --------------------------- ------ ----- ---------- ------------
<S> <C> <C> <C> <C>
Stephen N. Kahane, M.D. .......................... $200,000 -- 421,800(2) $ 11,996(3)
Chief Executive Officer and
President
Joseph D. Hill ................................... $131,667 $ 10,000 86,050 $ 2,120(4)
Vice President and Chief
Financial Officer
</TABLE>
- --------------------
(1) Datamedic did not grant any restricted stock awards or stock appreciation
rights or make any long-term incentive plan payouts during fiscal year ended
March 31, 1999 to Dr. Kahane or Mr. Hill.
(2) Consists of (i) an option to purchase 372,600 shares of Datamedic common
stock granted to Dr. Kahane during the fiscal year ended March 31, 1999 and
(ii) an option to purchase 49,200 shares of Datamedic common stock which was
granted to replace existing options as a result of the repricing described
elsewhere in this proxy statement-prospectus. See "Option Grants in Last
Fiscal Year."
(3) Consists of a matching contribution of $603 made under Datamedic's 401(k)
plan on behalf of Dr. Kahane and premiums paid by Datamedic for life
insurance to Dr. Kahane in the amount of $11,393.
(4) Consists of premiums paid by Datamedic for life insurance to Mr. Hill in the
amount of $2,120.
Option Grants in Last Fiscal Year
The following table sets forth information concerning stock options
granted during the year ended March 31, 1999 to Dr. Kahane and Mr. Hill.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year (1) Share(2) Date
---- ------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Stephen N. Kahane, M.D ....... 372,600(3) 29.5% $ 2.25 4/7/08
49,200(4) 3.9% $ 2.25 4/7/08
Joseph D. Hill ............... 86,050(3) 6.8% $ 2.25 4/7/08
</TABLE>
- --------------------
(1) Datamedic granted options to purchase 1,263,250 shares of Datamedic common
stock to employees in the year ended March 31, 1999.
(2) All options were granted at fair market value as determined by the board of
directors of Datamedic based on all factors available to them on the grant
date. These factors included the history of, and prospects for, Datamedic
and the industry in which it competes, an assessment of Datamedic's past and
present operations and financial performance and the prospects of future
earnings.
(3) The option vests in four equal installments on April 7, 1999, April 7, 2000,
April 7, 2001 and April 7, 2002.
(4) In April 1998, the board of directors of Datamedic voted to reprice a
substantial number of the outstanding stock options of Datamedic to provide
that the exercise price of such options would be the fair market value of
the Datamedic common stock on April 7, 1998. Datamedic repriced the options
by amending them or canceling them and granting new replacement options.
The vesting schedule of the replacement options remained the same as the
prior repriced options. Dr. Kahane was granted an option to purchase 49,200
shares of Datamedic common stock as a replacement option.
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<PAGE>
Fiscal Year-End Option Values
The following table summarizes unexercised options held at March 31,
1999 by Dr. Kahane and Mr. Hill. Dr. Kahane and Mr. Hill did not exercise or
hold any stock appreciation rights and did not exercise any stock options during
the year ended March 31, 1999.
Number of
Unexercised
Options at
Fiscal Year End
-----------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Stephen N. Kahane, M.D. ..... 49,200 372,600
Joseph D. Hill............... - 86,050
Employment Contracts and Termination of Employment and Change-in Control
Arrangements
Datamedic has entered into an employment agreement with Dr. Kahane. The
agreement does not specify a term of employment. The agreement provides for Dr.
Kahane to receive an annual base salary of $200,000.00, and he is eligible to
participate in any management cash bonus program that is adopted by the board of
directors of Datamedic. Dr. Kahane is also entitled to certain fringe benefits,
including an automobile allowance, if approved by the Board of Directors, and
split-dollar life insurance. The agreement further provide that, if Datamedic
terminates Dr. Kahane's employment without cause, as defined in the agreement,
if he is terminated as a result of his disability or if Dr. Kahane terminates
his employment for "good reason", as defined in the agreement and which includes
his removal as president or chief executive officer of Datamedic, he is entitled
to severance pay for twelve (12) months following the date of termination. If
his termination is voluntary, by reason of his death or by Datamedic for
"cause", Datamedic has no obligation to pay severance beyond Dr. Kahane's
accrued base salary and bonus up to the date of termination. The agreement also
contains certain non-competition and non-disclosure covenants. See "Interests of
Certain Datamedic Directors, Officers and Affiliates in the Merger."
Datamedic has also entered into a severance arrangement with Joseph
Hill. See "Interests of Certain Datamedic Directors, Officers and Affiliates in
the Merger."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known by Datamedic
regarding the beneficial ownership of common stock, Series A convertible
preferred stock, Series B convertible preferred stock and Series C convertible
preferred stock as of September 3, 1999 by:
. each person known by Datamedic to be the beneficial owner of more
than 5% of its outstanding shares of common stock;
. each director of Datamedic;
. each executive officer of Datamedic; and
. all directors and executive officers of Datamedic as a group.
Unless otherwise indicated, the persons or entities listed below have
sole voting and investment power with respect to all shares of capital stock
owned by them.
Number of Shares Beneficially Owned
-----------------------------------
Percentages shown represent percent of class, except
That Percentage of Beneficially Owned Shares Represents
Percentage of all Classes of Common Stock and Preferred Stock
<TABLE>
<CAPTION>
Percentage of
Shares
Series A Series B Series C Beneficially
Name Common Preferred Preferred(1) Preferred Owned(2)(3)
- ---- ------ --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
CIBC Wood Gundy Ventures, Inc.(4) ......... -- -- -- 1,108,921 21.56%
c/o CIBC Capital Partners (34.99%)
161 Bay Street, 8th Floor
Toronto, ON M5J2S8
Vector Funds(5) ........................... -- -- -- 1,108,921 21.56%
c/o Vector Fund Management, L.P. (34.99%)
1751 Lake Cook Rd., Suite 350
Deerfield, IL 60015
Galen Funds(6) ............................ 498,707 -- 292,731 86,408 16.87%
c/o Galen Associates (38.57%) (36.36%) (2.72%)
610 Fifth Avenue, 5th Floor
New York, NY 10017-4011
Fidelity Ventures Limited(7) .............. 88,011 213,806 9,844 432,048 14.21%
c/o Fidelity Capital Associates, Inc. (6.81%) (49.99%) (31.81%) (13.63%)
82 Devonshire Street
R25C
Boston, MA 02109-3614
Bessemer Funds(8) ......................... 88,011 185,218 8,570 403,388 13.32%
c/o Bessemer Venture Partners (6.81%) (43.31%) (27.70%) (12.73%)
1400 Old Country Road, Suite 407
Westbury, NY 11590
Ranjan Lal(9) ............................. -- -- -- 1,108,921 21.56%
(34.99%)
Lori Koffman(10) .......................... -- -- -- 1,108,921 21.56%
(34.99%)
William R. Grant(11) ...................... 498,707 -- 292,731 86,408 16.87%
(38.57%) (36.36%) (2.72%)
Christopher F. O. Gabrieli(12) ............ 88,011 208,737 9,610 426,796 14.25%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares
Series A Series B Series C Beneficially
Name Common Preferred Preferred(1) Preferred Owned(2)(3)
- ---- ------ --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
(6.81%) (48.81%) (3.10%) (13.47%)
Peter Mann(13) ......................... 88,011 213,806 9,844 432,048 14.21%
(6.81%) (49.99%) (31.81%) (13.63%)
Stephen N. Kahane, M.D.(14) ............ 206,758 -- -- -- 3.87%
(14.43%)
Peter L. Fetterolf(15) ................. 194,647 -- -- -- 3.78%
(15.17%)
Henry P. Kilroy, Sr.(16) ............... 94,803 -- -- -- 1.83%
(7.52%)
Gerald N. Christopher(17) .............. 34,420 -- -- -- *%
(2.71%)
Joseph D. Hill(18) ..................... 34,420 -- -- -- *%
(2.71%)
Boine T. Johnson(19) ................... 12,500 -- -- -- *%
(1.00%)
All directors and executive officers ... 1,252,277 422,543 312,185 3,163,094 52.09%
as a group (13 persons)(20) ............ (65.57%) (98.88%) (99.92%) (99.83%)
- -----------
* Less than 1%.
</TABLE>
(1) Percentages reflect ownership in Series B-5 preferred stock only. Galen
Partners, L.P. owns 100% of Series B-1, B-2, B-3 and B-4 preferred stock.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to stock options and warrants
currently exercisable or exercisable within 60 days of September 3, 1999
are deemed to be outstanding for computing the percentage ownership of the
person holding the options and the percentage ownership of any group of
which the holder is a member, but are not deemed outstanding for computing
the percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of common stock shown beneficially owned by them.
(3) Percentage of ownership is based on shares of capital stock outstanding on
September 3, 1999.
(4) CIBC Wood Gundy Ventures, Inc. ("CIBC") has sole voting and investment
power with respect to these shares, and Ms. Koffman, a former Managing
Director of CIBC, expressly disclaims beneficial ownership of them. Ms.
Koffman is a director of Datamedic.
(5) Consists of 1,108,921 shares of Series C preferred stock owned by Vector
Later-Stage Equity Fund, L.P. and Vector Later-Stage Equity Fund II, L.P.
Mr. Lal is the Managing Director of Vector Fund Management, L.P. ("VFM")
and Vector Fund Management II, L.P. ("VFMII"), the sole General Partners of
each of Vector Later-Stage Equity Fund, L.P. and Vector Later-Stage Equity
Fund II, L.P. respectively. VFM and VFMII have sole voting and investment
power with respect to these shares. Mr. Lal, a director of Datamedic,
expressly disclaims beneficial ownership of these shares, except to the
extent of his pecuniary interest in the shares.
(6) With respect to common stock, consists of:
. 53,060 shares subject to currently exercisable warrants held by Galen
Partners, L.P.("GP") and 5,464 shares subject to currently exercisable
warrants held by Galen Partners International, L.P.("GPI");
. 399,138 shares owned by GP and 41,045 shares owned by GPI With respect
to Series B preferred stock, consists of:
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<PAGE>
. 26,667 shares of Series B-1 preferred stock, 12,953 shares of Series
B-2 preferred stock, 98,222 shares of Series B-3 preferred stock,
117,368 shares of Series B-4 preferred stock and 10,200 shares of
Series B-5 preferred stock owned by GP; and
. 2,745 shares of Series B-1 preferred stock, 1,333 shares of Series B-2
preferred stock, 10,111 shares of Series B-3 preferred stock, 12,082
shares of Series B-4 preferred stock and 1050 shares of series B-5
preferred stock owned by GPI ;
. With respect to Series C preferred stock, consists of: 78,343 shares
owned by GP and 8,065 shares owned by GPI.
Mr. Grant is the General Partner of BGW Partners, L.P. ("BGW"), the General
Partner of each of GP and GPI. BGW has sole voting and investment power
with respect to all of the shares described in this footnote. Mr. Grant, a
director of Datamedic, expressly disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest in such shares.
(7) With respect to common stock, consists of 88,011 shares subject to
currently exercisable warrants. Mr. Mann is a Vice President of Fidelity
Capital Associates, Inc., the General Partner of Fidelity Ventures Limited
Fidelity Capital Associates has sole voting and investment power with
respect to these shares, and Mr. Mann, a director of Datamedic, expressly
disclaims beneficial ownership of such shares.
(8) With respect to shares of common stock, consists of:
. 1,998 shares subject to a currently exercisable warrant held by BVP
Special Situations IV L.P. ("BVP"), 39,214 shares subject to currently
exercisable warrants held by Bessemer Venture Partners IV L.P.
("Bessemer") and 39,214 shares subject to currently exercisable
warrants held by Bessec Ventures IV L.P.("Bessec")
With respect to Series A preferred stock, consists of:
. 175,485 shares owned by Bessemer;
. 7,991 shares owned by BVP;
. 309 shares owned by the Belasarius Corporation;
. 92 shares owned by Rodney A. Cohen;
. 611 shares owned by Richard R. Davis;
. 92 shares owned by Adam P. Godfrey;
. 428 shares owned by Barbara M. Henagan;
. 916 shares owned by the Quentin Corporation;
. 153 shares owned by Robert J.S. Roriston; and
. 61 shares owned by Thomas F. Rhum.
With respect to Series B-5 preferred stock, consists of:
. 8,080 shares owned by Bessemer;
. 368 shares owned by BVP;
. 14 shares owned by the Belasarius Corporation;
. 4 shares owned by Rodney A. Cohen;
. 28 shares owned by Richard R. Davis;
. 4 shares owned by Adam P. Godfrey;
. 20 shares owned by Barbara M. Henagan;
. 42 shares owned by the Quentin Corporation;
. 7 shares owned by Robert J.S. Roriston; and
. 3 shares owned by Thomas F. Rhum.
With respect to Series C preferred stock, consists of:
. 196,180 shares owned by Bessemer;
. 8,275 shares by BVP;
. 196,181 shares owned by Bessec;
. 316 shares owned by the Belasarius Corporation;
. 95 shares owned by Rodney A. Cohen;
. 633 shares owned by Richard R. Davis;
. 95 shares owned by Adam P. Godfrey;
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<PAGE>
. 443 shares owned by Barbara M. Henagan;
. 949 shares owned by the Quentin Corporation;
. 158 shares owned by Robert J.S. Roriston; and
. 63 shares owned by Thomas F. Rhum.
Mr. Gabrieli is a manager of Deer IV & Co., L.L.C. ("Deer IV") which is the
General Partner of each of the Bessemer Funds. Mr. Gabrieli, a director of
Datamedic, shares voting and investment power with respect to all of the
shares described in this footnote with four other managers of Deer IV. Mr.
Gabrieli expressly disclaims beneficial ownership of such shares, except to
the extent of his pecuniary interest in such shares.
(9) See footnote 5 above.
(10) See footnote 4 above.
(11) See footnote 6 above.
(12) See footnote 8 above. In addition, these shares include (i) 21,381 shares
of Series A preferred stock, 984 shares of Series B-5 preferred stock and
22,143 shares of Series C preferred stock individually owned by Mr.
Gabrieli; and (ii) 1,222 shares of Series A preferred stock, 56 shares of
Series B preferred stock and1,265 shares of Series C preferred stock owned
by the Gabrieli Family Foundation. Mr. Gabrieli has sole voting and
investment power with respect to these shares.
(13) See footnote 7 above.
(14) Consists of 8,518 shares of common stock and 198,240 shares of common stock
subject to currently exercisable options. Does not include an additional
223,560 shares subject to options which are not currently exercisable but
which will accelerate upon the closing of the merger.
(15) Consists of 112,760 shares of common stock and 48,320 shares of common
stock subject to currently exercisable options. Does not include an
additional 38,730 shares subject to options which are not currently
exercisable but which will accelerate upon the closing of the merger. Also
consists of 8,567 shares of common stock owned by Mr. Fetterolf's wife,
Lucy T. Fetterolf and 25,000 shares of common stock owned by a trust for
the benefit of Mr. Fetterolf. Mr. Fetterolf disclaims beneficial ownership
of the shares owned by his wife and by the trust.
(16) Consists of the following shares of common stock: 53,803 shares, 22,500
shares subject to currently exercisable warrants, 1,500 shares subject to a
currently convertible debenture, 15,500 shares owned by a trust created
under a trust agreement among Mr. Kilroy, his wife and children and 1,500
shares of common stock subject to a currently convertible debenture owned
by Mr. Kilroy's wife, Marilyn Kilroy. Mr. Kilroy disclaims beneficial
ownership of the shares owned by his wife and by the trust.
(17) Consists of 34,420 shares of common stock subject to currently exercisable
options. Does not include an additional 51,630 shares subject to options
which are not currently exercisable but which will accelerate upon the
closing of the merger.
(18) Consists of 34,420 shares of common stock subject to currently exercisable
options. Does not include an additional 51,630 shares subject to options
which are not currently exercisable but which will accelerate upon the
closing of the merger.
(19) Consists of 12,500 shares of common stock subject to currently exercisable
warrants.
(20) Consists of 498,215 shares of common stock, 482,850 shares of common stock
subject to currently exercisable options, 467,599 shares of common stock
subject to currently exercisable warrants, 7,000 shares of common stock
subject to currently convertible debentures, 422,543 shares of Series A
preferred stock, 312,185 shares of Series B preferred stock and 3,163,094
shares of Series C preferred stock. See also footnotes 13, 14, 15, 16, 17,
18 and 19 above.
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<PAGE>
DATAMEDIC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations as of June 30, 1999 and for the three months ended June
30, 1999 and 1998 should be read in conjunction with the sections of Datamedic's
unaudited consolidated financial statements and notes thereto. In addition, the
portion of this Management's Discussion and Analysis of Financial Condition and
Results of Operations as of March 31, 1999 and March 31, 1998 and for the years
ended March 31, 1999, 1998 and 1997 should be read in conjunction with the
sections of Datamedic's consolidated audited financial statements and notes
thereto.
Results of Operations
Overview
Datamedic Holding Corp. provides an integrated family of software
products to ambulatory care providers for electronic medical record and practice
management. Datamedic's products provide physicians with the tools to manage
patient information to obtain complete, accurate documentation of patient visits
and to automatically extract critical data necessary to manage a patient's
healthcare needs. In addition, Datamedic offers a business management
information system offered to physician practices, management service
organizations and physician practice management organizations that enables these
organizations to manage their billing, scheduling and accounts receivables.
Datamedic has developed specialized software relating to the areas of
gastroenterology, emergency medicine, family practice, primary care, oncology,
ophthalmology, rehabilitation and renal medicine. Datamedic also offers
electronic data interchange services to physicians. These services include the
printing of patient statements and month end reports, as well as providing
system backup and electronic claims assistance. The majority of Datamedic
customers pay Datamedic a regular maintenance and support fee for such services.
In March 1998, Datamedic, in an effort to reduce expenses, implemented
cost-cutting measures and a company-wide restructuring. As a result of this
restructuring, Datamedic laid off approximately 90 employees in several
Datamedic departments.
It is difficult for Datamedic to forecast its revenues or earnings
accurately. Datamedic believes that period-to-period comparisons of its
operating results may not be meaningful and should not be relied upon as an
indication of future performance. In order to respond to competitive
developments, Datamedic may from time to time make pricing, service or marketing
decisions that could harm its business.
Three Months Ended June 30, 1999 compared to Three Months Ended June 30,
1998
Total Revenue. Datamedic's revenue primarily consists of fees resulting
from support and services to the independent practice area of the ambulatory
care market, sales of software systems and license fees from the large medical
institution market. Revenue for the three months ended June 30, 1999 was $4.92
million, a decrease of $30,400, or 0.1%, compared to revenue of $4.95 million
for the three months ended June 30, 1998. The decrease was primarily due to
lower license fees for original equipment and manufacturing and lower service
fees from the large medical institution market area of the ambulatory care
market. For the three months ended June 30, 1999, over 61.6% of Datamedic's
total revenue resulted from services and support revenue. This represents a
decrease of 7.3% as compared to sales to the same market for the three months
ended June 30, 1998.
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<PAGE>
Cost of Goods Sold. Cost of goods sold primarily consists of costs
relating to the purchase of third party hardware for use in Datamedic's products
and costs relating to the support and servicing of Datamedic's products. Cost of
goods sold for the three months ended June 30, 1999 was $3.0 million, an
increase of $114,300, or 4%, compared to cost of goods sold of $2.9 million for
the three months ended June 30, 1998. The increase was primarily due to
increased hardware purchases in conjunction with Year 2000 conversions and the
purchase of third party software for the independent practice area. Datamedic
expects that cost of goods sold as a percentage of revenue will remain the same
over the next several fiscal quarters.
Sales and Marketing. Datamedic's sales and marketing expenses primarily
consist of compensation for sales and marketing personnel, advertising, trade
show and other promotional costs and overhead costs. Sales and marketing
expenses for the three months ended June 30, 1999 were $672,000, a decrease of
$115,000, or 14.5%, compared to sales and marketing expenses of $787,000 for the
three months ended June 30, 1998. The decrease in expenses was primarily due to
a reduction in services provided by sales and marketing consultants and sales
promotion programs for the large medical institution market area of the
ambulatory care market. Datamedic expects that sales and marketing expenses will
remain constant over the next several fiscal quarters.
Research and Development. Datamedic's research and development expenses
consist primarily of compensation for product development staff and payments to
outside contractors. Research and development expenses for the three months
ended June 30, 1999 were $718,000, a decrease of $37,000, or 4.9%, compared to
research and development expenses of $755,000 for the three months ended June
30, 1998. The decrease was primarily due to a reduction in services provided by
research and development consultants. Datamedic expects that gross research and
development expenses will remain constant over the next several fiscal quarters.
General and Administrative. Datamedic's general and administrative
expenses consist primarily of compensation for personnel and legal and
accounting fees. General and administrative expenses for the three months ended
June 30, 1999 were $656,000, compared to general and administrative expenses of
$667,000 for the three months ended June 30, 1998. Datamedic expects that
general and administrative expenses will remain constant over the next several
fiscal quarters.
Depreciation and Amortization. Datamedic recognized depreciation and
amortization expenses of $211,000 for the three months ended June 30, 1999, a
decrease of $219,000, or 51.0%, compared to depreciation and amortization
expenses of $430,000 for the three months ended June 30, 1998. The decrease was
primarily due to a reduction in equipment purchases and certain assets becoming
fully depreciated. Datamedic expects that depreciation and amortization expenses
will decrease over the next several fiscal quarters because of less equipment
purchases during such quarters.
Interest Income/(Expense). Interest expense consists of interest
related to capital equipment leases and Datamedic's revolving line of credit.
Interest expense for the three months ended June 30, 1999 was $41,000, an
increase of $15,000, or 61.0%, compared to interest expense of $25,000 for the
three months ended June 30, 1998. The increase was primarily due to interest
expense incurred as a result of Datamedic's line of credit facility.
Net Loss. Datamedic recognized a net loss of $375,000 for the three
months ended June 30, 1999, representing a decrease of $222,000, or 37.0%,
compared to a net loss of $597,000 for the three months ended June 30, 1998. The
decrease was primarily due to lower sales and marketing expenses and lower
depreciation/amortization. Datamedic expects that its net loss will decrease
over the next several fiscal
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<PAGE>
quarters because of higher revenues expected from the large medical institution
market and Datamedic's original equipment manufacturing and the continued
reduction of expenses for depreciation and sales and marketing.
Income Taxes. Due to current year losses and the carryforward of
previous years' net operating losses, subject to certain Internal Revenue Code
limitations, Datamedic's income taxes are negligible for the quarter ended June
30, 1999.
Year Ended March 31, 1999 Compared to Year Ended March 31, 1998
Total Revenue. Datamedic revenue for the year ended March 31, 1999 was
$20.8 million, an increase of $1.6 million, or 8.6%, compared to revenue of
$19.2 million for the twelve months ended March 31, 1998. The increase was
primarily due to increased revenues from software sales and increased fees from
services to the independent practice area. For the year ended March 31, 1999,
Datamedic recognized revenue as a result of fees relating to its services and
customer support in the amount of $13.1 million, as compared to $11.7 million
for the year ended March 31, 1998, an increase of $1.4 million, or 12.0%. For
the year ended March 31, 1999, Datamedic recognized revenue as a result of sales
of its systems and from fees relating to licenses in the amount of $7.2 million,
as compared to $6.9 million for the year ended March 31, 1998, an increase of
$280,000, or 4.0%.
Cost of Goods Sold. Cost of goods sold for the year ended March 31,
1999 was $12.9 million, a decrease of $3.3 million, or 20.0%, compared to cost
of goods sold of $16.2 million for the year ended March 31, 1998. The decrease
resulted primarily from better margins on current sales and a reduction in
overhead costs, including outside consulting services, as a result of the
business restructuring in March 1998.
Sales. Selling expenses for the year ended March 31, 1999 were $3.2
million, a decrease of $2.1 million, or 39.5%, compared to selling expenses of
$5.3 million for the year ended March 31, 1998. The decrease was primarily due
to lower compensation, consulting services and sales programs within Datamedic's
corporate divisions as a result of a restructuring that took place in March
1998.
General and Administrative. General and administrative expenses for the
year ended March 31, 1999 were $2.8 million, a decrease of $2.5 million, or
46.7%, compared to general and administrative expenses of $5.3 million for the
year ended March 31, 1998. The decrease was primarily due to a reduction in
operating costs, related to Datamedic's restructuring in March 1998.
Research and Development. Research and development expenses for the
year ended March 31, 1999 were $2.5 million, a decrease of $2.5 million, or
49.3%, compared to research and development expenses of $5.0 million for the
year ended March 31, 1998. The decrease was primarily due to a reduction in
staff levels and a reduction of approximately $1.2 million in outside consulting
services as a result of Datamedic's restructuring in March 1998.
Depreciation and Amortization. Datamedic recognized depreciation and
amortization expenses of $1.0 million for the year ended March 31, 1999, a
decrease of $1.4 million, or 58.4%, compared to depreciation and amortization
expenses of $2.4 million for the year ended March 31, 1998. The decrease was
primarily due to a reduction in equipment purchases, certain assets becoming
fully depreciated and the write-down of approximately $718,000 of customer lists
in 1998.
Other Income (Expense). Datamedic recognized interest expense for the
year ended March 31, 1999 of $42,000, a decrease of interest expense of $251,000
from the year ended March 31, 1998. The decrease was primarily due to the
paydown of capitalized lease obligations in 1999 and other reductions of
long-term borrowings during fiscal 1998.
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<PAGE>
Net Loss. Datamedic recognized a net loss of $1.8 million for the year
ended March 31, 1999, a decrease of $15.5 million, or 89.9%, compared to a net
loss of $17.3 million for the year ended March 31, 1998. The decrease was
primarily due to a reduction in overall operating expenses due to Datamedic's
March 1998 restructuring and an improvement in operating margins.
Provision for Income Taxes. Due to the current year operating loss and
the carryforward of previous years' net operating losses, subject to certain
limitations, Datamedic's income taxes are negligible.
Year Ended March 31, 1998 Compared to Year Ended March 31, 1997
Total Revenue. Datamedic revenue for the year ended March 31, 1998 was
$19.2 million, an increase of $1.4 million, or 7.9%, compared to revenue of
$17.8 million for the year ended March 31, 1997. The increase was primarily due
to increased sales of products and services in the large medical institution
market and the original equipment and manufacturing areas. For the year ended
March 31, 1998, Datamedic recognized revenue as a result of fees relating to its
services and customer support in the amount of $11.7 million, as compared to
$12.0 million for the year ended March 31, 1997, a decrease of $300,000 or 2.5%.
For the year ended March 31, 1998, Datamedic recognized revenue as a result of
sales of its systems and fees relating to licenses in the amount of $6.9
million, as compared to $5.1 million for the year ended March 31, 1997, an
increase of $1.8 million, or 35.2%.
Cost of Goods Sold. Cost of goods sold remained relatively constant
both in total amount and as a percentage of revenue for the year ended March 31,
1998 compared to cost of goods sold for the year ended March 31, 1997.
Sales. Selling expenses for the year ended March 31, 1998 were $5.3
million, an increase of $1.4 million, or 36.6%, compared to selling expenses of
$3.9 million for the year ended March 31, 1997. The increase resulted primarily
from additional sales in 1998 and commissions on sales of software products.
General and Administrative. General and administrative expenses for the
year ended March 31, 1998 were $5.3 million, an increase of $2.7 million, or
102.4%, compared to general and administrative expenses of $2.6 million for the
year ended March 31, 1997. The increase was primarily due to Datamedic's hiring
of additional management personnel, support staff and related costs.
Research and Development. Research and development expenses for the
year ended March 31, 1998 were $5.0 million, an increase of $2.4 million, or
94.6%, compared to research and development expenses of $2.6 million for the
year ended March 31, 1997. The increase in 1998 resulted from an increase in
outside consulting services to develop new software products.
Depreciation and Amortization. Datamedic recognized depreciation and
amortization expenses of $2.4 million for the year ended March 31, 1998, an
increase of $572,000, or 30.7%, compared to depreciation and amortization
expenses of $1.9 million for the year ended March 31, 1997. The increase was
primarily due to the write-down of $718,000 of customer lists in 1998 offset by
a decrease in expense for assets becoming fully depreciated.
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Other Income (Expense). Datamedic recognized interest expense for the
year ended March 31,1998 of $293,000, a decrease in interest expense of $210,000
for the year ended March 31, 1997. The decrease was primarily due to the paydown
of long-term debt with part of the proceeds from the preferred stock offering.
Net Loss. Datamedic recognized a net loss of $17.3 million for the year
ended March 31, 1998, an increase of $7.7 million, or 79.1%, compared to a net
loss of $9.6 million for the year ended March 31, 1997. The increase was
primarily due to restructuring charges and other costs resulting from
Datamedic's efforts to improve the operations of the Company.
Provision for Income Taxes. Due to the current year losses and the
carryforward of prior years' net operating losses, subject to certain
limitations, Datamedic's income taxes are negligible.
Liquidity and Capital Resources
Since Datamedic's inception, Datamedic has financed its operations
primarily through net cash generated from operating activities and financing
from the sale of common stock, preferred stock and warrants and its revolving
line of credit.
As of June 30, 1999, Datamedic had cash and cash equivalents of
$261,000. In May 1999, Datamedic succeeded in obtaining a line of credit
facility in an aggregate of $2.0 million subject to certain restrictions and
covenants.
Net cash used in operating activities amounted to $625,000 for the
three months ended June 30, 1999. Cash outflows for the three months ended June
30, 1999 primarily consisted of cost of sales, professional fees and overhead
costs, offset in part by decreases in trade accounts receivable, inventory and
other receivables.
Net cash provided by financing activities for the three months ended
June 30, 1999 was $120,000. Net cash provided by financing activities for the
three months ended June 30, 1999 resulted primarily from Datamedic's draw down
of $127,000 from its revolving line of credit facility offset by principal
payments on capital lease obligations.
Datamedic had no material commitments for capital expenditures at June
30, 1999.
The Company believes that cash flow from operations and funds available
under its revolving credit facility will be sufficient to meet its operating
needs and debt service requirements during the next year.
Year 2000 Compliance
The "Year 2000 Problem" arose because many existing computer programs
use only the last two digits to refer to a year. Therefore, these computer
programs may recognize a year that ends in "00" as the Year 1900 rather than the
Year 2000. This could result in a significant disruption of operations and an
inability to process certain transactions.
Strategic Plan. In 1998, and continuing in early 1999, Datamedic
assessed both its internal computer systems and its products. It was determined
that some of Datamedic's internal computer systems and products were already
Year 2000 compliant, but that some products and systems were not.
After the completion of this internal review, steps were taken to
develop a strategy to fix Datamedic's non-compliant products. Additional
employees were assigned to work with outside vendors and consultants to
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ensure that Year 2000 compliance was achieved. By the spring of 1999, all but
one of Datamedic's products had been modified. These products are now believed
to be Year 2000 compliant.
Importantly, the software modifications required to bring the remaining
non-compliant product into compliance have been completed and the product is
currently at customer sites for final evaluation. All costs incurred to date
have been expensed. Datamedic believes that the final evaluation will be
completed by the end of October 1999. Once completed, Datamedic's customers who
use this product will be provided the software upgrade sometime in November
1999. Datamedic will provide the upgrade free of charge for all customers who
choose to install the software themselves. A large marketing effort has been
undertaken by Datamedic to notify all of its customers who use the product that
a software upgrade is necessary in order to bring the product into Year 2000
compliance.
With respect to certain internal computer systems, Datamedic has
purchased necessary hardware and software upgrades from third party vendors and
has made modifications to its own software systems to bring the majority of its
internal computer systems into compliance. However, Datamedic is still in the
process of obtaining a few remaining software upgrades from third parties.
Datamedic believes that it will have these upgrades in place by the end of
October 1999.
Costs. Datamedic has not tracked historical costs incurred to date
related to bringing its products and systems into Year 2000 compliance. However,
Datamedic does not believe that the costs of providing product upgrades to its
customers, including the marketing effort, as well as costs relating to the
purchase of certain upgrades from third parties will be material.
Risks. Datamedic continues to assess the potential risks associated
with non-compliance of its own internal systems and that of external third
parties. While it is understood that the potential effect on results of
operations and on that of third parties could be significant, at this time
management has not determined the entire potential level of risk.
Contingency Plan. At the present time, Datamedic does not believe that
a contingency plan is necessary. Management will continue to monitor the need
for a contingency plan based on the results of its Year 2000 strategic plan.
Quantitative and Qualitative Disclosure About Market Risk
Datamedic has reviewed the provisions of Financial Reporting Release
No. 48 "Disclosure of Accounting Policies for Derivative Financial Instruments
and Derivative Commodity Instruments, and Disclosure of Quantitative and
Qualitative Information about Market Risk Inherent in Derivative Financial
Instruments, Other Financial Instruments and Derivative Commodity Instruments."
Datamedic had no holdings of derivative financial instruments, commodity-based
instruments or other long-term debt obligations at June 30, 1999.
Certain Factors That May Affect Results of Operations
This proxy statement-prospectus contains "forward-looking statements"
that involve risks and uncertainties, such as statements concerning: growth and
future operating results of Datamedic and InfoCure; the benefits of the merger
to Datamedic, InfoCure and Datamedic stockholders; the anticipated closing date
of the merger; anticipated difficulties in integrating Datamedic's operations
with that of InfoCure's; additional charges and estimated transaction costs that
the combined company may encounter; the parties intent to account for the merger
as a "pooling of interests" business combination; the potential fluctuation in
market price of InfoCure common stock; the exchange ratio of the merger; the
number of shares of Datamedic capital
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stock outstanding on the closing date of the merger; the effects of
consolidation of the healthcare industry; InfoCure's ability to reduce salaries,
expenses and overhead; anticipated federal tax consequences resulting from the
merger; compliance with antitrust laws; InfoCure's ability to offer products
that serve specific needs of healthcare practice specialties; Datamedic's belief
that its size and limited access to capital resources may inhibit future growth;
future customer benefits attributable to Datamedic's or InfoCure's products;
developments in Datamedic's or InfoCure's markets and strategic focus; new
products and product enhancements; potential acquisitions and the integration of
acquired businesses, products and technologies; strategic relationships; and
future economic, business and regulatory conditions, future levels of
Datamedic's costs of goods sold, sales and marketing expenses, research and
development expenses, general and administrative expenses, depreciation and
amortization expenses and net loss; Datamedic's liquidity; and InfoCure's and
Datamedic's Year 2000 readiness.
Such forward-looking statements are generally accompanied by words
such as "project," "believe," "anticipate," "plan," "expect," "estimate,"
"intend," "believe," "should," "would," "could," or "may," or other words that
convey uncertainty of future events or outcomes. Although each of Datamedic and
InfoCure believes that such forward-looking statements are reasonable, neither
can assure you that such expectations will prove to be correct. Factors that
could cause actual results to differ materially from these forward-looking
statements are disclosed herein including, without limitation, in the "Risk
Factors" beginning on page 9. These factors and other cautionary statements
made in this document should be read as being applicable to all related forward-
looking statements whenever they appear in this document. Neither Datamedic nor
InfoCure undertakes any obligation to update any forward-looking statements.
References in this document to the terms "optimal" and "optimized" and words to
that effect are not necessarily intended to connote the mathematically optimal
solution, but may connote near-optimal solutions which reflect practical
considerations such as customer requirements as to response time and precision
of the results.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
The following discussion describes certain material differences between
the rights of InfoCure stockholders and the rights of Datamedic stockholders.
While we believe that the description covers the material differences between
the two, this summary may not contain all of the information that is important
to you. You should carefully read this entire proxy statement-prospectus and the
other documents we refer to for a more complete understanding of the differences
between being a stockholder of Datamedic and being a stockholder of InfoCure.
As a stockholder of Datamedic, your rights are governed by Datamedic's
amended and restated certificate of incorporation and amended bylaws, as
currently in effect. After completion of the merger, you will become a common
stockholder of InfoCure. As an InfoCure stockholder, your rights will be
governed by InfoCure's amended certificate of incorporation and InfoCure's
amended and restated bylaws. We are each incorporated under the laws of the
state of Delaware and accordingly, your rights as a stockholder will continue to
be governed by the Delaware General Corporation Law after completion of the
merger.
Classes of Common Stock of Datamedic and InfoCure
We each have one class of common stock issued and outstanding. Holders
of InfoCure common stock and holders of Datamedic common stock are each entitled
to one vote for each share held.
Board of Directors
Delaware law provides that a corporation's board of directors may be
divided into various classes with staggered terms of office. InfoCure's board of
directors is divided into three classes, as nearly equal in size as possible,
with one class being elected annually. Datamedic's board of directors is not
divided into classes and all directors are elected annually.
Number of Directors
InfoCure's board of directors may contain as few as three directors and
as many as twelve. Currently, there are six members. The exact number of
authorized directors within such range may be fixed from time to time by a
resolution adopted by InfoCure's board of directors. Datamedic's board of
directors may contain as few as four and as many as twelve. Currently there are
ten members. The minimum or maximum number of directors, within such range, may
be determined by a resolution of Datamedic's board of directors or by the
stockholders at the annual meeting.
Filling Vacancies on the Board
Any vacancy occurring on the InfoCure board of directors may be filled
by a vote of the majority of the remaining directors, though less than a quorum,
or by the sole remaining director, or if no director remains or if the vacancy
is not so filled, by the stockholders. Any vacancy that arises as a result of
the removal of a director by the InfoCure stockholders may be filled by the
stockholders, or if the stockholders so authorize, by the remaining director or
directors, but such newly elected director may only serve for the unexpired term
of his or her predecessor. The InfoCure board of directors may fill a vacancy
created by an increase in the number of directors, but only for the term of
office continuing until the next annual election of directors by the
stockholders.
Datamedic's bylaws also provide that vacancies and newly-created
directorships resulting from any
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increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director. The directors so chosen serve for the remainder of the term of the
vacated directorship being filled and until their successors are duly elected,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by the DGCL.
Quorum
InfoCure's bylaws provide that 33-1/3% of the number of shares of stock
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of stockholders. Datamedic's
bylaws, however, provide that the holders of fifty percent of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum of all meetings of stockholders unless a
otherwise provided by the DGCL.
Stockholder Action by Written Consent
The bylaws of both InfoCure and Datamedic provide that any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a written consent is signed by the holders having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. However, InfoCure stockholders may act by a written consent (that is less
than unanimous) to elect directors in lieu of holding an annual meeting only if
all directorships to which directors could be elected at an annual meeting are
vacant and are filled by such action.
Ability to Call Special Meeting
Special Meetings of InfoCure stockholders may be called by the board of
directors or by the chairman of the board of directors. Special meetings of
stockholders of Datamedic may be called by the president and shall be called by
the president or secretary upon the written request of Datamedic stockholders
owning a majority in amount of the capital stock issued and outstanding and
entitled to vote.
Notice of Meeting
InfoCure stockholders are entitled to notice of all stockholder
meetings not less than ten nor more than sixty days prior to the date of the
meeting. Datamedic stockholders are entitled to notice of all stockholder
meetings not less than ten nor more than fifty days prior to the date of the
meeting.
Advance Notice of Stockholder Proposals
For business to be properly brought by Datamedic stockholders,
stockholders owning a majority in amount or the entire capital stock of
Datamedic, must request in writing to the president or secretary that a special
meeting be called. Such request must state the purpose or purposes of the
proposed meeting.
Business at an annual meeting may be brought by an InfoCure stockholder
only upon the stockholder's timely notice thereof in writing to the secretary of
InfoCure. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of InfoCure not less than sixty
days prior to the meeting as originally scheduled; provided, however, that in
the event that less than sixty days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the earlier of the day on which such notice of the date of
the meeting was mailed or the date on which such public disclosure
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was made.
The InfoCure stockholder's notice to the secretary shall set forth
. a brief description of the proposal desired to be brought before the
meeting and the reasons for conducting such business at the meeting;
. the name and address of the stockholder proposing such business and
any other stockholders known by such stockholder to be supporting
such proposal;
. the class and number of shares of InfoCure stock that are
beneficially owned by the stockholder on the date such stockholder
gives notice to the secretary, and the number of shares of InfoCure
capital stock that are beneficially owned on such date by any other
stockholder known to be supporting such proposal; and
. any financial interest of the stockholder in such proposal.
With respect to InfoCure stockholders nominating persons to election to
InfoCure's board of directors, such nominations shall be made only at an annual
or special meeting of the stockholders called for that purpose and only by
complying with the notice procedures set forth in InfoCure's bylaws.
Specifically, the InfoCure stockholder must provide a timely notice in writing
to the secretary of InfoCure, such notice must be delivered to or mailed and
received at the principal executive offices of InfoCure not less than sixty days
prior to the meeting; provided, however, that in the event that less than sixty
days notice of the date of the meeting is give or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the tenth day following the earlier of the day on which such notice
of the date of the meeting was mailed or the date on which such public
disclosure was made.
The stockholder's notice must set forth:
(1) as to each person that the stockholder proposes to nominate for election or
reelection as a director:
. the name, age, business address and residence address of such
proposed nominee,
. the principal occupation or employment of such proposed nominee,
. the class and number of shares of capital stock of InfoCure which are
beneficially owned by such proposed nominee, and
. any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Schedule 14A under the Securities Exchange Act.
(2) as to the stockholder giving such notice:
. the name and address of such stockholder, and
. the class and number of shares of InfoCure's stock that are
beneficially owned by the stockholder on the date of such notice.
Voting Requirements
InfoCure's bylaws provide that when a quorum is present at any
stockholder meeting, a majority of the number of shares of stock entitled to
vote present thereat shall decide any proposal brought before the meeting,
unless the certificate of incorporation or the DGCL provides a different
threshold.
Datamedic's bylaws provide that when a quorum is present at any
stockholder meeting, the vote of the holders of a majority of the stock having
voting power present in person or represented by proxy shall decide any proposal
brought before the meeting, unless the certificate of incorporation or the DGCL
provides a different threshold.
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Those stockholders who currently hold shares of Datamedic preferred
stock are entitled to one vote for each share of Datamedic common stock into
which such holder's shares of Datamedic preferred stock could then be converted.
Pursuant to Datamedic's certificate of incorporation, Datamedic may
not, without first obtaining the approval of the holders of at least two thirds
of the then outstanding shares of each series of Datamedic preferred stock,
voting separately and not as a single class:
. Amend, alter or repeal the preferences, special rights or other powers of
such series of the outstanding preferred stock so as to affect adversely
such series; or
. Increase the total number of authorized shares of such series of Datamedic
preferred stock or issue any additional shares of such series
In addition, Datamedic shall not, without first obtaining the approval
of the holders of at least two thirds of the then outstanding shares of
Datamedic preferred stock, with all such series voting together as a single
class:
. Authorize any shares of capital stock with preference or priority over or
on a parity with the any of the outstanding series of preferred stock as to
the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of Datamedic; or
. Organize a subsidiary of Datamedic all of the stock of which is not owned
by Datamedic or permit the sale by any subsidiary of Datamedic of its
securities to any person other than Datamedic;
. Amend Datamedic's certificate of incorporation or bylaws
. Pay any dividends other than on the shares of the outstanding preferred
stock; or
. liquidate, dissolve or wind-up Datamedic.
Furthermore, for so long as ten percent of the shares of Datamedic
preferred stock remain outstanding, Datamedic shall not, without first obtaining
the approval of the holders of at least two thirds of the then outstanding
shares of Datamedic preferred stock, with all such series voting together as a
single class:
. Permit any subsidiary to consolidate or merge into or with or sell or
transfer all or substantially all its assets, except that any subsidiary
may (a) consolidate or merge into or with or sell or transfer assets to any
other subsidiary, or (b) merge into or sell or transfer assets to
Datamedic;
. Merge or consolidate into or with any other corporation or entity, except
in certain circumstances;
. Sell all or substantially all of the assets of Datamedic except in
certain circumstances;
. Redeem or repurchase any shares of Datamedic, other than (a) repurchases of
common stock held by employees or directors of, or consultants to Datamedic
upon termination of their employment or services pursuant to agreements
providing for such repurchases at the original issue price or (b) pursuant
to repurchases approved by a majority the board of directors of Datamedic
including the affirmative vote of majority of the directors designated by
holders of the preferred stock;
. Create or incur, or permit any subsidiary to create or incur, indebtedness
exceeding an aggregate principal amount $5,000,000;
. Make, or permit any subsidiary to make, a material change in the nature of
its business; or
. Increase any compensation (including salary, bonuses and other forms of
current compensation) payable to any employee, officer or director or any
of its subsidiaries, other than in the ordinary course of business unless
approved by the board of directors or the compensation committee of the
board of directors.
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Amending Certificate of Incorporation
InfoCure's certificate of amendment may be amended by the affirmative
vote of a majority of the outstanding capital stock voting together as a single
class and the affirmative vote of a majority of the outstanding stock of each
class entitled to vote thereon.
Currently, Datamedic's certificate of incorporation may be amended by
the affirmative vote of the holders of 66-2/3 of all outstanding shares of
Datamedic's preferred stock, with the holders of each series voting together as
a single class, as well as the affirmative vote of the holders of a majority of
the outstanding shares of Datamedic preferred stock and common stock, voting
together as a single class.
Amending Bylaws
InfoCure's bylaws may be amended as follows:
. At any meeting of stockholders at which a quorum is present, by vote
of a majority of the number of shares entitled to vote present in
person or by proxy, provided that the notice of the meeting
contained a statement of the substance of the amendment; or
. By a majority vote of the board of directors
In addition, any stockholder who intends to propose an amendment to the
InfoCure bylaws shall notify the secretary of InfoCure in writing of the
amendment not later than one hundred eighty days prior to a request by such
stockholder to call a special meeting for such purpose or, if such proposal is
intended to be made at an annual meeting of stockholders, not later than the
latest date permitted for submission of stockholder proposals by Rule 14a-8
under the Securities Exchange Act. Such notice to the secretary shall include
the text of the proposed amendment and a brief statement of the reason why such
stockholder intends to make such proposal.
Currently, Datamedic's bylaws may be amended by the affirmative vote of
the holders of 66-2/3 of all outstanding shares of Datamedic's preferred stock,
with the holders of each series voting together as a single class, as well as
the affirmative vote of the holders of a majority of the outstanding shares of
Datamedic preferred stock and common stock, voting together as a single class.
Interested Director Transactions
No contract or transaction between InfoCure and one or more of its
directors or officers, or between InfoCure and any other company, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board of directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
. The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee
in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
. The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
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. The contract or transaction is fair as to InfoCure as of the time it
is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
DESCRIPTION OF INFOCURE CAPITAL STOCK
InfoCure is authorized to issue 200,000,000 shares of InfoCure common
stock, of which 28,517,678 shares were issued and outstanding as of September
15, 1999.
Holders of InfoCure common stock are entitled to receive such dividends
as may be declared by the board of directors out of funds legally available
therefore.
For a further description of InfoCure capital stock, see "EFFECT OF THE
MERGER ON RIGHTS OF STOCKHOLDERS" on page 72.
OTHER MATTERS
As of the date of this proxy statement-prospectus, Datamedic's board of
directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement-prospectus.
However, if any other matters properly come before the special meeting or any
adjournment or postponement of the special meeting and are voted upon, the
enclosed proxy will be deemed to confer discretionary authority to the
individuals named as proxies to vote the shares represented by such proxy as to
any such matters.
EXPERTS
The consolidated financial statements of InfoCure Corporation and its
subsidiaries, incorporated by reference in this proxy statement-prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their reports incorporated herein by
reference and are incorporated herein in reliance upon such reports given upon
the authority of said firm as experts in accounting and auditing.
The financial statements of The Healthcare Systems Division of The
Reynolds and Reynolds Company incorporated by reference in this proxy statement-
prospectus from InfoCure Corporation's Registration Statement on Form S-3 (with
respect to a public offering of an aggregate of 3,759,000 common shares)
effective April 21, 1999, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Datamedic Holding Corp. and
subsidiaries as of March 31, 1999 and 1998, and for each of the years in the
three-year period ended March 31, 1999 have been included in this proxy
statement-prospectus in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
OPINIONS
Certain legal matters with respect to validity of the shares of
InfoCure common stock offered hereby in connection with the merger will be
passed upon for InfoCure by Morris, Manning & Martin, L.L.P., Atlanta, Georgia.
Employees of Morris, Manning & Martin, L.L.P. own an aggregate 121,100 shares of
InfoCure's common stock.
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WHERE YOU CAN FIND MORE INFORMATION
InfoCure files annual, quarterly and current reports, proxy and
information statements, and other information with the SEC under the Securities
Exchange Act. You may read and copy this information at the Public Reference
Room at the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information about
issuers that file electronically with the SEC. The address of that site is
http://www.sec.gov. You can also inspect reports, proxy and information
statements, and other information about InfoCure at the offices of The Nasdaq
Stock Market at Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
InfoCure filed a registration statement with the SEC under the
Securities Act, relating to the InfoCure common stock offered to the Datamedic
stockholders. This proxy statement-prospectus is one part of that registration
statement. The registration statement contains additional information about
InfoCure and the InfoCure common stock. The SEC allows InfoCure to omit certain
information included in the registration statement from this proxy
statement-prospectus. The registration statement may be inspected and copied at
the SEC's Public Reference Room described above.
This proxy statement-prospectus incorporates important business and
financial information about InfoCure that is not included in or delivered with
this proxy statement-prospectus. The following documents filed by InfoCure with
the SEC are incorporated by reference in this proxy statement-prospectus (SEC
File No. 611-12799):
(1) InfoCure's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998;
(2) InfoCure's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1999, filed on May 17, 1999;
(3) InfoCure's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 1999, filed on August 16, 1999;
(4) InfoCure's Current Reports on Form 8-K dated September 24, 1999,
February 9, 1999 and January 8, 1999;
(5) The description of the InfoCure common stock contained in InfoCure's
registration statement on form 8-A filed on January 28, 1999 pursuant
to Section 12(g) of the Securities Exchange Act and any amendment or
report filed for the purpose of updating such description.
(6) InfoCure's Registration Statement on Form S-3 (with respect to a public
offering of 3,759,000 common shares) declared effective April 21, 1999.
InfoCure also incorporates by reference additional documents filed by
InfoCure pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act after the date of this proxy statement-prospectus and prior to the
date of the special meeting. Any statement contained in this proxy
statement-prospectus or in a document incorporated by reference in this proxy
statement-prospectus shall be deemed to be modified or superseded to the extent
that a statement contained in this document or in any subsequently filed
document which also is incorporated by reference modifies or supersedes such
statement.
-79-
<PAGE>
You may obtain copies of the information incorporated by reference in
this proxy statement-prospectus (not including exhibits to the information
unless those exhibits are specifically incorporated by reference into this proxy
statement-prospectus) upon written or oral request.
All information contained in this proxy statement-prospectus or
incorporated herein by reference with respect to InfoCure was supplied by
InfoCure, and all information contained in this proxy statement-prospectus with
respect to Datamedic was supplied by Datamedic.
We have not authorized anyone to provide you with any information other
than the information included in this proxy statement-prospectus and the
documents we refer you to. If someone provides you with other information,
please do not rely on it as being authorized by us.
YOU CAN OBTAIN FREE COPIES OF THIS INFORMATION BY WRITING OR CALLING:
---------------------
Sue Griffen
INFOCURE CORPORATION
1765 The Exchange
Suite 500
Atlanta, Georgia 30339
Telephone: (770) 221-9990
IN ORDER TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST THE
INFORMATION BY ____________________________, 1999.
-80-
<PAGE>
ITEM 15. FINANCIAL STATEMENTS
The following are the consolidated financial statements of Datamedic
Holding Corp. and Subsidiaries which are filed as part of this report.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Datamedic Holding Corp. and Subsidiaries
Independent Auditors' Report................................................................ F-2
Consolidated Balance Sheets at March 31, 1999 and 1998..................................... F-3
Consolidated Statements of Operations Years Ended March 31, 1999, 1998 and 1997............ F-4
Consolidated Statements of Shareholders' Equity (Deficiency)
Years Ended March 31, 1999, 1998 and 1997......................................... F-5
Consolidated Statements of Cash Flows Years Ended March 31, 1999, 1998 and 1997............ F-6
Notes to Consolidated Financial Statements March 31, 1999, 1998 and 1997................... F-7
Consolidated Balance Sheet at June 30, 1999 (Unaudited).................................... F-16
Consolidated Statements of Operations Three Months Ended
June 30, 1999 and 1998 (Unaudited)................................................ F-17
Consolidated Statements of Shareholders' Deficiency Three Months Ended
June 30, 1999 and 1998 (Unaudited)................................................ F-18
Consolidated Statements of Cash Flows Three Months Ended
June 30, 1999 and 1998 (Unaudited)................................................ F-19
Notes to Consolidated Financial Statements June 30, 1999 and 1998 (Unaudited).............. F-20
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Datamedic Holding Corp.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Datamedic
Holding Corp. and subsidiaries as of March 31, 1999 and 1998 and the related
consolidated statements of operations, shareholders' equity (deficiency) and
cash flows for each of the years in the three-year period ended March 31, 1999.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Datamedic Holding
Corp. and subsidiaries as of March 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Melville, New York
May 25, 1999
F-2
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets 1999 1998
--------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 765,701 $ 4,260,767
Accounts
receivable:
Trade, less allowance for doubtful accounts
of $146,018 and $620,358, respectively 4,126,112 4,482,760
Other 243,471 332,828
Inventories 819,647 509,400
Prepaid expenses and other current assets 12,966 289,587
--------------- ----------------
Total current assets 5,967,897 9,875,342
--------------- ----------------
Long-term receivables 117,500 -
Property and equipment, net 1,190,391 1,595,765
Customer lists, less accumulated amortization of
$1,749,467 and $1,650,387 in 1999 and
1998, respectively 129,503 264,903
Excess costs over fair value of net assets acquired,
less accumulated amortization of $289,717 and
$253,835 and in 1999 and 1998, respectively 356,154 392,036
Other assets, less accumulated amortization of
$10,427 and $4,881 in 1999 and 1998,
respectively 1,654,222 1,883,611
--------------- ----------------
Total assets $ 9,415,667 14,011,657
=============== ================
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Accounts payable $ 2,532,321 $ 1,681,395
Accrued expenses 1,391,509 3,482,201
Accrued commissions 566,137 425,252
Deferred revenue 2,383,639 3,376,138
Customer deposits 1,217,363 1,493,138
Current installments of capital lease obligations 232,977 270,805
Current installments of long-term debt 13,925 12,512
Current installments of retirement obligation 230,888 182,892
--------------- ----------------
Total current liabilities 8,568,759 10,924,333
--------------- ----------------
Retirement obligation, less current installments 1,091,196 1,230,877
Capital lease obligations, less current installments 545,258 878,311
Long-term debt, less current installments 30,239 44,163
Convertible subordinated debentures 91,880 91,880
--------------- ----------------
Total liabilities 10,327,332 13,169,564
--------------- ----------------
Commitments and contingencies
Shareholders' equity (deficiency):
Class A convertible preferred stock, $.10 par value,
authorized 458,157 shares, issued and
outstanding 427,612 shares 42,761 42,761
Class B convertible preferred stock, $.10 par value,
authorized 312,419 shares, issued and
outstanding 312,419 shares 31,242 31,242
Class C convertible preferred stock, $.10 par value,
authorized 3,200,000 shares, issued and
outstanding 3,168,346 shares 316,835 316,835
Undesignated convertible preferred stock, $.10 par
value, authorized 1,229,424 shares, issued and
outstanding 0 shares - -
Common stock, $.10 par value per share - authorized
8,500,000 shares; issued and outstanding 1,251,236
in 1999 and 1,253,111 in 1998 125,124 125,311
Additional paid-in capital 32,119,104 32,133,917
Accumulated deficit (33,546,731) (31,794,391)
Deferred compensation - (13,582)
--------------- ----------------
(911,665) 842,093
--------------- ----------------
Total liabilities and shareholders' equity
(deficiency) $ 9,415,667 $ 14,011,657
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ------------------ ------------------
<S> <C> <C> <C>
Revenue:
Service and support revenue $ 13,069,463 $ 11,688,135 $ 11,989,875
System and license revenue 7,162,780 6,883,147 5,092,088
Other revenue 599,614 619,623 707,982
---------------- ------------------ -----------------
20,831,857 19,190,905 17,789,945
---------------- ------------------ -----------------
Cost of sales:
Cost of services and support 10,322,891 10,004,403 9,369,314
Cost of systems and licenses 1,867,685 5,606,398 5,762,792
Other 736,424 541,584 830,535
---------------- ------------------ -----------------
12,927,000 16,152,385 15,962,641
---------------- ------------------ -----------------
Gross margin 7,904,857 3,038,520 1,827,304
---------------- ------------------ -----------------
Expenses:
Selling 3,217,781 5,320,887 3,896,235
General and administrative 2,846,590 5,340,454 2,638,322
Research and development 2,536,400 5,005,629 2,572,038
Depreciation and amortization 1,014,200 2,436,248 1,864,181
Restructuring costs - 1,916,409 -
---------------- ------------------ -----------------
9,614,971 20,019,627 10,970,776
---------------- ------------------ -----------------
Loss from operations (1,710,114) (16,981,107) (9,143,472)
Other income (expense):
Interest expense, net (42,226) (293,384) (503,729)
---------------- ------------------ -----------------
Net loss $ (1,752,340) $ (17,274,491) $ (9,647,201)
================ ================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficiency)
Years ended March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Preferred stock Common stock
----------------------------- -----------------------
Shares Amount Shares Amount
------------- ------------- --------- ------------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 - $ - 1,182,637 $ 118,265
Net loss - - - -
Exercise of warrants - - 37,400 3,740
Stock issued in lieu of interest payments 30,938 3,093 27,534 2,753
Conversion of debt to preferred stock 709,093 70,910 - -
Stock issued in legal settlement - - 1,875 187
Amortization of deferred
compensation costs - - - -
------------- ------------- --------- ------------
Balance at March 31, 1997 740,031 74,003 1,249,446 124,945
Net loss - - - -
Stock issued in lieu of interest
and other payments 5,559 556 3,665 366
Issuance of Series C preferred stock, net 3,162,787 316,279 - -
Amortization of deferred compensation
costs - - - -
------------- ------------- --------- ------------
Balance at March 31, 1998 3,908,377 390,838 1,253,111 125,311
Net loss - - - -
Repurchase and retirement of stock - - (1,875) (187)
Amortization of deferred compensation
costs - - - -
------------- ------------- --------- ------------
Balance at March 31, 1999 3,908,377 $ 390,838 1,251,236 $ 125,124
============= ============= ========= ============
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred
paid-in Accumulated compen-
capital deficit sation Total
------------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 $ 6,391,721 $ (4,872,699) $ (112,837) $ 1,524,450
Net loss - (9,647,201) - (9,647,201)
Exercise of warrants 177,660 - - 181,400
Stock issued in lieu of interest payments 923,492 - - 929,338
Conversion of debt to preferred stock 10,421,760 - - 10,492,670
Stock issued in legal settlement 14,813 - - 15,000
Amortization of deferred
compensation costs - - 49,105 49,105
------------------ ---------------- -------------- --------------
Balance at March 31, 1997 17,929,446 (14,519,900) (63,732) 3,544,762
Net loss - (17,274,491) - (17,274,491)
Stock issued in lieu of interest
and other payments 85,397 - - 86,319
Issuance of Series C preferred stock, net 14,119,074 - - 14,435,353
Amortization of deferred compensation
costs - - 50,150 50,150
------------------ ---------------- -------------- --------------
Balance at March 31, 1998 32,133,917 (31,794,391) (13,582) 842,093
Net loss - (1,752,340) - (1,752,340)
Repurchase and retirement of stock (14,813) - - (15,000)
Amortization of deferred compensation
costs - - 13,582 13,582
------------------ ---------------- -------------- --------------
Balance at March 31, 1999 $ 32,119,104 $ (33,546,731) $ - $ (911,665)
================== ================ ============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,752,340) $(17,274,491) $(9,647,201)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 1,014,200 2,436,248 1,864,181
Issuance of stock for legal expense - - 15,000
Conversion of accrued interest to common stock - - 400,681
Write-off of capitalized software - - 1,619,983
Conversion of accrued interest to preferred stock - 26,319 528,657
Provision for losses on trade accounts receivable (474,339) 700,157 523,096
(Increase) reduction in carrying value of life insurance (141,746) 528,711 -
Deferred compensation 13,582 50,150 49,105
Loss on disposal of property and equipment - 418,187 -
Change in assets and liabilities:
Trade accounts receivable 595,988 (1,995,372) 13,055
Purchased accounts receivable - 350,755 859,722
Other receivables 89,357 (92,144) (91,612)
Long-term receivables 117,500 - -
Inventories (310,247) (84,209) 601,660
Prepaid expenses and other current assets 276,621 (7,926) (65,151)
Other assets 365,589 (777,681) (258,178)
Customer deposits (275,775) 338,024 782,302
Deferred revenue (992,499) 1,617,118 348,846
Accounts payable and accrued expenses (1,128,881) 1,594,177 (158,721)
Retirement obligation (91,686) 953,095 (4,634)
----------- ------------ -----------
Net cash used in operating activities (2,694,676) (11,218,882) (2,619,209)
----------- ------------ -----------
Cash flows from investing activities:
Acquisitions of property and equipment, net (431,983) (51,807) (740,623)
----------- ------------ -----------
Net cash used in investing activities (431,983) (51,807) (740,623)
----------- ------------ -----------
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term
borrowings net of debt issuance costs - 3,880,000 7,439,768
Principal payments on revolving line of credit
and long-term borrowings - (5,590,846) (1,980,039)
Principal payments on capital lease obligations (383,407) - -
Proceeds from sale of preferred stock - 14,495,353 -
Purchase of common stock 15,000 - -
Proceeds from exercise of stock options - - 181,400
----------- ------------ -----------
Net cash provided by (used in)
financing activities (368,407) 12,784,507 5,641,129
----------- ------------ -----------
Net increase (decrease) in cash and cash equivalents (3,495,066) 1,513,818 2,281,297
Cash and cash equivalents at beginning of year 4,260,767 2,746,949 465,652
----------- ------------ -----------
Cash and cash equivalents at end of year $ 765,701 $ 4,260,767 $ 2,746,949
=========== ============ ===========
Supplementary cash flow information:
Cash paid during the year for:
Interest $ 139,455 $ 349,105 $ 410,044
=========== ============ ===========
Income taxes $ 5,867 $ 2,404 $ 15,594
=========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(1) Significant Accounting Policies
(a) Consolidation
The consolidated financial statements include the accounts of Datamedic
Holding Corp. (DMC) and its wholly-owned subsidiaries (collectively,
the Company).
(b) Business, Revenue Recognition and Related Matters
The Company sells computer systems and services to physicians and
dentists and provides them with electronic medical records, patient
accounting, scheduling, billing and collection services.
The three general types of services and products provided to customers
are billing systems and services, managed practice services and
electronic medical record systems and services. Billing customers
purchase computer systems and receive patient accounting and billing
services for a fixed monthly fee, billable in advance. Managed practice
customers receive collection, as well as patient accounting and billing
services for a fee based upon a specified percentage of patient
receivable collections, billable to the physician at the time of
collection. Electronic medical record customers purchase software
developed by Datamedic. Datamedic markets and supports the customers of
these systems. Revenue related to managed practice customers is
recognized as services are rendered based on estimates of amounts to be
collected from patients. Unbilled accrued receivables included in trade
accounts receivable related to managed practice customers amounted to
$215,239 and $202,736 at March 31, 1999 and 1998, respectively. Revenue
from the sale of computer equipment and accessories is recognized when
title passes to the customer, generally at the time of shipment.
Datamedic also sells micro-computers, software and related maintenance
contracts to ophthalmologists. Revenue from the sale of computers and
software is recognized at the completion of shipment and installation.
Service revenue from maintenance contracts is recognized on a straight-
line basis over the term of the respective contract, which is generally
one year. The unearned portion of maintenance contracts is recorded as
deferred revenue. Noncontract service revenue is recognized when
services are performed.
Datamedic develops and markets clinical workstations and the related
software that assist physicians in recording, analyzing and
communicating information such as patient history, diagnosis and
treatment. Providing no significant customization or modification of
the software is required, the Company recognizes software license fees
when the software is delivered, the fees are fixed and determinable and
collectibility is probable. If significant customization or
modification is required, software revenue is recognized on a
percentage of completion basis. Anticipated losses on contracts are
recognized immediately. To the extent Datamedic enters into license
agreements with resellers, revenue is recognized when the reseller
enters into sub-licensing agreements with its customers. Unbilled
revenue included in trade accounts receivable at March 31, 1999 and
1998 was $232,500 and $462,000, respectively. Revenue from maintenance
contracts is recognized ratably over the period of the agreement
(generally one year). Revenue from consulting or development
arrangements is recognized under the percentage-of-completion method of
accounting measured by comparing costs incurred to total estimated
costs. Payments received under these arrangements prior to the
completion of the related work are recorded as deferred revenue.
During the past several years the Company has incurred substantial
operating losses. Through March 31, 1999, such losses have been funded
primarily from capital stock purchases by major shareholders. Although
the proceeds from such purchases and a line of credit obtained from a
(Continued)
F-7
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
bank (see note 3) appear adequate to fund operations in fiscal 2000, an
improvement in operating results or additional financing will be needed
to fund operations in subsequent years. Management has restructured
operations to reduce expenses and improve earnings for fiscal 2000.
(c) Cash and Cash Equivalents and Non-Cash Transactions
Cash and cash equivalents represent demand deposits, money market funds
with banks and certificates of deposit with maturities of three months
or less at time of purchase. During 1999 and 1998, the Company had non-
cash financing and investing activities of $111,845 and $728,622,
respectively, in connection with capital lease arrangements for the
purchase of equipment.
During 1998 and 1997, the Company issued stock valued at $86,319 and
$929,338, respectively, in lieu of recruiting expenses and interest
payments and in 1997, $15,000 of stock in lieu of payment of legal
fees. In 1997, the Company converted approximately $10,500,000 of debt
into shares of preferred stock.
(d) Inventories
Inventories, principally comprised of computer equipment, are stated at
the lower of cost (first-in, first-out basis) or market.
(e) Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization is computed by the straight-line method over the estimated
useful lives of the assets (3 to 7 years). Leasehold improvements are
amortized over the shorter of the remaining life of the lease or the
life of the improvement.
(f) Customer Lists
The Company records as assets, the cost of customer lists acquired,
either through the purchase of an existing business or the purchase of
the exclusive right to convert the customers of an existing business to
the Datamedic system. Such lists are amortized over their estimated
useful life of thirteen years. During 1998 the Company wrote off
$718,316 of customer list costs, net of accumulated amortization,
related to customers no longer serviced by the Company.
(g) Excess Costs Over Fair Value of Net Assets Acquired
Excess costs over fair value of net assets acquired are being amortized
over a twenty-five year life utilizing the straight-line method. The
Company assesses the recoverability of such costs based on the
undiscounted projected future cash flows of the acquired business.
(h) Software Development Costs
During 1998 and 1999, no software development costs have been
capitalized due to the insignificance of such costs qualifying for
capitalization. During fiscal 1997, the Company wrote off $1,619,983 of
unamortized costs associated with software products which were no
longer sold or which had values less than what could be supported by
product sales.
(Continued)
F-8
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(i) Income Taxes
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No.109, "Accounting for Income
Taxes" (Statement No.109). Under Statement No.109, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be realized or settled. Under Statement
No.109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(j) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(k) Reclassifications
Certain reclassifications have been made to the fiscal 1998
consolidated financial statements to conform to the 1999 presentation.
(2) Property and Equipment
A summary of property and equipment is as follows:
March 31,
----------------------
1999 1998
---------- ----------
Microcomputers $1,827,119 $2,994,874
Machinery and equipment 134,810 225,984
Furniture, leasehold improvements
and vehicles 306,598 282,780
---------- ----------
2,268,527 3,503,638
Less accumulated depreciation and
amortization 1,078,136 1,907,873
---------- ----------
$1,190,391 $1,595,765
========== ==========
(Continued)
F-9
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 19997
(3) Long-Term Debt
Long-term debt consists of the following:
March 31,
------------------
1999 1998
------- -------
Other $44,164 $56,675
Less current installments 13,925 12,512
------- -------
$30,239 $44,163
======= =======
Subsequent to March 31, 1999, the Company entered into a line of credit
facility with Silicon Valley Bank which matures in May 2000. Maximum
borrowings under the agreement amount to $2,000,000 subject to certain
limitations. Interest is payable at a rate of 2.25% over the prime rate.
(4) Commitments and Contingencies
(a) Leases
The Company has several computer and furniture and equipment leases
that are accounted for as capital leases. Net property and equipment
includes $750,268 and $1,256,578 at March 31, 1999 and 1998,
respectively, related to leases that have been capitalized.
The Company occupies premises at various locations under noncancellable
operating leases expiring in various years through January 2005. The
leases provide for minimum rentals plus escalations for real estate
taxes and certain operating expenses. The Company also rents certain
equipment under noncancellable operating leases expiring in various
years through 1999. Rent expense for all operating leases aggregated
$898,151, $895,793 and $647,245 in fiscal 1999, 1998 and 1997,
respectively.
Future minimum payments, by fiscal year and in the aggregate, under
capital leases and noncancellable operating leases with initial or
remaining terms of one year or more consisted of the following at
March 31, 1999:
Capital Operating
leases leases
---------- ----------
2000 $ 319,071 $1,160,165
2001 339,131 1,048,627
2002 266,768 963,239
2003 72,666 557,395
2004 and thereafter 8,003 169,787
---------- ----------
Total minimum lease payments 1,005,639 $3,899,213
---------- ==========
Less amounts representing interest at
rates ranging from 7.2% to 21.2% 227,404
----------
Present value of net minimum lease
payments ($232,977 current portion) $ 778,235
==========
(Continued)
F-10
<PAGE>
Datamedic Holding Corp. And Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(b) Employment, Retirement and Consulting Agreements
The Company had entered into an employment agreement with a key
employee which expired on July 1, 1998 which provided for minimum
annual compensation of approximately $200,000 per year. In addition the
agreement provided the employee with 25,500 shares of common stock (see
note 6(a)).
(i) The Company is also party to an agreement, entered into in
February 1990, and amended in March 1996, with a former officer of
the Company which provided for that officer to receive yearly
payments after retirement of $81,000 with annual cost of living
increases. This individual retired from the Company and the
Company accrued the actuarially determined present value of the
estimated amount of payments to be made to this individual in the
future. At March 31, 1999, the remaining retirement obligation
amounted to $621,204.
(ii) The Company is also party to an agreement entered into in February
1997, with a former officer of the Company, which provided for
that officer to receive yearly payments after retirement of
$131,250 through December 31, 2001, and $87,500 commencing January
1, 2002 through December 31, 2006, with annual cost of living
increases. This individual retired from the Company, and the
Company accrued the actuarially determined present value of the
estimated amount of payments to be made to this individual in the
future. At March 31, 1999 the remaining retirement obligation
amounted to $700,879.
(c) Litigation Settlement
During fiscal 1999, the Company agreed to settle two cases brought
against the Company by former employees for cash payments of $72,403
and $54,500, respectively.
In June 1996, the Company agreed to settle a case brought against the
Company by a customer for a cash payment of $75,000, a promissory note
in the sum of $75,000 payable to the customer over the next 12 month
period and the issuance of 1,875 shares of common stock of the Company,
valued at $15,000 by an investment firm, which can be put back to the
Company after two years for $110,000. The Company has the option, at
any time, to repurchase the shares from the customer for $110,000. The
Company provided for the above settlement at March 31, 1996. During
fiscal 1997, the 1,875 shares of stock were issued and in July 1998,
the Company repurchased the shares.
(d) Legal Matters
The Company is a party to several lawsuits, some involving substantial
amounts, arising in the ordinary course of business. Management of the
Company does not believe that the outcome of these matters will have a
material effect on the financial position or results of operations of
the Company.
(5) Convertible Subordinated Debentures
The convertible subordinated debentures, amounting to $91,880 at March 31,
1999 and 1998, bear interest at 10% and are subordinate to all existing or
future obligations for money borrowed from any bank, financial or lending
institution. The holders have the option, at any time prior to maturity, to
convert the principal amount, or any part thereof, into fully paid and
nonassessable shares of common
(Continued)
F-11
<PAGE>
Datamedic Holding Corp. And Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
stock of DMC, at the rate of $5 principal amount converted for each share
to be issued. DMC may redeem these debentures, at its option, at 103% of
the principal amount plus any accrued interest. Interest is payable semi-
annually and the maturity date is February 15, 2001.
(6) Shareholders' Equity
(a) Common Stock
The Company entered into an employment agreement that entitles a key
employee to receive 25,500 shares of the Company's voting common
stock. The award fully vested on July 1, 1998 and the cost, as
determined by an independent investment firm, was charged to expense
over the vesting period (July 1, 1995 through July 1, 1998).
At March 31, 1999, the Company has outstanding warrants, issued at
various times, to purchase a total of 294,382 shares of its common
stock at prices ranging from $.10 to $17.00 per share. The warrants
expire at various dates through December 2007. During the year ended
March 31, 1998, the Company issued 97,291 warrants in connection with
the issuance of its Series C preferred stock.
(b) Stock Options
The Company has a noncompensatory incentive stock option plan which
provides for the granting of options to key employees. During fiscal
1999, the Company issued 998,100 options to employees, at the then
current market value at the date of such grants. Such options vest
over four years, with certain options having an accelerated vesting
provision. The Company applies Accounting Principles Board Opinion
No.25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its stock option plan. Had
compensation cost been recognized consistent with Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation", for options granted, the pro forma net loss would have
been $2,001,865, $17,348,780 and $9,721,490 in 1999, 1998 and 1997,
respectively.
Pro forma net loss reflects only options granted in 1996 and later.
Therefore, the full impact of calculating compensation cost for stock
options under Statement No.123 is not reflected over the options'
vesting periods and compensation costs for options granted prior to
April 1, 1995 are not considered. Information regarding common stock
options as of and for the year ended March 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ------------------- -------------------
Weighted Weighted Weighted
average average average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding April 1 265,150 $ 2.25 267,650 $ 8.00 290,250 $ 8.00
Granted 998,100 2.25 - - - -
Expired (88,750) 2.25 (2,500) 8.00 (100) 8.00
Converted to warrants - - - - (22,500) 8.00
--------- ---- ------- ---- ------- -----
Outstanding March 31 1,174,500 $ 2.25 265,150 $ 8.00 267,650 $ 8.00
========= ==== ======= ==== ======= =====
Exercisable 176,400 253,900 187,425
========= ======= =======
</TABLE>
(Continued)
F-12
<PAGE>
Datamedic Holding Corp. And Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Effective April 1998 and October 1996, all outstanding stock options
were revalued to $2.25 and $8.00, respectively, per share which was
equivalent to the fair market value of the Company as of those dates.
(c) Preferred Stock
During Fiscal 1998, the Company raised additional capital of
approximately $14,500,000, net of expenses, through the issuance of
3,168,346 shares of Series C convertible preferred stock of the Company
and 97,291 warrants to purchase common stock at an exercise price of
$.10 per share.
All issued preferred stock is convertible into shares of common stock
at a conversion price of $16.37 for the Series A preferred stock,
$12.00 to $17.00 for the Series B preferred stock and $4.73 for the
Series C preferred stock.
All issued preferred stock also are entitled to received cumulative
dividends, when and if declared by the Board of Directors, payable at a
rate of 7.5% per year of a "cumulative base amount" equal to the
conversion price of between $4.73 and $17.00 per share, plus cumulative
unpaid dividends ($3,718,000 at March 31, 1999). Upon the request of
the holders of at least two-thirds of the outstanding preferred stock
or, under certain circumstances, the sale of shares of common stock in
a public offering, all outstanding shares of preferred stock will
automatically be converted into common stock.
(7) Income Taxes
As of March 31, 1999, the Company has net operating loss carryforwards of
approximately $14,950,000 for income tax purposes which expire in various
amounts through March 31, 2018. Utilization of most of the Company's net
operating loss is subject to substantial limitations resulting from the
change in control of the Company's ownership based on IRC Sec. 382. In
addition, the Company has research and development credits of approximately
$556,000 available for income tax purposes, to offset future income tax
liabilities which expire in various amounts through March 31, 2014.
In addition, one of the Company's subsidiaries has preacquisition net
operating loss carryforwards of approximately $1,800,000 and research and
development tax credit carryforwards of approximately $360,000, which
expire through 2007. Utilization of these preacquisition net operating loss
and tax credit carryforwards are subject to substantial limitations
including separate company limitations and limitations resulting from the
change in control.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
March 31, 1999 and 1998 are presented below:
(Continued)
F-13
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $6,888,000 $6,191,000
Acquired net operating loss carryforwards 721,000 721,000
Business credit carryforwards 666,000 527,000
Acquired business credit carryforwards 360,000 360,000
Inventory reserves 65,000 75,000
Allowance for doubtful accounts receivable 60,000 255,000
---------- ---------
8,760,000 8,129,000
Valuation allowance 8,504,000 7,784,000
---------- ---------
256,000 345,000
---------- ---------
Deferred tax liabilities:
Property and equipment 72,000 72,000
Unbilled accounts receivable 184,000 273,000
---------- ---------
256,000 345,000
--------- ---------
Net deferred tax liabilities $ - $ -
========= =========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences or net operating loss and credit
carryforwards become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based on the Company's
recent operating losses and substantial limitation of net operating losses
over the periods which the deferred tax assets are deductible, management
has established a valuation allowance of $8,504,000 at March 31, 1999 which
represents an increase of $720,000 for the year ended March 31, 1999.
(8) Related Party Transactions
At March 31, 1999 and 1998, included in other assets is approximately
$1,285,405 and $1,143,659, respectively, representing discounted cash
surrender value of life insurance and other amounts due from a trust whose
principal beneficiaries are the spouses of two principal shareholders. Upon
the death of these two shareholders, the Company is entitled to receive an
amount equal to the premiums paid on their behalf. The Company has
determined to discontinue providing life insurance to certain of its
employees. In this regard, the Company increased the carrying value by
$141,746 in fiscal 1999 to reflect the estimated amounts to be received
upon termination of the policies.
In addition, other receivables represent receivables from employees in the
amount of $243,471 and $332,828 of which $40,500 is due from retired
officers as of March 31, 1999 and 1998.
(Continued)
F-14
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(9) Federal Assistance Award
In December 1994, Datamedic was the recipient of a U.S. Department of
Commerce National Institute of Standards and Technology (NIST) Federal
Assistance Award. The total NIST award is for approximately $2 million over
a thirty-month period payable on a quarterly basis for reimbursement of a
proportionate share of direct costs associated with the development of a
Datamedic software product. Subsequently, in December 1997, the NIST
contract was further renewed for approximately $3 million thru December
2000. NIST reimbursable revenue and related cost included in other revenue
and other cost of sales in the consolidated financial statements amounted
to $599,614, $619,623 and $830,536 at March 31, 1999, 1998 and 1997,
respectively.
Restructuring Costs
In March 1998, the Company's Board of Directors approved a business and
reorganization plan outlining the future business direction of the
Company's operations and areas of staff and cost reductions and
realignment.
Restructuring costs of approximately $1,900,000 were provided to cover
contemplated staff reductions and other costs associated with the Company's
reorganization plan. Costs were principally comprised of approximately
$1,400,000 related to severance packages for terminated employees and
officers. Accrued expenses at March 31, 1998 included approximately
$1,600,000 of accrued restructuring costs.
The Company paid the severance and other costs during fiscal 1999, except
for, the severance cost of one employee which will be paid over an extended
period of time.
F-15
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1999
(Unaudited)
Assets
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash and cash equivalents $ 261,291
Accounts receivable:
Trade, less allowance for doubtful accounts of $257,871 3,861,996
Other 230,253
Inventories 725,417
Prepaid expenses and other current assets 25,390
-----------------
Total current assets 5,104,347
Long-term receivables 58,750
Property and equipment, net 950,846
Customer lists, less accumulated amortization of $1,783,407 95,653
Excess costs over fair value of net assets acquired, less accumulated
amortization of $298,687 347,184
Other assets, less accumulated amortization of $11,872 1,555,260
-----------------
Total assets $ 8,112,040
=================
See accompanying notes to consolidated financial statements.
Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued expenses $ 3,982,498
Deferred revenue 2,272,018
Customer deposits 807,463
Revolving line of credit payable 126,818
Current installments of capital lease obligations 150,211
Current installments of long-term debt 10,582
Current installments of retirement obligation 211,140
-----------------
Total current liabilities 7,560,730
Retirement obligation, less current installments 1,091,196
Capital lease obligations, less current installments 624,824
Long-term debt, less current installments 30,239
Convertible subordinated debentures 91,880
-----------------
Total liabilities 9,398,869
-----------------
Commitments and contingencies
Shareholders' deficiency:
Class A convertible preferred stock, $.10 par value, authorized 458,157
shares, issued and outstanding 427,612 shares 42,761
Class B convertible preferred stock, $.10 par value, authorized 312,419
shares, issued and outstanding 312,419 shares 31,242
Class C convertible preferred stock, $.10 par value, authorized 3,200,000
shares, issued and outstanding 3,168,346 shares 316,835
Undesignated convertible preferred stock, $.10 par value, authorized
1,229,424 shares, issued and outstanding 0 shares -
Common stock, $.10 par value per share - authorized 8,500,000 shares;
issued and outstanding 1,253,111 125,124
Additional paid-in capital 32,119,104
Accumulated deficit (33,921,895)
Deferred compensation
-----------------
(1,286,829)
-----------------
Total liabilities and shareholders' deficiency $ 8,112,040
=================
</TABLE>
F-16
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
---------------- ---------------
Revenue:
Service and support revenue $ 3,031,489 $ 3,254,015
System and license revenue 1,722,648 1,576,620
Other revenue 163,263 117,165
---------------- ---------------
4,917,400 4,947,800
---------------- ---------------
Cost of sales:
Cost of services and support 2,213,256 2,420,838
Cost of systems and licenses 644,534 326,278
Other 137,010 133,384
---------------- ---------------
2,994,800 2,880,500
---------------- ---------------
Gross margin 1,922,600 2,067,300
---------------- ---------------
Expenses:
Selling 672,458 786,943
General and administrative 655,763 666,668
Research and development 717,800 755,100
Depreciation and amortization 211,000 430,100
---------------- ---------------
2,257,021 2,638,811
Loss from operations (334,421) (571,511)
Other income (expense):
Interest expense, net (40,743) (25,353)
---------------- ---------------
Net loss $ (375,164) $ (596,864)
================ ===============
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Deficiency
Three months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Preferred stock Common stock Additional
-------------------------- ------------------------- paid-in
Shares Amount Shares Amount capital
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1998 3,908,377 $ 390,838 1,253,111 $ 125,311 $ 32,133,917
Net loss - - - - -
Amortization of deferred compensation costs - - - - -
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1998 3,908,377 $ 390,838 1,253,111 $ 125,311 $ 32,133,917
============ ============ ============ ============ =============
Balance at March 31, 1999 3,908,377 $ 390,838 1,251,236 $ 125,124 $ 32,119,104
Net loss - - - - -
------------ ------------ ------------ ------------ -------------
Balance at June 30, 1999 3,908,377 $ 390,838 1,251,236 $ 125,124 $ 32,119,104
============ ============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Deferred
Accumulated compen-
deficit sation Total
--------------- ------------ ------------
<S> <C> <C> <C>
Balance at March 31, 1998 $ (31,794,391) $ (13,582) $ 842,093
Net loss (596,864) - (596,864)
Amortization of deferred compensation costs - 4,179 4,179
--------------- ------------ ------------
Balance at June 30, 1998 $ (32,391,255) $ (9,403) $ 249,408
=============== ============ ============
Balance at March 31, 1999 $ (33,546,731) $ - $ (911,665)
Net loss (375,164) - (375,164)
-------------- ------------ ------------
Balance at June 30, 1999 $ (33,921,895) $ - $ (1,286,829)
============== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
DATAMEDIC HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (375,164) $ (596,864)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 210,980 430,909
Provision for losses on trade accounts receivable 11,853 21,889
(Increase) reduction in carrying value of life insurance 97,917 38,539
Deferred compensation - 4,179
Change in assets and liabilities:
Trade accounts receivable 252,263 3,829
Other receivables 86,049 7,280
Long-term receivables 58,750 -
Inventories 94,230 189,112
Prepaid expenses and other current assets (12,423) (63,068)
Other assets (401) (6,782)
Customer deposits (409,900) (194,560)
Deferred revenue (111,621) (269,265)
Accounts payable and accrued expenses (507,468) (1,203,432)
Retirement obligation (19,748) 85,216
----------------- -----------------
Net cash used in operating activities (624,683) (1,553,018)
----------------- -----------------
Cash flows from investing activities:
Acquisitions of property and equipment, net - (47,472)
----------------- -----------------
Net cash used in investing activities - (47,472)
----------------- -----------------
Cash flows from financing activities:
Proceeds from revolving line of credit 126,818 -
Principal payments on capital lease obligations (6,545) (71,638)
----------------- -----------------
Net cash provided by (used in) financing activities 120,273 (71,638)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents (504,410) (1,672,128)
Cash and cash equivalents at beginning of year 765,701 4,260,767
----------------- -----------------
Cash and cash equivalents at end of year $ 261,291 $ 2,588,639
================= =================
Supplementary cash flow information:
Cash paid during the year for:
Interest $ 45,258 $ 49,553
================= =================
Income taxes $ 11,379 $ 17,365
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
DATAMEDIC HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements of Datamedic Holding
Corp. and subsidiaries are unaudited; however, in the opinion of management,
such statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of financial
presentation and results of operations for the periods presented.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Therefore, the interim
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the years
March 31, 1999 and 1998 for each of the years in the three-year period ended
March 31, 1999.
The results of operations for the interim periods are not necessarily
indicative of the results that might be expected for future interim periods
or for the full year ending March 31, 2000.
(2) Other Assets
Included in other assets at June 30, 1999 is approximately $1.2 million of
cash surrender value of officers' life insurance.
(3) Subsequent Event
In September 1999, the Company announced that it had entered into a
definitive agreement to be acquired by InfoCure Corporation. InfoCure will
issue approximately 1.2 million shares subject to adjustment of common stock
in exchange for all outstanding shares of the Company. The transaction is
intended to be accounted for as a pooling of interests and is expected to
close in December 1999.
F-20
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DATAMEDIC HOLDING CORP.,
CERTAIN PRINCIPAL SHAREHOLDERS OF DATAMEDIC HOLDING CORP.,
INFOCURE CORPORATION
AND
INFOCURE SYSTEMS, INC.
DATED: SEPTEMBER 3, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS............................................ 2
1.1 Adjustment Amount................................. 2
1.2 Affiliate......................................... 2
1.3 Best Efforts...................................... 2
1.4 Breach............................................ 2
1.5 Closing........................................... 2
1.6 Closing Date...................................... 2
1.7 Code.............................................. 3
1.8 Company Expenses.................................. 3
1.9 Company Material Adverse Effect................... 3
1.10 Consent.......................................... 3
1.11 Contemplated Transactions........................ 3
1.12 Contract......................................... 3
1.13 Damages.......................................... 3
1.14 Disclosure Schedule.............................. 3
1.15 Effective Time................................... 3
1.16 Encumbrance...................................... 3
1.17 Environmental Requirements....................... 3
1.18 ERISA............................................ 4
1.19 ERISA Affiliate.................................. 4
1.20 Exchange Act..................................... 4
1.21 Facilities....................................... 4
1.22 GAAP............................................. 4
1.23 Governmental Authorization....................... 4
1.24 Governmental Body................................ 4
1.25 HSR Act.......................................... 4
1.26 InfoCure Share Price............................. 4
1.27 IRS.............................................. 4
1.28 Knowledge........................................ 4
1.29 Legal Requirement................................ 5
1.30 Order............................................ 5
1.31 Ordinary Course of Business...................... 5
1.32 Organizational Documents......................... 5
1.33 Percentage Ownership............................. 5
1.34 Person........................................... 5
1.35 Plan............................................. 5
1.36 Proceeding....................................... 5
1.37 Related Person................................... 5
1.38 Representative................................... 6
1.39 Securities Act................................... 6
1.40 Subsidiaries..................................... 6
1.41 Tax Returns...................................... 6
i
<PAGE>
1.42 Taxes............................................ 6
1.43 Threatened....................................... 7
2. MERGER................................................. 7
2.1 The Merger........................................ 7
2.2 Effect of the Merger.............................. 7
2.3 Consummation of the Merger........................ 7
2.4 Articles of Incorporation; Bylaws; Directors and
Officers.......................................... 7
2.5 Maximum Shares to be Issued; Conversion of
Securities........................................ 8
2.6 Exchange of Certificates.......................... 12
2.7 Lost, Stolen or Destroyed Certificates............ 14
2.8 Deposit of Shares in Escrow....................... 14
2.9 Closing........................................... 14
2.10 No Further Ownership Rights in Company Capital
Stock............................................ 15
2.11 Additional Actions............................... 15
2.12 Company Certificate.............................. 15
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... 15
3.1 Organization, Good Standing, Corporate Power and
Subsidiaries...................................... 16
3.2 Authority; No Conflict............................ 16
3.3 Capitalization.................................... 18
3.4 Financial Statements.............................. 19
3.5 Books and Records................................. 19
3.6 Real Property Interests........................... 19
3.7 Condition and Sufficiency of Assets............... 19
3.8 Accounts Receivable............................... 19
3.9 Inventory......................................... 20
3.10 No Undisclosed Liabilities....................... 20
3.11 Taxes............................................ 20
3.12 No Company Material Adverse Effect............... 21
3.13 Employee Benefits Matters........................ 21
3.14 Compliance With Legal Requirements; Governmental
Authorizations................................... 24
3.15 Legal Proceedings; Orders........................ 26
3.16 Absence of Certain Changes and Events............ 27
3.17 Contracts; No Defaults........................... 28
3.18 Insurance........................................ 30
3.19 Environmental Matters............................ 31
3.20 Employees........................................ 31
3.21 Government Contracts............................. 32
3.22 Intellectual Property Rights of the Company...... 32
3.23 Certain Payments................................. 40
3.24 Relationships With Related Persons............... 40
3.25 Brokers or Finders............................... 41
3.26 Labor Relations; Compliance...................... 41
3.27 Disclosure Documents............................. 41
ii
<PAGE>
3.28 Disclosure....................................... 42
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ISI AND
INFOCURE............................................... 42
4.1 Organization...................................... 42
4.2 Authorization..................................... 42
4.3 Absence of Restrictions and Conflicts............. 42
4.4 Capitalization of InfoCure........................ 43
4.5 InfoCure SEC Reports.............................. 43
4.6 Litigation........................................ 44
4.7 Disclosure........................................ 44
4.8 Certain Proceedings............................... 44
4.9 Brokers or Finders................................ 44
4.10 Tax Representations.............................. 44
5. COVENANTS OF THE PARTIES............................... 45
5.1 Mutual Covenants.................................. 45
5.2 Covenants of the Company/Principal Shareholders... 47
5.3 Listing of InfoCure Common Stock.................. 50
5.4 Stock Options, Warrants, and Convertible
Debentures........................................ 50
5.5 Form S-8.......................................... 51
5.6 Rucker Redemption................................. 51
5.7 Indemnification And Insurance..................... 51
6. CONDITIONS............................................. 52
6.1 Mutual Conditions................................. 52
6.2 Conditions to Obligations of ISI and InfoCure..... 53
6.3 Conditions to Obligations of the Company.......... 54
7. INDEMNIFICATION; REMEDIES.............................. 55
7.1 Agreement by the Principal Shareholders to
Indemnify......................................... 55
7.2 Agreements by InfoCure and ISI to Indemnify....... 56
7.3 Matters Involving Third Parties................... 57
8. TERMINATION............................................ 58
8.1 Termination Events................................ 58
9. MISCELLANEOUS.......................................... 58
9.1 Notices........................................... 58
9.2 Further Assurances................................ 60
9.3 Waiver............................................ 60
9.4 Entire Agreement and Modification................. 60
9.5 Assignments, Successors and No Third-Party
Rights............................................ 60
9.6 Pooling-of-Interests.............................. 60
9.7 Section Headings, Construction.................... 61
9.8 Time of Essence................................... 61
iii
<PAGE>
9.9 Governing Law..................................... 61
9.10 Counterparts..................................... 61
9.11 Payment of Company Expenses...................... 61
EXHIBITS:
Exhibit A Certificates of Merger for Georgia and Delaware
Exhibit B Escrow Agreement
Exhibit C Affiliate Agreement
Exhibit D Voting Agreement
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), is entered into as of the
________ day of September, 1999, by and among Datamedic Holding Corp., a
Delaware corporation (the "Company"), certain principal shareholders of
Datamedic Holding Corp. whose names appear on Schedule A attached hereto
----------
(hereinafter referred to as the "Principal Shareholders"), InfoCure Corporation,
a Delaware corporation ("InfoCure") and InfoCure Systems, Inc., a Georgia
corporation which is a wholly-owned subsidiary of InfoCure ("ISI").
BACKGROUND:
A. The respective Boards of Directors of the Company, ISI and InfoCure
deem it advisable and in the best interests of the Company, ISI and InfoCure
that the Company merge with and into ISI pursuant to this Agreement and the
Certificates of Merger to be filed with the Secretary of State of Georgia and
Secretary of State of Delaware substantially in the form of Exhibit A attached
---------
hereto (the "Certificate of Merger") whereby ISI will be the surviving
corporation. Upon the Merger, each issued and outstanding share of capital
stock of the Company ("Company Capital Stock") and all outstanding options,
warrants, convertible debentures or other rights to acquire or receive shares of
Company Capital Stock shall be converted into the right to receive a certain
number of shares of common stock, $.001 par value per share, of InfoCure
("InfoCure Common Stock"), such number to be determined as provided herein.
B. The Company, InfoCure, ISI and the Principal Shareholders desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to InfoCure's willingness to enter into this Agreement, the
Principal Shareholders are entering into Voting Agreements in substantially the
form attached hereto as Exhibit D (the "Voting Agreements") and Affiliate
---------
Agreements in substantially the form attached hereto as Exhibit C (the
---------
"Affiliate Agreements").
D. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of Section 368(a)(2)(D)
thereof.
E. The parties intend that the Merger be accounted for as a pooling-of-
interests for financial reporting purposes.
F. Concurrently with the consummation of the Merger and as an inducement
to ISI and InfoCure to enter into this Agreement, the Company and the Principal
Shareholders will enter into the Escrow Agreement in the form of Exhibit B.
---------
<PAGE>
NOW, THEREFORE, in consideration of the premises, the mutual agreements,
provisions and covenants herein contained and other good and valuable
consideration, the parties hereto hereby agree as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
1.1 "Adjustment Amount" means (i) breaches of representations and
warranties arising between the signing of this Agreement and the Closing
exceeding $150,000.00 in the aggregate, if applicable, but in any event not to
exceed an amount equal to five percent (5%) of the Maximum InfoCure Shares, and
(ii) the Company Expenses, as such term is defined below, and (iii) the amounts
paid by Datamedic to defend or settle any of the litigation listed on Schedule
3.15 between the date hereof and the Closing Date, and, (iv) the costs of the
tail insurance coverage provided for in Section 5.7 (c), and (v) the amount by
which the Company's and the Subsidiaries' total consolidated debt and accounts
payable, including all amounts payable to executive officers pursuant to that
certain Management Bonus Plan, as of Closing exceed $3,750,000.00; provided that
no specific expense in calculating the Adjustment Amount shall be counted twice.
1.2 "Affiliate" is used in this Agreement to indicate a relationship with
one (1) or more persons and when used shall mean any corporation or organization
of which such person is an executive officer, director or partner or is directly
or indirectly the beneficial owner of ten percent (10%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); or any person that directly, or
indirectly through one (1) or more intermediaries, controls or is controlled by,
or is under common control with, the person specified.
1.3 "Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
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obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits of this Agreement and the Contemplated
Transactions to such Person.
1.4 "Breach" means a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement and will be deemed to have
occurred if there is or has been any inaccuracy in or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision.
1.5 "Closing" is defined in this Agreement in Section 2.9.
1.6 "Closing Date" is referred to herein as the date on which the Closing
occurs.
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1.7 "Code" means the Internal Revenue Code of 1986, as amended, including
regulations or other authoritative notices or rulings issued by the Internal
Revenue Service thereunder.
1.8 "Company Expenses" means the aggregate of (i) the accounting and legal
fees payable to the Company's accountants and attorneys (and the Preferred
Shareholders' attorneys) in connection with the transaction contemplated hereby
and (ii) the fees payable to Broadview International, LLC ("Broadview") pursuant
to any agreement between the Company and Broadview.
1.9 "Company Material Adverse Effect" means a material adverse effect on
the financial condition, results of operation, business or properties of the
Company and its Subsidiaries taken as a whole.
1.10 "Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.11 "Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including, without limitation:
A. The Merger; and
B. The performance by ISI, InfoCure, the Principal Shareholders and
the Company of their respective covenants and obligations under this Agreement.
1.12 "Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.13 "Damages" means any loss, liability, claim, damages, expense
(including, without limitation, costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third party.
1.14 "Disclosure Schedule" means the disclosure schedule delivered by the
Company to ISI and InfoCure concurrently with the execution and delivery of this
Agreement.
1.15 "Effective Time" is defined in this Agreement in Section 2.3.
1.16 "Encumbrance" means any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
1.17 "Environmental Requirements" means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
3
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1.18 "ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.19 "ERISA Affiliate" means any Person which would be required to be
aggregated with the Company under Code (S) 414(b), (c), (m) and/or (o) and/or
under ERISA (S) 4001(a)(14) at any time during the period beginning seven (7)
years prior to the Closing Date and ending immediately prior to the Closing.
1.20 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
1.21 "Facilities" means any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company or any Subsidiary and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company
or any Subsidiary.
1.22 "GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial statements
referred to in Section 3.4. were prepared.
1.23 "Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.24 "Governmental Body" means any national, state or municipal or other
local government, state or municipal or other local governmental body, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body exercising any regulatory or taxing authority thereunder.
1.25 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, 15 U.S.C. (S) 18a, et seq.
-- ---
1.26 "InfoCure Share Price" means Twenty One and 3976/10,000 Dollars
($21.3976).
1.27 "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.28 "Knowledge" means an individual will be deemed to have "Knowledge" of
a particular fact or other matter if such individual is actually aware of such
fact or other matter, or a prudent individual given his position with the
Company could be expected to discover or otherwise become aware of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving or has served within the last five (5) years as a director, executive,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
Notwithstanding the foregoing, any reference in this Agreement to the
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Knowledge of the Company or any Subsidiary shall be deemed to include only the
Knowledge of the following individuals: (i) Stephen N. Kahane, M.D.; (ii) Joseph
D. Hill; (iii) Shiv Anand; (iv) John Schafer, and the actual knowledge of Susan
Schanen, David Fetterolf and Henry Kilroy.
1.29 "Legal Requirement" means any federal, state, local, municipal or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
1.30 "Order" means any award, decision, injunction, judgment, order,
ruling or verdict entered, issued, made or rendered by any court, administrative
agency or other Governmental Body or by any arbitrator.
1.31 "Ordinary Course of Business" means an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
1.32 "Organizational Documents" means (i) the Articles of Incorporation
and the Bylaws of a corporation; (ii) any charter or similar document adopted or
filed in connection with the creation, formation, or organization of a Person
and (iii) any amendment to any of the foregoing.
1.33 "Percentage Ownership" means the percentage of General Escrow Shares
owned by a Principal Shareholder immediately after the Effective Time.
1.34 "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.35 "Plan" as defined in Section 3.13.A. of this Agreement.
1.36 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.37 "Related Person" means with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by such
individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
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D. Any Person with respect to which such individual or one (1) or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
B. Any Person that holds a Material Interest in such specified
Person;
C. Each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B. or C.
For purposes of this definition, (i) the "Family" of an individual includes
(1) the individual's spouse and (2) any other natural person who is related to
the individual or the individual's spouse within the second degree and (ii)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least five percent (5%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or equity interests in a Person.
1.38 "Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.39 "Securities Act" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
1.40 "Subsidiaries" shall mean (i) Datamedic Corporation; (ii) Datamedic
Financial Corp.; (iii) Datamedic Acquisition Corp. and (iv) Clinical Information
Advantages, Inc.
1.41 "Tax Returns" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
1.42 "Taxes" means all taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value
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added and franchise taxes and customs duties, imposed by any Governmental Body
and any payments with respect thereto required under any tax-sharing agreement.
1.43 "Threatened" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally, if received by Stephen N. Kahane, M.D., Joseph D. Hill, Shiv
Anand, John Schafer, David Fetterolf or Henry Kilroy, or in writing) or any
notice has been given (orally, if received by Dr. Kahane, Mr. Hill, Shiv Anand,
John Schafer, David Fetterolf, Henry Kilroy or Susan Schanen, or in writing), or
any other event has occurred or any other circumstances exist, that would lead
the foregoing Persons to conclude that such a claim, Proceeding, dispute, action
or other matter is likely to be asserted, commenced, taken or otherwise pursued
in the future.
2. MERGER.
2.1 The Merger. Upon the terms and subject to the conditions set forth in
----------
this Agreement, the Company shall be merged with and into ISI at the Effective
Time (the "Merger"), the separate existence of the Company shall cease, and ISI
shall continue as the surviving corporation under the corporate name it
possesses immediately prior to the Effective Time. (ISI is sometimes hereinafter
referred to as the "Surviving Corporation").
2.2 Effect of the Merger. The Surviving Corporation shall possess all the
--------------------
rights, powers, franchises and authority, both public and private, and be
subject to all the restrictions, disabilities and duties, of the Company; shall
be vested with all assets and property, real, personal and mixed, and every
interest therein, wherever located, belonging to the Company; and shall be
liable for all the obligations and liabilities of the Company, all with the
effect set forth in the GBCC (as defined below).
2.3 Consummation of the Merger. On the Closing Date, the parties hereto
--------------------------
shall cause (i) a Certificate of Merger to be executed and filed with the
Secretary of State of the State of Delaware as provided in Section 252 of the
General Corporation Law of the State of Delaware ("GCL") and (ii) a Certificate
of Merger to be executed and filed with the Secretary of State of the State of
Georgia as provided in Article 11 of the Georgia Business Corporation Code
("GBCC") (the time of such filings being the "Effective Time").
2.4 Articles of Incorporation; Bylaws; Directors and Officers. The
---------------------------------------------------------
Articles of Incorporation, as amended, of ISI shall be the Articles of
Incorporation of the Surviving Corporation and thereafter shall continue to be
its Articles of Incorporation (until amended as provided under the GBCC).
The Bylaws of ISI, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation and thereafter shall continue
to be its bylaws (until amended as provided therein and under the GBCC).
The Directors and the Officers of ISI who are serving in such capacities
immediately prior to the Effective Time shall continue to serve as the directors
and officers of the Surviving Corporation in accordance with the bylaws of the
Surviving Corporation.
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2.5 Maximum Shares to be Issued; Conversion of Securities. The maximum
-----------------------------------------------------
number of shares of InfoCure Common Stock to be issued (including InfoCure
Common Stock to be reserved for issuance upon exercise of any of the Company's
Warrants or Options to be assumed by InfoCure as provided in Section 2.5.K and
Section 2.5.L below, and upon conversion of the Company's Convertible Debentures
to be assumed by InfoCure as provided in Section 2.5.M) in exchange for the
acquisition by InfoCure of all outstanding Company Capital Stock and all
unexpired and unexercised options, warrants, convertible debentures or other
rights to acquire Company Capital Stock shall be equal to 1,191,626 less (i) the
Adjustment Amount divided by the InfoCure Share Price, plus (ii) the aggregate
exercise price of the vested Datamedic Options and Warrants divided by the
InfoCure Share Price (the "Maximum InfoCure Shares"). Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of ISI, the Company or the holder of any shares
of the Company Capital Stock ("Company Shareholders"), the following shall
occur:
A. Treatment of ISI Capital Stock. Each share of the capital stock
------------------------------
of ISI issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding and shall not be affected by the Merger.
B. Conversion of Company Common Stock. Each share of the common
----------------------------------
stock, $.10 par value of the Company (the "Company Common Stock") issued and
outstanding as of the Effective Time (other than any shares of Company Capital
Stock to be canceled pursuant to Section 2.5. J. and any Dissenting Shares (as
defined and to the extent provided in Section 2.5. N.)) shall be converted into
the right to receive that number of shares of InfoCure Common Stock obtained by
dividing (i) the Maximum InfoCure Shares by (ii) the number of issued and
outstanding shares of the Company Capital Stock immediately prior to the
Effective Time calculated on a fully diluted basis including all outstanding
vested options, warrants, convertible debentures or other rights to receive
shares of Company Common Stock and treating all series of the Company's
Preferred Stock as if each share of such series had been converted in accordance
with Article Fourth, Section 4(a) of the Company's Certificate of Incorporation
and assuming the payment of the accrued and unpaid dividend thereon payable upon
such conversion in shares of Company Common Stock (the "Common Stock Exchange
Ratio"), upon surrender of the certificate representing such shares of Company
Common Stock in the manner provided in Section 2.6.
C. Conversion of Company Series A Convertible Preferred Stock. Each
----------------------------------------------------------
share of Series A Convertible Preferred Stock of the Company (the "Company
Series A Convertible Preferred Stock") issued and outstanding immediately prior
to the Effective Time (other than any shares of Company Capital Stock to be
canceled pursuant to Section 2.5. J. and any Dissenting Shares (as defined and
to the extent provided in Section 2.5. N.)) will be canceled and extinguished
and be converted automatically into the right to receive that number of shares
of InfoCure Common Stock equal to the number of shares of Company Common Stock
that would have been issued upon conversion of such share of Company Series A
Convertible Preferred Stock pursuant to Article Fourth, Section 4(a) of the
Company's Certificate of Incorporation and assuming the payment of the accrued
dividend thereon payable upon such conversion in shares of Company Common Stock
immediately prior to the Effective Time
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multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series A Convertible Preferred Stock in the
manner provided in Section 2.6.
D. Conversion of Company Series B-1 Convertible Preferred Stock.
------------------------------------------------------------
Each share of Series B-1 Convertible Preferred Stock of the Company (the
"Company Series B-1 Convertible Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.5.J. and any Dissenting
Shares (as defined and to the extent provided in Section 2.5. N.)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of InfoCure Common Stock equal to the number of
shares of Company Common Stock that would have been issued upon conversion of
such share of Company Series B-1 Convertible Preferred Stock pursuant to Article
Fourth, Section 4(a) of the Company's Certificate of Incorporation and assuming
the payment of the accrued dividend thereon payable upon such conversion in
shares of Company Common Stock immediately prior to the Effective Time
multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series B-1 Convertible Preferred Stock in the
manner provided in Section 2.6.
E. Conversion of Company Series B-2 Convertible Preferred Stock.
------------------------------------------------------------
Each share of Series B-2 Convertible Preferred Stock of the Company (the
"Company Series B-2 Convertible Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.5.J. and any Dissenting
Shares (as defined and to the extent provided in Section 2.5. N.)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of InfoCure Common Stock equal to the number of
shares of Company Common Stock that would have been issued upon conversion of
such share of Company Series B-2 Convertible Preferred Stock pursuant to Article
Fourth, Section 4(a) of the Company's Certificate of Incorporation and assuming
the payment of the accrued dividend thereon payable upon such conversion in
shares of Company Common Stock immediately prior to the Effective Time
multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series B-2 Convertible Preferred Stock in the
manner provided in Section 2.6.
F. Conversion of Company Series B-3 Convertible Preferred Stock.
------------------------------------------------------------
Each share of Series B-3 Convertible Preferred Stock of the Company (the
"Company Series B-3 Convertible Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.5.J. and any Dissenting
Shares (as defined and to the extent provided in Section 2.5. N.)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of InfoCure Common Stock equal to the number of
shares of Company Common Stock that would have been issued upon conversion of
such share of Company Series B-3 Convertible Preferred Stock pursuant to Article
Fourth, Section 4(a) of the Company's Certificate of Incorporation and assuming
the payment of the accrued dividend thereon payable upon such conversion in
shares of Company Common Stock immediately prior to the Effective Time
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multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series B-3 Convertible Preferred Stock in the
manner provided in Section 2.6.
G. Conversion of Company Series B-4 Convertible Preferred Stock.
------------------------------------------------------------
Each share of Series B-4 Convertible Preferred Stock of the Company (the
"Company Series B-4 Convertible Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.5.J. and any Dissenting
Shares (as defined and to the extent provided in Section 2.5. N.)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of InfoCure Common Stock equal to the number of
shares of Company Common Stock that would have been issued upon conversion of
such share of Company Series B-4 Convertible Preferred Stock pursuant to Article
Fourth, Section 4(a) of the Company's Certificate of Incorporation and assuming
the payment of the accrued dividend thereon payable upon such conversion in
shares of Company Common Stock immediately prior to the Effective Time
multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series B-4 Convertible Preferred Stock in the
manner provided in Section 2.6.
H. Conversion of Company Series B-5 Convertible Preferred Stock.
------------------------------------------------------------
Each share of Series B-5 Convertible Preferred Stock of the Company (the
"Company Series B-5 Convertible Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.5.J. and any Dissenting
Shares (as defined and to the extent provided in Section 2.5. N.)) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of InfoCure Common Stock equal to the number of
shares of Company Common Stock that would have been issued upon conversion of
such share of Company Series B-5 Convertible Preferred Stock pursuant to Article
Fourth, Section 4(a) of the Company's Certificate of Incorporation and assuming
the payment of the accrued dividend thereon payable upon such conversion in
shares of Company Common Stock immediately prior to the Effective Time
multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series B-5 Convertible Preferred Stock in the
manner provided in Section 2.6.
I. Conversion of Company Series C Convertible Preferred Stock. Each
----------------------------------------------------------
share of Series C Convertible Preferred Stock of the Company (the "Company
Series C Convertible Preferred Stock") issued and outstanding immediately prior
to the Effective Time (other than any shares of Company Capital Stock to be
canceled pursuant to Section 2.5.J. and any Dissenting Shares (as defined and to
the extent provided in Section 2.5. N.)) will be canceled and extinguished and
be converted automatically into the right to receive that number of shares of
InfoCure Common Stock equal to the number of shares of Company Common Stock that
would have been issued upon conversion of such share of Company Series C
Convertible Preferred Stock pursuant to Article Fourth, Section 4(a) of the
Company's Certificate of Incorporation and assuming the payment of the accrued
dividend thereon payable upon such conversion in shares of Company Common Stock
immediately prior to the Effective Time
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multiplied by the Common Stock Exchange Ratio, upon surrender of the certificate
representing such share of Company Series C Convertible Preferred Stock in the
manner provided in Section 2.6.
J. Cancellation of Company-Owned Capital Stock. Each share of
-------------------------------------------
Company Capital Stock owned by the Company or any Subsidiary of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
K. Warrants. All warrants to purchase Company Common Stock
--------
(collectively, the "Warrants") then outstanding shall be assumed by InfoCure in
accordance with Section 5.4.
L. Stock Options. At the Effective Time, all options (collectively,
-------------
the "Options") to purchase Company Common Stock then outstanding under the
Company's 1988, 1992 and 1995 Stock Option Plans (collectively, the "Company
Stock Option Plan") shall be assumed by InfoCure in accordance with Section 5.4.
M. Convertible Subordinated Debentures. All of the five year 10%
-----------------------------------
Convertible Subordinated Debentures of the Company (collectively, the
"Convertible Debentures") then outstanding shall be assumed by InfoCure in
accordance with Section 5.4.
N. Dissenters Rights.
-----------------
(i) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
the GCL and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal or dissenters' rights (the "Dissenting Shares") shall not be
converted into or represent a right to receive InfoCure Common Stock pursuant to
this Section 2.5., but the holder thereof shall only be entitled to such rights
as are granted by GCL.
(ii) Notwithstanding the provisions of subsection (i), if any
holder of shares of Company Capital Stock demands appraisal of such shares under
the GCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive InfoCure Common Stock and
payment for any fractional share as provided in this Section 2.5., without
interest thereon, upon surrender of the certificate representing such shares.
(iii) The Company shall give InfoCure (1) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to GCL
and received by the Company and (2) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under the
GCL. The Company shall not, except with the prior written consent of InfoCure,
voluntarily make any payment with respect to any demands for appraisal of
capital stock of the Company or offer to settle or settle any such demands.
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O. Adjustments to Exchange Ratio. The Common Stock Exchange Ratio
-----------------------------
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities convertible
into Company Common Stock or InfoCure Common Stock), reorganization,
recapitalization or other like change with respect to Company Common Stock or
InfoCure Common Stock occurring after the date hereof and prior to the Effective
Time.
P. Fractional Shares. As of the Effective Time, all such shares of
-----------------
the Company Capital Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent only the
right to receive a certificate representing the shares of InfoCure Common Stock
into which such Company Capital Stock was converted in the Merger. The holders
of such certificates previously evidencing such shares of the Company Capital
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of the Company Capital Stock as of the
Effective Time except as otherwise provided herein or by law. Such certificates
previously representing shares of the Company Capital Stock shall be exchanged
for certificates representing whole shares of InfoCure Common Stock issued in
consideration therefor upon the surrender of such certificates in accordance
with the provisions of Section 2.6., without interest. No fractional shares of
InfoCure Common Stock will be issued in connection with the Merger, but in lieu
thereof, the holder of any shares of Company Capital Stock who would otherwise
be entitled to receive a fraction of a share of InfoCure Common Stock shall
receive cash in an amount equal to the value of such fractional shares, which
shall be equal to the fraction of a share of InfoCure Common Stock that would
otherwise be issued multiplied by the InfoCure Share Price.
2.6 Exchange of Certificates.
------------------------
A. Promptly after the Effective Time, InfoCure shall supply, or
shall cause to be supplied, to or for the account of a bank or trust company
designated by InfoCure (the "Exchange Agent"), for exchange in accordance with
this Section 2.6., through the Exchange Agent, certificates evidencing the
InfoCure Common Stock issuable pursuant to Section 2.5. in exchange for
outstanding shares of Company Capital Stock, and cash in an amount sufficient
for payment in lieu of fractional shares pursuant to Section 2.5. P. and any
dividends or other distributions to which holders of shares of Company Capital
Stock may be entitled pursuant to Section 2.6.C.
B. As soon as reasonably practicable after the Effective Time,
InfoCure will instruct the Exchange Agent to mail to each holder of record (as
of the Effective Time) of a certificate or certificates which immediately prior
to the Effective Time evidenced outstanding shares of Company Capital Stock (the
"Certificates") whose shares were converted into shares of InfoCure Common Stock
pursuant to Section 2.5. (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as InfoCure may reasonably
specify after review by the Company) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates
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evidencing shares of InfoCure Common Stock, cash in lieu of any fractional
shares pursuant to Section 2.5. P. and any dividends or other distributions
pursuant to Section 2.6.C. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
InfoCure, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such other customary
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange thereof (1) certificates
evidencing that number of whole shares of InfoCure Common Stock which such
holder has the right to receive in accordance with the Common Stock Exchange
Ratio in respect of the shares of Company Capital Stock formerly evidenced by
such Certificate; (2) any dividends or other distributions to which such holder
is entitled pursuant to Section 2.6.C. and (3) cash in lieu of fractional shares
of InfoCure Common Stock to which such holder is in entitled pursuant to Section
2.5. P. (the foregoing InfoCure Common Stock, dividends, distributions and cash
being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Company Capital Stock which is not registered in the transfer
records of the Company as of the Effective Time, InfoCure Common Stock and cash
may be issued and paid in accordance with this Article 2. to a transferee if the
Certificate evidencing such shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 2.6. and by evidence that any applicable stock transfer
taxes have been paid. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence the ownership of the number of full shares
of InfoCure Common Stock into which such shares shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 2.5. P.
C. No dividends or other distributions declared or made after the
Effective Time, with respect to InfoCure Common Stock with a record date after
the Effective Time, shall be paid to the holder of any unsurrendered Certificate
until the holder of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
InfoCure Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of InfoCure Common Stock.
D. If any certificate for shares of InfoCure Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to InfoCure or any person designated by it any transfer or other taxes
required by reason of the issuance of a certificate for shares of InfoCure
Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of InfoCure or any
agent designated by it that such tax has been paid or is not payable.
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<PAGE>
E. Notwithstanding anything to the contrary in this Section 2.6.,
neither the Exchange Agent, InfoCure, ISI nor the Company shall be liable to any
holder of Company Capital Stock or InfoCure Common Stock for any Merger
Consideration (or dividends or distributions with respect thereto) delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
2.7 Lost, Stolen or Destroyed Certificates. In the event any Certificates
--------------------------------------
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of InfoCure Common
Stock as may be required pursuant to Section 2.5.; provided, however, that
InfoCure may, in its sole discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against InfoCure or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
2.8 Deposit of Shares in Escrow.
---------------------------
A. Upon issuance of the certificates representing the InfoCure
Common Stock issuable to the Principal Shareholders by virtue of the Merger,
InfoCure shall cause to be delivered into escrow that portion of such stock
certificates representing five percent (5%) of the Maximum InfoCure Shares to be
allocated among the Principal Shareholders based on their relative percentage
ownership of the InfoCure Common Stock issuable to the Principal Shareholders
pursuant to Section 2.5 (the "General Escrow Shares"), in accordance with the
terms of the Escrow Agreement in the form of Exhibit B hereto. The Escrow
---------
Agreement sets forth the conditions under which the General Escrow Shares shall
be delivered to the Principal Shareholders.
B. Upon issuance of the certificates representing the InfoCure
Common Stock issuable to the Principal Shareholders by virtue of the Merger, in
addition to the General Escrow Shares placed in escrow in accordance with
Section 2.8.A. above, the Principal Shareholders shall cause to be delivered
into escrow that number of shares of InfoCure Common Stock to be allocated among
the Principal Shareholders based on their relative percentage ownership of the
InfoCure Common Stock issuable to the Principal Shareholders pursuant to Section
2.5 as is equal to $750,000 less the amounts paid by Datamedic to defend or
settle any of the litigation on Schedule 3.15 between the date hereof and the
closing date, divided by the InfoCure Share Price, in order to fund the defense
and/or settlement of the remaining litigation listed on Schedule 3.15 (the
-------------
"Special Escrow Shares" which together with the "General Escrow Shares"
sometimes referred to as the "Escrow Shares") in accordance with the terms of
the Escrow Agreement. The Escrow Agreement sets forth the conditions under which
the Special Escrow Shares shall be delivered to the Principal Shareholders.
2.9 Closing. Subject to termination of this Agreement as provided in
-------
Section 8., the consummation of the Merger (the "Closing") shall take place at
the offices of Morris, Manning & Martin, L.L.P., Suite 1600, 3343 Peachtree
Road, N.E., Atlanta, Georgia 30326 at 2:00 P.M.,
14
<PAGE>
Eastern Standard Time, within three (3) business days after the satisfaction or
waiver (by the party or parties entitled to waive) of all conditions to Closing
set forth in this Agreement, but in no event later than December 31, 1999 or
such later date as shall be mutually agreeable to all parties.
2.10 No Further Ownership Rights in Company Capital Stock. All shares of
----------------------------------------------------
InfoCure Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any cash
paid in respect thereof pursuant to Section 2.5.P. and 2.6.C.) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 2.
2.11 Additional Actions. If, at any time after the Effective Time, the
------------------
Surviving Corporation or InfoCure shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of the Company, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
2.12 Company Certificate. At or prior to the Closing, the Company shall
-------------------
deliver to InfoCure a certificate signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company (the "Company
Certificate") identifying each of the holders of each series of the Company's
Preferred Stock and the stock dividend that would be payable upon the conversion
of such Preferred Stock as provided in Section 2.5 above. InfoCure shall be
entitled to rely without investigation on the information set forth in the
Company Certificate in delivering the InfoCure Common Stock to such holders
pursuant to Section 2.5. Notwithstanding anything to the contrary in this
Agreement, InfoCure shall not be obligated to deliver any portion of the
consideration set forth in Section 2.5. to such holders unless and until the
Company shall have delivered the Company Certificate to InfoCure.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to ISI and InfoCure, subject to such
exceptions as are disclosed in the Disclosure Schedule supplied by the Company
to ISI and InfoCure and dated as of the date hereof, as follows:
15
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3.1 Organization, Good Standing, Corporate Power and Subsidiaries.
-------------------------------------------------------------
A. Schedule 3.1.A of the Disclosure Schedule contains a complete and
--------------
accurate list of the Company and each Subsidiary's name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each).
The Company and each Subsidiary is a corporation duly organized, validly
existing, and, except as set forth in Schedule 3.1.A of the Disclosure Schedule,
in good standing under the laws of the jurisdiction in which it is organized,
with full corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use.
The Company and each Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified or
licensed would not result in a Company Material Adverse Effect.
B. The Company and Subsidiaries have delivered to ISI copies of the
Organizational Documents of the Company and each Subsidiary, as currently in
effect.
C. Except as set forth in Schedule 3.1.C of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries owns, directly or indirectly,
any capital stock or other ownership interest in any corporation, partnership,
joint venture or other entity.
3.2 Authority; No Conflict.
----------------------
A. The Company has the corporate power and authority to enter into
and perform its obligations under this Agreement and all agreements to which the
Company is or will be a party that are required to be executed pursuant to this
Agreement (the "Company Ancillary Agreements") and, subject only to the approval
and adoption of this Agreement and the approval of the Merger by the Company's
Shareholders at the Meeting (as defined below) as contemplated hereby (the
"Shareholder Approval"), to consummate the Merger. The execution, delivery and
performance of this Agreement and the Company Ancillary Agreements have been
duly and validly approved by the Company Board of Directors, as required by
applicable law and the Company Board of Directors has, as of the date of this
Agreement, determined (i) that the Merger is advisable and fair to, and in the
best interests of Company and its shareholders and (ii) to recommend that the
shareholders of Company approve and adopt this Agreement and approve the Merger.
This Agreement and the Company Ancillary Agreements are, or when executed
and delivered by the Company will be, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies;
16
<PAGE>
provided, however, that the Company Ancillary Agreements will not be effective
until the earlier of the date set forth therein or the Effective Time.
B. Except as set forth in Schedule 3.2 of the Disclosure Schedule,
------------
neither the execution and delivery of this Agreement and the Company Ancillary
Agreements nor, after Shareholder Approval, the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) Contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of the Company or any Subsidiary;
(ii) Contravene, conflict with, or result in a violation of, or
give any Governmental Body or, to the Knowledge of the Company, other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company or any Subsidiary, or any of the assets owned or used by the Company
or any Subsidiary, may be subject;
(iii) Subject to the filing of the Certificate of Merger with
the Georgia Secretary of State and the Delaware Secretary of State, contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by the Company
or any Subsidiary or that otherwise relates to the business of, or any of the
assets owned or used by the Company or any Subsidiary;
(iv) Cause the Company or any Subsidiary to become subject to,
or to become liable for the payment of, any Tax;
(v) Cause any of the assets owned by the Company or any
Subsidiary to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) Contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material Contract; or
(vii) Result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company or any
Subsidiary.
C. Except as set forth in Schedule 3.2 of the Disclosure Schedule
------------
and such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Company Material Adverse Effect
or have a material adverse effect on the ability of the parties to consummate
the Merger, the Company is not or will not be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement and the Company Ancillary Agreements or the consummation or
performance of any of the Contemplated Transactions.
17
<PAGE>
3.3 Capitalization. The authorized capital stock of the Company consists
--------------
of (i) eight million five hundred thousand (8,500,000) shares of Common Stock,
par value $.10 per share, of which one million two hundred fifty-three thousand
one hundred eleven (1,253,111) shares are issued and outstanding and (ii) five
million two hundred thousand (5,200,000) shares of Preferred Stock, par value
$.10 per share, of which four hundred fifty-eight thousand one hundred fifty-
seven (458,157) shares have been designated as Series A Convertible Preferred
Stock, of which four hundred twenty-seven thousand six hundred twelve (427,612)
shares are issued and outstanding; twenty-nine thousand four hundred twelve
(29,412) shares have been designated as Series B-1 Convertible Preferred Stock,
all of which are issued and outstanding; fourteen thousand two hundred eighty-
six (14,286) shares have been designated as Series B-2 Convertible Preferred
Stock, all of which are issued and outstanding; one hundred eight thousand three
hundred thirty-three (108,333) shares have been designated as Series B-3
Convertible Preferred Stock, all of which are issued and outstanding; one
hundred twenty-nine thousand four hundred fifty (129,450) shares have been
designated as Series B-4 Convertible Preferred Stock, of which eleven thousand
two hundred fifty (11,250) are issued and outstanding; thirty thousand nine
hundred thirty-eight (30,938) shares have been designated as Series B-5
Convertible Preferred Stock, all of which are issued and outstanding and three
million two hundred thousand (3,200,000) shares have been designated as Series C
Convertible Preferred Stock, of which three million one hundred sixty-eight
thousand three hundred forty-six (3,168,346) shares are issued and outstanding.
All of the issued and outstanding shares of the Company Common Stock and
Preferred Stock are held of record and (assuming exercise of all outstanding
Options, Warrants and conversion of all Convertible Debentures) owned by the
Persons set forth on Schedule 3.3.
------------
All of the outstanding equity securities of the Company and each Subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable. Other than as set forth on Schedule 3.3, neither the Company nor
------------
any Subsidiary is a party to any Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company or any
Subsidiary. Except as set forth on Schedule 3.1.C, the Company owns directly
--------------
all of the outstanding equity securities of each Subsidiary.
Except as set forth on Schedule 3.1.C, the Company or any Subsidiary does
--------------
not own, nor does it have any Contract to acquire, any equity securities or
other securities of any Person (other than the Company) or any direct or
indirect equity or ownership interest in any other business.
Except as disclosed on Schedule 3.3, there are no stock appreciation
------------
rights, options, warrants, conversion privileges or pre-emptive or other rights
or agreements outstanding to purchase or otherwise acquire any of the Company's
or any Subsidiary's capital stock; there are no options, warrants, conversion
privileges or pre-emptive or other rights or agreements to which the Company or
any Subsidiary is a party involving the purchase or other acquisition of any
share of the Company's or any Subsidiary's capital stock; there is no liability
for dividends accrued, but unpaid; and there are no voting agreements, right of
first refusal or other restrictions (other than normal restrictions on transfer
under applicable federal and state securities laws) applicable to any of the
Company's or any Subsidiary's outstanding securities.
18
<PAGE>
3.4 Financial Statements. The Company has delivered to ISI and InfoCure,
--------------------
as set forth on Schedule 3.4, (i) the audited consolidated balance sheet of the
------------
Company as of March 31, 1999, March 31, 1998 and March 31, 1997, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flow for the fiscal year then ended, prepared by the accounting firm of KPMG in
accordance with GAAP consistently applied and (ii) the unaudited consolidated
balance sheet of the Company as of June 30, 1999, and the related consolidated
statements of income, changes in stockholders' equity, and cash flow for the
three (3) month period then ended (collectively, the "Financial Statements").
The Financial Statements and notes, if any, have been prepared on an
accrual basis and fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company and
the Subsidiaries as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP, subject, in the case
of the unaudited interim Financial Statements, to normal year-end and audit
adjustments.
No financial statements of any Person, other than the Company and its
Subsidiaries, are required by GAAP to be included in the Financial Statements of
the Company.
3.5 Books and Records. The books of account, stock record books, and
-----------------
other records of the Company and each Subsidiary, all of which have been made
available to ISI and InfoCure, are complete and correct in all material
respects.
The minute books of the Company and each Subsidiary made available to
counsel for InfoCure are the only minute books of the Company and each
Subsidiary and contain a reasonably accurate summary, in all material respects,
of all meetings held of, and corporate action taken by, the stockholders, the
Board of Directors and committees of the Board of Directors of Company and each
Subsidiary since January 1, 1989. At the Closing, all of those books and
records will be in the possession of the Company.
3.6 Real Property Interests. Neither the Company nor any Subsidiary owns
-----------------------
real property. Schedule 3.6 of the Disclosure Schedule contains a complete and
------------
accurate list of all leaseholds or other interests in real property of the
Company and each Subsidiary. The Company has delivered or made available to ISI
and InfoCure copies of the lease agreements and other instruments by which the
Company and each Subsidiary acquired such leasehold and other real property
interests.
3.7 Condition and Sufficiency of Assets. Except as set forth on Schedule
----------------------------------- --------
3.7 of the Disclosure Schedule, to the Company's Knowledge, the buildings,
- ---
plants, structures and equipment of the Company and each Subsidiary are
structurally sound, are in good operating condition and repair, subject to
normal wear and tear, and are adequate for the uses to which they are being put.
3.8 Accounts Receivable. All accounts receivable of the Company and each
-------------------
Subsidiary that are reflected on the Financial Statements or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will
19
<PAGE>
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, to the Knowledge of the Company, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Financial Statements or
on the accounting records of the Company and each Subsidiary as of the Closing
Date.
To the Knowledge of the Company, there is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
material Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable.
Schedule 3.8 of the Disclosure Schedule contains a complete and accurate
------------
list of all Accounts Receivable as of June 30, 1999, which list sets forth the
aging of such Accounts Receivable.
3.9 Inventory. All inventory of the Company and each Subsidiary, whether
---------
or not reflected in the Financial Statements, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been or will be written
off or written down to net realizable value in the Financial Statements or on
the accounting records of the Company and each Subsidiary as of the Closing
Date, as the case may be.
3.10 No Undisclosed Liabilities. Except as set forth in Schedule 3.10 of
-------------------------- -------------
the Disclosure Schedule, the Company has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent or
otherwise) except for liabilities or obligations reflected or reserved against
in the Financial Statements and not heretofore paid or discharged and current
liabilities incurred in the Ordinary Course of Business since June 30, 1999.
3.11 Taxes.
-----
A. Except as set forth on Schedule 3.11 to the Disclosure Schedule,
-------------
the Company and each Subsidiary has timely filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
material respects. The Company and each Subsidiary has paid in full or made
adequate provision by the establishment of reserves for all Taxes which have
become due or which are attributable to the conduct of the Company's and each
Subsidiary's business prior to the date hereof. The Company and each Subsidiary
will continue to make adequate provision for all such Taxes for all periods
through the Closing Date. The Company and each Subsidiary is not the
beneficiary of any extension of time within which to file any Tax Return.
Except as set forth on Schedule 3.11, the Company has no Knowledge of any
-------------
Tax deficiency proposed or Threatened against the Company or any Subsidiary.
There are no Tax liens upon any property or assets of the Company or any
Subsidiary to secure the payment of any delinquent Taxes.
20
<PAGE>
Except as set forth on Schedule 3.11, the Company and each Subsidiary has
-------------
made all payments of estimated Taxes when due in amounts sufficient to avoid the
imposition of any penalty.
B. Except as set forth on Schedule 3.11, all Taxes and other
-------------
assessments and levies which the Company or any Subsidiary was required by law
to withhold or to collect have been duly withheld and collected, and have been
paid over to the proper Governmental Body.
C. Except as set forth in Schedule 3.11, the Tax Returns of the
-------------
Company and each Subsidiary have never been audited by the IRS or other
Governmental Body, nor are any such audits in process. Except as set forth in
Schedule 3.11, there are no outstanding agreements or waivers extending the
- -------------
statute of limitations applicable to any Tax Returns of the Company or any
Subsidiary for any period.
D. For federal income tax purposes, the Company and each Subsidiary
has a taxable year ending on March 31 in each year.
E. The Company has not filed a consent under Code (S) 341(f)
concerning collapsible corporations. The Company and each Subsidiary has not
made any material payments, is not obligated to make any material payments, and
is not a party to any agreement that under any circumstances could obligate it
to make any material payments that will not be deductible under Code (S) 280G.
The Company and each Subsidiary has not been a United States real property
holding corporation within the meaning of Code (S) 897(c)(2) during the
applicable period specified in Code (S) 897(c)(1)(A)(ii). The Company and each
Subsidiary is not a party to any Tax allocation or sharing agreement. Except
with respect to the Subsidiaries, the Company (i) has not been a member of an
affiliated group filing a consolidated federal income Tax Return and (ii) has no
liability for the Taxes of any Person under Reg. (S)1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
F. The Company's and each Subsidiary's Tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's and each
Subsidiary's books and records in all material respects.
3.12 No Company Material Adverse Effect. Since June 30, 1999, there has
----------------------------------
not been any Company Material Adverse Effect.
3.13 Employee Benefits Matters.
-------------------------
A. Schedule 3.13.1 lists all plans, programs, and similar
---------------
agreements, commitments or arrangements (including, but not limited to, any
bonus, profit sharing, pension, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, tuition
reimbursement, disability, sick leave, vacation, commission, retention or other
arrangements), whether oral or written, sponsored or maintained by or on behalf
of, or to which contributions are or were made by, Company and/or any ERISA
Affiliate within the last seven (7) years that provide or provided benefits,
compensation or other remuneration to, or for
21
<PAGE>
the benefit of, current or former employees of Company and/or any ERISA
Affiliate or any or any other individual who provides services to the Company
and/or any ERISA Affiliate (including, but not limited to, any shareholder,
officer, director, employee or consultant), or any spouse, child or other
dependent of such current or former employee or other individual ("Plan" or
"Plans"). Except as disclosed on Schedule 3.13.1, there are no other benefits to
---------------
which any current or former employees of Company and/or any ERISA Affiliate or
any or any other individual who provides services to the Company and/or any
ERISA Affiliate (including, but not limited to, any shareholder, officer,
director, employee or consultant), or any spouse, child or other dependent of
such current or former employee or other individual is entitled or for which the
Company and/or any ERISA Affiliate has any obligation. Except as set forth on
Schedule 3.13.1, only current employees of Company participate in the Plans,
- ---------------
except as required by IRC (S) 4980B and/or ERISA (S)(S) 601-609. Copies of all
Plans and, to the extent applicable, all related trust agreements, actuarial
reports, and valuations for the most recent three (3) years, all summary plan
descriptions, prospectuses, Annual Report Form 5500's or similar forms (and
attachments thereto) for the most recent three (3) years, all Internal Revenue
Service determination letters, and any related documents requested by Buyer,
including all amendments, modifications and supplements thereto, all material
employee and/or participant communications relating to each such Plan, and all
insurance contracts, administrative services agreements or contracts, have been
delivered to Buyer, and all of the same are true, correct and complete.
B. With respect to each Plan to the extent applicable:
(i) Except as set forth in Schedule 3.15, no litigation or
administrative or other proceeding or investigation, claim, lawsuit, arbitration
or other action is pending or threatened involving such Plan or any
administrator, fiduciary, employee, contributing employer, contractor or agent
of such Plan, other than routine claims for benefits in the ordinary course for
such Plan.
(ii) Such Plan has been administered and operated in compliance
with, and has been amended to comply with, all applicable laws, rules, and
regulations, including, without limitation, ERISA, the Code, and the regulations
issued under ERISA and the Code.
(iii) Company and ERISA Affiliates have made and as of the
Closing Date will have made or accrued, all payments and contributions required,
or reasonably expected to be required, to be made under the provisions of such
Plan or required to be made under applicable laws, rules and regulations, with
respect to any period prior to the Closing Date, such amounts to be determined
using the ongoing actuarial and funding assumptions of the Plan if applicable.
(iv) Such Plan is fully funded in an amount sufficient to pay
all liabilities (whether or not vested) accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the date hereof.
(v) On the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities (whether or not vested) accrued as of
the Closing Date (including
22
<PAGE>
liabilities and obligations for health care, life insurance and other benefits
after termination of employment) and claims incurred as of the Closing Date, or
adequate reserves will be set up on Company's books and records, or paid-up
insurance will be provided, therefor.
(vi) Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has not
been in the four (4) years prior hereto any increase in the liabilities of such
Plan beyond increases typically experienced as a result of changes in the
workforce.
(vii) Such Plan is not a multiemployer plan (as defined in ERISA
(S)(S) 3(37) or 4001(a)(3)), is not a single-employer plan (as defined in ERISA
(S) 4001(a)(15)), and is not a defined benefit plan (as defined in ERISA (S)
3(35), and is not a plan maintained by more than one employer (within the
meaning of Code (S) 413(c).
(viii) No Person has engaged in any "prohibited transaction" (as
defined in ERISA (S) 406 or Code (S)(S) 503(b) or 4975) with respect to such
Plan on or prior to the Closing Date, and no Person who would be a fiduciary
with respect to such Plan has breached any of his responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA which would subject
Company or any ERISA Affiliate, or any Person whom the Company has an obligation
to indemnify, to any liability.
(ix) Such Plan contains provisions which allow additional
benefits under the Plan to be discontinued at any time and for any reason, and
which allow the Plan to be terminated (or the Company's participation in the
Plan to be terminated) by the Company at any time and for any reason, and, if
such Plan were terminated (or the Company's participation in such Plan were
terminated) on or prior to the Closing Date, no additional liability would be
incurred by the Company by such action.
(x) All communications with respect to such Plan by any Person
on or prior to the Closing Date have reflected accurately the documents and
operations of such Plan, and no Person has, as of the Closing Date, any
liability under any applicable law by reason of any communication or failure to
communicate with respect to or in connection with such Plan.
(xi) Such Plan does not provide benefits to any former
employee, or any other Person who is not performing services for the Company,
except as required by Code (S) 4980B and/or ERISA (S)(S) 601-609.
(xii) No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred or will be incurred as of the Closing Date by Company
or any ERISA Affiliate, except for PBGC insurance premiums (if any), and all
such insurance premiums incurred or accrued up to and including the Closing Date
have been timely paid, or will be timely paid prior to the Closing Date.
(xiii) Neither the Company nor any ERISA Affiliate has ceased
operations at any facility or withdrawn from such Plan in a manner which could
subject the TAGET to liability under ERISA (S)(S) 4062, 4063 or 4064, and no
events have occurred or will
23
<PAGE>
occur on or prior to the Closing Date which might give rise to any liability of
Company to the PBGC under Title IV of ERISA or which could reasonably be
anticipated to result in any claims being made against Company by the PBGC.
(xiv) No entitlement to any benefit (including, but not limited
to, severance pay, unemployment compensation or payment contingent upon a change
in control or ownership of the Company) from such Plan shall arise, and no
acceleration or increase in benefits due any Person shall occur, by reason of
the consummation of the transactions contemplated by this Agreement.
(xv) If such Plan purports to provide benefits which qualify
for tax-favored treatment under Code (S)(S) 79, 105, 106, 117, 120, 125, 127 129
or 132, the Plan satisfies the requirements of said Code sections.
C. The participants and beneficiary records with respect to each
Plan providing benefits to employees or other Persons performing services for
the Company and their spouses, dependents, etc., are in the custody of the
Company (or an agent of the Company who must, upon demand, provide such records
to the Company), and such records accurately state the history of each
participant and beneficiary in connection with each such Plan and accurately
state the benefits earned by and/or owed to each such participant and
beneficiary.
D. Except as otherwise set forth on Schedule 3.13.2, the Company is
---------------
not liable for and neither the Company nor ISI nor InfoCure will be liable for,
any contribution, Tax, lien, penalty, cost, interest, claim, loss, action, suit,
damage, cost assessment or other similar type of liability or expense of any
ERISA Affiliate (including predecessors thereof) with regard to any Plan
maintained, sponsored or contributed to by an ERISA Affiliate, including,
without limitation, withdrawal liability arising under Title IV of ERISA,
liabilities to the PBGC, or liabilities under Code (S) 412 or ERISA (S) 302.
3.14 Compliance With Legal Requirements; Governmental Authorizations. For
---------------------------------------------------------------
purposes of this Section 3.14. only, the term "Company" shall be deemed to
include the Company and each of its Subsidiaries.
A. Except as set forth in Schedule 3.14 of the Disclosure Schedule:
(i) The Company is, and at all times since June 30, 1999 has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets except where the failure to comply with a Legal Requirement
would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (1) may
constitute or result in a violation by the Company of, or a failure on the part
of the Company to comply with, any Legal Requirement or (2) may give rise to any
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature except for events or
circumstances which in the aggregate would not have a Company Material Adverse
Effect; and
24
<PAGE>
(iii) The Company has not received, at any time since June 30,
1999, any written notice or other written communication from any Governmental
Body or any other Person regarding (1) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement or (2)
any actual, alleged, possible, or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature .
B. Schedule 3.14 of the Disclosure Schedule contains a complete and
-------------
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by the Company and that, in each case, is material to the conduct of the
Company's business. Each Governmental Authorization listed or required to be
listed in Schedule 3.14 of the Disclosure Schedule is valid and in full force
-------------
and effect. Except as set forth in Schedule 3.14 of the Disclosure Schedule:
-------------
(i) The Company is, and at all times since June 30, 1999 has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Schedule
--------
3.14 of the Disclosure Schedule, except where the failure to comply with a
- ----
Governmental Authorization would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time) (1)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 3.14 of the Disclosure Schedule or (2) result
-------------
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Schedule 3.14 of the Disclosure Schedule, except for
-------------
events or circumstances which in the aggregate would not have a Company Material
Adverse Effect;
(iii) The Company has not received, at any time since June 30,
1999, any written notice or other written communication from any Governmental
Body or any other Person regarding (1) any actual or alleged violation of or
failure to comply with any term or requirement of any Governmental Authorization
or (2) any actual or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) All applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Schedule 3.14 of the Disclosure Schedule have been duly filed on a timely basis
- -------------
with the appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies, except where the
failure to make such filings in a timely manner would not have a Company
Material Adverse Effect.
The Governmental Authorizations listed in Schedule 3.14 of the Disclosure
-------------
Schedule collectively constitute all of the Governmental Authorizations that are
material to the conduct of
25
<PAGE>
the Company's business in the manner it is currently conducted and to operate
such business and to permit the Company to own and use its assets in the manner
in which it currently owns and uses such assets.
3.15 Legal Proceedings; Orders.
A. Except as set forth in Schedule 3.15 of the Disclosure Schedule,
-------------
there is no pending Proceeding:
(i) That has been commenced by or against the Company or any
Subsidiary; or
(ii) To the Knowledge of the Company, that challenges, or that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
Except as set forth in Schedule 3.15 of the Disclosure Schedule, to the
-------------
Knowledge of the Company, (i) no such Proceeding has been Threatened and (ii) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any Proceeding by or against the Company or any
Subsidiary that could reasonably be expected to result in a Company Material
Adverse Effect. The Company has delivered to ISI and InfoCure copies of all
pleadings, correspondence, and other documents relating to each pending
Proceeding listed in Schedule 3.15 of the Disclosure Schedule.
-------------
B. Except as set forth in Schedule 3.15 of the Disclosure Schedule:
-------------
(i) There is no Order to which the Company or any Subsidiary,
or, to the Company's Knowledge, any of the assets owned or used by the Company
or any Subsidiary, is subject; and
(ii) To the Company's Knowledge, no officer, director, or
employee of the Company is subject to any Order that prohibits such officer,
director, or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of the Company or any Subsidiary as currently
conducted .
C. Except as set forth in Schedule 3.15 of the Disclosure Schedule:
-------------
(i) The Company and each Subsidiary is, and at all times since
June 30, 1999 has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject, except where the failure to comply would not have a
Company Material Adverse Effect;
(ii) To the Knowledge of the Company, no event has occurred or
circumstance exists that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Company or any Subsidiary, or any of the assets owned
or used by the Company or any
26
<PAGE>
Subsidiary, is subject, except for events or circumstances which in the
aggregate would not have a Company Material Adverse Effect; and
(iii) Neither the Company nor any Subsidiary has received, at
any time since June 30, 1999, any written notice from any Governmental Body or
any other Person regarding any actual or alleged violation of, or failure to
comply with, any term or requirement of any Order to which the Company, or any
of the assets owned or used by the Company or any Subsidiary, is or has been
subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
-------------------------------------
Schedule 3.16 of the Disclosure Schedule, since June 30, 1999, the Company and
- -------------
each Subsidiary has conducted its business only in the Ordinary Course of
Business and there has not been any:
A. Change in the Company's or any Subsidiary's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company or any Subsidiary; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company or any Subsidiary of any shares
of any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
B. Amendment to the Organizational Documents of the Company or any
Subsidiary;
C. Except in the Ordinary Course of Business, payment or increase by
the Company or any Subsidiary of any bonuses, salaries, or other compensation to
any stockholder, director, officer or employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
D. Adoption of, or substantial increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company or any Subsidiary;
E. Damage to or destruction or loss of any asset or property of the
Company or any Subsidiary, whether or not covered by insurance that had a
Company Material Adverse Effect;
F. Entry into, termination of, or receipt of written notice of
termination of any Contract or transaction involving a total remaining
commitment by or to the Company or any Subsidiary of at least Twenty-Five
Thousand and No/100 Dollars ($25,000.00);
G. Sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or any Subsidiary or mortgage, pledge, or imposition of any Encumbrance on any
material asset or property of the Company or any Subsidiary, including the sale,
lease, or other disposition of any of the Software and Intangibles;
27
<PAGE>
H. Cancellation or waiver of any claims or rights with a value to
the Company or any Subsidiary in excess of Fifteen Thousand and No/100 Dollars
($15,000.00);
I. Material change in the accounting methods used by the Company or
any Subsidiary; or
J. Agreement, whether oral or written, by the Company or any
Subsidiary to do any of the foregoing.
3.17 Contracts; No Defaults.
----------------------
A. Schedule 3.17(a) of the Disclosure Schedule contains a complete
----------------
and accurate list (other than Customer License Agreements which are disclosed in
Section 3.22.), and the Company has delivered to ISI and InfoCure true and
complete copies, of:
(i) Each Contract that involves performance of services or
delivery of goods or materials by the Company or any Subsidiary of an amount or
value in excess of Ten Thousand and No/100 Dollars ($10,000.00);
(ii) Each Contract that involves performance of services or
delivery of goods or materials to the Company or any Subsidiary of an amount or
value in excess of Ten Thousand and No/100 Dollars ($10,000.00);
(iii) Except for customer Contracts and inventory and equipment
purchase orders incurred in the Ordinary Course of Business, each Contract that
was not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company or any Subsidiary in excess of Ten
Thousand and No/100 Dollars ($10,000.00);
(iv) Each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than Ten Thousand and No/100 Dollars ($10,000.00) and
with terms of less than one (1) year) of the Company or any Subsidiary;
(v) Each collective bargaining agreement and other Contract to
or with any labor union or other employee representative of a group of employees
relating to the Company or any Subsidiary;
(vi) Each joint venture, partnership, and other Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
the Company or any Subsidiary with any other Person;
(vii) Each Contract containing covenants that in any way purport
to restrict the business activity of the Company or any Subsidiary or limit the
freedom of the Company or any Subsidiary to engage in any line of business or to
compete with any Person;
28
<PAGE>
(viii) Each Contract (relating to the Company or any Subsidiary)
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(ix) Each power of attorney relating to the Company or any
Subsidiary that is currently effective and outstanding;
(x) Each Contract relating to the Company or any Subsidiary
for capital expenditures in excess of Ten Thousand and No/100 Dollars
($10,000.00);
(xi) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company or
any Subsidiary other than in the Ordinary Course of Business; and
(xii) Each amendment, supplement, and modification in respect of
any of the foregoing.
B. Except as set forth in Schedule 3.17(b) of the Disclosure
----------------
Schedule, to the Knowledge of the Company, no officer, director, or employee of
the Company or any Subsidiary is bound by any Contract that purports to limit
the ability of such officer, director or employee to (i) engage in or continue
any conduct, activity, or practice relating to the business of the Company or
any Subsidiary, as currently conducted or (ii) assign to the Company or any
Subsidiary any rights to any invention, improvement, or discovery relating to
the business of the Company or any Subsidiary.
C. Except as set forth in Schedule 3.17(c) of the Disclosure
----------------
Schedule, each Contract identified or required to be identified in Schedule
--------
3.17(a) of the Disclosure Schedule is in full force and effect, except as to
- -------
matters or default which in the aggregate would not have a Company Material
Adverse Effect.
D. Except as set forth in Schedule 3.17(d) of the Disclosure
----------------
Schedule:
(i) The Company and each Subsidiary is in full compliance with
all material terms and requirements of each Contract under which Company or such
Subsidiary has or had any obligation or liability or by which Company or such
Subsidiary or any of the assets owned or used by Company or such Subsidiary is
or was bound, except where the failure to comply with such terms and
requirements would not have a Company Material Adverse Effect;
(ii) To the Knowledge of the Company, each other Person that has
or had any obligation or liability under any Contract under which the Company
has or had any rights is in full compliance with all material terms and
requirements of such Contract;
(iii) To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give the
Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to
29
<PAGE>
cancel, terminate, or modify, any material Contract, except for events or
circumstances which in the aggregate would not have a Company Material Adverse
Effect; and
(iv) Neither the Company nor any Subsidiary has given to or
received from any other Person, at any time since March 31, 1999, any written
notice regarding any actual, alleged, possible, or potential violation or breach
of, or default under, any material Contract.
E. There are no renegotiations of or attempts to renegotiate any
material amounts paid or payable to the Company or any Subsidiary under current
or completed Contracts with any Person and the Company has not received any
written demand for such renegotiation.
3.18 Insurance.
---------
A. The Company has delivered to ISI and InfoCure:
(i) True and complete copies of all policies of insurance to
which the Company or any Subsidiary is a party;
(ii) True and complete copies of all pending applications for
policies of insurance; and
(iii) Any written statement by the auditor of the Financial
Statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
B. Except as set forth on Schedule 3.18(b) of the Disclosure
----------------
Schedule:
(i) All policies to which the Company is a party or that provide
coverage to the Company or any Subsidiary, or any director of the Company or any
Subsidiary:
(1) Are in full force and effect, except as to matters or
defaults which in the aggregate, would not have a Company Material Adverse
Effect; and
(2) Taken together in the reasonable judgment of the
Company, provide adequate insurance coverage for the assets and the operations
of the Company or any Subsidiary for all risks to which the Company or any
Subsidiary is normally exposed.
(ii) Neither the Company nor any Subsidiary has received any
written notice of cancellation or other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) The Company and each Subsidiary has paid all premiums due
and has otherwise performed all of its material obligations under each policy to
which the Company or such Subsidiary is a party or that provides coverage to the
Company or such Subsidiary or any director thereof, except where the failure to
so perform would not in the aggregate have a Company Material Adverse Effect.
30
<PAGE>
3.19 Environmental Matters. Except as set forth in Schedule 3.19 of the
---------------------- -------------
Disclosure Schedule, the Company has obtained and is in compliance with all
permits, licenses and other authorizations (collectively, "Permits") required to
do business by Environmental Requirements. To the Company's Knowledge, there are
no conditions, circumstances, activities, practices, incidents, or actions
(collectively, "Conditions") resulting from the conduct of its business which
Conditions may reasonably form the basis of any claim or suit against the
Company based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling by the Company, or the
emission, discharge, release or Threatened release by the Company into the
environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
3.20 Employees.
---------
A. Schedule 3.20.1 contains a complete and accurate list of the
---------------
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: name; job title; current
compensation and any change in compensation during the past two (2) years, other
than in the Ordinary Course of Business; vacation accrued; and dated of hire
(and service credited if different) used to determine vesting and eligibility to
participate under the Company's Plans to the extent applicable under such Plans.
B. To the Company's Knowledge, no employee or director of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects (i) the performance of his duties
as an employee or director of the Company or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with the
Company by any such employee or director.
C. Schedule 3.20.2 sets forth (i) the names of the individuals with
---------------
whom the Company has an employment or severance or similar agreement pursuant to
which the Company has or will have an ongoing obligation to provide post-
termination payments and benefits and (ii) a schedule of the payments due to
each and the insurance benefits provided to each or his respective dependents or
beneficiaries. There are no other current or former employees or directors of
the Company, or their dependents, receiving such severance benefits or scheduled
to receive such benefits in the future.
D. Schedule 3.20.3 contains a complete listing of (i) all covered
---------------
employees and qualified beneficiaries (as each is defined in ERISA (S) 607(2)
and (3) and/or Code (S) 4980B(f)(7) and (g)(1)) currently receiving continuation
coverage (within the meaning of ERISA (S) 602 and/or Code (S) 4980B(f)(2)) along
with the date such continuation coverage began and the date such coverage is
expected to end and (ii) all individuals who may be otherwise eligible for
continuation coverage as a result of a qualifying event (within the meaning of
ERISA (S) 603 and/or Code (S) 4980B(f)(3) from whom a continuation coverage
election has not been received and the election period for making such election
(within the meaning of ERISA (S) 605
31
<PAGE>
and/or Code (S) 4980B(f)(5)) has not yet expired and the date on which their
prior coverage ceased and the date on which they were notified of their
continuation coverage rights.
E. Schedule 3.20.4 contains a complete listing of all Persons who
---------------
are on a leave of absence from the Company (indicating also whether or not such
leave is pursuant to the Family and Medical Leave Act of 1993, as amended), and
denoting whether such Person is receiving or entitled to receive health coverage
under a Plan during such period of leave.
3.21 Government Contracts. Except as set forth in Schedule 3.21 of the
-------------------- -------------
Disclosure Schedule, the Company has no business contracts with any independent
or executive agency, division, subdivision, audit group or procuring office of
the federal government or of a state government, including any prime contractor
of the federal government and any higher level subcontractor of a prime
contractor of the federal government, and including any employees or agents
thereof, in each case acting in such capacity.
3.22 Intellectual Property Rights of the Company. For purposes of this
-------------------------------------------
Section 3.22. only, the term "Company" shall be deemed to include the Company
and each of its Subsidiaries.
A. Definitions. As used in this Agreement, and in addition to any
-----------
other terms defined in this Agreement, the following terms shall have the
following meanings.
(i) "Software" means any computer program, operating system,
----------
applications system, microcode, firmware or software of any nature, whether
operational, under development or inactive, including all object code, source
code, technical manuals, compilation procedures, execution procedures, flow
charts, programmers notes, user manuals and other documentation thereof, whether
in machine-readable form, programming language or any other language or symbols
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
(ii) "Owned Software" means all Software owned by the Company,
----------------
whether purchased from a third party, developed by or on behalf of the Company,
currently under development or otherwise.
(iii) "Customer Software" means all Software, other than the
-------------------
Owned Software, that is either (1) offered or provided by Company, directly or
through Distributors, to customers of the Company or (2) used by the Company to
provide information or services to customers of Company for a fee.
(iv) "Company Software" means the Owned Software and the
------------------
Customer Software.
(v) "Other Software" means all Software, other than the
----------------
Company Software, that is licensed by the Company from third parties or
otherwise used by the Company for any purpose whatsoever.
32
<PAGE>
(vi) "Distributor" means the Company and any other person or
-------------
entity that has been authorized by the Company to sell, license or offer to sell
or license any Owned Software, other than an employee of Company. Distributors
may include, without limitation, value added resellers, original equipment
manufacturers, dealers, sales agents, and distributors.
(vii) "Distributor Agreement" means a reseller agreement, sales
-----------------------
agency agreement, VAR agreement, OEM agreement, distribution agreement or other
written or oral agreement or permission between the Company and a Distributor.
(viii) "Customer License Agreement" means a license agreement or
----------------------------
other written or oral agreement or permission, other than a Distributor
Agreement, by which the Company has granted to any third party any rights
regarding the Company Software or any Intangibles thereof.
(ix) "Supplier License Agreement" means a license agreement or
----------------------------
other written or oral agreement or permission by which a third party has granted
to the Company any rights regarding any Software or any Intangibles thereof.
(x) "Registration" means any governmental filing, whether
--------------
federal, state, local, foreign or otherwise, related to Owned Software or any
Intangible, including, without limitation, all registrations of patents,
copyrights, trademarks, service marks, trade names, and maskworks, and all re-
issues, divisions, continuations, renewals, extensions and continuations-in-part
thereof.
(xi) "Intangible" means:
------------
(1) Patents, patent applications, and patent disclosures,
as well as all re-issues, re-examinations, divisions, continuations, renewals,
extensions and continuation-in-parts thereof and improvements thereto;
(2) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and applications for Registration
thereof and all goodwill associated therewith;
(3) Copyrights, Registrations thereof and applications
for Registration thereof;
(4) Maskworks, Registrations thereof and applications for
Registration thereof;
(5) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, flow charts, processes, ideas, specifications, designs, plans,
proposals, technical data, copyrightable works, financial,
33
<PAGE>
marketing, and business data, pricing and cost information, business and
marketing plans, and customer and supplier lists and information);
(6) All rights necessary to prevent claims of invasion of
privacy, right of publicity, defamation, infringement of moral rights, or any
other causes of action arising out of the use, adaptation, modification,
reproduction, distribution, sale, or exhibition of the applicable Software;
(7) All income, royalties, Damages and payments due at
Closing or thereafter with respect to the Owned Software, Customer Software,
Other Software, or other Intangibles and all other rights thereunder including,
without limitation, Damages and payments for past, present or future
infringements or misappropriations thereof, the right to sue and recover for
past, present or future infringements or misappropriations thereof;
(8) All rights to use all of the foregoing forever; and
(9) All other rights in, to, and under the foregoing in
all countries.
B. Identification.
--------------
(i) Schedule 3.22(b)(i) of the Disclosure Schedule contains an
-------------------
accurate and complete list (including a name, summary product description, the
language in which it is written and the type of hardware platform(s) on which it
runs) of the following:
(1) All Owned Software;
(2) All Customer Software; and
(3) All Other Software, other than Other Software that is
commercially available at retail.
(ii) Schedule 3.22(b)(ii) to the Disclosure Schedule:
--------------------
(1) Contains a complete list of each Registration of the
Company;
(2) Identifies each pending Registration of the Company;
(3) Identifies each application for or Registration by the
Company regarding the Intangibles and Software of the Company which have been
withdrawn, abandoned, or have lapsed or been denied; and
(4) Attaches any written legal or regulatory advice
received by the Company within twenty-four (24) months of the date of execution
of this Agreement that describes any limitation on the scope of each of the
following Registrations: Texttalk,
34
<PAGE>
Datamedic, GIstation and CHARTLab. Schedule 3.22 indicates the Company's basis
-------------
for its claim of ownership of such items.
(iii) Schedule 3.22(b)(iii) to the Disclosure Schedule sets
---------------------
forth a complete list of each Person to which the Company has granted any rights
regarding the Company Software or any Intangible thereof, other than by virtue
of a Distributor Agreement.
(iv) Schedule 3.22(b)(iv) to the Disclosure Schedule identifies
--------------------
each Distributor Agreement, together with the term thereof, and each source code
escrow agreement entered into by the Company and relating to any Intangibles and
Software identified in such Distributor Agreement.
(v) Schedule 3.22(b)(v) to the Disclosure Schedule identifies
-------------------
each Supplier License Agreement, together with the term thereof, all royalties
or other amounts due thereon, and each source code escrow agreement entered into
by the provider or licensor thereof running to the benefit of the Company and
relating to any Intangibles and Software identified in such Supplier License
Agreement.
C. Ownership and Right to License.
------------------------------
(i) Except as set forth in Schedule 3.22(c) of the Disclosure
----------------
Schedule, (X) the Company owns the copyrights in and to the Owned Software
(subject to any licenses of the Owned Software by the Company, directly or
indirectly); (Y) the Company owns all available patent rights, trade secret
rights, and confidential information rights in and to the Owned Software
(subject to any licenses of the Owned Software by the Company, directly or
indirectly) and (Z) no other person or entity owns or has an interest in any
Intangible that would prevent the Company from using the Owned Software, as used
or required to operate the Company's businesses, as currently conducted, free
and clear of any liens, claims, charges or encumbrances which would affect the
use of the Owned Software in connection with the operation of the Company's
business as currently conducted.
(ii) Except as set forth in Schedule 3.22(c) of the Disclosure
----------------
Schedule, the Company has received written license agreements granting to the
Company the full right to use all of the Customer Software and Other Software,
and Intangibles attributable thereto, as used or required to operate the
Company's businesses, as currently conducted, to the Company's knowledge free
and clear of any liens, claims, charges or encumbrances which would materially
and adversely affect the use of such Software in connection with the operation
of the Company's business as currently conducted. The Company has no Knowledge
that such written license agreements are from a source other than a Person who
is authorized to grant the rights granted to Company therein.
(iii) Other than patents not issued as of the date of execution
of this Agreement, no rights of any third party not previously obtained are
necessary to market, license, sell, modify, update, and/or create derivative
works for any Software as to which the Company takes any such action in its
business as currently conducted.
35
<PAGE>
(iv) Except as set forth in Schedule 3.22(c) of the Disclosure
----------------
Schedule, none of the Software or Intangibles listed in Schedule 3.22 of the
-------------
Disclosure Schedule, or their respective past or current uses by or through the
Company have violated, infringed upon, misappropriated, or is violating,
infringing upon, or misappropriating any Software, issued patent, copyright,
trade secret right or other Intangible right of any Person. The Company has
adequately maintained all trade secrets and copyrights (provided that it is the
Company's policy not to register its copyrights) with respect to the Owned
Software.
Except as set forth in Schedule 3.17(d) of the Disclosure Schedule, the
----------------
Company has substantially performed all obligations imposed upon the Company
with regard to the Customer Software and Other Software which are required to be
performed by the Company on or prior to the date hereof, and neither the Company
nor, to the Knowledge of the Company, any other party, is in breach of or
default thereunder in any material respect, nor to Knowledge of the Company, is
there any event which with notice or lapse of time or both would constitute a
default thereunder.
(v) Except as set forth in Schedule 3.22(c) of the Disclosure
----------------
Schedule, to the Knowledge of the Company, no Person is violating or infringing
upon, or has violated or infringed upon at any time, any of the Company's rights
to any of the Software or Intangibles listed in Schedule 3.22.
-------------
(vi) Except as set forth in Schedule 3.22(c), none of the
----------------
Software or Intangibles listed in Schedule 3.22 are owned by or registered in
-------------
the name of any current or former owner, shareholder, partner, director,
executive, officer, employee, salesman, agent, customer, or contractor of the
Company, nor does any such Person have any interest therein or right thereto,
including, but not limited to, the right to royalty payments. Except as set
forth in Schedule 3.22, the Company has not granted any third party any
-------------
exclusive rights related to any Owned Software.
(vii) No litigation is pending and no claim has been made
against the Company or, to the Knowledge of the Company, is Threatened, which
contests the right of the Company to sell or license to any Person or entity or
use any of the Owned Software, Customer Software or Other Software. No former
employer of any employee or consultant of the Company has made a claim against
the Company or, to the Knowledge of the Company against any other Person, that
the Company or such employee or consultant is misappropriating or violating the
Intangibles of such former employer.
(viii) The Company is not a party to nor bound by and, upon the
consummation of the Contemplated Transactions, ISI will not be a party to or
bound by (as a result of any acts or agreements of the Company) any license or
other agreement requiring the payment by the Company or their assigns of any
future royalty or license payment, excluding such agreements relating to the
Customer Software or Other Software to the extent such royalty or license
payment is expressly set forth in Schedule 3.22.
-------------
(ix) Except as set forth in Schedule 3.22(c), the Owned Software,
----------------
Customer Software, and Other Software and the information used by the Company,
and to the
36
<PAGE>
extent owned by the Company, the Intangibles thereunder, are fully transferable
to ISI the manner contemplated by the Contemplated Transactions.
(x) No Software other than the Owned Software, Customer
Software and Other Software is required to operate the business of the Company
as currently conducted.
(xi) The Company has supplied ISI with correct and complete
copies of representative Customer License Agreements and Distributor Agreements.
Except as set forth in Schedule 3.22(c), all Customer License Agreements,
----------------
Distributor Agreements and Supplier License Agreements may be transferred to ISI
free of cost or expense without obtaining the consent or approval of any other
Person in any manner contemplated by the Contemplated Transactions. All of the
Persons listed on Schedule 3.22(b)(iii) to the Disclosure Schedule have entered
---------------------
into written Customer License Agreements with the Company. Except as set forth
on Schedule 3.22(b)(iv) to the Disclosure Schedule, the only source code escrow
--------------------
agreements or other agreement for the provision of source code of the Owned
Software to any Person other than an employee of the Company are source code
escrow agreements with Persons listed on Schedule 3.22(b)(iii). Except as set
---------------------
forth in Schedule 3.22(c)(xi), other than the term of the license grant and the
--------------------
consideration paid for such license grant, the terms and conditions of all
Customer License Agreements entered into between the Company and any customer of
Company from December 1, 1998 until the Closing Date are not materially
different from the terms and conditions of the copies of representative Customer
License Agreements provided to ISI.
(xii) Schedule 3.22(c) identifies all individuals who have
----------------
contributed to the development of the Owned Software within the twenty-four (24)
month period prior to the Closing Date.
D. Performance.
-----------
(i) Except as set forth in Schedules 3.22(d)(i) or 3.17(d) of
-------------------- -------
the Disclosure Schedule, the Company Software substantially:
(1) Performs in accordance with all Company published
specifications for the Company Software;
(2) Complies with all Company published documentation,
descriptions and literature with respect to the Company Software; and
(3) Complies with all representations, warranties and other
requirements specified in all Customer License Agreements and Distributor
Agreements.
Except as set forth in Schedule 3.15, Schedule 3.17(d) and Schedule
------------- ---------------- --------
3.22(d)(i) of the Disclosure Schedule, no written claim has been made or, to the
- ----------
Knowledge of the Company, is Threatened, that the Company Software substantially
fails to perform as set forth in the immediately preceding sentence.
37
<PAGE>
(ii) Except as set forth in Schedule 3.22(d)(ii), the Company has
--------------------
substantially complied with all Customer License Agreements, Distributor
Agreements and Supplier License Agreements, and to the Knowledge of the Company,
except as set forth in Schedule 3.22, all other parties to such agreements have
-------------
substantially complied with all provisions thereof and no default or event of
default exists under any of the Customer License Agreements, Distributor
Agreements and Supplier License Agreements.
(iii) Except as set forth in Schedule 3.22(d)(iii), with respect
---------------------
to the Company Software:
(1) The Company maintains machine-readable master-
reproducible copies, reasonably complete technical documentation and/or user
manuals for the most current releases or versions thereof and for all earlier
releases or versions thereof currently being supported by the Company.
(2) In each case, the machine-readable copy substantially
conforms to the corresponding source code listing.
(3) Such Company Software for which the Company possesses
source code is written in the language set forth in Schedule 3.22, for use on
-------------
the hardware set forth in Schedule 3.22 with standard operating systems.
-------------
E. Such Company Software for which the Company possesses source code
can be maintained and modified by reasonably competent programmers familiar with
such language, hardware and operating systems after a reasonable amount of
training in the architecture and programming conventions of such source code.
F. Millennium Compliance. Except as set forth in Schedule 3.22(f),
--------------------- ----------------
the current versions of the Owned Software are "Millennium Compliant." For the
purposes of this Agreement "Millennium Compliant" means, so long as the inputs
to the applicable Software are provided in a format consistent with the
specifications for such Software:
(i) The functions, calculations, and other computing processes
of the applicable Software (collectively, "Processes") perform in an accurate
manner regardless of the date in time on which the Processes are actually
performed and regardless of the date input to the applicable Software, whether
before, on, or after January 1, 2000, and whether or not the dates are affected
by leap years;
(ii) The applicable Software accepts, stores, sorts, extracts,
sequences, and otherwise manipulates date inputs and date values, and return and
display date values, in an accurate manner regardless of the dates used, whether
before, on, or after January 1, 2000;
(iii) The applicable Software will function without interruptions
caused by the date in time on which the Processes are actually performed or by
the date input to the applicable Software, whether before, on, or after January
1, 2000;
38
<PAGE>
(iv) The applicable Software accepts and responds to two (2)
digit year and four (4) digit year date input in a manner that resolves any
ambiguities as to the century in a defined, predetermined, and accurate manner;
(v) The applicable Software displays, prints, and provides
electronic output of date information in ways that are unambiguous as to the
determination of the century; and
(vi) The applicable Software has been tested by the Company to
determine whether the applicable Software is Millennium Compliant. The Company
shall deliver the test plans and results of such tests upon written request from
ISI. The Company shall notify ISI immediately of the results of any tests or
any claim or other information that indicates the applicable Software is not
Millennium Compliant.
G. Except as set forth in Schedule 3.22(g) of the Disclosure
----------------
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Customer Software and any
computer hardware and devices owned or leased by the Company that operates any
of the Company Software ("Company Hardware") with the vendor thereof, has
obtained assurances and/or representations and/or compliance policies (except
where the vendor is no longer in business) that such Customer Software and
Company Hardware is or will be in sufficient time to migrate before December 31,
1999, Millennium Compliant, and has tested such Customer Software and Company
Hardware in conjunction with the Owned Software to determine whether the
operation of the Owned Software would result in dated-related failures or errors
in such Customer Software or Company Hardware. In the event that the Company
obtains information that such Customer Software or Company Hardware is not
currently Millennium Compliant or such Customer Software or Company Hardware
fails the testing as described above, the Company has established and has timely
implemented written plans to migrate the Company and all Company customers off
of such Customer Software or Company Hardware before the Company anticipates
that errors or failures in such Customer Software or Company Hardware will
occur.
H. Except as set forth in Schedule 3.22(h) of the Disclosure
----------------
Schedule and except as described in the next following sentence, the Company has
inquired as to the Millennium Compliance of the Other Software with the vendor
thereof and has obtained assurances that such Other Software is or will be in
sufficient time to migrate before December 31, 1999 Millennium Compliant. In the
event that the Company obtains information that such Other Software is not
currently Millennium Compliant, the Company has established and has timely
implemented written plans to migrate the Company off of such Other Software
before the Company anticipates that errors or failures in such Other Software
will occur.
I. Schedule 3.22(i) of the Disclosure Schedule sets forth the
----------------
Company's customer list indicating (i) the product and operating system used by
each customer listed; (ii) the version number of such product and operating
system; and (iii) whether such product is Millennium Compliant. A Millennium
Compliant version of the Owned Software known as "Ophthalmic" (the "Ophthalmic
Software") will be released on or before October 22, 1999, with
39
<PAGE>
the first seventy (70) copies of the Ophthalmic Software being shipped for
installation on or before October 25, 1999, and an additional Seventy (70)
copies of such Ophthalmic Software being shipped on each Monday thereafter,
until all customers currently using Ophthalmic shall have shall have received
the Ophthalmic Software.
J. Trade Secrets and Confidential Information. Without limiting any
------------------------------------------
of the foregoing representations and warranties contained in the preceding
subparagraphs of this Section 3.22., to the Knowledge of the Company, no current
or former owner, shareholder, partner, director, executive, officer, employee,
salesman, agent, customer, or contractor of the Company has disclosed to
(without proper obligation of confidentiality) or otherwise used or utilized on
behalf of any Person other than the Company, any trade secrets or proprietary
information, including, without limitation, the source codes for Company
Software.
All Customer License Agreements, Distributor Agreements, software
development agreements, and any other written agreement between the Company and
any third party in which trade secrets or confidential information of the
Company, the Company's customers, agents, or suppliers are disclosed binds the
recipient thereof to take reasonable steps to protect the proprietary rights of
the Company and their customers, agents, and suppliers in such trade secrets and
confidential information.
3.23 Certain Payments. To the Knowledge of the Company, neither the
----------------
Company or any Subsidiary nor any director, officer, agent, or employee of the
Company or any Subsidiary, nor any other Person associated with or acting for or
on behalf of the Company or any Subsidiary, has directly or indirectly:
A. On behalf of the Company or any Subsidiary or for the Company's
or any Subsidiary's benefit, made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement.
B. Established or maintained any fund or asset on behalf of the
Company or any Subsidiary that has not been recorded in the books and records of
the Company or any Subsidiary.
3.24 Relationships With Related Persons. Except as set forth in Schedule
---------------------------------- --------
3.24 of the Disclosure Schedule, no Related Person (but not including any
- ----
Related Persons who are present holders of the Company's Preferred Stock) of the
Company has, or since June 30, 1999, has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
the Company's or any Subsidiary's businesses.
Except as set forth in Schedule 3.24 of the Disclosure Schedule, to the
-------------
Knowledge of the Company, no Related Person (but not including any Related
Persons who are present holders of the Company's Preferred Stock) of the Company
owns, or since June 30, 1999, has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
a material financial interest in any transaction with the Company.
40
<PAGE>
Except as set forth in Schedule 3.24 of the Disclosure Schedule, no Related
-------------
Person of the Company is a party to any Contract or commitment with the Company.
3.25 Brokers or Finders. Except for Broadview International, LLC, neither
------------------
the Company nor its agents have incurred any obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.26 Labor Relations; Compliance. Neither the Company nor any Subsidiary
---------------------------
has been or is a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and there is not
Threatened:
A. Any strike, slowdown, picketing, work stoppage or employee
grievance process;
B. To the Knowledge of the Company, any Proceeding against or
affecting Company or any Subsidiary relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters; or
C. To the Knowledge of the Company, any application for
certification of a collective bargaining agent.
To the Knowledge of the Company, no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by Company or any Subsidiary, and
no such action is contemplated by Company or any Subsidiary. Company and each
Subsidiary has complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health and plant
closing. To the Knowledge of the Company, it and each Subsidiary has only
employed Persons authorized to work in the United States.
To the Knowledge of the Company, neither it nor any Subsidiary is liable
for the payment of any compensation, Damages, taxes, fines, penalties, or other
amounts, however, designated, for failure to comply with any of the foregoing
Legal Requirements.
3.27 Disclosure Documents. None of the information supplied or to be
--------------------
supplied by the Company in writing for inclusion in and which is in fact
included in (i) the combined Proxy Statement (as defined in section 5.1.) and
(ii) the Registration Statement (as defined in Section 4.3.) including the Proxy
Statement included therein, will, in the case of the Proxy Statement, at the
time of mailing of the Proxy Statement to stockholders of the Company, contain
any untrue statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or will, in the case of the Registration Statement, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to
41
<PAGE>
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
3.28 Disclosure. No representation or warranty made by the Company in
----------
this Agreement or any Exhibit hereto or in the Disclosure Schedule, when taken
together, contains or contained (as of the date made) any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were made.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ISI AND INFOCURE.
ISI and InfoCure, jointly and severally, hereby represent and warrant to
the Company as follows:
4.1 Organization. Each of ISI and InfoCure is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and ISI and InfoCure each has all requisite
corporate power and authority to own, lease and operate its assets and to carry
on its business as now being conducted. Each of ISI and InfoCure is duly
qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of ISI, InfoCure or their respective
subsidiaries taken as a whole.
4.2 Authorization. Each of ISI and InfoCure has full corporate power and
-------------
authority to execute and deliver this Agreement and to perform its respective
obligations under this Agreement and to consummate the Merger and the other
transactions contemplated hereby (the "InfoCure/ISI Ancillary Agreements"). The
execution and delivery of this Agreement by ISI and InfoCure and the performance
by ISI and InfoCure of their respective obligations hereunder and the
consummation of the Merger, the InfoCure/ISI Ancillary Agreements and the other
transactions provided for herein have been duly and validly authorized by all
necessary corporate action on the part of each of ISI and InfoCure. This
Agreement and the InfoCure/ISI Ancillary Agreements have been duly executed and
delivered by each of ISI and InfoCure and each constitutes the legal, valid and
binding agreement of ISI and InfoCure, enforceable against each of ISI and
InfoCure in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies. Each other agreement to be executed by ISI and
InfoCure in connection with this Agreement will be duly executed and delivered
by ISI and InfoCure in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies.
4.3 Absence of Restrictions and Conflicts. The execution, delivery and
-------------------------------------
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or
42
<PAGE>
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of any obligation under,
(i) any term or provision of the Organizational Documents of ISI or InfoCure;
(ii) any Contract material to the business and operations of ISI or InfoCure;
(iii) any judgment, decree, injunction or order of any court or governmental
authority or agency to which ISI or InfoCure is a party or by which ISI or
InfoCure or any of their respective properties is bound or (iv) any statute,
law, regulation or rule applicable to ISI or InfoCure, so as to have, in the
case of subsections (ii) through (iv) above, a material adverse effect on the
assets, liabilities, results of operations, financial condition, business or
prospects of ISI or InfoCure and their respective subsidiaries taken as a whole.
Except for (i) filing of the Certificate of Merger; (ii) the filing of a Form S-
4 Registration Statement (the "Registration Statement") with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Act; (iii) the
filing of the Proxy Statement (as defined in Section 5.1.) with the SEC in
accordance with the Exchange Act and (iv) the filing of such consents,
approvals, orders, authorizations, registrations, declarations and filing as may
be required under applicable state securities laws, no Consent, approval, order
or authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
ISI or InfoCure is required in connection with the execution, delivery or
performance of this Agreement by ISI or InfoCure or the consummation of the
Contemplated Transactions contemplated by this Agreement by ISI or InfoCure, the
failure to obtain which would have a material adverse effect upon the assets,
liabilities, results of operations, financial condition, business or prospects
of ISI or InfoCure and its subsidiaries taken as a whole.
4.4 Capitalization of InfoCure. The authorized capital stock of InfoCure
--------------------------
consists of two hundred million (200,000,000) shares of common stock, $.001 par
value per share of which thirteen million five hundred twenty-six thousand four
hundred fifteen (13,526,415) shares were issued and outstanding as of April 30,
1999, and two million (2,000,000) shares of preferred stock, $.001 par value per
share, of which zero (0) shares were issued and outstanding as of April 30,
1999. All shares of InfoCure Common Stock outstanding as of the date hereof are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. None of the outstanding shares of InfoCure Common Stock or
other securities of InfoCure was issued in violation of the Securities Act or
applicable state securities laws. The shares of InfoCure Common Stock to be
issued pursuant to this Agreement have been duly authorized and, when issued,
will be validly issued, fully paid, nonassessable, free of preemptive rights and
in compliance with the Securities Act and applicable state securities laws.
4.5 InfoCure SEC Reports. InfoCure has heretofore made available to the
--------------------
Principal Shareholders its Annual Report on Form 10-K for the period ended
December 31, 1998, its Quarterly Reports on Form 10-Q for the quarter ended
March 31, 1999 and June 30, 1999 and the Prospectus filed with the Securities
and Exchange Commission as of April 22, 1999 (the "InfoCure SEC Reports"). As of
their respective dates, the InfoCure SEC Reports did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since June 30, 1999,
there has been no material adverse change in the assets, liabilities, results of
operations, financial condition, business or prospects of InfoCure and its
subsidiaries taken as a whole, and there are no existing facts or circumstances
43
<PAGE>
known to the senior management of InfoCure reasonably likely to cause such a
material adverse change, other than with respect to general domestic or
international economic conditions. Since June 30, 1999, InfoCure has filed all
forms, reports and documents with the Securities and Exchange Commission
required to be filed by it pursuant to the Exchange Act and the Securities Act,
and the rules and regulations promulgated thereunder, each of which (i) complied
as to form, at the time such form, document or report was filed, in all material
respects with the applicable requirements of the Exchange Act and the applicable
rules and regulations promulgated thereunder and (ii) as of their respective
dates, did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.6 Litigation. Except as may be disclosed in the InfoCure SEC Reports,
----------
there are no suits, arbitrations, actions, claims, complaints, grievances,
investigations or proceedings pending or, to the Knowledge of InfoCure or ISI,
Threatened against InfoCure or ISI that, if resolved against InfoCure or ISI
could be reasonably expected to have a material adverse effect on InfoCure or
ISI on their ability to consummate the Merger and the other transactions
contemplated hereby.
4.7 Disclosure. No representation, warranty or covenant made by InfoCure
----------
or ISI in this Agreement or any Exhibit hereto contains any untrue statement of
a material fact or omits to state a material fact required to be stated herein
or therein or necessary to make the statements contained herein or therein not
misleading.
4.8 Certain Proceedings. There is no pending Proceeding that has been
-------------------
commenced against ISI or InfoCure that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the knowledge of ISI or InfoCure, no such
Proceeding has been Threatened.
4.9 Brokers or Finders. Neither ISI or InfoCure nor any of their
------------------
respective officers or agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4.10 Tax Representations.
-------------------
A. Except with respect to fractional shares, neither InfoCure nor,
to InfoCure's Knowledge, a person related to InfoCure (within the meaning of
Treas. Reg. Section 1.368-1(e)(3)) has any present plan or intention to redeem
or acquire, directly or indirectly, any of the InfoCure Common Stock issued in
the Merger.
B. Following the Merger, InfoCure presently intends to cause the
Surviving Corporation to hold at least ninety percent (90%) of the fair market
value of its net assets and at least seventy percent (70%) of the fair market
value of its gross assets held immediately prior to the Merger.
44
<PAGE>
C. Prior to the Merger, InfoCure will own directly all of the shares
of all classes of stock of ISI.
D. InfoCure has no present plan or intention to cause ISI to issue
additional shares of stock after the Merger, or take any other action, that
would result in InfoCure losing control (within the definition of Section 368(c)
of the Code) of ISI.
E. Except for transfers of stock and assets described in Section
368(a)(2)(C) of the Code and Treas. Reg. Sections 1.368-2(f) and (k), InfoCure
has no present plan or intention to sell or otherwise dispose of the stock of
the Surviving Corporation, or, except for dispositions made in the ordinary
course of business, to cause the Surviving Corporation to sell or otherwise
dispose of any of its assets or any of the assets acquired from the Company.
F. InfoCure intends to cause the Surviving Corporation to either
continue the historic business of the Company or use a significant portion of
its historic business assets in a business (within the meaning of Treas. Reg.
Section 1.368-1(d)). For purposes of this representation, InfoCure will be
deemed to satisfy this requirement if (i) the members of InfoCure's qualified
group (as defined in Treas. Reg. Section 1.368-1(d)(4)(ii)), in the aggregate,
continue the historic business of the Company or use a significant portion of
the Company's historic business assets in a business or (ii) the foregoing
activities are undertaken by a partnership as contemplated by Treas. Reg.
Section 1.368-1(d)(4)(iii).
G. There is no intercorporate indebtedness existing between InfoCure
and the Company or between ISI and the Company that was issued, acquired or will
be settled at a discount as a result of the Merger.
H. Neither InfoCure nor ISI is an "investment company" within the
meaning of Sections 368(a)(2)(F)(iii) and (iv) of the Code.
I. InfoCure has no present plan or intention to merge or liquidate
the Surviving Corporation with or into InfoCure.
5. COVENANTS OF THE PARTIES.
The parties hereto hereby agree as follows with respect to the period from
and after the date of this Agreement.
5.1 Mutual Covenants.
----------------
A. General. Each of the parties shall use its reasonable efforts to
-------
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this Agreement
(including, without limitation, using its reasonable efforts to cause the
conditions set forth in this Section 5. for which they are responsible to be
satisfied as soon as reasonably practicable and to prepare, execute and deliver
such further instruments and take or cause to be taken such other and further
action as any other party hereto shall reasonably request).
45
<PAGE>
B. Governmental Matters. Each of the parties shall use its
--------------------
reasonable efforts to take any action that may be necessary, proper or advisable
in connection with any other notices to, filings with, and authorizations,
consents and approvals of any Governmental Body or other third party that it may
be required to give, make or obtain in connection with the Merger including,
without limitation, compliance with the HSR Act.
C. Pooling-of-Interests. Each of the parties shall use its Best
--------------------
Efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment for financial reporting purposes. Neither the Company nor any
Affiliate of the Company shall knowingly take any action that would jeopardize
the treatment of the Merger as a "pooling-of-interests" for accounting purposes.
D. Tax-Deferred Treatment. Each of the parties shall use its
----------------------
reasonable efforts to cause the Merger to constitute a tax-deferred
"reorganization" under section 368(a) of the Code.
E. Expenses. Except as expressly otherwise provided herein, ISI and
--------
InfoCure on the one hand, and the Principal Shareholders on the other hand,
shall bear its respective expenses incurred in connection with the preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, including all fees and expenses of agents, representatives, counsel and
accountants. After the Effective Time, the Principal Shareholders shall be
solely responsible for such fees and expenses relating to themselves or the
Company. In the case of termination of this Agreement, the obligation of each
party to pay its own expenses shall be subject to any rights of such party
arising from a breach of this Agreement by the other party.
F. Public Announcements. The parties hereto shall consult and
--------------------
cooperate with each other and agree upon the terms and substance of all press
releases, announcements and public statements with respect to this Agreement and
the Merger; provided, however, that such consultation and cooperation shall not
interfere with any obligation of either party hereto to disclose any information
as and when required by applicable law. Any press release or other announcement
by the InfoCure, ISI or the Company with respect to the Merger will be subject
to the prior consent and approval of the other party, which consent or approval
will not be unreasonably withheld.
G. Access. From and after the date of this Agreement until the
------
Effective Time (or the termination of this Agreement pursuant to Section 8.),
the Company, on the one hand, and ISI and InfoCure, on the other hand, shall
permit Representatives of the other to have appropriate access at all reasonable
times to the other's premises, properties, books, records, contracts, tax
records, documents, customers and suppliers, and any information obtained by any
party pursuant to this Section 5.1.G. shall be subject to the provisions of the
mutual confidentiality agreement between them and the confidentiality provisions
of that certain Letter of Intent between the parties dated July 16, 1999, which
agreements remain in full force and effect.
46
<PAGE>
H. Proxy Statement/Prospectus; Registration Statement; Shareholder
---------------------------------------------------------------
Approval. As promptly as practicable after the execution of this Agreement and
- --------
in any event by September 21, 1999, InfoCure, ISI and the Company will prepare
and file with the SEC, a preliminary proxy statement relating to the Merger (the
"Proxy Statement") and InfoCure will prepare and file with the SEC the
Registration Statement in which the Proxy Statement will be included as a
prospectus. Each of InfoCure, ISI and the Company will respond to any comments
of the SEC and will use its best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and the Company will cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time. As promptly as practicable after
the execution of this Agreement, InfoCure, ISI and the Company will prepare and
file any other filings required under the Exchange Act, the Securities Act or
any other Federal or blue sky laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each party will notify
the other party promptly upon the receipt of any comments from the SEC or its
staff and of any supplements to the Registration Statement, the Proxy Statement
or any Other Filing or for additional information and will supply the other
party with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or other government
officials, on the other hand, with respect to the Registration Statement, the
Proxy Statement, the Merger or any Other Filing. InfoCure further agrees to
file promptly following the Effective Time a post-effective amendment to the S-4
Registration Statement to convert it to a Form S-3 shelf registration covering
resales of InfoCure Common Stock by affiliates of the Company. The Proxy
Statement, the Registration Statement and the Other Filings will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Statement, the
Registration Statement or any Other Filing, InfoCure or the Company, as the case
may be, will promptly inform the other party of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company, such amendment or supplement. The Proxy
Statement will also include the recommendation of the Board of Directors of the
Company in favor of approval of this Agreement and the Merger. Promptly after
the date hereof, the Company will take all action necessary in accordance with
Delaware law and its Certificate of Incorporation and Bylaws to convene the
Meeting to be held as promptly as practicable, and in any event within (forty-
five (45)) days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon this Agreement.
I. Closing. Without limiting Section 2.9., from and after the date
-------
hereof, the parties agree to exercise their respective best efforts to cause the
Closing to take place on or before November 30, 1999.
5.2 Covenants of the Company/Principal Shareholders.
-----------------------------------------------
A. Conduct of the Company's Operations. For purposes of this
-----------------------------------
Section 5.2., the term "Company" shall be deemed to include Company and each
Subsidiary. During the period from the date of this Agreement to the Effective
Time or the date of termination of this Agreement, the Company shall use its
reasonable efforts to maintain and preserve its business
47
<PAGE>
organization and to retain the services of its officers and key employees and
maintain relationships with customers, suppliers and other third parties to the
end that their goodwill and ongoing business shall not be impaired in any
material respect. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, the Company shall
not, except as otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby, without the prior written consent of ISI, such
consent not to be unreasonably withheld or delayed:
(i) Sell, transfer, lease, pledge, mortgage, encumber or
otherwise dispose of any of its personal property or assets other than sales or
leases of inventory or licensing of Intellectual Property Assets in the Ordinary
Course of Business.
(ii) Make or propose any changes in its Certificate of
Incorporation or Bylaws.
(iii) Merge or consolidate with any other Person or acquire a
material amount of assets or capital stock of any other Person or enter into any
confidentiality agreement with any Person other than in the Ordinary Course of
Business.
(iv) Other than for normal borrowings in the Ordinary Course of
Business under the Company's existing working capital credit facility, incur,
create, assume or otherwise become liable for indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become responsible
or liable for obligations of any other individual, corporation or other entity,
other than its Subsidiaries, except in the Ordinary Course of Business.
(v) Create any subsidiaries.
(vi) Enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to, any officer, director,
consultant or employee other than salary increases granted in the Ordinary
Course of Business.
(vii) Change its method of doing business, in any material
respect, or change any material method or principle of accounting in a manner
that is inconsistent with past practice.
(viii) Except for any litigation set forth on Schedule 3.15,
-------------
settle any Proceeding, whether now pending or hereafter made or brought
involving an amount in excess of Twenty-Five Thousand and No/100 Dollars
($25,000.00).
(ix) Modify, amend or terminate, or waive, release or assign
any material rights or claims with respect to, any material Contract to which
the Company is a party or any confidentiality agreement to which the Company is
a party.
48
<PAGE>
(x) Incur or commit to any capital expenditures, obligations
or liabilities in respect thereof which in the aggregate exceed or would exceed
Twenty-Five Thousand and No/100 Dollars ($25,000.00) on a cumulative basis.
(xi) Issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract with respect
to the issuance or sale of any securities of the Company, or rights or
obligations convertible into or exchangeable for any securities of the Company,
or alter the terms of any presently outstanding options or make any changes, by
split-up, combination, reorganization or otherwise in the capital structure of
the Company .
(xii) Declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock.
(xiii) Agree in writing or otherwise to take any of the foregoing
actions.
B. Notification of Certain Matters. The Company and the Principal
-------------------------------
Shareholders shall give prompt notice to ISI and InfoCure and ISI and InfoCure
shall give prompt notice to the Company and the Principal Shareholders of the
occurrence or non-occurrence of any event the occurrence or nonoccurrence of
which would cause (i) any representation or warranty contained in this Agreement
to be untrue or inaccurate at or prior to the Effective Time or (ii) any failure
of the Company or any Principal Shareholder or InfoCure or ISI, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.2.B. shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice and
provided, further, that failure to give such notice shall not be treated as a
breach of covenant for the purposes of Section 8.1.A. unless the failure to give
such notice results in material prejudice to the other party.
C. Intellectual Property Matters. The Company shall use its
-----------------------------
reasonable efforts to preserve its ownership rights to all of the intellectual
property ("Intellectual Property") described in Section 3.22. free and clear of
any Encumbrances and shall use its reasonable efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service mark, trade name or copyright that forms a part of the Intellectual
Property or any misappropriation or disclosure of any trade secret, confidential
information or know-how that forms a part of the Intellectual Property.
D. No Solicitation. The Company agrees that during the term of this
---------------
Agreement or until the Effective Time, it shall not, and shall not authorize or
permit any of its directors, officers, employees, agents or Representatives,
directly or indirectly, to solicit, initiate, encourage, or furnish or disclose
non-public information in furtherance of, any inquiries or the making of any
proposal with respect to any recapitalization, merger, consolidation or other
business combination involving the Company or any Subsidiary, or acquisition or
sale of any capital stock (other than upon exercise of outstanding options of
the Company) or any material portion of the assets (except for acquisition of
assets in the Ordinary Course of Business consistent with past practice) of the
Company or any Subsidiary, or any combination of the
49
<PAGE>
foregoing (a "Company Competing Transaction"), or negotiate, explore or
otherwise engage in discussions with any person other than ISI and InfoCure or
its directors, officers, employees, agents and representatives, with respect to
any Company Competing Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement.
E. Affiliate Agreements. The Principal Shareholders are Persons who,
--------------------
in the Company's reasonable judgment, are or may be "affiliates" of the Company
within the meaning of Rule 145 (each such Person and "Affiliate") promulgated
under the Securities Act ("Rule 145"). The Company has delivered or shall cause
to be delivered to InfoCure, concurrently with the execution of this Agreement
an executed Affiliate Agreement from each "Affiliate" in the form attached
hereto as Exhibit E. InfoCure shall be entitled to place appropriate legends on
the certificates evidencing any InfoCure Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stock transfer instructions to the transfer agent for InfoCure Common Stock,
consistent with the terms of such Affiliate Agreements.
F. Voting Agreements. The Company shall deliver or cause to be
-----------------
delivered to InfoCure, concurrently with the execution of this Agreement, from
each of the Principal Shareholders, an executed Voting Agreement (the "Voting
Agreements") in the form attached hereto as Exhibit D, agreeing, among other
---------
things, to vote in favor of the Merger.
G. Principal Shareholders. Each of the Principal Shareholders
----------------------
covenant and agree that they will make no election pursuant to Article Fourth,
Section 2(c) of the Company's Certificate of Incorporation.
H. Company Auditors. The Company will use its commercially
----------------
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of financial statements
(including pro forma financial statements if required) as required by InfoCure
to comply with applicable SEC regulations, (ii) the review of the Company's
audit work papers for up to the past three years, including the examination of
selected interim financial statements and data, and (iii) the delivery of such
representations from the Company's independent accountants as may be reasonably
requested by InfoCure or its accountants in order for InfoCure's accountants to
render the opinion called for by Section 6.1.B. hereof.
5.3 Listing of InfoCure Common Stock. InfoCure shall use its reasonable
--------------------------------
best efforts to cause the shares of InfoCure Common Stock to be issued in the
Merger to be approved for listing on Nasdaq prior to the Effective Time.
5.4 Stock Options, Warrants, and Convertible Debentures.
---------------------------------------------------
A. At the Effective Time, the Company's obligations with respect to
each outstanding Option, Warrant or Convertible Debenture (each a "Convertible
Security") whether vested or unvested, will be assumed by InfoCure. Each
Convertible Security so assumed by InfoCure under this Agreement shall continue
to have, and be subject to, the same terms and conditions set forth in the
Company Stock Option Plan, the debenture instrument, or Warrant
50
<PAGE>
pursuant to which such Convertible Security was issued as in effect immediately
prior to the Effective Time, except that (i) such Convertible Security will be
exercisable for that number of whole shares of InfoCure Common Stock equal to
the product of the number of shares of Company Common Stock that were
purchasable under such Convertible Security immediately prior to the Effective
Time multiplied by the Common Stock Exchange Ratio, rounded up to the nearest
whole number of shares of InfoCure Common Stock and (ii) the per share exercise
price or conversion price, as the case may be, for the shares of InfoCure Common
Stock issuable upon exercise of such assumed Convertible Security will be equal
to the quotient determined by dividing the exercise price or conversion price,
as the case may be, per share of Company Common Stock at which such Convertible
Security was exercisable or convertible immediately prior to the Effective Time
by the Common Stock Exchange Ratio and rounding the resulting exercise price or
conversion price up to the nearest whole cent.
B. It is the intention of the parties that Options assumed by
InfoCure qualify following the Effective Time as incentive stock options as
defined in the Code ("ISO's") to the extent such Options qualified as ISO's
immediately prior to the Effective Time.
C. After the Effective Time, InfoCure will issue to each holder of
an outstanding Convertible Security a document evidencing the foregoing
assumption by InfoCure.
D. InfoCure will reserve sufficient shares of InfoCure Common Stock
for issuance under this Section 5.4. hereof.
5.5 Form S-8. InfoCure agrees to file a registration statement on Form S-8
--------
for the shares of InfoCure Common Stock issuable with respect to assumed Options
no later than twenty (20) business days after the Closing Date.
5.6 Rucker Redemption. The Company shall exercise its best efforts to
-----------------
cause the redemption prior to Closing of the entire ownership interest of Donald
W. Rucker in Clinical Information Advantages, Inc. pursuant to a Redemption and
Release Agreement in a form reasonably satisfactory to InfoCure.
5.7 Indemnification And Insurance.
-----------------------------
A. From and after the Effective Time, the Surviving Corporation will
fulfill and honor in all respects the obligations of the Company which exist
prior to the date hereof to indemnify the Company's present and former directors
and officers and their heirs, executors and assigns. Except to the extent not
permitted under Georgia law, the Articles of Incorporation and Bylaws of the
Surviving Corporation will contain provisions with respect to indemnification
and elimination of liability for monetary damages substantially similar to those
set forth in the Certificate of Incorporation and By-laws of the Company.
B. After the Effective Time the Surviving Corporation will, to the
fullest extent permitted under applicable law or under the Surviving
Corporation's Articles of Incorporation or Bylaws, indemnify and hold harmless,
each present or former director or officer of the Company or any of its
Subsidiaries and his or her heirs, executors and assigns
51
<PAGE>
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director, officer, employee or agent of the
Company occurring prior to the Effective Time (including without limitation
actions or omissions relating to the Merger) for a period of three years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time will be reasonably satisfactory to the Surviving Corporation, (ii) after
the Effective Time, the Surviving Corporation will pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; provided, however, that the Surviving Corporation will not be liable for
any settlement effected without its prior written consent; and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such three year period, all rights to indemnification in
respect of any such claim or claims will continue until the disposition of any
and all such claims. The Indemnified Parties as group may retain only one law
firm to represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties.
C. The Surviving Corporation will maintain in effect three year
tail, directors' and officers' liability insurance covering those persons who
are currently covered by the Company's Directors, Officers and Company Liability
insurance policies on terms comparable to those applicable to the current
directors of the Company
D. This Section 5.7 will survive any termination of this Agreement
and the consummation of the Merger at the Effective Time, is intended to benefit
the Company, the Surviving Corporation and the Indemnified Parties, and will be
binding on all successors and assigns of the Surviving Corporation
6. CONDITIONS.
6.1 Mutual Conditions. The obligations of the parties hereto to consummate
-----------------
the Merger shall be subject to fulfillment of the following conditions:
A. No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Body which prevents the
consummation of the Merger.
B. InfoCure shall have received a letter from BDO Seidman regarding
such firm's concurrence with InfoCure management's conclusion as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if consummated in accordance with
this Agreement. In addition, KPMG Peat Marwick LLP shall
52
<PAGE>
have provided a letter, satisfactory in form and substance to InfoCure,
regarding the appropriateness of pooling of interests accounting for a
transaction involving the Company.
C. No Proceeding shall be instituted by any Governmental Body which
seeks to prevent consummation or the Merger or seeking material damages in
connection with the transactions contemplated hereby which continues to be
outstanding.
D. The Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the SEC and no proceedings
for that purpose and no similar proceeding in respect of the Proxy Statement
shall have been initiated or, to the knowledge of InfoCure, ISI or the Company,
threatened by the SEC.
E. The InfoCure Common Stock shall have been approved for listing,
subject to notice of issuance, on Nasdaq.
F. All waiting periods, if any, under the HSR Act relating to the
Merger will have expired or terminated early.
G. The Shareholder Approval shall have been obtained.
6.2 Conditions to Obligations of ISI and InfoCure. The obligations of ISI
---------------------------------------------
and InfoCure to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
ISI and InfoCure:
A. The representations and warranties of the Company set forth in
Section 3. shall be true and correct in all material respects on the date hereof
and on and as of the Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a specified date, which
need be true and correct only as of the specified date), except, in all such
cases, for such breaches, inaccuracies or omissions of such representations and
warranties which have neither had nor reasonably would be expected to have a
Company Material Adverse Effect; and provided further, however, that none of the
following described items shall constitute a Company Material Adverse Effect or
a breach of any representation or warranty hereunder, notwithstanding anything
to the contrary herein:
(1) InfoCure agrees to promptly provide reasonable retention compensation
packages to all Company employees deemed to be key employees by InfoCure and if
InfoCure does not deliver such compensation packages and key employees leave the
Company's employ, such departures shall not be deemed to be a Company Material
Adverse Effect or a breach of any representation or warranty hereunder and
provided further, that the foregoing shall not create any implication by itself
that the loss of any key employee constitutes a Company Material Adverse Effect.
(2) The Company shall have the right to request InfoCure senior management
to attend meetings with each of its top ten customers. If InfoCure Senior
Management does not attend such meetings, the loss of a customer where no such
meeting took place shall not
53
<PAGE>
constitute a Company Material Adverse Effect or a breach of any representation
or warranty hereunder.
(3) No changes in the business or operations of the Company (including,
but not limited to, any workforce reductions) of which InfoCure is aware and
consents to in advance, including but not limited to consents given by InfoCure
pursuant to Section 5.2 hereof, nor any proximate consequences thereof,
financial (such as failing to achieve budgeted projections) or otherwise, shall
constitute a Company Material Adverse Effect or a breach of any representation
or warranty hereunder.
(4) The cessation of their employment with the Company by Messrs. Hill
and/or Kahane shall not constitute a Company Material Adverse Effect or a breach
of any representation or warranty hereunder.
B. The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by such parties hereunder prior
to the Effective Time.
C. Since the date of this Agreement, there shall not have been any
Company Material Adverse Effect or any material adverse effect on the ability of
the Company to consummate the transactions contemplated hereby.
D. The Company shall have furnished ISI and InfoCure with a
certificate dated the Closing Date signed on behalf of it by its President to
the effect that the conditions set forth in Sections 6.2.A., B. and C. have been
satisfied.
E. The Principal Shareholders shall have executed the Escrow
Agreement, in the form attached hereto as Exhibit B.
---------
F. ISI and InfoCure shall have received the legal opinion, dated the
Closing Date, of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., counsel to
the Company, in a form reasonably satisfactory to counsel for ISI and InfoCure.
G. The Company shall have obtained all material consents, waivers,
approvals, authorizations or orders, including the consents set forth on
Schedule 3.2, and made all filings in connection with the authorization,
- ------------
execution and delivery of this Agreement by the Company and the consummation by
each of the transactions contemplated hereby.
H. The Company shall have fully complied with its obligations to
complete production of the Ophthalmic Software and to ship the first seventy
(70) copies of such software as set forth in Section 3.22(I).
6.3 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to consummate the Merger and the other transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
the Company:
54
<PAGE>
A. The representations and warranties of ISI and InfoCure set forth
in Section 4. shall be true and correct in all material respects on the date
hereof and on and as of the Closing Date as though made on and as of the Closing
Date (except for representations and warranties made as of a specified date,
which need be true and correct only as of the specified date).
B. Each of ISI and InfoCure shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it hereunder at
or prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been any
material adverse change in the assets, liabilities, results of operations,
business or financial condition of ISI and InfoCure or any material adverse
effect on the ability of ISI and InfoCure to consummate the transactions
contemplated hereby.
D. Each of ISI and InfoCure shall have furnished the Company with a
certificate dated the Closing Date signed on its behalf by its Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 6.3.A., B. and C. have been satisfied.
E. The Company shall have received the legal opinion, dated the
Closing Date, of Morris, Manning & Martin, L.L.P., counsel to ISI and InfoCure
in a form reasonably satisfactory to counsel for the Company.
F. ISI and InfoCure shall have executed the Escrow Agreement in the
form attached hereto as Exhibit B.
---------
G. ISI and InfoCure shall have obtained all material consents,
waivers, approvals, authorizations or orders and made all filings in connection
with the authorization, execution and delivery of this Agreement by ISI and
InfoCure and the consummation by them of the transactions contemplated hereby.
7. INDEMNIFICATION; REMEDIES.
7.1 Agreement by the Principal Shareholders to Indemnify. Subject to the
----------------------------------------------------
limitations set forth in Section 7.1.1 and in Section 7.1.2, the Principal
Shareholders, severally and not jointly, in proportion to each Principal
Shareholder's relative Percentage Ownership, agree that they will indemnify and
hold ISI and InfoCure harmless in respect of the aggregate of all Indemnifiable
Damages of ISI and InfoCure.
For this purpose, "Indemnifiable Damages" of ISI or InfoCure means the
aggregate of all Damages incurred or suffered by ISI and InfoCure resulting
from:
A. Any inaccurate representation or warranty made by the Company in
or pursuant to this Agreement;
55
<PAGE>
B. Any breach of or default in the performance of any of the
covenants or agreements made by the Company or the Principal Shareholders in
this Agreement; or
C. The Pending Matters (as defined in Section 2.8.B.).
The foregoing obligation of the Principal Shareholders to indemnify
InfoCure and ISI shall be subject to each of the following principles or
qualifications:
7.1.1 All representations, warranties and covenants of the Company,
the Principal Shareholders, ISI and InfoCure contained in this Agreement will
remain operative and in full force and effect for a period ending on the earlier
of (i) one (1) year after the Closing and (ii) publication of audited combined
financial statements of InfoCure and the Surviving Corporation for the fiscal
year ended December 31, 1999; provided, however, nothing herein shall be
construed as limiting InfoCure and ISI's respective rights to seek
indemnification for the Pending Matters at any time during the three (3) year
period following Closing.
Except for claims relating to fraud or willful misrepresentation under
applicable law outside of this Agreement with respect to persons who
participated in such fraud or willful misrepresentation, no claim for the
recovery of Indemnifiable Damages as a result of an inaccurate representation or
warranty may be asserted by InfoCure or ISI against the Principal Shareholders
or their successors in interest after such representations and warranties shall
be thus extinguished; provided, however, that claims first asserted in writing
within the applicable period shall not thereafter be barred. In addition,
Principal Shareholders shall have no liability with respect to Indemnifiable
Damages until the total of all such Damages exceeds Three Hundred Thousand and
No/100 Dollars ($300,000.00) in which event Principal Shareholders shall be
obligated to indemnify InfoCure and ISI as provided herein for all such Damages
in excess of Three Hundred Thousand and No/100 Dollars ($300,000.00) subject to
Section 7.1.2 below. Notwithstanding the foregoing, the amount of Indemnifiable
Damages shall be calculated to be the cost or loss to InfoCure and ISI after
giving effect to amounts recoverable under insurance with respect thereto. It
is further agreed that there shall be no recovery of any amount under this
Section 7.1. or this Agreement that would be recoverable under insurance of the
Company or Subsidiary in effect on the date hereof or any insurance maintained
by ISI or InfoCure.
7.1.2 In seeking indemnification for any Indemnifiable Damages
otherwise payable to ISI or InfoCure under this Agreement following the Closing,
and except for claims relating to fraud or willful misrepresentations under
applicable law outside of this Agreement with respect to Persons who participate
in such fraud or willful misrepresentation, the sole remedy of ISI and InfoCure
shall be the Escrow Shares.
7.2 Agreements by InfoCure and ISI to Indemnify. Subject to the
-------------------------------------------
limitations set forth in Section 7.2.1, InfoCure and ISI, jointly and severally,
agree that they will indemnify and hold the holders of the Company Capital Stock
(the "Shareholders") harmless in respect of the aggregate of all Shareholder
Indemnifiable Damages of the Shareholders.
For this purpose, "Shareholder Indemnifiable Damages" of the Shareholders
means the aggregate of all Damages incurred or suffered by the Shareholders
resulting from:
56
<PAGE>
A. Any breach of a representation or warranty made by InfoCure and
ISI in or pursuant to this Agreement; or
B. Any breach of or default in the performance of any of the
covenants or agreements made by InfoCure or ISI in this Agreement.
The foregoing obligation of InfoCure and ISI to indemnify the Shareholders
shall be subject to each of the following principles or qualifications:
7.2.1 All representations, warranties and covenants of ISI and
InfoCure contained in this Agreement will remain operative and in full force and
effect for a period ending on the earlier of (i) one (1) year after the Closing
and (ii) publication of audited combined financial statements of InfoCure and
the Company for a full fiscal year.
No claim for the recovery of Shareholder Indemnifiable Damages may be
asserted by the Shareholders against InfoCure or ISI or their successors in
interest after such representations and warranties shall be thus extinguished;
provided, however, that claims first asserted in writing within the applicable
period shall not thereafter be barred.
7.3 Matters Involving Third Parties. If any third party shall notify ISI
-------------------------------
or InfoCure (the "Indemnified Party") with respect to any matter which may give
rise to a claim by ISI or InfoCure for indemnification against the Principal
Shareholders (collectively the "Indemnifying Party") under this Section 7. (a
"Third Party Claim") then the Indemnified Party shall notify the Indemnifying
Party promptly; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to the extent
that) the Indemnifying Party thereby is Damaged.
If the Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
B. The Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes that the counsel the Indemnifying Party has selected has a conflict of
interest);
C. The Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnified Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the
57
<PAGE>
plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld or delayed unreasonably).
If (i) the Indemnifying Party fails to notify the Indemnified Party within
fifteen (15) days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof or (ii) the
Indemnifying Party notifies the Indemnified Party within fifteen (15) days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is not assuming the defense thereof, then the Indemnified Party may defend
---
against, or enter into any settlement with respect to, the matter in any manner
it may deem appropriate. The parties acknowledge that the Principal Shareholders
shall have the right to control the defense of the claims listed on Schedule
--------
3.15, the cost of such defense to be borne by the Surviving Corporation and
- ----
reimbursed to the Surviving Corporation as provided in the Escrow Agreement.
8. TERMINATION.
8.1 Termination Events. This Agreement may, by written notice given at or
------------------
prior to the Closing Date in the manner hereinafter provided, be terminated:
A. (i) By ISI and InfoCure, if all of the conditions set forth in
Sections 6.1. and 6.2. shall not have been satisfied on or before the Closing
Date or shall become incapable of satisfaction on or before the Closing Date,
other than through failure of ISI or InfoCure to fully materially comply with
its obligations hereunder, and such conditions shall not have been waived by ISI
and InfoCure on or before such date; or
(ii) By the Company if all of the conditions set forth in
Sections 6.1. and 6.3. shall not have been satisfied on or before the Closing
Date or shall become incapable of satisfaction on or before the Closing Date,
other than through failure of the Company to fully materially comply with its
obligations hereunder, and such conditions shall not have been waived by the
Company on or before such date;
B. By mutual consent of the Company, ISI and InfoCure; or
C. By either the Company or ISI and InfoCure if the Closing shall
not have occurred, other than through failure of any such party to materially
fulfill its obligations hereunder, on or before December 31, 1999, or such later
date as may be agreed upon by the parties.
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
9. MISCELLANEOUS.
9.1 Notices. Except as otherwise set forth herein, all notices given in
-------
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by telecopy
58
<PAGE>
or similar facsimile means, by certified or registered mail, return receipt
requested, or by express courier or delivery service, addressed to the parties
hereto at the following addresses:
A. Principal Shareholders: See Schedule A attached hereto
----------
With a copy to: McDermott, Will & Emery
28 State Street
Boston, Massachusetts
Attention: Arthur I. Anderson, P.C.
Telecopy No.: (617) 535-3800
B. Company: Datamedic Holding Corp.
95 Sawyer Road
Waltham, Massachusetts 02453
Attention: President
Telecopy No.: (781) 642-6593
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky &
Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: John R. Pomerance, Esq.
Telecopy No.: (617) 542-2241
C. ISI and InfoCure: InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Richard E. Perlman
Telecopy No.: (770) 857-1300
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.
Telecopy No.: (404) 365-9532
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given (i) when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means) and (ii) when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail,
return receipt requested.
59
<PAGE>
9.2 Further Assurances. The parties hereto agree to furnish upon request
------------------
to each other such further information, to execute and deliver to each other
such other documents, and to do such other acts and things, all as the other
party hereto may at any time reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to herein.
9.3 Waiver. The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay on the part of
any party in exercising any right, power or privilege under this Agreement or
the documents referred to herein shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. To the maximum extent permitted by applicable law, no claim or
right arising out of this Agreement or the documents referred to herein can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; no
waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and no notice to or demand on one party
hereto shall be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
herein.
9.4 Entire Agreement and Modification. This Agreement, including all
---------------------------------
exhibits and schedules hereto, are intended by the parties to this Agreement as
a final expression of their agreement with respect to the subject matter hereof,
and are intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.
9.5 Assignments, Successors and No Third-Party Rights. This Agreement
-------------------------------------------------
shall apply to and be binding in all respect upon, and shall inure to the
benefit of, the successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person or entity other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement, or any provision
hereof, it being the intention of the parties hereto that this Agreement and all
of its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement, their successors and assigns, and for the benefit of
no other person or entity; provided, however, that the parties hereto consent to
the assignment of interests in this Agreement, including all exhibits and
schedules hereto, as collateral security for the obligations of InfoCure and ISI
following the Closing to FINOVA Capital Corporation.
9.6 Pooling-of-Interests. If any provision of this Agreement or the
--------------------
application of any such provision to any person or circumstance precludes the
use of "pooling-of-interests" accounting treatment in connection with the
transactions contemplated by this Agreement, then such provision shall be of no
force and effect to the extent, and solely to the extent necessary to preserve
such accounting treatment and in the event, the remainder of this Agreement
shall not be affected, and in lieu of such provision there shall be added as
part of this Agreement a
60
<PAGE>
provision as similar in terms as may be possible for the transactions
contemplated by this Agreement to be treated as a "pooling-of-interests" for
accounting purposes.
9.7 Section Headings, Construction. The headings of articles and sections
------------------------------
contained in this Agreement are provided for convenience only. They form no part
of this Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.
9.8 Time of Essence. With regard to all time periods set forth or
---------------
referred to in this Agreement, time is of the essence.
9.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
UNDER, THE LAWS OF THE STATE OF GEORGIA WITHOUT REGARD TO CONFLICTS OF LAWS, ALL
RIGHTS AND REMEDIES BEING GOVERNED BY SUCH LAWS.
9.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute,
but one and the same agreement.
9.11 Payment of Company Expenses.
---------------------------
At Closing, the Chief Financial Officer of the Company shall deliver to
InfoCure a certificate setting forth the amount of all Company Expenses, which
amount shall be paid by InfoCure by means of wire transfers of funds at
Closing.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
61
<PAGE>
IN WITNESS WHEREOF, the Company, ISI and InfoCure, by their duly authorized
officers and the Principal Shareholders, individually, have each caused this
Agreement and Plan of Merger to be executed as of the date first written above.
INFOCURE:
InfoCure Corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ISI:
InfoCure Systems, Inc.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
COMPANY:
Datamedic Holding Corp.
By:
----------------------------------
Stephen N. Kahane, M.D.
President, Chief Executive Officer
62
<PAGE>
Preferred Stockholders
BESSEC VENTURES IV L.P. BVP SPECIAL SITUATIONS L.P.
By: Deer IV & Co., LLC By: Deer IV & Co., LLC
Its: General Partner Its: General Partner
By: By:
------------------------------ ------------------------------
Robert H. Buescher Robert H. Buescher
Manager Manager
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co., LLC
Its: General Partner
By:
------------------------------
Robert H. Buescher
Manager
- ----------------------------------
Robert H. Buescher, Individually &
Attorney in Fact for each of:
Michael I. Barach
Belisarius Corporation
Rodney A. Cohen
David J. Cowan
Richard R. Davis
Christopher F. O. Gabrieli
Gabrieli Family Foundation
Adam P. Godfrey
G. Felda Hardymon
Barbara M. Henagan
Diane N. McPartlin
Ravi B. Mhatre
Gautam A. Prakash
Quentin Corporation
Thomas Rhum
Robert J. S. Rouston
Robi L. Soni, and
Joanna A. Strober
63
<PAGE>
CIBC WOOD GUNDY VENTURES, INC.
By:
------------------------------
Name:
Title:
FIDELITY VENTURES, LTD.
By: Fidelity Capital Associates, Inc.
Its: General Partner
By:
------------------------------
Peter Mann
Title:
GALEN PARTNERS, L.P.
By: BGW Partners L.P.
Its: General Partner
By:
------------------------------
William R. Grant
General Partner
GALEN PARTNERS INTERNATIONAL, L.P.
By: BGW Partners L.P.
Its: General Partner
By:
------------------------------
William R. Grant
General Partner
64
<PAGE>
VECTOR LATER-STAGE EQUITY FUND II, L.P.
By: Vector Fund Management II, L.L.C.,
Its: General Partner
By:
------------------------------
Ranjan Lal
Managing Director
VECTOR LATER-STAGE EQUITY FUND, L.P.
By: Vector Fund Management, L.P.
Its: General Partner
By:
------------------------------
Ranjan Lal
Managing Director
65
<PAGE>
SCHEDULE A TO AGREEMENT AND PLAN OF MERGER
Preferred Shareholders
BESSEC VENTURES IV L.P.
BESSEMER VENTURE PARTNERS IV L.P.
BVP SPECIAL SITUATIONS L.P.
Robert H. Buescher, Individually & as Attorney
in Fact for each of:
Michael I. Barach
Belisarius Corporation
Rodney A. Cohen
David J. Cowan
Richard R. Davis
Christopher F. O. Gabrieli
Gabrieli Family Foundation
Adam P. Godfrey
G. Felda Hardymon
Barbara M. Henagan
Diane N. McPartlin
Ravi B. Mhatre
Gautam A. Prakash
Quentin Corporation
Robert J. S. Roriston
Thomas F. Ruhm
Robi L. Soni
Joanna A. Strober
All of the above c/o
- --------------------
Bessemer Venture Partners
1400 Old Country Road, Suite 407
Westbury, NY 11590
Attn: Robert H. Buescher
CIBC WOOD GUNDY VENTURES, INC.
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto, ON M5J2S8
Attn: Teddy Rosenberg
66
<PAGE>
FIDELITY VENTURES, LTD.
82 Devonshire Street
R25C
Boston, MA 02109-3614
Attn: Peter Mann
GALEN PARTNERS, L.P.
c/o Galen Associates
610 Fifth Avenue, 5th Floor
New York, NY 10017-4011
Attn: William R. Grant
GALEN PARTNERS INTERNATIONAL, L.P.
c/o Galen Associates
610 Fifth Avenue, 5th Floor
New York, NY 10017-4011
Attn: William R. Grant
VECTOR LATER-STAGE EQUITY FUND II, L.P.
c/o Vector Fund Management, L.P.
1751 Lake Cook Rd., Suite 350
Deerfield, IL 60015
Attn: Ranjan Lal
VECTOR LATER-STAGE EQUITY FUND, L.P.
c/o Vector Fund Management, L.P.
1751 Lake Cook Rd., Suite 350
Deerfield, IL 60015
Attn: Ranjan Lal
67
<PAGE>
EXECUTION COPY
EXHIBIT C
---------
AFFILIATE'S AGREEMENT
---------------------
September ___, 1999
InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Ladies and Gentlemen:
The undersigned, as a shareholder of, or holder of a Warrant or Option to
acquire capital stock of, or holder of a Convertible Debenture convertible into
capital stock of Datamedic Holding Corporation, a Delaware corporation
("Datamedic"), will become a shareholder of, or holder of a warrant or option to
acquire capital stock of, or holder of a convertible subordinated debenture
convertible into capital stock of InfoCure Corporation, a Delaware corporation
("InfoCure") upon the consummation of the transactions set forth in the
Agreement and Plan of Merger dated as of even date hereof (the "Merger
Agreement"), by and among InfoCure, InfoCure Systems, Inc., a Georgia
corporation and the wholly-owned subsidiary of InfoCure ("ISI"), Datamedic and
certain principal shareholders of Datamedic. Pursuant to the terms of the
Merger Agreement, Datamedic will be merged with and into ISI, with ISI being the
surviving entity (the "Merger") and the shares of the Company Capital Stock
owned by the shareholders of Datamedic will be converted into and exchanged for
a certain number of shares of the $0.001 par value per share voting common stock
of InfoCure ("InfoCure Common Stock") and all Options, Warrants and Convertible
Debentures of Datamedic outstanding as of the Effective Time will be assumed by
InfoCure as provided in the Merger Agreement. This Affiliate's Agreement
represents an agreement between the undersigned and InfoCure regarding certain
rights and obligations of the undersigned in connection with the shares of
InfoCure Common Stock, or options or warrants to acquire shares of InfoCure
Common Stock or convertible subordinated debentures convertible into shares of
InfoCure Common Stock, to be received by the undersigned as a result of the
Merger. Capitalized terms used and not otherwise defined herein are used herein
as defined in the Merger Agreement.
In consideration of Ten and No/100 Dollars ($10.00) in hand paid, and the
mutual premises and covenants contained herein and the Merger Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged conclusively, the undersigned and InfoCure, intending to
be legally bound, agree as follows:
1. Affiliate Status. The undersigned understands and agrees that, as to
----------------
Datamedic, the undersigned may be deemed an "affiliate," as defined in Rule 405
of the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended ("1933
Act"), and the undersigned anticipates that the undersigned may be deemed to be
such an "affiliate" at the time of the Merger although nothing contained herein
should be construed as an admission hereof.
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<PAGE>
2. Restriction on Disposition. The undersigned will not make any sale,
--------------------------
transfer, pledge or other disposition of
(i) InfoCure Common Stock,
(ii) or options or warrants to acquire InfoCure Common Stock
or
(iii) convertible subordinated debentures convertible into
InfoCure Common Stock, received by the undersigned as a result of
the Merger in violation of the 1933 Act or the Rules and
Regulations.
3. Covenants and Warranties of Undersigned. In addition to the foregoing
---------------------------------------
and the other agreements and covenants of the undersigned hereunder, the
undersigned represents, warrants and agrees as of the date hereof and as of the
Closing Date that:
A. The undersigned has full power and authority to execute this
Affiliate's Agreement and the Merger Agreement and to make the representations
and warranties set forth herein and to perform the undersigned's s obligations
hereunder and thereunder.
B. Notwithstanding any other provision of this Affiliate's Agreement
to the contrary, during the thirty (30) day period immediately preceding the
Effective Time, the undersigned has not engaged and will not engage, and after
the Effective Time until such time as results covering at least thirty (30) days
of combined post-Merger operations of the Surviving Corporation and InfoCure
have been published by InfoCure, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on Form
10-K, 10-Q, or 8-K, or any other public filing or announcement which includes
such combined results of operations, the undersigned will not engage (except to
the extent allowed by SEC Staff Accounting Bulletin 76), in the sale, exchange,
transfer, pledge, disposition of or grant of any option, the establishment of
any "short" or put-equivalent position with respect to or the entry into or any
similar transaction intended to reduce the risk of the undersigned's ownership
of or investment in, any of the following:
(i) Any Company Capital Stock (or Options, Warrants or
Convertible Debentures) or InfoCure Common Stock (or options or warrants to
acquire, or convertible subordinated debentures convertible into, InfoCure
Common Stock); or Convertible Debentures
(ii) Any shares of Company Capital Stock or InfoCure Common
Stock or any other equity securities of InfoCure which the undersigned purchases
or otherwise acquires after the execution of this Affiliate's Agreement.
4. Proposed Registration of InfoCure Common Stock; Certain Restrictions on
-----------------------------------------------------------------------
Transfer.
- --------
A. The undersigned has been advised that the issuance of InfoCure
Common Stock to the undersigned in connection with the Merger will be registered
with the SEC under the 1933 Act on a Registration Statement on Form S-4.
However, the undersigned has also been advised that, since at the time the
Merger will be submitted for a vote of the stockholders of
69
<PAGE>
Datamedic the undersigned may be deemed to be an affiliate of Datamedic, the
undersigned may not sell, transfer, pledge or otherwise dispose of InfoCure
Common Stock issued to the undersigned in the Merger unless (i) such sale,
transfer, pledge or other disposition has been registered under the 1933 Act;
(ii) such sale, transfer, pledge or other disposition is made in conformity with
the volume and other limitations of Rule 145 or (iii) in the opinion of counsel
reasonably acceptable to InfoCure, such sale, transfer, pledge or other
disposition is otherwise exempt from registration under the 1933 Act.
B. Except as set forth in the Merger Agreement, the undersigned
understands that InfoCure is under no obligation to register the sale, transfer,
pledge or other disposition of InfoCure Common Stock by the undersigned or on
the undersigned's behalf under the 1933 Act or to take any other action
necessary in order to make compliance with an exemption from such registration
available.
C. The undersigned understands and agrees that stop transfer
instructions with respect to the shares of InfoCure Common Stock received by the
undersigned pursuant to the Merger or in case of second legend below, issued
upon exercise of Warrants or Options, or conversion of Convertible Debentures,
assumed by InfoCure pursuant to the Merger, will be given to InfoCure's transfer
agent and that there will be placed on the certificates for such shares, or
shares issued in substitution thereof, a legend stating in substance:
"The securities evidenced by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended, applies. The securities evidenced by this certificate
may not be transferred, sold, assigned, pledged, hypothecated or
otherwise disposed of, and no registration of transfer of such
securities will be made on the books of the issuer, unless such
transfer, sale, assignment, pledge, hypothecation or other disposal is
(i) in accordance with the provisions of Rule 145; (ii) in connection
with an effective registration statement under the Securities Act of
1933, as amended, and any applicable state securities law or (iii) is
otherwise exempt from the registration requirements of such Act, the
Rules and Regulations in effect thereunder and any applicable state
securities laws.
The securities evidenced by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling-of-interests"
and may not be sold, nor may the owner thereof reduce the owner's risks
relative thereto in any way, until such time as InfoCure Corporation
has published the financial results covering at least thirty (30) days
of combined operations after the effective date of the merger through
which the business combination was effected."
Such legend will also be placed on any certificate representing InfoCure
securities issued subsequent to the original issuance of the InfoCure Common
Stock pursuant to the Merger as a result of any transfer of such shares or any
stock dividend, stock split or other recapitalization as long as the InfoCure
Common Stock issued to the undersigned pursuant to the Merger has not
70
<PAGE>
been registered or transferred in such manner to justify the removal of the
legend therefrom. Upon the request of the undersigned, InfoCure shall cause the
certificates representing the shares of InfoCure Common Stock issued to the
undersigned in connection with the Merger to be reissued free of (a) any legend
relating to restrictions on transfer by virtue of SEC Accounting Series Release
Nos. 130 and 135 ("ASR 130 and 135") as soon as practicable after the
requirements of ASR 130 and 135 have been met and (b) any legend relating to
Rule 145 upon (i) receipt of an opinion of counsel reasonably satisfactory to
InfoCure that such shares may be sold without restriction under Rule 144 and
Rule 145, (ii) three (3) months after the Closing (except for anyone becoming an
InfoCure Affiliate) or (iii) an effective registration statement with respect to
the resale of such shares.
5. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Merger Agreement and this Affiliate's Agreement and has
discussed such documents' requirements and impact upon the undersigned's ability
to sell, transfer or otherwise dispose of the shares of InfoCure Common Stock
received by the undersigned, to the extent the undersigned believes necessary,
with the undersigned's counsel or counsel for Datamedic.
6. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply to all shares of the capital stock of Datamedic
and InfoCure that are deemed to be beneficially owned by the undersigned
pursuant to applicable federal securities laws, which the undersigned agrees may
include, without limitation, shares owned or held in the name of (i) the
undersigned's spouse; (ii) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned; (iii) any trust
or estate in which the undersigned, the undersigned's spouse, and any such
relative collectively own at least a ten percent (10%) beneficial interest or of
which any of the foregoing serves as trustee, executor or in any similar
capacity and (iv) any corporation or other organization in which the
undersigned, the undersigned's spouse and any such relative collectively own at
least ten percent (10%) of any class of equity securities or of the equity
interests. The undersigned further recognizes that, in the event that the
undersigned is a director or officer of InfoCure or becomes a director or
officer of InfoCure upon consummation of the Merger, among other things, any
sale of InfoCure Common Stock by the undersigned within a period of less than
six (6) months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
7. Notices.
-------
A. All notices, requests, demands and other communications under this
Affiliate's Agreement or in connection herewith shall be given to or made upon
the undersigned at the address set forth in the Datamedic's records, with a copy
to Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., One Financial Center,
Boston, Massachusetts 02111, attention: John R. Pomerance, Esq. and McDermott,
Will & Emery, 28 State Street, Boston, Massachusetts 02109, attention: Arthur I.
Anderson, P.C.; and, if to InfoCure, to InfoCure Corporation, 1765 The Exchange,
Suite 450, Atlanta, Georgia 30339, attention: James K. Price, 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.
71
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EXECUTION COPY
B. All notices, requests, demands and other communications given or
made in accordance with the provisions of this Affiliate's Agreement shall be in
writing, and shall be deemed given (i) when received, if sent by telecopy or
similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communication sent by telecopy or other
facsimile means) and (ii) when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused) if hand-delivered, sent by express
courier or delivery service, or sent by certified or registered mail, return
receipt requested.
C. Any party may, by written notice to the other, alter its address or
respondent, and such notice shall be considered to have been given three (3)
days after the airmailing or faxing thereof.
8. Publication of Combined Operations. As promptly as practicable after
----------------------------------
the Effective Time, InfoCure will publish results covering at least thirty (30)
days of combined post-Merger operations of the Surviving Corporation and
InfoCure in the form of a quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Form 10-K, 10-Q, 8-K, or
any other public filing or announcement which includes such combined results of
operations; provided, however, that InfoCure will be under no obligation to
publish any such financial information other than with respect to a fiscal
quarter of InfoCure ending no earlier than the thirtieth (30th) day following
the Effective Time.
9. Miscellaneous. This Affiliate's Agreement and the Merger Agreement
-------------
together constitute the complete agreement between InfoCure and the undersigned
concerning the subject matter hereof. This Affiliate's Agreement shall be
governed by the laws of the State of Delaware. This Affiliate's Agreement may
be executed in counterparts, each of which shall be deemed an original, but all
of which together shall be deemed one and the same instrument.
IN WITNESS WHEREOF, this Affiliate's Agreement has been duly executed by
the parties hereto, as of the date first above written.
Very truly yours,
-----------------------------------------
[AFFILIATE]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
AGREED TO AND ACCEPTED
AS AFORESAID, AS OF
SEPTEMBER ___, 1999.
InfoCure Corporation
By:
----------------------------------------
James K. Price, Executive Vice President
72
<PAGE>
APPENDIX B
----------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("Agreement") is entered into as of ________ ___,
1999, by and among InfoCure Corporation, a Delaware corporation ("InfoCure"),
the undersigned Principal Shareholders ("Principal Shareholders") and SunTrust
Bank, Atlanta, a Georgia banking corporation, as escrow agent ("Escrow Agent").
BACKGROUND
----------
A. Pursuant to that certain Agreement and Plan of Merger dated as of
September 3rd, 1999 (the "Merger Agreement"), by and among InfoCure, InfoCure
Systems, Inc., a Georgia corporation and the wholly owned subsidiary of InfoCure
("ISI"), Datamedic Holding Corp., a Delaware corporation ("Datamedic") and the
Principal Shareholders (as defined therein) immediately prior to the Merger
(hereinafter defined), as of the date hereof Datamedic is merging with and into
ISI, with ISI being the surviving entity (the "Merger"). Capitalized terms used
in this Agreement and not otherwise defined herein shall have the meanings given
such terms in the Merger Agreement. Escrow Agent acknowledges receipt of the
Merger Agreement.
B. Pursuant to Section 2.8 of the Merger Agreement, the Principal
Shareholders have agreed that, at the closing of the transactions contemplated
by the Merger Agreement (the "Closing"), InfoCure shall deposit on behalf of the
Principal Shareholders into an escrow account (the "Escrow Account") the Escrow
Shares issuable to the Principal Shareholders by virtue of the Merger. The
Escrow Account shall be available to satisfy any indemnification claims of
InfoCure as set forth in Section 7 of the Merger Agreement.
C. Escrow Agent is willing to hold the Escrow Account in escrow in
accordance with the provisions of this Agreement, and to act as escrow agent
hereunder.
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00)
in hand paid, the mutual premises and covenants set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged conclusively, the parties hereto, intending to be and being legally
bound, agree as follows:
1. Escrow. The parties hereby appoint Escrow Agent to serve as escrow
------
agent, subject to and in accordance with the terms of this Agreement. Escrow
Agent hereby accepts such appointment as Escrow Agent and agrees to hold the
Escrow Shares, and any cash received in substitution thereof as provided below
("Escrow Cash"), and to disburse the Escrow Shares and Escrow Cash, which Escrow
Cash shall include any interest income or other amounts received thereon (the
"Escrow Earnings") in accordance with the terms of this Agreement. Within ten
(10) business days of the execution hereof, InfoCure shall cause to be delivered
to Escrow Agent, to be held and distributed as hereinafter provided, stock
certificates issued in the name of the Principal Shareholders representing the
Escrow Shares. Upon notice of the Shareholder Representative after the release
of 30 days combined operating results of the Surviving Corporation and InfoCure,
the Shareholder Representative shall have the right to substitute cash in an
amount equal to the product of the number of Escrow Shares then in escrow
multiplied by the Price, as defined below, and upon tendering such cash to the
Escrow Agent, the Escrow Shares shall be
<PAGE>
immediately released to the Principal Shareholders. Except as InfoCure and the
Shareholder Representative may, from time to time, jointly instruct Escrow Agent
in writing, the Escrow Cash and the Escrow Earnings shall be invested, from time
to time, to the extent possible, in United States Treasury bills having a
remaining maturity of ninety (90) days or less, with any remainder being
deposited and maintained in Escrow Agent's Federated Treasury Obligations Money
Market Fund, until disbursement of the entire Escrow Fund. Escrow Agent is
authorized to liquidate in accordance with its customary procedures any portion
of the Escrow Fund consisting of investments to provide for payments required to
be made under this Agreement. Unless otherwise payable pursuant to the terms
hereof, all Escrow Earnings shall belong to Seller and shall be taxable to
Seller. Escrow Agent shall give prompt notice of all earnings with respect to
the Escrow Fund to Seller.
2. Voting and Dividend Rights and Transfer of Escrow Shares. The
--------------------------------------------------------
Principal Shareholders shall have the right to vote their own Escrow Shares
deposited with Escrow Agent for the account of such Principal Shareholders so
long as such Escrow Shares are held in escrow. Until such time as they are
distributed as hereinafter provided, Principal Shareholders shall not transfer
the Escrow Shares, or any interest therein, except under the laws of descent and
distribution or to the partners or equity holders of any Principal Shareholder
which is an entity; any dividends paid by InfoCure with respect to the Escrow
Shares shall be deposited in the Escrow Account so long as such Escrow Shares
are held in escrow and will be distributed to the recipient of the Escrow Shares
to which they relate.
3. Shareholder Representative. For all purposes set forth in this
--------------------------
Agreement including the right to receive the Notice (as defined in Section 4
below) and to provide the Counter Notice (as defined in Section 4 below), each
Principal Shareholder hereby appoints __________ as its true and lawful
attorney-in-fact to act for and on behalf of such Principal Shareholder (the
"Shareholder Representative"). Each Principal Shareholder hereby agrees to
indemnify and to save and hold harmless the Shareholder Representative from any
liability incurred by the Shareholder Representative based upon or arising out
of any act, whether of omission or commission, of the Shareholder Representative
pursuant to the authority herein granted, other than acts, whether of omission
or commission, of the Shareholder Representative that constitute willful
misconduct in the exercise by the Shareholder Representative of the authority
herein granted. The death or incapacity of any Principal Shareholder shall not
terminate the authority and agency of the Shareholder Representative. In the
event of the resignation of the Shareholder Representative, the resigning
Shareholder Representative shall appoint a successor either from among the
Principal Shareholders or who shall otherwise be acceptable to InfoCure, and who
shall agree in writing to accept such appointment, and the resigning Shareholder
Representative's resignation shall not be effective until such a successor shall
exist. If the Shareholder Representative shall die or become incapacitated, his
successor shall be appointed within thirty (30) days of his death or incapacity
by a majority of the Principal Shareholders, and such successor either shall be
a Principal Shareholder or shall otherwise be acceptable to InfoCure. The
choice of a successor Shareholder Representative appointed in any manner
permitted above shall be final and binding upon all of the Principal
Shareholders. The decisions and actions of any successor Shareholder
Representative shall be, for all purposes, those of the Shareholder
Representative as if originally named herein.
4. Distribution of the General Escrow Shares.
-----------------------------------------
A. From time to time, on or before the earlier of (i) one (1) year
after the Closing and (ii) publication of audited consolidated financial
statements of InfoCure for the first fiscal year end following the Closing (the
General Escrow Termination Date"), InfoCure shall provide written notice (a
"Notice") to the Shareholders Representative and Escrow Agent specifying in
reasonable detail the nature and dollar amount of any claim (a "Claim") it may
have under Section 7 of the Merger Agreement. Upon
2
<PAGE>
Receipt of the Notice, Escrow Agent shall forward said Notice to the Shareholder
Representative. If the Shareholder Representative provides written notice to
InfoCure and Escrow Agent disputing any Claim (a "Counter Notice") within thirty
(30) days following receipt by the Shareholder Representative of the Notice
regarding such Claim, such Claim shall be resolved as provided in subsection 4.B
below. If no Counter Notice is received by Escrow Agent within such thirty (30)
day period, then the dollar amount of damages claimed by InfoCure as set forth
in its Notice shall be deemed established for purposes of this Agreement and the
Merger Agreement and, at the end of such thirty (30) day period, Escrow Agent
shall distribute out of the Escrow Account to InfoCure the lesser of (i) the
number of General Escrow Shares (rounded to the nearest whole share) that is
equal to the amount of such damages divided by the average per share closing
price of InfoCure Common Stock as quoted on Nasdaq for the twenty (20) trading
day period ending on the day before the date of this Agreement (the "Price") or
(ii) all of the Escrow Shares. Escrow Agent shall not inquire into or consider
whether a Claim complies with the requirements of the Merger Agreement.
B. If a Counter Notice is given with respect to a Claim, Escrow Agent
shall make a distribution out of the Escrow Account with respect thereto only in
accordance with: (i) joint written instructions of InfoCure and the Shareholder
Representative or (ii) a final order of the arbitrator acting in accordance with
Section 10 below. In the case of a Claim for which a Counter Notice has been
given, InfoCure and the Shareholder Representative on behalf of the Principal
Shareholders shall use good faith efforts to resolve such dispute amicably over
a thirty (30) day period following receipt of the Counter Notice. If the dispute
cannot be amicably resolved during such thirty (30) day period, then either
party may initiate arbitration of such dispute, which arbitration shall be
handled in accordance with Section 10 below.
C. Escrow Agent is also directed to make distributions out of the
Escrow Account of General Escrow Shares to InfoCure upon receipt of any court
order, accompanied by a written legal opinion by counsel for InfoCure to the
effect that the order is final and non-appealable and determining that an amount
is owed to InfoCure pursuant to Section 7 of the Merger Agreement. InfoCure
shall provide the Shareholder Representative a copy of such court order and
legal opinion. Escrow Agent shall act on such court order and legal opinion
without further inquiry.
D. On or before the General Escrow Termination Date, Escrow Agent
shall distribute out of the Escrow Account to the Principal Shareholders in
accordance with Exhibit B hereto the remaining balance of the Escrow Shares in
---------
the Escrow Account (if any) less the number of General Escrow Shares (rounded to
the nearest whole share) in such Escrow Account, as is most nearly equal to the
amount of any Claim (a "Pending Claim") which has not been paid or resolved in
accordance with subsections 4.A and 4.B above. In determining the number of
Escrow Shares which would be equal to the amount of the Pending Claim for
purposes of this Section 4.D, the Escrow Shares shall be valued at the Price.
E. The General Escrow Shares in the Escrow Account not so distributed
pursuant to this Section 4 shall be retained by the Escrow Agent until it
receives notice that all Pending Claims against the Principal Shareholders are
resolved by a final order of the arbitrator acting in accordance with Section 10
below or by agreement of InfoCure and the Shareholder Representative.
F. Notwithstanding anything contained in this Agreement or which is
or shall be interpreted to the contrary, the Escrow Account represents
InfoCure's sole remedy for the Principal Shareholders' obligations of
indemnification and other obligations under the Merger Agreement (except
3
<PAGE>
for fraud and willful misrepresentation by those who committed such fraud or
willful misrepresentation to the extent set forth in the Merger Agreement).
G. Distribution of Special Escrow Shares. On or before three (3)
years after the date hereof, as InfoCure incurs expenses in defending, settling
or pursuant to judgments obtained in any of the litigation disclosed on Schedule
3.15 to the Merger Agreement ("Expenses"), InfoCure may, upon notice to the
Shareholders Representative and notice to the Escrow Agent, request a release of
Special Escrow Shares. The Escrow Agent shall release that number of Special
Escrow Shares equal to the quotient obtained by dividing the Expenses by the
Price, or if cash has been substituted in lieu thereof as provided in Section 1,
the Escrow Agent shall release an amount of cash equal to the amount of Expenses
set forth in such notice. On the earlier of the third anniversary of the date
hereof or the settlement or adjudication of all of the litigation disclosed in
Schedule 3.15, the Special Escrow Shares not previously released to InfoCure
shall be immediately released to the Principal Shareholders upon the request of
the Shareholder Representative.
5. Disbursement of the Escrow Shares and Escrow Allocations. To
--------------------------------------------------------
facilitate disbursement of the Escrow Account as authorized herein, each
Principal Shareholder shall execute a Stock Power in blank in the form attached
hereto as Exhibit A. Attached hereto as Exhibit B is a schedule setting forth
--------- ---------
the percentages for allocating the Escrow Account among the individual Principal
Shareholders. All distributions and allocations of the Escrow Account to the
Principal Shareholders shall be made according to the percentages set forth in
Exhibit B. Distributions of Escrow Shares shall be rounded upward or downward to
- ---------
the closest whole number which rounding will be performed by InfoCure (0.5 and
greater to be rounded upward) and delivered in writing to Escrow Agent.
6. Duties and Powers of Escrow Agent.
---------------------------------
A. Escrow Agent shall not be under any duty to give the Escrow Account
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder, except as
directed in this Agreement. Uninvested funds held hereunder shall not earn or
accrue interest.
B. Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated herein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
C. Escrow Agent may act pursuant to the advice of counsel with respect
to any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
D. Escrow Agent does not have any interest in the Escrow Account
deposited hereunder, but is serving as escrow holder only and having only
possession thereof. Any payments of
4
<PAGE>
income from their Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The parties hereto will
provide Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien certifications at the
Closing. Such forms shall be provided to the Principal Shareholders by Escrow
Agent prior to Closing.
E. The other parties hereto authorize Escrow Agent, for any securities
held hereunder, to use the services of any United States central securities
depository, including, without limitation, the Depository Trust Company and the
Federal Reserve Book Entry System.
F. In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Account or in the event that Escrow Agent is in doubt as to what action it
should take hereunder, Escrow Agent shall be entitled to retain the Escrow
Account until Escrow Agent shall have received (i) a final order of the
arbitrator acting in accordance with Section 10 hereof directing delivery of the
Escrow Account; (ii) a final non-appealable order of a court of competent
jurisdiction directing delivery of the Escrow Account or (iii) a written
agreement executed by all of the other parties hereto directing delivery of the
Escrow Account, in which event Escrow Agent shall disburse the Escrow Account in
accordance with such order or agreement without further inquiry. Any arbitrator
or court order shall be accompanied by a written legal opinion by counsel for
the presenting party to the effect that the order is final and non-appealable.
Escrow Agent shall act on such arbitration or court order and legal opinion
without further inquiry.
7. Limited Liability. In performing any of its duties hereunder, Escrow
-----------------
Agent shall not incur any liability to anyone for any damages, losses, or
expenses, except for any willful misconduct or gross negligence by Escrow Agent
hereunder, and, accordingly, Escrow Agent shall not incur any such liability
with respect to (i) any action taken or omitted in good faith upon advice of its
legal counsel given with respect to any questions relating to the duties and
responsibilities of Escrow Agent under this Agreement or (ii) any action taken
or omitted in reliance on any instrument, including any written notice or
instruction provided for in this Agreement, not only as to its due execution and
the validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by a person or
persons having authority to sign or present such instrument, and to conform with
the provisions of this Agreement.
8. Indemnity. InfoCure on the one hand and the Principal Shareholders on
---------
the other hand (but with respect to the Principal Shareholders, solely to the
extent of the Escrow Shares), agree to indemnify Escrow Agent against, and agree
to hold Escrow Agent harmless from, any and all claims, actions, demands,
losses, damages, expenses (including, without limitation, court costs,
attorneys' fees and expenses, and accountants' fees), and liabilities that may
be imposed upon Escrow Agent in the performance of its duties hereunder as
Escrow Agent, including, without limitation, any litigation arising from this
Agreement or involving the subject matter hereof, but excluding any such claims,
actions, demands, losses, damages, expenses, and liabilities resulting from or
arising out of any willful misconduct or gross negligence by Escrow Agent
hereunder.
9. Resignation and Removal of Escrow Agent. Escrow Agent (and any
---------------------------------------
successor escrow agent) may at any time resign or be removed by the mutual
consent of InfoCure and the Shareholder Representative upon written notice to
the other parties hereto given at least thirty (30) days prior to the effective
date of such resignation or removal. The resignation or removal of Escrow Agent
shall not be effective until delivery of the Escrow Account to any successor
escrow agent jointly designated by InfoCure and the Shareholder Representative
in writing, or to any court of competent jurisdiction,
5
<PAGE>
whereupon Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. If Escrow Agent has not
received a designation of a successor escrow agent within thirty (30) days of
the notice of resignation or removal, Escrow Agent's sole responsibility after
that time shall be to interplead and deposit the Escrow Account with the
arbitrator or the sponsoring arbitration association as provided for in Section
10 below, whereupon its duties hereunder shall cease.
10. Binding Arbitration/Attorneys' Fees. Except as otherwise specifically
-----------------------------------
provided herein, all disputes arising under this Agreement shall be submitted to
and settled by arbitration. Arbitration shall be by one (1) arbitrator selected
in accordance with the rules of the American Arbitration Association, New York,
New York ("AAA") by the AAA. The hearing before the arbitrator shall be held in
New York, New York and shall be conducted in accordance with the rules existing
at the date thereof of the AAA, to the extent not inconsistent with this
Agreement. The decision of the arbitrator shall be final and binding as to any
matters submitted to them under this Agreement. All costs and expense incurred
in connection with any such arbitration proceeding and those incurred in any
civil action to enforce the same shall be borne by the party against which the
decision is rendered.
11. Notices. All notices, consents, waivers and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given: (i) upon delivery by hand (with written confirmation of receipt); (ii)
upon transmission by telecopier (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested; (iii) five
(5) business days after posting, if transmitted by postage prepaid registered or
certified mail, return receipt requested or (iv) upon receipt by the addressee,
if sent by a nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
If to InfoCure: InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Mr. Frederick L. Fine, President
Telephone: (770) 221-9990
Telecopy: (770) 857-1300
With a copy to: Richard L. Haury, Jr., Esq.
Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telephone: (404) 223-7000
Telecopy: (404) 364-6932
If to Principal Shareholders:
---------------------------------------
Shareholder Representative
---------------------------------------
Telephone:
-----------------------------
Telecopy:
------------------------------
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky &
Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: John R. Pomerance, Esq.
Telephone: (617)-542-6000
Telecopy: (617)-542-2241
6
<PAGE>
and: McDermott, Will & Emery
28 State Street
Boston, Massachusetts, 02109
Attention: Arthur I. Anderson, P.C.
Telecopy: (617)-535-3800
If to Escrow Agent: SunTrust Bank, Atlanta
Corporate Trust Department
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305-1727
Attention: Rebecca Fischer
Telephone: (404) 240-1954
Telecopy: (404) 240-2030
12. Assignment. No assignment by InfoCure of its rights and obligations
----------
under this Agreement shall be effective, unless such assignment is made (i)
pursuant to the prior written consent of the Shareholder Representative or (ii)
to an affiliate or a successor of all or substantially all of the business of
InfoCure. No assignment by the Principal Shareholders of its respective rights
and obligations under this Agreement shall be effective unless such assignment
is made pursuant to the prior written consent of InfoCure, which consent will
not be unreasonably withheld. Escrow Agent shall receive written notice of any
such assignment.
13. Waiver. The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise or any such right, power,
or privilege will preclude any other or further exercise of any such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (i) no claim or right arising
out of this Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by any
other party; (ii) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given and (iii) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
14. Escrow Agent's Fee. Escrow Agent's fee for performing its duties
------------------
under this Agreement shall be Two Thousand and No/100 Dollars ($2,000.00) per
year which shall be paid by InfoCure. Escrow Agent's first year fee shall be
paid by InfoCure upon delivery to Escrow Agent of the Escrow Shares.
7
<PAGE>
15. Governing Law. This Agreement and the rights arising from it shall be
-------------
governed by, construed and interpreted in accordance with the laws of the State
of Georgia, without regard to conflicts of law principles.
16. Jurisdiction; Service of Process. Subject to Section 10 hereof, any
--------------------------------
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties in the
courts of the City of New York, or, if it has or can acquire jurisdiction, in
the United States District Court for the Southern District of New York, and each
of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
17. Cooperation. Subject to the terms and conditions of this Agreement,
-----------
each of the parties hereto shall undertake in good faith to use commercially
reasonable efforts to take, or cause to be taken, such action, to execute and
deliver, or cause to be executed and delivered, such additional documents and
instruments and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transaction contemplated by this Agreement and
shall use in good faith in carrying out the intent of this Agreement.
18. Miscellaneous.
-------------
A. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors, and permitted assigns. Any
and all rights granted to any of the parties hereto may be exercised by their
agents or personal representatives.
B. Time is of the essence of this Agreement.
C. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all such counterparts together shall
constitute one and the same instrument.
D. In the event that any court of competent jurisdiction shall
determine that any provision of this Agreement is invalid, such determination
shall not effect the validity of any other provision of this Agreement which
shall remain in full force and effect and which shall be construed to be valid
under applicable law .
E. This Agreement constitutes the sole and entire agreement of the
parties hereto with respect to the subject matter hereof and no promises,
agreements or understandings, whether oral or written, shall be of any force or
effect unless set forth herein. This Agreement may not be amended, except by a
written agreement executed by all of the parties hereto.
F. The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
G. Escrow Agent is not a party to, nor is it bound by, nor need it
give consideration to the terms or provisions of, any agreement or undertaking
among the undersigned or any of them, or between the undersigned or any of them
and other persons, including, but not limited to, the Merger Agreement or any
agreement or undertaking which may be evidenced by or disclosed by the Escrow
Account, it being the intention of the parties hereto that Escrow Agent assent
to and be obligated to give consideration only to the terms and provisions
hereof.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly signed this Escrow
Agreement as of the day and year first above written.
INFOCURE: ESCROW AGENT:
InfoCure Corporation SunTrust Bank, Atlanta
By: By:
------------------------------- ------------------------------
Frederick L. Fine, President Rebecca Fischer, Trust Officer
PRINCIPAL SHAREHOLDERS:
- ----------------------------------
Stephen N. Kahane, M.D.
President, Chief Executive Officer
- ----------------------------------
Peter L. Fetterolf
- ----------------------------------
Boine T. Johnson
- ----------------------------------
David Fetterolf
- ----------------------------------
Henry P. Kilroy
9
<PAGE>
BESSEC VENTURES IV L.P. BVP SPECIAL SITUATIONS L.P.
By: Deer IV & Co., LLC By: Deer IV & Co., LLC
Its: General Partner Its: General Partner
By: By:
---------------------------- ---------------------------
Robert H. Buescher Robert H. Buescher
Manager Manager
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co., LLC
Its: General Partner
By:
----------------------------
Robert H. Buescher
Manager
- ------------------------------------
Robert H. Buescher, Individually &
Attorney in Fact for each of:
Michael I. Barach
Belisarius Corporation
Rodney A. Cohen
David J. Cowan
Richard R. Davis
Christopher F. O. Gabrieli
Gabrieli Family Foundation
Adam P. Godfrey
G. Felda Hardymon
Barbara M. Henagan
Diane N. McPartlin
Ravi B. Mhatre
Gautam A. Prakash
Quentin Corporation
Thomas Rhum
Robert J. S. Rouston
Robi L. Soni, and
Joanna A. Strober
10
<PAGE>
CIBC WOOD GUNDY VENTURES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
FIDELITY VENTURES, LTD.
By: Fidelity Capital Associates, Inc.
Its: General Partner
By:
---------------------------------
Peter Mann
Title:
---------------------------
GALEN PARTNERS, L.P.
By: BGW Partners L.P.
Its: General Partner
By:
---------------------------------
William R. Grant
General Partner
GALEN PARTNERS INTERNATIONAL, L.P.
By: BGW Partners L.P.
Its: General Partner
By:
---------------------------------
William R. Grant
General Partner
11
<PAGE>
VECTOR LATER-STAGE EQUITY FUND II, L.P.
By: Vector Fund Management II, L.L.C.,
Its: General Partner
By:
---------------------------------
Ranjan Lal
Managing Director
VECTOR LATER-STAGE EQUITY FUND, L.P.
By: Vector Fund Management, L.P.
Its: General Partner
By:
---------------------------------
Ranjan Lal
Managing Director
12
<PAGE>
EXHIBIT A
IRREVOCABLE STOCK POWER
-----------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________ ________ (___) Shares of the common stock of InfoCure
Corporation, a Delaware corporation ("InfoCure") standing in the undersigned's
name on the books of InfoCure represented by Certificate No. ___ herewith, and
does hereby irrevocably constitute and appoint any officer of InfoCure attorney
to transfer the said stock on the books of InfoCure with full power of
substitution in the premises.
Dated __________, 199___.
_________________________________
(Medallion Signature Guaranty)
- --------------------------------------------
The Signature(s) Should Be Guaranteed By
An Eligible Guarantor Institution (Banks,
Stockbrokers, Savings And Loan
Associations And Credit Unions With
Membership In An Approved Signature
Guarantee Medallion Program), Pursuant To
SEC Rule 17 Ad-15.
13
<PAGE>
EXHIBIT B
ESCROW ALLOCATIONS AMONG PRINCIPAL SHAREHOLDERS
-----------------------------------------------
Principal Shareholders Escrow Percentage
---------------------- -----------------
Total 100%
14
<PAGE>
APPENDIX C
----------
VOTING AGREEMENT
----------------
THIS VOTING AGREEMENT is made and entered into as of September ___, 1999
("Voting Agreement"), by and between InfoCure Corporation, a Delaware
corporation ("InfoCure") and the party identified on the signature page hereto
("Securityholder").
RECITALS:
A. Datamedic Holding Corp., a Delaware corporation ("Datamedic"), InfoCure
Systems, Inc., a Georgia corporation ("ISI"), InfoCure and certain principal
shareholders of Datamedic have entered into an Agreement and Plan of Merger
dated of even date hereof (the "Merger Agreement"), which provides, among other
things, that Datamedic shall be merged (the "Merger") with and into ISI pursuant
to the terms and conditions thereof;
B. As an essential condition and inducement to InfoCure to enter into the
Merger Agreement and in consideration therefor, Securityholder and InfoCure have
agreed to enter into this Voting Agreement;
C. Capitalized terms used and not defined herein shall have the meaning
set forth in the Merger Agreement; and
D. As of the date hereof, the Securityholder owns of record and
beneficially the shares of Company Capital Stock or may, subsequent to the date
hereof and prior to the consummation of the Merger, acquire shares of Company
Capital Stock by virtue of Options, Warrants or Convertible Debentures that may
be owned by Securityholder as of the date hereof (as defined and as disclosed
with respect to such Securityholder in the Merger Agreement and Schedule 3.3.
thereto) ("Datamedic Stock") and desires to enter into this Agreement with
respect to such shares of Datamedic Stock.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, the parties hereto
agree as follows:
ARTICLE I
1. Voting of Shares.
----------------
1.1 Voting Agreement. Securityholder hereby agrees to (i) appear in
----------------
person or by proxy, or cause the holder of record on any applicable record date
(the "Record Holder") to appear for the purpose of obtaining a quorum at any
annual or special meeting of Securityholders of Datamedic and at any adjournment
thereof at which matters relating to the Merger, the Merger Agreement or any
transaction contemplated thereby are considered and (ii) vote, or cause the
Record Holder to vote, in person or by proxy, all of the shares of the Datamedic
Stock owned by Securityholder, or with respect to which such Securityholder has
or shares voting power or control, and all of the shares of Datamedic Stock
which shall, or with respect to which voting power or control shall, hereafter
be acquired by Securityholder (collectively the "Shares") in favor of the
Merger, the Merger Agreement and the transactions contemplated by the Merger
<PAGE>
Agreement. In the event written consents are solicited or otherwise sought from
Securityholders of Datamedic with respect to approval or adoption of the Merger
Agreement, with respect to the approval of the Merger or with respect to any of
the other actions contemplated by the Merger Agreement, Securityholder shall
(unless otherwise directed by InfoCure) execute, or cause the Record Holder to
execute, with respect to all Shares, a written consent or written consents to
such proposed action.
1.2 Further Assurances. Securityholder shall perform such further acts
------------------
and execute such further documents and instruments as may reasonably be required
to vest in InfoCure and ISI the power to carry out and give effect to the
provisions of this Voting Agreement.
1.3 No Ownership Interest. Nothing contained in this Voting Agreement
---------------------
shall be deemed to vest in InfoCure any direct or indirect ownership or
incidence of ownership of or with respect to any Shares. All rights, ownership
and economic benefits of and relating to the Shares shall remain and belong to
Securityholder, and InfoCure shall have no authority to manage, direct,
superintend, restrict, regulate, govern, or administer any of the policies or
operations of Datamedic or exercise any power or authority to direct
Securityholder in the voting of any of the Shares, except as otherwise provided
herein, or the performance of Securityholder's duties or responsibilities as a
Securityholder of Datamedic.
1.4 Documents Delivered. Securityholder acknowledges receipt of copies of
-------------------
the following documents:
A. The Merger Agreement and all Exhibits and Schedules thereto; and
B. The InfoCure SEC Reports referenced in Section 4.5 of the Merger
Agreement.
1.5 No Inconsistent Agreements. Securityholder hereby covenants and
--------------------------
agrees that, except as contemplated by this Voting Agreement and the Merger
Agreement, the Securityholder (i) has not entered, and shall not enter at any
time while this Voting Agreement remains in effect, into any voting agreement
and (ii) has not granted, and shall not grant at any time while this Voting
Agreement remains in effect, a proxy or power of attorney, in either case which
is inconsistent with this Voting Agreement.
ARTICLE II
2. Transfer.
--------
2.1 Transfer of Title.
-----------------
A. Securityholder hereby covenants and agrees that Securityholder
will not, prior to the termination of this Voting Agreement, either directly or
indirectly, sell, assign, pledge, hypothecate, transfer, exchange, or dispose
("Transfer") of any Shares, Options, Warrants, Convertible Debentures or any
other securities or rights convertible into or exchangeable for shares of
Datamedic Stock, owned either directly or indirectly by
2
<PAGE>
Securityholder or with respect to which Securityholder has the power of
disposition, whether now or hereafter acquired without the prior written consent
of InfoCure, which consent shall not be unreasonably withheld or delayed;
provided that nothing contained herein will be deemed to restrict the exercise
of Options or Warrants or conversion of Convertible Debentures; and provided
further that the foregoing requirements shall not prohibit any Transfer to any
person or entity where as a pre-condition to such Transfer the transferee agrees
to be bound by all of the terms and conditions of this Voting Agreement and
delivers a duty executed copy of this Voting Agreement to InfoCure to evidence
such agreement.
B. Securityholder hereby agrees and consents to the entry of stop
transfer instructions by Datamedic against the transfer of any Shares consistent
with the terms of Section 2.1.A hereof.
ARTICLE III
3. Representations and Warranties of Securityholder. Securityholder hereby
------------------------------------------------
represents and warrants to InfoCure as follows:
3.1 Authority Relative to This Agreement. Securityholder is competent to
------------------------------------
execute and deliver this Voting Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Voting Agreement
has been duly and validly executed and delivered by Securityholder and assuming
the due authorization, execution and delivery by InfoCure, constitutes a legal,
valid and binding obligation of Securityholder, enforceable against
Securityholder in accordance with its terms.
3.2 No Conflict. The execution and delivery of this Voting Agreement by
-----------
Securityholder does not, and the performance of this Voting Agreement by
Securityholder shall not, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under
any material agreement, to which Securityholder is a party or by which
Securityholder or the Shares, Options, Warrants or Convertible Debentures are
bound or affected.
3.3 Title to the Shares. Except as set forth on Schedule 3.3 of the
-------------------
Merger Agreement, the Shares, Options, Warrants and Convertible Debentures held
by Securityholder are owned free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Securityholder's voting rights, charges and other encumbrances of any nature
whatsoever, and Securityholder has not appointed or granted any proxy, which
appointment or grant remains effective, with respect to the Shares (other than
under this Voting Agreement).
ARTICLE IV
4. Miscellaneous.
-------------
4.1 No Solicitation. From the date hereof until the Effective Time or, if
---------------
earlier, the termination of the Merger Agreement, Securityholder shall not
(whether directly or indirectly
3
<PAGE>
through advisors, agents or other intermediaries) (i) solicit, initiate or
encourage any Company Competing Transaction or (ii) engage in discussions or
negotiations with, or disclose any non-public information relating to Datamedic
or its subsidiaries to any person that has indicated an interest in pursuing a
Company Competing Transaction or has advised Securityholder, or to its
knowledge, Datamedic or any other Securityholder of Datamedic, that such person
is interested in pursuing a Company Competing Transaction unless the Board of
Directors of Datamedic receives an opinion of counsel that the Board's fiduciary
duties under applicable law require it to do so and such Securityholder is a
Director of Datamedic.
4.2 Termination. This Agreement shall terminate upon the earliest to
-----------
occur of (i) the termination of the Merger Agreement in accordance with its
terms or (ii) the Effective Time. Upon such termination, no party shall have
any further obligations or liabilities hereunder, provided that no such
termination shall relieve any party from liability for any breach of this Voting
Agreement prior to such termination.
4.3 Enforcement of Agreement. The parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Voting
Agreement were not performed in accordance with its specified terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Voting Agreement and
to specific performance of the terms and provisions hereof in addition to any
other remedy to which they are entitled at law or in equity.
4.4 Successors and Affiliates. This Voting Agreement shall inure to the
-------------------------
benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives and permitted assigns. If Securityholder shall at
any time hereafter acquire ownership of, or voting power with respect to, any
additional Shares in any manner, whether by the exercise of any Options or
Warrants, the conversion of any Convertible Debentures, or the exercise of any
securities or rights convertible into or exchangeable for shares of Datamedic
Stock, by operation of law or otherwise, such Shares shall be held subject to
all of the terms and provisions of this Voting Agreement. Without limiting the
foregoing, Securityholder specifically agrees that the obligations of
Securityholder hereunder shall not be terminated by operation of law, whether by
death or incapacity of Securityholder or otherwise.
4.5 Entire Agreement. This Voting Agreement together with the Merger
----------------
Agreement and Affiliate Agreement, in the form attached as Exhibit C to the
---------
Merger Agreement, if and to the extent entered into by Securityholder and
InfoCure, constitutes the entire agreement among InfoCure and Securityholder
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, among InfoCure and Securityholder
with respect to the subject matter hereof.
4.6 Captions and Counterparts. The captions in this Voting Agreement are
-------------------------
for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Voting Agreement. This
Voting Agreement may be executed in several counterparts, each of which shall
constitute one and the same instrument.
4
<PAGE>
4.7 Amendment. This Voting Agreement may not be amended except by an
---------
instrument in writing signed by the parties hereto.
4.8 Waivers. Except as provided in this Voting Agreement, no action taken
-------
pursuant to this Voting Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Voting Agreement. The
waiver by any party hereto of a breach of any provision hereunder shall not
operate or be construed as a wavier of any prior or subsequent breach of the
same or any other provision hereunder.
4.9 Severability. If any term or other provision of this Voting Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Voting Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Voting Agreement so
as to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in a mutually acceptable manner in
order that the terms of this Voting Agreement remain as originally contemplated
to the fullest extent possible.
4.10 Notices. All notices and other communications given or made pursuant
-------
hereto shall be in writing and shall be deemed to have been duty given or made
and shall be effective upon receipt, if delivered personally, upon receipt of a
transmission confirmation if sent by facsimile (with a confirming copy sent by
overnight courier) and on the next business day if sent by Federal Express,
United Parcel Service, Express Mail or other reputable overnight courier to the
parties at the following addresses (or at such other address for a party as
shall be specified by notice):
If to Securityholder: At the address set forth in Datamedic's records.
With a copy to: Arthur I. Anderson, P.C.
McDermott, Will & Emery
28 State Street
Boston, Massachusetts 02109
Telecopy No.: (617) 535-3800
B. Company: Datamedic Holding Corp.
95 Sawyer Road
Waltham, Massachusetts 02453
Attention: President
Telecopy No.: (781) 642-6593
5
<PAGE>
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: John R. Pomerance, Esq.
Telecopy No.: (617) 542-2241
C. InfoCure: InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Richard E. Perlman
Telecopy No.: (770) 857-1300
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.
Telecopy No.: (404) 365-9532
4.11 Governing Law. This Voting Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
4.12 Officers and Directors. No person who is or becomes (during the term
----------------------
hereof) a director or officer of Datamedic makes any agreement or understanding
herein in his or her capacity as such director or officer, and nothing herein
will limit or affect, or give rise to any liability to Securityholder by virtue
of, any actions taken by any Securityholder in Securityholder's capacity as an
officer or director of or in exercising his rights under the Merger Agreement.
4.13 Interpretation. The parties have participated jointly in the
--------------
negotiation of this Voting Agreement. In the event that an ambiguity or
question of intent or interpretation arises, this Voting Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of the provisions of this Voting Agreement.
[Remainder of Page Intentionally Left Blank]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Voting
Agreement to be duly executed as of the date first written above.
INFOCURE:
InfoCure Corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SECURITYHOLDER:
----------------------------------------
Name of Securityholder
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
7
<PAGE>
APPENDIX D
----------
DATAMEDIC HOLDING CORP.
TERMS, RIGHTS, PREFERENCES AND PRIVILEGES OF
DATAMEDIC HOLDING CORP. PREFERRED STOCK
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is 13,700,000 shares, consisting of 8,500,000
shares of Common Stock, par value $.10 per share, and 5,200,000 shares of
Preferred Stock, par value $.10 per share (the "Preferred Stock") of which (i)
458,157 shares have been designated as Series A Convertible Preferred Stock, par
value $.10 per share ( the "Series A Preferred Stock"), (ii) 29,412 shares have
been designated as Series B-1 Convertible Preferred Stock, par value $.10 per
share (the "Series B-1 Preferred Stock"), (iii) 14,286 shares have been
designated as Series B-2 Convertible Preferred Stock, par value $.10 per share
(the "Series B-2 Preferred Stock"), (iv) 108,333 shares have been designated as
Series B-3 Convertible Preferred Stock, par value $.10 per share (the "Series B-
3 Preferred Stock"), (v) 129,450 shares have been designated as Series B-4
Convertible Preferred Stock, par value $.10 per share (the "Series B-4 Preferred
Stock"), (vi) 30,938 shares have been designated as Series B-5 Convertible
Preferred Stock, par value $.10 per share (the "Series B-5 Preferred Stock"),
(vii) 3,200,000 shares have been designated as Series C Convertible Preferred
Stock, par value $.10 per share (the Series C Preferred Stock") and (viii)
1,229,424 shares are shares of undesignated Preferred Stock, par value $.10 per
share.
Preferred Stock. The designations, powers, preferences, rights,
---------------
qualifications, limitations, restrictions, and the relative, participating,
optional or other special rights of the Preferred Stock, and the express grant
of authority to the Board of Directors of the Corporation (the "Board of
Directors") to fix by Resolution the designations, powers, preferences, rights,
qualifications, limitations, restrictions, and the relative, participating,
optional or other special rights in respect of each share of Preferred Stock,
including the number of shares of any series, which are not fixed by this
Amended and Restated Certificate of Incorporation, are as follows:
Subject to other terms and provisions of this Amended and Restated
Certificate of Incorporation, and in addition to the Series A Preferred Stock,
the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, the Series B-3
Preferred Stock, the Series B-4 Preferred Stock, the Series B-5 Preferred Stock
and the Series C Preferred Stock, the Board of Directors is hereby authorized
from time to time to provide by Resolution for the issuance of shares of
Preferred Stock in one or more series not exceeding the aggregate number of
shares of Preferred Stock authorized by this Amended and Restated Certificate of
Incorporation, as amended from time to time, and to determine with respect to
each such series, the number of shares in such series, the voting powers, if any
(which voting powers if granted may be full or limited), designations, powers,
preferences, qualifications, limitations, restrictions and the relative,
participating, optional or other special rights, if any, appertaining thereto
including, without limiting the generality of the foregoing, the voting rights
appertaining to shares of Preferred Stock of any Series (which may be one vote
per share or a fraction or multiple of a vote per share, and which may be
applicable generally or only upon the happening and continuance of stated events
or
<PAGE>
conditions), the rate of dividend to which holders of Preferred Stock of any
series may be entitled (which may be cumulative or noncumulative), the rights of
holders of Preferred Stock of any series in the event of liquidation,
dissolution or winding up of the affairs of the Corporation, the rights, if any,
of holders of Preferred Stock of any series to convert or exchange such shares
of Preferred Stock of such series for shares of any other class of capital stock
(including the determination of the price or prices or the rate or rates
applicable to such rights to convert or exchange and the adjustment thereof, the
time or times during which the right to convert or exchange shall be applicable
and the time or times during which a particular price or rate shall be
applicable) and the rights, if any, of holders of Preferred Stock of any series
to require the Corporation to redeem such Preferred Stock (including the
determination of the price or prices applicable to such redemption, the time or
times during which the right to redeem such series shall be applicable and the
time or times during which a particular price shall be applicable).
Before the Corporation shall issue any shares of Preferred Stock of any
series so designed by Resolution or resolutions of the Board of Directors, a
certificate setting forth a copy of the Resolution or resolutions of the Board
of Directors, fixing the voting and other powers, designations, preferences,
qualifications, limitations, restrictions and the relative, participating,
optional or other special rights, if any, appertaining to the shares of
Preferred Stock of such series and the number of shares of Preferred Stock of
such series authorized by the Board of Directors to be issued shall be executed,
acknowledged, filed and recorded to the extent and in the manner prescribed by
the laws of the State of Delaware.
Designated Preferred Stock. The powers, designations, preferences,
--------------------------
qualifications, limitations, restrictions and the relative, participating,
optional or other special rights of the Series A Preferred Stock, the Series B-1
Preferred Stock, the Series B-2 Preferred Stock, the Series B-3 Preferred Stock,
the Series B-4 Preferred Stock, the Series B-5 Preferred Stock, and the Series C
Preferred Stock are as follows. As used in this Article Fourth, the term
"Designated Preferred Stock" used without reference to any particular series of
Preferred Stock means the shares of Series A Preferred Stock, Series B-1
Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series
B-4 Preferred Stock, Series B-5 Preferred Stock and Series C Preferred Stock.
1. Dividends.
---------
(a) The holders of Designated Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation (the
"Board"), and as otherwise provided in this Amended and Restated Certificate of
Incorporation, out of funds legally available therefor, a dividend (the
"Accruing Dividend") at the annual rate of 7.5% (12% from and after the
Redemption Date as defined below) of the applicable Base Amount (as defined
below) of each share of Designated Preferred Stock from and including the date
of issuance of such share to and including the day on which such share ceases to
be outstanding. The Accruing Dividend shall accrue from day to day, whether or
not earned or declared, on each issued and outstanding share of Designated
Preferred Stock, and shall be cumulative. The date on which the Corporation
initially issues any share of Designated Preferred Stock will be deemed to be
its date of issuance regardless of the number of times transfer of such share is
made on the stock records
2
<PAGE>
of the Corporation and regardless of the number of certificates which may be
issued to evidence such share.
(b) If declared by the Board, the Accruing Dividend on each share of
Designated Preferred Stock shall be paid on each December 31, commencing
December 31, 1997 (the "Dividend Reference Dates"), while such share is
outstanding, and if not declared, the Accruing Dividend and Matching Dividend,
if any, shall be due and payable upon redemption, liquidation or optional
conversion, but not on mandatory conversion.
(c) The "Base Amount" of any share of Designated Preferred Stock as of a
particular date shall be an amount equal to the Original Issue Price (as defined
below) of such share (appropriately adjusted in the event of any stock dividend,
stock split or combination, or similar recapitalization). The Original Issue
Price of the Series A Preferred Stock, the Series B-1 Preferred Stock, the
Series B-2 Preferred Stock, the Series B-3 Preferred Stock, the Series B-4
Preferred Stock, the Series B-5 Preferred Stock and the Series C Preferred
Stock shall be $16.37, $17.00, $14.00, $12.00, $15.45 and $16.37 and $4.734330,
respectively.
(d) The Corporation shall not declare or pay any dividends (other than a
dividend payable on shares of Common Stock in shares of Common Stock) or other
distributions (as defined below) on shares of Common Stock until the holders of
Designated Preferred Stock then outstanding shall have first received, or
simultaneously receive, a cash dividend on each outstanding share of Designated
Preferred Stock in an amount at least equal to (i) all accrued but unpaid
Accruing Dividends thereon, plus (ii) an amount (the "Matching Dividend") equal
to the product of (A) the per share amount, if any of the dividends or other
distributions to be declared, paid or set aside for the Common Stock,
multiplied by (B) the number of whole shares of Common Stock into which such
share of Preferred Stock is then convertible.
(e) The Corporation shall not declare or pay any dividend or other
distribution on any shares of Designated Preferred Stock unless a dividend or
other distribution of the same kind and per share amount is simultaneously
declared or paid, as the case may be, on all outstanding shares of Designated
Preferred Stock, provided that if and to the extent the total dividend is less
than the aggregate Accruing Dividend on all outstanding shares of Designated
Preferred Stock, it shall be paid pro rata based on the amount of accrued and
unpaid Accruing Dividends on such shares of Designated Preferred Stock.
(f) For purposes of this Section 1, the term "distribution" shall mean the
transfer of cash or property without consideration, whether by way of dividend
or otherwise, payable other than in Common Stock of the Corporation, or the
purchase or redemption of shares of the Corporation (other than (i) repurchases
of Common Stock held by employees, directors or consultants of the Corporation
upon termination of their employment or services pursuant to agreements
providing for such repurchase at a price equal to the original issue price of
such shares, (2) redemptions approved by the Board (including a majority of the
directors elected by the holders of Designated Preferred Stock), or (3)
redemptions in liquidation or dissolution of the Corporation) for cash or
property, including any such transfer, purchase or redemption by a subsidiary of
the Corporation.
3
<PAGE>
2. Liquidation. Dissolution or Winding Up; Certain Mergers, Consolidations
-----------------------------------------------------------------------
and Asset Sales.
---------------
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of shares of Designated Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, after and subject to
the payment in full of all amounts required to be distributed to the holders of
any other class or series of stock of the Corporation ranking on liquidation
prior and in preference to the Designated Preferred Stock (the "Senior Preferred
Stock") but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the
Designated Preferred Stock (collectively, the "Junior Stock") by reason of their
ownership thereof an amount per share equal to the greater of (i) the Base
Amount, or (ii) such amount per share as would have been payable had each such
share been converted into Common Stock pursuant to Section 4 hereof immediately
prior to such liquidation, dissolution or winding up. If upon any such
liquidation, dissolution or winding up of the Corporation the remaining assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Designated Preferred Stock the full
amount to which they shall be entitled, the holders of shares of Designated
Preferred Stock and any class or series of stock ranking on liquidation on a
parity with the Designated Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full. If and to the extent that the amount
paid to the holders of Designated Preferred Stock in accordance with the
immediately preceding sentence is less than an amount equal to the aggregate
Base Amount for all holders of Designated Preferred Stock plus all accrued but
unpaid Accruing Dividends, Matching Dividends and other dividends on the
Designated Preferred Stock (any such difference being herein referred to as the
"Unpaid Dividend Amount"), the holders of shares of Designated Preferred Stock
shall next be entitled to receive their pro rata (based upon the aggregate
amount of accrued and unpaid Accruing Dividends, Matching Dividends and other
dividends due to such holder of Designated Preferred Stock) share of the Unpaid
Dividend Amount. If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of
Designated Preferred Stock their respective full pro rata share of the Unpaid
Dividend Amount, the holders of shares of Designated Preferred Stock shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the respective amounts which would otherwise be payable in
respect of the shares held by them upon such distribution if the full Unpaid
Dividend Amount were paid in full.
(b) After the payment of all preferential amounts required to be paid to
the holders of Senior Preferred Stock, the Designated Preferred Stock and any
other class or series of stock of the Corporation ranking on liquidation on a
parity with the Designated Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock
4
<PAGE>
then outstanding shall be entitled to receive the remaining assets and funds of
the Corporation available for distribution to its stockholders.
(c) In the event of any merger or consolidation of the Corporation into or
with another corporation (except one in which the holders of capital stock of
the Corporation immediately prior to such merger or consolidation continue to
hold at least a majority of the voting power of the capital stock of the
surviving corporation) or the sale of all or substantially all the assets of the
Corporation, if the holders of at least a majority of the then outstanding
shares of Designated Preferred Stock so elect by giving written notice thereof
to the Corporation at least ten (10) days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation), or
all consideration payable to the Corporation, together with all other available
assets of the Corporation (in the case of an asset sale), shall be distributed
to the holders of capital stock of the Corporation in accordance with
Subsections 2(a) and 2(b) above. The Corporation shall promptly provide to the
holders of shares of Designated Preferred Stock such information concerning the
terms of such merger, consolidation or asset sale and the value of the assets of
the Corporation as may reasonably be requested by the holders of Designated
Preferred Stock in order to assist them in determining whether to make such an
election. If the holders of the Designated Preferred Stock make such an
election, the Corporation shall use its best efforts to amend the agreement or
plan of merger or consolidation to adjust the rate at which the shares of
capital stock of the Corporation are converted into or exchanged for cash, new
securities or other property to give effect to such election. The amount deemed
distributed to the holders of Designated Preferred Stock upon any such merger or
consolidation shall be the cash or the value of the property, rights or
securities distributed to such holders by the acquiring person, firm or other
entity. The value of such property, rights or other securities shall be
determined in good faith by the Board of Directors of the Corporation. If no
notice of the election permitted by this Subsection (c) is given, the provisions
of Subsection 4(i) shall apply.
3. Voting.
------
(a) Each holder of outstanding shares of Designated Preferred Stock shall
be entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Designated Preferred Stock held by such holder
are then convertible (as adjusted from time to time pursuant to Section 4
hereof) at each meeting of stockholders of the Corporation (and written actions
of stockholders in lieu of meetings) with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of this Section 3
or by the provisions establishing any other series of Preferred Stock, holders
of shares of Designated Preferred Stock and of any other outstanding series of
Preferred Stock shall vote together with the holders of Common Stock as a single
class.
(b) The Corporation shall not, without the consent or affirmative vote of
the holders of two-thirds (2/3) of the then outstanding shares of a series of
Designated Preferred Stock, given in writing or by vote at a meeting, consenting
or voting (as the case may be) separately as a class:
5
<PAGE>
(i) Amend, alter or repeal the preferences, special rights or other
powers of such series of Designated Preferred Stock so as to affect
adversely such series; or
(ii) Increase the number of authorized shares of such series of
Designated Preferred Stock or issue any additional shares of such series of
Preferred Stock other than shares of Series C Preferred Stock to be issued
pursuant to the December Warrants (as defined below).
(c) The Corporation shall not, without the written consent or affirmative
vote of the holders of at least two-thirds (2/3) of the then outstanding shares
of Designated Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) together as a single class:
(i) Authorize any shares of capital stock with preference or
priority over or on a parity with the Designated Preferred Stock as to the
right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation;
(ii) Organize a subsidiary of the Corporation all of the stock of
which is not owned by the Corporation or permit the sale by any subsidiary
of the Corporation of its securities to any person other than the
Corporation;
(iii) Amend the Corporation's Certificate of Incorporation or By-
Laws;
(iv) Pay any dividends other than on the shares of the Designated
Preferred Stock; or
(v) liquidate, dissolve or wind-up.
(d) For so long as ten percent (10%) of the shares of the Designated
Preferred Stock remain outstanding, the Corporation shall not, without the
written consent or affirmative vote of the holders of at least two-thirds of the
then outstanding shares of Designated Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) together as a
single class:
(i) Permit any subsidiary to consolidate or merge into or with or
sell or transfer all or substantially all its assets, except that any
subsidiary may (a) consolidate or merge into or with or sell or transfer
assets to any other subsidiary, or (b) merge into or sell or transfer
assets to the Company.
(ii) Merge or consolidate into or with any other corporation or
entity, except that neither such written consent nor affirmative vote shall
be required in the case of a Qualified Sale as defined in Section 5 below;
(iii) Sell all or substantially all of the assets of the Corporation,
except that neither
6
<PAGE>
such written consent nor affirmative vote shall be required in the case of
a Qualified Sale as defined in Section 5 below;
(iv) Redeem or repurchase any shares of the Corporation, other than
(a) repurchases of Common Stock held by employees or directors of, or
consultants to, the Company upon termination of their employment or
services pursuant to agreements providing for such repurchases at the
original issue price or (b) pursuant to repurchases approved by a majority
the Board of Directors of the Company including the affirmative vote of
majority of the Directors of the Corporation designated by holders of the
Designated Preferred Stock;
(v) Create or incur, or permit any subsidiary to create or incur,
indebtedness exceeding an aggregate principal amount $5,000,000;
(vi) Make, or permit any subsidiary to make, a material change in
the nature of its business; or
(vii) increase any compensation (including salary, bonuses and other
forms of current compensation) payable to any employee, officer or director
of the Company or any of its subsidiaries, other than in the ordinary
course of business unless approved by the Board of Directors or the
compensation committee of the Board of Directors.
(e) The number of authorized shares of the Common Stock may be increased or
decreased (but not below the number of shares of the Common Stock then
outstanding) by written consent or affirmative vote of the holders of at least a
majority of the then outstanding shares of Common Stock.
4. Optional Conversion. The holders of the Designated Preferred Stock
-------------------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Designated Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time and from time to
time, and without the payment of additional consideration by the holder thereof,
into (i) such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the Base Amount of such share by the Applicable
Conversion Price (as defined below) in effect at the time of conversion and (ii)
cash or, at the Corporation's election, additional shares of the Common Stock
(valued at the fair market value per share at the time of conversion as
determined in good faith by the Board), equal to all accrued but unpaid Accruing
Dividends thereon plus Matching Dividends or other dividends thereon that have
been declared or accrued but are unpaid. The Applicable Conversion Price for
the Series A Preferred Stock, the Series B-1 Preferred Stock, the Series B-2
Preferred Stock, the Series B-3 Preferred Stock, the Series B-4 Preferred Stock,
the Series B-5 Preferred Stock and the Series C Preferred Stock shall be
$4.734330 for each such Series, subject to adjustment as provided below.
(b) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon
7
<PAGE>
conversion of the Designated Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Applicable Conversion
Price for such series of Designated Preferred Stock.
(c) Mechanics of Conversion.
-----------------------
(i) In order for a holder of Designated Preferred Stock to convert
shares of Designated Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Designated Preferred Stock, at the office of the transfer agent for the
Designated Preferred Stock (or at the principal office of the Corporation
if the Corporation serves as its own transfer agent), together with written
notice that such holder elects to convert all or any number of the shares
of the Designated Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of
the nominees in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. If required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
a written instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed by the registered holder or his or its
attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
(the "Conversion Date"). The Corporation shall, as soon as practicable
after the Conversion Date, issue and deliver at such office to such holder
of Designated Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Designated
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion
of the Designated Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding Designated Preferred Stock. Before taking
any action which would cause an adjustment reducing the Applicable
Conversion Price of any series of Designated Preferred Stock below the then
par value of the shares of Common Stock issuable upon conversion of any
such series of Designated Preferred Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Applicable Conversion
Price.
(iii) All shares of Designated Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor. Any shares
of Designated Preferred Stock so converted shall be retired and canceled
and shall not be reissued, and the Corporation (without the need for
stockholder action) may from time to time take such
8
<PAGE>
appropriate action as may be necessary to reduce the authorized shares of
such series of Designated Preferred Stock accordingly.
(iv) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Designated Preferred Stock
pursuant to this Section 4. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock in a name other than
that in which the shares of Designated Preferred Stock so converted were
registered, and no such issuance or delivery shall be made unless and until
the person or entity requesting such issuance has paid to the Corporation
the amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(d) Adjustments to Applicable Conversion Price for Diluting Issues.
--------------------------------------------------------------
(i) Special Definitions. For the purposes of this Subsection 4(d),
-------------------
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in Subsection
4(d)(i)(D)(IV) below and the warrants described in Subsection
4(d)(i)(D)(V) below.
(B) "Original Issue Date" shall mean the date on which a share
of Designated Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock issued or issuable:
(I) Upon conversion of shares of Designated Preferred
Stock of the Corporation outstanding from time to time;
(II) As a dividend or distribution on Designated
Preferred Stock;
(III) By reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock that is covered by
Subsection 4(e), 4(f) 4(g) or 4(h) below;
9
<PAGE>
(IV) To employees, directors or consultants of the
Corporation pursuant to a plan adopted by the Board of
Directors of the Corporation;
(V) Upon exercise of the warrants issued pursuant to
that certain Term Loan Agreement dated as of July 1, 1997 among
the Corporation, Datamedic Corporation, Datamedic Financial
Corp., Datamedic Acquisition Corp., Clinical Information
Advantages, Inc, Galen Partners, L.P., as agent, and the
lenders named therein;
(VI) Upon exercise of the warrants issued to Bessemer
Venture Partners IV, L.P., Fidelity Ventures, Ltd. and Galen
Partners, L.P. in connection with the Bridge Loan dated as of
November 4, 1997; or
(VII) Upon exercise of the warrants (the "December
Warrants") to be issued to Bessemer Venture Partners IV, L.P.
and Fidelity Ventures Ltd. in connection with the demand
promissory notes dated December 15, 1997 issued to such persons
under a letter dated December 15, 1997 from the Corporation to
such persons.
(ii) No Adjustment of Applicable Conversion Price. No adjustment in
--------------------------------------------
the number of shares of Common Stock into which the shares of any series of
Designated Preferred Stock is convertible shall be made by adjustment in
the Applicable Conversion Price thereof (a) unless the consideration per
share (determined pursuant to Subsection 4(d)(v)) for an Additional Share
of Common Stock issued or deemed to be issued by the Corporation is less
than the Applicable Conversion Price for such series in effect on the date
of, and immediately prior to, the issue of such Additional Shares, or (b)
if prior to such issuance, the Corporation receives written notice from the
holders of at least two-thirds of the then outstanding shares of such
series of Designated Preferred Stock agreeing that no such adjustment shall
be made as the result of the issuance of Additional Shares of Common Stock.
(iii) Issues of Securities Deemed Issue of Additional Shares of
---------------------------------------------------------
Common Stock. If the Corporation at any time or from time to time after
------------
the date hereof shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares of Common Stock (as set forth in the
instrument relating thereto without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Subsection
4(d)(v) hereof) of such Additional Shares of Common Stock would be less
than the Applicable Conversion Price in effect on the date
10
<PAGE>
of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Applicable Conversion Price
shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Applicable Conversion Price
computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase becoming effective, be
recomputed to reflect such increase insofar as it affects such
Options or the rights of conversion or exchange under such
Convertible Securities;
(C) Upon the expiration of termination of any unexercised
Option or rights of conversion or exchange under any Convertible
Securities which have not been exercised, the Applicable Conversion
Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto) and any subsequent
adjustments based thereon shall, upon such expiration, be recomputed
as if the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon such exercise or
exchange and the consideration received therefor were the
consideration actually received by the Corporation for the issue and
upon such exercise or exchange;
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a
change resulting from the anti dilution provisions thereof, the
Applicable Conversion Price then in effect shall forthwith be
readjusted to such Applicable Conversion Price as would have been
obtained had the adjustment which was made upon the issuance of such
Option or Convertible Security not exercised or converted prior to
such change been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B) or (D) above shall
have the effect of increasing the Applicable Conversion Price of any
series of Designated Preferred Stock to an amount which exceeds the
lower of (i) the Applicable Conversion Price of such series on the
original adjustment date, or (ii) the Applicable Conversion Price of
such series that would have resulted from any issuances of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date.
11
<PAGE>
Notwithstanding the foregoing, if a record date for the determination
of holders of any class of securities entitled to receive any such Option
or Convertible Securities shall have been fixed and such Options or
Convertible Securities are not issued at the date fixed therefor, the
Applicable Conversion Price shall be recomputed accordingly as of the close
of business on such record date.
(iv) Adjustment of Applicable Conversion Price Upon Issuance of
----------------------------------------------------------
Additional Shares of Common Stock. In the event the Corporation shall at
---------------------------------
any time after the date hereof issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant
to Subsection 4(d)(iii), but excluding shares issued as a dividend or
distribution as provided in Subsection 4(f) or upon a stock split or
combination as provided in Subsection 4(e)), without consideration or for a
consideration per share less than the Applicable Conversion Price of any
series of Designated Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event, such Applicable
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Applicable
Conversion Price by a fraction, (A) the numerator of which shall be (1)
the number of shares of Common Stock outstanding immediately prior to such
issue plus (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Corporation for the total
number of Additional Shares of Common Stock so issued would purchase at
such Applicable Conversion Price and (B) the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of such Additional Shares of Common Stock so issued
provided that, (i) for the purpose of this Subsection 4(d)(iv), all shares
of Common Stock issuable upon exercise or conversion of Designated
Preferred Stock, Options or Convertible Securities outstanding immediately
prior to such issue shall be deemed to be outstanding (other than shares
excluded from the definition of "Additional Shares of Common Stock" by
virtue of clause (IV) of Subsection 4(D)(i)(D)), and (ii) the number of
shares of Common Stock deemed issuable upon conversion of such outstanding
Designated Preferred Stock, Options and Convertible Securities shall not
give effect to any adjustments to the conversion price or conversion rate
of such Designated Preferred Stock, Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is
the subject of this calculation. Notwithstanding the foregoing,, the
Applicable Conversion Price shall not be so reduced at such time if the
amount of such reduction would be an amount less than $.05, but any such
amount shall be carried forward and reduction with respect thereto made at
the time of and together with any subsequent reduction which, together with
such amount and any other amount or amounts so carried forward, shall
aggregate $.05 or more.
(v) Determination of Consideration. For purposes of this
------------------------------
Subsection 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(A) Cash and Property: Such consideration shall:
-----------------
12
<PAGE>
(I) Insofar as it consists of cash, be computed at the
aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest or accrued
dividends;
(II) Insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of
Directors of the Corporation; and
(III) In the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as
provided in clauses (I) and (II) above, as determined in good
faith by the Board of Directors of the Corporation.
(B) Options and Convertible Securities. The consideration per
----------------------------------
share received by the Corporation for Additional Shares of Common
Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined
by dividing:
(x) The total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities; by
(y) The maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities.
(vi) Multiple Closing Dates. In the event the Corporation shall
----------------------
issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and
such issuance dates occur within a period of no more than 120 days, then
the Conversion Price shall be adjusted only once on account of such
issuances, with such adjustment to occur upon the final such issuance and
to give effect to all such issuances as if they occurred on the date of the
final such issuance.
(e) Adjustment for Stock Splits and Combinations. If the Corporation shall
--------------------------------------------
at any
13
<PAGE>
time or from time to time after the date hereof effect a subdivision of the
outstanding Common Stock, the Applicable Conversion Price for each series of
Designated Preferred Stock then in effect immediately before that subdivision
shall be proportionately decreased. If the Corporation shall at any time or from
time to time after the Original Issue Date effect a subdivision of any series of
Designated Preferred Stock, the Applicable Conversion Price for such series then
in effect immediately before that subdivision shall be proportionately
increased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Applicable Conversion Price for each series of Designated Preferred Stock then
in effect immediately before the combination shall be proportionately increased.
If the Corporation shall at any time or from time to time after the Original
Issue Date combine the outstanding shares of any series of Designated Preferred
Stock, the Applicable Conversion Price for such series then in effect
immediately before the combination shall be proportionately decreased. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event the
--------------------------------------------------
Corporation at any time, or from time to time after the date hereof shall make
or issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the Applicable Conversion
Price for each series of Designated Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such a record date, by
multiplying the Applicable Conversion Price for such series of Designated
Preferred Stock then in effect by a fraction:
(1) The numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and
(2) The denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Applicable Conversion Price for each series of Designated
Preferred Stock shall be recomputed accordingly as of the close of business on
such record date and thereafter the Applicable Conversion Price for such series
of Designated Preferred Stock shall be adjusted pursuant to this paragraph as of
the time of actual payment of such dividends or distributions; and provided
further, however, that no such adjustment shall be made to the Applicable
Conversion Price of any series of Designated Preferred Stock if the holders of
such series of Designated Preferred Stock simultaneously receive a dividend or
other distribution of shares of Common Stock in a number equal to the number of
shares of Common Stock as they would have received if all outstanding shares of
Designated Preferred Stock had been converted into Common Stock on the date of
such event.
14
<PAGE>
(g) Adjustments for Other Dividends and Distributions. In the event the
-------------------------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock then and in each
such event provision shall be made so that the holders of the Designated
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Designated Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application to all adjustments called for during such period
under this paragraph with respect to the rights of the holders of the Designated
Preferred Stock; and provided further, however, that no such adjustment shall be
made in respect of any series of Designated Preferred Stock if the holders of
such series of Designated Preferred Stock simultaneously receive a dividend or
other distribution of such securities in an amount equal to the amount of such
securities as they would have received if all outstanding shares of such series
of Designated Preferred Stock had been converted into Common Stock on the date
of such event.
(h) Adjustment for Reclassification, Exchange or Substitution. If the
---------------------------------------------------------
Common Stock issuable upon the conversion of the Designated Preferred Stock
shall be changed into the same or a different number of shares or any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below or a consolidation, merger or sale which is treated as
a liquidation by Subsection 2(c)), then and in each such event the holder of
each such share of Designated Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Designated Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. In case of any
--------------------------------------------
consolidation or merger of the Corporation with or into another corporation or
the sale of all or substantially all of the assets of the Corporation to another
corporation (other than a consolidation, merger or sale which is covered by
Subsection 2(c)), each share of Designated Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Designated Preferred Stock would have been
entitled upon such consolidation, merger or sale. In each such case,
appropriate adjustment (as determined in good faith by the Board of Directors of
the Corporation) shall be made in the application of the provisions in this
Section 4 set forth with respect to the rights and interest thereafter of the
holders of the Designated Preferred Stock, to the end that the provisions set
forth in this Section 4 (including provisions with respect to changes in and
other adjustments of the Applicable Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property
15
<PAGE>
thereafter deliverable upon the conversion of the Designated Preferred Stock.
(j) No Impairment: Purpose and Effect of Adjustments. The Corporation will
------------------------------------------------
not, by amendment of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Designated Preferred Stock against
impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each adjustment
-----------------------------
or readjustment of the Applicable Conversion Price of a series of Designated
Preferred Stock pursuant to this Section 4, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of such series of Designated Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Designated
Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Applicable Conversion Price then in effect for such series and (iii) the number
of shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of such series of Designated Preferred
Stock.
(l) Notice of Record Date. In the event:
---------------------
(i) That the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation;
(ii) That the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) Of any reclassification of the Common Stock of the Corporation
(other than a subdivision or combination of its outstanding shares of
Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another
corporation, or of the sale of all or substantially all of the assets of
the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at
the office of the transfer agent of the Designated Preferred Stock, and shall
cause to be mailed to the holders of the Designated Preferred Stock at their
last addresses as shown on the records of the Corporation or such transfer
agent, at least ten days prior to the date specified in (A) below or twenty days
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before the date specified in (B) below, a notice stating:
(A) The record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(B) The date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
5. Mandatory Conversion.
--------------------
(a) Upon the request of the holders of at least two-thirds (2/3) of the
outstanding Designated Preferred Stock acting as a single class or upon the
closing of the sale of shares of Common Stock in a public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, at a price to the public in excess of $11.83 per share (appropriately
adjusted for stock splits, stock dividends, stock combinations and similar
recapitalizations affecting the Common Stock) and resulting in at least
$20,000,000 of net proceeds to the Corporation or upon a sale of all or
substantially all of the assets of the Corporation or a merger or consolidation
with or into another corporation or other entity, in any such case at a price
per share in excess of $11.83 (appropriately adjusted for stock splits, stock
dividends, stock combinations and similar recapitalizations affecting the Common
Stock) where the consideration is cash or freely tradable, registrable
securities of a publicly traded entity (a "Qualified Sale"), (i) all
outstanding shares of Designated Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective conversion rate and
(ii) the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Designated Preferred Stock that had been
designated as Series A Preferred Stock, Series B-1 Preferred Stock, Series B-2
Preferred Stock, Series B-3 Preferred Stock, Series B-4 Preferred Stock, Series
B-5 Preferred Stock and Series C Preferred Stock. The date of any of the events
giving rise to automatic conversion of Designated Preferred Stock as described
above shall be referred to herein as the "Mandatory Conversion Date."
(b) All holders of record of shares of Designated Preferred Stock will be
given written notice of the Mandatory Conversion Date and the place designated
for mandatory conversion of all such shares of Designated Preferred Stock
pursuant to this Section 5. Such notice shall be sent by first class or
registered mail, postage prepaid, to each record holder of Designated Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Designated Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). Upon receipt of such notice, each holder of
shares of Designated Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 5. On
the Mandatory
17
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Conversion Date, all rights with respect to the Designated Preferred Stock so
converted, including the rights, if any, to receive notices and vote, will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Designated Preferred Stock has
been converted. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or by his or its attorney duly authorized in writing. As soon
as practicable after the Mandatory Conversion Date and the surrender of the
certificate or certificates for Designated Preferred Stock, the Corporation
shall cause to be issued and delivered to such holder, or on his or its written
order, a certificate or certificates for the number of full shares of Common
Stock issuable on such conversion in accordance with the provisions hereof and
cash as provided in Subsection 4(b) in respect of any fraction of a share of
Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Designated Preferred Stock which
are required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and canceled and the shares of Designated Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without the need for stockholder action) as may be necessary
to reduce the authorized Preferred Stock accordingly.
6. Mandatory Redemption.
--------------------
(a) On the fifth anniversary of the date hereof (the "Redemption Date"),
the Corporation shall, unless waived in writing by the holders of at least two-
thirds (2/3) of the outstanding shares of Designated Preferred Stock acting as a
single class, redeem all of the then issued and outstanding shares of the
Designated Preferred Stock at a price per share equal to the Base Amount
thereof, plus any Accruing Dividends thereon that have accrued and have not been
paid and any Matching Dividends or other dividends thereon that have been
declared or accrued but are unpaid thereon, against actual delivery to the
Corporation or its agent of the certificate(s) representing the shares to be
redeemed.
(b) If the funds of the Corporation legally available for redemption of the
Designated Preferred Stock on the Redemption Date are insufficient to redeem all
shares of Designated Preferred Stock required under this Section 6 to be
redeemed on such date, the holders of shares of Preferred Stock shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts which would be payable with respect to the number of
shares owned by them if the shares to be so redeemed on such Redemption Date
were redeemed in full. At any time thereafter when additional funds of the
Corporation become legally available for the redemption of Designated Preferred
Stock, such funds will be used, at the end of the next succeeding fiscal
quarter, to redeem the balance of the shares of Designated Preferred Stock which
the Corporation was theretofore obligated to redeem, ratably on the basis set
forth in the preceding sentence.
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(c) The Corporation shall provide notice of the redemption of Designated
Preferred Stock pursuant to this Section 6 specifying the time and place of
redemption and the redemption price, by first class or registered mail, postage
prepaid, to each holder of record of Designated Preferred Stock at the address
for such holder last shown on the records of the transfer agent therefor (or the
records of the Corporation, if it serves as its own transfer agent) not more
than 60 nor less than 30 days prior to the date on which such redemption is to
be made. If less than all Preferred Stock owned by such holder is then to be
redeemed, the notice will also specify the number of shares which are to be
redeemed. Upon mailing any such notice of redemption, the Corporation will
become obligated to redeem at the time of redemption specified therein all
Designated Preferred Stock specified therein (other than such shares of
Preferred Stock as are duly converted pursuant to Section 4 prior to the close
of business on the fifth full business day preceding a Redemption Date). In
case less than all Designated Preferred Stock represented by any certificate is
redeemed in a redemption pursuant to this Section 6, a new certificate will be
issued representing the unredeemed Designated Preferred Stock without cost to
the holder thereof.
(d) All shares of Designated Preferred Stock which shall have been
surrendered for redemption as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the date of redemption of such shares, except only the right of the holders
thereof to receive payment in exchange therefor. Any shares of Designated
Preferred Stock so redeemed shall be retired and canceled and shall not be
reissued, and the Corporation (without the need for stockholder action) may from
time to time take such appropriate action as may be necessary to reduce the
authorized shares of such series of Designated Preferred Stock accordingly.
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APPENDIX E
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DELAWARE GENERAL CORPORATION LAW
(S) 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S) 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one (1) or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264 of
this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than two thousand
(2,000) holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of (S)
251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S) 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
<PAGE>
(a) Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect thereof;
(b) Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than two thousand (2,000) holders;
(c) Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
(d) Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (S) 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than twenty (20) days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not constitute
such a demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within
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ten (10) days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228
or (S) 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten (10) days
thereafter, shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall included in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within twenty (20) days after
the date of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within ten
(10) days after such effective date; provided, however, that if such second
notice is sent more than twenty (20) days following the sending of the first
notice, such second notice need only be sent to each stockholder who is entitled
to appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to give
either notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than ten (10) days
prior to the date the notice is given, provided, that if the notice is given on
or after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within one hundred twenty (120) days after the effective date of the
merger or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within sixty (60) days
after the effective date of the merger or consolidation, any stockholder shall
have the right to withdraw
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such stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within one hundred twenty (120) days after the
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within ten (10) days after such stockholder's written request for
such a statement is received by the surviving or resulting corporation or within
ten (10) days after expiration of the period for delivery of demands for
appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within twenty (20) days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one (1) or more publications
at least one (1) week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior
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to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within sixty (60) days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
(8 Del. C. 1953, (S) 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, (S) 24; 57
Del. Laws, c. 148, (S)(S) 27-29; 59 Del. Laws, c. 106, (S) 12; 60 Del. Laws, c.
371, (S)(S) 3-12; 63 Del. Laws, c. 25, (S) 14;
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63 Del. Laws, c. 152, (S)(S) 1, 2; 64 Del. Laws, c. 112, (S)(S) 46-54; 66 Del.
Laws, c. 136, (S)(S) 30-32; 66 Del. Laws, c. 352, (S) 9; 67 Del. Laws, c. 376,
(S)(S) 19, 20; 68 Del. Laws, c. 337, (S)(S) 3, 4; 69 Del. Laws, c. 61, (S) 10;
69 Del. Laws, c. 262, (S)(S) 1-9; 70 Del. Laws, c. 79, (S) 16; 70 Del. Laws, c.
186, (S) 1; 70 Del. Laws, c. 299, (S)(S) 2, 3; 70 Del. Laws, c. 349, (S) 22; 71
Del. Laws, c. 120, (S) 15; 71 Del. Laws, c. 339, (S)(S) 49-52.)
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PART II
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a Delaware
corporation to indemnify officers, directors, employees and agents for actions
taken in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation, and with respect to any
criminal action, which they had no reasonable cause to believe was unlawful.
The Delaware General Corporation Law provides that a corporation may pay
expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, and must
reimburse a successful defendant for expenses, including attorney's fees,
actually and reasonably incurred, and permits a corporation to purchase and
maintain liability insurance for its directors and officers. The Delaware
General Corporation Law provides that indemnification may be made for any claim,
issue or matter as to which a person has been adjudged by a court of competent
jurisdiction to be liable to the corporation, unless and only to the extent a
court determines that the person is entitled to indemnity for such expenses as
the court deems proper.
InfoCure's bylaws provide that InfoCure shall, to the full extent permitted
by Section 145, indemnify any person, made or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is, was or is about to become an officer, director, employee or agent of
InfoCure. InfoCure shall pay the expenses (including attorneys' fees) incurred
by a person in defending any proceeding in advance of its final disposition,
provided, however, that, to the extent required by law, such payment of expenses
in advance of the final disposition of the proceeding shall be made by InfoCure
only upon receipt of an undertaking by the person to repay all amounts advanced
if it should be ultimately determined that the person is not entitled to be
indemnified.
In addition, InfoCure's certificate of incorporation eliminates or limits
personal liability of its directors to the full extent permitted by Section
102(b)(7) of the Delaware General Corporation Law.
Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.
For three years after the effective time of the merger, InfoCure has agreed
to indemnify and hold harmless, to the fullest extent permitted under applicable
law, its certificate of incorporation and bylaws, each present or former
director or officer of Datamedic or any of its subsidiaries (including his or
her heirs, executors and assigns) against any costs, expenses and amounts paid
in settlement of any claim, action, suit, proceeding or investigation arising
out of any act or omission in his or her capacity as a director, or officer
which occurred before the effective time of the merger.
Further, InfoCure has agreed to maintain in effect three year tail,
directors' and officers' liability insurance covering those individuals who are
currently covered by Datamedic's directors, officers and company liability
insurance policies.
Item 21. Exhibits
<PAGE>
<TABLE>
<CAPTION>
Exhibit
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Number Description
- ---------- ----------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger by and among Datamedic Holding Corp., Certain Principal Shareholders of
Datamedic Holding Corp., InfoCure Corporation and InfoCure Systems, Inc. dated September 3, 1999
(included as Appendix A to the proxy statement-prospectus contained in this registration statement)
2.2 Form of Escrow Agreement to be executed by and among InfoCure Corporation, certain stockholders of
Datamedic Holding Corp. and SunTrust Bank, Atlanta (included as Appendix B to the proxy
statement-prospectus contained in this registration statement)
2.3 Voting Agreement by and between InfoCure Corporation and certain stockholders of Datamedic Holding
Corp. dated September 3, 1999 (included as Appendix C to the proxy statement-prospectus contained in
this registration statement)
5.1 Opinion of Morris, Manning & Martin, L.L.P. regarding the legality of the Securities being issued
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Deloitte & Touche, LLP
23.3 Consent of KPMG LLP
23.4 Consent of Morris, Manning & Martin, L.L.P. (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule of InfoCure Corporation (filed as Exhibit 27.1 to InfoCure Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999)
99.1 Form of Proxy for Datamedic Holding Corp. stockholders.
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</TABLE>
Item 22. Undertakings
(a) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the registrant undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
<PAGE>
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia on the 27th day of
September, 1999.
INFOCURE CORPORATION
By: /s/ Frederick L. Fine
------------------------
Frederick L. Fine
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frederick L. Fine, Richard E. Perlman and James
K. Price, 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
(including post-effective amendments) to this Registration Statement, and any
subsequent registration statements pursuant to Rule 462 of the Securities Act
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorney-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------- -----------------------
<S> <C> <C>
/s/ Frederick L. Fine President, Chief Executive September 27, 1999
- ----------------------- Officer and Director
Frederick L. Fine (Principal Executive Officer)
/s/ James K. Price Executive Vice President, September 27, 1999
- -------------------- Secretary and Director
James K. Price
/s/ Richard E. Perlman Chairman, Treasurer and September 27, 1999
- ------------------------ Director
Richard E. Perlman
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ JAMES A. COCHRAN Senior Vice President--Finance September 27, 1999
- ------------------------- and Chief Financial Officer
James A. Cochran (Principal Financial Officer)
/s/ Michael E. Warren Vice President and Director September 27, 1999
- -------------------------
Michael E. Warren
/s/ Gary W. Plumer Vice President--Finance, September 27, 1999
- ------------------------ Assistant Secretary and
Gary W. Plumer Assistant Treasurer (Principal
Accounting Officer)
/s/ James D. Elliot Director September 27, 1999
- ------------------------
James D. Elliot
/s/ Raymond H. Welsh Director September 27, 1999
- ------------------------
Raymond H. Welsh
</TABLE>
<PAGE>
EXHIBIT 5.1
September 24, 1999
InfoCure Corporation
1765 The Exchange, Suite 450
Atlanta, Georgia 30339
Re: InfoCure Corporation Registration Statement on Form S-4 for the
Issuance of Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel for InfoCure Corporation, a Delaware corporation
(the "Company"), in connection with the proposed issuance and sale of the
Company's Common Stock (the "Shares") as described in the Company's Registration
Statement on Form S-4 (the "Registration Statement") filed on the date hereof
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act").
This opinion is being furnished in accordance with the requirements of Item
21 of Form S-4 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's certificate of incorporation and the
corporate proceedings taken by the Company in connection with the issuance and
sale of the Shares. Based on such review and assuming the Registration
Statement becomes and remains effective, and all applicable state and federal
laws are complied with, we are of the opinion that the Shares when issued in
accordance with the Registration Statement and the related prospectus (as
amended and supplemented through the date of issuance) will be validly issued,
fully paid and nonassessable shares of the Common Stock of the Company.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
<PAGE>
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
MORRIS, MANNING & MARTIN, L.L.P.
/s/ Morris, Manning & Martin, L.L.P.
-2-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
InfoCure Corporation
Atlanta, Georgia
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-4 of our report
dated February 5, 1999, relating to the financial statements of OMSystems, Inc.
for the year ended December 31, 1998, our report dated February 19, 1999,
relating to the consolidated financial statements of InfoCure Corporation and
subsidiaries appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and our report dated September 20, 1999, relating to the
supplemental consolidated financial statements of InfoCure Corporation and
subsidiaries appearing in the Company's Current Report on Form 8-K dated
September 24, 1999.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP
Atlanta, Georgia
September 24, 1999
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
InfoCure Corporation on Form S-4 of our report dated January 15, 1999, (relating
to the Healthcare Systems Division of the Reynolds and Reynolds Company)
appearing in the Registration Statement of InfoCure Corporation on Form S-3,
effective April 21, 1999, and to the reference to us under the heading "Experts"
in this Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dayton, Ohio
September 22, 1999
<PAGE>
EXHIBIT 23.3
Consent of Independent Accountants
We consent to the use of our report dated May 25, 1999 included herein and to
the reference to our firm under the headings "Experts" and "Datamedic Selected
Historical Consolidated Financial Information" in the prospectus.
/s/ KPMG LLP
KPMG LLP
Melville, New York
September 24, 1999
<PAGE>
EXHIBIT 99.1
DATAMEDIC HOLDING CORP.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ___________, 1999
The undersigned, having received the Notice of Special Meeting and the proxy
statement-prospectus, hereby appoints _________and _________, and each of them,
attorneys and proxies for the undersigned (with full power of substitution) to
attend the above special meeting and all adjournments thereof and to act for and
to vote all shares of Datamedic capital stock standing in the name of the
undersigned at the special meeting to be held on _________, _________, 1999 at
_______ __a.m. local time at the offices of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. located at One Financial Center, Boston, Massachusetts.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will grant
authority to vote "FOR" Proposal 1 on the reverse side, and in the discretion of
_________ or ____________ on any other business matters or proposals as may
properly come before the special meeting.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK ANY
BOXES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
------------------------------------------
Reverse Side
[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated
September 3, 1999, by and among InfoCure Corporation, InfoCure Systems, Inc., a
wholly-owned subsidiary of InfoCure, Datamedic and certain principal
stockholders of Datamedic, pursuant to which Datamedic will merge with and into
InfoCure Systems and InfoCure Systems will survive the merger and continue as a
wholly-owned subsidiary of InfoCure. In the merger, each share of Datamedic
preferred stock and Datamedic common stock, par value $.10 per share, will be
exchanged for a fraction of a share of InfoCure common stock, par value $.001
per share, unless the holder exercises appraisal rights under Delaware law. The
fraction will be determined immediately prior to completion of the merger
according to the formula specified in the merger agreement and described in the
proxy statement-prospectus mailed to all stockholders of Datamedic. Adoption of
the merger agreement will also constitute approval of the merger and the other
transactions contemplated by the merger agreement.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
MARK HERE FOR ADDRESS [ ] CHANGE AND NOTE AT LEFT
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
SIGNATURE: DATE
SIGNATURE: DATE
