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Securities And Exchange Commission
Washington, D.C. 20549
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FORM 10-KSB
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[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 011-12799
InfoCure Corporation
(exact name of registrant specified in its charter)
Delaware 58-2271614
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1765 The Exchange 30339
Suite 450 (zip code)
Atlanta, Georgia
(Address of principal executive
offices)
Registrant's telephone number, including area code: (770) 221-9990
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Securities registered pursuant to Section 12(b) of the Act:
None
----------------
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of exchange on which registered
------------------- ------------------------------------
<S> <C>
Common Stock, par value $.001 per share The Nasdaq Stock Market
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]
The Registrant's revenues for the fiscal year ended December 31, 1998 were
$63.7 million.
The aggregate market value of the common stock held by non-affiliates of the
Registrant, based upon the average of the closing bid and ask quotations for
the common stock on February 24, 1999 as reported by The Nasdaq Stock Market,
was approximately $213 million. The shares of common stock held by each officer
and director and by each person known to the Registrant who owns 5% or more of
the outstanding common stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of February 24, 1999, Registrant had outstanding 8,888,936 shares of
common stock.
Transitional Small Business Disclosure Format (check one): Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
Some of the statements contained in this report contain forward-looking
information. These statements are found in the sections entitled "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." They include statements concerning:
. InfoCure's growth and operating strategy;
. liquidity and capital expenditures;
. InfoCure's financing plans;
. trends in InfoCure's industry and in healthcare generally;
. trends in government regulation; and
. payment of dividends.
Forward-looking statements can be identified by forward-looking words such as
"expect," "believe," "goal," "plan," "intend," "estimate," "may" and "will" or
similar words. Such statements are subject to known and unknown risks,
uncertainties and other factors, including those discussed in the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors that May Affect Future Results," that could
cause the actual results to differ materially from those suggested by the
forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS.
Company Overview
InfoCure Corporation ("InfoCure" or the "Company") is a leading national
provider of healthcare practice management software products and services to
targeted healthcare practice specialties. InfoCure's systems are used primarily
by small to mid-size medical practices within the following specialty practice
areas: anesthesiology, emergency medicine, oral and maxillofacial surgery,
orthodontics, pathology, podiatry and radiology. In addition, InfoCure is the
leading provider of software products and services to larger medical practices
utilizing the IBM AS/400 computer platform. Our systems include software and
related hardware, ongoing training and support and electronic data interchange
or "EDI" services. These systems are designed to increase the quality and
reduce the cost of providing care by allowing physicians to manage their
practices more efficiently, contain costs and reduce the administrative burdens
created by an increasingly complex healthcare environment.
InfoCure was incorporated in Delaware in November 1996. Prior to July 10,
1997, InfoCure conducted no significant operations and generated no revenue. On
July 10, 1997, InfoCure completed the acquisitions of: American Medcare
Corporation ("AMC") (including its subsidiaries, International Computer
Solutions, Inc. ("ICS"), Health Care Division, Inc. and Millard-Wayne, Inc.
("Millard-Wayne")); DR Software, Inc. ("DR Software"); KComp Management
Systems, Inc. ("KComp"); and Rovak, Inc. ("Rovak"). These companies are
collectively referred to herein as the "Founding Companies." On July 10, 1997,
InfoCure also completed its initial public offering of 1.4 million shares of
common stock at a price to the public of $5.50 per share, resulting in net
proceeds to InfoCure of approximately $6.0 million.
Acquisitions
Effective October 1, 1997, InfoCure acquired SoftEasy, Inc. ("SoftEasy"),
Commercial Computers, Inc. ("CCI") and Professional On-Line Computers, Inc.
("POLCI"). SoftEasy provided practice management systems for podiatrists. CCI
provided UNIX- and Windows-based practice management systems for mid-size and
large medical practices and clinics. POLCI provided AS/400-based practice
management systems to hospital-affiliated physician practices, large non-
hospital physician clinics, radiology practices and management service
organizations.
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Effective November 1, 1997, InfoCure acquired PACE Financial Corporation
("PACE") and effective December 1, 1997, InfoCure acquired the orthodontic
business unit of HALIS Services, Inc. ("OPMS"). PACE provided AS/400 practice
management systems. OPMS provided Windows-based software solutions for
orthodontists.
Effective January 1, 1998, InfoCure acquired Micro-Software Designs, Inc.
("MDI") and Medical Software Integrators, Inc. ("MSI"). MDI provided Windows-
based client/server practice management software, with an emphasis on oral and
maxillofacial surgery practices. MSI provided practice management systems to
independent anesthesiology practices.
On October 23, 1998, InfoCure acquired substantially all of the assets and
assumed certain liabilities of the Healthcare Systems Division ("HSD") of The
Reynolds and Reynolds Company (the "HSD Acquisition"). HSD provided healthcare
practice management systems principally to radiology, anesthesiology and
enterprise-wide medical practices. With the HSD Acquisition, InfoCure entered
the radiology market and increased its presence in anesthesiology and among
larger general medical practices utilizing AS/400 systems. The installed
customer base of HSD included 1,580 practice sites, representing 35,020
physicians. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
On December 23, 1998, InfoCure completed a merger with Radiology Management
Systems, Inc. ("RADMAN"), a provider of practice management systems for
radiologists. The merger with RADMAN added approximately 2,000 radiologists to
InfoCure's customer base and strengthened its position as the largest provider
of healthcare information systems to radiology practices in the United States.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The acquisitions of SoftEasy, CCI, POLCI, PACE, OPMS, MDI, MSI, HSD and
RADMAN are referred to herein as the "Subsequent Acquisitions."
On February 12, 1999, InfoCure completed a merger with Macon Systems
Management, LLC, the parent of Medical Software Management, Inc. ("MSM"), a
provider of practice management systems for dermatologists (the "MSM Merger").
With the MSM Merger, InfoCure entered the dermatology market. On February 16,
1999, InfoCure completed a merger with OMSystems, Inc. ("OMS"), a provider of
practice management systems for orthodontists (the "OMS Merger"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Series A Preferred Stock Issuance
On February 9, 1998, InfoCure completed the private placement of 850,060
shares of its Convertible, Redeemable Preferred Stock Series A (the "Series A
Preferred"), resulting in gross proceeds to InfoCure of $8.5 million and net
proceeds of approximately $7.8 million after payment of selling commissions to
the placement agent for the offering and other expenses of the offering.
InfoCure granted to the placement agent a warrant to acquire 100,000 shares of
InfoCure's common stock at an exercise price of $9.00 per share. The
Consolidated Financial Statements of InfoCure reflect an accretive dividend
attributable to the preferred stockholders in the amount of $800,000
representing the issuance costs and the fair market value of the warrant
related to the Series A Preferred.
The Institutional Placement
On September 28, 1998, InfoCure completed the sale of 203,338 shares (the
"Institutional Placement") of common stock in a private placement to an
institutional investor (the "Investor") for $2.5 million. The Investor
committed to invest up to an additional $7.5 million upon the exercise by
InfoCure of options ("Put Options") through February 28, 2000. Generally, upon
exercise of a Put Option, the Investor must tender the amount designated by
InfoCure (the "Investment Amount"). The number of shares to be issued upon
exercise of a Put Option is determined by dividing the Investment Amount by an
amount (the "Subscription Date
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Price") equal to 92.5% of the average of the lowest three consecutive trading
day closing sale prices of the common stock during the 22 trading days
immediately preceding exercise of such Put Option. Generally, Put Options may
be exercised only once every 30 days and only if defined conditions are met,
including minimum average daily trading volumes for InfoCure's common stock and
a minimum Subscription Date Price of $10.00 (the "Floor Price"). Additionally,
InfoCure issued the Investor a five-year warrant to purchase 100,000 shares of
common stock at an exercise price of $23.00 per share. Since September 28,
1998, InfoCure has exercised two additional Put Options and has issued to the
Investor an aggregate 431,322 shares for a total investment of $7.0 million.
InfoCure is required to file a registration statement to register for resale
by the Investor any shares of common stock issuable upon exercise of subsequent
Put Options. Each subsequent registration statement must be declared effective
not later than 90 days from the corresponding Put Option closing. If a
registration statement is not declared effective within the applicable period,
InfoCure must pay a cash penalty of 1.5% of the Investment Amount per month
until the registration statement is declared effective.
With respect to any Put Option, the Investor is entitled to receive
additional shares of common stock ("Adjustment Shares") if the amount
determined as 92.5% of the average of the lowest three consecutive trading day
closing sales prices of the common stock during the 22 trading days immediately
preceding the effective date of any registration statement relating to the
shares issued upon exercise of such Put Option (the "Effective Date Price") is
lower than the Subscription Date Price. In such event, the Investor will
receive that number of Adjustment Shares determined by subtracting (x) the
Investment Amount divided by the Subscription Date Price from (y) the
Investment Amount divided by the Effective Date Price. InfoCure has the right
to pay cash in lieu of the issuance of Adjustment Shares if the closing sales
price of the common stock on the Effective Date is lower than $10.00.
To date, InfoCure has paid an aggregate of $237,500 to the Investor for fees
relating to the exercised Put Options and is required to pay an additional cash
fee of 1.25% of the amount invested pursuant to any subsequent exercise of a
Put Option.
Industry Overview
Healthcare costs in the United States have risen dramatically over the past
two decades and now represent approximately $1.0 trillion or 14% of the annual
gross domestic product. Federal and state governments, insurance carriers and
other third-party payors have moved aggressively to control these rising costs.
One of the ways in which these entities have managed rising costs has been to
employ alternative reimbursement models to replace the fee-for-service
reimbursement model which has been the traditional basis for payment for
healthcare services. Such alternative reimbursement models include managed
care, fixed-fee and capitated models of reimbursement. The result of these
generally more restrictive reimbursement practices has been a dramatic increase
in the complexity of accounting, billing and collecting payment for healthcare
services.
To address these challenges, healthcare providers are increasingly utilizing
information technology, including practice management systems. While spending
for information technology within the healthcare industry has historically been
below that of other industries, healthcare information technology expenditures
are expected to grow from $13.6 billion in 1997 to $21.0 billion by 2000.
Although the practice management segment of the healthcare industry has
historically lagged behind the healthcare industry as a whole in spending for
information technology, expenditures on practice management systems have grown
at a compound annual rate of approximately 26% from 1993 through 1997 and are
projected to grow at a comparable rate through 2000.
Practice management systems include a range of software products and
services for physicians and other healthcare providers. Most practice
management systems provide several common functions, including practice
administration functions, such as patient scheduling; financial functions, such
as patient billing and receivables management; and may include clinical
functions, such as preventative care notification. Beyond these common
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functions, the continued evolution of information and telecommunication
technologies has led to the development of electronic commerce tools for
integration with practice management systems. These tools can help to improve a
healthcare practice's cash flow by facilitating EDI, thereby enabling more
accurate and rapid submission of claims to third-party payors and more rapid
receipt of corresponding reimbursements.
Currently, nearly half of the total health claims submitted in the United
States annually are processed manually. Paper claims require more time and are
significantly more expensive to prepare, file and process than electronically-
submitted claims. Recent industry statistics suggest that the combined costs to
payors and providers of processing a manual claim total approximately 15% of
the average claim amount. EDI transactions, on the other hand, can be processed
directly with third-party payors or channeled through processing clearinghouses
at significantly lower costs to the provider and the payor. Because of these
significant cost savings, some payors are beginning to require practitioners to
submit reimbursement claims electronically.
Providers have also recognized a growing need for decision support tools
that access and analyze the increasing volume of financial and clinical
information generated by their practices. As the continued evolution of managed
care requires physicians to be "at risk" for the costs associated with
providing healthcare services, individual physicians will need advanced
information technology to aggregate and evaluate financial and clinical
information in an effort to manage their practices more efficiently and
profitably.
The practice management systems industry in the United States is highly
fragmented, with a large number of relatively small, regionally focused
companies and few national vendors. Most of these smaller competitors lack the
financial and technical resources to develop, effectively market and support
the advanced software products demanded by the marketplace. Many of these
vendors are increasingly willing to combine with larger practice management
systems vendors that have substantially greater financial, technical and
managerial resources.
Strategy
InfoCure's objective is to become the leading provider of advanced,
specialty-specific practice management systems within targeted healthcare
specialties. InfoCure's principal strategies to achieve this objective include:
Continue to take advantage of niche market opportunities. InfoCure has
developed significant market share within targeted niche healthcare
specialties. These specialties are attractive to InfoCure because they have
specific needs requiring related practice expertise. In addition, these
segments are highly fragmented with several significant, but typically not
dominant, players. InfoCure plans to continue to enhance its leadership
position within the markets it currently serves while broadening its presence
in new market niches through both internal marketing initiatives and additional
strategic acquisitions.
Cross-sell services and pursue opportunities with existing customers. With
over 11,600 customer sites, InfoCure has the ability to generate significant
growth by cross-selling additional products and services to its installed base.
In addition, InfoCure provides its customers with ongoing maintenance, support
and EDI services. These services are important sources of recurring revenue to
InfoCure. InfoCure intends to focus attention on cross-selling its advanced,
value-added products, such as EDI services and InfoMine, to these existing
customers. InfoCure believes that its strong relationship with customers
positions InfoCure to be the vendor of choice within its client base.
Expand the features of products and services offered. Through both internal
development and acquisitions, InfoCure intends to continue to provide
increasingly advanced technology solutions and additional customized services.
InfoCure believes this will allow InfoCure not only to capture new customers
but also to offer additional products and services to InfoCure's existing
customer base.
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Establish a national marketing identity. InfoCure has implemented efforts to
create a strong brand identity within the physician practice management
software industry. InfoCure has done so by tying all of its products together
with common marketing materials under one corporate name. In addition, InfoCure
has commenced InfoTour, a seminar program which enables InfoCure to meet face-
to-face with customers to strengthen its relationship with them while apprising
them of the new products and features available within InfoCure's core suite of
products. InfoCure believes these continuing efforts will increase awareness of
its latest technologies within its targeted market niches.
Take advantage of economies of scale. InfoCure has made significant
investments in its employees and the facilities and equipment necessary to
support them. InfoCure recently implemented a company-wide rollout of advanced
communications, accounting and client tracking systems. As a result, InfoCure
has built an infrastructure that it believes can support a level of business
significantly larger than currently exists. InfoCure intends to continue to
leverage this investment in infrastructure through both internal growth and
strategic acquisitions.
Products and Information Services
InfoCure offers a wide range of practice management software products to
healthcare providers in targeted specialty markets. These products are designed
to automate the administrative, financial and clinical information management
functions of office-based, hospital-based and enterprise-wide healthcare
practices. In addition to providing standard practice management features, many
of InfoCure's software products offer advanced features that serve the specific
needs of InfoCure's targeted healthcare practice specialties. For example,
anesthesiologists are required to bill their services on the basis of time
units; oral and maxillofacial surgeons must have the capability to process both
medical and dental claims; orthodontists must have the ability to offer their
patients contract billing alternatives; and radiologists require specialized
scheduling, film tracking and image delivery capabilities. InfoCure also offers
decision support software, add-on software modules and EDI services.
Specialty Markets
As of February 24, 1999, InfoCure had an installed base of 11,650 customer
sites representing an estimated 66,000 healthcare providers and had systems
installed in 50 states. The number of customer sites and the estimated number
of providers in InfoCure's targeted specialties are set forth in the table
below. InfoCure has focused its product development and marketing efforts on
these practice specialties.
<TABLE>
<CAPTION>
Number of Estimated Number
Practice Specialty Customer Sites of Providers
------------------ -------------- ----------------
<S> <C> <C>
Anesthesiology............................. 163 5,000
Dental..................................... 832 1,600
Dermatology................................ 260 500
Emergency Medicine......................... 56 5,500
General Medical............................ 1,431 7,300
Larger Medical Practices Utilizing AS/400
Technologies.............................. 457 8,000
Oral and Maxillofacial Surgery............. 1,745 4,000
Orthodontics............................... 2,476 3,400
Pathology.................................. 28 500
Podiatry................................... 3,471 4,800
Radiology.................................. 731 25,400
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Total.................................. 11,650 66,000
====== ======
</TABLE>
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Principal Products
InfoCure classifies its principal practice management software products as
either "core" or "classic." Core products offer advanced functionality and
operate with the latest generation of operating systems and hardware platforms.
In addition, core products are the primary products currently offered to
InfoCure's targeted practice specialties and are the focus of InfoCure's
ongoing product development and marketing efforts. Classic products, while
continuing to offer adequate functionality, typically lack the most advanced
practice management features and are not designed for the latest generation of
operating systems. Currently, InfoCure actively markets eleven core products
and supports 20 classic products. Approximately 15% of InfoCure's practice
sites use core products, while approximately 80% use classic products. InfoCure
believes there is a significant opportunity to provide system upgrades to those
customers utilizing classic and other non-core products by providing a
migration path to its core products. While InfoCure no longer actively markets
its classic products, it will continue to provide customer support for its
classic products until it determines that it is no longer cost effective to do
so. Additionally, approximately 5% of InfoCure's customers currently are using
products that were written for operating systems or hardware platforms that are
generally no longer supported by their respective vendors. InfoCure is actively
promoting the migration of customers utilizing these products to newer products
and intends to retire these products at the earliest possible opportunity.
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The following chart describes how the Company's principal products serve the
specialties and practice areas targeted by the Company:
<TABLE>
<CAPTION>
Specialties and Practice
Areas Served Principal Products Practice Specific Features
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<S> <C> <C>
Anesthesiology Micro*Star . Time and unit billing
. Single entry physician/CRNA(1)
charge creation
. Integrated procedure and diagnostic
coding
. Automated concurrency calculation
. Billing for treatment of acute or chronic
pain
. Quality outcomes measurements
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Dermatology Kiron Wisdom . Open item patient and insurance
processing
. Encounter form scanning
. Cross-coding integration
. Automatic modifier generation
. Multi-resource scheduling
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General Medical WinMED CS Wisdom . Open item patient and insurance
processing
. Patient charting via progress notes,
billing, narrative history and
correspondence history
. Multi-facility management, billing and
reporting
. Prescription tracking and processing
. Customizable insurance and statement form
templates
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Larger Medical Ideal . Multi-clinic capabilities/roll-up
Practices reporting
Utilizing AS/400 . Global patient records across clinics
Technologies . Preventative care and outcomes analysis
. Occupational medicine capabilities
. Laboratory requisition
. Chart tracking with bar code capability
. Integrated medical records
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Oral and Maxillofacial WinOMS CS . Medical and dental claim processing and
Surgery cross-coding
. Surgery narrative reporting
. Surgery stage tracking
. Implant tracking
. Pretreatment estimating and treatment
planning
. Image integration into patient records
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Orthodontics OPMS/32 . Contract billing via payment coupons
Orthotrac . Time scheduling by units of doctor and
assistant time per procedure
. Treatment charting
. Diagnostic and treatment planning
. Automatic patient treatment milestone
tracking
. Imaging
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Podiatry Wisdom . Open item patient and insurance
processing
. Medicare-specific podiatry requirements
. Progress notes, histories and physician
operating
. reports and correspondence
. Integrated speech recognition
. Customizable insurance and statement form
templates
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Hospital- Sentinel . Automatic calculation of weekly
based Providers: treatments
Emergency Medicine . Capability to upload transcription from
outside sources
Pathology . Bar code payment posting
Radiology . Integrated managed care features to
monitor contracts and verify eligibility
</TABLE>
- --------
(1) Certified Registered Nurse Anesthetist
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InfoCure has designed its core software products to offer advanced
functionality and to operate with the latest generation of operating systems
and hardware platforms. InfoCure believes that PC-based practice management
systems are standardizing on the Windows family of operating systems.
InfoCure's PC-based core products use Microsoft Corporation's relational
database software (such as SQL Server and Access), operating system software
(such as Windows 95, Windows 98 and WindowsNT) and networking software (such as
Windows Terminal Server). InfoCure has adopted 32-bit client/server technology
in its PC-based core products, maximizing their scalability in local and wide
area network environments.
Many larger healthcare practices including clinics, hospital-based practices
and other enterprise-wide providers utilize mid-range computer platforms. There
are several mid-range computer platforms that are used by these larger
healthcare practices. InfoCure believes that AS/400-based systems will continue
to represent a significant portion of installed mid-range computer platforms.
InfoCure's mid-range core product, Ideal, is written for the AS/400 platform.
InfoCure's systems provide customers with significant benefits that enable
them to manage their practices more efficiently. Our customers are able to
choose from a menu of features and functions most essential to their practices,
primarily in the following areas:
. Administrative management--appointment scheduling, patient
correspondence and referral analysis;
. Financial management--payor billing, patient billing and accounts
receivable management; and
. Clinical information management--patient medical history, treatment
planning and hospital interface.
In addition to the standard and specialty-specific features of its core
products, InfoCure has recently introduced InfoMine, a decision support tool
designed to be compatible with all of InfoCure's core products and to further
supplement their analytical features. InfoMine enables a provider to access,
sort and display data according to any data element selected by the user,
including payor, referral source, reimbursement rate, time interval or other
variable. InfoMine provides the customer with the ability to consolidate
reporting in a flexible format, to analyze the relationship between variables
and to view such reports in real time. InfoMine offers practitioners a
computerized solution for rapidly analyzing the performance of their practices,
including the ability to analyze the profitability of various contractual
relationships with payors. Currently, InfoMine is only available as part of
InfoCure's anesthesiology product. InfoCure expects to offer InfoMine as part
of its products for other practice specialties during 1999.
InfoCure also develops add-on software modules providing enhanced
functionality. Current add-on software modules include:
. a scanning system that uses optical scanning technology to automate
routine data entry tasks;
. a voice-activated medical records application that translates dictation
directly into InfoCure's software thereby permitting the on-site
creation of accurate patient clinical reports;
. a digital record keeping application that allows a practice to store and
merge radiographic and photographic images with correspondence and
clinical medical records; and
. an interface that enables hospital-based physician practices to download
patient data from hospital systems into InfoCure's practice management
system.
Information Services
InfoCure's core software products enable transaction-based EDI functions,
including patient billing and insurance claims submission and remittance. The
use of EDI can improve a healthcare practice's cash flow by
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enabling more accurate and rapid submission of claims to third-party payors and
more rapid receipt of corresponding reimbursements. EDI services currently
include the following:
. Electronic Patient Billing--electronically submits patient billing
information from practices by dial-up modem or via the Internet to
InfoCure's printing center or to independent national clearinghouses
which process, print and mail invoices and provide billing reports to
the practice.
. Electronic Claims Submission--electronically submits insurance claims
from practices to payors, either directly or through independent
national clearinghouses.
. Electronic Claims Remittance--electronically remits insurance payment
and automatically posts explanation of benefits into the practice
management system.
InfoCure generates revenues by facilitating EDI transactions, currently
processing more than 2.0 million EDI transactions each month through
clearinghouse arrangements. InfoCure believes that clearinghouse arrangements
serve customers better than EDI transactions directly with third-party payors
because of a clearinghouse's ability to administer the creation and submission
of claims, properly format data and facilitate reimbursements from multiple
payors. Accordingly, InfoCure actively encourages its customers to enter into
clearinghouse arrangements for their EDI transactions. InfoCure intends to
offer additional EDI services, such as eligibility verification, referral
authorization, precertification and claims status services.
Support Services
InfoCure believes that customer satisfaction with ongoing support and
services is critical to its success. InfoCure assists customers with the
initial installation of systems and offers several alternatives for training
and data conversion services. InfoCure's customer service and support groups
are organized both by computer platform and practice specialty. In addition to
providing on-site training for certain of its product lines, InfoCure maintains
classroom-based training facilities in twelve locations throughout the United
States. InfoCure sponsors continuing education programs, periodic newsletters
and user group conferences, providing the user with current information, as
well as an opportunity for InfoCure to demonstrate the features of new and
enhanced products.
InfoCure provides its customers with ongoing software support and services
under annual agreements that typically have automatically renewable one year
terms. These agreements provide for general support through access to help
desks, error corrections to software, software upgrades within a product line
and remote diagnostics. Customer support and services are provided through a
wide area voice and data network which incorporates automated call distribution
to route customer calls from any location to the appropriate support person,
regardless of physical location. Additionally, InfoCure has acquired a company-
wide customer support software system. This system, which is currently utilized
to support approximately 44% of InfoCure's customers, operates within a
client/server environment and provides client-tracking information to assist
InfoCure support representatives. InfoCure's remaining customers are scheduled
to be supported on this system by June 1999. Hardware support is generally
provided directly by the manufacturer or its authorized reseller.
InfoCure has invested significant resources in the systems, facilities and
personnel required to provide outstanding service to its customers. As of
February 24, 1999, the customer support and services group consisted of 392
employees, representing approximately 47% of InfoCure's total employee base.
Acquisition Integration
InfoCure has developed a significant infrastructure to support the
acquisition and integration of targeted businesses. This infrastructure
consists of management and technical personnel, sophisticated communications
technology and advanced financial and accounting software. An acquisition team,
which includes key members of InfoCure's management and technical staff,
identifies acquisition targets, performs due diligence
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investigations and negotiates the terms of each acquisition. An integration
team, which includes key operational personnel, works with each acquired
company to identify and complete the various post-acquisition tasks of
integration, including incorporation of desired product features into
InfoCure's products and consolidation of administrative and financial
functions.
InfoCure supports the integration of acquired businesses through company-
wide communications and software systems. Dedicated T-1 telecommunications
lines connect each of InfoCure's remote facilities enabling an integrated
computer network and phone system. Each acquired business is rapidly migrated
to this communications system in order to facilitate seamless integration with
InfoCure's operations. InfoCure's accounting software is capable of
standardizing the accounting and financial reporting of newly acquired
companies rapidly, minimizing the time and expense associated with financial
integration. InfoCure believes its infrastructure effectively positions it to
continue to acquire new companies and facilitates the integration of the
operations of each acquired company.
Product Development
InfoCure's research and development organization, comprised of 186 full time
employees as of February 24, 1999, is organized into product development,
conversion and quality assurance groups. InfoCure's research and development
efforts principally involve the incorporation of the best technologies from
each acquired product into InfoCure's core practice management systems.
InfoCure's research and development staff facilitates the integration of
acquired products by conducting a technical review of acquired companies'
software products to determine the best available functions and features within
such products. Based upon this evaluation, InfoCure generally pursues one of
the following alternatives for each acquired product:
. incorporate the features of the product into one or more of InfoCure's
core products; or
. continue to market and support the product without revision.
From time to time, InfoCure will choose to retire obsolete software products
and actively migrate users to its core products. InfoCure continually refines
its core products and rapidly deploys new features and advanced technologies
into such products. Moreover, InfoCure's product development staff develops
additional advanced practice management functionality for its core products and
add-on software modules designed to be compatible with these core products.
InfoCure is also seeking to expand its EDI services to include additional
capabilities such as electronic eligibility verification, referral
authorization, precertification and claims status.
Sales and Marketing
InfoCure markets its products through a direct sales force, comprised of 99
marketing and sales personnel in 20 locations as of February 24, 1999. InfoCure
organizes its sales force by specialty practice area and computer platform. The
sales force is trained to understand the specialty-specific needs of its
customers.
Within its existing customer base, InfoCure promotes and sells system
upgrades, maintenance services, add-on software modules and information
services. In addition, InfoCure targets new customers principally through
seminars, trade shows, telemarketing, direct mail campaigns and advertisements
in various publications. To address the complex needs of larger potential
customers, InfoCure recently formed an executive sales group. In addition,
senior personnel and members of management assist in sales and marketing
initiatives to larger and more technically-advanced potential customers.
Through third-party sources, InfoCure offers its customers who purchase systems
non-recourse financing with a rapid approval process.
Intellectual Property
InfoCure regards its software as proprietary and protects its software
primarily through reliance on copyright law and trade secret protection.
InfoCure generally enters into written license agreements with customers which
contain customary license and support terms. In limited circumstances, InfoCure
distributes its less expensive products under a "shrink-wrap" license. In most
instances InfoCure provides its software
10
<PAGE>
products in object code form, although source code licenses have been granted
in a limited number of unique situations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risk Factors that
May Affect Future Results."
Competition
InfoCure's principal competitors include both national and regional practice
management systems vendors. Currently, the practice management systems industry
in the United States is characterized by a large number of relatively small,
regionally-focused companies, comprising a highly fragmented industry with only
a few national vendors. Smaller, regionally-focused companies typically market
their products to a single practice specialty. Until recently, larger, national
vendors have targeted primarily large healthcare providers. InfoCure believes
that the larger, national vendors may broaden their markets to include both
small and large healthcare providers. In addition, InfoCure competes with
national and regional providers of computerized billing, insurance processing
and record management services to healthcare practices. As the market for
InfoCure's products and services expands, additional competitors are likely to
enter this market. InfoCure believes that the primary competitive factors in
its markets are:
. product features and functionality;
. customer service, support and satisfaction;
. price;
. ongoing product enhancements; and
. the reputation and stability of the vendor.
Some national competitors have greater financial, development, technical,
marketing and sales resources than InfoCure. If competition in the practice
management systems industry intensifies, InfoCure may be required to lower the
prices of its products and services. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Risk Factors that May Affect
Future Results."
Government Regulation
The confidentiality of patient records and the circumstances under which
such information may be used or released are subject to substantial regulation
by state and federal laws and regulations. Regulations governing electronic
health data transmissions are evolving rapidly and are often unclear and
difficult to apply. The Health Insurance Portability and Accountability Act of
1996 ("HIPAA"), signed into legislation on August 22, 1996, requires the
Secretary of Health and Human Services (the "Secretary") to adopt national
standards for certain types of electronic healthcare information transactions
and the data elements used in such transactions, and to adopt standards to
ensure the integrity and confidentiality of such information. In August 1998,
the Secretary issued proposed standards specifying electronic transactional
code sets, data security and electronic signature standards and certain
provider and employer identifiers (standards governing identifiers for health
plans have not yet been proposed). Final standards are expected following a
public comment period for each proposal and are expected to become mandatory
within 24 to 36 months thereafter. InfoCure believes that the proposed
standards would not materially affect InfoCure's business if adopted as
proposed. There can be no assurance, however, that such standards will be
adopted as proposed or that the standards yet to be proposed, particularly
those related to data security, will not have a material adverse effect on
InfoCure's business, financial condition and results of operations.
As required by the HIPAA legislation, the Secretary submitted
recommendations to Congress for legislation to protect privacy and
confidentiality of personal health information in September 1997. If Congress
does not enact legislation by August 1999, HIPAA requires the Secretary to
promulgate regulations concerning such protections. Legislation governing the
dissemination of medical record information is frequently proposed and debated
at both the federal and state levels. Such legislation, if enacted, could
require patient consent before even coded or anonymous patient information may
be shared with third parties and could also require
11
<PAGE>
that holders or users of such information implement specified security
measures. Any material restriction on the ability of healthcare providers to
obtain or disseminate patient information could adversely affect InfoCure's
business, financial condition and results of operations.
The FDA has jurisdiction under the 1976 Medical Device Amendments to the
Federal Food, Drug, and Cosmetic Act (the "FDC Act") to regulate computer
products and software as medical devices if they are intended for use in the
diagnosis, cure, mitigation, treatment or prevention of disease in humans. We
have not determined to what extent InfoCure's practice management software
products would be deemed to be a medical device subject to FDA regulation. The
FDA has issued a draft policy statement under which manufacturers of medical
image storage devices and related software are required to submit to the FDA
premarket notification applications and otherwise comply with the requirements
of the FDC Act applicable to medical devices. Recently, the FDA has initiated
agency rulemaking which may exempt certain close-up medical image management
devices from premarket notification procedures, but there can be no assurance
that such an exemption actually will be adopted and, if so, that the rulemaking
will apply to InfoCure's products. Non-compliance with applicable requirements
can result in, among other things, fines, injunctions, civil penalties, total
or partial suspension of production, refusal by the government to approve
products, revocation of approvals or clearances previously granted and criminal
prosecution. There can be no assurance that any final FDA policy governing
computer products, once issued, or future laws or regulations concerning the
manufacture or marketing of medical devices or healthcare information systems
will not increase the cost and time to market of new or existing products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors."
Human Resources
As of February 24, 1999, InfoCure employed 832 persons, including 99 in
marketing and sales, 392 in customer support and services, 186 in product
development and 155 in administration, finance and management. None of
InfoCure's employees is subject to a collective bargaining arrangement.
InfoCure considers its relations with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
InfoCure currently either owns or leases 20 facilities, having an aggregate
of approximately 230,000 square feet. These facilities are located in: Atlanta
(3 locations); Birmingham (2 locations); Charlotte; Cincinnati; Daytona Beach;
Los Angeles (2 locations); Miami; Pittsburgh; and San Diego; as well as
Beaverton, Oregon; Bloomington, Lake Elmo and Rochester, Minnesota; Macon,
Georgia; Ridgefield, Connecticut; and Saginaw, Michigan. The remaining lease
terms for InfoCure's leased facilities range between one and seven years.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. The Company
is not currently a party to any legal proceeding for which an adverse outcome
would be expected to have a material adverse effect on the Company's business,
results of operations or financial condition. However, one of InfoCure's
customers has initiated an arbitration claim against InfoCure claiming that
software it purchased from InfoCure is not Year 2000 ready. InfoCure is no
longer selling or supporting this software and is attempting to resolve this
dispute. InfoCure believes that this arbitration, regardless of its outcome,
will not result in a material adverse effect on InfoCure.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of the year ended December 31, 1998.
12
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
On January 29, 1999 InfoCure's common stock commenced trading on the Nasdaq
Stock Market under the symbol "INCX." From July 10, 1997 until January 29,
1999, the common stock was traded on the American Stock Exchange under the
symbol "INC." The following table sets forth the high and low closing sale
prices per share of the common stock for the periods indicated, as reported on
the American Stock Exchange or the Nasdaq Stock Market, as the case may be.
<TABLE>
<CAPTION>
Year Ended December 31, 1997 High Low
---------------------------- ---- ----
<S> <C> <C>
Third Quarter (beginning July 10, 1997)................. $ 5 5/8 $ 3 15/16
Fourth Quarter.......................................... 9 1/2 5 3/4
<CAPTION>
Year Ended December 31, 1998 High Low
---------------------------- ---- ----
<S> <C> <C>
First Quarter........................................... $17 1/16 $ 8 1/4
Second Quarter.......................................... 16 3/16 10 15/16
Third Quarter........................................... 16 15/16 12 3/4
Fourth Quarter.......................................... 32 3/4 11 5/8
<CAPTION>
Year Ended December 31, 1999 High Low
---------------------------- ---- ----
<S> <C> <C>
First Quarter (through February 24, 1999)............... $ 36 $27 3/4
</TABLE>
On February 24, 1999, the last reported sales price for the common stock was
$29 3/4 per share. As of February 24, 1998 there were approximately 350
stockholders of record of the common stock based on transfer agent reports.
InfoCure has neither declared nor paid any cash dividends on its common
stock or its preferred stock and does not anticipate paying any cash dividends
in the foreseeable future. InfoCure's commercial loan agreement (the "Line of
Credit") generally prohibits InfoCure from declaring or paying any dividends or
other distributions with respect to its capital stock.
Recent Sales of Unregistered Securities
Effective January 1998, InfoCure issued to the former owners of MDI an
aggregate of 270,000 shares of common stock based upon a price of $10.00 per
share, in connection with InfoCure's acquisition of MDI. Also effective January
1998, InfoCure issued to the former owners of MSI an aggregate of 101,767
shares of common stock based upon a price of $14.15 per share, in connection
with InfoCure's acquisition of MSI. Each issuance was exempt from registration
under the Securities Act of 1933, as amended, (the "Securities Act") pursuant
to Section 4(2) thereof and Regulation D promulgated thereunder.
In February 1998, InfoCure issued 850,060 shares of Series A Preferred to 96
investors in a private placement resulting in gross proceeds to InfoCure of
$8.5 million. In addition, InfoCure issued to the placement agent a three-year
warrant to acquire 100,000 shares of common stock at an exercise price of $9.00
per share. In connection with the private placement, each investor also
received the right to purchase an aggregate 181,812 shares of common stock from
a stockholder of InfoCure for a total of $1,000,000. InfoCure did not receive
any of the proceeds from the sale of these shares of common stock. The sales of
the shares to the investors and the issuance of the warrant to placement agent
were exempt from registration under the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder.
In August 1998, InfoCure issued to the former owners of KComp 102,940 shares
of common stock based upon a price of $5.50 per share, in satisfaction of the
earnout commitment payable by InfoCure in connection with InfoCure's
acquisition of KComp in July 1997. The issuance was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof and Regulation D
promulgated thereunder.
13
<PAGE>
In September 1998, InfoCure issued to the former owners of Rovak an
aggregate of 258,182 shares of common stock based upon a price of $5.50 per
share, in satisfaction of the earnout commitment payable by InfoCure in
connection with InfoCure's acquisition of Rovak in July 1997. In addition,
InfoCure issued to the former owner of Millard-Wayne 11,687 shares of common
stock based upon a price of $5.50 per share, in satisfaction of the earnout
commitment payable by InfoCure in connection with InfoCure's acquisition of
Millard-Wayne in July 1997. Also in September 1998, InfoCure issued 203,338
shares of common stock to the Investor in the Institutional Placement at
$12.29479 per share and a warrant to acquire 100,000 shares of common stock at
an exercise price of $23.00 per share. Each issuance was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and
Regulation D promulgated thereunder.
In October 1998, InfoCure issued to FINOVA Capital Corporation a warrant to
acquire 245,000 shares of common stock at an exercise price of $12.00 per
share. The issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof as a private transaction not involving a
public distribution.
In November 1998, InfoCure issued an aggregate of 76,709 shares of common
stock in connection with the cashless exercise of outstanding warrants held by
persons affiliated with Josephthal Lyon & Ross Incorporated. The exercise price
paid for the shares of common stock was $5.50 per share. The issuance was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof as a private transaction not involving a public distribution.
In December 1998, InfoCure issued an aggregate of 38,169 shares of common
stock at $6.60 per share to former employees of KComp in satisfaction of a
bonus commitment to such employees relating to InfoCure's acquisition of KComp
in July 1997. The issuance was exempt from registration under the Securities
Act pursuant to Section 4(2) thereof as a private transaction not involving a
public distribution. Also in December 1998, InfoCure issued 147,984 shares of
common stock to the Investor in the Institutional Placement at $16.89375 per
share. Effective December 1998, InfoCure issued to the former shareholders of
RADMAN an aggregate of 497,367 shares of common stock based upon a price of
$19.00 per share and assumed obligations to issue an aggregate of 57,644 shares
of InfoCure common stock in lieu of RADMAN shares pursuant to existing RADMAN
options and warrants in connection with InfoCure's merger with RADMAN. The
issuances to the Investor and to the former shareholders of RADMAN were exempt
from registration under the Securities Act pursuant to Section 4(2) thereof and
Regulation D promulgated thereunder. See "Description of Business--Company
Overview."
During the year ended December 31, 1998, InfoCure issued options to acquire
an aggregate of 885,489 shares of common stock pursuant to Rule 701 under the
Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of InfoCure and Notes thereto included elsewhere in this
Report.
Overview
InfoCure is a leading national provider of healthcare practice management
software products and services to targeted healthcare specialties. InfoCure
derives revenue from the sale of practice management software, the resale of
related hardware and the provision of customer support and services. Software
sales include the license of new software products and software upgrades.
InfoCure resells hardware components in connection with a portion of its
software sales. Customer support and services include ongoing product
maintenance and support, the installation of new and upgraded software and
hardware, customer training and EDI. Customer support and services typically
are provided either pursuant to renewable annual contracts or on a fee basis.
InfoCure derives revenue from both customers and third-party clearinghouses by
providing EDI services through contractual arrangements with such parties.
InfoCure bases its revenue recognition policies for sales of software on the
provisions of the American Institute of Certified Public Accountants'
("AICPA's") Statement of Position ("SOP") 97-2 "Software
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<PAGE>
Revenue Recognition." Revenue from software sales is recognized upon shipment
in instances where InfoCure has evidence of a contract, the fee charged is
fixed and determinable and collection is probable. Hardware resales are
recognized upon product shipment. Revenue from support and maintenance
contracts, which are typically one year in length, is recognized ratably over
the life of the contract. Revenue from other services is recognized as the
services are provided.
Depreciation and amortization expense results primarily from the
amortization of goodwill, which represents the excess of the consideration paid
by InfoCure over the fair value of the net assets acquired in acquisitions
accounted for under the purchase method of accounting. As of December 31, 1998,
InfoCure had goodwill, net of accumulated amortization, of $72.2 million.
Goodwill is amortized over its estimated useful life of 15 years. This goodwill
results in an amortization expense estimated to total approximately $5.0
million per year. Depreciation and amortization expense also includes
depreciation of property and equipment and amortization of software development
costs. Property and equipment are assigned lives ranging from three to five
years. Software development costs are expensed until technological feasibility
is achieved. Costs incurred after achievement of technological feasibility and
before general release are capitalized and generally amortized over a four-year
life. Costs incurred after general release are expensed as incurred.
InfoCure completed nine acquisitions of practice management software vendors
between July 10, 1997 and December 31, 1998. These acquisitions were the
primary source of the substantial growth in InfoCure's revenue and other
components of its operating results. Therefore, a year to year comparison of
InfoCure's results of operations for the prior two years is not necessarily
indicative of future results.
Restructuring Plan
Effective December 1, 1997, InfoCure adopted a plan (the "Restructuring
Plan") to restructure its operations by consolidating existing facilities and
acquired operations. In connection with the Restructuring Plan, which was
completed in the second quarter of 1998, InfoCure took restructuring charges
totaling $13.0 million, of which $11.1 million was recorded in the fourth
quarter of 1997 and $1.9 million was recorded in the first six months of 1998.
As a result of the Restructuring Plan, InfoCure wrote down approximately:
. $7.8 million representing an impairment of goodwill associated with
prior acquisitions and capitalized software for discontinued products of
approximately $6.3 million and $1.5 million, respectively;
. $3.3 million reflecting the recognition of contingent consideration
earned or deemed payable under the terms of certain acquisition
agreements for acquired companies affected by the Restructuring Plan;
. $1.1 million representing severance and other termination benefits for
the termination of certain redundant staff positions;
. $461,000 reflecting the elimination of redundant facilities and
cancellation of leases and other contracts; and
. $296,000 representing other asset write downs and costs associated with
the Restructuring Plan.
For a more detailed discussion of these restructuring charges, see Note 4 to
the Consolidated Financial Statements of InfoCure.
Change in Fiscal Year
In the first quarter of 1998, InfoCure changed its fiscal year end from
January 31 to December 31. As a result, InfoCure's fiscal year beginning
February 1, 1997 ended on December 31, 1997 and reflected eleven months of
operations. The consolidated financial data provided herein reports InfoCure's
financial statements as of and for the fiscal year ended December 31, 1998 and
the eleven months ended December 31, 1997.
15
<PAGE>
In Process Research and Development Write-off
On October 23, 1998, InfoCure acquired the assets of HSD, a former division
of The Reynolds and Reynolds Company. In connection with the HSD Acquisition,
InfoCure retained an independent appraiser to complete a valuation of the
assets of HSD, including valuation of certain in process research and
development. InfoCure identified three projects for which technological
feasibility had not been achieved as of the acquisition date and for which
there was no alternative future use. The products include POWERRmanager, a next
generation physician practice management system, the Year 2000 ready version of
ProMed, a Unix-based practice management system, and the Year 2000 ready
version of Kredo, a practice management system running on the IBM AS/400
platform.
The value associated with these projects was determined using a discounted
cashflow model with a risk adjusted discount rate of 30%. The model reflects
revenue to be generated beginning in the later part of 1999 and continuing
through 2003 for ProMed and Kredo and 2004 for POWERRmanager. The valuation
also incorporated a stage of completion methodology where the value was
adjusted based on the technology's percentage of completion.
As of the acquisition date, the majority of the core modules of
POWERRmanager had been coded. Product testing began in the fourth quarter of
1998, and InfoCure estimates completion of testing and documentation in the
first quarter of 1999 and initial beta testing in the second quarter of 1999.
The ProMed and Kredo products are expected to be completed in the first quarter
of 1999. Upgrades for the existing customer base will occur in the second and
third quarter of 1999. The schedule below details the status of each product as
of the acquisition date and its appraised in process research and development
("IPRD") value (dollar amounts in thousands).
<TABLE>
<CAPTION>
Post-acquisition
Estimated Pre-acquisition Costs to Percentage of
Project Completion Costs Complete Completion IPRD Value
------- ------------- --------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
POWERRmanager 2nd Qtr. 1999 $9,001 $474 95% $4,800
Y2K Compliant
ProMed 1st Qtr. 1999 76 47 62 3,100
Y2K Compliant
Kredo 1st Qtr. 1999 848 357 70 1,300
------ ---- --- ------
Total $9,925 $878 92% $9,200
====== ==== === ======
</TABLE>
Based on the results of the appraisal, $9.0 million was attributed to the in
process research and development purchased in the HSD Acquisition and expensed
in the fourth quarter of 1998 when the acquisition was completed.
16
<PAGE>
Results of Operations
The following table sets forth certain statement of operations data as a
percentage of gross revenue for the periods indicated:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, 1997 December 31, 1998
----------------- -----------------
<S> <C> <C>
Consolidated Statement of Operations Data:
Revenue:
Systems and software...................... 53.3 % 54.1 %
Maintenance, support and services......... 46.7 45.9
----- -----
Total revenue.............................. 100.0 100.0
Operating expense:
Hardware and other items purchased for
resale................................... 23.7 19.7
Selling, general and administrative....... 63.8 54.5
Depreciation and amortization............. 6.0 6.8
Purchased research and development........ -- 14.1
Asset impairment and restructuring costs.. 60.9 2.9
----- -----
Total operating expense.................... 154.4 98.0
Operating income (loss).................... (54.4) 2.0
Other expense (income):
Interest, net............................. 1.9 5.5
Other, net................................ (1.3) (0.1)
----- -----
Loss before income taxes................... (55.0) (3.4)
Income tax benefit......................... (7.2) (0.5)
----- -----
Net loss................................... (47.8)% (2.9)%
===== =====
</TABLE>
Year Ended December 31, 1998 Compared To Eleven Months Ended December 31,
1997
Total Revenue. Total revenue for the year ended December 31, 1998 was $63.7
million compared to total revenue of $18.3 million for the eleven months ended
December 31, 1997. The increase of $45.4 million in total revenue reflects
primarily the combined revenue of the Founding Companies for the entire twelve
month period in 1998 and revenue from the Subsequent Acquisitions as of their
respective effective dates, except for the RADMAN acquisition which was
accounted for as a pooling of interests and is reflected retroactively for all
periods presented. Revenue for periods prior to July 10, 1997 includes only
revenue of InfoCure's predecessor, AMC, its consolidated subsidiaries and
RADMAN. Systems and software revenue was $34.5 million for the year ended
December 31, 1998, or 54.1% of total revenue, compared to $9.7 million, or
53.3% of total revenue, for the eleven months ended December 31, 1997. The
increase as a percentage of total revenue was primarily a result of a higher
percentage mix of systems and software revenue among acquired companies and
relatively strong demand for several of InfoCure's software products in the
year ended December 31, 1998. Maintenance, support and services revenue was
$29.2 million, or 45.9% of total revenue for the year ended December 31, 1998,
compared to $8.5 million, or 46.7% of total revenue, for the eleven months
ended December 31, 1997. Management anticipates that maintenance, support and
services revenue will increase as a percentage of total revenue in future
periods.
Hardware and Other Items Purchased for Resale. Hardware and other items
purchased for resale consist of costs incurred to purchase hardware, and
include costs of forms and postage, outsourced hardware maintenance, third-
party software and other items for resale in connection with sales of new
systems and software. The costs required to install such systems and to perform
software maintenance and support services are reported in selling, general and
administrative expenses. For the year ended December 31, 1998, cost of hardware
and other items purchased for resale was $12.6 million, or 19.7% of revenue,
compared to $4.3 million, or 23.7% of revenue, for the eleven months ended
December 31, 1997. The increase in cost of hardware and other items purchased
for resale reflects primarily the increase resulting from InfoCure's
acquisitions. The decrease in cost of hardware and other items purchased for
resale as a percentage of revenue reflects a lower percentage of revenue from
sales of hardware.
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<PAGE>
Selling, General and Administrative. Selling, general and administrative
expense includes salaries and benefits, product development expense, product
maintenance and support expense, variable commissions and bonuses,
advertisement and promotional marketing materials, travel, communications,
facilities, insurance and other administrative expense. Selling, general and
administrative expense increased to $34.7 million, or 54.5% of revenue, for the
year ended December 31, 1998 compared to $11.7 million, or 63.8% of revenue,
for the eleven months ended December 31, 1997. This increase reflects primarily
an increase in the marketing and administrative personnel and other selling and
administrative costs necessary to support the consolidated businesses of the
acquired companies. The decrease in selling, general and administrative expense
as a percentage of revenue reflects InfoCure's ability to take advantage of
economies of scale resulting from the larger installed customer base and a
higher base of revenue realized from its acquisitions.
Depreciation and Amortization. Depreciation and amortization expense was
$4.3 million, or 6.8% of revenue, for the year ended December 31, 1998 compared
to $1.1 million or 6.0% of revenue, for the eleven months ended December 31,
1997. Increased depreciation and amortization expense represents primarily the
significant increase in goodwill arising from InfoCure's acquisitions.
Purchased Research and Development. Purchased research and development
expense was $9.0 million, or 14.1% of total revenue, for the year ended
December 31, 1998. This expense represents charges related to the write-off of
certain in process research and development costs associated with the HSD
Acquisition.
Asset Impairment and Restructuring Costs. Asset impairment and restructuring
costs were $1.9 million, or 2.9% of total revenue for the year ended December
31, 1998 compared to $11.1 million, or 60.9% of total revenue for the eleven
months ended December 31, 1997. This decrease represents the completion of the
Restructuring Plan in the second quarter of 1998.
Operating Income (Loss). Income from operations was $1.2 million, or 2.0% of
revenue, for the year ended December 31, 1998 compared to a loss of $9.9
million, or 54.4% of revenue, for the eleven months ended December 31, 1997.
This increase represents primarily the profitable results of operations of
InfoCure's acquisitions, as well as efficiencies realized by InfoCure from a
larger installed customer base and higher total revenue.
Interest, Net. Net interest expense increased to $3.5 million for the year
ended December 31, 1998 compared to $344,000 for the eleven months ended
December 31, 1997. This increase reflects primarily increases in interest
expense associated with indebtedness incurred to complete InfoCure's
acquisitions.
Other, Net. Net other income decreased to $81,000 for the year ended
December 31, 1998 compared to $223,000 for the eleven months ended December 31,
1997. This decrease relates primarily to one-time other income related to the
RADMAN merger.
Income Tax Benefit. The benefit for income taxes was $334,000 for the year
ended December 31, 1998 compared to $1.3 million for the eleven months ended
December 31, 1997.
Liquidity and Capital Resources
Since its inception, InfoCure has financed its operations through a
combination of commercial borrowings, cash generated from operations and sales
of equity. As of December 31, 1998, InfoCure had cash and cash equivalents of
$8.6 million and working capital of $481,000. During the year ended December
31, 1998, InfoCure generated $6.1 million of cash from operating activities,
representing principally a net loss of $1.9 million plus non-cash charges of
$9.0 million and $1.9 million for in process research and development and asset
impairment, respectively, and non-cash depreciation and amortization expenses
of $4.3 million offset by an increase in accounts receivable of $7.5 million.
During the year ended December 31, 1998, cash used in investing activities
was $65.9 million, representing primarily cash used for acquisitions of $60.2
million and property and equipment purchases of
18
<PAGE>
$2.6 million. Of the cash invested in acquisitions, $42.0 million, $12.8
million and $5.3 million were used to acquire HSD, MDI and MSI, respectively.
The HSD Acquisition provided InfoCure with radiology, anesthesiology and
enterprise-wide medical practice and practice management systems for management
service organizations. The MDI acquisition provided InfoCure with its Windows-
based client/server practice management software serving oral and maxillofacial
surgery practices. This software is being further developed by InfoCure as a
core product serving these and other specialties. The MSI acquisition provided
InfoCure with a leading position among office-based anesthesiology practices. A
substantial portion of the property and equipment costs represented InfoCure's
investment in its telecommunications infrastructure.
During the year ended December 31, 1998, InfoCure generated cash from
financing activities of $66.7 million, including $55.2 million net proceeds
from the Line of Credit, $7.8 million net proceeds from the issuance of the
Series A Preferred and $6.8 million net proceeds from the Institutional
Placement. These net proceeds were principally used to fund InfoCure's
acquisitions of PACE, MDI and MSI. The PACE acquisition provided InfoCure with
its Ideal core software product for larger general medical practices utilizing
AS/400 systems. In October 1998, InfoCure used $41.2 million from the Line of
Credit to fund a portion of the purchase price for HSD.
The Line of Credit is comprised of (a) a $10.0 million term loan (the "Term
Loan"); (b) a $20.0 million acquisition loan (the "Acquisition Loan"); and (c)
a $40.0 million convertible bridge loan (the "Convertible Bridge Loan").
Outstanding principal amounts under the Term Loan and Acquisition Loan are due
in 16 equal quarterly installments commencing January 1999 as follows: for the
Term Loan, installments of $527,000 each and for the Acquisition Loan,
installments of $1.2 million each. Outstanding principal amounts under the
Convertible Bridge Loan are due quarterly commencing April 1, 1999, and are
payable as follows: four payments of $1.0 million each; eight payments of $2.0
million each; two payments of $4.0 million each; and one payment in the amount
of the balance outstanding. The Convertible Bridge Loan must be repaid to the
extent of proceeds received by InfoCure from any public offering of securities.
Additionally, the lender has the right to demand a $10.0 million prepayment of
the Convertible Bridge Loan at any time before May 22, 1999 and is entitled to
certain additional annual prepayments based on InfoCure's excess cash flow.
Prepayment premiums ranging from 1% to 3% of principal outstanding apply to
early payment of principal amounts under the Term Loan and the Acquisition
Loan. The interest rates on the Term Loan and the Convertible Bridge Loan are
fixed at 9.50% per year. The interest rate on the Acquisition Loan is the
lender's base rate plus 1% through March 31, 1999. After March 31, 1999, the
rate is the lender's base rate plus a percentage based on InfoCure's senior
debt service coverage ratio. Interest on all three loans is due quarterly, in
arrears, on the same dates as the principal payments. The Line of Credit must
be paid in full not later than October 28, 2002. The Line of Credit is secured
by substantially all of InfoCure's assets. See "Risk Factors that May Affect
Future Results--InfoCure May Have Charges Associated with Acquisitions and
Other Events."
On February 9, 1998, InfoCure completed the private placement of 850,060
shares of Series A Preferred, resulting in gross proceeds to InfoCure of $8.5
million and net proceeds of approximately $7.8 million after payment of selling
commissions to the placement agent for the offering and other expenses of the
offering. InfoCure granted to the placement agent a warrant to acquire 100,000
shares of InfoCure's common stock at an exercise price of $9.00 per share. The
Consolidated Financial Statements of InfoCure reflect an accretive dividend
attributable to the preferred stockholders in the amount of $800,000 with
respect to the issuance costs and the fair market value of the warrant related
to the Series A Preferred. The Series A Preferred will convert to 1,000,070
shares of common stock upon the completion of the Underwritten Offering (as
defined herein). See "Description of Business--Company Overview."
On September 28, 1998, InfoCure completed the sale of 203,338 shares of
common stock for $2.5 million in the Institutional Placement. The Investor
committed to invest an additional $7.5 million, which must be invested from
time to time at the request of InfoCure in its sole discretion and subject to
certain price and trading volume limitations, upon the exercise of Put Options
through March 28, 2000. Subsequently, InfoCure completed the sale of 147,984
shares of common stock for $2.5 million in December 1998 and the sale of 80,000
shares of common stock for $2.0 million completed in January 1999. See
"Description of Business--Company Overview" and Note 10 to the Consolidated
Financial Statements of InfoCure.
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In connection with the HSD Acquisition, InfoCure delivered to The Reynolds
and Reynolds Company a $10.0 million, five-year, convertible promissory note,
bearing interest per annum at rates commencing at 8.0% and increasing each year
to a maximum of 14.0%. The note is convertible at the option of InfoCure during
the first year of the term into common stock at a price based on the price of
the common stock in an underwritten public offering or the average market value
of the common stock over a period of time prior to the conversion date. In
addition, InfoCure delivered to The Reynolds and Reynolds Company a $2.0
million subordinated promissory note payable within 120 days of the closing of
the HSD Acquisition. See Note 13 to the Consolidated Financial Statements of
InfoCure.
Proposed Public Offering
On January 25, 1999, InfoCure filed with the Securities and Exchange
Commission (the "Commission") a registration statement for the proposed sale to
the public in an underwritten offering of an estimated 3.0 million shares (the
"Underwritten Offering"). An additional estimated 1.0 million shares will be
sold by certain non-management selling stockholders in the Underwritten
Offering. InfoCure has granted the underwriters an over-allotment option to
purchase up to 600,000 additional shares in the Underwritten Offering. Pursuant
to its registration rights commitments with a number of its stockholders,
InfoCure will also file a registration statement with the Commission to
register for resale an additional estimated 4.0 million shares of its common
stock (the "Resale Registration Statement"). See "Risk Factors That May Effect
Future Results--Future Sales of Shares to Effect InfoCure's Stock Price."
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires companies to display, with the same
prominence as other financial statements, the components of other comprehensive
income. SFAS No. 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. SFAS No. 130 was adopted in 1998 but does not have any impact on
InfoCure's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS No. 131 was adopted in 1998 but had no effect on InfoCure's
financial statements.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to
recognize all derivative contracts as either assets or liabilities on the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset
or liability that are attributable to the hedged risk, or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not designated as
a hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Historically, InfoCure has not entered into
derivative contracts either to hedge existing risks or for speculative
purposes. Accordingly, InfoCure does not expect adoption of the new standard on
January 1, 2000 to affect its financial statements.
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Statement of Position ("SOP") 97-2, Software Revenue Recognition, issued in
October 1997, superseded SOP 91-1 and was effective for InfoCure for
transactions entered into after December 31, 1997. This statement provides
guidance on applying GAAP in recognizing revenue on software transactions and
establishes certain criteria for revenue recognition. InfoCure adopted SOP 97-2
in the first quarter of 1998. The adoption of this statement did not have a
significant impact on InfoCure's consolidated financial statements and is not
expected to have a significant impact in the future.
SOP 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, issued in April 1998, provides guidance on
accounting for the costs of computer software developed or obtained for
internal use and determining whether computer software is for internal use.
This statement is effective for fiscal years beginning after December 15, 1998.
Adoption of this statement is not expected to have a significant impact on
infoCure's financial statements.
Costs Related to Year 2000 Readiness
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 be "Year 2000 ready" because they may not operate properly
when requested to distinguish dates beginning in the year 2000. InfoCure has
implemented a plan in which it assesses, modifies and tests its products to
determine their Year 2000 readiness. As a result of these assessments,
modifications and tests, InfoCure believes that a majority of its products are
Year 2000 ready. For those of its products that it intends to support, InfoCure
has implemented a program for developing and installing modifications that
address date processing issues. In general, these modifications represent
relatively short segments of software code. Customers that are on current
maintenance contracts qualify to receive these modifications. InfoCure believes
that it will complete its Year 2000 readiness program by July 1999, but
InfoCure cannot be certain that it will do so. InfoCure could experience delays
or failures developing or implementing Year 2000 readiness modifications.
InfoCure also may be required to hire additional technical personnel to address
Year 2000 readiness issues, and InfoCure cannot guarantee that such additional
personnel will be available. In addition, customers may not install software
solutions received by us in a proper or timely manner, and InfoCure may not be
able to locate affected customers that are not currently a party to a
maintenance contract. Further, because a customer's products are often
interfaced with the customer's existing third-party applications, its products,
and potentially InfoCure's products, may not operate properly due to the
failure of such third-party applications to be Year 2000 ready. InfoCure
estimates that the remaining costs to complete its Year 2000 readiness program
are approximately $400,000. These estimates are based on assumptions that
InfoCure believes to be reasonable at this time; however, no assurance can be
given that these assumptions will remain accurate. While InfoCure does not
expect that the failure of any of its products to be Year 2000 ready will have
a material adverse effect on its business or results of operations, InfoCure
cannot guarantee that any such failure would not have such an effect.
Multiple lawsuits relating to Year 2000 issues have been filed against
certain of InfoCure's competitors. The plaintiffs in these lawsuits have sought
compensatory damages and equitable and injunctive relief. InfoCure has taken
measures to avoid these types of lawsuits. However, one of InfoCure's customers
has initiated an arbitration claim against InfoCure claiming that software it
purchased from InfoCure is not Year 2000 ready. InfoCure is no longer selling
or supporting this software and is attempting to resolve this dispute. InfoCure
believes that this arbitration, regardless of its outcome, will not result in a
material adverse effect on InfoCure. As InfoCure develops and implements its
Year 2000 readiness plan, InfoCure cannot guarantee that additional Year 2000
related claims will not be brought against it in the future, that the assertion
of such claims will not result in litigation or that InfoCure would prevail in
such litigation. Litigation, regardless of its outcome, could result in
substantial costs, divert management's attention from its operations and impact
customer purchasing decisions. Any such litigation could have a material
adverse effect on future results.
The Year 2000 problem also creates a risk of unforeseen problems in the
computer systems InfoCure uses in its business and in the systems of third
parties with whom InfoCure conducts business. InfoCure has substantially
completed its assessment of its software and hardware systems and InfoCure
believes that the
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substantial majority of its products are Year 2000 ready. InfoCure also has
contacted parties with whom InfoCure conducts a material amount of business to
assess the Year 2000 readiness of the software and systems in their businesses.
InfoCure intends to complete its determination of Year 2000 readiness by these
third parties by March 1999 and to develop strategies to assure that no
material business disruptions result from third-party Year 2000 problems. These
strategies may include demanding assurance that current business partners
achieve timely Year 2000 readiness or, in the absence of such assurance,
contracting with alternate third parties or developing solutions to work around
any such third-party Year 2000 readiness issues. Because InfoCure has not yet
determined the expense and related potential effect of Year 2000 readiness by
its third-party business partners, InfoCure cannot guarantee that non-readiness
by these third parties will not have a material adverse effect on future
results.
Risk Factors that May Affect Future Results
InfoCure May Face Difficulties Integrating Acquired Businesses
InfoCure's successful integration of the businesses it acquires is critical
to its future success. Integrating the management and operations of the
businesses it acquires is time consuming, and InfoCure cannot guarantee that it
will achieve any of the anticipated synergies and other benefits expected to be
realized from the acquisitions, including those reflected in InfoCure's
unaudited pro forma combined financial data. InfoCure may face difficulties
executing its acquisition strategy, including any one or more of the following:
. difficulty integrating the financial, operational and administrative
functions of acquired businesses;
. difficulty integrating the products of acquired businesses;
. delays in realizing the benefits of InfoCure's strategies for an
acquired business;
. diversion of management's attention from InfoCure's existing operations;
. difficulty operating in markets in which InfoCure has little prior
experience; or
. inability to retain key employees necessary to continue the operations
of the acquired businesses.
InfoCure may incur significant costs associated with acquisitions,
principally in the quarter in which it completes them. InfoCure expects such
costs to include:
. the direct costs of acquisitions, including fees to financial advisors,
legal counsel and independent auditors;
. the costs of integrating the operations of the businesses it acquires;
and
. charges related to the elimination of overlapping operations and
products (including in process research and development).
InfoCure's Products May Not Be Year 2000 Ready
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 be "Year 2000 ready" because they may not operate properly
when required to distinguish dates beginning in the year 2000 from dates in the
1900's. If InfoCure's software products are not Year 2000 ready, its customers
may make claims against it which may result in significant costs and
uncertainty. InfoCure is taking the following steps to determine the Year 2000
readiness of its products:
. review products that InfoCure will continue to market and support to
determine how they process dates;
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. design and complete modifications to fix any date processing issues that
InfoCure identifies for these products;
. test products to determine that they can process dates on or after
January 1, 2000; and
. deliver these modifications to InfoCure's customers for installation and
use.
InfoCure has designed its Year 2000 readiness tests in a way that it
believes will identify most Year 2000 readiness issues. InfoCure has concluded
tests for substantially all of its products that it will continue to sell or
support. InfoCure has determined that a majority of these products are Year
2000 ready. InfoCure believes that all products that it will continue to sell
or support will be Year 2000 ready by July 1999, but InfoCure cannot assure
that they will be. InfoCure could experience delays or failures in developing
or implementing modifications necessary to make a product Year 2000 ready. For
older products that it no longer sells or supports, InfoCure has attempted to
notify all known users of these products that these products generally are not
Year 2000 ready and will not be made Year 2000 ready. InfoCure cannot guarantee
that it will be able to contact all such users.
As part of InfoCure's effort to make its products Year 2000 ready and to
help its customers to make their systems that use our products Year 2000 ready,
InfoCure has offered its customers various alternative forms of products and
assistance, including generally available Year 2000 information and diagnostic
tools (through its InfoTour 2000 customer assistance program), software
patches, product upgrades or replacement products. InfoCure cannot guarantee
that these tools, patches, upgrades or replacement products will solve all
material Year 2000 problems with InfoCure's products or its customers' systems
or that claims will not be brought against InfoCure 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 with InfoCure's products or its customers' systems.
InfoCure has substantially completed an assessment of the Year 2000
readiness of the software and hardware systems that it uses in its business.
InfoCure believes that almost all of its internal software and hardware systems
are Year 2000 ready. InfoCure has contacted several third parties that it does
business with to assess whether the products and systems that they use in their
businesses are Year 2000 ready. InfoCure intends to complete this assessment by
contacting the remainder of the third parties that it regularly does business
with and by developing strategies that will help it make sure that no material
business disruptions will result from third-party Year 2000 problems. These
strategies may include obtaining assurances that current business partners
achieve timely Year 2000 readiness for the products they use in their
businesses. If InfoCure does not obtain these assurances it may be required to
contract with alternate third parties or develop a temporary solution. For a
more detailed discussion of Year 2000 readiness issues, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Costs
Related to Year 2000 Readiness."
InfoCure May Have Charges Associated with Acquisitions and Other Events
At times, InfoCure has terminated the use of software products, personnel
and facilities of businesses that it has acquired. This has resulted in
substantial charges for discontinued products, impairment of goodwill, employee
terminations and termination of leases and other contracts. InfoCure's
financial statements for the year ended December 31, 1998 reflect charges for
such items totaling $1.9 million. Additionally, InfoCure expensed $9.0 million
related to the purchase of in process research and development for the HSD
Acquisition completed in October 1998. In February 1999, InfoCure completed a
merger with OMS in a transaction accounted for as a pooling of interests. As a
result, InfoCure's historical financial results will retroactively reflect the
effects of the pooling. For 1998, OMS reported a net loss of $3.3 million
including a one-time, non-cash charge of $6.4 million for compensatory stock
awards. InfoCure may write off similar charges in connection with future
acquisitions. Recently, the Commission has required companies to reduce the
amount of such charges and to restate previously issued financial statements.
If the Commission were to require InfoCure
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to restate its financial statements, the announcement of such a restatement
could have an adverse effect on the trading price of InfoCure's common stock.
In addition, InfoCure plans to prepay the outstanding balance on its Line of
Credit which may result in a charge of as much as $5.1 million for the early
extinguishment of this debt by the first or second quarter of 1999.
In June 1998, InfoCure's Board of Directors approved restricted stock awards
for 35,000 shares to its Chief Executive Officer, 30,000 shares to its
Executive Vice President and 30,000 shares to its Chairman. The total value of
these restricted stock awards was approximately $1.1 million on the date of
grant. The restricted stock awards vest ratably over a ten-year term but
vesting can be accelerated upon the occurrence of certain events. One-half of
the shares subject to the restricted stock awards vested in the first quarter
of 1999 when the average closing price of InfoCure's common stock was $25.00 or
more for 20 consecutive trading days. InfoCure will incur an estimated
compensation charge of $500,000 in the first quarter of 1999 related to the
restricted stock awards to reflect this accelerated vesting. The remaining
shares will vest immediately at the time the average closing price of
InfoCure's common stock is $40.00 or more for 20 consecutive trading days. It
is possible that InfoCure will incur an additional charge of up to $580,000 if
this second accelerated vesting occurs. InfoCure does not expect to grant
additional restricted stock awards in the future and therefore does not expect
to incur compensation charges relating to restricted stock awards in the
future.
InfoCure May Have Difficulties Managing Its Growth
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. Key
personnel have recently joined InfoCure, and none of its 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 its business.
InfoCure's ability to implement its growth strategy could be adversely affected
by an inability to hire and retain additional qualified personnel.
InfoCure May Face Difficulties Implementing Its Acquisition Strategy
InfoCure intends to pursue acquisitions of businesses, product lines and
technologies that are complementary to its business. These acquisitions will
enable InfoCure to achieve its objective of becoming the leading provider of
advanced, specialty-specific practice management systems. InfoCure's ability to
grow through acquisitions will depend upon:
. the availability of suitable acquisition candidates at acceptable
acquisition prices;
. the availability of capital to complete acquisitions; and
. the market value of InfoCure's common stock.
InfoCure may experience increased competition for acquisition candidates.
This would mean that fewer acquisition opportunities would be available to it
and that acquisition prices could be higher.
Future acquisitions also could have a significant impact on InfoCure's
financial condition and capital needs, creating substantial fluctuations in its
quarterly and annual results of operations. Furthermore, future acquisitions
may require InfoCure to issue additional equity securities, incur additional
debt, amortize the costs of goodwill and intangible assets, and write off in
process research and development. Additionally, businesses that InfoCure
acquires could experience problems that InfoCure is not aware of at the time of
the acquisitions. Such problems might include unknown liabilities, Year 2000
problems, software bugs or adverse litigation and
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claims. Any one of these risks could have a material adverse effect on our
business. See "--InfoCure May Face Difficulties Integrating Acquired
Businesses," "Description of Business--Industry Overview" and "--Strategy."
InfoCure is a Relatively New Company
InfoCure has conducted its operations on a consolidated basis since July 10,
1997. InfoCure has only recently implemented company-wide systems and
procedures designed to manage its combined enterprise. InfoCure cannot
guarantee that it will ultimately be able to integrate successfully the
operations of all of its acquired businesses. The inability to successfully
integrate its acquisitions and reduce its operating expenses could have a
material adverse effect on future results and could negatively impact its
ability to acquire other businesses or otherwise execute its business strategy.
As a result of this growth through acquisitions, a year-to-year comparison of
our historical financial statements does not accurately reflect future results.
InfoCure's Quarterly Operating Results May Vary and in the Past InfoCure Has
Experienced Losses
InfoCure's operating results may vary significantly from quarter to quarter.
In addition, InfoCure has experienced historical losses. InfoCure's operating
results are influenced by such factors as:
. the timing of and charges associated with completed acquisitions or
other events;
. changes in customer purchasing patterns;
. competition;
. the timing of sales;
. the timing of and cost related to new product introductions and
upgrades;
. the length of sales cycles;
. the time required to install products; and
. the levels of advertising and promotional expenditures.
InfoCure's sales cycle is influenced by such factors as the size of the
transaction, size of the customer, changing business plans of the customer,
pace of the customers' decision-making process and general economic conditions.
Therefore, it is difficult to forecast revenue from system sales. The sales and
installation efforts for InfoCure's AS/400 products are more expensive and
require more time than for InfoCure's Windows-based products. Moreover, sales
of AS/400 products occur less frequently than sales of InfoCure's Windows-based
products, but typically result in greater revenue per sale. In addition,
InfoCure recognizes substantially lower margins on hardware sales relative to
software sales. Fluctuations in sales of hardware relative to sales of software
may negatively affect InfoCure's operating margins in a particular quarter.
InfoCure operates without any significant backlog of product orders. A
majority of the revenue realized in a quarter results from orders received or
services rendered in that quarter. Thus, operating results for any particular
quarter are not necessarily an indication of future results. Uncertainties
associated with the introduction of new products and with general market trends
may limit InfoCure's ability to forecast accurately short-term results of
operations. Additionally, substantially all of InfoCure's expenses are
relatively fixed, including costs of personnel, facilities and communications,
and are not susceptible to rapid reduction.
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. InfoCure believes that the primary
competitive factors in this market are:
. product features;
. ability to customize products by practice specialty;
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. customer service, support and satisfaction;
. price;
. ongoing product enhancements; and
. reputation and stability of the vendor.
InfoCure's principal competitors include both national and regional practice
management systems vendors. Some of InfoCure's national competitors have
greater financial, development, technical, marketing and sales resources than
InfoCure has. If competition in the practice management systems industry
intensifies, InfoCure may be required to lower the prices it charges for its
products and services. This may have a material adverse effect on future
results. Additionally, it is anticipated that additional competitors are likely
to enter the practice management systems market as it expands.
InfoCure's Success Depends On Its Ability to Protect the Confidentiality of
Its Software
InfoCure relies on a combination of trade secrets, copyright and trademark
laws, license agreements, nondisclosure and other contractual provisions and
technical measures to protect its proprietary rights. InfoCure's software
technology is not patented and existing copyright laws offer only limited
practical protection. In addition, InfoCure generally has not entered into
confidentiality agreements with its employees. InfoCure cannot guarantee that
the legal protections that it relies on will be adequate to prevent
misappropriation of its technology. Also, these protections do not prevent
independent third-party development of competitive products or services.
InfoCure believes that its products, trademarks and other proprietary rights do
not infringe upon the proprietary rights of third parties. However, InfoCure
cannot guarantee that third parties will not assert infringement claims against
it in the future or that any such assertion will not require InfoCure to enter
into a license agreement or royalty agreement with the party asserting a claim.
Regardless of the outcome of any such legal proceedings, responding to and
defending against any such infringement claim may require significant
management resources and otherwise have a material adverse effect on future
results.
InfoCure's Products May Not Be Accepted By Customers
Evolving healthcare industry standards, technological advances in software
and hardware, and changes in customer demands require significant ongoing
expenditures for the development and timely introduction of new products and
enhancements. InfoCure cannot guarantee that it will successfully develop new
products or enhancements of existing products that will satisfy the needs of
customers. Further, products or technologies developed by others may render
InfoCure's products and technologies noncompetitive or obsolete. In either
case, InfoCure's failure to gain market acceptance of new products and
enhancements by both existing customers and new customers would adversely
affect its revenue. For example, InfoCure has only recently begun to emphasize
its EDI service capabilities and InfoCure does not know whether this service
will be accepted by its customers. In addition, InfoCure has only recently
begun to offer InfoMine decision support software to the anesthesiology market.
InfoCure does not know whether this software will be accepted by its
anesthesiology customers or whether InfoCure will be able to offer the product
to other healthcare practice specialties.
InfoCure May Have Liability if Its Products are Defective
InfoCure's products perform functions for a healthcare provider's financial
records, patient medical records and treatment plans. If InfoCure's products
fail to provide accurate, confidential and other timely information, including
failures related to the Year 2000, InfoCure may incur liability or face other
claims. InfoCure cannot guarantee that it will not be subject to such claims in
the future or that contractual limitations on liability will be enforceable.
InfoCure currently maintains product liability insurance on all of its
products. InfoCure cannot guarantee that such insurance will adequately cover
any specific claim asserted against it or that its insurance carrier will not
deny coverage. A successful claim brought against InfoCure in excess of its
insurance coverage could have a material adverse effect on future results. Even
unsuccessful claims could result in substantial cost, divert management's
attention from InfoCure's operations and decrease or delay market acceptance of
InfoCure's products.
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While InfoCure tests its products, they may contain defects or problems.
These defects or problems could result in the failure of InfoCure's customers'
systems or the inability of those systems to perform properly. InfoCure's
contracts with its customers contain provisions that limit its liability for
those types of defects or problems; however, these provisions may not be
enforceable and may not protect InfoCure from liability. While InfoCure has
general liability insurance that it believes is adequate, including coverage
for errors and omissions, InfoCure may not be able to maintain this insurance
on reasonable terms in the future. In addition, InfoCure's insurance coverage
may not be sufficient to cover large claims and its insurer could disclaim
coverage on claims. If InfoCure is liable for an uninsured or underinsured
claim or if its premiums increase significantly, InfoCure's financial condition
could be adversely affected.
InfoCure's Success Depends on Its Key Executives
InfoCure's business depends on the continued efforts of its executive
officers and senior managers. InfoCure's strategy has been to retain the most
talented personnel of its acquired businesses. InfoCure will also likely be
dependent on members of the senior management of any business that it acquires
in the future. If any of these persons becomes unable or unwilling to continue
his or her role with InfoCure, 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 key executives, InfoCure
cannot guarantee that any individual will continue in his present capacity with
InfoCure for any particular period of time.
The Consolidation of the Healthcare Industry Could Adversely Affect InfoCure's
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 InfoCure's future results.
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 its 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
InfoCure's future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Description of Business--
Government Regulation."
27
<PAGE>
InfoCure's Management and Major Stockholders Can Influence Stockholder
Actions Through Their Share Ownership
Currently, directors, executive officers and major stockholders of InfoCure
beneficially own approximately 19% of the outstanding shares of InfoCure's
common stock. Although these persons do not presently have any agreements to
act in concert, any such agreement would make it difficult for others to elect
the entire Board of Directors and to control the disposition of any matter
submitted to a vote of stockholders. See "Principal Stockholders."
Future Sales Of Shares Could Affect InfoCure's Stock Price
The market price for InfoCure's common stock could fall dramatically if
InfoCure's stockholders sell large amounts of InfoCure's common stock in the
public market. These sales, or the possibility that these sales may occur,
could make it more difficult for us to sell equity or equity-related
securities in the future.
Upon completion of the proposed Underwritten Offering and effectiveness of
the Resale Registration Statement, substantially all of InfoCure's common
stock will be eligible for resale in the public market subject to certain
restrictions set forth in Rule 144 of the Securities Act and in lock-up
agreements between a number of InfoCure's stockholders and the underwriters
for the Underwritten Offering. If holders of InfoCure's common stock sell a
large number of shares in the public market, InfoCure's stock price could fall
significantly.
InfoCure's Certificate of Incorporation and Bylaws and Delaware Law May
Inhibit a Takeover of InfoCure
Certain provisions of Delaware law, InfoCure's Certificate of Incorporation
and Bylaws could, together or separately, have the effect of delaying,
deferring or preventing an acquisition of InfoCure and limit the price that
investors might be willing to pay in the future for InfoCure's common stock.
These provisions, among other things: (a) authorize InfoCure's Board of
Directors to issue, without further stockholder approval, preferred stock with
rights and preferences senior to the rights associated with the common stock;
(b) classify the Board of Directors into three classes of directors with each
class serving staggered three year terms; and (c) limit stockholders' ability
to call or make proposals at stockholder meetings.
ITEM 7. FINANCIAL STATEMENTS.
InfoCure Corporation
Contents
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......................... 29
Consolidated Financial Statements
Balance sheet............................................................. 30
Statements of operations.................................................. 31
Statements of changes in stockholders' equity............................. 32
Statements of cash flows.................................................. 33
Notes to financial statements............................................. 34
</TABLE>
28
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Shareholders of
InfoCure Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of InfoCure
Corporation and its subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1998 and the eleven months ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of InfoCure Corporation and its subsidiaries at December 31, 1998 and the
consolidated results of their operations and their cash flows for the year
ended December 31, 1998 and the eleven months ended December 31, 1997 in
conformity with generally accepted accounting principles.
Atlanta, Georgia
February 19, 1999
29
<PAGE>
InfoCure Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS:
Current
Cash and cash equivalents....................................... $ 8,552,217
Accounts receivable--trade, net of allowance of $633,000........ 22,244,180
Other receivables............................................... 403,756
Inventory....................................................... 2,043,268
Deferred tax assets............................................. 675,000
Prepaid expense and other current assets........................ 1,233,059
------------
Total current assets.......................................... 35,151,480
Property and equipment, net of accumulated depreciation........... 8,102,495
Goodwill, net of accumulated amortization of $3,467,000........... 72,202,999
Other intangible assets........................................... 7,308,382
Deferred tax assets............................................... 5,019,000
------------
$127,784,356
============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Note payable.................................................... $ 2,000,000
Accounts payable................................................ 3,723,248
Accrued expense................................................. 5,950,996
Accrued restructuring costs..................................... 282,916
Income taxes payable............................................ 644,956
Deferred revenue and customer deposits.......................... 9,184,940
Current portion of long-term debt............................... 12,883,684
------------
Total current liabilities..................................... 34,670,740
Long-term debt, less current portion.............................. 68,357,932
------------
Total liabilities............................................. 103,028,672
------------
Commitments
Convertible, redeemable preferred stock........................... 8,500,600
------------
Stockholders' equity
Common stock.................................................... 7,622
Common stock issuable........................................... 1,975,000
Additional paid-in capital...................................... 31,358,016
Accumulated deficit............................................. (15,780,949)
Deferred compensation........................................... (1,083,000)
Treasury stock, at cost......................................... (221,605)
------------
Total stockholders' equity.................................... 16,255,084
------------
$127,784,356
============
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
InfoCure Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Eleven Months Year Ended
Ended December
December 31, 31,
1997 1998
------------- -----------
<S> <C> <C>
Revenue:
Systems and software............................... $ 9,733,619 $34,491,904
Maintenance, support and services.................. 8,540,814 29,231,668
------------ -----------
Total revenue........................................ 18,274,433 63,723,572
------------ -----------
Operating expense:
Hardware and other items purchased for resale...... 4,327,396 12,566,865
Selling, general and administrative................ 11,653,369 34,741,989
Depreciation and amortization...................... 1,091,848 4,328,423
Purchased research and development................. -- 9,000,000
Asset impairment and restructuring costs........... 11,136,027 1,874,032
------------ -----------
Total operating expense.............................. 28,208,640 62,511,309
------------ -----------
Operating income (loss).............................. (9,934,207) 1,212,263
Other expense (income):
Interest, net...................................... 344,146 3,488,225
Other, net......................................... (223,123) (80,884)
------------ -----------
Loss before income taxes............................. (10,055,230) (2,195,078)
Income tax benefit................................... (1,324,142) (334,000)
------------ -----------
Net loss............................................. (8,731,088) (1,861,078)
Accretive dividend................................... -- 800,000
------------ -----------
Net loss available to common stockholders............ $ (8,731,088) $(2,661,078)
============ ===========
Net loss per share--basic and diluted................ $ (1.79) $ (0.39)
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
31
<PAGE>
InfoCure Corporation
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Shares
--------------------- Common Accrued Stock Additional
Common Treasury Common Treasury Stock Stock Purchase Deferred Paid-in
Stock Stock Stock Stock Issuable Repurchase Warrant Compensation Capital
----------- -------- -------- --------- ---------- ---------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at
February 1, 1997.. 63,301,936 (228,489) $ 63,302 $(100,000) $ -- $(65,000) $80,000 $ -- $ 3,642,192
Issuance of
common stock..... 800,000 -- 800 -- -- -- -- -- 279,200
Stock
repurchase....... (114,933) -- (115) -- -- 65,000 -- -- (64,885)
Conversion of
common stock
upon formation
of Company ...... (60,501,333) 228,489 (60,501) 100,000 -- -- -- -- (41,670)
Issuance of
common stock,
net of related
expense for:
Initial public
offering....... 1,400,000 -- 1,400 -- -- -- -- -- 5,727,064
Acquisition of
Founding
Companies...... 907,585 -- 908 -- -- -- -- -- 4,990,811
Payment of debt
and other
obligations.... 276,716 -- 277 -- -- -- -- -- 1,521,662
Exercise of
warrants....... 111,296 -- 111 -- -- -- (80,000) -- 201,159
Recent
Acquisitions... 76,748 -- 76 -- -- -- -- -- 577,315
Issuance of stock
options and
warrants......... -- -- -- -- -- -- -- -- 27,641
Purchase of
treasury stock... -- (21,073) -- (115,904) -- -- -- -- --
Net loss.......... -- -- -- -- -- -- -- -- --
----------- -------- -------- --------- ---------- -------- ------- ----------- -----------
Balance, at
December 31,
1997.............. 6,258,015 (21,073) 6,258 (115,904) -- -- -- -- 16,860,489
Issuance of
common stock,
net of related
expense for:
Recent
Acquisitions... 373,547 -- 374 -- -- -- -- -- 4,158,903
Private
Placements..... 351,322 -- 351 -- -- -- -- -- 4,777,149
Exercise of
stock options
and warrants... 146,141 -- 146 -- -- -- -- -- 314,024
Earnout
commitments.... 398,123 -- 398 -- -- -- -- -- 2,329,178
Restricted stock
award.......... 95,000 -- 95 -- -- -- -- (1,140,000) 1,139,905
Common stock
issuable in
private
placement ....... -- -- -- -- 1,975,000 -- -- -- --
Issuance of stock
options and
warrants......... -- -- -- -- -- -- -- -- 1,778,368
Accretive
dividend......... -- -- -- -- -- -- -- -- --
Purchase of
treasury stock... -- (19,370) -- (105,701) -- -- -- -- --
Amortization of
deferred
compensation..... -- -- -- -- -- -- -- 57,000 --
Net loss.......... -- -- -- -- -- -- -- -- --
----------- -------- -------- --------- ---------- -------- ------- ----------- -----------
Balance, at
December 31,
1998.............. 7,622,148 (40,443) $ 7,622 $(221,605) $1,975,000 $ -- $ -- $(1,083,000) $31,358,016
=========== ======== ======== ========= ========== ======== ======= =========== ===========
<CAPTION>
Deficit
-------------
<S> <C>
Balance, at
February 1, 1997.. $ (4,388,783)
Issuance of
common stock..... --
Stock
repurchase....... --
Conversion of
common stock
upon formation
of Company ...... --
Issuance of
common stock,
net of related
expense for:
Initial public
offering....... --
Acquisition of
Founding
Companies...... --
Payment of debt
and other
obligations.... --
Exercise of
warrants....... --
Recent
Acquisitions... --
Issuance of stock
options and
warrants......... --
Purchase of
treasury stock... --
Net loss.......... (8,731,088)
-------------
Balance, at
December 31,
1997.............. (13,119,871)
Issuance of
common stock,
net of related
expense for:
Recent
Acquisitions... --
Private
Placements..... --
Exercise of
stock options
and warrants... --
Earnout
commitments.... --
Restricted stock
award.......... --
Common stock
issuable in
private
placement ....... --
Issuance of stock
options and
warrants......... --
Accretive
dividend......... (800,000)
Purchase of
treasury stock... --
Amortization of
deferred
compensation..... --
Net loss.......... (1,861,078)
-------------
Balance, at
December 31,
1998.............. $(15,780,949)
=============
</TABLE>
See accompanying notes to consolidated financial statements
32
<PAGE>
InfoCure Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
<S> <C> <C>
Cash provided by (used in) operating activities:
Net loss........................................ $(8,731,088) $ (1,861,078)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Purchase of in-process research and
development................................... -- 9,000,000
Asset impairment and restructuring costs....... 11,136,027 1,874,032
Depreciation and amortization.................. 1,091,848 4,328,423
Allowance for doubtful accounts................ 16,000 582,000
Net gain on sale of property and equipment..... -- (9,160)
Stock-based compensation....................... 27,500 86,155
Deferred income taxes.......................... (1,369,991) (1,633,000)
Changes in current assets and liabilities--net
of effects of acquisitions:
Accounts receivable.......................... (1,077,338) (7,469,327)
Inventory, prepaid expense and other current
assets...................................... (493,087) (131,035)
Accounts payable and accrued expense......... (2,107,821) 2,380,458
Deferred revenue............................. 817,046 (1,039,001)
----------- ------------
Net cash provided by (used in) operating
activities.................................. (690,904) 6,108,467
----------- ------------
Cash used in investing activities:
Net cash paid for acquisition of Founding
Companies...................................... (3,745,113) --
Net cash paid for acquisition of Recent
Acquisitions................................... (4,795,408) (60,161,254)
Property and equipment expenditures............. (297,472) (2,557,791)
Net proceeds from disposal of property and
equipment...................................... -- 327,679
Cash paid for other intangible assets........... (76,093) (3,505,628)
Proceeds from collection of notes and other
receivables.................................... 375,201 --
----------- ------------
Net cash used in investing activities............. (8,538,885) (65,896,994)
----------- ------------
Cash provided by financing activities:
Proceeds from issuance of common stock.......... 6,008,464 6,752,500
Proceeds from exercise of options and warrants.. 121,270 314,170
Net borrowings under acquisition credit
facility....................................... 7,188,095 55,200,788
Payment of loan costs........................... (299,879) (2,519,308)
Proceeds from issuance of convertible preferred
stock.......................................... -- 7,819,952
Repayment of notes payable to stockholders...... -- (143,848)
Principal payments on long-term debt............ (2,262,115) (603,566)
Purchase of treasury stock...................... (115,904) (105,701)
----------- ------------
Net cash provided by financing activities......... 10,639,931 66,714,987
----------- ------------
Net change in cash and cash equivalents........... 1,410,142 6,926,460
Cash and cash equivalents, beginning of period.... 215,615 1,625,757
----------- ------------
Cash and cash equivalents, end of period.......... $ 1,625,757 $ 8,552,217
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements
1. Organization and Basis of Presentation
InfoCure Corporation ("InfoCure") was founded in November 1996 to develop,
market and service practice management systems for use by health care providers
throughout the United States. On July 10, 1997, InfoCure closed an initial
public offering of its common stock, par value $.001 per share, (the "Common
Stock") (the "July Offering") and simultaneously acquired the following six
operating companies: (i) International Computer Solutions, Inc. ("ICS"), (ii)
Health Care Division, Inc. ("HCD"), (iii) Millard-Wayne, Inc. ("Millard-
Wayne"), (iv) KComp Management Systems, Inc. ("KComp"), (v) DR Software, Inc.
("DR Software") and (vi) Rovak, Inc. ("Rovak") (collectively the "Founding
Companies"). American Medcare Corporation ("AMC"), a holding company and parent
of ICS, HCD, and Millard-Wayne, originally incorporated on January 11, 1983,
was merged with and into InfoCure at the time the Offering became effective and
is considered a predecessor company to InfoCure and the accounting acquirer of
all the companies. All outstanding shares of AMC were converted into
approximately 3.0 million shares of InfoCure Common Stock concurrently with the
consummation of the Offering. The aggregate consideration paid for the Founding
Businesses was approximately $3.7 million in cash and 907,000 shares of Common
Stock for an aggregate value of $8.7 million including fees and other
acquisition related costs.
Subsequent to the consummation of the Offering and the acquisition of the
Founding Companies, InfoCure acquired substantially all the assets or all the
outstanding equity securities of the following companies: (i) Professional On-
Line Computer, Inc. ("POLCI"); (ii) Commercial Computers, Inc. ("CCI"); (iii)
SoftEasy Software, Inc. ("SoftEasy"); (iv) Pace Financial Corporation ("PACE");
and (v) the orthodontic business unit of HALIS Services, Inc. ("OPMS"). POLCI,
CCI and SoftEasy were acquired with effect from October 1, 1997; PACE was
acquired with effect from November 1, 1997 and OPMS was acquired with effect
from December 1, 1997. Aggregate consideration for these acquisitions completed
in the eleven months ended December 31, 1997 was approximately 77,000 shares of
Common Stock and $11.7 million cash and debt, for an aggregate value of $12.4
million.
Additionally, in the year ended December 31, 1998, InfoCure acquired
substantially all the assets, subject to the assumption of certain liabilities,
of Micro-Software Designs, Inc. ("MDI") and Healthcare Systems Division ("HSD")
of The Reynolds and Reynolds Company and acquired the outstanding equity
securities of Medical Software Integrators, Inc. ("MSI"). These acquisitions
were effective from January 1, 1998 with respect to MDI and MSI and October 23,
1998 for HSD. Aggregate consideration for these acquisitions completed in 1998
was approximately 373,000 shares of Common Stock and $73.0 million cash and
debt for an aggregate value of $77.1 million. These acquisitions, together with
the acquisitions described in the preceding paragraph, are collectively
referred to as the "Recent Acquisitions."
In December 1998, InfoCure completed a merger with Radiology Management
Systems, Inc. ("RADMAN"). The Company exchanged approximately 497,000 shares of
InfoCure in the transaction. This acquisition was accounted for as a pooling of
interests. Accordingly, the accompanying consolidated financial statements
include the financial position, results of operations and cash flows of RADMAN
for all periods.
With the exception of the RADMAN transaction, the acquisitions of the
Founding Companies as well as the Recent Acquisitions, have been accounted for
using the purchase method of accounting.
InfoCure, the Founding Companies, the Recent Acquisitions and RADMAN are
referred to collectively as the Company. The Company changed its fiscal
reporting period to December 31 effective February 1, 1997.
The accompanying financial statements have been presented on a consolidated
basis for the eleven months ended December 31, 1997, and the year ended
December 31, 1998, including InfoCure, and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated. The
accompanying consolidated financial statements include AMC (InfoCure's
predecessor) and its subsidiaries, RADMAN, ICS
34
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
and HCD for the period from February 1, 1997; the Founding Companies for the
period from July 11, 1997, and the Recent Acquisitions from their respective
dates of acquisition.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Revenue Recognition
Revenue from software sales is recognized upon shipment in instances where
the Company has evidence of a contract, the fee charged is fixed and
determinable and collection is probable. Hardware resales are recognized upon
product shipment. Revenue from support and maintenance contracts, which are
typically one year in length, is recognized ratably over the life of the
contract. Revenue from other services is recognized as the services are
provided.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturity dates of
three months or less from the date of purchase to be cash equivalents.
Concentrations of Credit Risk
The Company's credit concentrations are limited due to the wide variety of
customers in the health care industry and the geographic areas into which the
Company's systems and services are sold. The Company performs periodic credit
evaluations of its customers and generally does not require collateral.
At certain times during the year, the Company maintains cash and cash
equivalents in bank accounts in amounts above the federally insured limits.
Fair Value of Financial Instruments
The fair value of financial instruments is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Management estimates that the carrying amounts of the Company's financial
instruments included in the accompanying consolidated balance sheets are not
materially different from their fair values.
Inventories
Inventory consists primarily of peripheral computer equipment and related
supplies. Inventory is accounted for on the first-in, first-out basis and
reported at the lower of cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the related assets using both straight line and
accelerated methods for financial reporting and primarily accelerated
35
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
methods for income tax purposes. Substantial betterments to property and
equipment are capitalized and repairs and maintenance are expensed as incurred.
Capitalized Software Costs
Software development costs are expensed as incurred prior to establishing
the technological feasibility of a product. For the period between the
establishment of technological feasibility and the time a product is available
for general release, such costs are capitalized. Capitalized software costs are
amortized using the straight-line method over the estimated lives of the
related products (generally 48 months).
Goodwill and Other Intangible Assets
Intangible assets consist primarily of goodwill, which represents the excess
of cost over the fair value of assets acquired in business combinations
accounted for under the purchase method. All goodwill is amortized on a
straight-line basis over an estimated useful life of 15 years. Other intangible
assets consist primarily of deferred loan costs which are being amortized over
the life of the respective loans at rates which approximate the interest
method.
Asset Impairment
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, effective for years beginning after December 15, 1995, requires that long-
lived assets and certain intangibles to be held and used by the Company be
reviewed for impairment. The Company periodically assesses whether there has
been a permanent impairment of its long-lived assets, in accordance with SFAS
No. 121. A write-down of assets due to impairment was required for the eleven
months ended December 31, 1997, in the amount of approximately $7.8 million
(Note 4).
Income Taxes
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than possible enactments of changes in the tax laws or rates.
Restructuring Costs
The Company records the costs of consolidating existing Company facilities
into acquired operations, including the external costs and liabilities to close
redundant Company facilities and severance and relocation costs related to the
Company's employees in accordance with Emerging Issues Task Force ("EITF")
Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in
Restructuring).
Earnings Per Share
The Company has adopted the provisions of SFAS No. 128, Earnings Per Share,
which is effective for fiscal years ending after December 15, 1997. Basic
earnings per share for the eleven months ended December 31, 1997 and the year
ended December 31, 1998 is calculated based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share include
the dilutive effect of Common Stock equivalents.
36
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Weighted average number of shares outstanding used in computing basic EPS
for the eleven months ended December 31, 1997, were 4,880,455. Weighted average
number of shares outstanding used in computing basic EPS for the year ended
December 31, 1998, were 6,780,437. The impact of the assumed exercise of the
Company's stock options and warrants and convertible preferred stock would have
been antidilutive for the eleven months ended December 31, 1997, and the year
ended December 31, 1998, and, therefore, diluted EPS data have not been
presented. The impact of the assumed exercise of these instruments may have a
dilutive effect in the future.
Reclassification
Certain prior year amounts have been reclassified to conform with the
current year presentation.
New Accounting Pronouncements
SFAS No. 130, Reporting Comprehensive Income, became effective in 1998. This
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purposes financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company addressed the requirements of SFAS No.
130 and there was no impact on the financial statements as a result.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, became effective in 1998. It establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports issued to shareholders. Generally, certain financial
information is required to be reported on the basis that is used internally for
evaluating performance of and allocation of resources to operating segments.
The Company has determined that this standard did not impact its current
practice of reporting operating information.
Statement of Position ("SOP") 97-2, Software Revenue Recognition, issued by
the American Institute of Certified Public Accountants, became effective in
1998. This Statement provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions and
establishes certain criteria for revenue recognition. The revenue recognition
criteria stated in the pronouncement had no material impact on the Company's
financial statements.
SOP 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, issued in April 1998, provides guidance on
accounting for the costs of computer software developed or obtained for
internal use and determining whether computer software is for internal use.
This statement is effective for fiscal years beginning after December 15, 1998.
Adoption of this statement is not expected to have a significant impact on
infoCure's financial statements.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. SFAS No. 133 requires companies to recognize all derivatives contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on January 1, 2000, to affect its
financial statements.
37
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
3. Business Combinations
As described in Note 1, the Company, in conjunction with the July Offering,
acquired the six Founding Companies. The Recent Acquisitions, also described in
Note 1, included POLCI, CCI and SoftEasy, acquired with effect from October 1,
1997; PACE, acquired with effect from November 1, 1997; and OPMS, acquired with
effect from December 1, 1997. Additionally, the Recent Acquisitions described
in Note 1 also included the fiscal 1998 acquisitions of MSI and MDI, acquired
with effect from January 1, 1998, and HSD, acquired October 23, 1998.
Also as described in Note 1, the Company merged with RADMAN in December
1998. This acquisition was accounted for as a pooling of interests.
Accordingly, the accompanying consolidated financial statements include the
financial position, results of operations and cash flows of RADMAN for all
periods.
All of the companies acquired have long-term marketing rights to and/or
ownership of licensed software in various segments of the healthcare industry.
Except for the RADMAN acquisition, all of the acquisitions of the Company and
its predecessor have been accounted for under the purchase method of accounting
and the acquired companies' results of operations from the respective
acquisition dates are included in the accompanying consolidated financial
statements.
The separate results of operations of InfoCure and RADMAN for the periods
presented follow.
<TABLE>
<CAPTION>
Eleven Months Year Ended
Ended December
December 31, 31,
1997 1998
------------- -----------
<S> <C> <C>
Revenue
InfoCure........................................ $15,755,072 $59,235,474
RADMAN.......................................... 2,519,361 4,488,098
----------- -----------
$18,274,433 $63,723,572
=========== ===========
Net income (loss)
InfoCure........................................ $(8,569,498) $(2,881,712)
RADMAN.......................................... (161,590) 1,020,634
----------- -----------
$(8,731,088) $(1,861,078)
=========== ===========
</TABLE>
The following unaudited pro forma information presents the consolidated
results of operations of the Company as if the acquisitions had occurred as of
the beginning of the immediately preceding period. The pro forma information is
not necessarily indicative of what would have occurred had the acquisitions
been made as of such periods, nor is it indicative of future results of
operations. The pro forma amounts give effect to appropriate adjustments for
the fair value of the assets acquired, reductions in personnel costs and other
operating expenses not assumed as part of the acquisitions, amortization of
intangibles, interest expense and income taxes.
<TABLE>
<CAPTION>
Eleven Months Ended Year Ended
Pro Forma Amounts December 31, 1997 December 31, 1998
----------------- ------------------- -----------------
(In Thousands Except Share Data)
<S> <C> <C>
Revenue.............................. $ 89,056 $101,938
Net loss available to common
stockholders ....................... (18,174) (3,002)
Loss per share--basic and diluted.... (2.52) (0.34)
</TABLE>
The pro forma amounts for net income and earnings per share include the
impact of asset impairment and restructuring charges as described in Note 4.
38
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
The following tables summarize the fair values of the assets acquired,
liabilities assumed and consideration given in connection with the foregoing
acquisitions accounted for as purchases:
<TABLE>
<CAPTION>
Eleven Months Ended Year Ended
December 31, 1997 December 31, 1998
------------------- -----------------
<S> <C> <C>
Accounts receivable................... $ 3,218,513 $10,642,067
Inventory............................. -- 1,426,186
Prepaid expenses...................... -- 347,374
Property and equipment................ 1,216,574 4,831,662
Goodwill.............................. 21,644,540 56,148,495
Capitalized software.................. 1,717,956 420,082
Other assets.......................... 1,321,316 707,381
Deferred revenue...................... (2,690,051) (4,942,109)
Accounts payable...................... (933,630) (692,577)
Notes payable......................... (1,650,173) --
Other liabilities..................... (2,744,090) (742,118)
----------- -----------
Net assets acquired................... 21,100,955 68,146,443
Purchased research and development.... -- 9,000,000
----------- -----------
Total acquisition..................... $21,100,955 $77,146,443
=========== ===========
</TABLE>
These acquisitions were funded as follows:
<TABLE>
<CAPTION>
Eleven Months Ended Year Ended
December 31, 1997 December 31, 1998
------------------- -----------------
<S> <C> <C>
Common stock........................... $ 5,569,110 $ 4,159,277
Note payable and other payables........ 6,991,324 12,825,912
Cash................................... 8,540,521 60,161,254
----------- -----------
Total consideration.................... $21,100,955 $77,146,443
=========== ===========
</TABLE>
In addition to the foregoing consideration, certain of the purchase
acquisition agreements provided for additional purchase consideration based on
attaining certain revenue or operating income goals. The additional
consideration will be accounted for as additional purchase price or
compensation expense if and when earned. Maximum contingent consideration
payable with respect to the Founding Companies originally aggregated
$4.7 million. As more fully described in Note 4, the Company's restructuring
plans affected certain of the acquired companies such that portions of the
contingent consideration related thereto was deemed earned and payable as of
December 31, 1997. Accordingly, approximately $2.5 million of such
consideration was included as part of the Company's restructuring costs for the
eleven months ended December 31, 1997, in settlement of estimated contingent
consideration obligations related to the affected companies. In the year ended
December 31, 1998, the Company finalized negotiations with respect to
contingent consideration for one affected company. As a result the Company
agreed to an additional $750,000 of purchase consideration which is included in
its restructuring costs for the year ended December 31, 1998.
Maximum contingent consideration payable with respect to the Recent
Acquisitions completed in 1998 aggregates $12.4 million. In 1998 contingent
consideration of approximately $1.1 million was earned and has been recorded as
additional purchase price pursuant to the terms of the original purchase
agreement, as amended. Total remaining contingent consideration outstanding at
December 31, 1998 is approximately $10.9 million.
39
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Purchased Research and Development
Through its acquisition of HSD, the Company acquired three in-process
physician practice management system research and development projects. As of
the acquisition date, technological feasability had not been established and
there were no alternative future uses for the projects. The Company assigned an
aggregate value of $9 million to the projects, based on the results of an
independent appraisal. The appraisal considered the projects' stage of
completion at the acquisition date and the time frame and estimated costs to
complete the projects.
4. Impairment of Assets and Restructuring Costs
Effective December 1, 1997, the Company determined to restructure through a
plan to consolidate existing facilities and acquired operations. This
restructuring plan enabled the Company to more effectively leverage its present
and planned acquisitions, streamline its offering of products and services and
respond more effectively to changing market conditions. In connection
therewith, management also reevaluated the Company's investment in goodwill and
capitalized software in light of current market conditions and the
restructuring plan. Management determined that, based on current market
conditions and an analysis of projected undiscounted future cash flows
calculated in accordance with the provisions of SFAS No. 121, the carrying
amount of certain long-lived assets, principally of Rovak and DR Software, may
not be recoverable. The resultant impairment of long-lived assets, due
principally to the impact of the Company's new acquisitions (Note 3),
necessitated a write-down of approximately $7.8 million as follows: (i) $3.5
million and $2.8 million of goodwill representing the excess of cost over net
assets of the acquisition of Rovak and DR Software, respectively, acquired in
July 1997 and (ii) $1.5 million of capitalized software related to products
whose future utility is diminished based on market conditions. The estimated
fair values of these long-lived assets were determined by calculating the
present value of estimated expected future cash flows using a discount rate
commensurate with the risks involved.
In connection with effecting the consolidation and restructuring, the
Company has also recorded costs and accrued liabilities to close redundant
facilities, cancel leases and other executory contracts and recognize
contingent consideration earned or deemed as payable under terms of certain
acquisition agreements for acquired companies affected by the consolidation and
restructuring.
The restructuring plan, which was completed in the second quarter of 1998,
also included termination of certain redundant staff positions. Details of this
element of the restructuring plan were finalized and communicated in the first
quarter of 1998. Accordingly, compensation costs, including severance and other
termination benefits, and other future costs related to the restructuring
aggregating $1.1 million, were recognized in the first quarter of 1998 in
accordance with EITF No. 94-3.
40
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Asset impairment and restructuring costs for the eleven months ended
December 31, 1997 and the year ended December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
Cost related to 1997 1998
--------------- ------------- ------------
<S> <C> <C>
Write-off of goodwill............................ $ 6,360,063 $ --
Write-off of capitalized software development
costs........................................... 1,460,943 --
Facility closure and consolidation............... 460,808 --
Compensation costs for severance and other
termination benefits............................ -- 1,124,032
"Earn-out" compensation for contingent
consideration earned or deemed payable to former
stockholders of entities affected by the
consolidation and restructuring................. 2,558,169 750,000
Other asset write-downs and costs................ 296,044 --
----------- ----------
Total asset impairment and restructuring costs... $11,136,027 $1,874,032
=========== ==========
</TABLE>
As of December 31, 1998, approximately 50 employee terminations were related
to restructuring actions. Accrued restructuring at December 31, 1998 totaled
approximately $283,000, which is considered adequate to cover the facilities
related costs which remain as a result of the 1997 restructuring plan.
5. Property and Equipment
Major classes of property and equipment consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31,
(Years) 1998
------------ ------------
<S> <C> <C>
Office and computer equipment...................... 3-5 $ 6,765,489
Furniture and fixtures............................. 5-7 1,684,816
Equipment under capital lease obligations.......... 3-5 1,233,876
Leasehold improvements............................. 3-5 333,320
-----------
10,017,501
Less accumulated depreciation...................... 1,915,006
-----------
$ 8,102,495
===========
</TABLE>
Depreciation expense was approximately $231,000 and $651,000 for the eleven
months ended December 31, 1997 and the year ended December 31, 1998,
respectively. In connection with the restructuring plan described in Note 4,
the Company disposed of property and equipment, primarily office and computer
equipment, with a net book value of approximately $155,000.
41
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
6. Other Intangible Assets
Other intangible assets consisted of:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Unamortized loan costs.......................................... $4,655,739
Capitalized software development costs.......................... 2,602,027
Capitalized costs of future acquisitions........................ 401,746
Other........................................................... 417,425
----------
8,076,937
Less accumulated amortization................................... 768,555
----------
$7,308,382
==========
</TABLE>
As described in Note 4, approximately $1.5 million of capitalized software
was written-off during the eleven month period ended December 31, 1997.
Amortization of capitalized software charged to operations was approximately
$331,000 and $112,000 for the eleven months ended December 31, 1997, and the
year ended December 31, 1998, respectively.
7. Accrued Expense
Accrued expense consisted of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Interest........................................................ $1,677,195
Compensation.................................................... 1,420,875
Additional purchase price consideration......................... 1,100,000
Taxes, other than income........................................ 484,249
Professional fees............................................... 146,849
Other........................................................... 1,121,828
----------
$5,950,996
==========
</TABLE>
8. Notes Payable and Long-Term Debt
The Company has a $2 million short-term note payable given in connection
with an acquisition. The note bears interest at 12% per annum. The first
installment of $1 million was due in January 1999 and the second installment is
due and payable in February 1999.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December
31,
1998
-----------
<S> <C>
Notes payable, FINOVA Capital Corporation ("FINOVA") (1)........ $68,350,807
Subordinated notes payable, remainder of purchase price for
acquisitions (2)............................................... 10,603,566
Subordinated notes payable to stockholders; interest varies
between 7% and 10%; maturing at various dates through 2001..... 180,058
Other........................................................... 2,107,185
-----------
81,241,616
Less current portion............................................ 12,883,684
-----------
$68,357,932
===========
</TABLE>
42
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
(1) At December 31, 1997, the Company had a $10 million credit facility with
FINOVA for the purpose of funding its acquisition program. The credit
facility is collateralized by substantially all of the Company's assets and
the accounts receivable, cash flows and assets of future acquisition
companies. This facility has a five-year term and accrues interest at an
annual rate of prime plus 1.25% to 2%, depending on the Company achieving
certain debt service ratios. This facility also included a contingent
obligation payment, due in 2001 or upon full prepayment, based on the
Company achieving certain operating cash flows in excess of a base
operating cash flow, as defined. At December 31, 1997, the interest rate
was 10.5% per annum and the contingent obligation payment was
indeterminable.
In February 1998, an amendment to the credit facility and a new loan
increased the available credit under this facility to $30 million and, in
October 1998, another amendment and new loan increased the available credit
under this facility to $70 million. In connection with the amendments and
increases, the interest rates were prime plus 0.5% to 1% (8.75% at December
31, 1998) on the $20 million loan and fixed at 9.5% on the $40 million and
$10 million loans. Principal is due on all the loans in quarterly
installments, beginning at $2,777,000, increasing ratably to $6,777,000,
before the final installment of $13,777,000 in October 2002. In addition,
with the October 1998 amendment and increase, the Company agreed to pay
fees and costs of approximately $2.5 million and issued warrants to the
lender to acquire up to 245,000 shares of Common Stock. The estimated value
of these warrants is $1.5 million, which is included in other intangible
assets and is being amortized as interest expense over the remaining term
of the loan. A portion of these fees and costs were in substitution of the
contingent obligation payment described above.
(2) The notes payable for the remainder of purchase price for acquisitions
consist of two notes at December 31, 1998. One note, for $10 million, is
due in equal installments of principal over five years. The initial
interest rate is eight percent per annum and increases each year to a
maximum of 14 percent per annum. The note is convertible, at the Company's
option during the first year of the term, into shares of Common Stock at a
rate based on the price per share of an underwritten public offering or the
market value of the Common Stock. The remaining $603,566 note bears
interest at six percent per annum and is due October 1, 2000. This note is
convertible into shares of Common Stock upon the closing of a public
offering of the Common Stock (Note 13). The conversion price is $7.59 or
$8.25 per share if the conversion occurs in 1999 or 2000, respectively.
As of December 31, 1998, future maturities of these obligations are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- -----------
<S> <C>
1999......................................................... $12,883,684
2000......................................................... 14,217,296
2001......................................................... 13,592,420
2002......................................................... 38,473,429
2003......................................................... 2,074,787
-----------
Total...................................................... $81,241,616
===========
</TABLE>
9. Commitments
Operating Leases
The Company leases its office facilities and certain equipment under
operating leases having terms ranging from one to seven years.
43
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Approximate future minimum rentals, by year and in the aggregate, under
noncancellable operating leases with remaining terms of more than one year are
as follows:
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1999.......................................................... $2,838,000
2000.......................................................... 2,393,000
2001.......................................................... 2,002,000
2002.......................................................... 1,847,000
2003.......................................................... 560,000
Thereafter.................................................... 203,000
----------
Total....................................................... $9,843,000
==========
</TABLE>
Rent expense was approximately $468,000 and $1,338,000 for the eleven months
ended December 31, 1997, and the year ended December 31, 1998, respectively.
Employee Benefit Plan
In January 1998, the Company implemented a qualified 401(k) savings plan
("the Plan") covering all employees meeting certain age and years of service
eligibility requirements. Eligible employees may contribute up to 15% of their
annual salary to the Plan, subject to certain limitations. The Company may make
matching contributions and may also provide profit-sharing contributions at its
sole discretion. Employees become fully vested in any employer contributions
after five years of service.
During the eleven months ended December 31, 1997, the companies comprising
the Founding Companies and the Recent Acquisitions had separate benefit plans
for employee retirement. As of January 31, 1998, all previous plans were rolled
into the newly adopted plan. Contributions to employee benefit plans for the
eleven months ended December 31, 1997, and the year ended December 31, 1998,
were approximately $34,000, and $435,000, respectively. The contribution for
the year ended December 31, 1998 will be in Common Stock.
10. Stockholders' Equity
Common Stock
In connection with the formation of the Company and concurrent with
completion of its initial public offering, all of the approximately 52 million
outstanding shares of AMC common stock were converted into approximately 3.0
million shares of Common Stock. The Company had 15,000,000 shares of $.001 par
value Common Stock and 2,000,000 shares of $.001 par value Preferred Stock
authorized at December 31, 1998. Shares of Common Stock issued and outstanding
were 7,581,705 at December 31, 1998.
Institutional Investor
Under the terms of a private placement agreement with an institutional
investor (the "Investor"), the Company can exercise options ("Put Options")
with the Investor. Generally, upon exercise of a Put Option, the Investor must
tender the amount designated by the Company (the "Investment Amount"). The
number of shares to be issued upon exercise of a Put Option is based on a
nominal discount of the stock's average closing price, as defined.
The Investor has committed to invest up to $10 million. The Company has
exercised $7 million in three installments from September 28 through December
31, 1998. The most recent installment, for $2 million, was
44
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
initiated in December 1998, closed in January 1999, and is reflected as common
stock issuable in the accompanying financial statements. A total of 351,322
shares were issued in the first two installments and 80,000 shares were issued
in the third installment.
The Company also granted the Investor warrants to acquire 100,000 shares of
common stock (see below).
Convertible Redeemable Preferred Stock
In February 1998, the Company completed the sale of 850,060 shares of its
Convertible Redeemable Preferred Stock in a private placement for
approximately $8.5 million which netted the Company $7.8 million after
commissions and offering expenses. These proceeds were used primarily for
funding future acquisitions and related expenses.
The Preferred Stock is not currently entitled to any set level of
dividends; however, in the event the Company should pay any dividend or make
any other distribution in respect of its Common Stock, a dividend in a like
amount must be paid in respect to the Preferred Stock based on the number of
shares of Common Stock into which the Preferred Stock could then be converted.
Shares of the Redeemable Preferred Stock are immediately convertible into
shares of Common Stock. Until February 6, 1999, the shares can be converted
into that number of Common Stock shares determined by dividing the initial
price of $10.00 per share by a conversion price of $8.50. On February 6, 1999,
the conversion price will be reset for the lesser of $8.50 per share or the
trailing 30-day average closing price of the Common Stock, subject to a
minimum of $6.75 per share. All unconverted shares of Preferred Stock will be
redeemed by the Company for $10 per share plus accumulated and unpaid
dividends in February 2003.
The holders of Preferred Stock are entitled to vote together as a single
class with the holders of Common Stock on all matters submitted to a vote of
stockholders, except to the extent a separate class vote is required. The
holders of Preferred Stock have one vote for each share of Common Stock that
could then be acquired on conversion of their Preferred Stock.
Upon any dissolution, liquidation or winding-up of the Company, before any
payments are made to any holders of Common Stock or any other class or series
the Company's capital stock then outstanding, the holders of Preferred Stock
are entitled to receive an amount equal to $10.00 per share of Preferred Stock
or, in the event the holders of Common Stock would be entitled to a greater
payment, the holders of Preferred Stock are entitled to participate equally
with the holders of Common Stock, on an as-converted basis, in such
liquidating distribution.
The Preferred Stock is not entitled to cumulative voting and has no
preemptive rights. There is no sinking fund in respect of the Preferred Stock.
In connection with the immediate conversion feature the Company recognized
$800,000 as an accretive dividend attributable to the Preferred Stock issuance
including commissions and the estimated value of warrants granted to the
placement agent (see below).
Stock Compensation Plans
The Company has stock option plans that provide for the granting of
incentive and non-qualified options to purchase the Company's Common Stock to
selected officers, other key employees, directors, and consultants. These
plans include the InfoCure Corporation 1996 Stock Option Plan, the InfoCure
Corporation Length-of-Service Nonqualified Stock Option Plan, and the InfoCure
Corporation Directors Stock Option Plan. The
45
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Company also assumed the stock options of AMC, its predecessor, which were
outstanding at July 10, 1997. Such options were converted at the same rate used
in connection with the conversion of AMC's common stock.
Under the InfoCure Corporation 1996 Stock Option Plan 3,000,000 shares of
Common Stock of the Company have been reserved for option grants to directors,
officers, other key employees, and consultants. Employees of the Company may be
granted Incentive Stock Options (ISOs) within the dollar limitations under
Section 422(d) of the Internal Revenue Code. The exercise price of all ISOs
shall not be less than the fair market value of the Common Stock as of the
option grant date (110% of such value for 10% shareholders). Options granted to
directors and consultants must be nonqualified stock options. Options vest
ratably over the four year period beginning on the grant date.
Under the InfoCure Corporation Length-of-Service Nonqualified Stock Option
Plan, 500,000 shares of Common Stock of the Company have been reserved for
issuance to employees of the Company. Employees are granted nonqualified stock
options based on years of service with the Company and are fully vested four
years from the grant date. The exercise price of options issued pursuant to
this plan shall be no less than the fair market value of the Common Stock as of
the grant date.
Under the InfoCure Corporation Directors Stock Option Plan, 100,000 shares
of Common Stock of the Company have been reserved for issuance as nonqualified
stock options to Directors of the Company who are not employees of the Company.
Upon appointment to the Board of Directors, a director receives an option grant
of 10,000 shares and may receive an additional option grant of 2,500 shares on
each anniversary date. One-half of the options granted pursuant to this plan
vests after one year of service following the grant date and the other one-half
vests after two years of service following the grant date.
In 1998, the Company implemented the InfoCure Employee Stock Purchase Plan.
This plan allows employees of the Company to purchase Common Stock through
payroll deductions for 85% of fair market value. As of December 31, 1998, there
are 150,000 shares of Common Stock reserved for issuance under this plan.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, Accounting for Stock-Based Compensation, effective for InfoCure
beginning February 1, 1996. SFAS No. 123 defines a "fair value method" of
accounting for employee stock options. It also allows accounting for such
options under the "intrinsic value method" in accordance with Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations. If a company elects to use the intrinsic
value method, then pro forma disclosures of earnings and earnings per share are
required as if the fair value method of accounting was applied. The effects of
applying SFAS No. 123 in the pro forma disclosures are not necessarily
indicative of future amounts because the pro forma disclosures do not take into
account the amortization of the fair value of awards prior to 1995.
Additionally, InfoCure is expected to grant additional awards in future years.
The Company has elected to account for its stock options under the intrinsic
value method as outlined in APB No. 25. The fair value method requires use of
option valuation models, such as the Black-Scholes option valuation model, to
value employee stock options, upon which a compensation expense is based. The
Black-Scholes option valuation model was not developed for use in valuing
employee stock options. Instead, this model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because InfoCure's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, it is management's
opinion that the existing models do not necessarily provide a reliable measure
of the fair value of its employee stock options. Under the intrinsic value
46
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
method, compensation expense is only recognized if the exercise price of the
employee stock option is less than the market price of the underlying stock on
the date of grant.
In accordance with SFAS No. 123, the fair value for the Company's employee
stock options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions for the eleven
months ended December 31, 1997 and the year ended December 31, 1998.
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
<S> <C> <C>
Risk-free interest rate........................... 5.7-6.2% 6%
Dividend yield.................................... 0.0% 0.0%
Volatility factor................................. 19.7% 58%
Weighted average expected life (in years)......... 5 4
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
(In Thousands Except Share
Data)
<S> <C> <C>
Net loss available to common stockholders
As reported..................................... $ (8,731) $(2,661)
Pro forma....................................... (8,835) (3,803)
Basic and diluted loss per share
As reported..................................... $ (1.79) $ (0.39)
Pro forma....................................... (1.81) (0.56)
</TABLE>
A summary of stock option activity, and related information for the eleven
months ended December 31, 1997, and the year ended December 31, 1998 follows:
<TABLE>
<CAPTION>
Weighted-
Average
exercise
Options price
--------- ---------
<S> <C> <C>
Outstanding at February 1, 1997......................... 168,540 $ 3.63
Granted............................................... 985,471 4.23
Exercised............................................. -- --
Forfeited or canceled................................. (2,983) 1.67
---------
Outstanding at December 31, 1997........................ 1,151,028 4.15
Granted............................................... 1,697,475 12.64
Exercised............................................. (50,887) 1.22
Forfeited or canceled................................. (251,829) 8.26
---------
Outstanding at December 31, 1998........................ 2,545,787 9.74
Options exercisable at December 31, 1997................ 68,236 2.91
Options exercisable at December 31, 1998................ 361,232 4.22
</TABLE>
47
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
The weighted average fair value of options granted for the eleven months
ended December 31, 1997, and the year ended December 31, 1998, were $1.34 and
$6.81, respectively.
The following table summarizes information about the Company's outstanding
stock options at December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ ------------------------
Weighted-
Average
Number Remaining Weighted- Number Weighted-
Range of Outstanding at Contractual Average Exercisable at Average
Exercise December 31, Life Exercise December 31, Exercise
Prices 1998 (Years) Price 1998 Price
-------- -------------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.68- 4.13 708,696 2.6 $ 4.01 266,211 $3.81
4.19- 9.81 454,742 2.7 7.55 95,021 5.31
10.00-13.50 1,320,549 3.8 13.29 -- --
13.63-26.44 61,800 3.6 15.77 -- --
------------ --------- --- ------ ------- -----
$ 1.68-26.44 2,545,787 3.2 $ 9.74 361,232 $4.22
============ ========= === ====== ======= =====
</TABLE>
Restricted Stock Award
In 1998, the Board approved a restricted stock award aggregating 95,000
shares as part of an incentive compensation package to three executives. The
fair value of this award at the grant date, approximately $1.1 million, is
deferred compensation amortizable over its ten year vesting period; however,
the vesting can be accelerated upon the occurrence of certain events. Under the
terms of the agreement, 50% of shares not vested will automatically vest upon
the Company's stock having an average closing price of $25 per share over a
20-day period. The remainder of shares not vested will automatically vest upon
the Company's stock having an average closing price of $40 per share over a 20-
day period. Based on these criteria, approximately $500,000 vested in the first
quarter of 1999 and it is possible that the remaining portion will also vest
during the first quarter 1999.
Warrants
In 1997, the Company issued to an investment advisory firm a warrant to
acquire 110,000 shares of Common Stock at $5.50 per share. This warrant was in
lieu of approximately $330,000 payable to the investment advisory firm
principally for services in connection with the Company's acquisition program.
An executive/director is associated with this investment advisory firm.
In connection with the acquisition of PACE, the Company issued to the former
owners of PACE warrants to acquire 186,000 shares of Common Stock at an
exercise price of $9.13 per share. These warrants have a ten-year term.
In connection with the Redeemable Preferred Stock private placement in
February 1998, the Company granted to the placement agent a ten-year warrant to
acquire 100,000 shares of Common Stock at an exercise price of $9.00 per share.
The $219,000 estimated value of this warrant was recorded as part of the
accretive dividend attributed to the preferred stockholders.
In connection with a private placement arrangement with the Investor, the
Company granted a warrant to acquire 100,000 shares of Common Stock at $23.00
per share. This warrant has a five-year term and is immediately exercisable.
48
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
In connection with the October 1998 loan which increased the Company's
credit facility, the lender was granted the right to acquire up to 245,000
shares of Common Stock at $12 per share. At December 31, 1998, an immediately
exercisable warrant for 225,000 shares had been issued with a ten-year term.
The $1.5 million estimated value of this warrant has been recorded as deferred
loan costs.
None of the foregoing warrants have been exercised.
11. Income Taxes
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
<S> <C> <C>
Current:
Federal....................................... $ 38,849 $ 1,064,000
State......................................... 7,000 235,000
----------- -----------
Total current................................... 45,849 1,299,000
----------- -----------
Deferred:
Federal....................................... (1,406,741) (1,104,000)
State......................................... (248,250) (244,000)
----------- -----------
Total deferred.................................. (1,654,991) (1,348,000)
----------- -----------
Change in deferred tax asset valuation
allowance...................................... 285,000 (285,000)
----------- -----------
Net income tax benefit.......................... $(1,324,142) $ (334,000)
=========== ===========
</TABLE>
Deferred taxes result from temporary differences between the bases of assets
and liabilities for financial reporting purposes and such amounts as measured
by tax laws and regulations. The sources of the temporary differences and their
effect on deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Current:
Deferred tax assets
Allowance for doubtful accounts........................... $ 247,000
Deferred revenue and customer deposits.................... 235,000
Accrued restructuring costs............................... 72,000
Accrued expense........................................... 76,000
Other..................................................... 45,000
----------
675,000
----------
Noncurrent:
Deferred tax assets
Basis difference of goodwill, capitalized software costs,
property and equipment and other assets.................. 4,760,000
Net operating loss carryforwards.......................... 259,000
----------
5,019,000
----------
$5,694,000
==========
</TABLE>
49
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
The Company's effective income tax rate varied from the U.S. federal
statutory rate as follows:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
<S> <C> <C>
Expected tax benefit............................ $(3,419,000) $(746,000)
Increase (decrease) in income taxes resulting
from:
State income benefit.......................... (603,000) (154,000)
Nondeductible goodwill........................ 2,306,000 724,000
Other, net.................................... 106,858 127,000
Change in deferred tax asset valuation
allowance.................................... 285,000 (285,000)
----------- ---------
Net income tax benefit.......................... $(1,324,142) $(334,000)
=========== =========
</TABLE>
As of December 31, 1998, the Company and its subsidiaries have net operating
loss carryforwards for federal income tax purposes of approximately $761,000
which expire at various dates to 2013.
12. Supplemental Cash Flow Information
Cash payments for interest amounted to approximately $309,000 and $1,906,000
for the eleven months ended December 31, 1997, and the year ended December 31,
1998, respectively. The Company made cash payments for income taxes of
approximately $5,000 and $1,200,000 for the eleven months ended December 31,
1997 and the year ended December 31, 1998, respectively.
During the eleven months ended December 31, 1997, the Company issued Common
Stock with an aggregate fair value of approximately $5.6 million and incurred
notes payable and other liabilities of approximately $7.0 million in connection
with acquisition of the Founding Companies and the Recent Acquisitions. During
the year ended December 31, 1998, the Company issued Common Stock with an
aggregate fair value of approximately $4.2 million and incurred notes payable
and other liabilities of approximately $12,800,000 in connection with
acquisitions completed during the period.
During the year ended December 31, 1998, the Company issued stock warrants
with an aggregate value of approximately $1.7 million for services rendered to
the Company.
13. Subsequent Events
In January 1999, the Company filed a registration statement to offer to the
public 3 million shares of its Common Stock. The Company intends to use the
proceeds to repay amounts outstanding on the FINOVA credit facility and notes
payable to The Reynolds and Reynolds Company from the purchase of HSD. The
balance of the proceeds will be used for working capital and other general
corporate purposes. In connection with planned extinguishment of outstanding
debt, the Company will incur debt extinguishment costs of as much as $5.1
million, representing write-off of deferred loan costs, including costs paid
after December 31, 1998.
In two separate transactions in February 1999, the Company merged with
OMSystems, Inc. ("OMS") and Macon Systems Management, LLC ("MSM") in business
combinations to be accounted for as pooling of interests. The Company exchanged
approximately 1,144,000 shares of Common Stock in the OMS transaction and
83,000 shares of Common Stock in the MSM transaction. OMS and MSM provide
practice management software for orthodontists and dermatologists,
respectively.
50
<PAGE>
InfoCure Corporation
Notes to Consolidated Financial Statements--(Continued)
Pro forma unaudited results of operations assuming the OMS merger occurred
on February 1, 1997 are as follows:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
December 31, December 31,
1997 1998
------------- ------------
(In Thousands Except Share
Data)
<S> <C> <C>
Net revenue.......................................... $29,617 $78,676
Net loss available to common stockholders............ (7,124) (5,957)
Net loss per share--basic and diluted................ (1.18) (0.75)
</TABLE>
The pro forma information presented does not include the results of
operations of MSM as this merger was not considered significant.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements with InfoCure's independent accountants
involving accounting and financial disclosure matters.
51
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The directors and executive officers of InfoCure and their ages as of the
date of this report are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Frederick L. Fine.. 40 Chief Executive Officer, President and Director(1)
James K. Price..... 40 Executive Vice President, Secretary and Director(1)
Richard E. 52 Chairman, Treasurer and Director(1)
Perlman...........
Lance B. Cornell... 33 Senior Vice President--Finance; Chief Financial Officer
Michael E. Warren.. 44 Vice President--Human Resources and Director
R. Ernest 49 Vice President--Sales and Marketing
Chastain..........
Donald M. Rogers... 40 Chief Information Officer
Kurt I. Lawrence... 47 Vice President--Research and Development
Gary W. Plumer..... 41 Vice President--Finance, Assistant Secretary and
Assistant Treasurer
James D. Elliott... 38 Director(2)(3)
Raymond H. Welsh... 67 Director(2)(3)
</TABLE>
- --------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Frederick L. Fine is a founder of InfoCure and currently serves as its
President and Chief Executive Officer. He has served as a director of InfoCure
since its inception. Mr. Fine served as president of AMC from 1995 to 1997 and
as president of ICS from 1994 to 1997. From 1993 to 1995, Mr. Fine served as
executive vice president of AMC, and from 1985 to 1994 served as executive vice
president of ICS, which he co-founded in 1985. From 1991 to 1993, Mr. Fine
served as vice president of Newport Capital, Inc. ("Newport"), predecessor to
AMC. Mr. Fine has served as a director of InfoCure as well as AMC, ICS and
Newport throughout the terms of his employment by each company. From 1983 to
1985, Mr. Fine was with Informatics General Corporation, a supplier of
accounting software, and from 1981 to 1983 was with Moore Business Systems, a
division of Moore Corporation Ltd., a provider of practice management systems.
Mr. Fine holds a B.S. in Economics from the University of Georgia.
James K. Price is a founder of InfoCure and currently serves as its
Executive Vice President and Secretary. He has served as a director of InfoCure
since its inception. Mr. Price served as executive vice president of AMC from
1996 until 1997 and was vice president from 1993 to 1995. Mr. Price co-founded
ICS and has served as its executive vice president since 1994, as vice
president from 1987 to 1994 and as president from 1985 to 1987. In addition,
from 1991 to 1993, Mr. Price was a vice president of Newport. Mr. Price has
served as a director of InfoCure as well as AMC, ICS and Newport throughout the
terms of his employment by each company. From 1983 to 1985, Mr. Price was
healthcare sales manager of Executive Business Systems, a practice management
systems supplier, and from 1981 to 1983 was with Moore Business Systems. Mr.
Price holds a B.A. in Marketing from the University of Georgia.
Richard E. Perlman has served as InfoCure's Chairman and Treasurer since
December 1997 and as a director since March 1997. From December 1997 until
October 1998, Mr. Perlman served as InfoCure's Chief Financial Officer. Mr.
Perlman is the founder of Compass Partners, L.L.C. ("Compass"), a merchant
banking
52
<PAGE>
and financial advisory firm specializing in corporate restructuring and middle
market companies, and has served as its president since its inception in May
1995. From 1991 to 1995, Mr. Perlman was executive vice president of Matthew
Stuart & Co., Inc., an investment banking firm. Mr. Perlman received a B.S. in
Economics from the Wharton School of the University of Pennsylvania and a
Masters in Business Administration from the Columbia University Graduate School
of Business.
Lance B. Cornell has served as InfoCure's Senior Vice President of Finance
and Chief Financial Officer since October 1998. Prior to joining InfoCure, Mr.
Cornell served as vice president--controller and in other financial management
roles at HBO & Company, a healthcare information systems company, from March
1992 through June 1998. Mr. Cornell holds a B.S. in Finance from the University
of Colorado and is a Certified Public Accountant.
Michael E. Warren has served as Vice President of InfoCure since December
1997, most recently as Vice President--Human Resources since August 1998. Prior
to that time he served as InfoCure's Chief Financial Officer from December 1996
until December 1997. He has served as a director of InfoCure since March 1997.
Mr. Warren served as vice president of operations and as chief financial
officer of AMC from 1994 to 1996. From 1992 to 1994, Mr. Warren was director of
provider systems at Millennium Healthcare, a supplier of electronic healthcare
services. From 1986 to 1992, Mr. Warren was director of the Southeast Computer
Risk Management Practice of Arthur Andersen, LLP. From 1983 to 1986, Mr. Warren
worked as Manager of Systems Auditing for NationsBank, and from 1980 to 1983
was an accountant with Coopers & Lybrand, LLP. Mr. Warren holds a Masters in
Business Information Systems from Georgia State University and a B.A. in
Accounting from the University of Georgia. Mr. Warren is a member of the AICPA
and a member of the Georgia Society of CPAs.
R. Ernest Chastain has served as Vice President--Sales and Marketing of
InfoCure since December 1997. Prior to joining InfoCure in December 1997, Mr.
Chastain served as vice president--sales and marketing of AMC from November
1996. From 1994 until 1996 he served as vice president of sales of Quality
Systems, Inc., a healthcare practice management company; and from 1993 to 1994,
Mr. Chastain served as vice president of sales for ELCOMP, Inc., a healthcare
practice management company. From 1983 to 1986, Mr. Chastain served as regional
vice president for Contel Business Systems, Inc., a supplier of practice
management systems, which was acquired in 1986 by Versyss, Inc., another
practice management system supplier. From 1986 to 1992, Mr. Chastain served as
vice president of sales management for Versyss, Inc. Mr. Chastain holds a B.A.
in Marketing from the University of Georgia.
Donald M. Rogers has served as InfoCure's Chief Information Officer since
July 1998. Mr. Rogers served as a Vice President of InfoCure from April 1998
until July 1998 and as President of InfoCure's medical systems division from
April 1997 until April 1998. He was the founder of DR Software and served as
its president since its formation in 1983. From 1983 to 1984, Mr. Rogers was an
account manager at HBO & Company, a healthcare information systems company, and
from 1980 to 1983 was a systems analyst at NCR Corporation, a computer hardware
manufacturer. Mr. Rogers holds a B.S. in Management from the State University
of New York at Buffalo.
Kurt I. Lawrence has served as InfoCure's Vice President--Research and
Development since August 1998. Mr. Lawrence has led InfoCure's research and
development efforts since joining InfoCure in March 1998. He founded MSI in
June 1989 and served as its president and chief executive officer until MSI was
acquired by InfoCure. Mr. Lawrence was founder, president and chief executive
officer of Lawrence Data Systems, Inc. from 1983 until 1989 and from 1976 until
1982 he served as the director of the University of Rochester Medical Center's
computing department.
Gary W. Plumer has served as Vice President--Finance, Assistant Secretary
and Assistant Treasurer of InfoCure since December 1997. He served as
Controller for the Company from November 1996 until December 1997. Prior to
joining the Company, Mr. Plumer served as divisional controller for Turner
Broadcasting System, Inc., a worldwide broadcasting company, from April 1988
until November 1996. Mr. Plumer is a Certified Public Accountant and holds a
B.B.A. in Finance from the University of Georgia.
53
<PAGE>
James D. Elliott has served as a director of InfoCure since March 1997. Mr.
Elliott is the president of Cablepro, Inc., a computer/telephone cable systems
integration company, and has served in that position since 1991. He was
president of GE Network Services from August 1996 until August 1997. Mr.
Elliott co-founded Universal Data Consultants, Inc., a systems integrator, in
1983 and served as its president from 1983 until it was purchased by an
affiliate of GE Capital Services Company in July 1996. Mr. Elliott has also
served as a director of Abdata Systems, Inc. since February 1998. Mr. Elliott
holds a B.S. in Economics from the University of Georgia.
Raymond H. Welsh has served as a director of InfoCure since March 1998. He
has served as senior vice president of PaineWebber Incorporated since January
1995. From August 1955 to January 1995, Mr. Welsh served as an investment
broker, director, senior vice president and partner of Kidder Peabody & Co.
Incorporated. Mr. Welsh is a trustee of the University of Pennsylvania, a
trustee and member of the executive committee of the University of Pennsylvania
Health System, and chairman of the Health System Capital Campaign, "Creating
the Future of Medicine." Mr. Welsh received a B.S. in Economics from the
Wharton School of the University of Pennsylvania.
There are no family relationships between any of the directors or executive
officers of InfoCure.
Terms of Directors
The Board of Directors consists of seven directors each serving a one-year
term. Currently, there are six directors serving on the Board of Directors and
one vacancy. InfoCure's Bylaws permit the Board of Directors to fill vacancies.
In addition, InfoCure's Bylaws divide the Board of Directors into three classes
and each class serves for a staggered three-year term or until successors of
such class have been elected and qualified. Messrs. Perlman and Warren are
Class I directors and serve until the annual meeting of shareholders held in
1999. Messrs. Price and Welsh are Class II directors and serve until the annual
meeting of shareholders held in 2000. Messrs. Fine, Elliott and any director
appointed to fill the existing vacancy are Class III directors and will serve
until the annual meeting of shareholders held in 2001. At each annual meeting
of shareholders, a class of directors is elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. To the
extent there is an increase in the number of directors, the Board of Directors
will distribute the additional directorships among the three classes so that,
as nearly as possible, each class will consist of an equal number of directors.
Committees of the Board of Directors
InfoCure's Board of Directors has established a Compensation Committee and
an Audit Committee. Messrs. Elliott and Welsh currently comprise the members of
the Audit and Compensation Committees of the Board of Directors. The Audit
Committee is responsible for recommending independent auditors, reviewing with
the independent auditors the scope and results of the audit engagement,
monitoring InfoCure's financial policies and control procedures, and reviewing
and monitoring the provisions of non-audit services by InfoCure's auditors. The
Compensation Committee is responsible for reviewing and recommending salaries,
bonuses and other compensation for InfoCure's executive officers. The
Compensation Committee also is responsible for administering InfoCure's stock
option plans and for establishing the terms and conditions of all stock options
granted under these plans.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires InfoCure's directors and officers and persons who own more than
10% of a registered class of InfoCure's equity securities, to file initial
reports of ownership and reports of changes in ownership with the Commission.
Such persons are required by Commission regulations to furnish InfoCure with
copies of all Section 16(a) forms they file.
54
<PAGE>
Based solely on its review of the copies of such forms furnished to InfoCure
and written representations from the executive officers and directors of
InfoCure, InfoCure believes that all Section 16(a) requirements were met during
1998 except that Mr. Cornell filed an initial report after the filing date set
forth in Section 16(a), Mr. Ronald M. Vagle, a former director of InfoCure,
filed two reports of changes in ownership after the filing date set forth in
Section 16(a) and Messrs. Fine, Price, Warren, Chastain and Rogers each
reported a 1997 stock option grant belatedly on their most recent annual
statement of changes in beneficial ownership.
ITEM 10. EXECUTIVE COMPENSATION.
Executive Compensation
The following table sets forth the total compensation paid by InfoCure for
services rendered by InfoCure's Chief Executive Officer for the year ended
December 31, 1998, the eleven months ended December 31, 1997 and the year ended
January 31, 1997 as well as InfoCure's four other most highly compensated
executive officers in the year ended December 31, 1998, (collectively, the
"Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
---------------- ---------------------
Restricted Securities
Name and Year Stock Underlying All Other
Principal Position Ending Salary Bonus Awards Options Compensation (1)
- ------------------ -------- -------- ------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Frederick L. Fine
President and Chief
Executive Officer..... 12/31/98 $125,000 $33,333 35,000 175,100 $16,911
12/31/97 127,778 -- -- 130,200 --
01/31/97 101,065 -- -- -- --
James K. Price
Executive Vice
President and 12/31/98 125,000 33,333 30,000 160,100 19,270
Secretary............. 12/31/97 126,036 -- -- 126,200 --
01/31/97 100,292 -- -- -- --
Richard E. Perlman
Chairman and 12/31/98 120,000 33,333 30,000 160,050 11,927
Treasurer............. 12/31/97 -- -- -- 120,000 --
01/31/97 -- -- -- -- --
R. Ernest Chastain
Vice President--Sales
and Marketing ........ 12/31/98 125,000 25,000 -- 2,056 --
12/31/97 125,000 25,000 -- 60,050 --
01/31/97 20,833 4,167 -- 80,541 --
Donald M. Rogers
Chief Information 12/31/98 110,000 -- -- 33,100 16,000
Officer............... 12/31/97 54,500 -- -- 41,400 9,000
01/31/97 -- -- -- -- --
</TABLE>
- --------
(1) In accordance with the rules of the Commission, the compensation set forth
in the table does not include compensation in the form of perquisites or
other personal benefits because such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total
annual salary and bonus for the Named Executive Officer for such year.
55
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth all individual grants of stock options during
the year ended December 31, 1998, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term(2)
-------------------------------------------------- ---------------------
Securities Percent of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted(1) Fiscal Year Per Share Date 5% 10%
- ---- ---------- ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frederick L. Fine....... 100 -- % $ 9.81 01/01/08 $ 617 $ 1,563
35,000 2.0 12.25 06/01/08 269,639 683,317
140,000 8.1 13.50 10/23/08 1,188,611 3,012,173
James K. Price.......... 100 -- 9.81 01/01/08 617 1,563
30,000 1.7 12.25 06/01/08 231,119 585,700
130,000 7.5 13.50 10/23/08 1,103,710 2,797,018
Richard E. Perlman...... 30,000 1.7 12.25 06/01/08 231,119 585,700
50 -- 13.75 09/09/08 432 1,096
130,000 7.5 13.50 10/23/08 1,103,710 2,797,018
R. Ernest Chastain...... 2,006 0.1 13.50 10/23/08 17,031 43,160
50 -- 20.00 12/02/08 629 1,594
Donald M. Rogers........ 100 -- 9.81 01/01/08 617 1,563
33,000 1.9 13.50 10/23/08 280,173 710,012
</TABLE>
- --------
(1) All options were granted with exercise prices equal to or in excess of the
fair market value of the common stock on the date of grant as determined by
the Board of Directors.
(2) The potential realizable value is calculated based on the 10-year term of
the option at the time of its grant. It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually over the term of the option. These numbers are
calculated based upon rules promulgated by the Commission and do not
represent InfoCure's estimate or projection of the future value of the
common stock. The actual realizable value of the options based on the price
to public in the offering will exceed the potential realizable value shown
in the table.
Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth the aggregate dollar value of all options
exercised and the total number of unexercised options held by the Named
Executive Officers as of December 31, 1998:
<TABLE>
<CAPTION>
Securities Underlying Value of Unexercised In-
Unexercised Options at the-Money Options at
Shares Fiscal Year-End Fiscal Year-End(1)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frederick L. Fine....... -- -- 48,424 256,876 $1,385,895 $5,755,223
James K. Price.......... -- -- 48,424 237,876 1,385,895 5,345,743
Richard E. Perlman...... -- -- 47,364 232,686 1,355,558 5,340,392
R. Ernest Chastain...... -- -- 55,271 87,376 1,579,440 2,482,187
Donald M. Rogers........ -- -- 10,000 64,500 286,200 1,536,212
</TABLE>
- --------
(1) The closing price for InfoCure's common stock as reported by the American
Stock Exchange on December 31, 1998 was $32 3/4. The value is calculated on
the basis of the difference between the option
56
<PAGE>
exercise price and $32 3/4, multiplied by the shares of common stock
underlying the option. InfoCure's common stock commenced trading on the
Nasdaq Stock Market on January 29, 1999.
Employee Benefit Plans
In October 1996, AMC adopted and issued stock options under AMC's 1996 Stock
Option Plan (the "AMC Plan"). In addition, in December 1996, InfoCure's Board
of Directors and stockholders adopted the InfoCure Corporation 1996 Stock
Option Plan ("InfoCure's Plan"). In June 1998, InfoCure's stockholders approved
an amendment to InfoCure's Plan to allow 1,125,000 shares of common stock to be
issued thereunder. Effective October 23, 1998, the Board of Directors approved
an amendment to InfoCure's Plan, subject to stockholder approval, to reserve
3,000,000 shares of common stock to be issued thereunder.
InfoCure's Plan and the AMC Plan (collectively, the "Stock Option Plans")
each provide for the granting to officers, key employees and employee directors
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, (the "Code") and for the granting of non-
statutory stock options to employees and consultants. The Stock Option Plans
are administered by the Board of Directors, or a committee thereof, which
determines the term of the option granted, the exercise price, when and to whom
options are granted, shares subject to the option, the vesting schedule and the
form of consideration payable at the exercise of the option.
Incentive stock options granted under the Stock Option Plans are not
transferable by the optionee other than by will or the laws of descent and
distribution, and each incentive stock option is exercisable only by the
optionee during his or her lifetime. The exercise price of all incentive stock
options granted under the Stock Option Plans must be at least equal to the fair
market value of InfoCure's common stock on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting power of
all classes of the outstanding stock of the issuer, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the maximum term of such option must not exceed
five years. The term of all options granted under the Stock Option Plans may
not exceed ten years. All options expire one year after termination of an
optionee's employment or engagement, unless such termination was for death or
disability in which case such options expire two years after termination.
Unless terminated sooner by the Board of Directors, stock options may be
granted within ten years of the adoption of the Stock Option Plan.
Generally, stock options granted under the Stock Option Plans to executive
officers expire ten years from the date of grant and vest 25% per year on the
anniversary of the date of grant, thus becoming fully exercisable on the fourth
anniversary. Certain options granted under InfoCure's Plan become fully vested
in the event that the common stock reaches a target average closing price for a
specified number of consecutive trading days. Certain options granted to
Messrs. Fine, Perlman and Price in September 1997 have longer vesting
schedules. If the executive officer's employment is terminated for any reason,
except upon a change of control, prior to the vesting of the option, that
portion of the option which has not vested shall be terminated. Upon certain
events resulting in a change of control of InfoCure, all options become fully
vested.
As of December 31, 1998, options to purchase 128,642 shares of common stock
were outstanding under the AMC Plan at an equivalent weighted average exercise
price of $4.19 per share and options to purchase 2,209,036 shares of common
stock were outstanding under InfoCure's Plan at weighted average exercise price
of $9.58 per share. No additional stock options will be granted under the AMC
Plan.
Employee Stock Purchase Plan
In June 1998, InfoCure's stockholders approved the InfoCure Corporation
Employee Stock Purchase Plan (the "Stock Purchase Plan") which is intended to
qualify under Section 423 of the Code. InfoCure implemented the Stock Purchase
Plan during the first quarter of 1998. The Stock Purchase Plan allows employees
to purchase common stock through payroll deductions for 85% of the fair market
value of the common stock. Participation in the Stock Purchase Plan is
voluntary. Employees may become participants in
57
<PAGE>
the Stock Purchase Plan by authorizing payroll deductions of one to fifteen
percent of their base pay or a set dollar amount for each payroll period. At
the end of each three-month purchase period, each participant in the Stock
Purchase Plan will receive an amount of InfoCure's common stock equal to the
sum of that participant's payroll deductions during the calendar quarter
multiplied by 85% of the lower of the fair market value of InfoCure's common
stock at the beginning of the calendar quarter, or the fair market value of
InfoCure's common stock at the end of the quarter. Common stock which is
purchased pursuant to the Stock Purchase Plan is subject to a one-year holding
period, and thus employees who purchase common stock under the Stock Purchase
Plan will not receive stock certificates for their shares until the one-year
holding period has terminated. This holding period lapses upon certain events
resulting in a change of control. No employee may participate in the Stock
Purchase Plan to the extent that such employee owns or would own 5% or more of
the voting power of all classes of InfoCure's stock. There are currently
100,000 shares of common stock reserved for issuance under the Stock Purchase
Plan. In addition, InfoCure is permitted under the Stock Purchase Plan to
purchase shares of common stock on the open market for the purpose of reselling
the shares to participants in the Stock Purchase Plan. As of December 31, 1998,
all of the shares sold to participants in the Stock Purchase Plan were
purchased on the open market and no shares have been originally issued by
InfoCure. Effective October 23, 1998, the Board of Directors approved an
amendment to the Stock Purchase Plan, subject to stockholder approval within
one year, increasing the number of shares of common stock reserved for issuance
thereunder to 150,000, and deleting payment by personal check as an alternate
method of payment for common stock purchased under the Stock Purchase Plan.
Length-of-Service Stock Option Plan
In June 1998, InfoCure's stockholders approved InfoCure's Length-of-Service
Nonqualified Stock Option Plan which provides for the grant of nonqualified
stock options to employees (the "Length-of-Service Plan"). Employees are
eligible for the grant of options under the Length-of-Service Plan based on the
number of years of service which they have completed with InfoCure or a
business which has been acquired by InfoCure. Upon completion of each of their
first five years of service, employees are eligible to receive an option to
purchase 50 shares of InfoCure's common stock. Upon completion of their sixth
year of service, employees are eligible to receive an option to purchase 350
shares of common stock. Upon completion of each year of service after the sixth
year of service, employees are eligible to receive an option to purchase 100
shares of common stock. Options granted under the Length-of-Service Plan will
be granted at an exercise price equal to the fair market value of the
underlying common stock on the date of grant and, generally, will fully vest on
the fourth anniversary thereof. The term of options granted under the Length-
of-Service Plan may not exceed ten years. Employees lose all non-vested options
upon leaving the employment of InfoCure. Employees who leave InfoCure may
exercise their options, to the extent vested, within 30 days after leaving the
employment of InfoCure, except in the case of a termination for cause, in which
case the employees lose all vested options upon termination. Options are
exercisable only by optionees during their lifetime and, except by will or the
laws of descent or distribution, are non-transferrable. Upon certain events
resulting in a change of control, all outstanding options under the Length-of-
Service Plan fully vest and become immediately exercisable. The Length-of-
Service Plan will continue in effect for a period of ten years or until all
options outstanding thereunder have expired or been exercised. Effective
October 23, 1998, the Board of Directors approved an amendment to the Length-
of-Service Plan which, subject to stockholder approval, increases the number of
shares of common stock reserved for issuance under the Length-of-Service Plan
to 500,000 from 150,000. As of December 31, 1998, options to acquire 216,650
shares have been granted at a weighted average exercise price of $9.39 per
share.
Employment Agreements
In July 1998, InfoCure entered into four-year employment agreements with
Frederick L. Fine and James K. Price. Each agreement provides for an initial
annual base salary of $125,000 and a severance payment equal to three times the
then current annual base salary rate upon the termination of employment by
InfoCure without cause or a voluntary termination in the event of a change of
control of InfoCure. In addition, each agreement
58
<PAGE>
provides for incentive compensation pursuant to a program established by the
Board of Directors, a cash bonus payment in the event that InfoCure meets
certain earnings thresholds and a restricted stock grant payable in ten years
or earlier if InfoCure's common stock attains certain market price thresholds.
See "--Restricted Stock Awards." A market price threshold was achieved in
January 1999 resulting in an acceleration of vesting in the amount of 50% of
the stock covered by this restricted stock award. See "Risk Factors that May
Affect Future Results--InfoCure May Have Charges Associated with Acquisitions
and Other Events." Both executives are entitled to participate in InfoCure's
employee benefit programs.
Richard E. Perlman entered into a four-year employment agreement with
InfoCure in January 1998 which provides for an annual base salary of $120,000
and a severance payment equal to three times the then current annual base
salary rate upon termination of employment by InfoCure without cause or a
voluntary termination in the event of a change of control of InfoCure. Under
the agreement, Mr. Perlman is eligible to receive incentive compensation
pursuant to a program established by the Board of Directors, a cash bonus
payment in the event InfoCure meets certain earnings thresholds and a
restricted stock grant payable in ten years or earlier if InfoCure's common
stock attains certain market price thresholds. See "--Restricted Stock Awards."
A market price threshold was achieved in January 1999 resulting in an
acceleration of vesting in the amount of 50% of the stock covered by this
restricted stock award. See "Risk Factors that May Affect Future Results--
InfoCure May Have Charges Associated with Acquisitions and Other Events." In
addition, Mr. Perlman may participate in InfoCure's employee benefit program.
As of July 10, 1997, InfoCure entered into a two-year employment agreement
with Donald M. Rogers which provides for an annual base salary of $110,000. In
February 1998, InfoCure entered into a two-year employment agreement with Kurt
I. Lawrence which provides for an annual base salary of $110,000. Each of the
foregoing employment agreements has a covenant that the executive may not
compete with InfoCure for a period of one year following termination of
employment. InfoCure has not adopted a formal bonus plan. However, all
executive officers of InfoCure are eligible for a bonus, awardable at the sole
discretion of the Board of Directors, which is dependent upon each executive
officer's individual performance and the performance of InfoCure.
Restricted Stock Awards
In June 1998, the Board of Directors approved restricted stock awards for
35,000 shares to Mr. Fine, 30,000 shares to Mr. Price and 30,000 shares to Mr.
Perlman. The total value of these restricted stock awards was approximately
$1.1 million on the date of grant. The restricted stock awards vest ratably
over a ten-year term but vesting can be accelerated upon the occurrence of
certain events. One-half of the shares subject to the restricted stock awards
vested in the first quarter of 1999 when the average closing price of
InfoCure's common stock was $25.00 or more for 20 consecutive trading days.
InfoCure will incur an estimated compensation charge of $500,000 in the first
quarter of 1999 related to the restricted stock awards to reflect this
accelerated vesting. The remaining shares will vest immediately at the time the
average closing price of InfoCure's common stock is $40.00 or more for 20
consecutive trading days. It is possible that InfoCure will incur an additional
charge of up to $580,000 if this second accelerated vesting occurs. InfoCure
does not expect to grant additional restricted stock awards in the future and
therefore does not expect to incur compensation charges relating to restricted
stock awards in the future.
Limitation of Liability and Indemnification of Officers and Directors
Pursuant to InfoCure's Certificate of Incorporation and Bylaws, officers and
directors shall be indemnified by InfoCure to the fullest extent allowed under
Delaware law for claims brought against them in their capacities as officers or
directors. Indemnification is not allowed if the officer or director does not
act in good faith and in a manner reasonably believed to be in the best
interests of InfoCure, or if the officer or director had no reasonable cause to
believe his conduct was lawful. Accordingly, indemnification may occur for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of InfoCure pursuant to the foregoing
provisions or
59
<PAGE>
otherwise, InfoCure has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities
Act and therefore, may be unenforceable.
Compensation of Directors
InfoCure's Board of Directors has adopted the InfoCure Corporation Directors
Stock Option Plan (the "Directors Plan") which provides for the grant of non-
qualified stock options to directors who are not officers or employees of
InfoCure or its subsidiaries ("Non-employee Directors"). The Directors Plan,
and options granted thereunder, were approved by InfoCure's stockholders in
June 1998. Effective January 1998, each Non-employee Director who is first
appointed or elected to the Board of Directors will be granted an option to
purchase 10,000 shares of InfoCure's common stock. On each anniversary
thereafter, Non-employee Directors will be eligible for annual grants of
options to purchase 2,500 shares of common stock. The Directors Plan also
allows the Compensation Committee of the Board of Directors to make
extraordinary grants of options to Non-employee Directors. All options granted
under the Directors Plan vest at a rate of 50% upon completion of each year of
service by the Non-employee Director on the Board of Directors. Generally, no
option is transferable by the optionee other than by will or the laws of
descent and distribution, and each option is exercisable only by the optionee
during his or her lifetime. The exercise price of all options will be the fair
market value of the shares of common stock on the date of grant, and the term
of each option may not exceed ten years. Unless terminated sooner by the Board
of Directors, the Directors Plan will continue in effect for a period of ten
years or until all options outstanding thereunder have expired or been
exercised. There are 100,000 shares of common stock reserved for issuance under
the Directors Plan. As of December 31, 1998, options to acquire 25,000 shares
of common stock have been granted pursuant to the Directors Plan at a weighted
average exercise price of $7.22 per share.
Effective October 23, 1998, the Board of Directors granted a non-qualified
stock option to acquire 2,500 shares of common stock to each of Mr. Elliott and
Mr. Welsh at an exercise price of $13.50 per share, subject to vesting of 50%
upon the optionee's completion of each year of service on the Board of
Directors. These options were not granted pursuant to the Directors Plan.
Compensation Committee Interlocks and Insider Participation
Mr. Elliott and Mr. Welsh, currently the members of the Compensation
Committee, were not at any time during the year ended December 31, 1997 or at
any other time an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of another entity which has one or more executive officers serving as
a member of the Company's Board of Directors or Compensation Committee.
60
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information with respect to the beneficial
ownership of InfoCure capital stock as of February 24, 1999 by: (i) each
director; (ii) the Named Executive Officers; (iii) each shareholder known by
InfoCure to be beneficial owners of more than 5% of the outstanding shares of
common stock; and (iv) all executive officers and directors of InfoCure as a
group.
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Beneficially Beneficially
Owned(1) Owned(1)
-------------------- --------------------
Number of Number of
Shares of Percentage Shares of Percentage
Name and Address of Common of Preferred of
Beneficial Owners Stock Class Stock Class
- ------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Frederick L. Fine (2)............... 527,718 5.9% -- --%
James K. Price (3).................. 525,300 5.9 -- --
Richard E. Perlman (4).............. 352,055 3.9 -- --
Michael E. Warren (5)............... 84,192 * -- --
James D. Elliott (6)................ 28,886 * -- --
Raymond H. Welsh (6)................ 23,000 * -- --
R. Ernest Chastain (7).............. 56,569 * -- --
Donald M. Rogers (8)................ 91,828 1.2 -- --
All executive officers and directors
as a group (11 persons)(9)......... 1,802,328 19.4 -- --
Crescent International Limited
(10)............................... 549,983 6.1 13,422 1.6
William Herbert Hunt Trust Estate
(11)............................... 548,932 6.0 268,440 31.6
James D. Davis...................... 465,036 5.2 -- --
Reid W. Simmons..................... 465,036 5.2 -- --
</TABLE>
- --------
* Less than one percent.
(1) Information with respect to "beneficial ownership" shown in the table above
is based on information supplied by the respective beneficial owner or by
other stockholders as well as filings made with the Commission or furnished
to InfoCure. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power
with respect to securities. For purposes of calculating the percentage
beneficially owned, the shares of common stock deemed outstanding (a)
include: (i) 8,888,936 shares outstanding as of February 24, 1999; (ii) the
conversion of shares of Series A Preferred held by the respective person
into shares of common stock; and (iii) shares issuable by InfoCure pursuant
to warrants and options held by the respective person or group which may be
exercised within 60 days following the date of this Report ("Presently
Exercisable Options") and (b) exclude 47,500 shares that are issuable upon
attainment of vesting goals applicable to restricted stock awards. See
"Executive Compensation--Restricted Stock Awards." Presently Exercisable
Options are deemed to be outstanding and to be beneficially owned by the
person or group holding such options for the purpose of computing the
percentage ownership of such person or group but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person or group. Unless otherwise specified, the mailing address of
each beneficial owner is c/o InfoCure Corporation, 1765 The Exchange, Suite
450, Atlanta, Georgia 30339.
(2) Includes 3,579 shares held by Mr. Fine for the benefit of his children and
1,193 shares held by a charitable trust over which he has sole voting and
investment control. Also includes 17,500 shares held in a deferred
compensation trust on behalf of Mr. Fine and 48,424 shares issuable upon
the exercise of Presently Exercisable Options.
(3) Includes 3,225 shares held by Mr. Price's brother as to which Mr. Price
maintains voting control. Also includes 15,000 shares held in a deferred
compensation trust on behalf of Mr. Price and 48,424 shares issuable upon
the exercise of Presently Exercisable Options.
(4) Includes (i) 195,691 shares held by Compass Partners, L.L.C. ("Compass"),
of which Mr. Perlman holds a majority interest; (ii) 110,000 shares
issuable to Compass upon exercise of an outstanding warrant at an
61
<PAGE>
exercise price of $5.50 per share; (iii) 15,000 shares held in a deferred
compensation trust on behalf of Mr. Perlman; and (iv) 47,364 shares
issuable upon the exercise of Presently Exercisable Options.
(5) Includes 34,330 shares issuable upon the exercise of Presently Exercisable
Options.
(6) Includes 5,000 shares issuable upon the exercise of Presently Exercisable
Options.
(7) Includes 55,271 shares issuable upon the exercise of Presently Exercisable
Options.
(8) Includes 40,511 shares held by Mr. Rogers' spouse. Also includes 10,000
shares issuable upon the exercise of Presently Exercisable Options.
(9) Includes an aggregate of 277,137 additional shares issuable upon the
exercise of Presently Exercisable Options.
(10) According to a Schedule 13D filed by Crescent International Limited
("Crescent") dated December 21, 1998, Crescent has sole voting and
dispositive power as to the shares of common stock. The common stock total
includes 15,790 shares of common stock issuable upon conversion of 13,422
shares of Series A Preferred at a conversion price of $8.50 per share and
100,000 shares issuable upon exercise of a warrant at an exercise price of
$23.00 per share. Crescent's mailing address is c/o Greenlight
(Switzerland) SA, 84, Av Louis-Casai, P.O. Box 42, 1216, Geneva, Cointrin,
Switzerland.
(11) According to a Schedule 13D, as amended, filed by The William Herbert Hunt
Trust Estate (the "Hunt Trust") dated February 19, 1998, the Hunt Trust
has sole voting and dispositive power as to the shares of common stock.
The common stock total includes 315,811 shares of common stock issuable
upon conversion of 268,440 shares of Series A Preferred at a conversion
price of $8.50 per share. The mailing address of the Hunt Trust is 3900
Thanksgiving Tower, 1601 Elm Street, Dallas, Texas 75201.
62
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed as part of, or are
incorporated by reference into, this report on Form 10-KSB:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ----------------------------------------------------------------------
<C> <S>
3.1 Amended Certificate of Incorporation of InfoCure (incorporated by
reference to Exhibit of the same number filed with InfoCure's
Registration Statement on Form SB-2)
(Registration No. 333-18923).
3.2 Amended and Restated Bylaws of InfoCure (incorporated by reference to
Exhibit of the same number filed with InfoCure's Registration
Statement on Form S-3) (Registration No. 333-71109).
4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended Certificate of
Incorporation and Bylaws of InfoCure defining rights of the holders of
common stock of InfoCure.
4.2 Specimen Certificate for shares of common stock (incorporated by
reference to Exhibit of the same number filed with InfoCure's
Registration Statement on Form SB-2) (Registration No. 333-18923).
10.1 Employment Agreement between the Company and Frederick L. Fine dated
July 1998.
10.2 Employment Agreement between the Company and James K. Price dated July
1998.
10.3 Employment Agreement between the Company and Richard E. Perlman dated
January 1998.
10.4 Employment Agreement between the Company and Kurt I. Lawrence dated
February 26, 1998.
10.5 Asset Purchase Agreement among the Company, The Reynolds and Reynolds
Company and Thoroughbred Acquisition, Inc. dated September 23, 1998
(incorporated by reference to Exhibit 2.1 filed with the Company's
Current Report on Form 8-K on November 6, 1998).
10.6 Amendment No. 1 to Asset Purchase Agreement among the Company, The
Reynolds and Reynolds Company and Thoroughbred Acquisition, Inc. dated
October 22, 1998 (incorporated by reference to Exhibit 2.2 filed with
the Company's Current Report on Form 8-K on November 6, 1998).
10.7 Second Amended and Restated Loan Agreement among the Company, its
subsidiaries and FINOVA Capital Corporation dated February 24, 1998
(incorporated by reference to Exhibit 10.43 filed with the Company's
Annual Report on Form 10-KSB on April 1, 1998).
10.8 Third Amended and Restated Term Note dated February 24, 1998
(incorporated by reference to Exhibit 10.44 filed with the Company's
Annual Report on Form 10-KSB on April 1, 1998).
10.9 Third Amended and Restated Acquisition Loan Note dated February 24,
1998 (incorporated by reference to Exhibit 10.45 filed with the
Company's Annual Report on Form 10-KSB on April 1, 1998).
10.10 Fourth Amended and Restated Term Note dated March 2, 1998
(incorporated by reference to Exhibit 10.46 filed with the Company's
Annual Report on Form 10-KSB on April 1, 1998).
</TABLE>
63
<PAGE>
<TABLE>
<C> <S>
10.11 Fourth Amended and Restated Acquisition Loan Note dated March 2, 1998
(incorporated by reference to Exhibit 10.47 filed with the Company's
Annual Report on Form 10-KSB on April 1, 1998).
10.12 InfoCure Corporation 1997 Directors' Stock Option Plan (incorporated by
reference to Exhibit 10.48 filed with the Company's Annual Report on
Form 10-KSB on April 1, 1998).
10.13 First Amendment to Loan Instruments dated October 23, 1998.
10.14 InfoCure Corporation Length-of-Service Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 10.49 filed with the Company's
Annual Report on Form 10-KSB on April 1, 1998).
10.15 InfoCure Corporation Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.50 filed with the Company's Annual Report on
Form 10-KSB on April 1, 1998).
21.1 List of Subsidiaries
23.1 Consent of BDO Seidman, LLP
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. The Company filed the following report on Form 8-K
during the quarter ended December 31, 1998:
(i) Report on Form 8-K with respect to HSD Acquisition filed November 6, 1998.
(ii) Report on Form 8-K/A with respect to the HSD Acquisition filed December
21, 1998.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on this 26th day of
February, 1999.
INFOCURE CORPORATION
/s/ Frederick L. Fine
By: _________________________________
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 and Richard E. Perlman, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Report on Form
10-KSB, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Frederick L. Fine President; Chief Executive February 26, 1999
_________________________________ Officer; (Principal
Frederick L. Fine Executive Officer);
Director
/s/ James K. Price Executive Vice President; February 26, 1999
_________________________________ Secretary; Director
James K. Price
/s/ Richard E. Perlman Chairman; Treasurer; February 26, 1999
_________________________________ Director
Richard E. Perlman
/s/ Lance B. Cornell Senior Vice President-- February 26, 1999
_________________________________ Finance; Chief Financial
Lance B. Cornell Officer (Principal
Financial Officer)
/s/ Michael E. Warren Vice President; Director February 26, 1999
_________________________________
Michael E. Warren
/s/ Gary W. Plumer Vice President--Finance; February 26, 1999
_________________________________ Assistant Secretary;
Gary W. Plumer Assistant Treasurer
(Principal Accounting
Officer)
/s/ James D. Elliott Director February 26, 1999
_________________________________
James D. Elliott
/s/ Raymond H. Welsh Director February 26, 1999
_________________________________
Raymond H. Walsh
</TABLE>
65
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between InfoCure
Corporation, a Delaware corporation ("Company"), and Frederick L. Fine
("Executive") is hereby entered into as of the 1st day of July, 1998 (the
"Effective Date").
WHEREAS, Company is engaged in the business of providing practice
management software products and related services that address the needs of
health care providers to manage and communicate administrative, practice
management and clinical applications designed to meet the information
requirements of the vast majority of medical specialties and office-based health
care practices in the United States (the "Business"); and
WHEREAS, Executive desires to be employed by Company and Company desires to
employ and assure itself of the continued services of Executive on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
1. Employment and Duties.
---------------------
A. Company shall employ Executive as President and Chief Executive
officer during the term of his employment as set forth in this Agreement and
Executive hereby accepts such employment. Executive shall report to the
President and Board of Directors of Company and shall have duties and
responsibilities as set forth on Exhibit A and/or as may be assigned, from time
---------
to time, by the President and Board of Directors of Company (the "Duties").
B. The Company shall use its best efforts to cause the Executive to be
nominated for and elected to the Board of Directors of the Company during the
term of his employment.
C. The Executive shall devote approximately forty (40) hours per week
to the performance of his duties hereunder. Neither the foregoing nor any other
provision of this Agreement is intended or shall be construed as preventing
Executive from devoting his time and effort to charitable, community activities
and other business non-competitive to the Business substantially to the same
extent as he has devoted time and effort prior to the effective date of this
Agreement provided that such involvement with such activities does not
materially interfere with the performance of his duties under this Agreement.
2. Compensation.
------------
A. Base Salary. During the Term (as defined below), Company shall pay
-----------
to Executive a base salary ("Base Salary") of One Hundred Twenty Five Thousand
and No/100 Dollars ($125,000.00) per year, payable in arrears in accordance with
the Company's standard payroll practices for senior executives (but in no event
less frequently than in equal semi-
<PAGE>
monthly payments). In the event of a Disability, to the extent payments are
received under an employer-sponsored disability program, the payments hereunder
are to be reduced by an amount equal to such disability payments.
B. Incentive Compensation. During the Term of this Agreement, in
----------------------
addition to the Base Salary as provided in Section 2.A. above, Executive shall
be eligible for annual incentive compensation (the "Incentive Compensation")
pursuant to a program established by Company's Board of Directors in its sole
and absolute discretion, from time to time, provided that the Goals (as defined
below) of said program are met by Executive. The Incentive Compensation program
shall be based upon the achieving of certain revenue and/or profit goals and/or
other goals (the "Goals") of Company. Upon the establishment of the program and
Goals, the parties agree to enter into an agreement setting forth the Incentive
Compensation program and Executive's eligibility to participate in said program,
which agreement shall be attached hereto as Exhibit B and shall constitute a
---------
part of this Agreement. This Incentive Compensation is over and above the cash
bonus described on Schedule B, which is attached hereto and shall constitute a
----------
part of this Agreement.
C. Employee Benefit Programs. Executive shall be eligible to
-------------------------
participate in all employee benefit programs generally available to senior
executive officer of the Company; including medical and hospitalization
programs; employee stock option and bonus plans generally made available to
employees of Executive's employment status; now or hereafter made available,
subject to the terms and conditions of such programs, including eligibility. It
is understood that Company reserves the right to modify and rescind any program
or adopt new programs in its sole discretion. Company may, in its sole
discretion, maintain key man life insurance on the life of Executive and
designate Company as the beneficiary. Executive agrees to execute any documents
necessary to effect such policy.
D. Vacation. Executive shall accrue six (6) weeks of vacation during
--------
each calendar year during the term of this Agreement (with such vacation time
pro-rated for 1997). Vacation time shall be taken at such time as not to
materially interfere with the Business of Company and must be pre-approved by
Company. Vacation time may not be carried forward from one (1) calendar year to
another.
E. Automobile Allowance. Executive shall be entitled to receive an
--------------------
automobile allowance of One Thousand Five Hundred and No/100 Dollars ($1,500.00)
per month to cover the costs associated with an automobile (including lease,
insurance and maintenance expense) and shall be entitled to reimbursement of
operating costs when operated for business purposes. The automobile allowance
shall be payable semi-monthly.
F. Business Expenses. The Executive shall be entitled to be reimbursed
-----------------
for reasonable business expenses incurred by him in connection with his services
hereunder in accordance with the Company's policies and procedures for its
senior executives.
3. Term. The term of employment of Executive under this Agreement shall
----
be for a period of four (4) years (the "Term") commencing on the date hereof and
ending on the fourth (4th) anniversary thereof, subject to earlier termination
as provided in Section 4; provided,
-2-
<PAGE>
however, that at the end of such four (4) year period and each anniversary date
thereafter, the term of this Agreement will automatically be extended for an
additional year unless, not later than six (6) months prior to the end of such
four (4) year period or one (1) year extension period, as the case may be, the
Company or the Executive shall have given notice that it or he elects not to
have the term extended.
4. Early Termination.
-----------------
A. For Cause.
---------
(i) Notwithstanding the foregoing, Company may terminate the
employment of Executive "for cause" (as hereinafter defined) at any time upon
written notice effective immediately. For purposes of this Agreement, "Cause"
shall mean that, prior to any termination pursuant to this Section 4.A.,
Executive shall have committed:
(1) An intentional act or acts of fraud, embezzlement or
theft constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment for Executive at the expense of the
Company; or
(2) The continued, repeated, intentional and willful refusal
to perform the duties associated with Executive's position with the Company,
which is not cured within thirty (30) days following written notice to
Executive.
For purposes of this Agreement, no act or failure to act on the part of
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Company then in office at a meeting of the Board
called and held for such purpose, after reasonable notice to Executive and an
opportunity for Executive, together with his counsel (if Executive chooses to
have counsel present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars thereof in
detail. Nothing herein will limit the right of Executive or his beneficiaries
to contest the validity or propriety of any such determination.
(ii) Upon termination of Executive's employment for cause, Company
shall have no further obligation to pay any compensation to Executive for
periods after the effective date of the termination for cause, except for Base
Salary which accrued as of the termination date. In addition, the right to
exercise any vested stock option shall terminate on the thirtieth (30th) day
following the effective date of the termination of employment for cause.
-3-
<PAGE>
B. Termination Upon Death or Total and Permanent Disability.
--------------------------------------------------------
(i) The employment of Executive shall terminate upon his death or,
ten (10) business days after written notice by Company of termination, upon or
during the continuance of the Total and Permanent Disability (as hereinafter
defined) of Executive.
(ii) Upon termination upon death or upon or during Executive's Total
and Permanent Disability, Company shall have no further obligation to pay any
compensation for periods after the effective date of such termination, except
for Base Salary which accrued as of the termination date. The term "Total and
Permanent Disability" means the suffering by Executive of a Disability for a
continuous period in excess of one hundred eighty (180) days, unless extended in
writing by Company. A Total and Permanent Disability shall be deemed to commence
upon the expiration of such one hundred eighty (180) day period.
(iii) For purposes hereof, the terms "Disabled" or "Disability" shall
mean the suffering by Executive of a physical or mental condition resulting from
bodily injury, disease, or mental disorder which renders Executive incapable of
continuing each and every one of his or her usual and customary duties in an
efficient manner as an employee of Company, as determined by the Board of
Directors. No Disability shall be deemed to exist until Executive shall be
unable to perform such duties hereunder for seven (7) consecutive days, and
after such Disability continues for seven (7) consecutive days, then the same
shall be deemed to have existed from the first (1st) day of such Disability. At
the end of any Disability (other than a Disability that results in a Total and
Permanent Disability as defined below), Executive shall return to work, and this
Agreement shall continue as though such Disability had not occurred.
If Executive desires to return to work at the end of any Disability, but
there is a dispute as to whether Executive is able to perform his or her duties
hereunder or if there is a dispute as to whether Executive is Disabled or has
suffered a Total and Permanent Disability, the issue shall be submitted to a
Board of Arbiters consisting of three (3) persons: one (1) physician who
specializes in the physical or mental condition which resulted in the Disability
(hereinafter referred to as a "Specialist") shall be appointed on behalf of
Company by the Board of Directors of Company (with Executive having no vote on
this question); the second (2nd) Specialist shall be appointed by Executive and
a third (3rd) Specialist shall be appointed by the two (2) Specialists so
appointed. If a majority of the Specialists determine that Executive is able to
perform his or her duties hereunder on a full-time basis, Executive shall be
permitted to return to work under the provisions hereof. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
C. Change in Control. In the event of a Change in Control (as hereinafter
-----------------
defined) of Company, and Executive elects, in his sole discretion, to terminate
his employment hereunder as of a date within six (6) months after the Change in
Control, Executive shall give Company two (2) weeks prior written notice of such
termination and Executive shall be entitled to receive, and Company shall pay,
on the date of the termination of employment an amount equal to three (3) times
Executive's then Base Salary.
-4-
<PAGE>
The term "Change in Control" means:
(i) The acquisition by any person, entity or "group" within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
("34 Act") (excluding, for this purpose, Company, any of subsidiaries, or any
employee benefit plan of Company or any of its subsidiaries) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 34 Act) of
more than fifty percent (50%) of either the then outstanding shares of common
stock of Company or of the combined voting power of Company's then outstanding
voting securities entitled to vote generally in the election of directors;
(ii) Individuals who, as of the date hereof, constitute the board of
directors of Company ("Incumbent Board") cease for any reason to constitute at
least a majority of the board of directors, provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual is a member of the Incumbent Board; or
(iii) Approval of the shareholders of Company of a merger,
consolidation or other reorganization in each case, with respect to which
persons who were the shareholders of Company and optionees immediately prior to
such merger, consolidation or other reorganization, immediately thereafter, do
not own more than fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the merged, consolidated or
reorganized Company's then outstanding voting securities, or of the sale of all
or substantially all of the assets of Company; provided, however, in such event
the Change in Control will be deemed to have occurred immediately prior to the
merger, consolidation or other reorganization.
Notwithstanding anything to the contrary contained in this Agreement, if
Executive is a "disqualified individual" (as that term is defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code") or any
successor provision thereto) and if any portion of the payments hereunder would
be an "excess parachute payment" (as that term is defined in Section 280G of the
Code or any successor provision thereto), but for the application of this
sentence, then the amount of such payment otherwise payable to Executive under
this Agreement shall be reduced to the minimum extent necessary (but in no event
to less than zero (0)) so that no portion of such payment, as so reduced,
constitutes an excess parachute payment, provided, that, any separate
compensation arrangements extended to Executive by the Company which involve
non-cash compensation shall be reduced first in priority before any reduction in
payment hereunder. The Company shall bear responsibility for performing the
necessary calculations under this section and shall indemnify Executive, on a
grossed-up, after tax (federal, state and local) basis, for any error or
omission on the part of the Company which results in additional tax liability to
Executive, within five (5) calendar days following determination of the amount
of indemnity owed to Executive.
D. Termination by Company Without Cause. In the event either (i) Company
------------------------------------
terminates the employment of the Executive, except for cause, prior to the
expiration of term of
-5-
<PAGE>
this Agreement as set forth in Section 3. hereof or (ii) Executive terminates
the employment after a Constructive Discharge (as defined below), Company shall
pay Executive, as its sole and exclusive liability hereunder, an amount equal to
thirty-six (36) months of the Executive's then current monthly base salary.
Payment shall be made within five (5) days of such termination.
For purposes of this Agreement, "Constructive Discharge" shall mean any of
the events set forth below which are not cured within fifteen (15) days
following written notice thereof by Executive to Company:
(i) Any material reduction in Base Salary;
(ii) A material reduction in Executive's job function, duties or
responsibilities, or a similar change in Executive's reporting relationships;
(iii) A required relocation of Executive of more than one hundred
(100) miles from Executive's current job location;
(iv) Any material breach of any of the terms of this Agreement by
the Company; or
(v) Any failure by the Company to grant to Executive not later than
August 1, 1998 stock options in the amount and on terms set forth on Schedule A.
----------
provided, however, that the term "Constructive Discharge" shall not include a
- -------- -------
specific event described in the preceding clause (i), (ii), (iii) or (iv) unless
Executive actually terminates his employment with the Company within sixty (60)
days after the occurrence of such event.
5. No Mitigation Obligation. The Company hereby acknowledges that it will
------------------------
be difficult and may be impossible (i) for Executive to find reasonably
comparable employment following the date of termination and (ii) to measure the
amount of damages which Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the termination compensation
by the Company to Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable and will be liquidated
damages, and Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of Executive hereunder or otherwise.
6. Confidential Information.
------------------------
A. Company may disclose to Executive certain Confidential Information
(defined below). Executive acknowledges and agrees that Company has a
reasonable, competitive business interest in the Confidential Information and
the Confidential Information is the sole and exclusive property of Company (or a
third party providing such information to Company) and that Company or such
third party owns all worldwide rights therein under patent, copyright, trade
secret, confidential information, moral right or other property right. Executive
-6-
<PAGE>
acknowledges and agrees that the disclosure of the Confidential Information to
Executive does not confer upon Executive any license, interest or rights of any
kind in or to the Confidential Information. Executive may use the Confidential
Information solely for the benefit of Company while Executive is employed by
Company. Except in the performance of services for Company, Executive shall hold
in confidence and not reproduce, distribute, transmit, reverse engineer,
decompile, disassemble, or transfer, directly or indirectly, in any form, by any
means, or for any purpose, the Confidential Information or any portion thereof.
Executive agrees to return to Company, upon request by Company, the Confidential
Information and all materials relating thereto.
B. Executive acknowledges that his obligations with regard to the
Confidential Information shall remain in effect while Executive is engaged by
Company and for a period of two (2) years thereafter.
"Confidential Information" shall mean any confidential or proprietary
information possessed by Seller or relating to its business, including, without
limitation, any confidential "know-how", trade secrets, customer lists, details
of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel
acquisition plans; provided, however, that Executive shall not be restricted
from disclosing or using Confidential Information that: (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure; (ii) becomes available to Executive in a manner that is not in
contravention of applicable law from a source that is not bound by a
confidential relationship with Company or by a confidentiality or other similar
agreement; (iii) was known to Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Executive by Company or one of Company's or (iv) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, Executive shall
provide Company with prompt notice of such requirement so that Company may seek
an appropriate protective order prior to any such required disclosure by
Executive. Confidential Information may include, but not be limited to, future
business plans, licensing strategies, advertising campaigns, information
regarding customers, employees and independent contractors and the terms and
conditions of this Agreement.
7. Non-Solicitation.
----------------
A. Customers. During Executive's employment with Company and for a
period of twelve (12) months thereafter (the "Restricted Period"), Executive
shall not, on his own behalf or on behalf of any person, firm, partnership,
association, corporation or business organization, entity or enterprise ("Other
Entity"), solicit, contact, call upon, communicate with or attempt to
communicate with any customer of Company, or any representative of any
-7-
<PAGE>
customer of Company, with a view to providing products and/or services in the
Business of Company provided that the restrictions set forth in this Section
7.A. shall apply only to customers of Company, or representatives of customers
of Company, with which Company had contact during the two (2) year period
immediately preceding termination of his employment with Company (or shorter
period if Executive has not then been engaged by Company for two (2) years).
B. Employees/Independent Contractors. During the Restricted Period,
---------------------------------
Executive shall not, on his own behalf or on behalf of any Other Entity, recruit
or hire, or attempt to recruit or hire, any employees or independent contractors
of Company who were employed or engaged by Company, as the case may be, during
the one (1) year period prior to the termination of his employment with Company
(or shorter period if Executive has not then been engaged by Company for one (1)
year).
8. Non-Competition. During the Restricted Period, Executive shall not on
---------------
his own behalf or on behalf of any Other Entity, perform the duties and services
Executive performs for Company for, or own a material financial interest in, any
Other Entity that is competitive with the business of the Company or any of its
subsidiaries (as such business is conducted on the first (1st) day of the
Restricted Period) within the United States (the "Territory"). The ownership of
an interest constituting not more than five percent (5%) of the outstanding debt
or equity in a corporation, the shares of which are traded on a recognized stock
exchange or traded in the over-the-counter market, even though that corporation
may be a competitor of the Company or any of its subsidiaries, shall not be
deemed a material financial interest in a competitor.
9. Acknowledgment. The parties hereto agree that: (i) the Restricted
--------------
Period and Territory contained in this Agreement are reasonably necessary for
the protection of Company's legitimate business interests and that the Territory
is the area in which Executive shall perform (or currently perform) services for
Company; (ii) by having access to information concerning employees, independent
contractors and customers of Company, Executive shall obtain a competitive
advantage as to such parties; (iii) Executive's covenants and agreements
contained in this Agreement are reasonably necessary to protect the interests of
Company in whose favor said covenants and agreements are imposed in light of the
nature of Company's Business and Executive's involvement in such Business; (iv)
the restrictions imposed by this Agreement are not greater than are necessary
for the protection of Company in light of the substantial harm that Company
shall suffer should Executive breach any of the provisions of said covenants or
agreements and (v) Executive's covenants and agreements contained in this
Agreement form material consideration for this Agreement, the Acquisition
Agreement and Executive's employment by Company.
10. Remedy for Breach. Executive agrees that the remedies at law of
-----------------
Company for any actual or threatened breach by Executive of the covenants
contained in Sections 6. through 8. of this Agreement would be inadequate and
that Company shall be entitled to specific performance of the covenants in such
paragraphs, including entry of an ex parte, temporary restraining order in state
or federal court, preliminary and permanent injunctive relief against activities
in violation of such paragraphs, or both, or other appropriate judicial remedy,
writ or
-8-
<PAGE>
order, in addition to any damages and legal expenses (including attorney's fees)
which Company may be legally entitled to recover. Executive acknowledges and
agrees that the covenants contained in Sections 6. through 8. of this Agreement
shall be construed as agreements independent of any other provision of this or
any other agreement between the parties hereto, and that the existence of any
claim or cause of action by Executive against Company, whether predicated upon
this or any other agreement, shall not constitute a defense to the enforcement
by Company of said covenants.
11. No Prior Agreements. Executive hereby represents and warrants to
-------------------
Company that the execution of this Agreement by Executive and Executive's
employment by Company and the performance of Executive's duties hereunder shall
not violate or be a breach of any agreement with a former employer, client or
any other person or entity.
12. Assignment; Binding Effect. Executive understands that Executive has
--------------------------
been selected for employment by Company on the basis of Executive's personal
qualifications, experience and skills. Executive agrees, therefore, that
Executive cannot assign all or any portion of Executive's performance under this
Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 13. below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Executive has no oral representations, understandings or agreements
with Company or any of its officers, directors or representatives covering the
same subject matter as this Agreement. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between Company
and Executive. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between Company and Executive and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of Company and Executive,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To Company: InfoCure Corporation
Corporate Headquarters
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Frederick L. Fine
-9-
<PAGE>
With a Copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
To Executive: Frederick L. Fine
77 East Andrews Drive, #366
Atlanta, Georgia 30305
With a Copy to: Anderson, Kill & Olick
1251 Avenue of the Americas
New York City, New York 10020
Attention: Michael Stamm, Esq.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. Mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
Agreement shall be enforced separately and independently of any other agreement
involving the parties hereto. The Section headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of the Agreement or of any part hereof.
16. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Georgia.
17. Counterparts. This Agreement may be executed simultaneously in two
------------
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute, but one and the same instrument.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
-------------------------------------------
Its: Chairman and Chief Financial Officer
---------------------------------------
EXECUTIVE:
/s/ Frederick L. Fine (SEAL)
----------------------
Frederick L. Fine
-11-
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
-------------------
Overall Responsibility:
- ----------------------
The President and Chief Executive Officer shall be the chief executive
officer of the Corporation and shall have such powers as may be delegated to him
by the Board of Directors of the Company. The President shall manage the
direction and operations of the Company to insure optimal return on both short-
term and long-term investment and growth prospects and shall have general and
active management of the operations of the Company.
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Compensation
----------------------
<PAGE>
SCHEDULE A
A non-qualified option to purchase thirty-five thousand (35,000) shares of
Company's common stock at an exercise price equal to fair market value on the
date of grant, vesting over four years from the date of grant.
<PAGE>
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
--------------------------------
THIS AGREEMENT is made and entered into as of this 1st day of June, 1998
(the "Award Date"), by and between InfoCure Corporation (the "Company"), a
Delaware corporation and Frederick L. Fine (the "Employee").
BACKGROUND
A. The Board of Directors of the Company ("Board") desires to make an
award of restricted shares of the Company's stock to Employee to promote and
increase his personal interests in the welfare of the Company and to provide
incentives to him as one of the officers who is primarily responsible for the
operations of the Company and for shaping and carrying out the long-range plans
of the Company and aiding in its continued growth and financial success.
B. The Board has authorized the grant to Employee of a restricted stock
award to purchase shares of the common stock, $.001 par value ("Common Stock")
of the Company.
C. The Company and Employee wish to confirm herein the terms, conditions,
and restrictions of the restricted stock award.
For and in consideration of the premises, the mutual covenants contained
herein, and other good and valuable consideration, the parties hereto agree:
SECTION 1
AWARD OF SHARES
1.1 Award of Shares. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Company hereby awards to Employee Thirty-Five
Thousand (35,000) shares of Common Stock (the "Bonus Shares").
1.2 Vesting of Bonus Shares. Employee shall become vested in the Bonus
-----------------------
Shares as described in the vesting schedule attached hereto as Schedule I (the
----------
"Vesting Schedule"), except that the Board of Directors may, in its sole
discretion, waive all or a part of the Vesting Schedule, from time to time, in
which case all Bonus Shares shall become vested according to the terms of the
waiver. The Bonus Shares which have become vested pursuant to the Vesting
Schedule or by virtue of waiver of the Vesting Schedule by the Board of
Directors are herein referred to as the "Vested Bonus Shares" and all Bonus
Shares which are not Vested Bonus Shares are sometimes herein referred to as the
"Unvested Bonus Shares."
1.3 Additional Condition to Bonus Shares. In order not to forfeit the
------------------------------------
Bonus Shares for any such Bonus Shares, Employee must deliver to the Company,
within ten (10) days after the occurrence of an event in the Vesting Schedule,
pursuant to which some or all of the Bonus Shares become Vested Bonus Shares (a
"Vesting Date"), either a certified check payable to the Company in the amount
of all withholding tax obligations (whether federal, state or local),
<PAGE>
imposed on the Company by reason of the vesting of the Bonus Shares, or the
Withholding Election described in Section 1.4. Upon receipt of payment in full
of all withholding tax obligations, the Company shall cause a certificate
representing the Bonus Shares to be issued and delivered to the Share Custodian
pursuant to the instructions of Employee as provided in Section 1.5.
1.4 Optional Withholding Election. In lieu of paying the withholding tax
-----------------------------
obligation in cash, as described in Section 1.3, Employee may elect to have the
actual number of Vested Bonus Shares reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock on the Vesting Date as determined by the Board of Directors, is
sufficient to satisfy the amount of the withholding tax obligations imposed on
the Company by reason of the vesting of the Bonus Shares (the "Withholding
Election"). Employee may make a Withholding Election only if all of the
following conditions are met:
A. The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit A attached hereto;
---------
B. Any Withholding Election made will be irrevocable; however, the
acceptance by the Board of any Withholding Election shall rest solely in the
Board's unfettered discretion; and
C. If Employee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of 1934,
at any time during a period in which some or all of the Bonus Shares vest, then
the Withholding Election must be made (i) at least six (6) months prior to the
Tax Date applicable to the Vesting Date of Bonus Shares and (ii) prior to the
Tax Date and in any ten (10) day period beginning on the third (3rd) day
following the release of the Company's quarterly or annual summary statement of
sales and earnings.
1.5 Bonus Shares Held by the Share Custodian. Employee hereby authorizes
----------------------------------------
and directs the Company to deliver any share certificate issued by the Company
to evidence Bonus Shares to the Secretary of the Company or such other officer
of the Company as may be designated by the Board (the "Share Custodian") to be
held by the Share Custodian until the Bonus Shares vest in accordance with
Schedule I.
- ----------
During the period that the Share Custodian holds the shares of Common Stock
subject to this Section 1.5, Employee shall be entitled to all rights applicable
to shares of Common Stock not so held; provided, however, in the event the
number of shares of Common Stock is increased or reduced by changing par value,
split-up, stock split, reverse stock split, reclassification, merger,
reorganization, consolidation, or otherwise, and in the event of any
distribution of Common Stock or other securities of the Company in respect of
such shares of Common Stock, Employee agrees that any certificate representing
shares of Common Stock or other securities of the Company issued as a result of
any of the foregoing shall be delivered to the Share Custodian and shall be
subject to all of the provisions of this Agreement as if initially purchased
thereunder.
<PAGE>
1.6 Rights as Stockholder. Employee, or, if applicable, the Transferee
---------------------
(as defined in Section 3.13.F.), shall have no rights as a stockholder with
respect to any Bonus Shares until a stock certificate for the shares is issued
in Employee's name. Employee shall be entitled to dividends paid or declared on
Vested Bonus Shares, for which the record date is prior to a Vesting Date.
Employee shall not be entitled to dividends on Unvested Bonus Shares.
1.7 Investment Representations. Employee hereby represents, warrants,
--------------------------
covenants, and agrees with the Company as follows:
A. The Bonus Shares being acquired by Employee will be acquired for
Employee's own account without the participation of any other person, with the
intent of holding the Bonus Shares for investment and without the intent of
participating, directly or indirectly, in a distribution of the Bonus Shares and
not with a view to, or for resale in connection with, any distribution of the
Bonus Shares, nor is Employee aware of the existence of any distribution of the
Bonus Shares;
B. Employee is not acquiring the Bonus Shares based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Bonus Shares, but rather upon an independent examination
and judgment as to the prospects of the Company;
C. The Bonus Shares were not offered to Employee by means of publicly
disseminated advertisements or sales literature, nor is Employee aware of any
offers made to other persons by such means;
D. Employee is able to bear the economic risks of the investment in
the Bonus Shares, including the risk of a complete loss of his investment
therein;
E. Employee understands and agrees that the Bonus Shares will be
issued and sold to Employee without registration under any state law relating to
the registration of securities for sale, and will be issued and sold in reliance
on the exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
F. The Bonus Shares cannot be offered for sale, sold or transferred
by Employee other than pursuant to: (i) an effective registration under the
1933 Act or in a transaction otherwise in compliance with the 1933 Act and (ii)
evidence satisfactory to the Company of compliance with the applicable
securities laws of other jurisdictions. The Company shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance with
the above laws;
G. The Company will be under no obligation to register the Bonus
Shares or to comply with any exemption available for sale of the Bonus Shares
without registration or filing, and the information or conditions necessary to
permit routine sales of securities of the Company under Rule 144 of the 1933 Act
are not now available and no assurance has been given
<PAGE>
that it or they will become available. The Company is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Bonus Shares;
H. Employee has and has had complete access to and the opportunity to
review and make copies of all material documents related to the business of the
Company, including, but not limited to, contracts, financial statements, tax
returns, leases, deeds, and other books and records. Employee has examined such
of these documents as Employee has wished and is familiar with the business and
affairs of the Company. Employee realizes that the purchase of the Bonus Shares
is a speculative investment and that any possible profit therefrom is uncertain;
I. Employee has had the opportunity to ask questions of and receive
answers from the Company and any person acting on its behalf and to obtain all
material information reasonably available with respect to the Company and its
affairs. Employee has received all information and data with respect to the
Company which Employee has requested and which Employee has deemed relevant in
connection with the evaluation of the merits and risks of Employee's investment
in the Company;
J. Employee has such knowledge and experience in financial and
business matters that Employee is capable of evaluating the merits and risks of
the purchase of the Bonus Shares hereunder and Employee is able to bear the
economic risk of such purchase; and
K. The agreements, representations, warranties, and covenants made by
Employee herein extend to and apply to all of the Bonus Shares of the Company
issued to Employee pursuant to this restricted stock award. Acceptance by
Employee of the certificate representing such Bonus Shares shall constitute a
confirmation by Employee that all such agreements, representations, warranties,
and covenants made herein shall be true and correct at that time.
SECTION 2
RESTRICTIONS AND FORFEITURE OF BONUS SHARES
2.1 Forfeiture Upon Termination of Employment. Notwithstanding anything
-----------------------------------------
to the contrary herein, upon Termination of Employment (as defined in Section
3.13.E.) for:
A. Cause (as defined in Section 3.13.A.), all Unvested Bonus Shares
shall be forfeited, effective upon the Effective Date of Termination (as defined
in Section 3.13.C.); or
B. A reason other than Cause, death, or Disability as defined under
Section 4. of that certain Employment Agreement by and between Employee and
Company, dated as of July 1, 1998, certain Unvested Bonus Shares shall become
vested in accordance with the following formula and the remainder shall be
forfeited, such accelerated vesting and forfeiture shall be effective upon the
Effective Date of Termination: The closing price of the Common Stock of the
Company on the Effective Date of Termination (such price to be adjusted to
reflect changes in capitalization set forth in Section 3.1) shall be divided by
$40.00 and the result shall be multiplied by the total number of Unvested
<PAGE>
Bonus shares to reach the number of Unvested Bonus Shares in the "Vesting Pool"
(the number of shares in the "Vesting Pool", however, shall not be greater than
the number of Unvested Bonus Shares); the number of shares in the Vesting Pool
shall then be multiplied by a fraction, the numerator of which is the number of
years served in the initial term of the Employment Agreement at the Effective
Date of Termination (rounded up to the next whole year) and the denominator of
which shall be four (4), to reach the number of Unvested Bonus Shares that will
become vested.
2.2 Restrictions on Transfer of Bonus Shares. Bonus Shares shall be
----------------------------------------
subject to the following restrictions:
A. Except for transfers made in compliance with Section 2.2.B. below,
or as otherwise required or permitted hereunder, none of the Bonus Shares may be
conveyed, pledged, assigned, transferred, hypothecated, encumbered, or otherwise
disposed of by Employee, or if the Bonus Shares are held or owned of record by a
Transferee, by such Transferee. The foregoing notwithstanding, the Board may,
but shall not be obligated to, approve the transfer of such Bonus Shares upon
the condition that the transferee thereof execute and deliver to the Company
such documents and agreements as the Company shall reasonably require to
evidence the fact that the Bonus Shares to be owned, either directly or
beneficially, by such transferee shall continue to be subject to all the
restrictions set forth in this Section 2.2 and all applicable rights in favor of
the Company set forth elsewhere herein, and that such transferee is subject to
and bound by such restrictions and provisions. Any Bonus Shares transferred by
bequest or by operation of the laws of descent and distribution shall remain
subject to the restrictions set forth in this Section 2.2 and all applicable
rights in favor of the Company set forth elsewhere herein in the hands of any
transferee thereof. Nothing contained herein, however, shall be deemed to
impose any requirement that any transferee be an officer, director, or employee
of or consultant to the Company.
B. The Bonus Shares may be transferred by Employee to a Transferee
upon the death or Disability of Employee, provided that all such Bonus Shares
shall remain subject to the restrictions set forth in this Section 2.2 and all
applicable rights in favor of the Company set forth elsewhere herein in the
hands the Transferee and of any subsequent transferee of the Transferee.
2.3 Noncompetition. As a condition to preserving the benefits provided by
--------------
this Agreement, the Employee agrees to the restrictive covenant provisions
contained in Sections 6., 7. and 8 of that certain Employment Agreement by and
between Company and Employee of even date herewith. In the event that the
Committee determines in good faith that the Employee has violated the provisions
of this Section, then notwithstanding any other provisions contained in this
Agreement, the Employee (or his heir, legatee or Transferee) shall forfeit any
further right to Bonus Shares.
2.4 Termination of Restrictions. The restrictions contained in Section
---------------------------
2.2 shall terminate once the Bonus Shares become vested, but will remain subject
to the restrictions on transfer set forth in Section 3.2.
<PAGE>
SECTION 3
GENERAL PROVISIONS
3.1 Change in Capitalization. If the number of outstanding shares of the
------------------------
Common Stock shall be increased or decreased by a change in par value, split-up,
stock split, reverse stock split, reclassification, distribution of common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made by the Board in the number and kind of Bonus Shares, such that
Employee's proportionate interest shall be maintained as before the occurrence
of the event. No fractional shares shall be issued in making such adjustment.
All adjustments made by the Board under this Section shall be final, binding,
and conclusive.
3.2 Legends. Each certificate representing the Bonus Shares shall be
-------
endorsed with the following legend and Employee shall not make any transfer of
the Bonus Shares without first complying with the restrictions on transfer
described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED JULY 1,
1998, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
UNDER SUCH ACT COVERING SUCH SECURITIES; (II) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR (III) THE ISSUER
RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
Employee agrees that the Company may also endorse any other legends
required by applicable federal or state securities laws.
The Company need not register a transfer of the Bonus Shares, and may also
instruct its transfer agent, if any, not to register the transfer of the Bonus
Shares unless the conditions specified in the foregoing legends are satisfied.
3.3 Removal of Legend and Transfer Restrictions.
-------------------------------------------
A. Any legend endorsed on a certificate pursuant to Section 3.2 and
the stop transfer instructions with respect to the Bonus Shares shall be removed
and the Company shall issue a certificate without such legend to the holder
thereof if such Bonus Shares are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available.
<PAGE>
B. The restrictions described in the second sentence of the legend
set forth in Section 3.2 may be removed at such time as permitted by Rule 144(k)
promulgated under the Securities Act.
3.4 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, no
Bonus Shares shall be issued except, in the reasonable judgment of the Board, in
compliance with exemptions under applicable state securities laws of the state
in which Employee resides, and/or any other applicable securities laws.
3.5 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.6 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.7 Severability. In the event that any one (1) or more of the provisions
------------
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.8 Entire Agreement. This Agreement expresses the entire understanding
----------------
and agreement of the parties with respect to the subject matter. This Agreement
may be executed in two (2) or more counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same instrument.
3.9 Violation. Any transfer, pledge, sale, assignment, or hypothecation
---------
of the Bonus Shares or any portion thereof (other than in strict compliance with
this Agreement) shall be a violation of the terms of this Agreement and shall be
void and without effect.
3.10 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
3.11 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.12 No Employment Rights Created. The award of Bonus Shares hereunder
----------------------------
shall be construed as giving Employee the right to continued employment with the
Company.
<PAGE>
3.13 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
A. "Cause" shall have the meaning set forth in Section 4.A. of that
certain Employment Agreement by and between the Company and Employee dated as of
July 1, 1998; for purposes of this Agreement only, Cause shall also mean
voluntary resignation of employment by Employee not contemplated by such
Employment Agreement.
B. "Disability" shall have the meaning set forth for "Total and
Permanent Disability" in Section 4.B. of that certain Employment Agreement by
and between Company and Employee dated as of July 1, 1998.
C. "Effective Date of Termination" means the effective date of
Termination of Employment as stated in any notice of termination given by the
Company or Employee, or in the event no such notice of termination is given by
either the Company or Employee, then the date on which Employee last performs
the duties of Employee's employment or position with the Company as determined
by the Committee.
D. "Public Offering" means the offering for sale by the Company of
securities of the same class as the Bonus Shares pursuant to a registration
statement filed in accordance with the Securities Act of 1933, as amended, or
any comparable law then in effect, and the effective date of any such Public
Offering shall be the first day on which the securities covered thereby may
lawfully be offered and sold pursuant to such Registration Statement.
E. "Termination of Employment" means the termination of the
employee-employer relationship between Employee and the Company (and its parents
and subsidiaries) for any reason, including, without limitation, a termination
by resignation, discharge, death, Disability, or retirement, notwithstanding
that severance or similar payments are made to Employee. The Committee shall, in
its absolute discretion, determine the effect of all matters and questions
relating to Termination of Employment, including whether a leave of absence
constitutes a Termination of Employment, or whether a Termination of Employment
is for Cause.
F. "Transferee" means the estate, or the executor or administrator
of the estate, of a deceased optionee, or the personal representative of an
Optionee suffering a Disability.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
-----------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
ATTEST:
/s/ Susan Gustafson
- -----------------------------
Title: Vice President
-----------------------
[CORPORATE SEAL]
EMPLOYEE:
/s/ Frederick L. Fine (SEAL)
--------------------------------------
Frederick L. Fine
<PAGE>
SCHEDULE I
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Vesting Schedule
----------------
"Vested Bonus Shares" means: Thirty-Five Thousand (35,000) shares on the
tenth (10th) anniversary date of the Award Date ("Vesting Date").
1. Construction.
------------
A. For purposes of the Vesting Schedule, Employee shall be granted a
year of service for each consecutive twelve (12) consecutive-month period after
the Award Date during which Employee remains, at all times, employed on a full-
time basis by the Company, as determined by the Board.
B. Except as provided in Section 2.1.B. of the Restricted Stock Award
Agreement and in 2.A. and 2.D. below, the right of Employee to vest in Bonus
Shares shall cease upon the Employee's Termination of Employment by the Company,
and thereafter, no further shares shall become vested.
2. Accelerated Vesting Provisions. Notwithstanding any contrary provision
------------------------------
in this Agreement, Unvested Bonus Shares shall be vested under the following
circumstances, effective at the time specified:
A. All Unvested Bonus Shares shall be fully vested in the event
Employee ceases to be an employee of the Company by reason of death or
Disability (as defined in Section 3.13.B.), effective on the date of such death
or Disability.
B. Fifty percent (50%) of the Unvested Bonus Shares shall be fully
vested in the event the average per share closing price for the Company's stock
over a period of twenty (20) consecutive trading days reaches Twenty-Five and
No/100 Dollars ($25.00) (such price to be adjusted to reflect changes in
capitalization set forth in Section 3.1).
C. All Unvested Bonus Shares shall be fully vested in the event the
average per share closing price for the Company's stock over a period of twenty
(20) consecutive trading days reaches Forty and No/100 Dollars ($40.00) (such
price to be adjusted to reflect changes in capitalization set forth in Section
3.1).
D. Upon Termination of Employment (as defined in Section 3.13.E.) for
a reason other than Cause, death or Disability (as defined under Section 4. of
that certain Employment Agreement by and between Employee and Company) all of
the Unvested Bonus Shares not forfeited by reason of Section 2.1.B. shall be
fully vested.
3. Adjustment to Vested Bonus Shares. Appropriate adjustments shall be
---------------------------------
made to the number of Vested Bonus Shares to reflect any Withholding Election
made by Employee.
Schedule I to Restricted Stock Award Agreement
<PAGE>
EXHIBIT A
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Notice of Withholding Election
------------------------------
TO: INFOCURE CORPORATION
FROM: Name
-----------------------
RE: Withholding Election
- --------------------------------------------------------------------------------
This election relates to the Restricted Stock Award identified in Paragraph
3 below. I hereby certify that:
(1) My correct name and social security number and my current address
are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] The original recipient of the Restricted Stock Award.
[ ] The legal representative of the estate of the original
recipient of the Restricted Stock Award.
[ ] A legatee of the original recipient of the Restricted Stock
Award.
[ ] The legal guardian of the original recipient of the Restricted
Stock Award.
(3) The Restricted Stock Award pursuant to which this election is made
is dated and was issued in the name of __________ for ________
(___) shares of Common Stock. This election relates to _________
(___) shares of Common Stock issuable upon vesting of the Bonus
Shares, provided that the numbers set forth above shall be deemed
changed as appropriate to reflect any stock splits and other
adjustments made by the Board of Directors of the Company.
(4) In connection with any future vesting of the Restricted Stock
Award with respect to the Bonus Shares, I hereby elect to have
certain of the shares issuable pursuant to the exercise withheld
by the Company for the purpose of having the value of the shares
applied to pay federal, state, and local, if any, taxes arising
from the exercise. The shares to be withheld shall have, as of
the Tax Date applicable to the exercise, a fair market value equal
to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made.
<PAGE>
(6) I understand that this Withholding Election may not be revised,
amended or revoked by me, but is subject to the disapproval of the
Board of Directors.
(7) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Company shall withhold
from the Vested Bonus Shares a number of shares of Common Stock
having the value specified in Paragraph 4 above.
Dated:
------------------------------- -------------------------------
Legal Signature
- ------------------------------------- -------------------------------
Social Security Number Name (Printed)
-------------------------------
Street Address
-------------------------------
City, State, Zip Code
<PAGE>
INFOCURE CORPORATION
Non-qualified Stock Option Grant Certificate
InfoCure Corporation, a Delaware corporation (the "Company"), hereby
grants to the optionee named below ("Optionee") an option (this "Option")
to purchase the total number of shares shown below of Common Stock of the
Company (the "Shares"), at the exercise price per share set forth below
(the "Exercise Price"), subject to all of the terms and conditions on the
reverse side of this Stock Option Grant Certificate.
In witness whereof, this Stock Option Grant Certificate has been executed
by the Company by a duly authorized officer as of the date specified
hereon.
InfoCure Corporation
By:
----------------------------
Date of Grant: June 1, 1998
Type of Stock Option: Non-qualified
Shares Subject to Option: 35,000
Exercise Price Per Share: $12.25
Term of Option: Ten years
Shares subject to issuance under this Option shall be eligible for
exercise according to the vesting schedule selected below and further
described in Section 9 on the reverse of this Stock Option Grant
Certificate.
Four Year Vesting
Optionee acknowledges that there may be adverse tax consequences
upon exercise of this option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or
disposition.
------------------------------------------
Signature of Optionee
Frederick L. Fine
------------------------------------------
Print Name of Optionee
<PAGE>
1. Exercise Period of Option. Subject to the terms and conditions of this
-------------------------
Stock Option Grant Certificate, and unless otherwise modified by a written
modification signed by the Company and Optionee, this Option may be exercised
with respect to all of the Shares, but only according to the vesting schedule
selected on the reverse of this Stock Option Grant Certificate and as described
in Section 9 below, prior to the date which is the last day of the Term set
forth on the face hereof following the Date of Grant (the "Expiration Date").
2. Restrictions on Exercise. This Option may not be exercised unless such
------------------------
exercise is in compliance with the Securities Act of 1933 and all applicable
state securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such compliance.
3. Termination of Option. Except as provided below in this Section, this
---------------------
Option may not be exercised after the date which is ninety (90) days after
Optionee ceases to perform services for the Company, or any Parent or
Subsidiary. Optionee shall be considered to perform services for the Company,
or any Parent or Subsidiary, for all purposes under this Section and Section 9
hereof, if Optionee is an officer or full-time employee of the Company, or any
Parent or Subsidiary, or if the Board determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company, or any Parent or Subsidiary. The Board shall have discretion to
determine whether Optionee has ceased to perform services for the Company, or
any Parent or Subsidiary, and the effective date on which such services cease
(the "Termination Date").
(a) Termination Generally. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, for any reason other than a Termination
for Cause, as defined below, or death or disability (within the meaning of Code
Section 22(e)(3)), this option shall be terminated, along with any and all
rights or subsequent rights attached thereto, ninety (90) days following the
Termination Date, but in no event later than the Expiration Date.
(b) Termination for Cause. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, due to a Termination for Cause, as defined
in that certain employment agreement between Optionee and the Company dated July
1, 1998 (the "Employment Agreement"), this Option shall immediately be
terminated, along with any and all rights or subsequent rights attached thereto,
as of the Termination Date, but in no event later than the Expiration Date.
(c) Death or Disability. If Optionee ceases to perform services for the
-------------------
Company, or any Parent or Subsidiary, as a result of the death or disability of
Optionee (as determined by the Board in its sole discretion), this Option, to
the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee (or, in the event
of Optionee's death, by Optionee's legal representative) within twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
(d) No Right to Employment. Nothing in this Stock Option Grant Certificate
----------------------
shall confer on Optionee any right to continue in the employ of, or other
relationship with, the Company, or any Parent or Subsidiary, or limit in any way
the right of the Company, or any Parent or Subsidiary, to terminate Optionee's
employment or other relationship at any time, with or without cause.
4. Manner of Exercise.
------------------
(a) Exercise Agreement. This Option shall be exercisable by delivery to
------------------
<PAGE>
the Company of an executed Exercise and Shareholder Agreement ("Exercise
Agreement") in the form of the Exercise Agreement delivered to Optionee, if
applicable, or in such other form as may be approved or accepted by the Company,
which shall set forth Optionee's election to exercise this Option with respect
to some or all of the Shares, the number of Shares being purchased, any
restrictions imposed on the Shares, and such other representations and
agreements as may be required by the Company to comply with applicable
securities laws.
(b) Exercise Price. Such notice shall be accompanied by full payment of
--------------
the Exercise Price for the Shares being purchased. Payment for the Shares may
be made in U.S. dollars in cash (or check) or, where permitted by law and
approved by the Board in its sole discretion: (i) by surrender of shares of
Common Stock of the Company that have been owned by Optionee for more than six
(6) months (and which have been paid for within the meaning of SEC Rule 144,
and, if such Shares were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such Shares), or were obtained by
Optionee in the open public market, having a fair market Value equal to the
Exercise Price of the Shares being purchased; or (ii) by instructing the Company
to withhold Shares otherwise issuable pursuant to the exercise of the Option
having a fair market value equal to the exercise price of the Shares being
purchased (including the withheld Shares).
(c) Withholding Taxes. Prior to the issuance of Shares upon exercise of
-----------------
this Option, Optionee must pay, or make adequate provision for, any applicable
federal or state withholding obligations of the Company. Where approved by the
Board, Optionee may provide for payment of withholding taxes upon exercise of
the Option by requesting that the Company retain Shares with a fair market value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to Optionee by deducting the Shares
retained from the Shares exercised.
(d) Issuance of Shares. Provided that such notice and payment are in form
------------------
and substance satisfactory to counsel for the Company, the Company shall cause
the Shares to be issued in the name of Optionee or Optionee's legal
representative.
5. Nontransferability of Option. This Option may not be transferred in any
----------------------------
manner, other than by will or by the laws of descent and distribution, and may
be exercised during Optionee's lifetime only by Optionee. The terms of this
Option shall be binding upon the executor, administrators, successors and
assigns of Optionee.
6. Tax Consequences. Optionee understands that the grant and exercise of this
----------------
Option, and the sale of Shares obtained through the exercise of this Option, may
have tax implications that could result in adverse tax consequences to Optionee.
Optionee represents that Optionee has consulted with, or will consult with, his
or her tax advisor and Optionee further acknowledges that Optionee is not
relying on the Company for any tax, financial or legal advice.
7. Interpretation. Any dispute regarding the interpretation of this Stock
--------------
Option Grant Certificate shall be submitted by Optionee or the Company to the
Board or the Committee, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or Committee shall be
final and binding on the Company and Optionee.
8. Entire Agreement. Optionee acknowledges and agrees that the granting of
----------------
this Option constitutes a full accord, satisfaction and release of all
obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate constitutes the entire
agreement of the parties hereto, and supersede all prior undertakings and
agreements with respect to the subject matter hereof. All prior agreements,
commitments and understandings between the parties hereto regarding the subject
matter hereof are merged into this Stock Option Grant Certificate and the
<PAGE>
Exercise Agreement.
9. Vesting and Exercise of Shares. Subject to the terms of this Stock Option
------------------------------
Grant Certificate and the Exercise Agreement, the issuance of Shares pursuant to
the exercise of this Option shall be subject to the vesting restrictions
selected on the reverse side of this Stock Option Grant Certificate and defined
below. For purposes of this Section, "Continuous Service" means a period of
continuous performance of services by Optionee for the Company, a Parent, or a
Subsidiary, as determined by the Board.
Optionee may exercise this Option with respect to the percentage of Shares set
forth below only after Optionee has completed the following periods of
Continuous Service following the Date of Grant:
(a) After twelve (12) months of Continuous Service, up to twenty-five percent
(25%) of the Shares;
(b) After twenty-four (24) months of Continuous Service, up to fifty percent
(50%) of the Shares;
(c) After thirty-six (36) months of Continuous Service, up to seventy-five
percent (75%) of the Shares; and
(d) After forty-eight (48) months of Continuous Service, up to one hundred
percent (100%) of the Shares.
Notwithstanding anything herein to the contrary, if Optionee's employment by
the Company is terminated by the Company without cause pursuant to Section 4.D.
of the Employment Agreement, the vesting of this Option shall be accelerated as
of the Termination Date such that the Option shall be vested and exercisable to
the same extent as if Optionee had remained employed by the Company continuously
until the first anniversary of the next succeeding June 1.
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between InfoCure
Corporation, a Delaware corporation ("Company"), and James K. Price
("Executive") is hereby entered into as of the 1st day of July, 1998 (the
"Effective Date").
WHEREAS, Company is engaged in the business of providing practice
management software products and related services that address the needs of
health care providers to manage and communicate administrative, practice
management and clinical applications designed to meet the information
requirements of the vast majority of medical specialties and office-based health
care practices in the United States (the "Business"); and
WHEREAS, Executive desires to be employed by Company and Company desires to
employ and assure itself of the continued services of Executive on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
1. Employment and Duties.
---------------------
A. Company shall employ Executive as Executive Vice President during
the term of his employment as set forth in this Agreement and Executive hereby
accepts such employment. Executive shall report to the President and Board of
Directors of Company and shall have duties and responsibilities as set forth on
Exhibit A and/or as may be assigned, from time to time, by the President and
- ---------
Board of Directors of Company (the "Duties").
B. The Company shall use its best efforts to cause the Executive to be
nominated for and elected to the Board of Directors of the Company during the
term of his employment.
C. The Executive shall devote approximately forty (40) hours per week
to the performance of his duties hereunder. Neither the foregoing nor any other
provision of this Agreement is intended or shall be construed as preventing
Executive from devoting his time and effort to charitable, community activities
and other business non-competitive to the Business substantially to the same
extent as he has devoted time and effort prior to the effective date of this
Agreement provided that such involvement with such activities does not
materially interfere with the performance of his duties under this Agreement.
2. Compensation.
------------
A. Base Salary. During the Term (as defined below), Company shall pay
-----------
to Executive a base salary ("Base Salary") of One Hundred Twenty Five Thousand
and No/100 Dollars ($125,000.00) per year, payable in arrears in accordance with
the Company's standard payroll practices for senior executives (but in no event
less frequently than in equal semi-monthly payments). In the event of a
Disability, to the extent payments are received under an employer-sponsored
disability program, the payments hereunder are to be reduced by an amount equal
to such disability payments.
B. Incentive Compensation. During the Term of this Agreement, in
----------------------
addition to the Base Salary as provided in Section 2.A. above, Executive shall
be eligible for annual incentive compensation (the "Incentive Compensation")
pursuant to a program established by Company's Board of Directors in its sole
and absolute discretion, from time to time, provided that the Goals (as defined
<PAGE>
below) of said program are met by Executive. The Incentive Compensation program
shall be based upon the achieving of certain revenue and/or profit goals and/or
other goals (the "Goals") of Company. Upon the establishment of the program and
Goals, the parties agree to enter into an agreement setting forth the Incentive
Compensation program and Executive's eligibility to participate in said program,
which agreement shall be attached hereto as Exhibit B and shall constitute a
---------
part of this Agreement. This Incentive Compensation is over and above the cash
bonus described on Schedule B, which is attached hereto and shall constitute a
----------
part of this Agreement.
C. Employee Benefit Programs. Executive shall be eligible to
-------------------------
participate in all employee benefit programs generally available to senior
executive officer of the Company; including medical and hospitalization
programs; employee stock option and bonus plans generally made available to
employees of Executive's employment status; now or hereafter made available,
subject to the terms and conditions of such programs, including eligibility. It
is understood that Company reserves the right to modify and rescind any program
or adopt new programs in its sole discretion. Company may, in its sole
discretion, maintain key man life insurance on the life of Executive and
designate Company as the beneficiary. Executive agrees to execute any documents
necessary to effect such policy.
D. Vacation. Executive shall accrue six (6) weeks of vacation during
--------
each calendar year during the term of this Agreement (with such vacation time
pro-rated for 1997). Vacation time shall be taken at such time as not to
materially interfere with the Business of Company and must be pre-approved by
Company. Vacation time may not be carried forward from one (1) calendar year to
another.
E. Automobile Allowance. Executive shall be entitled to receive an
--------------------
automobile allowance of One Thousand Five Hundred and No/100 Dollars ($1,500.00)
per month to cover the costs associated with an automobile (including lease,
insurance and maintenance expense) and shall be entitled to reimbursement of
operating costs when operated for business purposes. The automobile allowance
shall be payable semi-monthly.
F. Business Expenses. The Executive shall be entitled to be reimbursed
-----------------
for reasonable business expenses incurred by him in connection with his services
hereunder in accordance with the Company's policies and procedures for its
senior executives.
3. Term. The term of employment of Executive under this Agreement shall
----
be for a period of four (4) years (the "Term") commencing on the date hereof and
ending on the fourth (4th) anniversary thereof, subject to earlier termination
as provided in Section 4; provided, however, that at the end of such four (4)
year period and each anniversary date thereafter, the term of this Agreement
will automatically be extended for an additional year unless, not later than six
(6) months prior to the end of such four (4) year period or one (1) year
extension period, as the case may be, the Company or the Executive shall have
given notice that it or he elects not to have the term extended.
4. Early Termination.
-----------------
A. For Cause.
---------
(i) Notwithstanding the foregoing, Company may terminate the
employment of Executive "for cause" (as hereinafter defined) at any time upon
written notice effective immediately. For purposes of this Agreement, "Cause"
shall mean that, prior to any termination pursuant to this Section 4.A.,
Executive shall have committed:
<PAGE>
(1) An intentional act or acts of fraud, embezzlement or
theft constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment for Executive at the expense of the
Company; or
(2) The continued, repeated, intentional and willful refusal
to perform the duties associated with Executive's position with the Company,
which is not cured within thirty (30) days following written notice to
Executive.
For purposes of this Agreement, no act or failure to act on the part of
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Company then in office at a meeting of the Board
called and held for such purpose, after reasonable notice to Executive and an
opportunity for Executive, together with his counsel (if Executive chooses to
have counsel present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars thereof in
detail. Nothing herein will limit the right of Executive or his beneficiaries
to contest the validity or propriety of any such determination.
(ii) Upon termination of Executive's employment for cause, Company
shall have no further obligation to pay any compensation to Executive for
periods after the effective date of the termination for cause, except for Base
Salary which accrued as of the termination date. In addition, the right to
exercise any vested stock option shall terminate on the thirtieth (30th) day
following the effective date of the termination of employment for cause.
B. Termination Upon Death or Total and Permanent Disability.
--------------------------------------------------------
(i) The employment of Executive shall terminate upon his death or,
ten (10) business days after written notice by Company of termination, upon or
during the continuance of the Total and Permanent Disability (as hereinafter
defined) of Executive.
(ii) Upon termination upon death or upon or during Executive's Total
and Permanent Disability, Company shall have no further obligation to pay any
compensation for periods after the effective date of such termination, except
for Base Salary which accrued as of the termination date. The term "Total and
Permanent Disability" means the suffering by Executive of a Disability for a
continuous period in excess of one hundred eighty (180) days, unless extended in
writing by Company. A Total and Permanent Disability shall be deemed to commence
upon the expiration of such one hundred eighty (180) day period.
(iii) For purposes hereof, the terms "Disabled" or "Disability" shall
mean the suffering by Executive of a physical or mental condition resulting from
bodily injury, disease, or mental disorder which renders Executive incapable of
continuing each and every one of his or her usual and customary duties in an
efficient manner as an employee of Company, as determined by the Board of
Directors. No Disability shall be deemed to exist until Executive shall be
unable to perform such duties hereunder for seven (7) consecutive days, and
after such Disability continues for seven (7) consecutive
<PAGE>
days, then the same shall be deemed to have existed from the first (1st) day of
such Disability. At the end of any Disability (other than a Disability that
results in a Total and Permanent Disability as defined below), Executive shall
return to work, and this Agreement shall continue as though such Disability had
not occurred.
If Executive desires to return to work at the end of any Disability, but
there is a dispute as to whether Executive is able to perform his or her duties
hereunder or if there is a dispute as to whether Executive is Disabled or has
suffered a Total and Permanent Disability, the issue shall be submitted to a
Board of Arbiters consisting of three (3) persons: one (1) physician who
specializes in the physical or mental condition which resulted in the Disability
(hereinafter referred to as a "Specialist") shall be appointed on behalf of
Company by the Board of Directors of Company (with Executive having no vote on
this question); the second (2nd) Specialist shall be appointed by Executive and
a third (3rd) Specialist shall be appointed by the two (2) Specialists so
appointed. If a majority of the Specialists determine that Executive is able to
perform his or her duties hereunder on a full-time basis, Executive shall be
permitted to return to work under the provisions hereof. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
C. Change in Control. In the event of a Change in Control (as hereinafter
-----------------
defined) of Company, and Executive elects, in his sole discretion, to terminate
his employment hereunder as of a date within six (6) months after the Change in
Control, Executive shall give Company two (2) weeks prior written notice of such
termination and Executive shall be entitled to receive, and Company shall pay,
on the date of the termination of employment an amount equal to three (3) times
Executive's then Base Salary.
The term "Change in Control" means:
(i) The acquisition by any person, entity or "group" within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
("34 Act") (excluding, for this purpose, Company, any of subsidiaries, or any
employee benefit plan of Company or any of its subsidiaries) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 34 Act) of
more than fifty percent (50%) of either the then outstanding shares of common
stock of Company or of the combined voting power of Company's then outstanding
voting securities entitled to vote generally in the election of directors;
(ii) Individuals who, as of the date hereof, constitute the board of
directors of Company ("Incumbent Board") cease for any reason to constitute at
least a majority of the board of directors, provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual is a member of the Incumbent Board; or
(iii) Approval of the shareholders of Company of a merger,
consolidation or other reorganization in each case, with respect to which
persons who were the shareholders of Company and optionees immediately prior to
such merger, consolidation or other reorganization, immediately thereafter, do
not own more than fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the merged, consolidated or
reorganized Company's then outstanding voting securities, or of the sale of all
or substantially all of the assets of Company; provided, however, in such event
the Change in Control will be deemed to have occurred immediately prior to the
merger, consolidation or other reorganization.
<PAGE>
Notwithstanding anything to the contrary contained in this Agreement, if
Executive is a "disqualified individual" (as that term is defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code") or any
successor provision thereto) and if any portion of the payments hereunder would
be an "excess parachute payment" (as that term is defined in Section 280G of the
Code or any successor provision thereto), but for the application of this
sentence, then the amount of such payment otherwise payable to Executive under
this Agreement shall be reduced to the minimum extent necessary (but in no event
to less than zero (0)) so that no portion of such payment, as so reduced,
constitutes an excess parachute payment, provided, that, any separate
compensation arrangements extended to Executive by the Company which involve
non-cash compensation shall be reduced first in priority before any reduction in
payment hereunder. The Company shall bear responsibility for performing the
necessary calculations under this section and shall indemnify Executive, on a
grossed-up, after tax (federal, state and local) basis, for any error or
omission on the part of the Company which results in additional tax liability to
Executive, within five (5) calendar days following determination of the amount
of indemnity owed to Executive.
D. Termination by Company Without Cause. In the event either (i) Company
------------------------------------
terminates the employment of the Executive, except for cause, prior to the
expiration of term of this Agreement as set forth in Section 3. hereof or (ii)
Executive terminates the employment after a Constructive Discharge (as defined
below), Company shall pay Executive, as its sole and exclusive liability
hereunder, an amount equal to thirty-six (36) months of the Executive's then
current monthly base salary. Payment shall be made within five (5) days of such
termination.
For purposes of this Agreement, "Constructive Discharge" shall mean any of
the events set forth below which are not cured within fifteen (15) days
following written notice thereof by Executive to Company:
(i) Any material reduction in Base Salary;
(ii) A material reduction in Executive's job function, duties or
responsibilities, or a similar change in Executive's reporting relationships;
(iii) A required relocation of Executive of more than one hundred
(100) miles from Executive's current job location;
(iv) Any material breach of any of the terms of this Agreement by
the Company; or
(v) Any failure by the Company to grant to Executive not later than
August 1, 1998 stock options in the amount and on terms set forth on Schedule A.
----------
provided, however, that the term "Constructive Discharge" shall not include a
- -------- -------
specific event described in the preceding clause (i), (ii), (iii) or (iv) unless
Executive actually terminates his employment with the Company within sixty (60)
days after the occurrence of such event.
5. No Mitigation Obligation. The Company hereby acknowledges that it will
------------------------
be difficult and may be impossible (i) for Executive to find reasonably
comparable employment following the date of termination and (ii) to measure the
amount of damages which Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the termination compensation
by the Company to Executive in accordance with the terms of this Agreement is
hereby acknowledged by
<PAGE>
the Company to be reasonable and will be liquidated damages, and Executive will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of Executive
hereunder or otherwise.
6. Confidential Information.
------------------------
A. Company may disclose to Executive certain Confidential Information
(defined below). Executive acknowledges and agrees that Company has a
reasonable, competitive business interest in the Confidential Information and
the Confidential Information is the sole and exclusive property of Company (or a
third party providing such information to Company) and that Company or such
third party owns all worldwide rights therein under patent, copyright, trade
secret, confidential information, moral right or other property right.
Executive acknowledges and agrees that the disclosure of the Confidential
Information to Executive does not confer upon Executive any license, interest or
rights of any kind in or to the Confidential Information. Executive may use the
Confidential Information solely for the benefit of Company while Executive is
employed by Company. Except in the performance of services for Company,
Executive shall hold in confidence and not reproduce, distribute, transmit,
reverse engineer, decompile, disassemble, or transfer, directly or indirectly,
in any form, by any means, or for any purpose, the Confidential Information or
any portion thereof. Executive agrees to return to Company, upon request by
Company, the Confidential Information and all materials relating thereto.
B. Executive acknowledges that his obligations with regard to the
Confidential Information shall remain in effect while Executive is engaged by
Company and for a period of two (2) years thereafter.
"Confidential Information" shall mean any confidential or proprietary
information possessed by Seller or relating to its business, including, without
limitation, any confidential "know-how", trade secrets, customer lists, details
of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel
acquisition plans; provided, however, that Executive shall not be restricted
from disclosing or using Confidential Information that: (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure; (ii) becomes available to Executive in a manner that is not in
contravention of applicable law from a source that is not bound by a
confidential relationship with Company or by a confidentiality or other similar
agreement; (iii) was known to Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Executive by Company or one of Company's or (iv) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, Executive shall
provide Company with prompt notice of such requirement so that Company may seek
an appropriate protective order prior to any such required disclosure by
Executive. Confidential Information may include, but not be limited to, future
business plans, licensing strategies, advertising campaigns, information
regarding customers, employees and independent contractors and the terms and
conditions of this Agreement.
7. Non-Solicitation.
----------------
<PAGE>
A. Customers. During Executive's employment with Company and for a
---------
period of twelve (12) months thereafter (the "Restricted Period"), Executive
shall not, on his own behalf or on behalf of any person, firm, partnership,
association, corporation or business organization, entity or enterprise ("Other
Entity"), solicit, contact, call upon, communicate with or attempt to
communicate with any customer of Company, or any representative of any customer
of Company, with a view to providing products and/or services in the Business of
Company provided that the restrictions set forth in this Section 7.A. shall
apply only to customers of Company, or representatives of customers of Company,
with which Company had contact during the two (2) year period immediately
preceding termination of his employment with Company (or shorter period if
Executive has not then been engaged by Company for two (2) years).
B. Employees/Independent Contractors. During the Restricted Period,
---------------------------------
Executive shall not, on his own behalf or on behalf of any Other Entity, recruit
or hire, or attempt to recruit or hire, any employees or independent contractors
of Company who were employed or engaged by Company, as the case may be, during
the one (1) year period prior to the termination of his employment with Company
(or shorter period if Executive has not then been engaged by Company for one (1)
year).
8. Non-Competition. During the Restricted Period, Executive shall not on
---------------
his own behalf or on behalf of any Other Entity, perform the duties and services
Executive performs for Company for, or own a material financial interest in, any
Other Entity that is competitive with the business of the Company or any of its
subsidiaries (as such business is conducted on the first (1st) day of the
Restricted Period) within the United States (the "Territory"). The ownership of
an interest constituting not more than five percent (5%) of the outstanding debt
or equity in a corporation, the shares of which are traded on a recognized stock
exchange or traded in the over-the-counter market, even though that corporation
may be a competitor of the Company or any of its subsidiaries, shall not be
deemed a material financial interest in a competitor.
9. Acknowledgment. The parties hereto agree that: (i) the Restricted
--------------
Period and Territory contained in this Agreement are reasonably necessary for
the protection of Company's legitimate business interests and that the Territory
is the area in which Executive shall perform (or currently perform) services for
Company; (ii) by having access to information concerning employees, independent
contractors and customers of Company, Executive shall obtain a competitive
advantage as to such parties; (iii) Executive's covenants and agreements
contained in this Agreement are reasonably necessary to protect the interests of
Company in whose favor said covenants and agreements are imposed in light of the
nature of Company's Business and Executive's involvement in such Business; (iv)
the restrictions imposed by this Agreement are not greater than are necessary
for the protection of Company in light of the substantial harm that Company
shall suffer should Executive breach any of the provisions of said covenants or
agreements and (v) Executive's covenants and agreements contained in this
Agreement form material consideration for this Agreement, the Acquisition
Agreement and Executive's employment by Company.
10. Remedy for Breach. Executive agrees that the remedies at law of
-----------------
Company for any actual or threatened breach by Executive of the covenants
contained in Sections 6. through 8. of this Agreement would be inadequate and
that Company shall be entitled to specific performance of the covenants in such
paragraphs, including entry of an ex parte, temporary restraining order in state
or federal court, preliminary and permanent injunctive relief against activities
in violation of such paragraphs, or both, or other appropriate judicial remedy,
writ or order, in addition to any damages and legal expenses (including
attorney's fees) which Company may be legally entitled to recover. Executive
acknowledges and agrees that the covenants contained in Sections 6. through 8.
of this Agreement shall
<PAGE>
be construed as agreements independent of any other provision of this or any
other agreement between the parties hereto, and that the existence of any claim
or cause of action by Executive against Company, whether predicated upon this or
any other agreement, shall not constitute a defense to the enforcement by
Company of said covenants.
11. No Prior Agreements. Executive hereby represents and warrants to
-------------------
Company that the execution of this Agreement by Executive and Executive's
employment by Company and the performance of Executive's duties hereunder shall
not violate or be a breach of any agreement with a former employer, client or
any other person or entity.
12. Assignment; Binding Effect. Executive understands that Executive has
--------------------------
been selected for employment by Company on the basis of Executive's personal
qualifications, experience and skills. Executive agrees, therefore, that
Executive cannot assign all or any portion of Executive's performance under this
Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 13. below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Executive has no oral representations, understandings or agreements
with Company or any of its officers, directors or representatives covering the
same subject matter as this Agreement. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between Company
and Executive. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between Company and Executive and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of Company and Executive,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To Company: InfoCure Corporation
Corporate Headquarters
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Frederick L. Fine
With a Copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
To Executive: James K. Price
135 Crestwicke Trace
Atlanta, Georgia 30319
<PAGE>
With a Copy to: Anderson, Kill & Olick
1251 Avenue of the Americas
New York City, New York 10020
Attention: Michael Stamm, Esq.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. Mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
Agreement shall be enforced separately and independently of any other agreement
involving the parties hereto. The Section headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of the Agreement or of any part hereof.
16. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Georgia.
17. Counterparts. This Agreement may be executed simultaneously in two
------------
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute, but one and the same instrument.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
InfoCure Corporation
By: /s/ Frederick L. Fine
-------------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
EXECUTIVE:
/s/ James K. Price (SEAL)
----------------------------------------
James K. Price
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
-------------------
Overall Responsibility:
- ----------------------
Executive shall assist the President and Chief Executive Officer in
managing the day to day operations of the Company as may be deemed necessary or
desirable for the success of the Company and shall perform such specific duties
as the President and Chief Executive Officer or the Board of Directors shall
request or delegate, including but not limited to, the development of national
accounts and directing the mergers and acquisitions activity of the Company.
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Compensation
----------------------
<PAGE>
SCHEDULE A
A non-qualified option to purchase thirty thousand (30,000) shares of
Company's common stock at an exercise price equal to fair market value on the
date of grant, vesting over four years from the date of grant.
<PAGE>
SCHEDULE B
Executive shall receive a cash bonus of Thirty-Three Thousand and No/100
Dollars ($33,000.00) (the "Bonus") in the event the Company shall report
earnings for the first six (6) months of 1998 which are, after taking into
account the Bonus and similar bonus amounts payable to other senior executives
of the Company, at or above the June 15, 1998 consensus of analyst estimates for
such six (6) month period. Payment of any Bonus payable shall be made within
forty-five (45) days of June 30, 1998. In the event the Company would not meet
the consensus of analyst estimates if the full Bonus were paid, the Bonus shall
be reduced, pro rata with similar bonus amounts payable to other senior
executives of the Company, to such lower amount so the Company may pay the
reduced Bonus and reach such consensus earnings estimates.
<PAGE>
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
--------------------------------
THIS AGREEMENT is made and entered into as of this 1st day of June, 1998
(the "Award Date"), by and between InfoCure Corporation (the "Company"), a
Delaware corporation and James K. Price (the "Employee").
BACKGROUND
A. The Board of Directors of the Company ("Board") desires to make an
award of restricted shares of the Company's stock to Employee to promote and
increase his personal interests in the welfare of the Company and to provide
incentives to him as one of the officers who is primarily responsible for the
operations of the Company and for shaping and carrying out the long-range plans
of the Company and aiding in its continued growth and financial success.
B. The Board has authorized the grant to Employee of a restricted stock
award to purchase shares of the common stock, $.001 par value ("Common Stock")
of the Company.
C. The Company and Employee wish to confirm herein the terms, conditions,
and restrictions of the restricted stock award.
For and in consideration of the premises, the mutual covenants contained
herein, and other good and valuable consideration, the parties hereto agree:
SECTION 1
AWARD OF SHARES
1.1 Award of Shares. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Company hereby awards to Employee Thirty Thousand
(30,000) shares of Common Stock (the "Bonus Shares").
1.2 Vesting of Bonus Shares. Employee shall become vested in the Bonus
-----------------------
Shares as described in the vesting schedule attached hereto as Schedule I (the
----------
"Vesting Schedule"), except that the Board of Directors may, in its sole
discretion, waive all or a part of the Vesting Schedule, from time to time, in
which case all Bonus Shares shall become vested according to the terms of the
waiver. The Bonus Shares which have become vested pursuant to the Vesting
Schedule or by virtue of waiver of the Vesting Schedule by the Board of
Directors are herein referred to as the "Vested Bonus Shares" and all Bonus
Shares which are not Vested Bonus Shares are sometimes herein referred to as the
"Unvested Bonus Shares."
1.3 Additional Condition to Bonus Shares. In order not to forfeit the
------------------------------------
Bonus Shares for any such Bonus Shares, Employee must deliver to the Company,
within ten (10) days after the occurrence of an event in the Vesting Schedule,
pursuant to which some or all of the Bonus Shares become Vested Bonus Shares (a
"Vesting Date"), either a certified check payable to the Company in the amount
of all withholding tax obligations (whether federal, state or local), imposed on
the Company by reason of the vesting of the Bonus Shares, or the Withholding
Election described in Section 1.4. Upon receipt of payment in full of all
withholding tax obligations, the Company shall cause a certificate representing
the Bonus Shares to be issued and delivered to the Share Custodian pursuant to
the instructions of Employee as provided in Section 1.5.
<PAGE>
1.4 Optional Withholding Election. In lieu of paying the withholding tax
-----------------------------
obligation in cash, as described in Section 1.3, Employee may elect to have the
actual number of Vested Bonus Shares reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock on the Vesting Date as determined by the Board of Directors, is
sufficient to satisfy the amount of the withholding tax obligations imposed on
the Company by reason of the vesting of the Bonus Shares (the "Withholding
Election"). Employee may make a Withholding Election only if all of the
following conditions are met:
A. The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit A attached hereto;
---------
B. Any Withholding Election made will be irrevocable; however, the
acceptance by the Board of any Withholding Election shall rest solely in the
Board's unfettered discretion; and
C. If Employee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of 1934,
at any time during a period in which some or all of the Bonus Shares vest, then
the Withholding Election must be made (i) at least six (6) months prior to the
Tax Date applicable to the Vesting Date of Bonus Shares and (ii) prior to the
Tax Date and in any ten (10) day period beginning on the third (3rd) day
following the release of the Company's quarterly or annual summary statement of
sales and earnings.
1.5 Bonus Shares Held by the Share Custodian. Employee hereby authorizes
----------------------------------------
and directs the Company to deliver any share certificate issued by the Company
to evidence Bonus Shares to the Secretary of the Company or such other officer
of the Company as may be designated by the Board (the "Share Custodian") to be
held by the Share Custodian until the Bonus Shares vest in accordance with
Schedule I.
- ----------
During the period that the Share Custodian holds the shares of Common Stock
subject to this Section 1.5, Employee shall be entitled to all rights applicable
to shares of Common Stock not so held; provided, however, in the event the
number of shares of Common Stock is increased or reduced by changing par value,
split-up, stock split, reverse stock split, reclassification, merger,
reorganization, consolidation, or otherwise, and in the event of any
distribution of Common Stock or other securities of the Company in respect of
such shares of Common Stock, Employee agrees that any certificate representing
shares of Common Stock or other securities of the Company issued as a result of
any of the foregoing shall be delivered to the Share Custodian and shall be
subject to all of the provisions of this Agreement as if initially purchased
thereunder.
1.6 Rights as Stockholder. Employee, or, if applicable, the Transferee
---------------------
(as defined in Section 3.13.F.), shall have no rights as a stockholder with
respect to any Bonus Shares until a stock certificate for the shares is issued
in Employee's name. Employee shall be entitled to dividends paid or declared on
Vested Bonus Shares, for which the record date is prior to a Vesting Date.
Employee shall not be entitled to dividends on Unvested Bonus Shares.
1.7 Investment Representations. Employee hereby represents, warrants,
--------------------------
covenants, and agrees with the Company as follows:
<PAGE>
A. The Bonus Shares being acquired by Employee will be acquired for
Employee's own account without the participation of any other person, with the
intent of holding the Bonus Shares for investment and without the intent of
participating, directly or indirectly, in a distribution of the Bonus Shares and
not with a view to, or for resale in connection with, any distribution of the
Bonus Shares, nor is Employee aware of the existence of any distribution of the
Bonus Shares;
B. Employee is not acquiring the Bonus Shares based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Bonus Shares, but rather upon an independent examination
and judgment as to the prospects of the Company;
C. The Bonus Shares were not offered to Employee by means of publicly
disseminated advertisements or sales literature, nor is Employee aware of any
offers made to other persons by such means;
D. Employee is able to bear the economic risks of the investment in
the Bonus Shares, including the risk of a complete loss of his investment
therein;
E. Employee understands and agrees that the Bonus Shares will be
issued and sold to Employee without registration under any state law relating to
the registration of securities for sale, and will be issued and sold in reliance
on the exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
F. The Bonus Shares cannot be offered for sale, sold or transferred
by Employee other than pursuant to: (i) an effective registration under the
1933 Act or in a transaction otherwise in compliance with the 1933 Act and (ii)
evidence satisfactory to the Company of compliance with the applicable
securities laws of other jurisdictions. The Company shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance with
the above laws;
G. The Company will be under no obligation to register the Bonus
Shares or to comply with any exemption available for sale of the Bonus Shares
without registration or filing, and the information or conditions necessary to
permit routine sales of securities of the Company under Rule 144 of the 1933 Act
are not now available and no assurance has been given that it or they will
become available. The Company is under no obligation to act in any manner so as
to make Rule 144 available with respect to the Bonus Shares;
H. Employee has and has had complete access to and the opportunity to
review and make copies of all material documents related to the business of the
Company, including, but not limited to, contracts, financial statements, tax
returns, leases, deeds, and other books and records. Employee has examined such
of these documents as Employee has wished and is familiar with the business and
affairs of the Company. Employee realizes that the purchase of the Bonus Shares
is a speculative investment and that any possible profit therefrom is uncertain;
I. Employee has had the opportunity to ask questions of and receive
answers from the Company and any person acting on its behalf and to obtain all
material information reasonably available with respect to the Company and its
affairs. Employee has received all information and data with respect to the
Company which Employee has requested and which Employee has deemed relevant in
connection with the evaluation of the merits and risks of Employee's investment
in the Company;
<PAGE>
J. Employee has such knowledge and experience in financial and
business matters that Employee is capable of evaluating the merits and risks of
the purchase of the Bonus Shares hereunder and Employee is able to bear the
economic risk of such purchase; and
K. The agreements, representations, warranties, and covenants made by
Employee herein extend to and apply to all of the Bonus Shares of the Company
issued to Employee pursuant to this restricted stock award. Acceptance by
Employee of the certificate representing such Bonus Shares shall constitute a
confirmation by Employee that all such agreements, representations, warranties,
and covenants made herein shall be true and correct at that time.
SECTION 2
RESTRICTIONS AND FORFEITURE OF BONUS SHARES
2.1 Forfeiture Upon Termination of Employment. Notwithstanding anything
-----------------------------------------
to the contrary herein, upon Termination of Employment (as defined in Section
3.13.E.) for:
A. Cause (as defined in Section 3.13.A.), all Unvested Bonus Shares
shall be forfeited, effective upon the Effective Date of Termination (as defined
in Section 3.13.C.); or
B. A reason other than Cause, death, or Disability as defined under
Section 4. of that certain Employment Agreement by and between Employee and
Company, dated as of July 1, 1998, certain Unvested Bonus Shares shall become
vested in accordance with the following formula and the remainder shall be
forfeited, such accelerated vesting and forfeiture shall be effective upon the
Effective Date of Termination: The closing price of the Common Stock of the
Company on the Effective Date of Termination (such price to be adjusted to
reflect changes in capitalization set forth in Section 3.1) shall be divided by
$40.00 and the result shall be multiplied by the total number of Unvested Bonus
shares to reach the number of Unvested Bonus Shares in the "Vesting Pool" (the
number of shares in the "Vesting Pool", however, shall not be greater than the
number of Unvested Bonus Shares); the number of shares in the Vesting Pool shall
then be multiplied by a fraction, the numerator of which is the number of years
served in the initial term of the Employment Agreement at the Effective Date of
Termination (rounded up to the next whole year) and the denominator of which
shall be four (4), to reach the number of Unvested Bonus Shares that will become
vested.
2.2 Restrictions on Transfer of Bonus Shares. Bonus Shares shall be
----------------------------------------
subject to the following restrictions:
A. Except for transfers made in compliance with Section 2.2.B. below,
or as otherwise required or permitted hereunder, none of the Bonus Shares may be
conveyed, pledged, assigned, transferred, hypothecated, encumbered, or otherwise
disposed of by Employee, or if the Bonus Shares are held or owned of record by a
Transferee, by such Transferee. The foregoing notwithstanding, the Board may,
but shall not be obligated to, approve the transfer of such Bonus Shares upon
the condition that the transferee thereof execute and deliver to the Company
such documents and agreements as the Company shall reasonably require to
evidence the fact that the Bonus Shares to be owned, either directly or
beneficially, by such transferee shall continue to be subject to all the
restrictions set forth in this Section 2.2 and all applicable rights in favor of
the Company set forth elsewhere herein, and that such transferee is subject to
and bound by such restrictions and provisions. Any Bonus Shares transferred by
bequest or by operation of the laws of descent and distribution shall remain
subject to the restrictions set forth in this Section 2.2 and all applicable
rights in favor of the Company set forth
<PAGE>
elsewhere herein in the hands of any transferee thereof. Nothing contained
herein, however, shall be deemed to impose any requirement that any transferee
be an officer, director, or employee of or consultant to the Company.
B. The Bonus Shares may be transferred by Employee to a Transferee
upon the death or Disability of Employee, provided that all such Bonus Shares
shall remain subject to the restrictions set forth in this Section 2.2 and all
applicable rights in favor of the Company set forth elsewhere herein in the
hands the Transferee and of any subsequent transferee of the Transferee.
2.3 Noncompetition. As a condition to preserving the benefits provided by
--------------
this Agreement, the Employee agrees to the restrictive covenant provisions
contained in Sections 6., 7. and 8 of that certain Employment Agreement by and
between Company and Employee of even date herewith. In the event that the
Committee determines in good faith that the Employee has violated the provisions
of this Section, then notwithstanding any other provisions contained in this
Agreement, the Employee (or his heir, legatee or Transferee) shall forfeit any
further right to Bonus Shares.
2.4 Termination of Restrictions. The restrictions contained in Section
---------------------------
2.2 shall terminate once the Bonus Shares become vested, but will remain subject
to the restrictions on transfer set forth in Section 3.2.
SECTION 3
GENERAL PROVISIONS
3.1 Change in Capitalization. If the number of outstanding shares of the
------------------------
Common Stock shall be increased or decreased by a change in par value, split-up,
stock split, reverse stock split, reclassification, distribution of common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made by the Board in the number and kind of Bonus Shares, such that
Employee's proportionate interest shall be maintained as before the occurrence
of the event. No fractional shares shall be issued in making such adjustment.
All adjustments made by the Board under this Section shall be final, binding,
and conclusive.
3.2 Legends. Each certificate representing the Bonus Shares shall be
-------
endorsed with the following legend and Employee shall not make any transfer of
the Bonus Shares without first complying with the restrictions on transfer
described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED JULY 1,
1998, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
UNDER SUCH ACT COVERING SUCH SECURITIES; (II) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR (III) THE ISSUER
RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
<PAGE>
Employee agrees that the Company may also endorse any other legends
required by applicable federal or state securities laws.
The Company need not register a transfer of the Bonus Shares, and may also
instruct its transfer agent, if any, not to register the transfer of the Bonus
Shares unless the conditions specified in the foregoing legends are satisfied.
3.3 Removal of Legend and Transfer Restrictions.
-------------------------------------------
A. Any legend endorsed on a certificate pursuant to Section 3.2 and
the stop transfer instructions with respect to the Bonus Shares shall be removed
and the Company shall issue a certificate without such legend to the holder
thereof if such Bonus Shares are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available.
B. The restrictions described in the second sentence of the legend
set forth in Section 3.2 may be removed at such time as permitted by Rule 144(k)
promulgated under the Securities Act.
3.4 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, no
Bonus Shares shall be issued except, in the reasonable judgment of the Board, in
compliance with exemptions under applicable state securities laws of the state
in which Employee resides, and/or any other applicable securities laws.
3.5 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.6 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.7 Severability. In the event that any one (1) or more of the provisions
------------
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.8 Entire Agreement. This Agreement expresses the entire understanding
----------------
and agreement of the parties with respect to the subject matter. This Agreement
may be executed in two (2) or more counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same instrument.
3.9 Violation. Any transfer, pledge, sale, assignment, or hypothecation
---------
of the Bonus Shares or any portion thereof (other than in strict compliance with
this Agreement) shall be a violation of the terms of this Agreement and shall be
void and without effect.
3.10 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
<PAGE>
3.11 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.12 No Employment Rights Created. The award of Bonus Shares hereunder
----------------------------
shall be construed as giving Employee the right to continued employment with the
Company.
3.13 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
A. "Cause" shall have the meaning set forth in Section 4.A. of that
certain Employment Agreement by and between the Company and Employee dated as of
July 1, 1998; for purposes of this Agreement only, Cause shall also mean
voluntary resignation of employment by Employee not contemplated by such
Employment Agreement.
B. "Disability" shall have the meaning set forth for "Total and
Permanent Disability" in Section 4.B. of that certain Employment Agreement by
and between Company and Employee dated as of July 1, 1998.
C. "Effective Date of Termination" means the effective date of
Termination of Employment as stated in any notice of termination given by the
Company or Employee, or in the event no such notice of termination is given by
either the Company or Employee, then the date on which Employee last performs
the duties of Employee's employment or position with the Company as determined
by the Committee.
D. "Public Offering" means the offering for sale by the Company of
securities of the same class as the Bonus Shares pursuant to a registration
statement filed in accordance with the Securities Act of 1933, as amended, or
any comparable law then in effect, and the effective date of any such Public
Offering shall be the first day on which the securities covered thereby may
lawfully be offered and sold pursuant to such Registration Statement.
E. "Termination of Employment" means the termination of the
employee-employer relationship between Employee and the Company (and its parents
and subsidiaries) for any reason, including, without limitation, a termination
by resignation, discharge, death, Disability, or retirement, notwithstanding
that severance or similar payments are made to Employee. The Committee shall, in
its absolute discretion, determine the effect of all matters and questions
relating to Termination of Employment, including whether a leave of absence
constitutes a Termination of Employment, or whether a Termination of Employment
is for Cause.
F. "Transferee" means the estate, or the executor or administrator
of the estate, of a deceased Optionee, or the personal representative of an
Optionee suffering a Disability.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Frederick L. Fine
------------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ATTEST:
/s/ Susan Gustafson
- -----------------------------
Title: Vice President
-----------------------
[CORPORATE SEAL]
EMPLOYEE:
/s/ James K. Price (SEAL)
---------------------------------------
James K. Price
<PAGE>
SCHEDULE I
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Vesting Schedule
----------------
"Vested Bonus Shares" means: Thirty Thousand (30,000) shares on the tenth
(10th) anniversary date of the Award Date ("Vesting Date").
1. Construction.
------------
A. For purposes of the Vesting Schedule, Employee shall be granted a
year of service for each consecutive twelve (12) consecutive-month period after
the Award Date during which Employee remains, at all times, employed on a full-
time basis by the Company, as determined by the Board.
B. Except as provided in Section 2.1.B. of the Restricted Stock Award
Agreement and in 2.A. and 2.D. below, the right of Employee to vest in Bonus
Shares shall cease upon the Employee's Termination of Employment by the Company,
and thereafter, no further shares shall become vested.
2. Accelerated Vesting Provisions. Notwithstanding any contrary provision
------------------------------
in this Agreement, Unvested Bonus Shares shall be vested under the following
circumstances, effective at the time specified:
A. All Unvested Bonus Shares shall be fully vested in the event
Employee ceases to be an employee of the Company by reason of death or
Disability (as defined in Section 3.13.B.), effective on the date of such death
or Disability.
B. Fifty percent (50%) of the Unvested Bonus Shares shall be fully
vested in the event the average per share closing price for the Company's stock
over a period of twenty (20) consecutive trading days reaches Twenty-Five and
No/100 Dollars ($25.00) (such price to be adjusted to reflect changes in
capitalization set forth in Section 3.1).
C. All Unvested Bonus Shares shall be fully vested in the event the
average per share closing price for the Company's stock over a period of twenty
(20) consecutive trading days reaches Forty and No/100 Dollars ($40.00) (such
price to be adjusted to reflect changes in capitalization set forth in Section
3.1).
D. Upon Termination of Employment (as defined in Section 3.13.E.) for
a reason other than Cause, death or Disability (as defined under Section 4. of
that certain Employment Agreement by and between Employee and Company) all of
the Unvested Bonus Shares not forfeited by reason of Section 2.1.B. shall be
fully vested.
3. Adjustment to Vested Bonus Shares. Appropriate adjustments shall be
---------------------------------
made to the number of Vested Bonus Shares to reflect any Withholding Election
made by Employee.
Schedule I to Restricted Stock Award Agreement
<PAGE>
EXHIBIT A
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Notice of Withholding Election
------------------------------
TO: INFOCURE CORPORATION
FROM: Name
---------------------------
RE: Withholding Election
- --------------------------------------------------------------------------------
This election relates to the Restricted Stock Award identified in Paragraph
3 below. I hereby certify that:
(1) My correct name and social security number and my current address
are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] The original recipient of the Restricted Stock Award.
[ ] The legal representative of the estate of the original
recipient of the Restricted Stock Award.
[ ] A legatee of the original recipient of the Restricted Stock
Award.
[ ] The legal guardian of the original recipient of the Restricted
Stock Award.
(3) The Restricted Stock Award pursuant to which this election is made
is dated and was issued in the name of __________ for ________
(___) shares of Common Stock. This election relates to ________
(___) shares of Common Stock issuable upon vesting of the Bonus
Shares, provided that the numbers set forth above shall be deemed
changed as appropriate to reflect any stock splits and other
adjustments made by the Board of Directors of the Company.
(4) In connection with any future vesting of the Restricted Stock
Award with respect to the Bonus Shares, I hereby elect to have
certain of the shares issuable pursuant to the exercise withheld
by the Company for the purpose of having the value of the shares
applied to pay federal, state, and local, if any, taxes arising
from the exercise. The shares to be withheld shall have, as of
the Tax Date applicable to the exercise, a fair market value equal
to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made.
<PAGE>
(6) I understand that this Withholding Election may not be revised,
amended or revoked by me, but is subject to the disapproval of the
Board of Directors.
(7) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Company shall withhold
from the Vested Bonus Shares a number of shares of Common Stock
having the value specified in Paragraph 4 above.
Dated:
---------------------------- -------------------------------
Legal Signature
- ---------------------------------- -------------------------------
Social Security Number Name (Printed)
-------------------------------
Street Address
-------------------------------
City, State, Zip Code
<PAGE>
INFOCURE CORPORATION
Non-qualified Stock Option Grant Certificate
InfoCure Corporation, a Delaware corporation (the "Company"), hereby
grants to the optionee named below ("Optionee") an option (this "Option")
to purchase the total number of shares shown below of Common Stock of the
Company (the "Shares"), at the exercise price per share set forth below
(the "Exercise Price"), subject to all of the terms and conditions on the
reverse side of this Stock Option Grant Certificate.
In witness whereof, this Stock Option Grant Certificate has been executed
by the Company by a duly authorized officer as of the date specified
hereon.
InfoCure Corporation
By:
---------------------------
Date of Grant: June 1, 1998
Type of Stock Option: Non-qualified
Shares Subject to Option: 30,000
Exercise Price Per Share: $12.25
Term of Option: Ten years
Shares subject to issuance under this Option shall be eligible for
exercise according to the vesting schedule selected below and further
described in Section 9 on the reverse of this Stock Option Grant
Certificate.
Four Year Vesting
Optionee acknowledges that there may be adverse tax consequences
upon exercise of this Option or disposition of the Shares and that
Optionee should consult a tax adviser prior to such exercise or
disposition.
------------------------------------
Signature of Optionee
James K. Price
------------------------------------
Print Name of Optionee
<PAGE>
1. Exercise Period of Option. Subject to the terms and conditions of this
-------------------------
Stock Option Grant Certificate, and unless otherwise modified by a written
modification signed by the Company and Optionee, this Option may be exercised
with respect to all of the Shares, but only according to the vesting schedule
selected on the reverse of this Stock Option Grant Certificate and as described
in Section 9 below, prior to the date which is the last day of the Term set
forth on the face hereof following the Date of Grant (the "Expiration Date").
2. Restrictions on Exercise. This Option may not be exercised unless such
------------------------
exercise is in compliance with the Securities Act of 1933 and all applicable
state securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such compliance.
3. Termination of Option. Except as provided below in this Section, this
---------------------
Option may not be exercised after the date which is ninety (90) days after
Optionee ceases to perform services for the Company, or any Parent or
Subsidiary. Optionee shall be considered to perform services for the Company,
or any Parent or Subsidiary, for all purposes under this Section and Section 9
hereof, if Optionee is an officer or full-time employee of the Company, or any
Parent or Subsidiary, or if the Board determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company, or any Parent or Subsidiary. The Board shall have discretion to
determine whether Optionee has ceased to perform services for the Company, or
any Parent or Subsidiary, and the effective date on which such services cease
(the "Termination Date").
(a) Termination Generally. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, for any reason other than a Termination
for Cause, as defined below, or death or disability (within the meaning of Code
Section 22(e)(3)), this Option shall be terminated, along with any and all
rights or subsequent rights attached thereto, ninety (90) days following the
Termination Date, but in no event later than the Expiration Date.
(b) Termination for Cause. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, due to a Termination for Cause, as defined
in that certain employment agreement between Optionee and the Company dated July
1, 1998 (the "Employment Agreement"), this Option shall immediately be
terminated, along with any and all rights or subsequent rights attached thereto,
as of the Termination Date, but in no event later than the Expiration Date.
(c) Death or Disability. If Optionee ceases to perform services for the
-------------------
Company, or any Parent or Subsidiary, as a result of the death or disability of
Optionee (as determined by the Board in its sole discretion), this Option, to
the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee (or, in the event
of Optionee's death, by Optionee's legal representative) within twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
(d) No Right to Employment. Nothing in this Stock Option Grant Certificate
----------------------
shall confer on Optionee any right to continue in the employ of, or other
relationship with, the Company, or any Parent or Subsidiary, or limit in any way
the right of the Company, or any Parent or Subsidiary, to terminate Optionee's
employment or other relationship at any time, with or without cause.
4. Manner of Exercise.
------------------
(a) Exercise Agreement. This Option shall be exercisable by delivery to
------------------
the Company of an executed Exercise and Shareholder Agreement ("Exercise
Agreement") in the form of the Exercise Agreement delivered to Optionee, if
applicable, or in such other form as may be approved or accepted by the Company,
which shall set forth Optionee's election to exercise this Option with respect
to some or all of the Shares, the number of Shares being purchased, any
restrictions imposed on the Shares, and such other representations and
agreements as may be required by the Company to comply with applicable
securities laws.
(b) Exercise Price. Such notice shall be accompanied by full payment of
--------------
the Exercise Price for the Shares being purchased. Payment for the Shares may
be made in U.S. dollars in cash (or check) or, where permitted by law and
approved by the Board in its sole discretion: (i) by surrender of shares of
Common Stock of the Company that have been owned by Optionee for more than six
(6) months (and which have been paid for within the meaning of SEC Rule 144,
and, if such Shares were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such Shares), or were obtained by
Optionee in the open public market, having a fair market Value equal to the
Exercise Price of the Shares being purchased; or (ii) by instructing the Company
to withhold Shares otherwise issuable pursuant to the exercise of the Option
having a fair market value equal to the exercise price of the Shares being
purchased (including the withheld Shares).
(c) Withholding Taxes. Prior to the issuance of Shares upon exercise of
-----------------
this Option, Optionee must pay, or make adequate provision for, any applicable
federal or state withholding obligations of the Company. Where approved by the
Board, Optionee may provide for payment of withholding taxes upon exercise of
the Option by requesting that the Company retain Shares with a fair market value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to Optionee by deducting the Shares
retained from the Shares exercised.
(d) Issuance of Shares. Provided that such notice and payment are in form
------------------
and substance satisfactory to counsel for the Company, the Company shall cause
the Shares to be issued in the name of Optionee or Optionee's legal
representative.
5. Nontransferability of Option. This Option may not be transferred in any
----------------------------
manner, other than by will or by the laws of descent and distribution, and may
be exercised during Optionee's lifetime only by Optionee. The terms of this
Option shall be binding upon the executor, administrators, successors and
assigns of Optionee.
6. Tax Consequences. Optionee understands that the grant and exercise of this
----------------
Option, and the sale of Shares obtained through the exercise of this Option, may
have tax implications that could result in adverse tax consequences to Optionee.
Optionee represents that Optionee has consulted with, or will consult with, his
or her tax advisor and Optionee further acknowledges that Optionee is not
relying on the Company for any tax, financial or legal advice.
7. Interpretation. Any dispute regarding the interpretation of this Stock
--------------
Option Grant Certificate shall be submitted by Optionee or the Company to the
Board or the Committee, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or Committee shall be
final and binding on the Company and Optionee.
8. Entire Agreement. Optionee acknowledges and agrees that the granting of
----------------
this Option constitutes a full accord, satisfaction and release of all
obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate constitutes the entire
agreement of the parties hereto, and supersede all prior undertakings and
agreements with respect to the subject matter hereof. All prior agreements,
commitments and understandings between the parties hereto regarding the subject
matter hereof are merged into this Stock Option Grant Certificate and the
Exercise Agreement.
9. Vesting and Exercise of Shares. Subject to the terms of this Stock Option
------------------------------
Grant Certificate and the Exercise Agreement, the issuance of Shares pursuant to
the exercise of this Option shall be subject to the vesting restrictions
selected on the reverse side of this Stock Option Grant Certificate and defined
below. For purposes of this Section, "Continuous Service" means a period of
continuous performance of services by Optionee for the Company, a Parent, or a
Subsidiary, as determined by the Board.
Optionee may exercise this Option with respect to the percentage of Shares set
forth below only after Optionee has completed the following periods of
Continuous Service following the Date of Grant:
(a) After twelve (12) months of Continuous Service, up to twenty-five percent
(25%) of the Shares;
(b) After twenty-four (24) months of Continuous Service, up to fifty percent
(50%) of the Shares;
(c) After thirty-six (36) months of Continuous Service, up to seventy-five
percent (75%) of the Shares; and
(d) After forty-eight (48) months of Continuous Service, up to one hundred
percent (100%) of the Shares.
Notwithstanding anything herein to the contrary, if Optionee's employment by
the Company is terminated by the Company without cause pursuant to Section 4.D.
of the Employment Agreement, the vesting of this Option shall be accelerated as
of the Termination Date such that the Option shall be vested and exercisable to
the same extent as if Optionee had remained employed by the Company continuously
until the first anniversary of the next succeeding June 1.
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between InfoCure
Corporation, a Delaware corporation ("Company"), and Richard E. Perlman
("Executive") is hereby entered into as of the 1st day of January, 1998 (the
"Effective Date").
WHEREAS, Company is engaged in the business of providing practice
management software products and related services that address the needs of
health care providers to manage and communicate administrative, practice
management and clinical applications designed to meet the information
requirements of the vast majority of medical specialties and office-based health
care practices in the United States (the "Business"); and
WHEREAS, Executive desires to be employed by Company and Company desires to
employ and assure itself of the continued services of Executive on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:
1. Employment and Duties.
---------------------
A. Company shall employ Executive as Chairman of the Board of
Directors and Chief Financial Officer during the term of his employment as set
forth in this Agreement and Executive hereby accepts such employment. Executive
shall report to the President and Board of Directors of Company and shall have
duties and responsibilities as set forth on Exhibit A and/or as may be assigned,
---------
from time to time, by the President and Board of Directors of Company (the
"Duties"). If at any time during the term of this Agreement, the Board appoints
a person other than the Executive to fill the office of Chief Financial Officer,
the Executive shall at such time continue to hold the office of Chairman of the
Board and both the Company and the Executive shall in all respects continue to
be bound by this Agreement.
B. The Company shall use its best efforts to cause the Executive to
be nominated for and elected to the Board of Directors of the Company during the
term of his employment.
C. The location of the Executive's principal office for the
performance of services hereunder shall be New York City. The Executive shall,
from time to time and at any time upon the request of the Company be present at
the Company's office in Atlanta, Georgia. The Executive shall be reimbursed for
expenses incurred by him in traveling to the Company's office in Atlanta,
Georgia and, when present in Atlanta, shall be entitled to the use of the
Company's apartment.
D. The Executive shall devote approximately forty (40) hours per
week to the performance of his duties hereunder. Neither the foregoing nor any
other provision of this Agreement is intended or shall be construed as
preventing Executive from devoting his time and effort to charitable, community
activities and other business non-competitive to the Business
<PAGE>
substantially to the same extent as he has devoted time and effort prior to the
effective date of this Agreement provided that such involvement with such
activities does not materially interfere with the performance of his duties
under this Agreement.
2. Compensation.
------------
A. Base Salary. During the Term (as defined below), Company shall
-----------
pay to Executive a base salary ("Base Salary") of One Hundred Twenty Thousand
and No/100 Dollars ($120,000.00) per year, payable in arrears in accordance with
the Company's standard payroll practices for senior executives (but in no event
less frequently than in equal semi-monthly payments). In the event of a
Disability, to the extent payments are received under an employer-sponsored
disability program, the payments hereunder are to be reduced by an amount equal
to such disability payments.
B. Incentive Compensation. During the Term of this Agreement, in
----------------------
addition to the Base Salary as provided in Section 2.A. above, Executive shall
be eligible for annual incentive compensation (the "Incentive Compensation")
pursuant to a program established by Company's Board of Directors in its sole
and absolute discretion, from time to time, provided that the Goals (as defined
below) of said program are met by Executive. The Incentive Compensation program
shall be based upon the achieving of certain revenue and/or profit goals and/or
other goals (the "Goals") of Company. Upon the establishment of the program and
Goals, the parties agree to enter into an agreement setting forth the Incentive
Compensation program and Executive's eligibility to participate in said program,
which agreement shall be attached hereto as Exhibit B and shall constitute a
---------
part of this Agreement. This Incentive Compensation is over and above the cash
bonus described on Schedule B, which is attached hereto and shall constitute a
----------
part of this Agreement.
C. Employee Benefit Programs. Executive shall be eligible to
-------------------------
participate in all employee benefit programs generally available to senior
executive officer of the Company; including medical and hospitalization
programs; employee stock option and bonus plans generally made available to
employees of Executive's employment status; now or hereafter made available,
subject to the terms and conditions of such programs, including eligibility. It
is understood that Company reserves the right to modify and rescind any program
or adopt new programs in its sole discretion. Company may, in its sole
discretion, maintain key man life insurance on the life of Executive and
designate Company as the beneficiary. Executive agrees to execute any documents
necessary to effect such policy.
D. Vacation. Executive shall accrue six (6) weeks of vacation
--------
during each calendar year during the term of this Agreement (with such vacation
time pro-rated for 1997). Vacation time shall be taken at such time as not to
materially interfere with the Business of Company and must be pre-approved by
Company. Vacation time may not be carried forward from one (1) calendar year to
another.
E. Automobile Allowance. Executive shall be entitled to receive an
--------------------
automobile allowance of One Thousand Five Hundred and No/100 Dollars ($1,500.00)
per
-2-
<PAGE>
month to cover the costs associated with an automobile (including lease,
insurance and maintenance expense) and shall be entitled to reimbursement of
operating costs when operated for business purposes. The automobile allowance
shall be payable semi-monthly.
F. Business Expenses. The Executive shall be entitled to be
-----------------
reimbursed for reasonable business expenses incurred by him in connection with
his services hereunder in accordance with the Company's policies and procedures
for its senior executives.
3. Term. The term of employment of Executive under this Agreement shall
----
be for a period of four (4) years (the "Term") commencing on the date hereof and
ending on the fourth (4th) anniversary thereof, subject to earlier termination
as provided in Section 4; provided, however, that at the end of such four (4)
year period and each anniversary date thereafter, the term of this Agreement
will automatically be extended for an additional year unless, not later than six
(6) months prior to the end of such four (4) year period or one (1) year
extension period, as the case may be, the Company or the Executive shall have
given notice that it or he elects not to have the term extended.
4. Early Termination.
-----------------
A. For Cause.
---------
(i) Notwithstanding the foregoing, Company may terminate the
employment of Executive "for cause" (as hereinafter defined) at any time upon
written notice effective immediately. For purposes of this Agreement, "Cause"
shall mean that, prior to any termination pursuant to this Section 4.A.,
Executive shall have committed:
(1) An intentional act or acts of fraud, embezzlement or
theft constituting a felony and resulting or intended to result directly or
indirectly in gain or personal enrichment for Executive at the expense of the
Company; or
(2) The continued, repeated, intentional and willful
refusal to perform the duties associated with Executive's position with the
Company, which is not cured within thirty (30) days following written notice to
Executive.
For purposes of this Agreement, no act or failure to act on the part of
Executive shall be deemed "intentional" if it was due primarily to an error in
judgment or negligence, but shall be deemed "intentional" only if done or
omitted to be done by Executive not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Company then in office at a meeting of the Board
called and held for such purpose, after reasonable notice to Executive and an
opportunity for Executive, together with his counsel (if Executive chooses to
have counsel present at such meeting), to be heard before the Board, finding
that, in the good
-3-
<PAGE>
faith opinion of the Board, Executive had committed an act constituting "Cause"
as herein defined and specifying the particulars thereof in detail. Nothing
herein will limit the right of Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(ii) Upon termination of Executive's employment for cause,
Company shall have no further obligation to pay any compensation to Executive
for periods after the effective date of the termination for cause, except for
Base Salary which accrued as of the termination date. In addition, the right to
exercise any vested stock option shall terminate on the thirtieth (30th) day
following the effective date of the termination of employment for cause.
B. Termination Upon Death or Total and Permanent Disability.
--------------------------------------------------------
(i) The employment of Executive shall terminate upon his death
or, ten (10) business days after written notice by Company of termination, upon
or during the continuance of the Total and Permanent Disability (as hereinafter
defined) of Executive.
(ii) Upon termination upon death or upon or during Executive's
Total and Permanent Disability, Company shall have no further obligation to pay
any compensation for periods after the effective date of such termination,
except for Base Salary which accrued as of the termination date. The term "Total
and Permanent Disability" means the suffering by Executive of a Disability for a
continuous period in excess of one hundred eighty (180) days, unless extended in
writing by Company. A Total and Permanent Disability shall be deemed to commence
upon the expiration of such one hundred eighty (180) day period.
(iii) For purposes hereof, the terms "Disabled" or "Disability"
shall mean the suffering by Executive of a physical or mental condition
resulting from bodily injury, disease, or mental disorder which renders
Executive incapable of continuing each and every one of his or her usual and
customary duties in an efficient manner as an employee of Company, as determined
by the Board of Directors. No Disability shall be deemed to exist until
Executive shall be unable to perform such duties hereunder for seven (7)
consecutive days, and after such Disability continues for seven (7) consecutive
days, then the same shall be deemed to have existed from the first (1st) day of
such Disability. At the end of any Disability (other than a Disability that
results in a Total and Permanent Disability as defined below), Executive shall
return to work, and this Agreement shall continue as though such Disability had
not occurred.
If Executive desires to return to work at the end of any Disability, but
there is a dispute as to whether Executive is able to perform his or her duties
hereunder or if there is a dispute as to whether Executive is Disabled or has
suffered a Total and Permanent Disability, the issue shall be submitted to a
Board of Arbiters consisting of three (3) persons: one (1) physician who
specializes in the physical or mental condition which resulted in the Disability
(hereinafter referred to as a "Specialist") shall be appointed on behalf of
Company by the Board of Directors of Company (with Executive having no vote on
this question); the second (2nd) Specialist shall be appointed by Executive and
a third (3rd) Specialist shall be appointed by the two (2) Specialists so
appointed. If a majority of the Specialists determine that Executive is able to
-4-
<PAGE>
perform his or her duties hereunder on a full-time basis, Executive shall be
permitted to return to work under the provisions hereof. Executive agrees to
submit medical records requested and to submit to such examination and testing
requested by such physician.
C. Change in Control. In the event of a Change in Control (as
-----------------
hereinafter defined) of Company, and Executive elects, in his sole discretion,
to terminate his employment hereunder as of a date within six (6) months after
the Change in Control, Executive shall give Company two (2) weeks prior written
notice of such termination and Executive shall be entitled to receive, and
Company shall pay, on the date of the termination of employment an amount equal
to three (3) times Executive's then Base Salary.
The term "Change in Control" means:
(i) The acquisition by any person, entity or "group" within
the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 ("34 Act") (excluding, for this purpose, Company, any of subsidiaries, or
any employee benefit plan of Company or any of its subsidiaries) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 34 Act) of
more than fifty percent (50%) of either the then outstanding shares of common
stock of Company or of the combined voting power of Company's then outstanding
voting securities entitled to vote generally in the election of directors;
(ii) Individuals who, as of the date hereof, constitute the
board of directors of Company ("Incumbent Board") cease for any reason to
constitute at least a majority of the board of directors, provided that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual is a member of the Incumbent Board; or
(iii) Approval of the shareholders of Company of a merger,
consolidation or other reorganization in each case, with respect to which
persons who were the shareholders of Company and optionees immediately prior to
such merger, consolidation or other reorganization, immediately thereafter, do
not own more than fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the merged, consolidated or
reorganized Company's then outstanding voting securities, or of the sale of all
or substantially all of the assets of Company; provided, however, in such event
the Change in Control will be deemed to have occurred immediately prior to the
merger, consolidation or other reorganization.
Notwithstanding anything to the contrary contained in this Agreement, if
Executive is a "disqualified individual" (as that term is defined in Section
280G of the Internal Revenue Code of 1986, as amended (the "Code") or any
successor provision thereto) and if any portion of the payments hereunder would
be an "excess parachute payment" (as that term is defined in Section 280G of the
Code or any successor provision thereto), but for the application of this
sentence, then the amount of such payment otherwise payable to Executive under
this Agreement shall be reduced to the minimum extent necessary (but in no event
to less than zero (0)) so that no portion of such payment, as so reduced,
constitutes an excess parachute payment, provided, that, any
-5-
<PAGE>
separate compensation arrangements extended to Executive by the Company which
involve non-cash compensation shall be reduced first in priority before any
reduction in payment hereunder. The Company shall bear responsibility for
performing the necessary calculations under this section and shall indemnify
Executive, on a grossed-up, after tax (federal, state and local) basis, for any
error or omission on the part of the Company which results in additional tax
liability to Executive, within five (5) calendar days following determination of
the amount of indemnity owed to Executive.
D. Termination by Company Without Cause. In the event either
------------------------------------
(i) Company terminates the employment of the Executive, except for cause, prior
to the expiration of term of this Agreement as set forth in Section 3. hereof or
(ii) Executive terminates the employment after a Constructive Discharge (as
defined below), Company shall pay Executive, as its sole and exclusive liability
hereunder, an amount equal to thirty-six (36) months of the Executive's then
current monthly base salary. Payment shall be made within five (5) days of such
termination.
For purposes of this Agreement, "Constructive Discharge" shall mean
any of the events set forth below which are not cured within fifteen (15) days
following written notice thereof by Executive to Company:
(i) Any material reduction in Base Salary;
(ii) A material reduction in Executive's job function, duties
or responsibilities, or a similar change in Executive's reporting relationships
(other than the appointment by the Board of another person other than the
Executive to fill the office of Chief Financial Officer);
(iii) A required relocation of Executive of more than one
hundred (100) miles from Executive's current job location (other than a required
relocation to the greater Atlanta metropolitan area);
(iv) Any material breach of any of the terms of this Agreement
by the Company; or
(v) Any failure by the Company to grant to Executive not later
than August 1, 1998 stock options in the amount and on terms set forth on
Schedule A.
- ----------
provided, however, that the term "Constructive Discharge" shall not include a
- -------- -------
specific event described in the preceding clause (i), (ii), (iii) or (iv) unless
Executive actually terminates his employment with the Company within sixty (60)
days after the occurrence of such event.
5. No Mitigation Obligation. The Company hereby acknowledges that it
------------------------
will be difficult and may be impossible (i) for Executive to find reasonably
comparable employment following the date of termination and (ii) to measure the
amount of damages which Executive may suffer as a result of termination of
employment hereunder. Accordingly, the payment of the termination compensation
by the Company to Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable and will be liquidated
-6-
<PAGE>
damages, and Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor will any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation on
the part of Executive hereunder or otherwise.
6. Confidential Information.
------------------------
A. Company may disclose to Executive certain Confidential
Information (defined below). Executive acknowledges and agrees that Company has
a reasonable, competitive business interest in the Confidential Information and
the Confidential Information is the sole and exclusive property of Company (or a
third party providing such information to Company) and that Company or such
third party owns all worldwide rights therein under patent, copyright, trade
secret, confidential information, moral right or other property right. Executive
acknowledges and agrees that the disclosure of the Confidential Information to
Executive does not confer upon Executive any license, interest or rights of any
kind in or to the Confidential Information. Executive may use the Confidential
Information solely for the benefit of Company while Executive is employed by
Company. Except in the performance of services for Company, Executive shall hold
in confidence and not reproduce, distribute, transmit, reverse engineer,
decompile, disassemble, or transfer, directly or indirectly, in any form, by any
means, or for any purpose, the Confidential Information or any portion thereof.
Executive agrees to return to Company, upon request by Company, the Confidential
Information and all materials relating thereto.
B. Executive acknowledges that his obligations with regard to the
Confidential Information shall remain in effect while Executive is engaged by
Company and for a period of two (2) years thereafter.
"Confidential Information" shall mean any confidential or proprietary
information possessed by Seller or relating to its business, including, without
limitation, any confidential "know-how", trade secrets, customer lists, details
of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel
acquisition plans; provided, however, that Executive shall not be restricted
from disclosing or using Confidential Information that: (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure; (ii) becomes available to Executive in a manner that is not in
contravention of applicable law from a source that is not bound by a
confidential relationship with Company or by a confidentiality or other similar
agreement; (iii) was known to Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Executive by Company or one of Company's or (iv) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, Executive shall
provide Company with prompt notice
-7-
<PAGE>
of such requirement so that Company may seek an appropriate protective order
prior to any such required disclosure by Executive. Confidential Information may
include, but not be limited to, future business plans, licensing strategies,
advertising campaigns, information regarding customers, employees and
independent contractors and the terms and conditions of this Agreement.
7. Non-Solicitation.
----------------
A. Customers. During Executive's employment with Company and for
---------
a period of twelve (12) months thereafter (the "Restricted Period"), Executive
shall not, on his own behalf or on behalf of any person, firm, partnership,
association, corporation or business organization, entity or enterprise ("Other
Entity"), solicit, contact, call upon, communicate with or attempt to
communicate with any customer of Company, or any representative of any customer
of Company, with a view to providing products and/or services in the Business of
Company provided that the restrictions set forth in this Section 7.A. shall
apply only to customers of Company, or representatives of customers of Company,
with which Company had contact during the two (2) year period immediately
preceding termination of his employment with Company (or shorter period if
Executive has not then been engaged by Company for two (2) years).
B. Employees/Independent Contractors. During the Restricted Period,
---------------------------------
Executive shall not, on his own behalf or on behalf of any Other Entity, recruit
or hire, or attempt to recruit or hire, any employees or independent contractors
of Company who were employed or engaged by Company, as the case may be, during
the one (1) year period prior to the termination of his employment with Company
(or shorter period if Executive has not then been engaged by Company for one (1)
year).
8. Non-Competition. During the Restricted Period, Executive shall not on
---------------
his own behalf or on behalf of any Other Entity, perform the duties and services
Executive performs for Company for, or own a material financial interest in, any
Other Entity that is competitive with the business of the Company or any of its
subsidiaries (as such business is conducted on the first (1st) day of the
Restricted Period) within the United States (the "Territory"). The ownership of
an interest constituting not more than five percent (5%) of the outstanding debt
or equity in a corporation, the shares of which are traded on a recognized stock
exchange or traded in the over-the-counter market, even though that corporation
may be a competitor of the Company or any of its subsidiaries, shall not be
deemed a material financial interest in a competitor.
9. Acknowledgment. The parties hereto agree that: (i) the Restricted
--------------
Period and Territory contained in this Agreement are reasonably necessary for
the protection of Company's legitimate business interests and that the Territory
is the area in which Executive shall perform (or currently perform) services for
Company; (ii) by having access to information concerning employees, independent
contractors and customers of Company, Executive shall obtain a competitive
advantage as to such parties; (iii) Executive's covenants and agreements
contained in this Agreement are reasonably necessary to protect the interests of
Company in whose favor said covenants and agreements are imposed in light of the
nature of Company's Business and
-8-
<PAGE>
Executive's involvement in such Business; (iv) the restrictions imposed by this
Agreement are not greater than are necessary for the protection of Company in
light of the substantial harm that Company shall suffer should Executive breach
any of the provisions of said covenants or agreements and (v) Executive's
covenants and agreements contained in this Agreement form material consideration
for this Agreement, the Acquisition Agreement and Executive's employment by
Company.
10. Remedy for Breach. Executive agrees that the remedies at law of
-----------------
Company for any actual or threatened breach by Executive of the covenants
contained in Sections 6. through 8. of this Agreement would be inadequate and
that Company shall be entitled to specific performance of the covenants in such
paragraphs, including entry of an ex parte, temporary restraining order in state
or federal court, preliminary and permanent injunctive relief against activities
in violation of such paragraphs, or both, or other appropriate judicial remedy,
writ or order, in addition to any damages and legal expenses (including
attorney's fees) which Company may be legally entitled to recover. Executive
acknowledges and agrees that the covenants contained in Sections 6. through 8.
of this Agreement shall be construed as agreements independent of any other
provision of this or any other agreement between the parties hereto, and that
the existence of any claim or cause of action by Executive against Company,
whether predicated upon this or any other agreement, shall not constitute a
defense to the enforcement by Company of said covenants.
11. No Prior Agreements. Executive hereby represents and warrants to
-------------------
Company that the execution of this Agreement by Executive and Executive's
employment by Company and the performance of Executive's duties hereunder shall
not violate or be a breach of any agreement with a former employer, client or
any other person or entity.
12. Assignment; Binding Effect. Executive understands that Executive has
--------------------------
been selected for employment by Company on the basis of Executive's personal
qualifications, experience and skills. Executive agrees, therefore, that
Executive cannot assign all or any portion of Executive's performance under this
Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 13. below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Executive has no oral representations, understandings or agreements
with Company or any of its officers, directors or representatives covering the
same subject matter as this Agreement. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between Company
and Executive. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between Company and Executive and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of Company and Executive,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
-9-
<PAGE>
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To Company: InfoCure Corporation
Corporate Headquarters
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Frederick L. Fine
With a Copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
To Executive: Richard E. Perlman
119 East 84th Street
New York, New York 10028
With a Copy to: Anderson, Kill & Olick
1251 Avenue of the Americas
New York City, New York 10020
Attention: Michael Stamm, Esq.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. Mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
Agreement shall be enforced separately and independently of any other agreement
involving the parties hereto. The Section headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of the Agreement or of any part hereof.
16. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Georgia.
17. Counterparts. This Agreement may be executed simultaneously in two
------------
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute, but one and the same instrument.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
InfoCure Corporation
By: Frederick L. Fine
---------------------------------------------
Its: President and Chief Executive Officer
-----------------------------------------
EXECUTIVE:
/s/ Richard E. Perlman (SEAL)
--------------------------------------------
Richard E. Perlman
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<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
-------------------
OVERALL RESPONSIBILITY:
- ----------------------
Chairman of the Board
- ---------------------
The Chairman of the Board shall preside at all meetings of the Shareholders
and of the Board of the Company. The Chairman of the Board shall have the
duties and responsibilities set forth in the By-laws of the Company and shall
work to fulfill the Company's obligations to its various audiences, including
but not limited to, owners, investment bankers, analysts, employees, suppliers
and customers.
Chief Financial Officer
- -----------------------
This is the top corporate financial job, with responsibility for
formulating financial policy and plans. Responsible for providing overall
direction for the accounting, tax, insurance, budget, credit and treasury
functions. Directs activities associated with the security and investment of
the Company's assets and funds, and ensures that financial transactions,
policies and procedures meet corporate short- and long-term objectives, and
regulatory body requirements.
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Compensation
----------------------
<PAGE>
SCHEDULE A
A non-qualified option to purchase thirty thousand (30,000) shares of
Company's common stock at an exercise price equal to fair market value on the
date of grant, vesting over four years from the date of grant.
<PAGE>
SCHEDULE B
Executive shall receive a cash bonus of Thirty-Three Thousand and No/100
Dollars ($33,000.00) (the "Bonus") in the event the Company shall report
earnings for the first six (6) months of 1998 which are, after taking into
account the Bonus and similar bonus amounts payable to other senior executives
of the Company, at or above the June 15, 1998 consensus of analyst estimates for
such six (6) month period. Payment of any Bonus payable shall be made within
forty-five (45) days of June 30, 1998. In the event the Company would not meet
the consensus of analyst estimates if the full Bonus were paid, the Bonus shall
be reduced, pro rata with similar bonus amounts payable to other senior
executives of the Company, to such lower amount so the Company may pay the
reduced Bonus and reach such consensus earning estimates.
<PAGE>
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
--------------------------------
THIS AGREEMENT is made and entered into as of this 1st day of June, 1998
(the "Award Date"), by and between InfoCure Corporation (the "Company"), a
Delaware corporation and Richard E. Perlman (the "Employee").
BACKGROUND
A. The Board of Directors of the Company ("Board") desires to make an
award of restricted shares of the Company's stock to Employee to promote and
increase his personal interests in the welfare of the Company and to provide
incentives to him as one of the officers who is primarily responsible for the
operations of the Company and for shaping and carrying out the long-range plans
of the Company and aiding in its continued growth and financial success.
B. The Board has authorized the grant to Employee of a restricted stock
award to purchase shares of the common stock, $.001 par value ("Common Stock")
of the Company.
C. The Company and Employee wish to confirm herein the terms, conditions,
and restrictions of the restricted stock award.
For and in consideration of the premises, the mutual covenants contained
herein, and other good and valuable consideration, the parties hereto agree:
SECTION 1
AWARD OF SHARES
1.1 Award of Shares. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Company hereby awards to Employee Thirty Thousand
(30,000) shares of Common Stock (the "Bonus Shares").
1.2 Vesting of Bonus Shares. Employee shall become vested in the Bonus
-----------------------
Shares as described in the vesting schedule attached hereto as Schedule I (the
----------
"Vesting Schedule"), except that the Board of Directors may, in its sole
discretion, waive all or a part of the Vesting Schedule, from time to time, in
which case all Bonus Shares shall become vested according to the terms of the
waiver. The Bonus Shares which have become vested pursuant to the Vesting
Schedule or by virtue of waiver of the Vesting Schedule by the Board of
Directors are herein referred to as the "Vested Bonus Shares" and all Bonus
Shares which are not Vested Bonus Shares are sometimes herein referred to as the
"Unvested Bonus Shares."
1.3 Additional Condition to Bonus Shares. In order not to forfeit the
------------------------------------
Bonus Shares for any such Bonus Shares, Employee must deliver to the Company,
within ten (10) days after the occurrence of an event in the Vesting Schedule,
pursuant to which some or all of the Bonus Shares become Vested Bonus Shares (a
"Vesting Date"), either a certified check payable to the Company in the amount
of all withholding tax obligations (whether federal, state or local),
<PAGE>
imposed on the Company by reason of the vesting of the Bonus Shares, or the
Withholding Election described in Section 1.4. Upon receipt of payment in full
of all withholding tax obligations, the Company shall cause a certificate
representing the Bonus Shares to be issued and delivered to the Share Custodian
pursuant to the instructions of Employee as provided in Section 1.5.
1.4 Optional Withholding Election. In lieu of paying the withholding tax
-----------------------------
obligation in cash, as described in Section 1.3, Employee may elect to have the
actual number of Vested Bonus Shares reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock on the Vesting Date as determined by the Board of Directors, is
sufficient to satisfy the amount of the withholding tax obligations imposed on
the Company by reason of the vesting of the Bonus Shares (the "Withholding
Election"). Employee may make a Withholding Election only if all of the
following conditions are met:
A. The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit A attached hereto;
---------
B. Any Withholding Election made will be irrevocable; however, the
acceptance by the Board of any Withholding Election shall rest solely in the
Board's unfettered discretion; and
C. If Employee is required to file beneficial ownership reports
pursuant to Subsection (a) of Section 16 of the Securities Exchange Act of 1934,
at any time during a period in which some or all of the Bonus Shares vest, then
the Withholding Election must be made (i) at least six (6) months prior to the
Tax Date applicable to the Vesting Date of Bonus Shares and (ii) prior to the
Tax Date and in any ten (10) day period beginning on the third (3rd) day
following the release of the Company's quarterly or annual summary statement of
sales and earnings.
1.5 Bonus Shares Held by the Share Custodian. Employee hereby authorizes
----------------------------------------
and directs the Company to deliver any share certificate issued by the Company
to evidence Bonus Shares to the Secretary of the Company or such other officer
of the Company as may be designated by the Board (the "Share Custodian") to be
held by the Share Custodian until the Bonus Shares vest in accordance with
Schedule I.
- ----------
During the period that the Share Custodian holds the shares of Common Stock
subject to this Section 1.5, Employee shall be entitled to all rights applicable
to shares of Common Stock not so held; provided, however, in the event the
number of shares of Common Stock is increased or reduced by changing par value,
split-up, stock split, reverse stock split, reclassification, merger,
reorganization, consolidation, or otherwise, and in the event of any
distribution of Common Stock or other securities of the Company in respect of
such shares of Common Stock, Employee agrees that any certificate representing
shares of Common Stock or other securities of the Company issued as a result of
any of the foregoing shall be delivered to the Share Custodian and shall be
subject to all of the provisions of this Agreement as if initially purchased
thereunder.
<PAGE>
1.6 Rights as Stockholder. Employee, or, if applicable, the Transferee
---------------------
(as defined in Section 3.13.F.), shall have no rights as a stockholder with
respect to any Bonus Shares until a stock certificate for the shares is issued
in Employee's name. Employee shall be entitled to dividends paid or declared on
Vested Bonus Shares, for which the record date is prior to a Vesting Date.
Employee shall not be entitled to dividends on Unvested Bonus Shares.
1.7 Investment Representations. Employee hereby represents, warrants,
--------------------------
covenants, and agrees with the Company as follows:
A. The Bonus Shares being acquired by Employee will be acquired for
Employee's own account without the participation of any other person, with the
intent of holding the Bonus Shares for investment and without the intent of
participating, directly or indirectly, in a distribution of the Bonus Shares and
not with a view to, or for resale in connection with, any distribution of the
Bonus Shares, nor is Employee aware of the existence of any distribution of the
Bonus Shares;
B. Employee is not acquiring the Bonus Shares based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Bonus Shares, but rather upon an independent examination
and judgment as to the prospects of the Company;
C. The Bonus Shares were not offered to Employee by means of publicly
disseminated advertisements or sales literature, nor is Employee aware of any
offers made to other persons by such means;
D. Employee is able to bear the economic risks of the investment in
the Bonus Shares, including the risk of a complete loss of his investment
therein;
E. Employee understands and agrees that the Bonus Shares will be
issued and sold to Employee without registration under any state law relating to
the registration of securities for sale, and will be issued and sold in reliance
on the exemptions from registration under the Securities Act of 1933 (the "1933
Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
regulations promulgated thereunder;
F. The Bonus Shares cannot be offered for sale, sold or transferred
by Employee other than pursuant to: (i) an effective registration under the
1933 Act or in a transaction otherwise in compliance with the 1933 Act and (ii)
evidence satisfactory to the Company of compliance with the applicable
securities laws of other jurisdictions. The Company shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance with
the above laws;
G. The Company will be under no obligation to register the Bonus
Shares or to comply with any exemption available for sale of the Bonus Shares
without registration or filing, and the information or conditions necessary to
permit routine sales of securities of the Company under Rule 144 of the 1933 Act
are not now available and no assurance has been given
<PAGE>
that it or they will become available. The Company is under no obligation to act
in any manner so as to make Rule 144 available with respect to the Bonus Shares;
H. Employee has and has had complete access to and the opportunity to
review and make copies of all material documents related to the business of the
Company, including, but not limited to, contracts, financial statements, tax
returns, leases, deeds, and other books and records. Employee has examined such
of these documents as Employee has wished and is familiar with the business and
affairs of the Company. Employee realizes that the purchase of the Bonus Shares
is a speculative investment and that any possible profit therefrom is uncertain;
I. Employee has had the opportunity to ask questions of and receive
answers from the Company and any person acting on its behalf and to obtain all
material information reasonably available with respect to the Company and its
affairs. Employee has received all information and data with respect to the
Company which Employee has requested and which Employee has deemed relevant in
connection with the evaluation of the merits and risks of Employee's investment
in the Company;
J. Employee has such knowledge and experience in financial and
business matters that Employee is capable of evaluating the merits and risks of
the purchase of the Bonus Shares hereunder and Employee is able to bear the
economic risk of such purchase; and
K. The agreements, representations, warranties, and covenants made by
Employee herein extend to and apply to all of the Bonus Shares of the Company
issued to Employee pursuant to this restricted stock award. Acceptance by
Employee of the certificate representing such Bonus Shares shall constitute a
confirmation by Employee that all such agreements, representations, warranties,
and covenants made herein shall be true and correct at that time.
SECTION 2
RESTRICTIONS AND FORFEITURE OF BONUS SHARES
2.1 Forfeiture Upon Termination of Employment. Notwithstanding anything
-----------------------------------------
to the contrary herein, upon Termination of Employment (as defined in Section
3.13.E.) for:
A. Cause (as defined in Section 3.13.A.), all Unvested Bonus Shares
shall be forfeited, effective upon the Effective Date of Termination (as defined
in Section 3.13.C.); or
B. A reason other than Cause, death, or Disability as defined under
Section 4. of that certain Employment Agreement by and between Employee and
Company, dated as of January 1, 1998, certain Unvested Bonus Shares shall become
vested in accordance with the following formula and the remainder shall be
forfeited, such accelerated vesting and forfeiture shall be effective upon the
Effective Date of Termination: The closing price of the Common Stock of the
Company on the Effective Date of Termination (such price to be adjusted to
reflect changes in capitalization set forth in Section 3.1) shall be divided by
$40.00 and the result shall be multiplied by the total number of Unvested Bonus
shares to reach the number of Unvested
<PAGE>
Bonus Shares in the "Vesting Pool" (the number of shares in the "Vesting Pool",
however, shall not be greater than the number of Unvested Bonus Shares); the
number of shares in the Vesting Pool shall then be multiplied by a fraction, the
numerator of which is the number of years served in the initial term of the
Employment Agreement at the Effective Date of Termination (rounded up to the
next whole year) and the denominator of which shall be four (4), to reach the
number of Unvested Bonus Shares that will become vested.
2.2 Restrictions on Transfer of Bonus Shares. Bonus Shares shall be
----------------------------------------
subject to the following restrictions:
A. Except for transfers made in compliance with Section 2.2.B. below,
or as otherwise required or permitted hereunder, none of the Bonus Shares may be
conveyed, pledged, assigned, transferred, hypothecated, encumbered, or otherwise
disposed of by Employee, or if the Bonus Shares are held or owned of record by a
Transferee, by such Transferee. The foregoing notwithstanding, the Board may,
but shall not be obligated to, approve the transfer of such Bonus Shares upon
the condition that the transferee thereof execute and deliver to the Company
such documents and agreements as the Company shall reasonably require to
evidence the fact that the Bonus Shares to be owned, either directly or
beneficially, by such transferee shall continue to be subject to all the
restrictions set forth in this Section 2.2 and all applicable rights in favor of
the Company set forth elsewhere herein, and that such transferee is subject to
and bound by such restrictions and provisions. Any Bonus Shares transferred by
bequest or by operation of the laws of descent and distribution shall remain
subject to the restrictions set forth in this Section 2.2 and all applicable
rights in favor of the Company set forth elsewhere herein in the hands of any
transferee thereof. Nothing contained herein, however, shall be deemed to
impose any requirement that any transferee be an officer, director, or employee
of or consultant to the Company.
B. The Bonus Shares may be transferred by Employee to a Transferee
upon the death or Disability of Employee, provided that all such Bonus Shares
shall remain subject to the restrictions set forth in this Section 2.2 and all
applicable rights in favor of the Company set forth elsewhere herein in the
hands the Transferee and of any subsequent transferee of the Transferee.
2.3 Noncompetition. As a condition to preserving the benefits provided by
--------------
this Agreement, the Employee agrees to the restrictive covenant provisions
contained in Sections 6., 7. and 8 of that certain Employment Agreement by and
between Company and Employee of even date herewith. In the event that the
Committee determines in good faith that the Employee has violated the provisions
of this Section, then notwithstanding any other provisions contained in this
Agreement, the Employee (or his heir, legatee or Transferee) shall forfeit any
further right to Bonus Shares.
2.4 Termination of Restrictions. The restrictions contained in Section
---------------------------
2.2 shall terminate once the Bonus Shares become vested, but will remain subject
to the restrictions on transfer set forth in Section 3.2.
<PAGE>
SECTION 3
GENERAL PROVISIONS
3.1 Change in Capitalization. If the number of outstanding shares of the
------------------------
Common Stock shall be increased or decreased by a change in par value, split-up,
stock split, reverse stock split, reclassification, distribution of common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made by the Board in the number and kind of Bonus Shares, such that
Employee's proportionate interest shall be maintained as before the occurrence
of the event. No fractional shares shall be issued in making such adjustment.
All adjustments made by the Board under this Section shall be final, binding,
and conclusive.
3.2 Legends. Each certificate representing the Bonus Shares shall be
-------
endorsed with the following legend and Employee shall not make any transfer of
the Bonus Shares without first complying with the restrictions on transfer
described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED JULY 1,
1998, A COPY OF WHICH IS AVAILABLE FROM THE COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
UNDER SUCH ACT COVERING SUCH SECURITIES; (II) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR (III) THE ISSUER
RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.
Employee agrees that the Company may also endorse any other legends
required by applicable federal or state securities laws.
The Company need not register a transfer of the Bonus Shares, and may also
instruct its transfer agent, if any, not to register the transfer of the Bonus
Shares unless the conditions specified in the foregoing legends are satisfied.
3.3 Removal of Legend and Transfer Restrictions.
-------------------------------------------
A. Any legend endorsed on a certificate pursuant to Section 3.2 and
the stop transfer instructions with respect to the Bonus Shares shall be removed
and the Company shall issue a certificate without such legend to the holder
thereof if such Bonus Shares are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available.
<PAGE>
B. The restrictions described in the second sentence of the legend
set forth in Section 3.2 may be removed at such time as permitted by Rule 144(k)
promulgated under the Securities Act.
3.4 Governing Laws. This Agreement shall be construed, administered and
--------------
enforced according to the laws of the State of Delaware; provided, however, no
Bonus Shares shall be issued except, in the reasonable judgment of the Board, in
compliance with exemptions under applicable state securities laws of the state
in which Employee resides, and/or any other applicable securities laws.
3.5 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.6 Notice. Except as otherwise specified herein, all notices and other
------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.7 Severability. In the event that any one (1) or more of the provisions
------------
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.8 Entire Agreement. This Agreement expresses the entire understanding
----------------
and agreement of the parties with respect to the subject matter. This Agreement
may be executed in two (2) or more counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same instrument.
3.9 Violation. Any transfer, pledge, sale, assignment, or hypothecation
---------
of the Bonus Shares or any portion thereof (other than in strict compliance with
this Agreement) shall be a violation of the terms of this Agreement and shall be
void and without effect.
3.10 Headings. Paragraph headings used herein are for convenience of
--------
reference only and shall not be considered in construing this Agreement.
3.11 Specific Performance. In the event of any actual or threatened
--------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.12 No Employment Rights Created. The award of Bonus Shares hereunder
----------------------------
shall be construed as giving Employee the right to continued employment with the
Company.
<PAGE>
3.13 Certain Definitions. The capitalized terms listed below are used
-------------------
herein with the meaning thereafter ascribed:
A. "Cause" shall have the meaning set forth in Section 4.A. of that
certain Employment Agreement by and between the Company and Employee dated as of
January 1, 1998; for purposes of this Agreement only, Cause shall also mean
voluntary resignation of employment by Employee not contemplated by such
Employment Agreement.
B. "Disability" shall have the meaning set forth for "Total and
Permanent Disability" in Section 4.B. of that certain Employment Agreement by
and between Company and Employee dated as of January 1, 1998.
C. "Effective Date of Termination" means the effective date of
Termination of Employment as stated in any notice of termination given by the
Company or Employee, or in the event no such notice of termination is given by
either the Company or Employee, then the date on which Employee last performs
the duties of Employee's employment or position with the Company as determined
by the Committee.
D. "Public Offering" means the offering for sale by the Company of
securities of the same class as the Bonus Shares pursuant to a registration
statement filed in accordance with the Securities Act of 1933, as amended, or
any comparable law then in effect, and the effective date of any such Public
Offering shall be the first day on which the securities covered thereby may
lawfully be offered and sold pursuant to such Registration Statement.
E. "Termination of Employment" means the termination of the
employee-employer relationship between Employee and the Company (and its parents
and subsidiaries) for any reason, including, without limitation, a termination
by resignation, discharge, death, Disability, or retirement, notwithstanding
that severance or similar payments are made to Employee. The Committee shall, in
its absolute discretion, determine the effect of all matters and questions
relating to Termination of Employment, including whether a leave of absence
constitutes a Termination of Employment, or whether a Termination of Employment
is for Cause.
F. "Transferee" means the estate, or the executor or administrator
of the estate, of a deceased Optionee, or the personal representative of an
Optionee suffering a Disability.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Frederick L. Fine
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
ATTEST:
/s/ Susan Gustafson
- ---------------------------------
Title: Vice President
---------------------------
[CORPORATE SEAL]
EMPLOYEE:
/s/ Richard E. Perlman (SEAL)
---------------------------------
Richard E. Perlman
<PAGE>
SCHEDULE I
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Vesting Schedule
----------------
"Vested Bonus Shares" means: Thirty Thousand (30,000) shares on the tenth
(10th) anniversary date of the Award Date ("Vesting Date").
1. Construction.
------------
A. For purposes of the Vesting Schedule, Employee shall be granted a
year of service for each consecutive twelve (12) consecutive-month period after
the Award Date during which Employee remains, at all times, employed on a full-
time basis by the Company, as determined by the Board.
B. Except as provided in Section 2.1.B. of the Restricted Stock Award
Agreement and in 2.A. and 2.D. below, the right of Employee to vest in Bonus
Shares shall cease upon the Employee's Termination of Employment by the Company,
and thereafter, no further shares shall become vested.
2. Accelerated Vesting Provisions. Notwithstanding any contrary provision
------------------------------
in this Agreement, Unvested Bonus Shares shall be vested under the following
circumstances, effective at the time specified:
A. All Unvested Bonus Shares shall be fully vested in the event
Employee ceases to be an employee of the Company by reason of death or
Disability (as defined in Section 3.13.B.), effective on the date of such death
or Disability.
B. Fifty percent (50%) of the Unvested Bonus Shares shall be fully
vested in the event the average per share closing price for the Company's stock
over a period of twenty (20) consecutive trading days reaches Twenty-Five and
No/100 Dollars ($25.00) (such price to be adjusted to reflect changes in
capitalization set forth in Section 3.1).
C. All Unvested Bonus Shares shall be fully vested in the event the
average per share closing price for the Company's stock over a period of twenty
(20) consecutive trading days reaches Forty and No/100 Dollars ($40.00) (such
price to be adjusted to reflect changes in capitalization set forth in Section
3.1).
D. Upon Termination of Employment (as defined in Section 3.13.E.) for
a reason other than Cause, death or Disability (as defined under Section 4. of
that certain Employment Agreement by and between Employee and Company) all of
the Unvested Bonus Shares not forfeited by reason of Section 2.1.B. shall be
fully vested.
3. Adjustment to Vested Bonus Shares. Appropriate adjustments shall be
---------------------------------
made to the number of Vested Bonus Shares to reflect any Withholding Election
made by Employee.
Schedule I to Restricted Stock Award Agreement
<PAGE>
EXHIBIT A
TO
INFOCURE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
Notice of Withholding Election
------------------------------
TO: INFOCURE CORPORATION
FROM: Name
----------------------------
RE: Withholding Election
- --------------------------------------------------------------------------------
This election relates to the Restricted Stock Award identified in Paragraph
3 below. I hereby certify that:
(1) My correct name and social security number and my current address
are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] The original recipient of the Restricted Stock Award.
[ ] The legal representative of the estate of the original
recipient of the Restricted Stock Award.
[ ] A legatee of the original recipient of the Restricted Stock
Award.
[ ] The legal guardian of the original recipient of the Restricted
Stock Award.
(3) The Restricted Stock Award pursuant to which this election is made
is dated and was issued in the name of __________ for ________
(___) shares of Common Stock. This election relates to ________
(___) shares of Common Stock issuable upon vesting of the Bonus
Shares, provided that the numbers set forth above shall be deemed
changed as appropriate to reflect any stock splits and other
adjustments made by the Board of Directors of the Company.
(4) In connection with any future vesting of the Restricted Stock
Award with respect to the Bonus Shares, I hereby elect to have
certain of the shares issuable pursuant to the exercise withheld
by the Company for the purpose of having the value of the shares
applied to pay federal, state, and local, if any, taxes arising
from the exercise. The shares to be withheld shall have, as of
the Tax Date applicable to the exercise, a fair market value equal
to the minimum statutory tax withholding requirement under
federal, state, and local law in connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise timely made.
<PAGE>
(6) I understand that this Withholding Election may not be revised,
amended or revoked by me, but is subject to the disapproval of the
Board of Directors.
(7) I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Company shall withhold
from the Vested Bonus Shares a number of shares of Common Stock
having the value specified in Paragraph 4 above.
Dated:
------------------- ---------------------------------------------
Legal Signature
- ------------------------- ---------------------------------------------
Social Security Number Name (Printed)
---------------------------------------------
Street Address
---------------------------------------------
City, State, Zip Code
<PAGE>
INFOCURE CORPORATION
Non-qualified Stock Option Grant Certificate
InfoCure Corporation, a Delaware corporation (the "Company"), hereby grants
to the optionee named below ("Optionee") an option (this "Option") to purchase
the total number of shares shown below of Common Stock of the Company (the
"Shares"), at the exercise price per share set forth below (the "Exercise
Price"), subject to all of the terms and conditions on the reverse side of this
Stock Option Grant Certificate.
<TABLE>
<CAPTION>
<S> <C> <C>
In witness whereof, Shares Subject to Optionee acknowledges
this Stock Option Option: 30,000 that there may be
Grant Certificate adverse tax
has been executed Exercise Price Per consequences upon
by the Company by Share: $12.25 exercise of this Option
a duly authorized or disposition of the
officer as of the Term of Option: Ten Shares and that
date specified years Optionee should consult
hereon. a tax adviser prior to
such exercise or
disposition.
InfoCure Corporation Shares subject to ----------------------
issuance under this Signature of Optionee
Option shall be eligible
By: for exercise according
------------------ to the vesting schedule
selected below and
further described in
Section 9 on the reverse
Date of Grant: of this Stock Option Richard E. Perlman
June 1, 1998 Grant Certificate. ------------------------
Print Name of Optionee
Four Year Vesting
Type of Stock Option:
Non-qualified
</TABLE>
<PAGE>
1. Exercise Period of Option. Subject to the terms and conditions of this
-------------------------
Stock Option Grant Certificate, and unless otherwise modified by a written
modification signed by the Company and Optionee, this Option may be exercised
with respect to all of the Shares, but only according to the vesting schedule
selected on the reverse of this Stock Option Grant Certificate and as described
in Section 9 below, prior to the date which is the last day of the Term set
forth on the face hereof following the Date of Grant (the "Expiration Date").
2. Restrictions on Exercise. This Option may not be exercised unless such
------------------------
exercise is in compliance with the Securities Act of 1933 and all applicable
state securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such compliance.
3. Termination of Option. Except as provided below in this Section, this
---------------------
Option may not be exercised after the date which is ninety (90) days after
Optionee ceases to perform services for the Company, or any Parent or
Subsidiary. Optionee shall be considered to perform services for the Company,
or any Parent or Subsidiary, for all purposes under this Section and Section 9
hereof, if Optionee is an officer or full-time employee of the Company, or any
Parent or Subsidiary, or if the Board determines that Optionee is rendering
substantial services as a part-time employee, consultant, contractor or advisor
to the Company, or any Parent or Subsidiary. The Board shall have discretion to
determine whether Optionee has ceased to perform services for the Company, or
any Parent or Subsidiary, and the effective date on which such services cease
(the "Termination Date").
(a) Termination Generally. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, for any reason other than a Termination
for Cause, as defined below, or death or disability (within the meaning of Code
Section 22(e)(3)), this Option shall be terminated, along with any and all
rights or subsequent rights attached thereto, ninety (90) days following the
Termination Date, but in no event later than the Expiration Date.
(b) Termination for Cause. If Optionee ceases to perform services for the
---------------------
Company, or any Parent or Subsidiary, due to a Termination for Cause, as defined
in that certain employment agreement between Optionee and the Company dated
January 1, 1998 (the "Employment Agreement"), this Option shall immediately be
terminated, along with any and all rights or subsequent rights attached thereto,
as of the Termination Date, but in no event later than the Expiration Date.
(c) Death or Disability. If Optionee ceases to perform services for the
-------------------
Company, or any Parent or Subsidiary, as a result of the death or disability of
Optionee (as determined by the Board in its sole discretion), this Option, to
the extent (and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee (or, in the event
of Optionee's death, by Optionee's legal representative) within twelve (12)
months after the Termination Date, but in no event later than the Expiration
Date.
(d) No Right to Employment. Nothing in this Stock Option Grant Certificate
----------------------
shall confer on Optionee any right to continue in the employ of, or other
relationship with, the Company, or any Parent or Subsidiary, or limit in any way
the right of the Company, or any Parent or Subsidiary, to terminate Optionee's
employment or other relationship at any time, with or without cause.
4. Manner of Exercise.
------------------
(a) Exercise Agreement. This Option shall be exercisable by delivery to
------------------
the Company of an executed Exercise and Shareholder Agreement ("Exercise
Agreement") in the form of the Exercise Agreement delivered to Optionee, if
applicable, or in such other form as may be approved or accepted by the Company,
which shall set forth Optionee's election to exercise this Option with respect
to some or all of the Shares, the number of Shares being purchased, any
restrictions imposed on the Shares, and such other representations and
agreements as may be required by the Company to comply with applicable
securities laws.
(b) Exercise Price. Such notice shall be accompanied by full payment of
--------------
the Exercise Price for the Shares being purchased. Payment for the Shares may be
made in U.S. dollars in cash (or check) or, where permitted by law and approved
by the Board in its sole discretion: (i) by surrender of shares of Common Stock
of the Company that have been owned by Optionee for more than six (6) months
(and which have been paid for within the meaning of SEC Rule 144, and, if such
Shares were purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such Shares), or were obtained by Optionee
in the open public market, having a fair market Value equal to the Exercise
Price of the Shares being purchased; or (ii) by instructing the Company to
withhold Shares otherwise issuable pursuant to the exercise of the Option having
a fair market value equal to the exercise price of the Shares being purchased
(including the withheld Shares).
(c) Withholding Taxes. Prior to the issuance of Shares upon exercise of
-----------------
this Option, Optionee must pay, or make adequate provision for, any applicable
federal or state withholding obligations of the Company. Where approved by the
Board, Optionee may provide for payment of withholding taxes upon exercise of
the Option by requesting that the Company retain Shares with a fair market value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to Optionee by deducting the Shares
retained from the Shares exercised.
(d) Issuance of Shares. Provided that such notice and payment are in form
------------------
and substance satisfactory to counsel for the Company, the Company shall cause
the Shares to be issued in the name of Optionee or Optionee's legal
representative.
5. Nontransferability of Option. This Option may not be transferred in any
----------------------------
manner, other than by will or by the laws of descent and distribution, and may
be exercised during Optionee's lifetime only by Optionee. The terms of this
Option shall be binding upon the executor, administrators, successors and
assigns of Optionee.
6. Tax Consequences. OPTIONEE UNDERSTANDS THAT THE GRANT AND EXERCISE OF THIS
----------------
OPTION, AND THE SALE OF SHARES OBTAINED THROUGH THE EXERCISE OF THIS OPTION, MAY
HAVE TAX IMPLICATIONS THAT COULD RESULT IN ADVERSE TAX CONSEQUENCES TO OPTIONEE.
OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH, OR WILL CONSULT WITH, HIS
OR HER TAX ADVISOR AND OPTIONEE FURTHER ACKNOWLEDGES THAT OPTIONEE IS NOT
RELYING ON THE COMPANY FOR ANY TAX, FINANCIAL OR LEGAL ADVICE.
7. Interpretation. Any dispute regarding the interpretation of this Stock
--------------
Option Grant Certificate shall be submitted by Optionee or the Company to the
Board or the Committee, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or Committee shall be
final and binding on the Company and Optionee.
8. Entire Agreement. Optionee acknowledges and agrees that the granting of
----------------
this Option constitutes a full accord, satisfaction and release of all
obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate constitutes the entire
agreement of the parties hereto, and supersede all prior undertakings and
agreements with respect to the subject matter hereof. All prior agreements,
commitments and understandings between the parties hereto regarding the subject
matter hereof are merged into this Stock Option Grant Certificate and the
Exercise Agreement.
9. Vesting and Exercise of Shares. Subject to the terms of this Stock Option
------------------------------
Grant Certificate and the Exercise Agreement, the issuance of Shares pursuant to
the exercise of this Option shall be subject to the vesting restrictions
selected on the reverse side of this Stock Option Grant Certificate and defined
below. For purposes of this Section, "Continuous Service" means a period of
continuous performance of services by Optionee for the Company, a Parent, or a
Subsidiary, as determined by the Board.
Optionee may exercise this Option with respect to the percentage of Shares set
forth below only after Optionee has completed the following periods of
Continuous Service following the Date of Grant:
(a) After twelve (12) months of Continuous Service, up to twenty-five percent
(25%) of the Shares;
(b) After twenty-four (24) months of Continuous Service, up to fifty percent
(50%) of the Shares;
(c) After thirty-six (36) months of Continuous Service, up to seventy-five
percent (75%) of the Shares; and
(d) After forty-eight (48) months of Continuous Service, up to one hundred
percent (100%) of the Shares.
Notwithstanding anything herein to the contrary, if Optionee's employment by
the Company is terminated by the Company without cause pursuant to Section 4.D.
of the Employment Agreement, the vesting of this Option shall be accelerated as
of the Termination Date such that the Option shall be vested and exercisable to
the same extent as if Optionee had remained employed by the Company continuously
until the first anniversary of the next succeeding June 1.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between Medical Software
Integrators, Inc., a Georgia corporation ("Company") and Kurt I. Lawrence
("Employee") is hereby entered this 26th day of February, 1998, but effective as
of the 1st day of January, 1998 (the "Effective Date").
WHEREAS, Company is engaged or shall be engaged primarily in the business
(the "Business") of developing, marketing, selling, installing, licensing and
servicing computer hardware and software to healthcare providers and
specifically excluding the anesthesiology practice management business
---------
historically conducted prior to the date hereof by Physician's Equity Resources,
Inc., a Georgia corporation (the "PER Business"), which PER Business Employee
represents does not compete with the Business presently being conducted by
Company;
WHEREAS, pursuant to that certain Stock Purchase Agreement by and among
InfoCure Corporation, a Delaware corporation ("InfoCure"), Kurt I. Lawrence,
Karen A. Lawrence and Philip E. Warenik, dated February 26, 1998, but effective
as of January 1, 1998 (the "Acquisition Agreement"), InfoCure has agreed to
purchase all of the stock of Company (the "Acquisition");
WHEREAS, Employee has been the President of Company and is associated in
the view of its customers and employees with Company's success and the quality
of its services;
WHEREAS, Company has a reasonable, competitive business interest in
protecting the value of the assets of Company which it is acquiring, including,
without limitation, its goodwill, trade secrets and its customer identities;
WHEREAS, it is a condition of closing of the Acquisition (as set forth in
Section 2.4.A.(iv) of the Acquisition Agreement) that Employee enter into this
Agreement; and
WHEREAS, Employee desires to be employed by Company and Company desires to
employ and assure itself of the continued services of Employee on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and in the Acquisition Agreement and the
performance of each, it is hereby agreed as follows:
1. Employment and Duties.
---------------------
A. Company shall employ Employee as an executive during the term of
his employment as set forth in this Agreement and Employee hereby accepts such
employment. Employee shall report to the President of Company and shall have
duties and responsibilities as set forth on Exhibit A and/or as may be assigned,
---------
from time to time, by the President and Board of Directors of Company (the "New
Duties"), provided the New Duties are either reasonably consistent with the
duties previously performed by Employee or consented to by Employee.
<PAGE>
B. Employee shall keep James K. Price, Executive Vice President,
and/or the President of InfoCure timely advised of all significant developments
and opportunities and shall timely consult with Mr. Price and/or the President
of InfoCure on all significant policies and contracts. Employee's powers and
duties are subject to the supervision and instructions of Mr. Price and/or the
President of InfoCure.
C. Employee shall use his best efforts to perform his duties in
accordance with any applicable business plans and budgets and policies in
effect.
D. Employee agrees that he shall at all times faithfully and to the
best of his ability and experience faithfully perform all of the duties that may
be required of him pursuant to the terms of this Agreement. Employee shall
devote his full business time to the performance of his obligations hereunder;
provided, however, Employee shall be entitled to perform services four (4) hours
per week (outside of normal working hours) which four (4) hours shall be
substantially provided for Physician's Equity Resources, Inc., a Georgia
corporation ("PER"), provided the performance of said services for PER do not
materially interfere with the performance by Employee of his duties for Company.
2. Compensation.
------------
A. Base Salary. During the twenty-four (24) month term of his
-----------
employment (the "Term"), Company shall pay to Employee a base salary ("Base
Salary") of One Hundred Ten Thousand and No/100 Dollars ($110,000.00) per year,
payable in arrears in equal semi-monthly payments. In the event of a Disability,
to the extent payments are received under an employer-sponsored disability
program, the payments hereunder are to be reduced by an amount equal to such
disability payments.
B. Incentive Bonus. During the Term of this Agreement, in addition
---------------
to the Base Salary as provided in Section 2.A. above, Employee shall be eligible
for annual incentive compensation (the "Incentive Bonus") pursuant to a program
established by Company's Board of Directors in its sole and absolute discretion,
from time to time, provided that the Goals (as defined below) of said program
are met by Employee. The Incentive Bonus program and Employee's eligibility to
earn an Incentive Bonus shall be reasonably comparable to other chief executive
and operating officers of other affiliates of InfoCure. The Incentive Bonus
program shall be based upon the achieving of certain revenue and/or profit goals
and/or other goals (the "Goals") of Company and/or of the business unit of
Company for which Employee performs duties. Upon the establishment of the
program and Goals, the parties agree to enter into an agreement setting forth
the Incentive Bonus program and Employee's eligibility to participate in said
program, which agreement shall be attached hereto as Exhibit B and shall
---------
constitute a part of this Agreement.
C. Employee Benefit Program. Employee shall be eligible to
------------------------
participate in all employee benefit programs; including medical and
hospitalization programs; employee stock option and bonus plans generally made
available to employees of Employee's employment status; now or hereafter made
available, subject to the terms and conditions of such programs, including
eligibility. It is understood that Company reserves the right to modify and
rescind any
-2-
<PAGE>
program or adopt new programs in its sole discretion. Company may, in its sole
discretion, maintain key man life insurance on the life of Employee and
designate Company as the beneficiary. Employee agrees to execute any documents
necessary to effect such policy. Company shall use commercially reasonable
efforts to provide Employee with medical and hospital coverage. The parties
acknowledge that InfoCure intends to implement uniform employee benefits
throughout InfoCure and its subsidiaries (including Company) at reasonable
costs.
D. Business Allowance. Employee shall be paid a business allowance
------------------
of Five Hundred and No/100 Dollars ($500.00) per month to cover expenses which
are not accounted for and submitted to Company pursuant to Section 2.E. below.
Employee acknowledges that this stipend shall be reported as additional
compensation and taxable to Employee under applicable federal and state income
tax laws.
E. Expenses. In addition to the Business Allowance set forth in
--------
Section 2.D. above, Employee shall be reimbursed for accountable expenses
reasonably incurred by Employee in the performance of his duties hereunder which
are submitted on expense reports in accordance with the policies of Company then
in effect.
F. Vacation. Employee shall accrue five (5) weeks of vacation during
--------
each calendar year during the term of this Agreement. Vacation time shall be
taken at such time as not to materially interfere with the Business of Company
and must be pre-approved by Company. Vacation time may not be carried forward
from one (1) calendar year to another.
G. Automobile Allowance. Employee shall be entitled to receive an
--------------------
automobile allowance of One Thousand and No/100 Dollars ($1,000.00) per month to
cover Employee's automobile and related operating costs. The automobile
allowance shall be payable semi-monthly.
3. Term. The term of employment of Employee under this Agreement shall
----
be for a period of twenty-four (24) consecutive months (the "Term") commencing
on the date hereof and ending on the second (2nd) anniversary thereof, subject
to earlier termination as provided in Section 4. If the employment of Employee
continues thereafter, absent a written agreement, the employment following the
Term shall be at will and the provisions of this Agreement shall be of no force
and effect with respect to any such subsequent period, except for the provisions
of Sections 5. through 10. below.
4. Early Termination.
-----------------
A. For Cause.
---------
(i) Notwithstanding the foregoing, Company may terminate the
employment of Employee "for cause" (as hereinafter defined) at any time upon
written notice effective immediately. The term "for cause" shall mean (1) the
continued failure by Employee substantially to perform his duties with Company
in a reasonably professional manner other than due to a Total and Permanent
Disability or death for a period of thirty (30) days after a written
-3-
<PAGE>
demand for substantial performance is delivered to Employee by the Board of
Directors or President of Company, which demand identifies the manner in which
the Board of Directors or President believes Employee has not substantially
performed his duties; (2) the unauthorized dissemination of Confidential
Information (as defined below) of Company or InfoCure or InfoCure's other
subsidiaries; (3) the commission of a felony or any other crime involving moral
turpitude or the pleading of nolo contendere to any such act; (4) the commission
of any act of dishonesty when such act is intended to result or results,
directly or indirectly, in gain or personal enrichment of Employee or any
related person or affiliate of Employee or is intended to cause harm or damage
to Company or InfoCure or any of InfoCure's other subsidiaries; (5) the illegal
use of controlled substances; (6) the use of alcohol so as to have a material
adverse effect on the performance of his duties; (7) the misappropriation or
embezzlement of assets of Company or InfoCure or any of InfoCure's other
subsidiaries; (8) the making of material disparaging remarks regarding Company
or InfoCure or any of InfoCure's other subsidiaries or the products or services
of any such person to suppliers and/or customers of Company, InfoCure or any of
InfoCure's other subsidiaries or (9) the breach of any other material term or
provision of this Agreement to be performed by Employee which has not been cured
within thirty (30) days of receipt of written notice of such breach.
(ii) Upon termination of Employee's employment for cause,
Company shall have no further obligation to pay any compensation to Employee for
periods after the effective date of the termination for cause, except for Base
Salary which accrued as of the termination date. In addition, the right to
exercise any vested stock option shall terminate on the thirtieth (30th) day
following the effective date of the termination of employment for cause.
B. Termination Upon Death or Total and Permanent Disability.
--------------------------------------------------------
(i) The employment of Employee shall terminate upon his death
or, ten (10) business days after written notice by Company of termination, upon
or during the continuance of the Total and Permanent Disability (as hereinafter
defined) of Employee.
(ii) Upon termination by reason of death or during Employee's
Total and Permanent Disability, Company shall have no further obligation to pay
any compensation for periods after the effective date of such termination,
except for Base Salary which accrued as of the termination date. The term "Total
and Permanent Disability" means the suffering by Employee of a Disability for a
period (whether or not continuous) in excess of ninety (90) days, unless
extended in writing by Company. A Total and Permanent Disability shall be deemed
to commence upon the expiration of such ninety (90) day period.
(iii) For purposes hereof, the terms "Disabled" or "Disability"
shall mean the suffering by Employee of a physical or mental condition resulting
from bodily injury, disease, or mental disorder which renders Employee incapable
of continuing substantially all of his or her usual and customary duties in an
efficient manner as an employee of Employer, as determined by the Board of
Directors. No Disability shall be deemed to exist until Employee shall be unable
to perform such duties hereunder for seven (7) consecutive days, and after such
Disability continues for seven (7) consecutive days, then the same shall be
deemed to have
-4-
<PAGE>
existed from the first (1st) day of such Disability. At the end of any
Disability (other than a Disability that results in a Total and Permanent
Disability as defined below), Employee shall return to work, and this Agreement
shall continue as though such Disability had not occurred.
If Employee desires to return to work at the end of any Disability, but
there is a dispute as to whether Employee is able to perform his or her duties
hereunder or if there is a dispute as to whether Employee is Disabled or has
suffered a Total and Permanent Disability, the issue shall be submitted to a
Board of Arbiters consisting of three (3) persons: one (1) physician who
specializes in the physical or mental condition which resulted in the Disability
(hereinafter referred to as a "Specialist") shall be appointed on behalf of
Employer by the Board of Directors of Employer (with Employee having no vote on
this question); the second (2nd) Specialist shall be appointed by Employee and a
third (3rd) Specialist shall be appointed by the two (2) Specialists so
appointed. If a dispute remains following the completion of this procedure, the
matter shall be determined as set forth in Section 16. below. If a majority of
the Specialists determine that Employee is able to perform his or her duties
hereunder on a full-time basis, Employee shall be permitted to return to work
under the provisions hereof. Employee agrees to submit medical records
requested and to submit to such examination and testing requested by such
physician.
C. Termination by Company Without Cause. In the event Company
------------------------------------
terminates the employment of the Employee, except for cause, prior to the
expiration of term of this Agreement as set forth in Section 3. hereof, Company
shall pay Employee, as its sole and exclusive liability hereunder, an amount
equal to six (6) months of the Employee's then current monthly base salary.
Payment shall be made within five (5) days of such termination.
5. Company Property. All records, designs, patents, business plans,
----------------
financial statements, manuals, memoranda, lists and other property delivered to
or compiled by Employee by or on behalf of Company or its representatives,
vendors or customers which pertain to the Business of Company shall be and
remain the property of Company, as the case may be, and be subject at all times
to its discretion and control.
6. Confidential Information.
------------------------
A. Company may disclose to Employee certain Confidential Information
(defined below). Employee acknowledges and agrees that Company has a
reasonable, competitive business interest in the Confidential Information and
the Confidential Information is the sole and exclusive property of Company (or a
third party providing such information to Company) and that Company or such
third party owns all worldwide rights therein under patent, copyright, trade
secret, confidential information, moral right or other property right. Employee
acknowledges and agrees that the disclosure of the Confidential Information to
Employee does not confer upon Employee any license, interest or rights of any
kind in or to the Confidential Information. Employee may use the Confidential
Information solely for the benefit of Company while Employee is employed by
Company. Except in the performance of services for Company, Employee shall hold
in confidence and not reproduce, distribute, transmit, reverse engineer,
decompile, disassemble, or transfer, directly or indirectly, in any form, by any
means, or for any
-5-
<PAGE>
purpose, the Confidential Information or any portion thereof. Employee agrees to
return to Company, upon request by Company, the Confidential Information and all
materials relating thereto.
B. Employee acknowledges that his obligations with regard to the
Confidential Information shall remain in effect while Employee is employed by
Company and for a period of two (2) years thereafter.
"Confidential Information" shall mean any confidential or proprietary
information possessed by Company or InfoCure or relating to the Business of
Company (but specifically excluding confidential or proprietary information
related solely to the PER Business and which is not in any way related to the
Owned Software, as defined in the Acquisition Agreement), including, without
limitation, any confidential "know-how", trade secrets, customer lists, details
of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques, processes,
financial information and data, business acquisition plans and new personnel
acquisition plans; provided, however, that Employee shall not be restricted from
disclosing or using Confidential Information that: (i) is or becomes generally
available to the public other than as a result of an unauthorized disclosure;
(ii) becomes available to Employee in a manner that is not in contravention of
applicable law from a source that is not bound by a confidential relationship
with either InfoCure or Company or by a confidentiality or other similar
agreement; (iii) was known to Employee on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to Employee by Company, InfoCure or one of Company or
InfoCure's principals or representatives or (iv) is required to be disclosed by
law, court order or other legal process; provided, however, that in the event
disclosure is required by law, Employee shall provide Company with prompt notice
of such requirement so that Company may seek an appropriate protective order
prior to any such required disclosure by Employee. Confidential Information may
include, but not be limited to, future business plans, licensing strategies,
advertising campaigns, information regarding customers, employees and
independent contractors and the terms and conditions of this Agreement.
7. Non-Solicitation.
----------------
A. Customers. During Employee's employment with Company and for a
---------
period of two (2) years thereafter (the "Restricted Period"), Employee shall
not, on his own behalf or on behalf of any person, firm, partnership,
association, corporation or business organization, entity or enterprise ("Other
Entity"), solicit, contact, call upon, communicate with or attempt to
communicate with any customer of Company, or any representative of any customer
of Company, with a view to providing products and/or services in the Business
provided that the restrictions set forth in this Section 7.A. shall apply only
to customers of Company, or representatives of customers of Company, with which
Employee had contact during
-6-
<PAGE>
the two (2) year period immediately preceding termination of his employment with
Company (or shorter period if Employee has not then been engaged by Company for
two (2) years).
B. Employees/Independent Contractors. During the Restricted Period,
---------------------------------
Employee shall not, on his own behalf or on behalf of any Other Entity, recruit
or hire, or attempt to recruit or hire, any employees or independent contractors
of Company who were employed or engaged by Company, as the case may be, during
the one (1) year period prior to the termination of his employment with Company
(or shorter period if Employee has not then been engaged by Company for one (1)
year).
8. Non-Competition. During the Restricted Period, Employee shall not on
---------------
his own behalf or on behalf of any Other Entity, perform the duties and services
Employee performs for Company for any Other Entity in the Business within a one
hundred (100) mile radius of the following location, said location being the
location at which Employee performs services for Company (the "Territory"):
3939 Roswell Road, N.E., Suite 300, Marietta, Georgia 30062.
9. Acknowledgment. The parties hereto agree that: (i) the Restricted
--------------
Period and Territory contained in this Agreement are reasonably necessary for
the protection of InfoCure and Company's legitimate business interests and that
the Territory is the area in which Employee shall perform (or currently perform)
services for Company; (ii) by having access to information concerning employees,
independent contractors and customers of Company, Employee shall obtain a
competitive advantage as to such parties; (iii) Employee's covenants and
agreements contained in this Agreement are reasonably necessary to protect the
interests of Company in whose favor said covenants and agreements are imposed in
light of the nature of Company's Business and Employee's involvement in such
Business; (iv) the restrictions imposed by this Agreement are not greater than
are necessary for the protection of Company in light of the substantial harm
that Company shall suffer should Employee breach any of the provisions of said
covenants or agreements and (v) Employee's covenants and agreements contained in
this Agreement form material consideration for this Agreement, the Acquisition
Agreement and Employee's employment by Company.
10. Remedy for Breach. Employee agrees that the remedies at law of
-----------------
Company for any actual or threatened breach by Employee of the covenants
contained in Sections 6. through 8. of this Agreement would be inadequate and
that Company shall be entitled to specific performance of the covenants in such
paragraphs, including entry of an ex parte, temporary restraining order in state
or federal court, preliminary and permanent injunctive relief against activities
in violation of such paragraphs, or both, or other appropriate judicial remedy,
writ or order, in addition to any damages and legal expenses (including
attorney's fees) which Company may be legally entitled to recover. Employee
acknowledges and agrees that the covenants contained in Sections 6. through 8.
of this Agreement shall be construed as agreements independent of any other
provision of this or any other agreement between the parties hereto, and that
the existence of any claim or cause of action by Employee against Company,
whether predicated upon this or any other agreement, shall not constitute a
defense to the enforcement by Company of said covenants.
-7-
<PAGE>
11. No Prior Agreements. Employee hereby represents and warrants to
-------------------
Company that the execution of this Agreement by Employee and Employee's
employment by Company and the performance of Employee's duties hereunder shall
not violate or be a breach of any agreement with a former employer, client or
any other person or entity.
12. Assignment; Binding Effect. Employee understands that Employee has
--------------------------
been selected for employment by Company on the basis of Employee's personal
qualifications, experience and skills. Employee agrees, therefore, that
Employee cannot assign all or any portion of Employee's performance under this
Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 13. below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Employee has no oral representations, understandings or agreements
with Company or any of its officers, directors or representatives covering the
same subject matter as this Agreement. This Agreement hereby supersedes any
other employment agreements or understandings, written or oral, between Company
and Employee. This written Agreement is the final, complete and exclusive
statement and expression of the agreement between Company and Employee and of
all the terms of this Agreement, and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of Company and Employee, and
no term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To Company: Medical Software Integrators, Inc.
c/o InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Frederick L. Fine
With a copy to: Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
To Employee: Kurt I. Lawrence
4660 Jefferson Township Lane
Marietta, Georgia 30066
-8-
<PAGE>
With a copy to: Manko & Hogan
332 Lawrence Street, N.E.
Marietta, Georgia 30060
Attention: J. Stephen Manko, Esq.
James D. Hogan, Jr., Esq.
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. Mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
Agreement shall be enforced separately and independently of any other agreement
involving the parties hereto. The Section headings herein are for reference
purposes only and are not intended in any way to describe, interpret, define or
limit the extent or intent of the Agreement or of any part hereof.
16. Arbitration. Except as otherwise set forth in Sections 4.B.(iii) and
-----------
6. through 10., any dispute, controversy or claim arising out of, relating to or
in connection with, this Agreement, or the breach, termination or validity
thereof shall be finally settled by arbitration conducted in accordance with
this Section. The arbitration shall be conducted in accordance with the Rules
of the American Arbitration Association (the "AAA") in effect at the time of the
arbitration, except as they may be modified herein or by mutual agreement of the
parties. The seat of the arbitration shall be Atlanta, Georgia, and each party
hereto irrevocably submits to the jurisdiction of the arbitration panel in
Atlanta, Georgia. The arbitration shall be conducted by three (3) arbitrators.
The party initiating arbitration (the "Claimant") shall identify its arbitrator
within twenty (20) days of receipt of the request for arbitration (the
"Request") and shall notify the Claimant of such appointment in writing. If the
Respondent fails to identify an arbitrator within such twenty (20) day period,
the arbitrator named in the Request shall decide the controversy or claim as the
sole arbitrator. Otherwise, the two (2) arbitrators appointed by the parties
shall appoint a third (3rd) arbitrator within twenty (20) days after the
Respondent has notified Claimant of the appointment of the Respondent's
arbitrator. When the third (3rd) arbitrator has accepted the appointment, the
two (2) party-appointed arbitrators shall promptly notify the parties of the
appointment. If the two (2) arbitrators appointed by the parties fail or are
unable to so appoint a third (3rd) arbitrator, then the appointment of the third
(3rd) arbitrator shall be made by the AAA, which shall promptly notify the
parties of the appointment. The third (3rd) arbitrator shall act as chair of
the panel. The arbitration award shall be in writing and shall be final and
binding on the parties. The award may include an award of costs, including
reasonable attorneys' fees and disbursements. Judgment upon the award may be
entered by any court having jurisdiction thereof or having jurisdiction over the
parties or their assets. Notwithstanding the foregoing, the parties may apply
to any court of competent jurisdiction for an ex parte temporary restraining
order, preliminary injunction, or other interim or conservatory
-9-
<PAGE>
relief, as necessary, without breach of this Section and without any abridgment
of the powers of the arbitrators.
17. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Georgia.
18. Counterparts. This Agreement may be executed simultaneously in two
------------
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute, but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
Medical Software Integrators, Inc.
By: /s/ James K. Price
-----------------------------------------------
Its: Executive Vice President
EMPLOYEE:
/s/ Kurt I. Lawrence
--------------------------------------------------
Kurt I. Lawrence
-10-
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
-------------------
OVERALL RESPONSIBILITY:
- ----------------------
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Bonus
---------------
The Incentive Bonus Program shall be attached hereto once completed by
InfoCure and Company. However, the parties understand and agree that the
Incentive Bonus shall be in the form of cash and shall not exceed Employee's
Base Salary as set forth in Section 2.A. of this Employment Agreement.
<PAGE>
Exhibit 10.13
FIRST AMENDMENT TO LOAN INSTRUMENTS
-----------------------------------
This FIRST AMENDMENT TO LOAN INSTRUMENTS (this "First Amendment"), dated as of
October 23, 1998, is among INFOCURE CORPORATION, a Delaware corporation
("InfoCure"), THOROUGHBRED ACQUISITION, INC., a Georgia corporation
("Thoroughbred Acquisition, Inc."), MEDICAL SOFTWARE INTEGRATORS, INC., a
Georgia corporation ("MSI"), PROFESSIONAL ON-LINE COMPUTER, INC., a Michigan
corporation ("Polci"), ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC., a Georgia
corporation ("OPMS"), PACE FINANCIAL CORPORATION, an Ohio corporation ("Pace"),
MD ACQUISITION, INC., a Connecticut corporation ("MD Acquisition, Inc."), ROVAK,
INC., a Minnesota corporation ("Rovak"), KCOMP MANAGEMENT SYSTEMS, INC., a
California corporation ("KComp"), SOFTEASY SOFTWARE, INC., a Pennsylvania
corporation ("SoftEasy"), CCI ACQUISITION, INC., a Florida corporation ("CCI
Acquisition, Inc."), HEALTH CARE DIVISION, INC., a Georgia corporation ("HCD"),
DR SOFTWARE, INC., a Georgia corporation ("DR Software"), MILLARD-WAYNE, INC., a
Georgia corporation ("Millard-Wayne"), INTERNATIONAL COMPUTER SOLUTIONS, INC., a
Georgia corporation ("ICS") (Infocure, Thoroughbred Acquisition, Inc., MSI,
Polci, OPMS, Pace, MD Acquisition, Inc., Rovak, KComp, SoftEasy, CCI
Acquisition, Inc., HCD, DR SoftWare, Millard-Wayne and ICS, and such other
entities that from time to time have or may become a "Borrower" in accordance
with and under the terms of the Loan Agreement (as defined below), hereinafter
sometimes are referred to individually as a "Borrower" and collectively as
"Borrowers"), and FINOVA Capital Corporation, a Delaware corporation ("FINOVA").
All capitalized terms used but not elsewhere defined herein shall have the
respective meanings ascribed to such terms in Section 1 below.
R E C I T A L S
---------------
A. Borrowers and FINOVA entered into that certain Second Amended and Restated
Loan Agreement dated as of February 24, 1998 (as amended through the date
hereof, the "Existing Loan Agreement"), pursuant to which FINOVA, among other
things, made certain loans and other financial accommodations to Borrowers
subject to the terms and conditions therein set forth.
B. Borrowers and FINOVA desire to amend the Existing Loan Agreement and other
Loan Instruments in certain respects, subject to the terms and conditions herein
set forth, including, without limitation, to provide for an addition term loan
to Borrowers in an amount not to exceed $40,000,000, the proceeds of which shall
be used solely to (i) consummate the Thoroughbred Acquisition and (ii) pay
related transaction costs.
NOW, THEREFORE, in consideration of the foregoing and other mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, and subject to the terms and
conditions hereof, Borrowers and FINOVA agree as follows:
<PAGE>
1. Definitions. All capitalized terms used but not elsewhere defined herein
-----------
shall have the respective meanings ascribed to such terms in the Existing Loan
Agreement, as amended by this First Amendment.
2. Amendments to the Existing Loan Agreement. The Existing Loan Agreement is
-----------------------------------------
amended as set forth below:
(i) Section 1.1 - Substituted Definition. Section 1.1 of the Existing
------------------------------------
Loan Agreement hereby is amended by (a) deleting the definitions of
Contingent Obligation Payment, COP Base Amount, COP Calculation Date, COP
Default Event, COP Market Value, COP Maturity Payment Date, Market Event,
Market Refinancing Event and Multiplier and (b) substituting the following
definitions in lieu of the current version of such definitions:
Acquisition Loan: the loan in the aggregate amount of $19,997,113.43,
----------------
the proceeds of which are to be used solely for Permitted Acquisitions
and to pay related transaction costs and, with respect only to the
Acquisition Loan Working Capital Advance, for working capital purposes.
Borrowers: collectively, InfoCure, Rovak, CCI Acquisition, Inc.,
---------
Polci, HCD, KComp, SoftEasy, DR Software, Millard-Wayne, ICS, OPMS,
Pace, MD Acquisition, Inc., MSI, Thoroughbred Acquisition, Inc., each
Acquisition Subsidiary and any Target Acquired by InfoCure pursuant
to an Equity Acquisition.
Default Rate: (i) with respect to the Term Loan and the Convertible
------------
Bridge Loan, a rate equal to fourteen and one-half percent (14.5%)
per annum, (ii) with respect to the Acquisition Loan, a rate equal
to the Base Rate, plus the Applicable Margin then in effect, plus
---- ----
five percent (5.0%) per annum and (iii) with respect to any other
amounts which may be owing by Borrowers to FINOVA pursuant to this
Loan Agreement, the other Loan Instruments or otherwise, a rate equal
to the greater of (i) and (ii) of this definition.
Existing Acquisition Instruments: collectively, (i) the Micro-
--------------------------------
Software Acquisition Instruments, (ii) the SoftEasy Acquisition
Instruments, (iii) the Commercial Acquisition Instruments, (iv) the
OPMS Acquisition Instruments, (v) the Pace Acquisition Instruments
and (vi) the Polci Acquisition Instruments.
Fiscal Year: shall mean the fiscal year of Borrowers for financial
-----------
accounting purposes, which fiscal year ends on December 31.
2
<PAGE>
Instruments: collectively, (i) the Loan Instruments, (ii) the
-----------
Acquisition Instruments, (iii) the Existing Acquisition Instruments,
(iv) the KComp Notes, (v) the Commercial Subordinated Note, (vi) the
Polci Subordinated Note, (vii) the Thoroughbred Acquisition
Instruments, (viii) the FINOVA Warrants and (ix) each subordination
agreement executed and delivered in connection with the transactions
contemplated by the Loan Instruments.
Loan Agreement: this Second Amended and Restated Loan Agreement, as
--------------
amended by the First Amendment, and any amendments, modifications or
supplements thereto or hereto.
Loan Instruments: collectively, (i) the Initial Loan Instruments,
----------------
(ii) the Existing Loan Instruments and (iii) the Acquisition Loan
Instruments, including, without limitation, the Acquisition Loan
Instruments executed and delivered in connection with the Micro-
Software Acquisition and the Thoroughbred Acquisition.
Loans: collectively, the Term Loan, the Convertible Bridge Loan and
-----
the Acquisition Loan.
Notes: collectively, the Term Note, the Convertible Bridge Loan
-----
Note and the Acquisition Loan Note.
Polci: Professional On-Line Computer, Inc., a Michigan corporation.
-----
Prepayment Premium: as defined in subsection 2.6.1(b)(i).
------------------
(ii) Section 1.1 - Additional Definitions. Section 1.1 of the Existing
------------------------------------
Loan Agreement hereby is amended by adding the following definitions
thereto in the appropriate alphabetical order:
Acquisition Loan Working Capital Advance: a one-time Advance of the
----------------------------------------
Acquisition Loan in an amount equal to $1,000,000 to be made by FINOVA
to Borrowers on the First Amendment Closing Date.
Commitment Letter: that certain commitment letter dated as of
-----------------
September 27, 1998 among FINOVA and Borrowers.
Conversion Prepayment: as defined in subsection 2.6.2(c).
---------------------
3
<PAGE>
Convertible Bridge Loan: the term loan in the aggregate amount of
-----------------------
$40,000,000 to be made by FINOVA to Borrowers pursuant to subsection
2.1.3 of this Loan Agreement.
Convertible Bridge Loan Note: a promissory note in the principal
----------------------------
amount of $40,000,000 executed and delivered by Borrowers to FINOVA to
evidence the Convertible Bridge Loan, and any notes issued in substitution
thereof pursuant to the terms of this Loan Agreement, in each case in form
and substance satisfactory to FINOVA.
Facility: as defined in subsection 2.6.1(b)(iii).
--------
FINOVA Warrants: collectively, (i) that certain Warrant dated as of
---------------
the First Amendment Closing Date issued by InfoCure for the benefit of
FINOVA to acquire 225,000 shares of common stock of InfoCure and (ii) that
certain Warrant dated as of the Initial CBL Maturity Date issued by
InfoCure for the benefit of FINOVA to acquire 25,000 shares of common stock
of InfoCure, provided, however, that the Warrant described in clause (ii)
of this definition shall only be issued by InfoCure in the event the entire
Principal Balance of the Convertible Bridge Loan and interest thereon shall
not have been repaid in full on or before the Initial CBL Maturity Date.
First Amendment: that certain First Amendment to Loan Instruments
---------------
dated as of the First Amendment Closing Date among Borrowers and FINOVA.
First Amendment Closing Date: October 23, 1998.
----------------------------
First Amendment Capital Fee: as defined in Section 2.8.
---------------------------
Initial CBL Maturity Date: January 21, 1999.
-------------------------
MSI: Medical Software Integrators, Inc., a Georgia corporation.
---
Offering: the first underwritten public offering of InfoCure common
--------
stock pursuant to an effective registration statement under the Securities
Act consummated after the First Amendment Closing Date.
Permitted Acquisitions: an Acquisition funded in whole or in part
----------------------
with the proceeds of an Advance of the Acquisition Loan and, for the
purposes of the definition of "Acquisition Loan Instruments," the
Thoroughbred Acquisition.
4
<PAGE>
Reynolds Company: The Reynolds and Reynolds Company, Inc., an Ohio
----------------
corporation.
Reynolds Holdings: Reynolds and Reynolds Holdings, Inc., an Ohio
-----------------
corporation.
Success Fee: as defined in Section 2.11.
-----------
Third Party Loan: as defined in subsection 2.6.1(b)(iii).
----------------
Third Party Refinancing: as defined in subsection 2.6.1(b)(iii).
-----------------------
Thoroughbred Acquisition: the acquisition by Thoroughbred Acquisition,
------------------------
Inc. of the Property to be sold to Thoroughbred Acquisition, Inc.
pursuant to the Thoroughbred Acquisition Instruments.
Thoroughbred Acquisition, Inc.: Thoroughbred Acquisition, Inc., a
------------------------------
Georgia corporation.
Thoroughbred Acquisition Instruments: collectively, the Thoroughbred
------------------------------------
Company Asset Purchase Agreement, the Thoroughbred Holdings Asset
Purchase Agreement, all agreements, documents and instruments executed
pursuant thereto and any other agreements, documents and instruments
executed by or delivered in connection with the Thoroughbred Acquisition.
Thoroughbred Company Asset Purchase Agreement: that certain Asset
---------------------------------------------
Purchase Agreement dated as of October 23, 1998 among Thoroughbred
Acquisition, Inc., InfoCure and Reynolds Company, together with all
schedules, exhibits and other attachments thereto.
Thoroughbred Holdings Asset Purchase Agreement: that certain Asset
----------------------------------------------
Purchase Agreement dated as of September 28, 1998 among Thoroughbred
Acquisition, Inc., InfoCure and Reynolds Holdings, together with all
schedules, exhibits and other attachments thereto.
Thoroughbred Assignment of Acquisition Instruments: that certain
--------------------------------------------------
assignment of the Thoroughbred Acquisition Instruments from
Thoroughbred Acquisition, Inc. to FINOVA, in form and substance
satisfactory to FINOVA.
Thoroughbred Pay-Off Letters: a pay-off letter from each holder of
----------------------------
existing indebtedness secured by a Lien on the Property to be sold to
5
<PAGE>
Thoroughbred Acquisition, Inc. pursuant to the Thoroughbred
Acquisition Instruments, in form and substance satisfactory to FINOVA.
Thoroughbred Sellers: collectively, Reynolds Company and Reynolds
--------------------
Holdings.
Thoroughbred Subordinated Note: that certain Convertible Promissory
------------------------------
Note dated as of the First Amendment Closing Date in the original principal
amount of $10,000,000 made by InfoCure payable to the order of
Reynolds Holdings.
Thoroughbred Subordination Agreement: that certain Subordination
------------------------------------
Agreement dated as of the First Amendment Closing Date between Reynolds
Holdings and FINOVA.
(iii) Section 2.1. Section 2.1 of the Existing Loan Agreement is amended
-----------
by adding the following subsection 2.1.3 thereto in
the appropriate numerical order:
"2.1.3 Convertible Bridge Loan. The Convertible Bridge
-----------------------
Loan shall consist of a term loan from FINOVA to Borrowers in the
aggregate amount of $40,000,000. FINOVA shall disburse the proceeds
of the Convertible Bridge Loan to or as directed by Borrowers when
all of the terms and conditions set forth in Paragraph 3 of the
First Amendment have been satisfied."
(iv) Subsection 2.1.1. Subsection 2.1.1 of the Existing Loan Agreement
----------------
is amended by adding the following sentence to the end of such subsection:
"Borrowers agree and acknowledge that on the First Amendment Closing
Date,the Principal Balance of the Term Loan shall be equal to $8,433,271.11."
(v) Subsection 2.1.2. Subsection 2.1.2 of the Existing Loan Agreement
----------------
is deleted in its entirety and the following is substituted in lieu thereof:
"2.1.2 Advances of the Acquisition Loan. Borrowers agree and
--------------------------------
acknowledge that on the First Amendment Closing Date, after giving effect
to the making of the Acquisition Loan Working Capital Advance, the
Acquisition Loan shall be deemed to have been fully disbursed and, on such
date, the Principal Balance of the Acquisition Loan shall be equal to
$19,997,113.43, such amount constituting (i) the outstanding Principal
Balance of the Acquisition Loan as of the First Amendment Closing Date
without giving effect to the making of the Acquisition Loan Working Capital
Advance ($18,997,113.43), plus (ii) the
----
6
<PAGE>
Acquisition Loan Working Capital Advance to be disbursed on the First
Amendment Closing Date in an amount equal to $1,000,000. FINOVA shall have
no obligation to make Advances of the Acquisition Loan on or after the
First Amendment Closing Date (except for the Acquisition Loan Working
Capital Advance to be made on the First Amendment Closing Date, the
proceeds of which shall be disbursed by FINOVA to or as directed by
Borrowers when all of the terms and conditions set forth in Paragraph 3 of
the First Amendment have been satisfied)."
(vi) Section 2.2. Section 2.2 of the Existing Loan Agreement is deleted
-----------
in its entirety and the following is substituted in lieu thereof:
"2.2 Use of Proceeds, Notes and Reborrowing.
--------------------------------------
2.2.1 Use of Proceeds. The proceeds of the Term Loan and the
---------------
Acquisition Loan shall be used solely for Permitted Acquisitions and
to pay related transaction costs; provided that the proceeds of the
Acquisition Loan Working Capital Advance shall be used solely for
working capital purposes. The proceeds of the Convertible Bridge
Loan shall be used solely for the Thoroughbred Acquisition and to
pay related transaction costs.
2.2.2 Notes. The Term Loan, the Convertible Bridge Loan and
-----
the Acquisition Loan shall be evidenced by the Term Note, the
Convertible Bridge Loan Note and the Acquisition Loan Note,
respectively.
2.2.3 Reborrowing. Borrowers may not reborrow all or any
-----------
portion of the Loans which is repaid or prepaid."
(vii) Subsection 2.3.1. Clause (i) contained in the first sentence of
----------------
Section 2.3.1 of the Existing Loan Agreement is amended by adding the phrase
"and the Convertible Bridge Loan" after the phrase "Term Loan" therein
contained. Subsection 2.3.1 of the Existing Loan Agreement further is amended
by deleting the last sentence of such subsection and substituting the
following in lieu thereof:
"Interest shall be payable monthly in arrears on the first Business
Day of each month commencing with the first month following the month in
which the Original Closing Date occurs; provided, however, that after the
First Amendment Closing Date, interest shall be payable quarterly in
arrears on the first Business Day of each quarter commencing with the first
quarter following the quarter in which the First Amendment Closing Date
occurs."
7
<PAGE>
(viii) Subsection 2.3.2. Subsection 2.3.2 of the Existing Loan Agreement
----------------
is deleted in its entirety and the following is substituted in lieu thereof:
"2.3.2 Default Rate. During a Default Rate Period, Borrowers'
------------
Obligations shall bear interest at the applicable Default Rate."
(ix) Subsection 2.4.1. Subsection 2.4.1 of the Existing Loan Agreement
----------------
is deleted in its entirety and the following is substituted in lieu thereof:
"2.4.1 Term Loan. The Principal Balance of the Term Loan after
---------
the First Amendment Closing Date shall be payable by Borrowers, jointly and
severally, in sixteen (16) consecutive quarterly installments on the first
Business Day of each quarter commencing with the first Business Day of
January, 1999. Each of the first fifteen (15) installments shall be in the
amount of $527,079.44, and the last installment shall be in the amount of
the then remaining Principal Balance of the Term Loan."
(x) Subsection 2.4.2. Subsection 2.4.2 of the Existing Loan Agreement
----------------
is deleted in its entirety and the following is substituted in lieu thereof:
"2.4.2 Acquisition Loan. The Principal Balance of the Acquisition
----------------
Loan after the First Amendment Closing Date shall be payable by Borrowers,
jointly and severally, in sixteen (16) consecutive quarterly installments
on the first Business Day of each quarter commencing with the first
Business Day of January, 1999. Each of the first fifteen (15) installments
shall be in the amount of $1,249,819.58, and the last installment shall be
in the amount of the then remaining Principal Balance of the Acquisition
Loan."
(xi) Subsection 2.4.3. Subsection 2.4.3 of the Existing Loan Agreement is
----------------
deleted in its entirety and the following is substituted in lieu thereof:
"2.4.3 Convertible Bridge Loan. The Principal Balance of the
-----------------------
Convertible Bridge Loan shall be due and payable on the Initial CBL
Maturity Date; provided, however, in the event InfoCure shall not have
consummated an Offering on or before the Initial CBL Maturity Date the net
proceeds of which shall have been sufficient to repay in full the Principal
Balance of the Convertible Bridge Loan on the Initial CBL Maturity Date in
accordance with subsection 2.6.2(b), then the Principal Balance of the
Convertible Bridge Loan (after giving effect to any repayments thereof
required to be made under subsection 2.6.2(b) and subsection 2.6.2(c))
shall be payable in fifteen (15) consecutive quarterly installments on the
first Business Day of each quarter commencing with the first Business Day
of the quarter immediately succeeding the quarter in which the
8
<PAGE>
Initial CBL Maturity Date occurs. Each such installment shall be in an
amount equal to the applicable percentage of the Principal Balance of the
Convertible Bridge Loan on the Initial CBL Maturity Date (after giving
effect to any repayments thereof required to be made under subsection
2.6.2(b) and subsection 2.6.2(c)) as set forth below:
Installment Percentage
----------- ----------
1 through 4 2.5%
5 through 12 5.0%
13 through 14 10.0%
15 Then Remaining
Principal Balance"
(xii) Section 2.4. Section 2.4 of the Existing Loan Agreement is amended
-----------
by adding the following subsection 2.4.4 to such Section 2.4 in the
appropriate numerical order:
"2.4.4 Final Payments. Notwithstanding anything contained in
--------------
Section 2.4 to the contrary, the then remaining Principal Balance of the
Loans, if any, and any other sums which then are due and payable pursuant
to the terms of the Loan Instruments, shall be due and payable on October
28, 2002."
(xiii) Subsection 2.6.1(b). Subsection 2.6.1(b) of the Existing Loan
-------------------
Agreement is deleted in its entirety and the following is substituted in
lieu thereof:
"(b) Prepayment Premium.
------------------
(i) Subject to clause (ii) and (iii) of this subsection
2.6.1(b), any prepayment of the Principal Balance (other than a
prepayment made pursuant to subsection 2.6.2(a) and subsection
2.6.2(c)) shall be accompanied by a payment (a "Prepayment Premium")
of (i) three percent (3%) of the amount so prepaid if prepaid during
the first Loan Year, (ii) two percent (2%) of the amount so prepaid
if prepaid during the second Loan Year; and (iii) one percent (1%)
of the amount so prepaid if prepaid during the third, fourth or
fifth Loan Year.
(ii) In the event any portion or portions of the Principal
Balance of the Convertible Bridge Loan shall have been repaid or
prepaid (a) at any time or from time to time on or before the one
hundred eightieth (180th) day after the Initial CBL Maturity Date
with the proceeds of an Offering or any other equity offering by
InfoCure of its capital stock or (b) pursuant
9
<PAGE>
to subsection 2.6.2(c), the amount so prepaid shall not be subject
to a Prepayment Premium or Make Whole Premium.
(iii) In the event the Principal Balance of the Convertible
Bridge Loan and interest thereon shall have been repaid or prepaid
in full with the proceeds of an Offering or any other equity
offering by InfoCure of its capital stock and the then outstanding
Borrowers' Obligations subsequently are prepaid and performed in
full during any of the first three Loan Years with the proceeds of
any refinancing made by any financial institution other than FINOVA
(a "Third Party Refinancing"), then the Prepayment Premium
applicable thereto shall be equal to (i) one and three-quarters
percent (1.75%) of the amount so prepaid if prepaid during the first
Loan Year, (ii) one and one-quarter percent (1.25%) of the amount so
prepaid if prepaid during the second Loan Year; and (iii) one
percent (1.00%) of the amount so prepaid if prepaid during the third
Loan Year, provided that each of the following conditions shall have
been satisfied in connection with such Third Party Refinancing:
(A) the Acquisition Loan shall have been fully
disbursed;
(B) Borrowers shall have requested in writing from
FINOVA a total credit facility in the aggregate amount of
$75,000,000 (the "Facility"), a portion of the proceeds of
which would be used to pay and perform in full Borrowers'
Obligations, and Borrowers and FINOVA shall have been unable
to agree on the other material terms and conditions of such
Facility;
(C) Borrowers and a financial institution other than
FINOVA shall have agreed on the material terms and conditions
of a loan or credit facility the aggregate amount of which
shall be equal to $75,000,000 (the "Third Party Loan"), and
Borrowers shall have notified FINOVA in writing of such terms
and conditions;
(D) FINOVA shall have failed to notify Borrowers
within twenty (20) Business Days after the date of such
notification that FINOVA has elected to make the Facility
available to Borrowers on terms and conditions substantially
similar to those so presented with respect to the Third Party
Loan; and
10
<PAGE>
(E) within sixty (60) days after the expiration of the
twenty (20) Business Day period referred to in (D) of this
clause (iii), the Loans and all other Borrowers' Obligations
(including, without limitation, the Contingent Obligation
Payment pursuant to Section 2.11, if applicable) shall have
been paid in full with the proceeds (or a portion thereof) of
such Third Party Loan provided by such other financial
institution, and such Third Party Loan shall have been on the
same terms and conditions (or more favorable terms and
conditions to Borrowers) presented to FINOVA pursuant to (C)
of this clause (iii)."
(xiv) Subsection 2.6.1(e). Subsection 2.6.1(e) of the Existing Loan
-------------------
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
"(e) Make Whole Premium. In addition to the premiums calculated
------------------
pursuant to (b) above, and subject to subsection 2.6.1(b)(ii), any
prepayment of the Term Loan or the Convertible Bridge Loan (including,
without limitation, any prepayment made pursuant to subsection 2.6.2(a))
shall be accompanied by a payment equal to the Make Whole Premium
applicable thereto. The following definitions shall apply in calculating
the Make Whole Premium:
(i) "Make Whole Premium" means the positive difference,
------------------
if any, between (A) the Discounted Value immediately prior to any
prepayment of that portion of the Principal Balance of the
applicable Loan which is being prepaid and (B) the Principal Balance
of the applicable Loan, or portion thereof, being prepaid as of the
date of any such prepayment.
(ii) "Discounted Value" means the amount determined by
----------------
discounting the Remaining Scheduled Payment Amounts from their
respective due dates to the date of the prepayment of the applicable
Loan at a discount factor equal to the Reinvestment Yield.
(iii) "Remaining Scheduled Payment Amount" means the
----------------------------------
amount of each scheduled payment of the Principal Balance of and
interest on the applicable Loan that would be due on or after the
date of a prepayment of the applicable Loan if no prepayment of the
applicable Loan were made prior to its scheduled due date.
(iv) "Reinvestment Yield" means the sum of (A) the rates
------------------
shown under the column heading "Ask YLD" for "Govt. Bonds & Notes"
in the "Treasury Bonds, Notes & Bills" section of The Wall Street
Journal,
11
<PAGE>
Western Edition, published on the Business Day prior to the date of
any proposed prepayment of the applicable Loan for the government
bond or note with a maturity date having the closest matching
maturity to the applicable Weighted Average Life to Maturity, or, if
there is more than one government bond or note with a maturity date
having the closest matching maturity to the applicable Weighted
Average Life to Maturity, the highest of the rates shown in the "Ask
YLD" column for any such bond or note, plus (B) two percent (2%).
----
(v) "Weighted Average Life to Maturity" means the number
---------------------------------
of years (calculated to the nearest one-twelfth year) obtained by
dividing (A) the sum of the products obtained by multiplying each
remaining scheduled payment of principal under the applicable Loan
by the number of years (calculated to the nearest one-twelfth) which
will elapse between the date of a prepayment of the applicable Loan
and the scheduled due date of such remaining scheduled principal
payments, by (B) the outstanding Principal Balance of the applicable
Loan on such prepayment date prior to giving effect to any such
prepayment."
(xv) Subsection 2.6.2. Subsection 2.6.2 of the Existing Loan Agreement
----------------
is deleted in its entirety and the following is substituted in lieu thereof:
"2.6.2 Mandatory Prepayment.
--------------------
(a) Excess Cash Flow Payments. Until Borrowers' Obligations
-------------------------
are paid and performed in full, for each Fiscal Year of Borrowers
commencing with the Fiscal Year of Borrowers ending January 31, 1999,
Borrowers shall pay to FINOVA an amount equal to twenty-five percent
(25%) of the Excess Cash Flow for such Fiscal Year. Each such payment
shall be made within thirty (30) days after the date that Borrowers
are required to deliver to FINOVA the financial statements for such
Fiscal Year pursuant to subsection 6.3.3. Each Borrower agrees that
it will not take any actions primarily intended to decrease the amount
payable under this subsection 2.6.2(a) in anticipation of the
calculation referred to herein.
(b) If InfoCure shall consummate an Offering at any time and
from time to time, then, to the extent the Principal Balance of the
Convertible Bridge Loan and interest thereon shall not have been paid
and otherwise performed in full, Borrowers shall pay to FINOVA an
amount equal to the lesser of (i) the aggregate net proceeds of such
Offering and (ii) an amount necessary to repay in full the then
Principal Balance of the Convertible Bridge Loan and any accrued and
unpaid interest thereon after giving effect to the provisions of the
immediately
12
<PAGE>
succeeding sentence. Any prepayments made pursuant to this subsection
2.6.2(b) shall be applied in the following order of priority to the
payment of: (i) any and all sums which are due and payable pursuant to
the terms of the Loan Instruments, except the Principal Balance and
accrued and unpaid interest thereon but specifically including the
Success Fee and the First Amendment Closing Fee, as applicable, (ii)
accrued and unpaid interest on the portion of the Principal Balance
being prepaid, (iii) any other accrued and unpaid interest which is
unpaid and (iv) the Principal Balance of the Convertible Bridge Loan.
(c) In the event the Convertible Bridge Loan shall not have
been paid and performed in full on the Initial CBL Maturity Day
pursuant to subsection 2.6.2(b), then, upon the request of FINOVA at
any time after the Initial CBL Maturity Date (but in no event later
than the one hundred twentieth (120th) day after the Initial CBL
Maturity Date), Borrowers shall pay to FINOVA on demand an amount
equal to $10,000,000 (the "Conversion Prepayment") with cash on hand
and/or the proceeds of an equity line provided to InfoCure by Crescent
International Limited or any other substitute equity funding source
and the terms of any such equity line and the contributions made to
InfoCure pursuant thereto shall not violate any of the terms of this
Loan Agreement. Any prepayments made pursuant to this subsection
2.6.2(c) shall be applied in the following order of priority to the
payment of (i) the Principal Balance of the Convertible Bridge Loan
and (ii) to the payment of Borrowers' Obligations in such manner as
FINOVA shall determine in its sole and absolute discretion.
(d) Concurrently with any payment of the Principal Balance
received by FINOVA resulting from the exercise by FINOVA of any remedy
available to FINOVA subsequent to the occurrence of an Event of
Default and the acceleration of Borrowers' Obligations, Borrowers
jointly and severally shall pay to FINOVA a prepayment premium in an
amount equal to the prepayment premium which would be payable if such
payment was made pursuant to subsection 2.6.1.
(e) Prepayments received by FINOVA pursuant to this subsection
2.6.2 (except subsection 2.6.2(b) and subsection 2.6.2(c)) shall be
applied in the following order of priority to the payment of: (i) any
and all sums which are due and payable pursuant to the terms of the
Loan Instruments, except the Principal Balance and accrued and unpaid
interest thereon but specifically including the Contingent Obligation
Payment and the First Amendment Closing Fee, as applicable, (ii)
accrued and unpaid interest on the portion of the Principal Balance
being prepaid, (iii) any other accrued and unpaid interest which is
unpaid and (iv) the installments of the Principal Balance in
accordance with subsection 2.6.1(d)."
13
<PAGE>
(xvi) Section 2.8. Section 2.8 of the Existing Loan Agreement is
-----------
deleted in its entirety and the following is substituted in lieu thereof:
"2.8 First Amendment Capital Fee. Borrowers shall pay to FINOVA
---------------------------
a capital fee of $500,000 (the "First Amendment Capital Fee") on the
earlier to occur of (i) the date on which an Offering shall have been
consummated and (ii) December 15, 1998. The First Amendment Capital Fee
shall be (i) deemed fully earned as of the date of the Commitment Letter,
(ii) made in Good Funds via Federal wire transfer to the account designated
by FINOVA in Section 2.12 (or such other account as designated by FINOVA in
writing) and (iii) in addition to any loan or similar fee paid to FINOVA by
Borrowers pursuant to the Existing Amended and Restated Loan Agreement or
otherwise, including, without limitation, the Success Fee."
(xvii) Section 2.9. Section 2.9 of the Existing Loan Agreement is deleted
-----------
in its entirety.
(xviii) Section 2.11. Section 2.11 of the Existing Loan Agreement is
------------
deleted in its entirety and the following is substituted in lieu thereof:
"2.11 Success Fee. Borrowers shall pay to FINOVA a success fee
-----------
of $2,000,000 (the "Success Fee") on the earlier to occur of (i) the date
on which an Offering shall have been consummated and (ii) December 15,
1998. The Success Fee shall be (i) deemed fully earned as of the date of
the Commitment Letter, (ii) made in Good Funds via Federal wire transfer to
the account designated by FINOVA in Section 2.12 (or such other account as
designated by FINOVA in writing) and (iii) in addition to any loan or
similar fee paid to FINOVA by Borrowers pursuant to the Existing Amended
and Restated Loan Agreement or otherwise, including, without limitation,
the First Amendment Closing Fee."
(xix) Section 5.3. Section 5.3 of the Existing Loan Agreement is amended
-----------
by adding the following subsection 5.3.3 to such Section 5.3 in the
appropriate numerical order:
"5.3.3 FINOVA Warrants.
---------------
(a) Authority. InfoCure has full corporate power and
---------
authority to execute and deliver each FINOVA Warrant and to
perform all of its obligations thereunder, and the execution,
delivery and performance thereof have been duly authorized by all
necessary corporation action on its part. Each FINOVA Warrant
has been duly executed on behalf of
14
<PAGE>
InfoCure and constitutes the legal, valid and binding obligation
of InfoCure, enforceable in accordance with its terms.
(b) No Legal Bar. The execution, delivery and performance
------------
of each FINOVA Warrant will not (a) conflict with or result in a
violation of the articles or certificate of incorporation or
bylaws of InfoCure, (b) conflict with or result in a violation of
any law, statute, regulation, order or decree applicable to
InfoCure or any Affiliate of InfoCure, (c) require any consent or
authorization or filing with, or other act by or in respect of,
any governmental authority or body or (d) result in a reach of,
constitute a default under or constitute an event creating rights
of acceleration, termination or cancellation under any mortgage,
lease, contract, franchise, instrument or other agreement to
which InfoCure is a party or by which it is or its assets are
bound. Each FINOVA Warrant has been issued in compliance with
all applicable federal and state laws, rules and regulations,
including, without limitation, all so-called "Blue-Sky" laws.
(c) Validity of Shares. When issued upon the exercise of
------------------
the FINOVA Warrants as contemplated therein, shares of common
stock of InfoCure will have been validly issued and will be fully
paid and nonassessable and shall have been issued and sold in
compliance with all applicable federal and state laws, rules and
regulations, including, without limitation, all so-called "Blue-
Sky" laws."
(xx) Section 5.22. Section 5.22 of the Existing Loan Agreement is
------------
deleted in its entirety and the following is substituted in lieu thereof:
"5.22 Subsidiaries. As of the First Amendment Closing Date, (i)
------------
InfoCure has no subsidiaries other than Rovak, CCI Acquisition, Inc.,
Polci, HCD, KComp, SoftEasy, DR Software, Millard-Wayne, ICS, OPMS, Pace,
MD Acquisition, Inc., MSI and Thoroughbred Acquisition, Inc. and (ii) no
Borrower (other than InfoCure) has any subsidiaries."
(xxi) Section 5.23. Section 5.23 of the Existing Loan Agreement is
------------
deleted in its entirety and the following is substituted in lieu thereof:
"5.23 Representations as to Acquisition Instruments. To the
---------------------------------------------
best knowledge of Borrowers, the representations and warranties made by the
Polci Seller, the SoftEasy Seller, the Commercial Seller, the Micro-
Software Seller, the Thoroughbred Sellers, the sellers under the Pace
Acquisition Instruments and the OPMS Acquisition Instruments and the
sellers under any other Acquisition Instruments to which any Borrower is a
party pursuant to the Polci Acquisition
15
<PAGE>
Instruments, the SoftEasy Acquisition Instruments, the Commercial
Acquisition Instruments, the Micro-Software Acquisition Instruments, the
Thoroughbred Acquisition Instruments, the Pace Acquisition Instruments, the
OPMS Acquisition Instruments and such other Acquisition Instruments, as
applicable, are true and correct and no default exists thereunder."
(xxii) Article VI. Article VI of the Existing Loan Agreement is amended
----------
amended by adding the following Section 6.15 to such Article VI in the
appropriate numerical order:
"6.15 Syndication. If the Principal Balance of the Convertible
-----------
Bridge Loan and interest thereon shall not have been paid and otherwise
satisfied in full on or before the Initial CBL Maturity Date, (i) FINOVA
shall have the right at any time to sell, assign, transfer any portion of
its loan position to one or more lenders or otherwise syndicate the
transaction, (ii) in connection with any such sale, assignment, transfer or
syndication, FINOVA shall have the right to disclose to such prospective
lender(s) any and all information regarding or relating to Borrowers, the
transactions contemplated by this Loan Agreement and the other Instruments
which has now or may hereafter be provided to or obtained by FINOVA and
(iii) until successful completion of the initial syndication of the Loans,
in the event such initial syndication of the Loans by FINOVA shall prove to
be impracticable, Borrowers agree to restructure the credit facilities
evidenced by this Loan Agreement and the other Loan Instruments, which
restructuring may include a restructuring of the interest rates and other
lender compensation for Borrowers' Obligations, so as to make syndication
of the Loans reasonably practicable. In connection with any such sale,
assignment, transfer or syndication contemplated by this Section 6.15,
Borrowers agree and acknowledge that (i) FINOVA and Borrowers will be
required to re-document the transactions contemplated by this Loan
Agreement and the other Loan Instruments, which re-documentation shall
contain such terms, agreements, provisions, covenants, representations and
warranties customarily contained in FINOVA syndicated transactions, and
(ii) the costs, fees (including attorneys' fees and expenses),
disbursements and expenses for any such re-documentation shall be borne
solely by Borrowers."
(xxiii) Section 7.1. Section 7.1 of the Existing Loan Agreement is
-----------
deleted in its entirety and the following is substituted in lieu thereof:
"7.1 Borrowing. Create, incur, assume or suffer to exist any
---------
liability for Indebtedness for Borrowed Money except (i) Borrowers'
Obligations, (ii) Permitted Senior Indebtedness, (iii) Indebtedness
for Borrowed Money evidenced by the KComp Notes, (iv) Indebtedness
for Borrowed Money evidenced by the
16
<PAGE>
Commercial Subordinated Note, (v) Indebtedness for Borrowed Money
evidenced by the Polci Subordinated Note, (vi) Indebtedness for
Borrowed Money evidenced by the Thoroughbred Subordinated Note and
(vii) unsecured inter-company loans by any Borrower to any other
Borrower, provided that the obligations of each obligor of such
Indebtedness shall: (A) be evidenced by promissory notes which shall
have been pledged to FINOVA as security for Borrowers' Obligations,
(B) if required by FINOVA, be subordinated in right of payment to
Borrowers' Obligations on terms and conditions acceptable to FINOVA
and (C) have such other terms and provisions as FINOVA reasonably may
require."
(xxiv) Section 7.3. Section 7.3 of the Existing Loan Agreement is
-----------
amended by (a) inserting a comma after the word "Acquisitions" contained in
clause (i) thereof, (b) deleting the symbol "(ii)" in the third line of such
section and substituting the symbol "(iii)" in lieu thereof and (c) adding the
following clause (ii) thereto in the appropriate numerical order:
"(ii) the Thoroughbred Acquisition and"
(xxv) Section 7.6. Section 7.6 of the Existing Loan Agreement is
-----------
deleted in its entirety and the following is substituted in lieu thereof:
"7.6 Capital Expenditures. Make or incur any Capital
--------------------
Expenditures (other than Permitted Acquisitions, the Thoroughbred
Acquisition and payments made by any Borrower in connection with the
development of computer software in connection with the business of such
Borrower) in any year if the aggregate amount of Capital Expenditures for
all Borrowers for such year would exceed $2,500,000."
(xxvi) Section 7.7. Section 7.7 of the Existing Loan Agreement is deleted
-----------
in its entirety and the following is substituted in lieu thereof:
"7.7 Payments of Indebtedness for Borrowed Money. Make any
-------------------------------------------
payment or prepayment, whether voluntary, mandatory or optional, of any
Indebtedness for Borrowed Money other than (i) Borrowers' Obligations, (ii)
regularly scheduled payments of Permitted Senior Indebtedness, (iii) KComp
may make regularly scheduled payments of interest and principal of the
Indebtedness for Borrowed Money evidenced by the KComp Notes, provided that
no Event of Default or Incipient Default exists or would be created by the
making
17
<PAGE>
of any such payment, (iv) without duplication, InfoCure and CCI
Acquisition, Inc. may make regularly scheduled payments or interest and
principal of the Indebtedness for Borrowed Money evidenced by the
Commercial Subordinated Note, provided that no Event of Default or
Incipient Default exists or would be created by the making of any such
payment, (v) without duplication, InfoCure and Polci may make regularly
scheduled payments of interest and principal of the Indebtedness for
Borrowed Money evidenced by the Polci Subordinated Note, provided that no
Event of Default or Incipient Default exists or would be created by the
making of any such payment, and (vi) InfoCure may make regularly scheduled
payments of interest and principal of the Indebtedness for Borrowed Money
evidenced by the Thoroughbred Subordinated Note to the extent permitted
under, and in accordance with, the terms of the Thoroughbred Subordination
Agreement."
(xxvii) Section 7.12. Section 7.12 of the Existing Loan Agreement
------------
is deleted in its entirety and the following is substituted in lieu thereof:
"7.12 Amendment of Documents. Amend or modify (i) its articles
----------------------
of incorporation except (A) if required by law or (B) InfoCure may amend
its articles of incorporation in connection with the issuance of additional
capital stock permitted under Section 7.14, (ii) any of the KComp Notes,
(iii) the Commercial Subordinated Note, (iv) the Polci Note, (v) any of the
Existing Acquisition Instruments, (vi) any of the Thoroughbred Acquisition
Instruments, (vii) the Thoroughbred Subordinated Note, (viii) the FINOVA
Warrants (except as permitted under the terms thereof) or (ix) any
Acquisition Instruments."
(xxviii) Section 7.14. Section 7.14 of the Existing Loan Agreement is
------------
deleted in its entirety and the following is substituted in lieu thereof:
"7.14 Issuance of Capital Stock or other Similar Interests.
----------------------------------------------------
Issue or sell, permit to be issued or sold, or otherwise consent to the
transfer of, any additional capital stock or equity interests or any
interests convertible into or exercisable for any such capital stock or
additional equity interests, except (i) the FINOVA Warrants and issuances
of shares of capital stock of InfoCure pursuant to the terms thereof, (ii)
the issuance of capital stock of InfoCure, provided that InfoCure shall not
be required to pay dividends, redeem such capital stock or make other
distributions with respect thereto except as permitted under Section 7.5
and (iii) the convertible rights granted pursuant to the Commercial Long-
Term Subordinated Note."
(xxix) Subsection 8.1.4. Subsection 8.1.4 of the Existing Loan
----------------
Agreement is amended by deleting clause (iii) of such subsection 8.1.4 and
substituting the following in lieu thereof:
"(iii) any Borrower at any time shall be in default under any of
the KComp Notes, the Commercial Subordinated Note, the Polci Note or the
Thoroughbred Subordinated Note."
18
<PAGE>
(xxx) Exhibits. The Existing Loan Agreement is amended by substituting
--------
Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 attached hereto for
Exhibits 5.3.1, 5.5.1, 5.5.2, 5.5.3, 5.5.4, 5.5.5, 5.5.8, 5.7.1, 5.7.2, 5.8,
5.12, 5.19.1 and 5.20.1 to the Existing Loan Agreement, respectively.
3. Conditions to Effectiveness. The effectiveness of this First Amendment
---------------------------
shall be subject to the satisfaction of all of the following conditions in a
manner, form and substance satisfactory to FINOVA:
(a) Representations and Warranties. On the First Amendment Closing
------------------------------
Date, all of the representations and warranties of Borrowers set forth in
the Loan Instruments, as amended hereby, shall be true and correct in all
material respects.
(b) Thoroughbred Acquisition. FINOVA shall have received evidence
------------------------
that (i) immediately upon Borrowers' receipt, or such other Person's receipt
as designated by Borrowers, of the proceeds of the Convertible Bridge Loan,
the Thoroughbred Acquisition shall be consummated in accordance with the terms
of the Thoroughbred Acquisition Instruments and as a result thereof
Thoroughbred Acquisition, Inc. shall have acquired good and marketable title
to all Property to be acquired by such Person under the Thoroughbred
Acquisition Instruments, free and clear of all Liens other than Permitted
Liens, and (ii) none of the parties to the Thoroughbred Acquisition
Instruments shall have failed to perform any obligation or covenant required
by any of the Thoroughbred Acquisition Instruments to be performed or complied
with by such Person on or before the First Amendment Closing Date.
(c) Subordination Agreements. FINOVA shall have received subordination
------------------------
agreements or reaffirmations of subordination agreement, as applicable, each
in form and substance previously approved by FINOVA, with respect to any and
all loans, management fees, dividends, distributions and other payments
payable by any Borrower to any other Person (other than holders of Permitted
Liens), including, without limitation, the Indebtedness for Borrowed Money
evidenced by (i) the KComp Notes, (ii) the Commercial Subordinated Note,
(iii) the Polci Note and (iv) the Thoroughbred Subordinated Note.
(d) Delivery of Documents. The following shall have been delivered to
---------------------
FINOVA, each duly authorized and executed and in form and substance
satisfactory to FINOVA:
(1) this First Amendment;
(2) the applicable Acquisition Loan Instruments;
19
<PAGE>
(3) Convertible Bridge Loan Note;
(4) the Thoroughbred Subordination Agreement;
(5) the Thoroughbred Assignment of Acquisition Instruments and a
consent to the Thoroughbred Assignment of Acquisition Instruments
executed by the Thoroughbred Sellers;
(6) certified copies of the (i) Thoroughbred Acquisition Instruments
and all agreements, documents and instruments executed pursuant thereto
and in connection therewith and (ii) Licenses, License Agreements and
material Operating Agreements to be acquired by or otherwise assigned to
Thoroughbred Acquisition, Inc. pursuant to the Thoroughbred Acquisition;
(7) a Mortgage encumbering each parcel of Real Estate to be
acquired by any Borrower pursuant to the Thoroughbred Acquisition
Instruments and title policies and other related documents and
instruments required by FINOVA;
(8) a Landlord's Consent executed by the landlord under each
Lease assumed by any Borrower pursuant to the Thoroughbred Acquisition
Instruments and a certified copy of each such Lease;
(9) a notice of borrowing/disbursement request with respect to
the disbursement of the proceeds of the Convertible Bridge Loan;
(10) such evidence of Borrowers' authority to execute, deliver
and perform the obligations under this First Amendment, the Thoroughbred
Acquisition Instruments and the other agreements, documents and instruments
to be executed and delivered by Borrowers pursuant to the terms of this
First Amendment, as FINOVA reasonably may require, including but not
limited to certified copies of resolutions duly adopted by the board of
directors of each Borrower authorizing the execution and delivery of, and
performance of its obligations under, such agreements, documents and
instruments by such Borrower;
(11) Thoroughbred Pay-Off Letters;
(12) original certificates representing one hundred percent
(100%) of the issued and outstanding capital stock of Thoroughbred
Acquisition, Inc. and executed stock powers in form reasonably acceptable
to FINOVA;
20
<PAGE>
(13) an opinion dated as of the First Amendment Closing Date from
(a) Morris, Manning & Martin, counsel to the Borrowers, and (b) Douglas
M. Ventura, general counsel to Thoroughbred Sellers, in each case
addressed to FINOVA, in such form and covering such matters as FINOVA
reasonably shall require; and
(14) such other instruments, documents, agreements, certificates,
consents, waivers and opinions as FINOVA reasonably may request.
(e) Approvals. The approval and/or consent shall have been obtained
---------
from all Persons whose approval or consent is necessary or required to
enable Borrowers to enter into this First Amendment, the Thoroughbred
Acquisition Instruments and the agreements, documents and instruments
delivered in connection herewith and therewith and to perform their
obligations hereunder and thereunder;
(f) Security Interests. All filings of Uniform Commercial Code
------------------
financing statements and all other filings and actions necessary to perfect
and maintain the Liens granted by Borrowers under the Loan Instruments, as
amended, as first, valid and perfected Liens in the Property covered
thereby shall have been filed or taken and FINOVA shall have received such
UCC, state and federal tax Lien, pending suit, judgment and other Lien
searches as it deems necessary to confirm the foregoing and to confirm that
such Property is not subject to any other Liens except Permitted Liens.
(g) Material Adverse Change. No event shall have occurred since the
-----------------------
date on which financial statements shall have been most recently delivered
to FINOVA under the terms of the Existing Loan Agreement which has had or
reasonably could be expected to have a Material Adverse Effect.
(h) Performance; No Default. Borrowers shall have performed and
-----------------------
complied with all agreements, covenants and conditions contained in the
Loan Instruments to be performed by or complied with by Borrowers prior to
the date hereof, and no Event of Default or Incipient Default shall exist
on the First Amendment Closing Date or be created by the disbursement of
the proceeds of the Convertible Bridge Loan.
(i) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the execution and delivery of this First Amendment by
Borrowers shall be satisfactory to FINOVA, and FINOVA shall have received
all such counterpart originals or certified or other copies of evidence of
such as FINOVA may request.
(j) Use of Assets. FINOVA shall be satisfied that Borrowers at all
-------------
times shall be entitled to the use and quiet enjoyment of all Property
necessary for the continued ownership and operation of Borrowers' business,
including, without limitation, the use of
21
<PAGE>
equipment, fixtures, licenses, offices and means of ingress and egress
thereto, and any easements or rights-of-way necessary to reach any
equipment or other items necessary of the operation of Borrowers' business.
(k) Insurance. At least three (3) Business Days prior to the First
---------
Amendment Closing Date Borrowers shall have delivered to FINOVA evidence
reasonably satisfactory to FINOVA that all insurance coverage required by
FINOVA is in full force and effect and all premiums then due thereon have
been paid in full.
(l) Payment of Fees and Expenses. Borrowers shall have paid all fees
----------------------------
and expenses of FINOVA incurred in connection with this First Amendment,
including, without limitation, attorneys' fees and expenses.
(m) Litigation. FINOVA shall have received from Borrowers a
----------
comprehensive disclosure of the nature, procedural status and projected
outcome of each suit, action or other proceeding or investigation that is
pending or threatened by or against any Borrower (after giving effect to
the Thoroughbred Acquisition) or against any of their respective assets as
of the First Amendment Closing Date, and such disclosure shall not set
forth any suits, proceedings or investigations which, individually or in
the aggregate, are likely to have a Material Adverse Effect.
(n) Environmental Matters. FINOVA shall have received such reports
---------------------
concerning the environmental condition of Borrowers' facilities (after
giving effect to the Thoroughbred Acquisition), the delivery and
sufficiency of which shall be in accordance with past courses of dealings
among Borrowers and FINOVA.
(o) Background and Reference Checks. FINOVA shall not have determined
-------------------------------
from any background checks which FINOVA shall have conducted that any
individual serving as an executive officer of any of the Borrowers (after
giving effect to the Thoroughbred Acquisition) shall have been convicted of
a felony based upon the commission of fraud.
(p) Financials. FINOVA shall have received copies of the audited
----------
financial statements covering the Property to be acquired by Thoroughbred
Acquisition, Inc. pursuant to the Thoroughbred Acquisition Instruments for
the fiscal years 1996 and 1997.
(q) Year 2000 Audit and Review. FINOVA shall have received (i) the
--------------------------
results of a review and assessment conducted by Borrowers of all micro-chip
computer-based applications and programs and software and other processing
capabilities owned, licensed or used by any Borrower in its business (prior
to the First Amendment Closing Date) and (ii) evidence of a plan to be
implemented by Borrowers to address any (a) potential and actual
inabilities of any such micro-chip and computer-based applications or
22
<PAGE>
programs, software or other processing capabilities to properly perform
data-sensitive or other functions after, or in respect of dates occurring
after, December 31, 1999, including, without limitation, the uninterrupted
ability to interpret, store, transmit, receive and manipulate date on and
in relation to dates in and after the year 2000 or (b) other so called
potential or actual "Year 2000" non-compliances.
4. References.
----------
(a) From and after the First Amendment Closing Date, all references in
the Existing Loan Agreement and the other Loan Instruments to (i) the "Loan
Agreement" or such Loan Instrument shall be deemed to refer to the Existing
Loan Agreement or such Loan Instrument as amended hereby and (ii) a term
defined in the Existing Loan Agreement shall be deemed to refer to such
defined term as amended by this First Amendment.
(b) All references in the Existing Loan Agreement and the other Loan
Instruments, in each case as the same may be amended, modified, supplemented
or restated from time to time, to "Polci" or "Polci Acquisition, Inc." shall
be deemed to refer to "Professional On-Line Computer, Inc.", and all Loan
Instruments hereby are amended to reflect the name change of Polci
Acquisition, Inc. to Professional On-Line Computer, Inc.
5. Representations and Warranties. Each Borrower hereby confirms to
------------------------------
FINOVA that the representations and warranties set forth in Article V of the
Existing Loan Agreement, as amended by this First Amendment, are true and
correct in all respects as of the date hereof, and shall be deemed to be
remade as of the date hereof. Each Borrower represents and warrants to FINOVA
that (i) such Borrower has full power and authority to execute and deliver
this First Amendment and to perform such Borrower's obligations hereunder,
(ii) upon the execution and delivery hereof, this First Amendment shall be
valid, binding and enforceable upon such Borrower in accordance with its
terms, (iii) the execution and delivery of this First Amendment does not and
will not contravene, conflict with, violate or constitute a default under (A)
the articles or certificate or incorporation or bylaws of such Borrower, (B)
any of the KComp Notes, the Commercial Subordinated Note, the Polci Note, the
Thoroughbred Subordinated Note or any subordination agreement executed in
connection therewith or (C) any applicable law, rule, regulation, judgment,
decree or order or any agreement, indenture or instrument to which such
Borrower is a party or is bound or which is binding upon or applicable to all
or any portion of such Borrower's Property, (iv) no Incipient Default or Event
of Default exists or will be created by the disbursement of the proceeds of
the Convertible Bridge Loan, (v) such Borrower's Property is free and clear of
all Liens other than Permitted Liens, (vi) no Borrower has Indebtedness for
Borrowed Money except (A) Borrowers' Obligations, (B) Permitted Senior
Indebtedness and (C) Indebtedness for Borrowed Money evidenced by the KComp
Notes, the Commercial Subordinated Note, the Polci Note and the Thoroughbred
Subordinated Note and
23
<PAGE>
(vii) as of the date hereof, after giving effect to the transactions
contemplated hereby, the Principal Balance of the (a) Term Loan is $8,433,271.11
and (b) Acquisition Loan is $19,997,113.43.
6. Costs and Expenses. Each Borrower jointly and severally agrees to
------------------
reimburse FINOVA for all fees and expenses incurred in the preparation,
negotiation and execution of this First Amendment and the consummation of the
transactions contemplated hereby, including, without limitation, the fees and
expenses of counsel for FINOVA.
7. No Further Amendments; Ratification of Liability. Except as amended
------------------------------------------------
hereby, the Existing Loan Agreement and each of the other Loan Instruments shall
remain in full force and effect in accordance with their respective terms. Each
Borrower hereby ratifies and confirms its liabilities, obligations and
agreements under the Existing Loan Agreement and the other Loan Instruments, all
as amended by this First Amendment, and the Liens created thereby, and
acknowledges that (i) it has no defenses, claims or set-offs to the enforcement
by FINOVA of such liabilities, obligations and agreements, (ii) FINOVA has fully
performed all obligations to Borrowers which it may have had or has on and as of
the date hereof and (iii) other than as specifically set forth herein, FINOVA
does not waive, diminish or limit any term, condition or covenant contained in
the Existing Loan Agreement or any of the other Loan Instruments. FINOVA's
agreement to the terms of this First Amendment shall not be deemed to establish
or create a custom or course of dealing among FINOVA and Borrowers.
8. Counterparts. This First Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
9. Further Assurances. Each Borrower covenants and agrees that it will
------------------
at any time and from time to time do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged and delivered, all such further acts,
documents and instruments as reasonably may be required by FINOVA in order to
effectuate fully the intent of this First Amendment.
10. Severability. If any term or provision of this First Amendment or the
------------
application thereof to any party or circumstance shall be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
the validity, legality and enforceability of the remaining terms and provisions
of this First Amendment shall not in any way be affected or impaired thereby,
and the affected term or provision shall be modified to the minimum extent
permitted by law so as most fully to achieve the intention of this First
Amendment.
11. Captions. The captions in this First Amendment are inserted for
--------
convenience of reference only and in no way define, describe or limit the scope
or intent of this First Amendment or any of the provisions hereof.
24
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
INFOCURE CORPORATION, a Delaware corporation,
THOROUGHBRED ACQUISITION, INC., a Georgia corporation,
MEDICAL SOFTWARE INTEGRATORS, INC., a Georgia
corporation, MD ACQUISITION, INC., a Connecticut
corporation, PACE FINANCIAL CORPORATION, an Ohio
corporation, ORTHODONTIC PRACTICE MANAGEMENT SYSTEM,
INC., a Georgia corporation, PROFESSIONAL ON-LINE
COMPUTER, INC., a Michigan corporation, ROVAK, INC., a
Minnesota corporation, CCI ACQUISITION, INC., a Florida
corporation, KCOMP MANAGEMENT SYSTEMS, INC., a
California corporation, SOFTEASY SOFTWARE, INC., a
Pennsylvania corporation, HEALTH CARE DIVISION, INC., a
Georgia corporation, MILLARD-WAYNE, INC., a Georgia
corporation, DR SOFTWARE, INC., a Georgia corporation,
and INTERNATIONAL COMPUTER SOLUTIONS, INC., a Georgia
corporation
By: /s/ RICHARD E. PERLMAN
---------------------------------------------------
Richard E. Perlman
A duly authorized officer of each Borrower
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/ MICHAEL KELLER
---------------------------------------------------
Vice President
25
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF INFOCURE CORPORATION
Company
-------
Infocure Systems, Inc.
Thoroughbred Acquisition, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
InfoCure Corporation
Atlanta, Georgia
We hereby consent, as independent public accountants, to the inclusion in this
Annual Report on Form 10-KSB of our report dated February 19, 1999, on the
financial statements of InfoCure Corporation (and to all references to our Firm)
and to the incorporation by reference of such report (and all references to our
Firm) in InfoCure Corporation's Registration Statements as follows: Registration
Statement on Form S-8 (Registration No. 333-48829) Registration Statement on
Form S-3 (Registration No. 333-71109 and Registration Statement on Form S-3
(Registration Statement No. 333- to be subsequently filed).
BDO SEIDMAN, LLP
Atlanta, Georgia
February 26, 1999
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