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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] 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 as Specified in its Charter)
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DELAWARE 58-2271614
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1765 THE EXCHANGE BUILDING
SUITE 500
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
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Registrant's Telephone Number, Including Area Code: (770) 221-9990
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class)
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 be
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 28, 2000 was approximately $559.5 million (based on
the last sale price of a share of Common Stock as of March 28, 2000
($18 13/16)), as reported by the Nasdaq National Market.
As of March 28, 2000, 32,609,199 shares of the registrant's Common Stock,
$0.001 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on June 7, 2000 are incorporated herein by reference in Part III.
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INFOCURE CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 15
Item 3. Legal Proceedings........................................... 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
Item X. Executive Officers of the Registrant........................ 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 17
Item 6. Selected Financial Data..................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 29
Item 8. Financial Statements and Supplementary Data................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 30
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 30
Item 11. Executive Compensation...................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 30
Item 13. Certain Relationships and Related Transactions.............. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 30
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PART I
ITEM 1. BUSINESS
OVERVIEW
InfoCure 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 practice areas: anesthesiology, dental, dermatology and
plastic surgery, emergency medicine, general medical, oral and maxillofacial
surgery, ophthalmology, orthodontics, pathology, pediatrics, podiatry and
radiology. 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 and reduce the
administrative burdens created by an increasingly complex healthcare
environment.
RECENT EVENTS
InfoCure is currently reorganizing its business to facilitate changes in
its pricing of practice management software products, its delivery of these
products to customers and the scope of its product offerings. During the fourth
quarter of 1999, InfoCure acquired five companies that provide dental practice
management solutions, increasing InfoCure's number of dental customers by
approximately 9,100 practices. These acquisitions, along with InfoCure's
determination that there is a natural segregation of InfoCure's business into
medical and dental specialties, have caused InfoCure to divide its business into
a medical division and a dental division. The medical division consists of
InfoCure's business for general medical practices and medical specialty
practices in the areas of anesthesiology, dermatology and plastic surgery,
emergency medicine, oncology, ophthalmology, pathology, pediatrics, podiatry and
radiology. The dental division consists of the portion of InfoCure's business
that serves dental, orthodontics and oral and maxillofacial surgery practices.
As part of the reorganization, InfoCure intends to transfer the assets of
its medical division to VitalWorks, Inc., a newly-formed subsidiary of InfoCure.
VitalWorks intends to develop new practice management software applications that
can be delivered through the application services provider, or "ASP," delivery
model. In the ASP delivery model, VitalWorks would remotely host applications
from an offsite central server which physicians would access over dedicated
lines, virtual private networks or the Internet. VitalWorks also intends to
offer its new practice management applications through installations directly in
physicians' offices as "practice-hosted" systems. VitalWorks intends to
primarily target physicians that practice in groups of 25 or less.
VitalWorks also intends to offer Internet solutions that will allow its
customers to utilize the Internet to enhance office workflow and conduct
business-to-business e-commerce. VitalWorks is continuing to develop its
Internet solutions and to establish strategic relationships to facilitate these
product offerings. Upon successful completion of these efforts, VitalWorks plans
to offer customers the following Internet solutions:
- Enhanced EDI Services. InfoCure currently offers EDI services that
enable customers to electronically submit claims to payors, receive
payments, check patient eligibility and process patient statements.
VitalWorks intends to enter into a strategic relationship to enable EDI
transactions to be processed over the Internet and to expand the number
of EDI services offered to customers.
- E-Commerce Services. VitalWorks plans to enable online purchasing of a
comprehensive selection of medical and office supplies, medical journals
and books, and other practice needs.
- The Physician Portal. VitalWorks plans to offer a web-based product that
provides physicians with access to patient and clinical data stored in
their practice management applications and access to other Internet
solutions from any personal computer with Internet access.
- Office Desktop. VitalWorks plans to offer an office desktop, or user
interface, that utilizes a web-framework to provide a central access
point for office staff to access VitalWorks' practice management
applications and Internet solutions.
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- Customized Physician Websites. VitalWorks plans to develop interactive
websites for physicians that will enable patients to register, schedule
appointments, pay bills and view medical records online.
As part of the reorganization, InfoCure intends to transfer the assets of
its dental division to PracticeWorks, Inc., which will be a new subsidiary of
InfoCure. InfoCure intends for PracticeWorks to focus on development of Internet
solutions and ASP-delivered practice management applications that are tailored
to the needs of the dental division's customers. In particular, due to
InfoCure's current penetration of the dental market and existing channels of
distribution, InfoCure expects PracticeWorks to generate a significant amount of
business-to-business e-commerce in the dental market. InfoCure expects
PracticeWorks to begin offering its new solutions by the end of 2000.
InfoCure intends for VitalWorks and PracticeWorks to seek new customers and
to offer existing users of InfoCure's classic and core products an opportunity
to upgrade to their new ASP-delivered products.
In connection with InfoCure's strategy to develop ASP-delivered products,
InfoCure plans to convert to subscription-based pricing for substantially all of
its products and services. Under this subscription pricing model, customers will
pay a fixed, monthly fee for use of InfoCure's practice management applications
and Internet solutions and the computer hardware necessary to utilize those
applications and solutions. This represents a change in InfoCure's historical
pricing model in which customers were charged an initial licensing fee for use
of practice management products and continuing maintenance, support and EDI
transaction fees. InfoCure intends to begin offering substantially all of its
products and services on the subscription pricing model in the second quarter of
2000. InfoCure will initially continue to derive substantially all of its
revenue from hardware and software maintenance and support fees and EDI
transaction fees that will be paid by its existing customers. As a result of the
transition to subscription pricing model, InfoCure expects to see a decline in
one-time revenue from software license fees and hardware sales, replaced over
time by monthly subscription fees. In addition, InfoCure expects revenue from
maintenance, support and EDI transaction fees from existing customers to decline
and be replaced by subscription fees as existing customers convert to the
subscription pricing model. InfoCure expects the percentage of revenue that is
recurring in nature to increase substantially as a result of the change to a
subscription pricing model.
This reorganization of InfoCure, the change in InfoCure's product strategy
to develop and offer ASP-delivered products and Internet solutions and the
transition to a subscription pricing model involves certain risks and
assumptions. There can be no assurance that InfoCure will successfully implement
these changes in its organization, product strategy or pricing model or that the
changes will not have a material adverse effect on InfoCure's business,
financial condition or results of operations. See "Disclosure Regarding Forward-
Looking Information" beginning on page 9.
Note 14 to InfoCure's Consolidated Financial Statements sets forth certain
financial information regarding InfoCure's medical and dental divisions.
In February 2000, InfoCure entered into an agreement with Healtheon/WebMD
whereby Healtheon/ WebMD would acquire up to $100.0 million of convertible
redeemable preferred stock of VitalWorks. In consideration of the investment,
the agreement provides for development and distribution agreements between the
parties to create an industry-standard physician practice management system to
be delivered through an ASP delivery model. Similarly, the parties entered into
a marketing agreement which, with respect to services conducted by VitalWorks,
provides for utilization, delivery and promotion of Healtheon/WebMD's clinical,
financial transaction and EDI services. InfoCure received $10.0 million in
exchange for shares of Series A preferred stock of VitalWorks, which will
automatically be converted into 1% of the outstanding common stock of VitalWorks
(on a diluted basis) upon completion of an initial public offering of
VitalWorks. The agreement contemplates the investment of an additional $90
million upon completion of an initial public offering of VitalWorks, subject to
regulatory approval and approval of both companies' board of directors. The
companies are currently negotiating definitive documentation and discussing the
terms of their relationship, including the amount and form of the contemplated
further investment by Healtheon/WebMD in VitalWorks.
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FORMATION AND ACQUISITIONS
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 its initial public offering and the
acquisitions of four companies. During the remainder of 1997 and 1998, InfoCure
completed acquisitions of nine additional companies.
During 1999, InfoCure acquired the following businesses:
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COMPANY CLOSING DATE BUSINESS
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Macon Systems February 12, 1999 Practice Management Software for
Management, LLC, the parent of Dermatologists
Medical Software Management,
Inc.
OMSystems, Inc. February 18, 1999 Practice Management Software for
Orthodontics
Strategicare, Inc. and its June 1, 1999 Practice Management Software for
wholly-owned subsidiary DISC General Medical Practices
Computer Systems, Inc.
Ardsley, M.I.S., Inc. d/b/a August 17, 1999 Practice Management Software for
Glentec Business Computers, Orthodontists
Inc.
Medfax Corporation August 30, 1999 Practice Management Software for
Radiologists and other Medical
Practices
Scientific Data Management, Inc. August 31, 1999 Practice Management Software for
General Medical Practices
Datamedic Holding Corp. November 9, 1999 Practice Management Software and
Clinical Systems for
Ophthalmologists, Oncologists
and Other Physicians
The dental business of National December 15, 1999 Practice Management Software for
Data Corporation ("NDC") Dentists
The dental practice management December 20, 1999 Practice Management Software for
software business of Zila, Dentists
Inc., known as PracticeWorks
Kevin Kozlowski, Inc. d/b/a December 20, 1999 Practice Management Software for
Human Touch Software Dentists
Unident Corporation December 21, 1999 Practice Management Software for
Dentists
InfoLogic, Inc. December 21, 1999 Practice Management Software for
Dentists
VitalWorks, Inc. December 21, 1999 ASP-Delivered Practice
Management Applications for
General Medical Practices
Prism Data Systems, Inc. December 29, 1999 Practice Management Software for
Ophthalmologists
CDL Healthcare Systems, Inc. December 30, 1999 Practice Management Software for
General Medical Practices
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InfoCure also acquired substantially all of the assets of VitalWorks, Inc.
("Acquired VitalWorks"), including rights to the "VitalWorks" trademark, in
December 1999. Acquired VitalWorks developed ASP-
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delivered practice management software applications which it began offering to
customers during the third quarter of 1999. The Acquired VitalWorks practice
management software applications were developed to deliver practice management
applications through a browser-based interface over the Internet. InfoCure is
utilizing the Acquired VitalWorks practice management software applications in
the development of its own ASP-delivered practice management software
applications. The acquisition of Acquired VitalWorks added three physician
practice sites.
In addition, in 1999 InfoCure acquired technology assets in connection with
the acquisition of PhyNet EDI Solutions, L.L.C. and Crunchy Frog Software, Inc.
INDUSTRY OVERVIEW
Healthcare costs in the United States have risen dramatically over the past
two decades and, according to the Healthcare Financing Administration, amounted
to approximately $1.2 trillion in 2000 and are expected to grow to $2.2 trillion
in 2008. Federal and state governments, insurance carriers and other third-party
payors have moved aggressively to control these rising costs. As a result,
physicians are under increasing pressure to reduce costs and operate their
practices more efficiently. One of the ways in which third-party payors 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 be $21.0 billion during 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
patient charting and treatment planning.
The continued evolution of information and telecommunication technologies
has led to the development of electronic tools that can be integrated 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. According to Faulkner & Gray, a leading market
research firm focused on the electronic commerce and EDI markets, only 62% of
the 4.4 billion claims submitted in 1998 were processed electronically. Of
these, only 1% were effected through the Internet. Paper claims require more
time and are significantly more expensive to prepare, file and process than
electronically-submitted claims. According to American Health Consultants, a
publisher of health care newsletters, 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.
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PRODUCTS AND SERVICES
Product Features. 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. 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 -- complete documentation of patient
visits, patient medical history and treatment planning.
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.
Specialty Markets. As of March 30, 2000, InfoCure had an installed base of
approximately 23,000 customer sites and had systems installed in all 50 states.
Approximately 35% of InfoCure's customer sites (representing 74% of InfoCure's
providers) are medical and approximately 65% of InfoCure's customer sites
(representing 26% of InfoCure's providers) are dental. InfoCure markets its
products to the following targeted specialties:
- Dental
- Dermatology and Plastic Surgery
- Hospital Based (Anesthesiology, Emergency Medicine, Pathology and
Radiology)
- General Medical (including pediatrics)
- Ophthalmology
- Oral and Maxillofacial Surgery
- Orthodontics
- Podiatry
In 1999, InfoCure derived approximately 75% of its revenue from medical
customers and approximately 25% from dental customers.
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 offered
to InfoCure's targeted practice areas. Classic products, while continuing to
offer adequate functionality, typically lack advanced practice management
features and are not designed for the latest generation of operating systems. In
the second quarter of 2000, InfoCure expects its medical division to actively
market six core products and support 31 classic products and its dental division
to actively market five core products and support 25 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 primarily markets its core 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 no longer supported
by their respective vendors. InfoCure is actively promoting the
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migration of customers utilizing these products to newer products and intends to
retire these products at the earliest possible opportunity.
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), operating system software (such as Windows 95, Windows 98
and Windows NT) and networking software (such as Windows Terminal Server).
InfoCure has adopted 32-bit client/server technology for substantially all of
its PC-based core products, maximizing their scalability in local and wide area
network environments.
As part of InfoCure's reorganization, it intends to develop new products
that can be delivered through the ASP delivery model. InfoCure intends for
VitalWorks to develop ASP-delivered products for medical practices and for
PracticeWorks to develop ASP-delivered products for the dental division.
InfoCure intends for VitalWorks and PracticeWorks to develop these ASP-delivered
products to include features that are equal to or improve upon the practice-area
specific features included in InfoCure's classic and core products. VitalWorks
and PracticeWorks plan to begin offering these ASP-delivered products by
practice area as they are completed.
Decision Support Tools. InfoMine is a decision support tool designed to
supplement the analytical features of InfoCure's practice management software
products. InfoMine enables a physician 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 offers
physicians a computerized solution for rapidly analyzing the performance of
their practices. InfoMine is currently available to analyze data for most of
InfoCure's target specialties and practice groups and we expect it to be
available for the remaining specialties later in 2000.
Wireless Access Software. InfoCure's InfoUnplugged software allows
physicians to utilize InfoCure's core products from a handheld computing device.
This package provides a physician with wireless access to InfoCure's practice
management system while seeing patients and performing other tasks within the
physician's office. Information input using InfoUnplugged automatically updates
information stored in the practice management system.
Remote Access Software. InfoCure's Info-To-Go software allows data stored
in InfoCure's practice management software products to be downloaded to any
handheld computing device that operates Palm OS software for access when the
physician is away from his or her office. For example, a physician using
Info-To-Go will have access to his or her schedule, referral information and
on-call information. Info-To-Go is currently available for use with InfoCure's
core products.
Electronic Data Interchange 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 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.
- Patient Insurance Verification -- electronically access insurance and
managed care plans to determine a patient's eligibility and benefits.
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InfoCure generates revenues by facilitating EDI transactions, currently
processing more than seven million EDI transactions each month.
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 15 locations throughout the United
States. InfoCure sponsors continuing education programs, periodic newsletters
and user group conferences, providing its customers 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 actively
manages approximately 50% 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 2000. 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 29, 2000, the customer support and services group consisted of 839
employees, representing approximately 57.3% of InfoCure's total employee base.
ACQUISITION INTEGRATION
InfoCure has developed 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 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.
RESEARCH AND DEVELOPMENT
InfoCure's research and development organization is comprised of 248 full
time employees as of February 29, 2000. InfoCure's research and development
efforts historically have principally involved the incorporation of the best
technologies from each acquired product into InfoCure's core practice management
systems. InfoCure's research and development staff facilitate the integration of
acquired products by conducting a technical review of acquired companies'
software products to determine the best available
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functions and features within such products. Based upon this evaluation,
InfoCure either incorporates the features of the acquired product into one or
more of InfoCure's core products, or continues to market and support the
acquired product without revision. InfoCure's research and development staff is
currently focused on developing ASP-delivered practice management software
products and Internet solutions. The development of the ASP-delivered products
involves preparing the products to be delivered through the ASP delivery method
and incorporating practice-area specific features into those products.
SALES AND MARKETING
InfoCure markets its products through a direct sales force, comprised of
148 marketing and sales personnel as of February 29, 2000. 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, and its EDI services. In addition, InfoCure
targets new customers principally through direct mail campaigns, telemarketing,
seminars, trade shows and advertisements in various publications. InfoCure has
an executive sales group which addresses the complex needs of larger potential
customers. In addition, senior personnel and members of management assist in
sales and marketing initiatives to larger and more technically-advanced
potential customers.
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 software license and support terms customary in the industry. In limited
circumstances, InfoCure has distributed its less expensive products under a form
license agreement printed on or inside the software package. In most instances
InfoCure has provided its software products in a form that does not permit the
software code to be altered by the user, although in a limited number of unique
situations it has licensed products in a form that would allow such alterations.
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.
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GOVERNMENT REGULATION
The Health Insurance Portability and Accountability Act of 1996, known as
HIPAA, was enacted on August 21, 1996 and required the Secretary of Health and
Human Services to adopt national standards for the transmission of certain types
of patient medical information and the data elements used in such transmissions,
and to adopt standards to ensure the integrity and confidentiality of such
information.
On November 3, 1999, the Secretary of Health and Human Services promulgated
proposed regulations designed to protect the privacy of electronically
transmitted or maintained, individually identifiable health information. We do
not know if these regulations will be adopted in their present form, a different
form, or at all. We believe our practice management applications will enable
compliance with the proposed regulations, but cannot assure you that we will be
able to comply with those proposed regulations in a timely manner or at all. If
these regulations are adopted, authorization may be required before identifiable
patient information could be electronically transmitted to third parties for any
purpose other than treatment, payment or health care operations which include
such activities as quality assessment, verification of a healthcare providers
credentials, insurance rating, peer review, fraud and abuse compliance review
and document production for use in civil or criminal legal proceedings. These
regulations also would require that we enter into agreements with certain of our
customers governing the dissemination of such information and would require that
holders or users of such information implement specified security measures. We
continue to monitor HIPAA activity and are prepared to incorporate any changes
to our practice management applications or our operations that are necessary to
ensure compliance.
The confidentiality of patient records and the circumstances under which
records may be released for inclusion in our databases are subject to
substantial regulation by state governments. These state laws and regulations
govern both the disclosure and the use of confidential patient medical record
information. Although compliance with these laws and regulations is at present
principally the responsibility of the hospital, physician or other healthcare
provider, regulations governing patient confidentiality rights are evolving
rapidly. Additional legislation governing the dissemination of medical record
information has been proposed at both the state and federal level. This
legislation may require holders of this information to implement security
measures. We continue to monitor regulation of patient records by state
governments and are prepared to incorporate any changes to our practice
management applications or our operations that are necessary to ensure
compliance.
The United States Food and Drug Administration is responsible for assuring
the safety and effectiveness of medical devices under the Federal Food, Drug and
Cosmetic Act. Computer applications and software are considered medical devices
and subject to regulation by the FDA when they are indicated, labeled or
intended to be used in the diagnosis of disease or other conditions, or in the
cure, mitigation, treatment or prevention of disease, or are intended to affect
the structure or function of the body. We do not believe that any of our current
applications or services are subject to FDA regulation as medical devices;
however, we could expand our application and service offerings into areas that
may subject it to FDA regulation. We have no experience in complying with FDA
regulations. Our compliance with these FDA regulations could prove to be time
consuming, burdensome and expensive, which could have a material adverse effect
on our ability to introduce new applications or services in a timely manner.
EMPLOYEES
As of February 29, 2000, InfoCure employed 1,465 persons, including 148 in
marketing and sales, 839 in customer support and services, 248 in research and
development and 230 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 satisfactory.
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information
relating to InfoCure that are based on the beliefs of management as well as
assumptions made by and information currently available to management. When used
in this report, the words "anticipate", "believe", "estimate", "expect",
"intend",
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<PAGE> 12
"plan", or any similar expressions, as they relate to InfoCure or its
management, or the management of any of our businesses, are intended to identify
forward-looking statements. Such statements reflect the current view of InfoCure
with respect to future events and are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected, intended or planned. InfoCure does not intend to update these
forward-looking statements.
The following are some of the factors that could cause InfoCure's actual
results to differ materially from the expected results described in InfoCure's
forward-looking statements:
Our subscription pricing model is unproven and our success depends on
acceptance of this model and our ability to set our subscription fees at
appropriate levels.
Potential customers may not accept our subscription pricing model. The
success of our subscription pricing model depends on our ability to set
subscription fees at rates that will allow us to achieve profitability. The
markets for practice management applications delivered through subscription
pricing are relatively new and evolving. There are relatively few similar
products whose subscription fees we can evaluate in setting our fees and
the providers of those products have also had to set their fees in the
context of an undeveloped market. As a result, we have limited information
from which to evaluate the appropriate level for our subscription fees and
we may fail to set our subscription fees at levels that enable us to become
profitable. In addition, we will enter into multi-year agreements with
subscribers pursuant to which subscription fees or increases in fees will
be locked-in typically for five years, limiting our ability to increase our
subscription fees for those subscribers. If we fail to appropriately price
our subscription fees, achieving profitability could take longer than
expected or we may never achieve profitability.
Our ASP product strategy is unproven and customers may not respond
favorably to our new products.
Providing software applications to physicians through the ASP delivery
model is a business that has only recently begun to develop, and this
concept may not achieve acceptance in the market. In order to successfully
sell our ASP-delivered products, we will need to convince new and existing
customers that the features of these products justify their cost, as well
as the time and administrative expense required to convert to these
products. If we are unsuccessful or if the market for our ASP-delivered
products does not grow or grows slowly, achieving profitability could take
longer than expected or we may never achieve profitability. Achieving
market acceptance for these products will require substantial sales and
marketing efforts and expenditure of significant funds to increase
awareness and demand by our target customers. In addition, our potential
customers may have made extensive investment in hardware, software and
training for existing systems. As a result, they may be unwilling to adopt
new systems. Further, our potential customers could perceive that our
ASP-delivered products will not adequately or cost-effectively address
their requirements.
The failure to successfully complete the development of our Internet
solutions and enter into strategic relationships could harm our business
and limit our potential growth.
Our ability to attract new customers may be dependent upon our ability
to complete the development of our Internet solutions. In addition, our
ability to offer some Internet solutions is contingent upon our entering
into strategic relationships. If we are unsuccessful in completing the
development of our Internet solutions or fail to enter into strategic
relationships, the offering of these products may be delayed or these
products may never become available.
Our ASP product strategy is dependent upon the continued development of the
Internet.
Our ability to offer ASP-delivered products that can be accessed over
the Internet and our Internet solutions on a widespread basis depends on
our potential customers having access to Internet connections with the
necessary speed, bandwidth and data capacity. The availability of this
Internet access will depend on others for the ongoing development of the
Internet infrastructure, including the necessary
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<PAGE> 13
speed, bandwidth, data capacity and security, as well as timely development
of complementary products for providing reliable Internet access and
service. We cannot predict whether the Internet will evolve to the point
where our customers will be able to take full advantage of the services we
offer. If the Internet fails to develop into an efficient medium for these
transactions, our ASP product strategy will be unsuccessful.
Our systems may be vulnerable to security breaches and viruses.
The success of our strategy to offer ASP-delivered products and
Internet solutions depends on the confidence of our customers in our
ability to securely transmit confidential information. Any failure to
provide secure electronic communication services could harm our business
and reputation. Our ASP-delivered products and Internet solutions will rely
on encryption, authentication and other security technology licensed from
third parties to achieve secure transmission of confidential information.
We may not be able to stop unauthorized attempts to gain access to or
disrupt the transmission of communications by our customers. Anyone who is
able to circumvent our security measures could misappropriate confidential
user information or interrupt our, or our customers', operations. In
addition, our ASP-delivered products may be vulnerable to viruses, physical
or electronic break-ins, and similar disruptions.
We plan to expand rapidly and it may be difficult to manage our growth.
We intend to rapidly grow our business. However, we cannot be sure
that we will successfully manage our growth. In order to successfully
manage our growth, we must:
- expand and enhance our administrative infrastructure
- improve our management, financial and information systems and controls
- expand, train and manage our employees effectively
Continued growth could place a further strain on our management,
operations and financial resources. There will also be additional demands
on our sales, marketing and administrative resources as we increase our
product offerings and expand our target markets and customers. We cannot
assure you that our operating and financial control systems, administrative
infrastructure, facilities and personnel will be adequate to support our
future operations or to effectively adapt to future growth. If we cannot
manage our growth effectively, our business may be harmed.
Our growth could be limited if we are unable to attract and retain
qualified personnel.
We believe our success depends largely on our ability to attract and
retain highly skilled technical, managerial and marketing personnel to
develop our products and services. Individuals with the information
technology skills we need to further develop our products and services are
in short supply and competition for qualified personnel is particularly
intense. We may not be able to hire the necessary personnel to implement
our business strategy, or we may need to pay higher compensation for
employees than we currently expect. There can be no assurance we will
succeed in attracting and retaining the personnel we need to continue to
grow and to implement our business strategy. In addition, we depend on the
performance of our executive officers and other key employees. The loss of
any member of our senior management team could negatively impact our
ability to execute our new product strategy and subscription pricing model.
If we are unable to protect our intellectual property rights from third
party challenges, it may significantly impair our competitive position.
We rely on a combination of copyright, trademark and trade secret laws
and restrictions on disclosure to protect the intellectual property rights
related to our software applications. Our software technology is not
patented and existing copyright laws offer only limited practical
protection. In addition, we have not generally entered into confidentiality
agreements with our employees. We cannot guarantee that the legal
protections that we rely on will be adequate to prevent misappropriation of
our technology.
11
<PAGE> 14
Further, these protections do not prevent independent third-party
development of competitive products or services. Unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology.
Monitoring use of our products is difficult, and we cannot assure you that
the steps we have taken will prevent unauthorized use of our technology,
particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States.
Intellectual property infringement claims against us could be costly to
defend and could divert management's attention away from our business.
As the number of software products in our target markets increases and
as the functionality of these products overlaps, we may become increasingly
subject to the threat of infringement claims. We cannot guarantee that
third parties will not assert infringement claims against us in the future.
Any infringement claims alleged against us, even if without merit, can be
time-consuming and expensive to defend. Any infringement claims may divert
management's attention and resources and could also cause delays in the
delivery of our applications to our customers. Settlement of any
infringement claims could require us to enter into costly royalty or
licensing agreements. If a claim of product infringement against us was
successful and we were unable to license the infringing or similar
technology, our business, financial condition and results of operations
could be harmed.
We may undertake acquisitions which can pose risks to our business.
We may undertake acquisitions if we identify companies with
complementary applications, services, businesses or technologies. We may be
unable to retain the acquired companies' personnel or integrate them into
our company. Our profitability may suffer because of acquisition-related
costs or amortization of acquired goodwill and other intangible assets.
Similarly, the time and expense associated with finding suitable and
compatible companies to enhance our product offering could disrupt our
ongoing business and divert our management's focus.
We may face difficulties integrating acquired businesses.
Our successful integration of the businesses we have acquired is
critical to our future success. Integrating the management and operations
of acquired businesses is time consuming, and we cannot guarantee that we
will achieve any of the anticipated synergies and other benefits expected
to be realized from these acquisitions.
Technology solutions may change faster than we are able to update our
technology.
The healthcare software application market in which we compete is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and the frequent introduction of new services,
software and other products. Our success depends partly on our ability to:
- develop new or enhance existing applications, software and services to
meet our customers' changing needs in a timely and cost-effective way;
- respond effectively to technological changes and new product offerings of
our competitors; and
- develop relationships with strategic partners necessary to offer our
Internet solutions and ASP-delivered products;
We cannot assure you that we will be able to accomplish any or all of
these goals. Many of our competitors may develop products or technologies
that are better or more attractive than ours or that may render our
technology or applications obsolete. If we do not succeed in adapting our
technology, our business could be harmed.
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<PAGE> 15
We are subject to government regulation and legal uncertainties.
Legislation currently being considered at the federal level could
impact the manner in which we conduct our business. HIPAA mandates the
adoption of national standards for the transmission of certain types of
medical information and the data elements used in such transmissions and to
insure the integrity and confidentiality of such information. On November
3, 1999, the Secretary of Health and Human Services promulgated regulations
to protect the privacy of electronically transmitted or maintained,
individually identifiable health information. We believe our products will
enable compliance with the proposed regulations but cannot assure you that
we will be able to comply with those proposed regulations in a timely
manner or at all. Moreover, until the proposed regulations become final,
they could change, which could require us to expend additional resources to
comply with the revised standards and we may not be able to comply with the
revised standards in a timely manner or at all. If any of our products or
services are subject to those regulations, we may be required to incur
additional expenses in order to comply with these requirements, and we may
not be able to comply with them in a timely manner or at all. In addition,
the success of our compliance efforts may also be dependent on the success
of healthcare participants in dealing with the standards. If we are unable
to comply with regulations implementing HIPAA in a timely manner or at all,
the sale of our products and our business could be harmed.
The United States Food and Drug Administration is responsible for
assuring the safety and effectiveness of medical devices under the Federal
Food, Drug and Cosmetic Act. Computer applications and software are
considered medical devices and are subject to regulation by the FDA when
they are indicated, labeled or intended to be used in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment or
prevention of disease, or are intended to affect the structure or function
of the body. We do not believe any of our current products or services are
subject to FDA regulation as medical devices; however, we plan to expand
our product and service offerings into areas that may be subject to FDA
regulation. We have no experience in complying with FDA regulations. Our
compliance with such FDA regulations could prove to be time consuming,
burdensome and expensive, which could adversely affect our ability to
introduce new applications or services in a timely manner.
In addition, we may become subject to additional government
regulations in connection with our changing product strategy. Laws and
regulations directly applicable to communications or commerce over the
Internet are becoming more prevalent. Laws and regulations may be adopted
with respect to the Internet or other online services covering issues such
as user privacy, pricing, content, copyrights, distribution and
characteristics, and quality of products and services. Because of the
increasing use of the Internet as a communication and commercial medium,
the government has adopted and may adopt additional laws and regulations
with respect to the Internet covering such areas as user privacy, pricing,
content, taxation, copyright protection, distribution and characteristics
and quality of production and services.
Changes in state and federal laws relating to confidentiality of patient
medical records could limit our customers' ability to use our services.
We cannot assure you that changes to state or federal laws will not
materially restrict the ability of healthcare providers to submit
information from patient records using our applications. Such restrictions
would decrease the value of our applications to our customers, which could
materially harm our business. The confidentiality of patient records and
the circumstances under which records may be released for inclusion in our
databases are subject to substantial regulation by state governments. These
state laws and regulations govern both the disclosure and the use of
confidential patient medical record information. Although compliance with
these laws and regulations is at present principally the responsibility of
the healthcare provider, regulations governing patient confidentiality
rights are evolving rapidly. Additional legislation governing the
dissemination of medical record information has been proposed at both the
state and federal level. This legislation may require holders of this
information to implement security measures. Such legislation might require
us to make substantial expenditures to implement such measures.
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<PAGE> 16
Changes in the regulatory and economic environment in the healthcare
industry could adversely affect our business.
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. These factors affect the
purchasing practices and operation of healthcare organizations. Changes in
current healthcare financing and reimbursement systems could require us to
make unplanned enhancements of applications or services, or result in
delays or cancellations of orders or in the revocation of endorsement of
our services by our strategic partners and others. Federal and state
legislatures have periodically considered programs to reform or amend the
U.S. healthcare system at both the federal and state level. These programs
may contain proposals to increase governmental involvement in healthcare,
lower reimbursement rates or otherwise change the environment in which
healthcare industry participants operate. Healthcare industry participants
may respond by reducing their investments or postponing investment
decisions, including investments in our applications and services.
Our quarterly operating results may vary and in the past we have
experienced losses.
Our operating results may vary significantly from quarter to quarter.
In addition, We have experienced historical losses. Our operating results
will be influenced by such factors as:
- our success in appropriately pricing and transitioning to the
subscription pricing model;
- the rate at which our existing customers convert and new customers
subscribe to our subscription pricing model;
- our release of our ASP-delivered product and Internet solutions and the
rate of adoption of these products and services by new and existing
customers;
- the timing of and charges associated with completed acquisitions or other
events;
- changes in customer purchasing patterns;
- competition;
- the timing of and cost related to development our new products;
- the length of sales cycles; and
- the levels of advertising and promotional expenditures.
Competition could reduce revenue from our products and services.
Our 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. We believe that the larger, national
vendors may broaden their markets to include both small and large
healthcare providers. The healthcare information technology industry is
consolidating, which has resulted in large, well-capitalized companies that
have not historically been providers of practice management systems
entering into the practice management systems market. In addition, we
compete with national and regional providers of computerized billing,
insurance processing and record management services to healthcare
practices. As the market for our 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;
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<PAGE> 17
- 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, our results of
operations may suffer and we may be required to lower the prices of our
products and services.
Our new product strategy and subscription pricing model will require
additional financing which may not be available.
Our transition to the subscription pricing model will initially
adversely impact our cash flow until subscription fees replace the decline
in one-time revenue from license fees and hardware sales. In addition, we
expect to incur increased marketing and sales expense in connection with
the rollout of our ASP-delivered products and Internet solutions. Adequate
financing for these needs may not be available to us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
ITEM 2. PROPERTIES
InfoCure currently leases 42 facilities and owns three facilities, having
an aggregate of approximately 416,000 square feet. These facilities are located
in: Atlanta and Macon, Georgia; Beaverton, Oregon; Birmingham, Alabama;
Bloomington, Lake Elmo and Rochester, Minnesota; Charlotte, North Carolina;
Cincinnati, Ohio; Daytona Beach and Miami, Florida; Los Angeles and San Diego,
California; Pittsburgh, Pennsylvania; Ridgefield, Connecticut; and Saginaw,
Michigan. Three of these facilities are subject to consolidation efforts as a
result of InfoCure's restructuring plan. (See Note 5 of the Consolidated
Financial Statements.)
InfoCure purchased 1765 The Exchange Building on August 11, 1999 and 1760
The Exchange Building in January 2000. Both buildings are located in Atlanta,
Georgia and 1765 The Exchange Building serves as InfoCure's principal executive
offices. Another building, in Macon, Georgia, was acquired through a 1999
acquisition. As discussed in Note 9 to the Consolidated Financial Statements,
substantially all of InfoCure's assets are collateralized under its credit
facility with FINOVA Capital Corporation.
ITEM 3. LEGAL PROCEEDINGS
From time to time, InfoCure is involved in various legal proceedings
relating to claims arising in the ordinary course of its business. InfoCure is
not currently a party to any legal proceeding for which an adverse outcome would
be reasonably expected to have a material adverse effect on its business,
results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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<PAGE> 18
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) to the Annual Report on Form 10-K, the
following information regarding executive officers of InfoCure is included in
Part I of this Report. The executive officers of InfoCure as of March 30, 2000
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frederick L. Fine..................... 41 Chief Executive Officer, President and
Director
James K. Price........................ 42 Executive Vice President, Secretary
and Director
Richard E. Perlman.................... 53 Chairman, Treasurer and Director
James A. Cochran...................... 52 Senior Vice President -- Finance;
Chief Financial Officer
</TABLE>
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 American Medcare from 1995
to 1997 and as president of International Computer Solutions, a subsidiary of
American Medcare, from 1994 to 1997. From 1993 to 1995, Mr. Fine served as
executive vice president of American Medcare, and from 1985 to 1994 served as
executive vice president of International Computer Solutions, which he
co-founded in 1985. From 1991 to 1993, Mr. Fine served as vice president of
Newport Capital, Inc., predecessor to American Medcare. 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.
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 American
Medcare from 1996 until 1997 and was vice president from 1993 to 1995. Mr. Price
co-founded International Computer Solutions 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 Capital. 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.
Richard E. Perlman has served as InfoCure's Chairman and Treasurer since
December 1997 and as a director of InfoCure 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., a merchant banking and
financial advisory firm specializing in corporate restructuring and middle
market companies, and has served as its president since its inception in May
1995. From 1991 to 1995, Mr. Perlman was executive vice president of Matthew
Stuart & Co., Inc., an investment banking firm.
James A. Cochran has served as InfoCure's Chief Financial Officer since
August 1999. From 1992 until joining InfoCure, Mr. Cochran was a member of the
accounting firm of BDO Seidman, LLP, serving as a partner since 1995. Mr.
Cochran is a Certified Public Accountant.
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<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On January 29, 1999, InfoCure's common stock commenced trading on the
Nasdaq National 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 sales price per
share of the common stock for the periods indicated, as reported on the American
Stock Exchange or the Nasdaq National Market, as the case may be.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 HIGH LOW
- ---------------------------- -------- -------
<S> <C> <C> <C> <C>
First Quarter............................................... $ 8 25/32 $ 3 15/16
Second Quarter.............................................. 8 5/16 5 1/4
Third Quarter............................................... 8 3/4 6 3/8
Fourth Quarter.............................................. 16 7/16 5 11/16
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 HIGH LOW
- ---------------------------- -------- -------
<S> <C> <C> <C> <C>
First Quarter............................................... $18 1/8 $10 1/2
Second Quarter.............................................. 26 5/8 11 5/8
Third Quarter............................................... 29 3/8 16 5/8
Fourth Quarter.............................................. 33 1/2 12 13/16
</TABLE>
On March 28, 2000, the last reported sales price for the common stock was
$18 13/16 per share. As of March 28, 2000 there were approximately 420
stockholders of record of the common stock.
InfoCure has neither declared nor paid any cash dividends on its common
stock and does not anticipate paying any cash dividends in the foreseeable
future. InfoCure's commercial loan agreements generally prohibit InfoCure from
declaring or paying any dividends or making other distributions with respect to
its capital stock.
In June 1999, InfoCure granted 440,000 non-qualified stock options to
Frederick L. Fine, 440,000 non-qualified stock options to Richard E. Perlman and
440,000 non-qualified stock options to James K. Price. These grants were exempt
from registration under the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof and Regulation D promulgated thereunder.
In December 1999, InfoCure issued:
- 255,247 shares of common stock to the former shareholder of Kevin
Kozlowski, Inc. d/b/a/ Human Touch Software in connection with InfoCure's
merger with Human Touch;
- 357,796 shares of common stock to the former shareholders of Unident
Corporation in connection with InfoCure's merger with Unident;
- 102,096 shares of common stock to the former shareholders of InfoLogic,
Inc. in connection with InfoCure's merger with InfoLogic;
- 228,544 shares of common stock to the former shareholders of Prism Data
Systems, Inc. in connection with InfoCure's merger with Prism;
- 104,329 shares of common stock to the former shareholders of CDL
Healthcare Systems, Inc. in connection with InfoCure's merger with CDL;
- 107,701 shares of common stock to the former shareholders of Crunchy Frog
Software, Inc.; and
- 300,000 shares of common stock to the former shareholders of VitalWorks,
Inc.
These issuances were exempt from registration under the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof and Regulation D promulgated
thereunder.
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<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
The selected financial data of InfoCure set forth below is qualified in its
entirety by, and should be read in conjunction with, the Consolidated Financial
Statements of InfoCure, including the Notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this annual report. The consolidated statements of
operations data for the years ended January 31, 1997 and 1996 and the
consolidated balance sheet data as of December 31, 1997, January 31, 1997 and
1996 are derived from the audited financial statements of InfoCure's
predecessor, American Medcare Corporation, which are not included in this annual
report. The consolidated statements of operations data for the years ended
December 31, 1999 and 1998 and the eleven months ended December 31, 1997, and
the consolidated balance sheet data as of December 31, 1999 and 1998 are derived
from, and are qualified by reference to, the consolidated financial statements
included elsewhere in this annual report. The financial statements for all
periods presented give retroactive effect to pooling of interests treatment for
11 acquisitions completed during 1999, one acquisition during 1998 and a 2-for-1
stock split in August 1999.
The EBITDA data presented below represents earnings before interest,
provision (benefit) for income taxes, depreciation and amortization, purchased
research and development, compensatory stock awards and restructuring and merger
costs. EBITDA is not a measurement in accordance with generally accepted
accounting principles and should not be considered an alternative to, or more
meaningful than, income from operations, net income or cash flows as defined by
GAAP or as a measure of InfoCure's profitability or liquidity. All companies do
not calculate EBITDA in the same manner. Accordingly, InfoCure's EBITDA data may
not be comparable with that of other companies. InfoCure has included
information concerning EBITDA because management believes EBITDA provides a
useful measure of InfoCure's performance.
<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED
------------------- JANUARY 31,
------------------------------
-------------------
CONSOLIDATED STATEMENT OF OPERATIONS DATA: 1999 1998(1) 1997 1997 1996
- ------------------------------------------ -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Systems and software...................... $ 96,241 $ 67,608 $ 37,002 $ 21,087 $ 24,239
Maintenance, support and services......... 107,393 62,237 38,227 32,557 29,517
-------- -------- -------- -------- --------
Total revenue..................... 203,634 129,845 75,229 53,644 53,756
-------- -------- -------- -------- --------
Operating expense:
Hardware and other items purchased for
resale................................. 49,613 28,981 19,255 14,408 12,931
Selling, general and administrative
(excluding compensatory stock
awards)................................ 104,770 63,647 49,864 36,693 34,928
Research and development.................. 15,655 17,398 13,919 7,516 7,154
Depreciation and amortization............. 14,490 6,382 4,401 2,603 3,030
Compensatory stock awards................. 1,431 6,447 78 -- --
Purchased research and development........ -- 9,000 -- -- --
Restructuring and other charges........... 10,681 1,874 13,052 -- --
Merger costs.............................. 3,764 123 -- -- --
-------- -------- -------- -------- --------
Total operating expense........... 200,404 133,852 100,569 61,220 58,043
-------- -------- -------- -------- --------
Operating income (loss)..................... 3,230 (4,007) (25,340) (7,576) (4,287)
Other expense (income):
Interest, net............................. 3,513 4,029 897 812 739
Other, net -- (200) (324) (31) --
-------- -------- -------- -------- --------
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
ELEVEN
MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED
------------------- JANUARY 31,
------------------------------
-------------------
CONSOLIDATED STATEMENT OF OPERATIONS DATA: (CONTINUED) 1999 1998(1) 1997 1997
- ------------------------------------------------------ -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Loss before income taxes and extraordinary item... (283) (7,836) (25,913) (8,357) (5,026)
-------- -------- -------- -------- --------
Income tax expense (benefit)..................... 576 (1,037) (7,204) (2,411) (340)
-------- -------- -------- -------- --------
Net loss before extraordinary item............... (859) (6,799) (18,709) (5,946) (4,686)
-------- -------- -------- -------- --------
Extraordinary item............................... 2,935 -- -- -- --
-------- -------- -------- -------- --------
Net loss......................................... (3,794) (6,799) (18,709) (5,946) (4,686)
-------- -------- -------- -------- --------
Accretive dividend............................... -- 800 -- -- --
-------- -------- -------- -------- --------
Net loss available to common stockholders........ $ (3,794) $ (7,599) $(18,709) $ (5,946) $ (4,686)
======== ======== ======== ======== ========
Net loss per share(2):
Basic and diluted.............................. $ (0.14) $ (0.39) $ (1.21)
======== ======== ========
Shares used in computing net loss per share:
Basic and diluted.............................. 27,994 19,312 15,523
======== ======== ========
OTHER DATA:
- ---------------
EBITDA........................................... $ 33,596 $ 19,819 $ (7,809) $ (4,973) $ (1,257)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JANUARY 31,
----------------------------- -----------------
CONSOLIDATED BALANCE SHEET DATA: 1999 1998 1997 1997 1996
- -------------------------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 16,836 $ 10,302 $ 6,795 $ 3,822 $ 1,280
Working capital................................ 26,601 (3,598) (6,736) (5,233) (5,000)
Total assets................................... 220,504 160,132 65,794 33,013 24,434
Long-term debt, less current portion........... 41,178 72,896 12,394 5,962 5,883
Convertible, redeemable preferred stock........ -- 8,501 -- -- --
Stockholders' equity (capital deficit)......... 135,339 22,772 11,615 5,051 (1,138)
</TABLE>
- ---------------
(1) During 1998, InfoCure acquired the net assets of the Healthcare Systems
Division of The Reynolds and Reynolds Company in a transaction accounted for
as a purchase. (See Note 3 to the consolidated financial statements.)
(2) Loss per share for the years ended January 31, 1997 and 1996 has not been
presented as it is not considered meaningful due to the acquisition of the
Founding Companies and the Company's initial public offering in conjunction
with the formation of the Company in the period ended December 31, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
A substantial part of our growth has been achieved through acquisitions.
From July 10, 1997 through December 31, 1999, we completed 24 acquisitions,
including acquisitions of 12 companies accounted for as pooling of interest
transactions. Given the significant number of acquisitions in each of the
periods presented, the results of operations from period to period may not
necessarily be comparable.
19
<PAGE> 22
During the year ended December 31, 1999, we completed mergers (the "1999
Mergers") with the 11 companies listed below (the "1999 Pooled Companies") in
transactions accounted for as poolings of interest. These mergers provided for
exchange of substantially all the outstanding equity interests of such companies
for shares of our common stock.
<TABLE>
<CAPTION>
SHARES
OF INFOCURE
COMPANY ISSUED
- ------- -----------
<S> <C>
Macon Systems Management, LLC,
the parent of Medical Software
Management, Inc. ......................................... 166,464
OMSystems, Inc. ............................................ 2,287,998
Ardsley, M.I.S., Inc. ...................................... 209,016
Medfax Corporation.......................................... 696,333
Scientific Data Management, Inc. ........................... 280,243
Datamedic Holding Corp. .................................... 1,088,674
Kevin Kozlowski, Inc.
d/b/a Human Touch Software................................ 255,247
Unident Corporation......................................... 357,796
InfoLogic, Inc. ............................................ 102,096
Prism Data Systems, Inc. ................................... 208,544
CDL Healthcare Systems, Inc. ............................... 109,658
</TABLE>
Because the 1999 Mergers were accounted for as poolings of interests, the
consolidated financial statements included in this Annual Report have been
retroactively restated to reflect them. The consolidated financial statements
included in this Annual Report have also been retroactively restated to reflect
the 1998 acquisition of Radiology Management Systems, Inc. ("RADMAN") in a
transaction that was accounted for as a pooling of interests. As a result, the
financial position, results of operations and cash flows are presented as if
RADMAN and the 1999 Pooled Companies had been consolidated for all periods
presented (see Notes to Consolidated Financial Statements).
InfoCure has historically derived revenue primarily from licensing new
software products and software upgrades, reselling hardware components in
connection with a portion of its software sales and providing customer support
and services. Customer support and services typically have been provided
pursuant to renewable annual contracts or on a fee basis. We have derived
additional revenue from customers and third-party clearinghouses by providing
electronic data interchange services through contractual arrangements with such
parties. Approximately 50% of our total 1999 revenue is recurring in nature.
InfoCure bases its revenue recognition policies for sales of software on
the provisions of the American Institute of Certified Public Accountants'
Statement of Position ("SOP") No. 97-2, "Software 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. Revenue from hardware sales is 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, 1999,
our balance sheet included goodwill, net of accumulated amortization, of $102.7
million. Goodwill is amortized over its estimated useful life, which had
previously been 15 years. In the fourth quarter of 1999, management determined
that the estimated useful life of goodwill should be shortened substantially to
be more reflective of the current rate of technological change and competitive
conditions within the marketplace. Accordingly, management changed the estimated
useful life of goodwill from 15 years to three years. This change in accounting
estimate is applied prospectively from the fourth quarter of 1999 and increased
1999 amortization
20
<PAGE> 23
expense by approximately $3.5 million. Future amortization expense is estimated
to total approximately $35.7 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 depreciable lives ranging from three to 40 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 amortized, generally over a four-year
life. Costs incurred after general release are expensed as incurred. As
discussed below, during the fourth quarter of 1999 InfoCure adopted a new
product strategy to begin development of ASP-delivered products and, as a
result, recorded a charge of approximately $5.6 million in the fourth quarter of
1999 representing the write-off of the carrying value of software development
costs for certain medical specialty products.
CHANGE IN PRODUCT STRATEGY AND BUSINESS MODEL
InfoCure is currently reorganizing its business to facilitate changes in
its pricing of practice management software products, its delivery of these
products and the scope of its product offerings. During the fourth quarter of
1999, InfoCure acquired five companies that provide dental practice management
solutions, increasing InfoCure's number of dental customers by approximately
9,100 practices. These acquisitions, along with InfoCure's determination that
there is a natural segregation of InfoCure's business into medical and dental
specialties, have caused InfoCure to divide its business into a medical division
and a dental division. The medical division consists of InfoCure's business for
general medical practices and medical specialty practices in the areas of
anesthesiology, dermatology and plastic surgery, emergency medicine, oncology,
ophthalmology, pathology, pediatrics, podiatry and radiology. The dental
division consists of the portion of InfoCure's business that serves dental,
orthodontic and oral and maxillofacial surgery practices.
As part of the reorganization, InfoCure intends to transfer the assets of
its medical division to VitalWorks, Inc., a newly-formed subsidiary of InfoCure.
VitalWorks intends to develop new practice management software applications that
can be delivered through the application services provider, or "ASP," delivery
model. In the ASP delivery model, VitalWorks would remotely host applications
from an offsite central server which physicians would access over dedicated
lines, virtual private networks or the Internet. VitalWorks also intends to
offer its new practice management applications through installations directly in
physicians' offices as "practice-hosted" systems. Additionally, VitalWorks
intends to offer Internet solutions that will allow its customers to utilize the
Internet to enhance office workflow and conduct business-to-business e-commerce.
VitalWorks is continuing to develop its Internet solutions and to establish
strategic relationships to facilitate these product offerings.
As part the reorganization, InfoCure intends to transfer the assets of its
dental division to PracticeWorks, Inc., which will be a new subsidiary of
InfoCure. InfoCure intends for PracticeWorks to focus on development of Internet
solutions and ASP-delivered practice management applications that are tailored
to the needs of the dental division's customers. In particular, due to
InfoCure's current penetration of the dental market and existing channels of
distribution, InfoCure expects PracticeWorks to generate a significant amount of
business-to-business e-commerce in the dental market. InfoCure expects
PracticeWorks to begin offering its new solutions by the end of 2000.
In connection with InfoCure's strategy to develop ASP-delivered products,
InfoCure plans to convert to subscription-based pricing for substantially all of
its products and services. Under this subscription pricing model, customers will
pay a fixed, monthly fee for use of InfoCure's practice management applications
and Internet solutions and the computer hardware necessary to utilize those
applications and solutions. This represents a change in InfoCure's historical
pricing model in which customers were charged an initial licensing fee for use
of practice management products and continuing maintenance, support and EDI
transaction fees. InfoCure intends to begin offering substantially all of its
products and services on the subscription pricing model in the second quarter of
2000. As a result of the transition to subscription pricing model, we expect to
see a decline in one-time revenue from software license fees and hardware sales,
replaced over time by monthly subscription fees. In addition, as we convert
existing customers to our new subscription contracts, the
21
<PAGE> 24
recurring support and EDI revenue from our installed customer base will
gradually decline and will be replaced by increasing monthly subscription fee
revenue. We expect the percentage of our revenue that is recurring in nature to
increase substantially as a result of this change. In addition, we expect to
eventually derive revenue from e-commerce relationships with key suppliers of
products and services in our markets. This revenue will typically be in the form
of a commission or royalty based on the value of products and services provided
by our partners to our customers and will be recognized as it is earned.
Because of our reorganization, our historical financial results are not
expected to be representative of future results.
RESTRUCTURING CHARGES
The 1999 Plan. In the fourth quarter of 1999, InfoCure decided to
restructure its business into a medical and a dental division, changed its
product strategy to begin development of ASP-delivered products and Internet
solutions, decided to transition to a subscription pricing model in connection
with its change in product strategy, and completed eight acquisitions, including
five acquisitions which substantially increased its presence in the dental
market. Concurrently, management committed to a plan of restructuring and
reorganization, expected to be completed in the second quarter of 2000, to
consolidate facilities, eliminate staffing redundancies and position InfoCure to
capitalize on its change of business model. In the fourth quarter of 1999,
InfoCure recorded $10.7 million in restructuring and other charges in connection
with this plan. The components of these charges are:
- $5.6 million representing carrying value of software development costs
for medical specialty products, the estimated useful life of which is now
considered minimal based on our change to an product strategy focused on
development of ASP-delivered products;
- $1.8 million representing facility closure and consolidation costs,
including cancellation of leases and other contracts;
- $1.5 million reflecting severance and other termination benefits for
approximately 80 employees representing certain redundant staff
positions;
- $700,000 reflecting contingent consideration deemed payable to former
stockholders of entities affected by the restructuring;
- $681,000 representing incremental costs associated with completion of
discontinued customer contracts; and
- $416,000 representing other asset write-downs and costs.
Additional charges will be recorded in the first quarter of 2000 primarily
to provide for costs associated with staffing reductions for our new dental
division. These personnel changes were finalized and communicated in the first
quarter of 2000. Accordingly, compensation costs, including severance and other
termination benefits, aggregating approximately $1.0 million will be recorded in
the first quarter of 2000.
The 1997 Plans. In 1997, InfoCure adopted a plan to restructure its
operations by consolidating existing facilities and acquired operations. In
connection with the restructuring plan, which was substantially completed in the
second quarter of 1998, we recorded 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. Additionally,
Datamedic, one of the 1999 Pooled Companies, incurred $1.9 million in
restructuring costs in 1997 representing severance and other costs associated
with staff reductions resulting from a plan of reorganization adopted in 1997
and completed in 1998.
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 and ending on December 31, 1997 reflects eleven months of
operations.
22
<PAGE> 25
IN-PROCESS RESEARCH AND DEVELOPMENT
On October 23, 1998, InfoCure acquired the assets of the HealthCare Systems
Division ("HSD") 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 included
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. 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 was expensed in the fourth quarter of 1998.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of operations
data as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED MONTHS
DECEMBER 31, ENDED
------------- DECEMBER 31,
1999 1998 1997
----- ----- ------------
<S> <C> <C> <C>
Revenue:
Systems and software..................................... 47.3% 52.1% 49.2%
Maintenance, support and services........................ 52.7 47.9 50.8
----- ----- -----
Total revenue.................................... 100.0 100.0 100.0
----- ----- -----
Operating expense:
Hardware and other items purchased for resale............ 24.4 22.3 25.6
Selling, general and administrative (excluding
compensatory stock awards)............................ 51.5 49.0 66.3
Research and development................................. 7.7 13.4 18.5
Depreciation and amortization............................ 7.1 4.9 5.9
Compensatory stock awards................................ 0.7 5.0 0.1
Purchased research and development....................... -- 6.9 --
Restructuring and other charges.......................... 5.2 1.4 17.3
Merger costs............................................. 1.8 0.2 --
----- ----- -----
Total operating expense.......................... 98.4 103.1 133.7
----- ----- -----
Operating income (loss).................................... 1.6 (3.1) (33.7)
Other expense (income):
Interest, net............................................ 1.7 3.1 1.1
Other, net............................................... -- (0.2) (0.4)
----- ----- -----
Loss before income taxes and extraordinary item............ (0.1) (6.0) (34.4)
Income tax expense(benefit)................................ 0.3 (0.8) (9.5)
----- ----- -----
Loss before extraordinary item................... (0.4)% (5.2)% (24.9)%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenue. Total revenue for the year ended December 31, 1999 was $203.6
million, compared to total revenue of $129.8 million for the year ended December
31, 1998. The increase of $73.8 million, or 56.8%, primarily reflects the
completion of the HSD acquisition effective October 1998 and overall growth in
the business. The 1999 Mergers, which are accounted for as poolings of
interests, are reflected retroactively for all periods presented. Systems and
software revenue was $96.2 million for the year ended December 31, 1999, or
23
<PAGE> 26
47.3% of total revenue, while maintenance, support, and service revenue was
$107.4 million, or 52.7% of total revenue for the same period.
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. Hardware and other items purchased for resale increased
$20.6 million, or 71.2%, to $49.6 million for the year ended December 31, 1999
from $29.0 for the year ended December 31, 1998. This increase was due primarily
to the HSD acquisition completed in October 1998. For the year ended December
31, 1999, gross margin, which represents total revenue less hardware and other
items purchased for resale, was 75.6% of total revenue, compared to 77.7% of
total revenue, for the year ended December 31, 1998. This decline in gross
margin is attributable primarily to a change in the mix of revenues resulting
from the growth in hardware maintenance revenues and statement processing
revenues, which generally carry lower margins.
Selling, General and Administrative. Selling, general and administrative
expense includes salaries and benefits, product development, product maintenance
and support, variable commissions and bonuses, marketing, travel,
communications, facilities, insurance and other administrative expense. Selling,
general and administrative expense increased $41.1 million, or 64.6%, to $104.8
million for the year ended December 31, 1999 compared to $63.6 million for the
year ended December 31, 1998. This increase reflects primarily additional
marketing and administrative personnel and other selling and administrative
costs necessary to support the consolidated businesses of the acquired
companies. As a percentage of revenue, selling, general and administrative
expenses increased to 51.5% for the year ended December 31, 1999 from 49.0% for
the year ended December 31, 1998 primarily to the fact that seven of the eight
companies acquired in the fourth quarter of 1999 had selling, general and
administrative expenses that were substantially higher in relation to their
revenues than ours. Five of these companies were pooling transactions;
therefore, their results of operations are included as if they had been
consolidated for all periods. As all of these companies were acquired in
December 1999, cost savings measures resulting from their integration have not
yet been reflected. Additionally, management deferred certain planned staff
reductions in connection with the reorganization of the business into the
medical and dental divisions and its change in product strategy. Further, during
the fourth quarter of 1999, the allowance for doubtful accounts increased by
$3.0 million to more closely align the allowance with collection experience and
to provide additional coverage as part of the announced change to a subscription
pricing model.
Research and Development. Research and development expenses consists
primarily of salaries and benefits, supplies, facilities and other
administrative expense associated with making enhancements to existing products
and the development of new products. Research and development expense decreased
$1.7 million, or 10.0%, to $15.7 million for the year ended December 31, 1999
from $17.4 million for the year ended December 31, 1998 due primarily to a
higher proportion of software development costs qualifying for capitalization in
1999. As a percentage of total revenue, research and development expense
decreased to 7.7% of total revenue for the year ended December 31, 1999 from
13.4% of total revenue for the year ended December 31, 1998. We capitalize
development costs incurred from the time a new product reaches technological
feasibility until it is available for general release. Capitalized software
development costs were $3.6 million for 1999 and $1.5 million for 1998. The
higher level of capitalized costs in 1999 is reflective of the state of
development of a variety of projects, including new e-commerce applications. In
conjunction with the change in product strategy, development efforts will be
concentrated on development of ASP-delivered products and Internet solutions and
no additional costs will be capitalized for other medical specialty products.
Depreciation and Amortization. Depreciation and amortization expense
increased $8.1 million, or 127.0%, to $14.5 million for the year ended December
31, 1999 from $6.4 million for the year ended December 31, 1998. This increase
was primarily due to our increased investment in property and equipment,
including approximately $8.0 million for the acquisition of a building in August
1999. Increased expense for amortization of goodwill results from a full year of
amortization related to approximately $34.0 million of goodwill from the October
1998 acquisition of HSD, the addition of approximately $22.0 million of goodwill
24
<PAGE> 27
related to the 1999 acquisitions and a change in accounting estimate, which was
effected in the fourth quarter of 1999, to reduce the estimated useful life of
goodwill from 15 years to three years. This change in accounting estimate
resulted in additional goodwill amortization of approximately $3.5 million for
1999 (see Notes 2 and 3 to the Consolidated Financial Statements). As a
percentage of total revenue, depreciation and amortization expense increased to
7.1% for the year ended December 31, 1999 from 4.9% for the year ended December
31, 1998.
Compensatory Stock Awards. Compensatory stock awards expense decreased
$5.0 million, or 77.8%, to $1.4 million for December 31, 1999 from $6.4 million
for the year ended December 31, 1998. The 1999 amount included approximately
$1.1 million in non-cash charges related to the accelerated vesting of a
restricted stock award for 190,000 shares granted to three executives in 1998.
The $6.4 million in 1998 related to contingently exercisable stock options of
OMSystems, a 1999 Pooled Company. Under the terms of OMSystems' stock option
agreement, the value of the options became determinable in the fourth quarter of
1998, resulting in recognition of compensation expense. As a percentage of total
revenue, compensatory stock awards expense decreased to 0.7% for the year ended
December 31, 1999 from 5.0% for the year ended December 31, 1998.
Purchased Research and Development. Purchased research and development
expense was $9.0 million, or 6.9% 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.
Restructuring and Other Charges. In the year ended December 31, 1999, we
incurred costs of $10.7 million, or 5.2% of total revenue associated with a
restructuring plan announced in the fourth quarter of 1999. (See Note 5 to
Consolidated Financial Statements). In the year ended December 31, 1998 we
incurred $2.0 million, or 1.4% of total revenue associated with a restructuring
plan completed in 1998.
Merger costs. In the year ended December 31, 1999, we incurred
merger-related costs associated with the 1999 Mergers of $3.8 million, or 1.8%
of total revenue, relating primarily to professional fees and transaction costs.
We incurred $123,000, or 0.1% of total revenue, of merger-related costs in the
year ended December 31, 1998.
Interest, Net. Net interest expense decreased $516,000, or 12.8%, to $3.5
million for the year ended December 31, 1999 from $4.0 million for the year
ended December 31, 1998. The decrease relates primarily to the repayment of the
commercial credit facility from the proceeds of the April 1999 public offering.
As a percentage of total revenue, interest, net decreased to 1.7% for the year
ended December 31, 1999 from 3.1% for the year ended December 31, 1998.
Other, Net. In the year ended December 31, 1998 net other income was
$200,000, or 0.2% of total revenue, due primarily to income related to the
RADMAN merger.
Income Taxes (Benefit). The provision for income taxes was $576,000 for
the year ended December 31, 1999, compared to a benefit of $1.0 million for the
year ended December 31, 1998. The effective income tax rate for the year ended
December 31, 1999, is higher than statutory rates due to state income taxes and
permanent differences resulting primarily from the amortization of nondeductible
goodwill. In addition, the effective tax rate for 1998 differs from the
statutory tax rate due to the more significant impact of poolings with certain
S-corporation entities that incurred no federal income taxes prior to their
acquisition by us.
Extraordinary Item. During the year ended December 31, 1999, we
extinguished our outstanding debt under our credit facility with FINOVA Capital
Corporation and incurred debt extinguishment costs of $4.9 million, or $2.9
million net of taxes, representing 1.4% of total revenue.
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
$129.8 million compared to total revenue of $75.2 million for the eleven months
ended December 31, 1997. The increase of $54.6 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,
25
<PAGE> 28
except for the RADMAN, and the 1999 Pooled Companies, which acquisitions which
were accounted for as poolings of interests and are reflected retroactively for
all periods presented. Systems and software revenue was $67.6 million for the
year ended December 31, 1998, or 52.1% of total revenue, compared to $37.0
million, or 49.2% 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 our software products in the year
ended December 31, 1998. Maintenance, support and services revenue was $62.2
million, or 47.9% of total revenue for the year ended December 31, 1998,
compared to $38.2 million, or 50.8% of total revenue, for the eleven months
ended December 31, 1997.
Hardware and Other Items Purchased for Resale. For the year ended December
31, 1998, cost of hardware and other items purchased for resale was $29.0
million, or 22.3% of revenue, compared to $19.3 million, or 25.6% of revenue,
for the eleven months ended December 31, 1997. The variance in cost of hardware
and other items purchased for resale reflects primarily the increase resulting
from InfoCure's acquisitions, including the acquisition of HSD in October 1998.
Selling, General and Administrative. Selling, general and administrative
expense increased to $63.6 million, or 49.0% of revenue, for the year ended
December 31, 1998 compared to $49.9 million, or 66.3% 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 expenses as a
percent of revenue reflects InfoCure's ability to leverage economies of scale
resulting from the larger installed customer base and higher base of revenue
realized from acquisitions.
Research and Development. Research and development expense was $17.4
million, or 13.4% or total revenue for the year ended December 31, 1998,
compared to $13.9 million, or 18.5% of total revenue for the year ended December
31, 1997. In 1998, we capitalized approximately $1.5 million in software
development costs related to various projects for new products and enhancements
to existing products. The overall increase in research and development expense
is largely attributable to the additional development staff added from
acquisitions and expenditures to integrate the acquired product sets.
Depreciation and Amortization. Depreciation and amortization expense was
$6.4 million, or 4.9% of revenue, for the year ended December 31, 1998 compared
to $4.4 million, or 5.9% 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.
Compensatory Stock Awards. In the year ended December 31, 1998, we
recorded a non-cash charge of $6.4 million, or 5.0% of total revenue.
Purchased Research and Development. Purchased research and development
expense was $9.0 million, or 6.9% 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.
Restructuring and Other Charges. Restructuring and other charges were $1.9
million, or 1.4% of total revenue, for the year ended December 31, 1998 compared
to $13.1 million, or 17.3% 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.
Merger Costs. Merger costs were $123,000, or 0.1% of revenue, for the year
ended December 31, 1998 and related to professional fees associated with the
RADMAN merger.
Interest, Net. Net interest expense increased to $4.0 million, or 3.1% of
total revenue, for the year ended December 31, 1998 compared to $897,000, or
1.2% of total revenue 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 $200,000, or 0.2% of total
revenue, for the year ended December 31, 1998 compared to $324,000, or 0.4% of
total revenue for the eleven months ended
26
<PAGE> 29
December 31, 1997. This decrease relates primarily to one-time other income
related to the RADMAN merger.
Income Taxes Benefit. The benefit for income taxes was $1.0 million for
the year ended December 31, 1998 compared to $7.2 million for the eleven months
ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements have been to fund:
- acquisitions
- working capital
- capital expenditures for buildings, furniture, fixtures and equipment and
- capitalized software development costs.
We have met our liquidity needs over the last three years through funds provided
by operating activities, equity offerings and long-term borrowings.
On February 9, 1998, InfoCure completed the private placement of 850,060
shares of Series A preferred stock, resulting in gross proceeds to us 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. We granted to the placement agent a warrant to acquire 200,000 shares
of our common stock at an exercise price of $4.50 per share. Our consolidated
financial statements 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 stock.
The Series A preferred stock automatically converted into 2,000,140 shares of
common stock upon the completion of our public offering in April 1999.
On September 28, 1998, InfoCure completed the sale of 406,676 shares of
common stock for $2.5 million in a private placement to an institutional
investor. The investor committed to invest an additional $7.5 million, which
must be invested from time to time at our request in our 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
295,968 shares of common stock for $2.5 million in December 1998 and the sale of
160,000 shares of common stock for $2.0 million in January 1999.
On October 18, 1998, 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 was convertible at
our option 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. In October 1999, we finalized certain
negotiations related to the HSD acquisition and exercised our conversion option
related to the convertible promissory note by issuing approximately 373,000
shares to convert approximately $7.5 million of this note. (See Note 9 to
Consolidated Financial Statements).
In connection with the conversion, we incurred an obligation to pay
approximately $1.7 million because the conversion shares were sold at a price
below the conversion price. We have the option to settle this obligation by
issuing additional shares of our common stock.
On April 27, 1999, InfoCure completed a public offering of 6.0 million
shares of common stock at $13.00 per share, which generated net proceeds of
$73.4 million. InfoCure applied $69.2 million of the proceeds of this offering
to retire the principal outstanding on its credit facility. The balance of the
proceeds was applied toward working capital and for general corporate purposes.
On May 6, 1999, InfoCure issued approximately 1.1 million shares of common stock
at $13.00 per share for net proceeds of $13.8 million relating to the exercise
of the underwriters' over-allotment option in connection with the public
offering. The proceeds from the over-allotment were applied toward working
capital and for general corporate purposes.
27
<PAGE> 30
Our deferred revenue and customer deposits decreased approximately $6.8
million to $13.0 million at December 31, 1999 from $18.6 million at December 31,
1998 (net of a $1.2 million increase from acquisitions). A significant portion
of this decrease is attributable to changes in billing cycles for maintenance
agreements. Maintenance agreements are billed to customers annually, quarterly
and monthly. As we have integrated our various acquisitions, we have
systematically moved customers to monthly billing cycles. This change results in
less deferred revenue and improved cash flow potential but no overall change in
maintenance revenue.
During the year ended December 31, 1999, we generated $9.2 million of cash
from operating activities primarily relating to non-cash charges for
depreciation and amortization and extinguishment of debt costs and non-operating
restructuring and other charges, which are offset by the impact of increased
investment in working capital, primarily an increase in accounts receivable and
a decrease in deferred revenue and customer deposits.
During 1999, cash used in investing activities was $40.2 million,
consisting primarily of cash used for acquisitions of $20.0 million, capital
expenditures of $5.6 million and intangible asset costs of $13.5 million. The
principal intangible asset expenditures included cash paid for contingent
consideration for previous acquisitions, capitalized software development costs
and purchased technology.
During the year ended December 31, 1999, we generated net cash from
financing activities of $37.5 million, including $86.2 million net proceeds from
issuance of common stock and $29.9 million proceeds from the line of credit and
other long-term debt. These proceeds were principally used to retire outstanding
debt of $69.2 million, fund the acquisition of the 1999 Purchased Companies (see
Notes 1 and 3 to Consolidated Financial Statements) and to fund capital
purchases, primarily a building.
Our commercial credit facility, with an aggregate availability of $70.0
million, was repaid in full with proceeds of our April 1999 public offering. The
early retirement of debt resulted in a write-off of previously paid deferred
loan costs in the amount of approximately $4.4 million and prepayment penalties
of approximately $500,000. In August 1999, we obtained a new five-year credit
facility in the amount of $100 million. The credit facility provides for an $8.7
million term loan and a $91.3 million revolving loan that converts to a term
loan in October 2001. The credit facility bears interest at rates ranging from
prime plus 0.50% to 1.25%, or LIBOR plus 2.00% to 2.75%, depending on our
achieving certain debt service ratios, and is collateralized by substantially
all of InfoCure's assets.
At December 31, 1999, we had total cash and cash equivalents of $16.8
million, working capital of $26.6 million and $36.8 million outstanding under
our line of credit. We expect the transition to a subscription pricing model
will adversely impact our cash flow until revenue from subscription fees
replaces revenue from software license fees and hardware sales. We also expect
to incur increased marketing and sales expenses in connection with offering our
ASP-delivered products and Internet solutions. We expect to finance this
restructuring and future acquisitions, if any, through one or more of the
following sources: our credit facility, other indebtedness and the issuance of
debt or equity securities by us or one of our subsidiaries. The sale of equity
securities, including investments convertible into equity securities, may result
in further dilution to existing stockholders. There can be no assurance that
additional sources of capital will be available on terms acceptable to us or at
all. We believe that our existing cash and anticipated future operating cash
flow, combined with availability of funds under the credit facility and other
sources of financing, will be sufficient to fund our working capital
requirements through at least the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 was effective for
financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use, including the requirement to capitalize specified costs and
amortization of such costs. Adoption of this standard did not have a material
effect on our capitalization policy.
28
<PAGE> 31
Financial Accounting Standards Board Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivatives and Hedging Activities",
as amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
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 this new standard on January 1, 2001, to affect its
financial statements.
COSTS RELATED TO YEAR 2000 COMPLIANCE
InfoCure recognized the material nature of the business issues surrounding
computer processing of dates into and beyond the Year 2000 and took corrective
action prior to December 31, 1999. In order to make its products Year 2000
compliant and to help its customers to make their systems that use our products
Year 2000 compliant, InfoCure offered its customers various alternative forms of
products and assistance, including generally available Year 2000 information and
diagnostic tools, software patches, product upgrades or replacement products.
Prior to the Year 2000, InfoCure discontinued the sale and support of products
that it did not believe would be Year 2000 compliant and attempted to notify all
known users of these products of its belief that those products were not Year
2000 compliant. InfoCure also believes that it completed all of the activities
within its control to ensure that its internal software and hardware systems
were Year 2000 compliant during the fiscal year 1999, and InfoCure has
experienced no material interruptions to operations due to the start of the Year
2000.
InfoCure's total Year 2000 compliance costs were approximately $1.4
million, of which approximately $500,000 were incurred in 1999. InfoCure does
not currently expect to apply additional material funds to address Year 2000
issues.
As of March 30, 2000, InfoCure is not aware of any material disruption in
the operation of its products by its customers as a result of Year 2000 issues.
In addition, as of March 30, 2000, InfoCure has not experienced any material
disruptions of its internal computer systems or software applications, and has
not experienced any material problems with the computer systems or software
applications of the third parties with whom it regularly does business as a
result of Year 2000 issues.
Although InfoCure's Year 2000 rollover did not present any material
business disruption, there are some remaining Year 2000-related risks.
InfoCure's management believes that appropriate action has been taken to address
these remaining Year 2000 issues and contingency plans are in place to minimize
the financial impact to InfoCure. In addition, InfoCure will continue to monitor
the third parties with whom it regularly does business to determine if they will
take appropriate action to address the remaining Year 2000 issues. InfoCure,
however, cannot be certain that Year 2000 issues will not have a material
adverse effect on its business, since the evaluation process is not yet complete
and it is early in the Year 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risks include fluctuations in interest rates and
variability in interest rate spread relationships (i.e. prime to LIBOR spreads).
Approximately $36.8 million of our outstanding debt at December 31, 1999 relates
to a five-year financing agreement with FINOVA Capital Corporation. Interest on
the outstanding balance is charged based on a variable rate related to prime
rate or, at our option, the LIBOR rate. Both rate bases are incremented for
margins specified in the agreement. Thus, our interest rate is subject to market
risk in the form of fluctuations in interest rates. The effect of a hypothetical
one percentage point increase across all maturities of variable rate debt would
result in a decrease of approximately $368,000 in pre-tax net income assuming no
further changes in the amount of borrowings subject to variable rate interest
from amounts outstanding at December 31, 1999. We do not trade in derivative
financial instruments.
29
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements listed on page F-1 of this report are filed as
part of this report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Item X in Part I of this report for information regarding the executive
officers of InfoCure. The section under the heading "Election of Directors"
entitled "Nominees to Serve until 2001 Annual Meeting" of InfoCure's definitive
proxy statement to be filed with respect to the Annual Meeting of Stockholders
to be held June 7, 2000 (the "Proxy Statement") is incorporated herein by
reference for information on the directors of InfoCure. The section under the
heading "Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy
Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The sections under the heading "Election of Directors" entitled "Directors'
Compensation," "Executive Compensation," "Option Grants in Last Fiscal Year,"
"Option Exercises in Last Fiscal Year and Year-End Option Values," "Employment
Agreements," "Restricted Stock Awards," "Employee Benefit Plans," "Employee
Stock Purchase Plan" and "Length-of-Service Stock Option Plan" of the Proxy
Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Stock Ownership of Certain Beneficial Owners
and Management" of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section under the heading "Related Party Transactions" of the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The financial statements listed on page F-1
of this report are filed as part of this report on the pages indicated.
(a)(2) Financial Statement Schedules. The applicable financial statement
schedules required under Regulation S-X have been included beginning on page S-1
of this report, as follows:
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants on
Financial Statement Schedule.............................. S-1
Schedule II - Valuation and Qualifying Accounts............. S-2
</TABLE>
30
<PAGE> 33
(a)(3) Exhibits. The exhibits required by Item 601 of Regulation S-K are
listed below.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Agreement and Plan of Merger by and among OMSystems, Inc,
the Shareholders of OMSystems, Inc., InfoCure Systems, Inc.
and InfoCure Corporation dated February 8, 1999.
2.2 -- Agreement and Plan of Merger by and among Datamedic Holding
Corp., Certain Principal Shareholders of Datamedic Holding
Corp., InfoCure Corporation and InfoCure Systems, Inc. dated
September 3, 1999 (incorporated herein by reference to
Appendix A to InfoCure's Registration Statement on Form S-4
(Registration No. 333-87867) filed on September 27, 1999).
2.3 -- Agreement and Plan of Merger and Reorganization among
InfoCure Corporation, Medical Dynamics, Inc. and CADI
Acquisition Corporation dated December 21, 1999
(incorporated by reference to Exhibit 99.2 filed with
InfoCure's Current Report on Form 8-K on December 22, 1999).
3.1 -- Certificate of Incorporation of InfoCure Corporation with
all amendments.
3.2 -- Second Amended and Restated Bylaws of InfoCure.
4.1 -- See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation, as amended, 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 4.2 to InfoCure's
Registration Statement on Form SB-2) (Registration No.
333-18923).
10.1 -- Employment Agreement between InfoCure and Frederick L. Fine
dated July 1998 (incorporated by reference to Exhibit 10.1
filed with InfoCure's Annual Report on Form 10-KSB on
February 26, 1999).
10.2 -- Amendment to Employment Agreement, dated June 9, 1999
between InfoCure and Frederick L. Fine.
10.3 -- Employment Agreement between InfoCure and James K. Price
dated July 1998 (incorporated by reference to Exhibit 10.2
filed with InfoCure's Annual Report on Form 10-KSB on
February 26, 1999).
10.4 -- Amendment to Employment Agreement, dated June 9, 1999
between InfoCure and James K. Price.
10.5 -- Employment Agreement between InfoCure and Richard E. Perlman
dated January 1998 (incorporated by reference to Exhibit
10.3 filed with InfoCure's Annual Report on Form 10-KSB on
February 26, 1999).
10.6 -- Amendment to Employment Agreement, dated June 9, 1999
between InfoCure and Richard E. Perlman.
10.7 -- Employment Agreement between InfoCure and James A. Cochran
dated August 2, 1999.
10.8 -- Loan Agreement among InfoCure Corporation, InfoCure Systems,
Inc., Thoroughbred Acquisition, Inc. and FINOVA Capital
Corporation dated August 11, 1999.
10.9 -- InfoCure Corporation 1996 Stock Option Plan (incorporated by
reference to Exhibit 10.1 filed with InfoCure's Registration
Statement on Form SB-2) (Registration No. 333-18923).
10.10 -- Form of Incentive Stock Option Agreement of InfoCure
Corporation (incorporated by reference to Exhibit 10.2 filed
with InfoCure's Registration Statement on Form SB-2)
(Registration No. 333-18923).
10.11 -- American Medcare Corporation 1996 Stock Option Plan
(incorporated by reference to Exhibit 10.19 filed with
InfoCure's Registration Statement on Form SB-2)
(Registration No. 333-18923).
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.12 -- Form of Incentive Stock Option Agreement of American Medcare
Corporation (incorporated by reference to Exhibit 10.20
filed with InfoCure's Registration Statement on Form SB-2)
(Registration No. 333-18923).
10.13 -- InfoCure Corporation 1997 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.48 filed with
InfoCure's Annual Report on Form 10-KSB on April 1, 1998).
10.14 -- InfoCure Corporation Length-of-Service Nonqualified Stock
Option Plan (incorporated by reference to Exhibit 10.49
filed with InfoCure's Annual Report on Form 10-KSB on April
1, 1998).
10.15 -- Amendment to InfoCure Corporation 1996 Stock Option Plan.
10.16 -- Amendment to InfoCure Corporation Length-of-Service
Nonqualified Stock Option Plan.
10.17 -- Amendment to InfoCure Corporation Employee Stock Purchase
Plan.
10.18 -- InfoCure Corporation Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.50 filed with
InfoCure's Annual Report on Form 10-KSB on April 1, 1998).
10.19 -- Deferred Compensation Agreement between InfoCure and
Frederick L. Fine.
10.20 -- Deferred Compensation Agreement between InfoCure and James
K. Price.
10.21 -- Deferred Compensation Agreement between InfoCure and Richard
E. Perlman.
10.22 -- Form of Stock Option Grant Certificate and schedule of
recipients of such options.
10.23 -- Form of Stock Option Grant Certificate and schedule of
recipients of such options.
10.24 -- Stock Option Grant Certificate for Stock Option Grant to
Michael Warren.
10.25 -- American Medcare Corporation 1994 Stock Option Plan.
21.1 -- List of Subsidiaries.
23.1 -- Consent of BDO Seidman, LLP.
23.2 -- Consent of KPMG LLP.
24.1 -- Powers of Attorney (included on signature page).
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K. InfoCure filed the following reports on Form 8-K
during the quarter ended December 31, 1999:
(i) Report on Form 8-K with respect to third quarter financial results
and the Medical Dynamics, Inc. and Zila, Inc. acquisitions, filed
November 4, 1999.
(ii) Report on Form 8-K with respect to the acquisitions of the dental
practice management systems business of National Data
Corporation, PracticeWorks from Zila, Inc., Unident Corporation,
InfoLogic, Inc. and Human Touch, and the merger with Medical
Dynamics, Inc., filed December 22, 1999.
(iii) Report on Form 8-K with respect to the VitalWorks acquisition,
filed December 23, 1999.
32
<PAGE> 35
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 30th day of
March, 2000.
INFOCURE CORPORATION
By: FREDERICK L. FINE
------------------------------------
Frederick L. Fine
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frederick L. Fine 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 Annual Report on
Form 10-K, 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
--------- ----- ----
<C> <S> <C>
FREDERICK L. FINE President; Chief Executive March 30, 2000
- ----------------------------------------------------- Officer and Director
Frederick L. Fine (Principal Executive Officer)
JAMES K. PRICE Executive Vice President, March 30, 2000
- ----------------------------------------------------- Secretary and Director
James K. Price
RICHARD E. PERLMAN Chairman, Treasurer and March 30, 2000
- ----------------------------------------------------- Director
Richard E. Perlman
JAMES A. COCHRAN Vice President and Chief March 30, 2000
- ----------------------------------------------------- Financial Officer (Principal
James A. Cochran Financial Officer and
Principal Accounting Officer)
MICHAEL E. WARREN Vice President and Director March 30, 2000
- -----------------------------------------------------
Michael E. Warren
Director March , 2000
- -----------------------------------------------------
James D. Elliott
/s/ RAYMOND H. WELSH Director March 30, 2000
- -----------------------------------------------------
Raymond H. Welsh
</TABLE>
33
<PAGE> 36
INFOCURE CORPORATION
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Reports of Independent Certified Public Accountants......... F-2
Consolidated balance sheets as of December 31, 1999 and
1998...................................................... F-4
Consolidated statements of operations for the years ended
December 31, 1999 and 1998 and the eleven months ended
December 31, 1997......................................... F-5
Consolidated statements of changes in stockholders' equity
for the years ended December 31, 1999 and 1998 and the
eleven months ended December 31, 1997..................... F-6
Consolidated statements of cash flows for the years ended
December 31, 1999 and 1998 and the eleven months ended
December 31, 1997......................................... F-7
Notes to consolidated financial statements.................. F-8
FINANCIAL STATEMENT SCHEDULE
Report of Independent Certified Public Accountants on
Financial Statement Schedule.............................. S-1
Schedule II - Valuation and Qualifying Accounts............. S-2
</TABLE>
F-1
<PAGE> 37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
InfoCure Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of InfoCure
Corporation and its subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years ended December 31, 1999 and 1998 and the eleven
months ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements give retroactive effect to the merger of InfoCure
Corporation and Datamedic Holding Corp., which has been accounted for as a
pooling of interests as described in the notes to the consolidated financial
statements. We did not audit the financial statements of Datamedic Holding Corp.
and subsidiaries as of March 31, 1999 and for each of the years in the two-year
period ended March 31, 1999 which were combined with the Company's financial
statements as of December 31, 1998 and for the year ended December 31, 1998 and
the eleven months ended December 31, 1997, which financial statements reflect
total assets of approximately $9.4 million as of March 31, 1999, total revenues
of approximately $20.8 million and $19.2 million and a net loss of approximately
$1.8 million and $17.3 million for each of the years in the two-year period
ended March 31, 1999, respectively. Those financial statements were audited by
another auditor whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for Datamedic Holding Corp. and
subsidiaries for the applicable years, is based solely on the report of the
other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of InfoCure Corporation and its
subsidiaries as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
and the eleven months ended December 31, 1997, in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
Atlanta, Georgia
February 21, 2000
F-2
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
Board of Directors
Datamedic Holding Corp.
and subsidiaries:
We have audited the consolidated balance sheets of Datamedic Holding Corp. and
subsidiaries as of March 31, 1999 and 1998 and the related consolidated
statements of operations, shareholders' equity (deficiency) and cash flows for
each of the years in the three-year period ended March 31, 1999. These
consolidated financial statements (not presented separately herein) are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Datamedic Holding
Corp. and subsidiaries as of March 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG, LLP
Melville, New York
May 25, 1999
F-3
<PAGE> 39
INFOCURE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS (NOTES 1 AND 9)
Current:
Cash and cash equivalents................................. $ 16,836 $ 10,302
Accounts receivable-trade, net of allowance of $4,296 and
$1,526................................................. 39,331 31,412
Other receivables......................................... 819 1,499
Inventory................................................. 4,428 4,864
Refundable income taxes................................... 3,256 --
Deferred tax assets (Note 12)............................. 2,843 1,510
Prepaid expenses and other current assets................. 1,376 1,687
-------- --------
Total current assets.............................. 68,889 51,274
Property and equipment, net of accumulated depreciation
(Note 6).................................................. 24,064 12,886
Goodwill, net of accumulated amortization of $13,462 and
$3,957 (Notes 3 and 5).................................... 102,678 74,264
Other intangible assets (Note 7)............................ 9,182 8,242
Deferred tax assets (Note 12)............................... 12,963 11,818
Other assets................................................ 2,728 1,648
-------- --------
$220,504 $160,132
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 9).................................... $ 1,222 $ 2,074
Accounts payable.......................................... 10,161 9,849
Accrued expenses (Note 8)................................. 15,306 8,594
Accrued restructuring costs (Note 5)...................... 2,534 283
Income taxes payable...................................... -- 670
Deferred revenue and customer deposits.................... 12,979 18,593
Current portion of long-term debt (Note 9)................ 694 14,809
-------- --------
Total current liabilities......................... 42,896 54,872
Long-term debt, less current portion (Note 9)............... 41,178 72,896
Other liabilities........................................... 1,091 1,091
-------- --------
Total liabilities................................. 85,165 128,859
-------- --------
Commitments (Notes 9 and 10)
Convertible, redeemable preferred stock $0.001 par value;
2,000,000 shares authorized, 0 and 850,060 shares with
redemption value of $10.00 outstanding (Note 11).......... -- 8,501
-------- --------
Stockholders' equity (Note 11):
Common stock $0.001 par value, 200,000,000 and 30,000,000
authorized, 32,327,099 and 19,987,768 outstanding...... 32 20
Common stock issuable..................................... -- 1,975
Additional paid-in capital................................ 189,837 72,070
Accumulated deficit....................................... (54,530) (49,988)
Deferred compensation..................................... -- (1,083)
Treasury stock, at cost................................... -- (222)
-------- --------
Total stockholders' equity........................ 135,339 22,772
-------- --------
$220,504 $160,132
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 40
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ---------------
<S> <C> <C> <C>
Revenue (Note 1):
Systems and software................................. $96,241 $67,608 $ 37,002
Maintenance, support and services.................... 107,393 62,237 38,227
------- ------- --------
Total revenue................................ 203,634 129,845 75,229
------- ------- --------
Operating expense:
Hardware and other items purchased for resale........ 49,613 28,981 19,255
Selling, general and administrative (excluding
compensatory stock awards)........................ 104,770 63,647 49,864
Research and development............................. 15,655 17,398 13,919
Depreciation and amortization........................ 14,490 6,382 4,401
Compensatory stock awards............................ 1,431 6,447 78
Purchased research and development (Note 4).......... -- 9,000 --
Restructuring and other charges (Note 5)............. 10,681 1,874 13,052
Merger costs (Note 3)................................ 3,764 123 --
------- ------- --------
Total operating expense...................... 200,404 133,852 100,569
------- ------- --------
Operating income(loss)................................. 3,230 (4,007) (25,340)
Other expense (income):
Interest, net........................................ 3,513 4,029 897
Other, net........................................... -- (200) (324)
------- ------- --------
Loss before income taxes and extraordinary item........ (283) (7,836) (25,913)
Income taxes (benefit) (Note 12)....................... 576 (1,037) (7,204)
------- ------- --------
Loss before extraordinary item......................... (859) (6,799) (18,709)
Extraordinary item -- debt extinguishment cost, net of
income taxes (Note 9)................................ 2,935 -- --
------- ------- --------
Net loss............................................... (3,794) (6,799) (18,709)
Pro forma tax adjustments.............................. (137) (1,436) 779
------- ------- --------
Pro forma net loss..................................... (3,657) (5,363) (19,488)
Accretive dividend (Note 11)........................... -- 800 --
------- ------- --------
Pro forma net loss available to common stockholders.... $(3,657) $(6,163) $(19,488)
======= ======= ========
Net loss available to common stockholders per share:
Basic and diluted.................................... $ (0.14) $ (0.39) $ (1.21)
Pro forma net loss available to common stockholders per
share (Note 2):
Pro forma basic loss before extraordinary item....... $ (0.03) $ (0.32) $ (1.26)
Extraordinary item, net of tax....................... (0.10) -- --
------- ------- --------
Pro forma basic net loss available to common
stockholders...................................... $ (0.13) $ (0.32) $ (1.26)
======= ======= ========
Weighted average shares outstanding.................... 27,994 19,312 15,523
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 41
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SHARES
----------------------- COMMON ACCRUED STOCK
COMMON TREASURY COMMON TREASURY STOCK STOCK PURCHASE DEFERRED
STOCK STOCK STOCK STOCK ISSUABLE REPURCHASE WARRANT COMPENSATION
------------ -------- ------ -------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at January 31, 1997 (Note
1)................................ 201,391,439 (456,978) $201 $(100) $ -- $(65) $80 $ (64)
Issuance of common stock.......... 1,600,000 -- 2 -- -- -- -- --
Stock repurchase.................. (229,866) -- -- -- -- 65 -- --
Conversion of common stock upon
formation of Company (Note 1)... (191,790,826) 456,978 (192) 100 -- -- -- --
Issuance of common stock, net of
related expense for:
Initial public offering......... 2,800,000 -- 3 -- -- -- -- --
Acquisition of Founding
Companies...................... 1,815,170 -- 2 -- -- -- -- --
Payment of debt and other
obligations.................... 583,432 -- -- -- -- -- -- --
Exercise of warrants............ 222,592 -- -- -- -- -- (80) --
1997 Acquisitions............... 153,496 -- -- -- -- -- -- --
Issuance of stock options and
warrants........................ -- -- -- -- -- -- -- --
Purchase of treasury stock........ -- (42,146) -- (116) -- -- -- --
Amortize deferred compensation.... -- -- -- -- -- -- -- 50
Net loss.......................... -- -- -- -- -- -- -- --
Equity issuances by Pooled
Companies....................... 795,187 -- 1 -- -- -- -- --
Distributions by Pooled
Companies....................... -- -- -- -- -- -- -- --
------------ -------- ---- ----- ------- ---- --- -------
Balance, at December 31, 1997...... 17,340,624 (42,146) 17 (116) -- -- -- (14)
Issuance of common stock, net of
related expense for:
1998 Acquisitions............... 747,094 -- 1 -- -- -- -- --
Private placements.............. 702,644 -- 1 -- -- -- -- --
Exercise of stock options and
warrants....................... 292,282 -- -- -- -- -- -- --
Earnout commitments............. 796,246 -- 1 -- -- -- -- --
Restricted stock award.......... 190,000 -- -- -- -- -- -- (1,140)
Compensatory stock awards......... -- -- -- -- -- -- -- --
Common stock issuable in private
placement....................... -- -- -- -- 1,975 -- -- --
Issuance of stock options and
warrants........................ -- -- -- -- -- -- -- --
Accretive dividend................ -- -- -- -- -- -- -- --
Purchase of treasury stock........ -- (38,740) -- (106) -- -- -- --
Amortize deferred compensation.... -- -- -- -- -- -- -- 71
Net loss.......................... -- -- -- -- -- -- -- --
Distributions and retirements by
Pooled Companies................ (236) -- -- -- -- -- -- --
------------ -------- ---- ----- ------- ---- --- -------
Balance, at December 31, 1998...... 20,068,654 (80,886) 20 (222) 1,975 -- -- (1,083)
Issuance of common stock, net of
related expense for:
Public offering................. 7,127,700 -- 7 -- -- -- -- --
Convertible preferred stock..... 2,000,140 -- 2 -- -- -- -- --
Convertible notes (Note 9)...... 574,892 -- 1 -- -- -- -- --
Private placement............... 160,000 -- -- -- (1,975) -- -- --
Payment of contingent
consideration.................. 123,540 -- -- -- -- -- -- --
Acquisition of assets........... 447,701 -- -- -- -- -- -- --
Exercise of stock options and
warrants....................... 1,423,355 -- 1 -- -- -- -- --
Matching contribution to 401(k)
plan........................... 47,390 -- -- -- -- -- -- --
Tax benefit from the exercise of
options......................... -- -- -- -- -- -- -- --
Amortize deferred compensation.... -- -- -- -- -- -- -- 1,083
Compensatory stock awards......... -- -- -- -- -- -- -- --
Treasury shares retired........... (80,886) 80,886 -- 222 -- -- -- --
Net loss.......................... -- -- -- -- -- -- -- --
Pooled Companies' losses included
in both 1999 and 1998........... -- -- -- -- -- -- -- --
Option exercises and other equity
issuances of Pooled Companies... 487,966 -- 1 -- -- -- -- --
Purchase and cancellation of
shares of Pooled Companies...... (53,353) -- -- -- -- -- -- --
Distributions by Pooled
Companies....................... -- -- -- -- -- -- -- --
------------ -------- ---- ----- ------- ---- --- -------
32,327,099 -- $ 32 $ -- $ -- $ -- $-- $ --
============ ======== ==== ===== ======= ==== === =======
<CAPTION>
ADDITIONAL ACCUMU-
PAID-IN LATED
CAPITAL DEFICIT TOTAL
---------- -------- --------
<S> <C> <C> <C>
Balance, at January 31, 1997 (Note
1)................................ $ 23,173 $(18,522) $ 4,703
Issuance of common stock.......... 278 -- 280
Stock repurchase.................. (65) -- --
Conversion of common stock upon
formation of Company (Note 1)... 58 -- (34)
Issuance of common stock, net of
related expense for:
Initial public offering......... 5,725 -- 5,728
Acquisition of Founding
Companies...................... 4,990 -- 4,992
Payment of debt and other
obligations.................... 1,522 -- 1,522
Exercise of warrants............ 201 -- 121
1997 Acquisitions............... 577 -- 577
Issuance of stock options and
warrants........................ 28 -- 28
Purchase of treasury stock........ -- -- (116)
Amortize deferred compensation.... -- -- 50
Net loss.......................... -- (18,709) (18,709)
Equity issuances by Pooled
Companies....................... 15,008 -- 15,009
Distributions by Pooled
Companies....................... -- (2,885) (2,885)
-------- -------- --------
Balance, at December 31, 1997...... 51,495 (40,116) 11,266
Issuance of common stock, net of
related expense for:
1998 Acquisitions............... 4,158 -- 4,159
Private placements.............. 4,776 -- 4,777
Exercise of stock options and
warrants....................... 315 -- 315
Earnout commitments............. 2,329 -- 2,330
Restricted stock award.......... 1,140 -- --
Compensatory stock awards......... 6,192 -- 6,192
Common stock issuable in private
placement....................... -- -- 1,975
Issuance of stock options and
warrants........................ 1,778 -- 1,778
Accretive dividend................ -- (800) (800)
Purchase of treasury stock........ -- -- (106)
Amortize deferred compensation.... -- -- 71
Net loss.......................... -- (6,799) (6,799)
Distributions and retirements by
Pooled Companies................ (113) (2,273) (2,386)
-------- -------- --------
Balance, at December 31, 1998...... 72,070 (49,988) 22,772
Issuance of common stock, net of
related expense for:
Public offering................. 86,158 -- 86,165
Convertible preferred stock..... 8,489 -- 8,491
Convertible notes (Note 9)...... 8,175 -- 8,176
Private placement............... 1,975 -- --
Payment of contingent
consideration.................. 1,850 -- 1,850
Acquisition of assets........... 7,000 -- 7,000
Exercise of stock options and
warrants....................... 1,878 -- 1,879
Matching contribution to 401(k)
plan........................... 660 -- 660
Tax benefit from the exercise of
options......................... 1,765 -- 1,765
Amortize deferred compensation.... -- -- 1,083
Compensatory stock awards......... 348 -- 348
Treasury shares retired........... (222) -- --
Net loss.......................... -- (3,794) (3,794)
Pooled Companies' losses included
in both 1999 and 1998........... -- 534 534
Option exercises and other equity
issuances of Pooled Companies... 643 -- 644
Purchase and cancellation of
shares of Pooled Companies...... (952) -- (952)
Distributions by Pooled
Companies....................... -- (1,282) (1,282)
-------- -------- --------
$189,837 $(54,530) $135,339
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 42
INFOCURE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
<S> <C> <C> <C>
Operating activities (Note 1):
Net loss................................................ $(3,794) $(6,799) $(18,709)
Adjustments to reconcile net loss to cash flows from
operating activities:
Extraordinary item -- non-cash portion of early
retirement of debt.................................. 4,892 -- --
Purchase of in-process research and development....... -- 9,000 --
Restructuring and other charges....................... 10,681 1,874 13,052
Depreciation and amortization......................... 14,490 6,382 4,401
Allowance for doubtful accounts....................... 3,746 1,630 1,664
Stock-based compensation.............................. 1,431 6,263 78
Tax benefit from the exercise of options.............. 1,765 -- --
Contribution to 401(k) plan made with common stock.... 660 -- --
Reduction (increase) in cash value of life
insurance........................................... 114 (142) 529
Loss on disposal of property and equipment............ -- -- 418
Deferred income taxes................................. (1,381) (2,370) (7,279)
Pooled companies' losses included in both 1999 and
1998................................................ 534 -- --
Changes in current assets and liabilities -- net of
effects of acquisitions:
Accounts receivable................................... (12,900) (8,432) (4,461)
Refundable income taxes............................... (3,256) -- --
Inventory, prepaid expenses and other current
assets.............................................. 386 (935) (503)
Accounts payable and accrued expenses................. (1,322) 2,234 (1,404)
Deferred revenue and customer deposits................ (6,811) (1,346) 3,760
------- ------- --------
Net cash flows from operating activities......... 9,235 7,359 (8,454)
------- ------- --------
Investing activities:
Net cash paid for Founding Companies.................... -- -- (3,745)
Net cash paid for other acquisitions.................... (20,007) (60,161) (6,297)
Property and equipment expenditures..................... (5,641) (4,007) (2,618)
Cash paid for other intangible assets................... (13,534) (3,709) (76)
Other................................................... (1,053) 319 132
------- ------- --------
Net cash flows used in investing activities...... (40,235) (67,558) (12,604)
------- ------- --------
Financing activities:
Proceeds from issuance of common stock.................. 86,165 6,752 6,008
Proceeds from issuance of convertible preferred stock... -- 7,820 --
Proceeds from exercise of options and warrants.......... 1,879 315 121
Purchase of treasury stock.............................. -- (106) (116)
Distributions paid by pooled companies.................. (1,282) (2,386) (2,885)
Option exercises and other equity issuances of pooled
companies............................................. 644 -- 15,009
Purchase and cancellation of shares of pooled
companies............................................. (952) -- --
Borrowings under credit facility and other long-term
debt.................................................. 29,937 55,364 13,913
Payment of loan costs................................... (1,038) (2,519) (325)
Principal payments on long-term debt.................... (75,745) (1,325) (8,189)
Net (repayment) proceeds of other notes payable......... (2,074) (209) 495
------- ------- --------
Net cash flows from financing activities......... 37,534 63,706 24,031
------- ------- --------
Net increase in cash and cash equivalents................. 6,534 3,507 2,973
Cash and cash equivalents, beginning of period............ 10,302 6,795 3,822
------- ------- --------
Cash and cash equivalents, end of period.................. $16,836 $10,302 $ 6,795
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 43
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 completed an initial
public offering of its common stock (the "Initial Public 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 upon
consummation of the Initial Public Offering and is considered the predecessor
company to InfoCure and the accounting acquirer of all the Founding Companies.
All outstanding shares of AMC were converted into approximately 6.0 million
shares of InfoCure common stock concurrently with the consummation of the
Initial Public Offering. The aggregate consideration paid for the Founding
Companies was approximately $3.7 million in cash and 1.8 million shares of
common stock for an aggregate value of $8.7 million, including fees and other
acquisition related costs.
In 1997, subsequent to the consummation of the Initial Public Offering and
the acquisition of the Founding Companies, InfoCure acquired substantially all
of the assets or all of 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");(v) HCC Communications, Inc. ("HCC") (which
acquisition had been made by an acquired company -- see "1999 Mergers" below)
and (vi) 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; OPMS was acquired with effect from
December 1, 1997 and HCC was acquired December 11, 1997 (collectively, the "1997
Acquisitions"). Aggregate consideration for the 1997 Acquisitions was
approximately 153,000 shares of common stock and $13.3 million cash and debt,
for an aggregate value of $13.9 million.
In 1998, InfoCure acquired substantially all of the assets, subject to the
assumption of certain liabilities, of Micro-Software Designs, Inc. ("MDI") and
the 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 (collectively, the "1998 Acquisitions")was
approximately 747,000 shares of common stock and $73.0 million cash and debt,
for an aggregate value of $77.1 million.
The acquisitions of the Founding Companies, the 1997 Acquisitions and the
1998 Acquisitions were accounted for using the purchase method of accounting.
In December 1998, InfoCure completed a merger with Radiology Management
Systems, Inc. ("RADMAN"). This transaction involved exchange of all of RADMAN's
outstanding equity interests for approximately 994,000 shares of InfoCure common
stock and was accounted for as a pooling of interests (the "RADMAN Merger").
In 1999, InfoCure acquired substantially all of the assets, subject to the
assumption of certain liabilities, of Cobb Dental Systems, Inc. ("Cobb");
Strategicare, Inc. and its wholly-owned subsidiary, DISC Computer Systems, Inc.
("DISC"); the dental practice management systems business of National Data
Corporation ("NDC Dental") and the PracticeWorks division of Zila, Inc.
("PracticeWorks") (collectively, the "1999 Purchase Acquisitions"). In
conjunction with the PracticeWorks acquisition, InfoCure also purchased the
rights to its electronic claims business which had been previously held by
another entity. These acquisitions were effective from January 1, 1999 with
respect to Cobb, June 1, 1999 with respect to DISC and
F-8
<PAGE> 44
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 1, 1999 for NDC Dental and PracticeWorks. Aggregate consideration for
these acquisitions was approximately 108,000 shares of common stock and $20.0
million in cash, for an aggregate value of $22.0 million. The Cobb acquisition
was made by an acquired company -- see "1999 Mergers" below. All of these
transactions were accounted for using the purchase method of accounting.
For the period February 12, 1999 to December 31, 1999, InfoCure completed
pooling of interests mergers (the "1999 Mergers") with eleven businesses (the
"1999 Pooled Companies") as indicated in the table below:
<TABLE>
<CAPTION>
SHARES OF
INFOCURE
COMPANY ISSUED CLOSING DATE
- ------- --------- ------------
<S> <C> <C>
Macon Systems Management, LLC, the parent of Medical
Software Management, Inc. ("MSM")................. 166,464 February 12, 1999
OMSystems, Inc.("OMS").............................. 2,287,998 February 18, 1999
Ardsley, M.I.S., Inc.("Orthoware").................. 209,016 August 17, 1999
Medfax Corporation ("Medfax")....................... 696,333 August 30, 1999
Scientific Data Management, Inc. ("SDM")............ 280,243 August 31, 1999
Datamedic Holding Corp. ("Datamedic")............... 1,088,674 November 9, 1999
Kevin Kozlowski, Inc. d/b/a Human Touch Software
("Human Touch")................................... 255,247 December 20, 1999
Unident Corporation ("Unident")..................... 357,796 December 21, 1999
InfoLogic, Inc. ("InfoLogic")....................... 102,096 December 21, 1999
Prism Data Systems, Inc. ("Prism").................. 208,544 December 29, 1999
CDL Healthcare Systems, Inc. ("CDL")................ 109,658 December 30, 1999
</TABLE>
The accompanying consolidated financial statements give retroactive effect
to the RADMAN Merger completed in 1998 and the 1999 Mergers because such mergers
have been accounted for as poolings of interests. Accordingly, the statements of
financial position, results of operations and cash flows included herein are
presented as if the combining companies had been consolidated for all periods
presented and the consolidated statements of stockholders' equity reflect the
accounts of InfoCure as if the additional common stock issued in connection with
the RADMAN Merger and the 1999 Mergers had been issued for all periods
presented. Additionally, all share and per share amounts have been adjusted
retroactively for the effect of a 2-for-1 stock split effective August 19, 1999.
Certain of the 1999 Pooled Companies had fiscal years that differed from
InfoCure's. Therefore the consolidated balance sheets as of December 31, 1998
and 1997 reflect the combination of InfoCure's balance sheets as of these dates
with the balance sheets of the 1999 Pooled Companies as of dates which most
closely correspond thereto. The consolidated statements of operations results
for the year ended December 31, 1998 and the eleven months ended December 31,
1997 reflect the combination of InfoCure's results for these periods with the
results of each of the 1999 Pooled Companies for the most closely comparable
periods. As of and for the year ended December 31, 1999, all of the 1999 Pooled
Companies' balance sheets and operations have been restated to coincide with
InfoCure's year end (Note 3).
The consolidated financial statements include the accounts of InfoCure and
all of its wholly-owned subsidiaries (collectively the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation. The Company changed its fiscal reporting period to December 31
effective February 1, 1997. For the eleven month period ended December 31, 1997,
the accompanying consolidated financial statements include AMC (InfoCure's
predecessor) and its subsidiaries, RADMAN, ICS and HCD and the 1999 Pooled
Companies, for the period from February 1, 1997; the Founding Companies for the
period from July 11, 1997, and the 1997 Acquisitions from their respective dates
of acquisition.
F-9
<PAGE> 45
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
InfoCure develops and markets practice management software products and
services to targeted healthcare practice specialties throughout the United
States. The Company generally does not require collateral for credit extended to
its customers but historically has not experienced any significant losses
related to individual customers, classes of customers or groups of customers in
any geographical area. In the fourth quarter of 1999, InfoCure decided to
restructure its business into a medical and a dental division, changed its
product strategy to begin development of ASP-delivered products and Internet
solutions, decided to transition to a subscription pricing model in connection
with its change in product strategy, and completed six acquisitions. These
changes in organization, product strategy and the pricing model have impacted
certain of the Company's accounting policies as described herein and have caused
the Company to evaluate the carrying value of certain assets and a restructuring
of its operations to position the Company to maximize its new business model
(Notes 3 and 5).
Revenue Recognition
Revenue from software sales is recognized when all shipment obligations
have been met, fees are fixed and determinable, collection of the sale proceeds
is deemed probable and persuasive evidence that an agreement exists. Revenue
from hardware sales is 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
Cash and cash equivalents include all highly liquid investments with
initial maturity dates of no more than three months.
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, including equipment under capital leases, are
stated at the lower of the fair value or cost. Depreciation is computed over the
estimated useful lives of the related assets using both straight-line and
accelerated methods for financial reporting and primarily accelerated methods
for income tax purposes. Substantial betterments to property and equipment are
capitalized and repairs and maintenance are expensed as incurred.
Capitalized Software Development 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
F-10
<PAGE> 46
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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). As a result of the Company's change
in product strategy to focus on development of ASP-delivered products, the
Company recorded a write-down of its investment in capitalized software in the
amount of $5.6 million in 1999. A write-down of capitalized software in the
amount of $1.5 million was also recorded in 1997 (Note 5).
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 its estimated useful life. Prior to the fourth quarter
of 1999, goodwill was amortized over a 15-year estimated useful life, which was
reflective of management's analysis that goodwill is derived from the historical
and estimated future lives of its customer relationships, the longevity and
continuing use of its core products and the relatively minor impact of
technological obsolescence on these core products. As a result of the Company's
change in product strategy to focus on development of ASP-delivered products and
Internet solutions, its related change to a subscription pricing model and
business model and the current rate of change within the industry, management
now estimates that the useful life of its remaining goodwill will be three
years.
Other intangible assets also include (1) purchased technology, to be
amortized over four years, (2) customer lists, amortized over three years and
(3) deferred loan costs, amortized over the life of the respective loans at
rates which approximate the interest method.
Long-lived Assets
Long-lived assets, such as goodwill and property and equipment are
periodically evaluated for impairment when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable through
the estimated undiscounted future cash flows resulting from the use of the
assets. When any such impairment exists, the related assets will be written down
to fair value. A write-down of assets due to impairment in the amount of $6.4
million was required for the eleven months ended December 31, 1997 (Note 5).
Change in Accounting Estimates
In view of recent competitive developments, the rapid pace of change
engendered by the encroachment of Internet companies into the marketplace and
the Company's change in product strategy to focus on development of
ASP-delivered products and Internet solutions and the related change to a
subscription pricing model, management has reassessed the useful life of
goodwill. While in management's opinion, there is currently no impairment in the
carrying value of this long-lived intangible asset (based on an analysis of
undiscounted future cash flows), management has determined that the useful life
of goodwill should be shortened substantially to be more reflective of the
current rate of technological change and competitive conditions. Accordingly,
management changed the estimated useful life of goodwill from an original life
of 15 years to a remaining life of three years, which change has been applied
prospectively from the fourth quarter of 1999. This change in accounting
estimate increased amortization expense by approximately $3.5 million (or $0.08
per share net of estimated income taxes) in 1999.
Additionally, based on the Company's analysis of current business and
market conditions, its cash collection experience and, in light of the change to
a subscription pricing model announced in the fourth quarter of 1999, management
also increased the allowance for doubtful accounts. This change of accounting
estimate, recorded in the fourth quarter of 1999, increased selling, general and
administrative expenses by $3.0 million (or $0.06 per share net of estimated
income taxes) in 1999.
F-11
<PAGE> 47
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock-based Compensation Plans
The Company accounts for its stock-based compensation plans under the
provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees." In Note 11, the Company presents the disclosure
requirements of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-based Compensation." SFAS No. 123 requires that companies
which elect not to account for stock-based compensation as prescribed by that
statement shall disclose, among other things, the pro forma effects on net loss
and basic net loss per share as if SFAS No. 123 had been adopted.
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 acquired operations into
existing Company facilities, 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 Issue
("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in Restructuring)."
Pro Forma Basic Net Loss Available to Common Stockholders Per Share
Pro forma basic net loss available to common stockholders per share is
presented in accordance with SFAS No. 128, "Earnings Per Share." Pro forma basic
net loss available to common stockholders per share is based on the weighted
average number of shares of common stock outstanding during the period. Pro
forma tax adjustments have been recorded to reflect the impact of income taxes
which would have been applicable to earnings of certain Pooled Companies which
were previously pass-through entities for tax purposes (Note 12). The 1999
actual net loss available to common stockholders before extraordinary item
amounted to $0.04 per share, the loss attributable to the extraordinary item
amounted to $0.10 per share; and the net loss available to common stockholders
after extraordinary item amounted to $0.14 per share on a basic and diluted
basis. Pro forma diluted net loss available to common stockholders per share is
not presented because it is antidilutive. In periods in which they have a
dilutive effect, the common shares issuable upon exercise of stock options,
warrants and similar convertible dilutive instruments will be included in the
pro forma diluted earnings per share calculation. Potentially dilutive shares
totaled approximately 4.1 million, 3.6 million and 284,000 shares for the years
ended December 31, 1999 and 1998 and the eleven months ended December 31, 1997.
All periods presented have been restated to reflect shares issued in the
1999 Mergers and the effect of the Company's 2-for-1 stock split, effective
August 19, 1999.
Management 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.
F-12
<PAGE> 48
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassification
Certain prior year amounts have been reclassified to conform with the
current year presentation.
New Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This statement
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. SOP No. 98-1 was effective in 1999. Adoption of this statement did
not have a significant impact on the Company's financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. 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, 2001, to affect its financial statements.
3. BUSINESS COMBINATIONS
Acquisitions Accounted for Using the Purchase Method of Accounting
As described in Note 1, the Company acquired the six Founding Companies
upon consummation of the Initial Public Offering, and subsequently completed the
1997 Acquisitions, 1998 Acquisitions and the 1999 Acquisitions.
F-13
<PAGE> 49
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>
1999
PURCHASE 1998 1997
ACQUISITIONS ACQUISITIONS ACQUISITIONS
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable................................. $ 2,504 $10,642 $ 3,218
Inventory........................................... 170 1,426 488
Prepaid expenses.................................... 112 347 231
Property and equipment.............................. 1,059 4,832 1,227
Goodwill............................................ 21,720 56,149 23,215
Capitalized software................................ 189 420 2,118
Other assets........................................ 318 707 602
Deferred revenue.................................... (1,222) (4,942) (3,171)
Accounts payable and accrued expenses............... (2,735) (693) (933)
Notes payable....................................... (6) -- (1,650)
Other liabilities................................... (102) (742) (2,744)
------- ------- -------
Net assets acquired....................... $22,007 $68,146 $22,601
Purchased research and development.................. -- 9,000 --
------- ------- -------
$22,007 $77,146 $22,601
======= ======= =======
These acquisitions were funded as follows:
Common stock........................................ $ 2,000 $ 4,159 $ 5,569
Notes payable and other payables.................... -- 12,826 6,990
Cash................................................ 20,007 60,161 10,042
------- ------- -------
$22,007 $77,146 $22,601
======= ======= =======
</TABLE>
Certain of the purchase acquisition agreements provided for additional
consideration based on the acquired company attaining specified revenue or
operating income goals. Maximum contingent consideration payable with respect to
the Founding Companies originally aggregated $4.7 million. Maximum determinable
contingent consideration aggregated $2.0 million for the 1999 Purchase
Acquisitions and $12.4 million for the 1998 Acquisitions. As more fully
described in Note 5, portions of the contingent consideration related to the
Founding Companies and the 1998 Acquisitions were deemed earned and payable in
connection with the Company's restructuring plans. Accordingly, restructuring
costs for the years ended December 31, 1999 and 1998 and the eleven months ended
December 31, 1997 included approximately $700,000, $750,000 and $2.6 million,
respectively, in settlement of estimated contingent consideration obligations
related to the affected companies.
In 1999 and 1998, contingent consideration of approximately $10.9 and $1.1
million, respectively, was earned and recorded as additional purchase price
pursuant to the terms of the original purchase agreements. Of this amount,
approximately $6.5 million was paid in 1999 and $5.5 million is included in
accrued expenses at December 31, 1999. As of December 31, 1999, maximum
contingent consideration payable based on future performance is $2.0 million.
In September 1999, InfoCure exercised its option to convert $7.5 million of
the indebtedness given to the seller in connection with the HSD acquisition
(Note 9) into shares of common stock of InfoCure and in the fourth quarter of
1999 finalized certain asserted claims and other outstanding issues regarding
the acquisition. In connection therewith, the seller agreed to reduce the
remaining indebtedness owed to it by approximately $1.3 million. The Company
recorded certain adjustments to the goodwill arising from this purchase
acquisition to reflect settlement of these claims and the related purchase price
adjustment.
F-14
<PAGE> 50
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma information presents the consolidated
results of operations of the Company as if each of 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
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
PRO FORMA AMOUNTS 1999 1998 1997
- ----------------- ------------ ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue.................................................. $216,552 $187,637 $146,011
Pro forma net loss available to common stockholders...... (4,271) (5,409) (28,931)
Pro forma net loss available to common stockholders
per share -- after extraordinary item:
Basic and diluted................................. $ (0.15) $ (0.28) $ (1.86)
</TABLE>
Acquisitions Accounted for Using the Pooling of Interests Method of Accounting
As described in Note 1, the Company merged with RADMAN in December 1998 in
an acquisition accounted for as a pooling of interests. Accordingly, the
accompanying consolidated financial statements have previously been restated to
include the financial position, results of operations and cash flows of RADMAN
for all periods presented.
During 1999, the Company completed the 1999 Mergers, which provided for the
exchange of substantially all of the outstanding equity interest of each entity
for shares of InfoCure common stock and are accounted for as poolings of
interests (Note 1). Accordingly, the accompanying consolidated financial
statements have been restated for all periods presented to include the financial
results of the combined companies.
F-15
<PAGE> 51
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents a reconciliation of revenue, loss before
extraordinary item and pro forma net loss available to common stockholders
previously reported by the Company to those presented in the accompanying
consolidated financial statements.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
InfoCure.......................................... $130,150 $ 63,724 $ 18,274
OMS............................................... 18,651 14,993 12,325
MSM............................................... 3,734 3,120 4,096
Orthoware......................................... 2,330 1,800 1,301
Medfax............................................ 7,676 5,517 5,451
SDM............................................... 4,955 4,626 4,552
Datamedic......................................... 17,022 20,832 19,191
Human Touch....................................... 2,288 1,007 798
Unident........................................... 6,518 4,510 353
InfoLogic......................................... 2,566 2,362 1,809
Prism............................................. 3,499 4,355 4,295
CDL............................................... 4,245 2,999 2,784
-------- -------- --------
$203,634 $129,845 $ 75,229
======== ======== ========
Income (loss) before extraordinary item:
InfoCure.......................................... $ 3,805 $ (1,861) $ (8,731)
OMS............................................... 1,623 (3,296) 1,703
MSM............................................... (106) 266 49
Orthoware......................................... 260 (73) (2)
Medfax............................................ 643 (729) (560)
SDM............................................... 314 47 166
Datamedic......................................... (4,599) (1,069) (11,237)
Human Touch....................................... 34 (1) (17)
Unident........................................... (1,545) (163) (27)
InfoLogic......................................... (1,231) 16 11
Prism............................................. (636) 32 32
CDL............................................... 579 32 (96)
-------- -------- --------
$ (859) $ (6,799) $(18,709)
======== ======== ========
</TABLE>
F-16
<PAGE> 52
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Pro forma net income (loss) available to common
stockholders -- after extraordinary item:
InfoCure.......................................... $ 870 $ (2,661) $ (8,731)
OMS............................................... 1,623 (3,296) 1,703
MSM............................................... (106) 266 49
Orthoware......................................... 260 (73) (2)
Medfax............................................ 643 (729) (560)
SDM............................................... 314 47 166
Datamedic......................................... (4,599) (1,069) (11,237)
Human Touch....................................... 34 (1) (17)
Unident........................................... (1,545) (163) (27)
InfoLogic......................................... (1,231) 16 11
Prism............................................. (636) 32 32
CDL............................................... 579 32 (96)
Pro forma tax adjustments......................... 137 1,436 (779)
-------- -------- --------
$ (3,657) $ (6,163) $(19,488)
======== ======== ========
</TABLE>
Certain of the 1999 Pooled Companies had fiscal years that differed from
that of InfoCure. Therefore, the consolidated balance sheet as of December 31,
1998 reflects the combination of InfoCure's balance sheet as of this date with
the balance sheets of the 1999 Pooled Companies as of dates which most closely
correspond thereto. The consolidated statements of operations for the year ended
December 31, 1998 and the eleven months ended December 31, 1997 reflect the
combination of InfoCure's results for these periods with the results of each of
the 1999 Pooled Companies for the most closely comparable periods. As of and for
the year ended December 31, 1999, the 1999 Pooled Companies' balance sheets and
statements of operations have been restated to coincide with InfoCure's year
end. As a result, certain of the 1999 Pooled Companies' operations are included
in both 1999 and 1998. The net revenue and net loss for such duplicated periods
was approximately $5.4 million and $534,000, respectively.
The Company incurred costs of approximately $3.8 million in completing the
1999 Mergers. Such costs consisted principally of professional fees and related
transaction costs.
4. PURCHASED RESEARCH AND DEVELOPMENT
Through its 1998 acquisition of HSD, the Company acquired three in-process
physician practice management system research and development projects. The
Company assigned an aggregate value of $9.0 million to the projects, based on
the results of an independent appraisal. The appraisal value was determined
using a discounted cash flow model with a risk-adjusted discount rate of 28%.
The valuation also incorporated a stage of completion methodology where the
value was adjusted based on the technology's percentage of completion. Based on
the appraisal results, the three projects had an aggregate pre-acquisition cost
of $9.9 million, an estimate of $900,000 cost to complete and were approximately
90% complete as of the acquisition date. As of the acquisition date,
technological feasibility had not been established and there were no alternative
future uses for the projects. Therefore, the Company expensed the $9.0 million
related to these in-process research and development projects.
F-17
<PAGE> 53
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. RESTRUCTURING AND OTHER CHARGES
Components of restructuring and other charges are as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
COST RELATED TO 1999 1998 1997
- --------------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Write-off of goodwill............................ $ -- $ -- $ 6,360
Write-off of capitalized software development
costs.......................................... 5,617 -- 1,461
Facility closure and consolidation............... 1,800 -- 461
Compensation costs for severance and other
termination benefits........................... 1,467 1,124 1,916
Incremental costs associated with completion of
discontinued customer contracts................ 681 -- --
Contingent consideration earned or deemed payable
to former stockholders of entities affected by
the consolidation and restructuring............ 700 750 2,558
Other asset write-downs and costs................ 416 -- 296
------- ------ -------
Total restructuring and other
charges.............................. $10,681 $1,874 $13,052
======= ====== =======
</TABLE>
The 1999 Plan. In the fourth quarter of 1999, the Company decided to
restructure its business into medical and dental divisions, changed its product
strategy to begin development of ASP-delivered products and Internet solutions,
decided to transition to a subscription pricing model in connection with its
change in product strategy, and completed six acquisitions. Concurrently,
management committed to a plan of restructuring and reorganization, expected to
be completed in the second quarter of 2000, to consolidate facilities and
eliminate staffing redundancies involving approximately 80 employees.
In connection with the change in product strategy to focus on development
of ASP-delivered products and in connection with the restructuring plan,
management also re-evaluated the carrying value of its investment in capitalized
software. As a result, the Company recorded as a part of restructuring and other
charges for 1999, a $5.6 million write-off of capitalized software.
Staffing reductions were finalized for the new dental division and
communicated in the first quarter of 2000. Accordingly, compensation costs,
including severance and other termination benefits aggregating approximately
$1.0 million are expected to be recorded in the first quarter of 2000 in
accordance with the provisions of EITF No. 94-3.
The 1997 Plans. 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 leverage more
effectively present and planned acquisitions, streamline its offering of
products and services and respond more effectively to changing market
conditions. In connection therewith, management also re-evaluated 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 pending new acquisitions (Notes 1 and 3),
necessitated a write-down of approximately $7.8 million as follows: (1) $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 (2) $1.5 million of capitalized software related to products whose
future utility was diminished based on market conditions. The estimated fair
values of these
F-18
<PAGE> 54
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The Company also recorded costs and accrued liabilities to close redundant
facilities, cancel leases and other executory contracts and recognize contingent
consideration earned or deemed payable under terms of certain acquisition
agreements for acquired companies affected by the consolidation and
restructuring.
The 1997 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 for approximately 50 employees, 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.
Datamedic, one of the 1999 Pooled Companies, underwent a plan of
reorganization in 1997. Under provisions of this plan staff reductions and
realignment were effected to reduce costs and improve profitability.
Restructuring costs of approximately $1.9 million were recorded to provide for
severance and other costs associated with the staff reductions.
A description of the type and amount of restructuring costs and other
charges recorded at the commitment date and subsequently incurred for all of the
restructurings discussed above are as follows:
<TABLE>
<CAPTION>
RESERVES
ESTABLISHED RESERVE RESERVE
ELEVEN MONTHS COSTS BALANCE COSTS BALANCE
ENDED APPLIED DECEMBER APPLIED DECEMBER
DECEMBER 31, AGAINST 31, RESERVE AGAINST 31, RESERVE
DESCRIPTION 1997 RESERVES 1997 ADJUSTMENTS RESERVES 1998 ADJUSTMENTS
- ----------- ------------- -------- -------- ----------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Write-off of goodwill........ $ 6,360 $(6,360) $ -- $ -- $ -- $ -- $ --
Write-off of capitalized
software development
costs...................... 1,461 (1,461) -- -- -- -- 5,617
Facility closure,
consolidation and lease
termination costs.......... 461 -- 461 -- (178) 283 1,800
Contingent consideration
earned or deemed payable to
former stockholders of
entities affected by the
consolidation and
restructuring.............. 2,558 -- 2,558 750 (3,308) -- 700
Compensation costs for
severance and other
termination benefits....... 1,916 (316) 1,600 1,124 (2,724) -- 1,467
Incremental costs associated
with completion of
discontinued customer
contracts.................. -- -- -- -- -- -- 681
Other asset write-downs and
costs...................... 296 (143) 153 -- (153) -- 416
------- ------- ------ ------ ------- ---- -------
$13,052 $(8,280) $4,772 $1,874 $(6,363) $283 $10,681
======= ======= ====== ====== ======= ==== =======
<CAPTION>
RESERVE
COSTS BALANCE
APPLIED DECEMBER
AGAINST 31,
DESCRIPTION RESERVES 1999
- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C>
Write-off of goodwill........ $ -- $ --
Write-off of capitalized
software development
costs...................... (5,617) --
Facility closure,
consolidation and lease
termination costs.......... (649) 1,434
Contingent consideration
earned or deemed payable to
former stockholders of
entities affected by the
consolidation and
restructuring.............. (350) 350
Compensation costs for
severance and other
termination benefits....... (952) 515
Incremental costs associated
with completion of
discontinued customer
contracts.................. (446) 235
Other asset write-downs and
costs...................... (416) --
------- ------
$(8,430) $2,534
======= ======
</TABLE>
The terminated leases have various expiration dates through 2002 and the
other costs will be paid in the first half of 2000.
F-19
<PAGE> 55
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY AND EQUIPMENT
Major classes of property and equipment consisted of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES DECEMBER 31, DECEMBER 31,
(YEARS) 1999 1998
--------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land................................................ -- $ 1,300 $ --
Buildings........................................... 40 8,885 2,671
Office and computer equipment....................... 3-5 15,337 11,612
Furniture and fixtures.............................. 5-7 3,014 2,875
Equipment under capital lease obligations........... 3-5 2,831 2,167
Leasehold improvements and other.................... 3-5 2,405 1,439
------- -------
33,772 20,764
Less accumulated depreciation....................... 9,708 7,878
------- -------
$24,064 $12,886
======= =======
</TABLE>
Depreciation expense was approximately $4.0, $2.5 and $1.7 million for the
years ended December 31, 1999 and 1998 and the eleven months ended December 31,
1997, respectively. In connection with the restructuring plans described in Note
5, the Company disposed of property and equipment, primarily office and computer
equipment, with a net book value of approximately $188,000 and $155,000 in 1999
and 1997, respectively.
7. OTHER INTANGIBLE ASSETS
Other intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Purchased technology........................................ $6,530 $ --
Customer lists.............................................. 1,915 1,915
Loan costs.................................................. 1,055 4,656
Capitalized software development costs...................... 1,118 3,671
Capitalized costs of future acquisitions.................... 300 402
Other....................................................... 815 915
------ -------
11,733 11,559
Less accumulated amortization............................... 2,551 3,317
------ -------
$9,182 $ 8,242
====== =======
</TABLE>
In the fourth quarter of 1999, the Company acquired technology for
deliverying practice management applications in an ASP delivery model in
exchange for cash and common stock aggregating approximately $6.5 million. This
technology will be utilized by the Company's research and development staff in
the development of its own ASP-delivered products. Costs to complete this
technology will be capitalized until products are ready for general release and
then will be amortized over the estimated useful life of the related products.
As described in Note 5, approximately $5.6 million of capitalized software was
written off in 1999 as a result of this change in product strategy. The
remaining capitalized software development costs relate to products not being
replaced, primarily those related to various e-commerce applications.
F-20
<PAGE> 56
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amortization of capitalized software charged to operations was
approximately $777,000, $285,000 and $1.2 million for the years ended December
31, 1999 and 1998 and the eleven months ended December 31, 1997, respectively.
As discussed in Note 9, approximately $4.9 million of unamortized loan costs
were written off in conjunction with the April 1999 prepayment of the Company's
acquisition credit facility.
8. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Additional purchase price consideration..................... $ 5,500 $1,100
Compensation................................................ 4,923 3,437
Interest.................................................... 1,114 1,730
Professional fees........................................... 799 169
Taxes, other than income.................................... 531 1,101
Other....................................................... 2,439 1,057
------- ------
$15,306 $8,594
======= ======
</TABLE>
9. NOTES PAYABLE AND LONG-TERM DEBT
Notes Payable
As of December 31, 1999, the Company had a $1.2 million note payable due
December 31, 2000 together with interest at 5% per annum. This amount represents
the remaining balance due the seller in connection with the HSD acquisition
following conversion of a portion of the total indebtedness and a reduction in
the total obligation negotiated by the parties in settlement of the purchase
price (see below).
As of December 31, 1998, the Company had a $2.0 million short-term note
payable with interest at 12% per annum given in connection with an acquisition.
This note was repaid in 1999.
Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Notes payable, FINOVA Capital Corporation ("FINOVA") (a).... $36,785 $68,351
Subordinated notes payable, remainder of purchase price for
acquisitions (b).......................................... -- 10,604
Subordinated notes payable to stockholders; interest rates
between 7% and 10% per annum; paid in 1999................ -- 180
Other....................................................... 5,087 8,570
------- -------
41,872 87,705
Less current portion........................................ 694 14,809
------- -------
$41,178 $72,896
======= =======
</TABLE>
(a) Under provisions of an agreement dated August 11, 1999, the Company has a
$100 million credit facility with FINOVA including a revolving loan for the
funding of the acquisition program and working capital needs and a term loan
for certain real estate purchases. The credit facility has a five-year term
and is collateralized by substantially all of the Company's assets and the
accounts receivable, cash flows and
F-21
<PAGE> 57
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets of any companies acquired in the future. Interest accrues at an
annual rate based, at the Company's option, on prime plus 0.5% to 1.25% or
LIBOR plus 2.0% to 2.75%, depending on the achievement of certain debt
service ratios. At December 31, 1999, the rate was 9.0%. The agreement
provides for mandatory prepayments based upon achieving certain defined
levels of cash flows and contains certain restrictive covenants.
The Company's previous credit facility was repaid in April 1999 with
proceeds from the sale of common stock. In connection with this early
retirement of debt the Company recognized an extraordinary item for the
unamortized portion of the loan costs and prepayment costs which aggregated
approximately $4.9 million and, net of estimated tax effect, approximately
$2.9 million or $0.10 per share.
(b) The subordinated notes payable for the remainder of purchase price for
acquisitions consisted of two notes at December 31, 1998.
One note, for $10.0 million given in connection with the purchase of HSD,
was convertible, at the Company's option during the first year of the term,
into shares of common stock at a rate based on the market value of the
common stock. In September 1999, the Company gave notice of its intent to
convert $7.5 million of this note and issued approximately 373,000 shares in
connection therewith. Terms of the conversion option provided that, in the
event the conversion shares are subsequently sold at a price below the
conversion price, the Company is obligated to pay the difference either in
cash or by the issuance of additional shares. The shares were in fact sold
at a lower price and, at December 31, 1999, the Company's obligation under
the price protection feature was approximately $1.7 million. The form of
settlement of this amount has not yet been determined. Of the remaining
balance due under the original note, approximately $1.2 million was
exchanged for a 5% note payable due December 2000 and the balance forgiven
by the holder in settlement of certain asserted claims and other issues
associated with the purchase.
The remaining $604,000 note payable was converted into approximately 202,000
shares of common stock in accordance with its original terms.
As of December 31, 1999, future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ------
(IN THOUSANDS)
<S> <C>
2000........................................................ $ 694
2001........................................................ 3,006
2002........................................................ 7,025
2003........................................................ 7,283
2004........................................................ 22,973
Thereafter.................................................. 891
-------
Total............................................. $41,872
=======
</TABLE>
F-22
<PAGE> 58
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS
Operating Leases
The Company leases office facilities and certain equipment under operating
leases having original terms ranging from one to seven years. 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
---- ------
(IN THOUSANDS)
<S> <C>
2000........................................................ $ 4,394
2001........................................................ 3,804
2002........................................................ 3,402
2003........................................................ 1,529
2004........................................................ 386
-------
Total............................................. $13,515
=======
</TABLE>
Rent expense was approximately $3.9, $3.0 and $2.0 million for the years
ended December 31, 1999 and 1998 and the eleven months ended December 31, 1997,
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 1997 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 years
ended December 31, 1999 and 1998 and the eleven months ended December 31, 1997
were approximately $1.7 million, $512,000 and $100,000, respectively. The
contribution for the year ended December 31, 1998 was made in common stock
during 1999.
11. STOCKHOLDERS' EQUITY
Institutional Investor
Under the terms of a private placement agreement with an institutional
investor (the "Investor"), the Company can require that the Investor purchase
shares of the Company's common stock (the "Put Options"). 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 in the agreement.
The Investor has committed to invest up to $10.0 million. The Company has
exercised $7.0 million in three installments from September 28 through December
31, 1998. The most recent installment, for $2.0 million, was initiated in
December 1998 and closed in January 1999. A total of 862,644 shares have been
issued pursuant to the Put Options.
The Company also granted the Investor warrants to acquire 200,000 shares of
common stock (see below).
F-23
<PAGE> 59
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Upon completion of the Company's April 1999
stock offering, the preferred stock was automatically converted into shares of
common stock.
The preferred stock was immediately convertible at the date of original
issuance. In connection with this 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.
Stock Compensation Plans
The Company has stock option plans that provide for the grant of incentive
and nonqualified options to purchase the Company's common stock to selected
officers, other key employees, directors, and consultants. These plans include
the InfoCure Corporation 1996 Stock Option Plan, the InfoCure Corporation
Length-of-Service Nonqualified Stock Option Plan, and the InfoCure Corporation
Directors Stock Option Plan. The Company has also assumed the stock options of
AMC, its predecessor, which were outstanding at July 10, 1997 and the
outstanding options of RADMAN and the 1999 Pooled Companies. Such options were
converted at the applicable rate used to issue the Company's common stock in the
mergers.
Under the InfoCure Corporation 1996 Stock Option Plan, 6.0 million 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% stockholders).
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, 1.0 million 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, 200,000 shares
of common stock of the Company have been reserved for issuance as nonqualified
stock options to non-employee directors of the Company. Upon appointment to the
Board of Directors, a director receives an option grant of 20,000 shares and may
receive an additional option grant of 5,000 shares on each anniversary date. One
half of the options granted pursuant to this plan vest after one year of service
following the grant date and the other 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, 1999, there
are 300,000 shares of common stock reserved for issuance under this plan.
SFAS No. 123, "Accounting for Stock-Based Compensation," 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 APB 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
F-24
<PAGE> 60
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, the Company expects 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 the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, it
is management's opinion that the existing models do not necessarily provide a
reliable measure of the fair value of its employee stock options. Under the
intrinsic value method, compensation expense is only recognized if the exercise
price of the employee stock option is less than the market price of the
underlying stock on the date of grant.
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 years ended December 31, 1999 and
1998 and the eleven months ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
<S> <C> <C> <C>
Risk-free interest rate............................. 6.2% 6.0% 5.7 - 6.2%
Dividend yield...................................... 0.0% 0.0% 0.0%
Volatility factor................................... 119.0% 58.0% 19.7%
Weighted average expected life (in years)........... 4 4 5
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Pro forma net loss available to common stockholders:
As reported....................................... $ (3,794) $(7,599) $(18,709)
Pro forma......................................... (11,752) (8,941) (18,813)
Pro forma basic loss available to common
stockholders per share:
As reported....................................... $ (0.14) $ (0.39) $ (1.21)
Pro forma......................................... (0.42) (0.46) (1.21)
</TABLE>
F-25
<PAGE> 61
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of stock option activity, and related information for the years
ended December 31, 1999 and 1998 and the eleven months ended December 31, 1997,
as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at January 31, 1997............................ 744,877 $ 3.76
Granted.................................................. 1,970,942 2.12
Exercised................................................ -- --
Forfeited or canceled.................................... (6,281) 3.98
---------
Outstanding at December 31, 1997........................... 2,709,538 2.00
Granted.................................................. 3,602,361 6.58
Exercised................................................ (101,774) 0.61
Forfeited or canceled.................................... (514,852) 4.43
---------
Outstanding at December 31, 1998........................... 5,695,273 4.83
Granted.................................................. 3,125,900 19.81
Exercised................................................ (830,839) 3.95
Forfeited or canceled.................................... (1,543) 5.00
---------
Outstanding at December 31, 1999........................... 7,988,791 10.78
=========
Options exercisable at December 31, 1997................... 506,670 0.39
Options exercisable at December 31, 1998................... 1,150,320 1.33
Options exercisable at December 31, 1999................... 2,254,812 4.33
</TABLE>
The weighted average fair value of options granted for the years ended
December 31, 1999 and 1998 and the eleven months ended December 31, 1997, were
$15.53, $3.33 and $0.67, respectively.
The following table summarizes information about the Company's outstanding
stock options at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- --------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1999 LIFE (YEARS) PRICE 1999 PRICE
-------- -------------- ------------ --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.67 - 2.07 1,609,479 1.6 $ 2.01 867,555 $1.91
2.10 - 4.91 548,660 1.7 3.78 211,245 2.66
5.00 - 6.75 1,080,176 2.8 6.45 1,018,691 6.00
6.82 - 13.22 1,736,869 2.6 7.89 157,321 7.50
13.75 - 31.00 3,013,607 3.5 17.78 -- --
--------- ---------
0.67 - 31.00 7,988,791 2.7 10.78 2,254,812 4.33
========= =========
</TABLE>
Restricted Stock Award
In 1998, Infocure's board of directors approved a restricted stock award
aggregating 190,000 shares of common stock as part of an incentive compensation
package to three executives. The fair value of this award at the grant date of
approximately $1.1 million was recorded as deferred compensation amortizable
over its ten year vesting period; however, the vesting could be accelerated upon
the occurrence of certain events. Under the terms of the agreement, 50% of the
unvested shares will automatically vest upon the Company's stock having an
average closing price of $12.50 per share over a 20-day period. The remainder of
the unvested shares will automatically vest upon the Company's stock having an
average closing price of $20 per share over a 20-day period. The award fully
vested in 1999.
F-26
<PAGE> 62
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Warrants
In connection with the 1997 acquisition of PACE, the Company issued to the
former owners of PACE ten-year warrants to acquire 372,000 shares of common
stock at an exercise price of $4.57 per share. As of December 31, 1999, 32,000
of these warrants had been exercised.
In connection with the private placement of redeemable preferred stock in
February 1998, the Company granted to the placement agent a ten-year warrant to
acquire 200,000 shares of common stock at an exercise price of $4.50 per share.
The $219,000 estimated value of this warrant was recorded as part of the
accretive dividend attributed to the preferred stockholders. As of December 31,
1999, 179,593 of these warrants had been exercised.
In connection with the 1998 private placement arrangement with the
Investor, the Company granted a warrant to acquire 200,000 shares of common
stock at $11.50 per share. This warrant has a five-year term and is immediately
exercisable. As of December 31, 1999, 12,169 of these warrants had been
exercised.
In connection with the October 1998 loan which increased the availability
under the Company's credit facility, the lender was granted the right to acquire
up to 490,000 shares of common stock at $6 per share. This warrant is
immediately exercisable and has a ten-year term. The estimated fair value of
approximately $1.5 million has been recorded as deferred loan costs. At December
31, 1999, 100,000 of these warrants had been exercised.
In connection with a certain acquisitions, the Company assumed
approximately 55,000 outstanding warrants with exercise prices ranging from
$0.79 to $134.78, which expire at various dates through 2007. Additionally,
approximately 45,000 warrants remain from an original grant of 280,000 made to
the underwriter in connection with the Initial Public Offering. These warrants
have an exercise price of $3.30 and expire in 2002.
12. INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................... $ -- $ 1,098 $ 69
State..................................... -- 235 6
------- ------- -------
Total current expense............. -- 1,333 75
------- ------- -------
Deferred:
Federal................................... (1,300) (3,098) (5,971)
State..................................... (177) (423) (814)
------- ------- -------
Total deferred benefit............ (1,477) (3,521) (6,785)
------- ------- -------
Change in deferred tax asset valuation
allowance................................. -- (285) 285
------- ------- -------
Total income tax benefit.......... (1,477) (2,473) (6,425)
Income tax benefit on extraordinary item.... 1,916 -- --
Pro forma tax adjustments................... 137 1,436 (779)
------- ------- -------
Income tax expense (benefit)................ $ 576 $(1,037) $(7,204)
======= ======= =======
</TABLE>
As discussed in Notes 1 and 3, the Company completed acquisitions of eleven
companies accounted for as pooling of interests. Four of these eleven companies
were pass-through entities for tax purposes in which the
F-27
<PAGE> 63
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
then-owners agreed to report their share of income or loss in their respective
individual income tax returns. Upon their acquisition by the Company, the
pass-through tax status terminated. Pro forma net loss available to common
stockholders and pro forma net loss available to common stockholders per share
are presented in the consolidated operations as if each of these entities had
been a taxable corporation during the periods presented.
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, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current:
Deferred tax assets:
Allowance for doubtful accounts........................ $ 1,321 $ 288
Deferred revenue and customer deposits................. 246 782
Accrued restructuring costs............................ 1,213 72
Accrued expenses....................................... 37 323
Credit carryforward.................................... -- --
Other.................................................. 26 45
------- -------
Total current deferred tax assets................. 2,843 1,510
------- -------
Noncurrent:
Deferred tax assets:
Basis difference of goodwill, capitalized software
costs, property and equipment and other assets....... 1,846 4,634
Business credit carry forwards......................... 1,997 1,026
Net operating loss carry forwards...................... 9,120 6,158
------- -------
Total noncurrent deferred tax assets.............. 12,963 11,818
------- -------
$15,806 $13,328
======= =======
</TABLE>
The Company's effective income tax rate varied from the U.S. federal
statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Expected tax expense (benefit).............. $ (96) $(2,664) $(8,810)
Increase (decrease) in income taxes
resulting from:
State income taxes........................ (20) (549) (1,814)
Nondeductible goodwill amortization....... 1,011 724 2,306
Other, net................................ (456) 301 1,608
Effect of operations of pooled companies
which were pass-through entities....... 137 1,436 (779)
Change in deferred tax asset valuation
allowance.............................. -- (285) 285
------ ------- -------
Net income tax expense
(benefit)....................... $ 576 $(1,037) $(7,204)
====== ======= =======
</TABLE>
As of December 31, 1999, the Company and its subsidiaries have net
operating loss carryforwards for federal income tax purposes of approximately
$24.0 million, which expire at various dates to 2014.
F-28
<PAGE> 64
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Approximately $19.0 million of such loss carryforwards is attributable to
preacquisition tax attributes of subsidiaries. Utilization of such carryforwards
is subject to substantial limitations resulting from the change in ownership of
these subsidiaries based on applicable provisions in the federal tax code.
Management has assessed the realizability of its deferred tax assets and has
concluded that it is more likely than not that such deferred tax assets will be
fully utilized.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest amounted to approximately $4.9 million, $2.3
million and $549,000 for the years ended December 31, 1999 and 1998 and the
eleven months ended December 31, 1997, respectively. The Company made cash
payments for income taxes of approximately $3.3 million, $1.2 million and
$203,000 for the years ended December 31, 1999 and 1998 the eleven months ended
December 31, 1997, respectively.
During the year ended December 31, 1999, the Company acquired certain
property and equipment with an aggregate value of approximately $8.6 million in
exchange for indebtedness including a mortgage and capital lease obligations.
Additionally, common stock with an aggregate value of approximately $17.0
million was issued for (1) acquisition of assets -- $7.0 million; (2) conversion
of notes payable -- $8.2 million; (3) payment of contingent consideration
obligations -- $1.8 million.
During the year ended 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.
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 1997 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 $12.8 million in connection with acquisitions
completed during the period.
14. SEGMENT REPORTING
The Company has historically evaluated its business based on the hardware
platform (i.e. desktop computer, AS400, etc.) provided or utilized by its
clients and/or the medical specialty (i.e. radiology, orthodontia, etc.) of
groups of clients. The Company's acquisition program has generated growth that
has continually changed and reshaped these bases for evaluation making
comparisons between the current and prior periods impracticable. Effective in
the fourth quarter of 1999, in connection with its change in product strategy to
focus on development of ASP-delivered products and Internet solutions, the
Company announced its plans for a reorganization of its business centered around
medical and dental strategic business units.
The Company's products and services are similar; however, management
believes that the delineation of medical and dental business units provides
definition for reportable segments and is consistent with its newly adopted
business model. Additionally, the corporate segment consists of corporate
services including executive office, marketing, personnel, finance and
administration together with rental activities. All activities of prior periods
have been recast on this basis.
F-29
<PAGE> 65
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management evaluates performance primarily on the basis of operating profit
or loss and EBITDA (earnings before interest, income taxes, depreciation,
amortization and non-recurring charges) contribution. Management does not make
use of identifiable assets information in its evaluation of performance and
there are no significant intersegment activities. The following tables provide
information concerning operations in these reportable segments.
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Medical.............................................. $153,426 $ 86,358 $ 53,745
Dental............................................... 49,566 43,487 21,484
Corporate............................................ 642 -- --
-------- -------- --------
$203,634 $129,845 $ 75,229
======== ======== ========
Operating profit (loss) (a):
Medical.............................................. $ 19,114 $ 9,685 $(13,405)
Dental............................................... 10,815 7,969 2,484
Corporate............................................ (10,823) (4,217) (1,289)
-------- -------- --------
19,106 13,437 (12,210)
-------- -------- --------
Depreciation and amortization:
Medical.............................................. 10,082 3,833 3,832
Dental............................................... 2,841 2,117 545
Corporate............................................ 1,567 432 24
-------- -------- --------
14,490 6,382 4,401
-------- -------- --------
EBITDA:
Medical.............................................. 29,196 13,518 (9,573)
Dental............................................... 13,656 10,086 3,029
Corporate............................................ (9,256) (3,785) (1,265)
-------- -------- --------
$ 33,596 $ 19,819 $ (7,809)
======== ======== ========
Interest expense and other, net........................ $ 3,513 $ 3,829 $ 573
======== ======== ========
Non-recurring charges (including restructuring and
other charges, merger costs, compensatory stock
awards and purchased research and development):
Medical.............................................. $ 5,305 $ 9,000 $ 6,589
Dental............................................... 2,903 750 6,463
Corporate............................................ 7,668 7,694 78
-------- -------- --------
$ 15,876 $ 17,444 $ 13,130
======== ======== ========
Loss before income taxes and extraordinary item........ $ (283) $ (7,836) $(25,913)
======== ======== ========
</TABLE>
- ---------------
(a) Excludes non-recurring charges -- restructuring and other charges, merger
costs, compensatory stock awards, and purchased research and development
F-30
<PAGE> 66
INFOCURE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUBSEQUENT EVENTS
During 1999, the Company entered into a definitive agreement to acquire all
the outstanding equity interests of Medical Dynamics, Inc. ("MEDY") in exchange
for approximately 900,000 shares of InfoCure common stock. The transaction is
expected to close in the second quarter of 2000. In connection with this
proposed transaction, the Company has also committed to advance MEDY up to $1.0
million under terms of a loan agreement dated October 1999. As of December 31,
1999, $500,000 had been advanced, which is reflected in other non-current assets
on the accompanying consolidated balance sheet.
In February 2000, InfoCure entered into an agreement with Healtheon/WebMD
whereby Healtheon/WebMD would acquire up to $100.0 million of convertible
redeemable preferred stock of VitalWorks, InfoCure's newly-formed subsidiary. In
consideration of the investment, the agreement provides for development and
distribution agreements between the parties to create an industry-standard
physician practice management system to be delivered through an ASP delivery
model. Similarly, the parties entered into a marketing agreement which, with
respect to services conducted by VitalWorks, provides for utilization, delivery
and promotion of Healtheon/WebMD's clinical financial transaction and EDI
services. InfoCure received $10.0 million in exchange for shares of Series A
preferred stock of VitalWorks, which will automatically be converted into 1% of
the outstanding common stock of VitalWorks (on a diluted basis) upon completion
of an initial public offering of VitalWorks. The agreement contemplates the
investment of an additional $90 million upon completion of an initial public
offering of VitalWorks, subject to regulatory approval and approval of both
companies' board of directors. The companies are currently negotiating
definitive documentation and discussing the terms of their relationship,
including the amount and form of the contemplated further investment by
Healtheon/WebMD in VitalWorks.
F-31
<PAGE> 67
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
InfoCure Corporation
The audits referred to in our report to InfoCure Corporation and
subsidiaries, dated February 21, 2000 which is contained in Item 8 of this Form
10-K, included the audit of the schedule listed under Item 14(a)(2). This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN, LLP
Atlanta, Georgia
February 21, 2000
S-1
<PAGE> 68
SCHEDULE II
INFOCURE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------- ---------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1999....... $1,526 $3,746 $-- $ (976)(A) $4,296
Year ended December 31, 1998....... 1,231 1,630 -- (1,335) 1,526
Eleven Months ended December 31,
1997............................ 1,175 1,664 -- (1,608) 1,231
ALLOWANCE FOR DEFERRED TAXES
Year ended December 31, 1999....... -- -- -- -- --
Year ended December 31, 1998....... 285 -- -- (285)(B) --
Eleven Months ended December 31,
1997............................ -- 285 -- -- 285
</TABLE>
- ---------------
(A) Uncollected receivables written off.
(B) Recovery of valuation reserve.
S-2
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OMSYSTEMS, INC.,
THE SHAREHOLDERS OF OMSYSTEMS, INC.,
INFOCURE SYSTEMS, INC.
AND
INFOCURE CORPORATION
DATED: FEBRUARY 8, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS....................................................................................................2
1.1. "AFFILIATE".........................................................................................2
1.2. "AVERAGE PER SHARE CLOSING PRICE"...................................................................2
1.3. "BEST EFFORTS"......................................................................................2
1.4. "BREACH"............................................................................................2
1.5. "CLOSING"...........................................................................................2
1.6. "CLOSING DATE"......................................................................................2
1.7. "COMPANY MATERIAL ADVERSE EFFECT"...................................................................3
1.8. "CONSENT"...........................................................................................3
1.9. "CONTEMPLATED TRANSACTIONS".........................................................................3
1.10. "CONTRACT".........................................................................................3
1.11. "DAMAGES"..........................................................................................3
1.12. "DISCLOSURE SCHEDULE"..............................................................................3
1.13. "EFFECTIVE TIME"...................................................................................3
1.14. "ENCUMBRANCE"......................................................................................3
1.15. "ENVIRONMENTAL REQUIREMENTS".......................................................................4
1.16. "ERISA"............................................................................................4
1.17. "FACILITIES".......................................................................................4
1.18. "GAAP".............................................................................................4
1.19. "GOVERNMENTAL AUTHORIZATION".......................................................................4
1.20. "GOVERNMENTAL BODY"................................................................................4
1.21. "IRS"..............................................................................................4
1.22. "KNOWLEDGE"........................................................................................4
1.23. "LEGAL REQUIREMENT"................................................................................5
1.24. "ORDER"............................................................................................5
1.25. "ORDINARY COURSE OF BUSINESS"......................................................................5
1.26. "ORGANIZATIONAL DOCUMENTS".........................................................................5
1.27. "PERCENTAGE OWNERSHIP".............................................................................5
1.28. "PERSON"...........................................................................................5
1.29. "PLAN".............................................................................................6
1.30. "PROCEEDING".......................................................................................6
1.31. "RELATED PERSON"...................................................................................6
1.32. "REPRESENTATIVE"...................................................................................7
1.33. "SECURITIES ACT"...................................................................................7
1.34. "TAX RETURNS"......................................................................................7
1.35. "TAXES"............................................................................................7
1.36. "THREATENED".......................................................................................7
2. MERGER.........................................................................................................7
2.1. The Merger..........................................................................................7
2.2. Effect of the Merger................................................................................8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
2.3. Consummation of the Merger..........................................................................8
2.4. Articles of Incorporation; Bylaws; Directors and Officers...........................................8
2.5. Conversion of Securities............................................................................8
2.6. Deposit of Shares in Escrow.........................................................................9
2.7. Closing.............................................................................................9
2.8. Additional Actions..................................................................................9
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.............................................9
3.1. Organization, Good Standing, Corporate Power and Subsidiaries......................................10
3.2. Authority; No Conflict.............................................................................10
3.3. Capitalization.....................................................................................11
3.4. Financial Statements...............................................................................12
3.5. Books and Records..................................................................................12
3.6. Real Property Interests............................................................................13
3.7. Condition and Sufficiency of Assets................................................................13
3.8. Accounts Receivable................................................................................13
3.9. Inventory..........................................................................................13
3.10. No Undisclosed Liabilities........................................................................14
3.11. Taxes.............................................................................................14
3.12. No Material Adverse Change........................................................................15
3.13. Employee Benefits Matters.........................................................................15
3.14. Compliance With Legal Requirements; Governmental Authorizations...................................16
3.15. Legal Proceedings; Orders.........................................................................17
3.16. Absence of Certain Changes and Events.............................................................18
3.17. Contracts; No Defaults............................................................................19
3.18. Insurance.........................................................................................22
3.19. Environmental Matters.............................................................................23
3.20. Employees.........................................................................................23
3.21. Government Contracts..............................................................................24
3.22. Intellectual Property Rights of the Company.......................................................24
3.23. Certain Payments..................................................................................31
3.24. Relationships With Related Persons................................................................31
3.25. Brokers or Finders................................................................................31
3.26. Disclosure........................................................................................32
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ISI AND INFOCURE...............................................32
4.1. Organization.......................................................................................32
4.2. Authorization......................................................................................32
4.3. Absence of Restrictions and Conflicts..............................................................33
4.4. Capitalization of InfoCure.........................................................................33
4.5. InfoCure SEC Reports...............................................................................33
4.6. Litigation.........................................................................................34
4.7. Disclosure.........................................................................................34
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
4.8. Certain Proceedings................................................................................34
4.9. Brokers or Finders.................................................................................34
5. COVENANTS OF THE PARTIES......................................................................................34
5.1. Mutual Covenants...................................................................................35
5.2. Covenants of the Company...........................................................................37
6. CONDITIONS....................................................................................................39
6.1. Mutual Conditions..................................................................................39
6.2. Conditions to Obligations of ISI and InfoCure......................................................40
6.3. Conditions to Obligations of the Company and the Shareholders......................................41
7. INDEMNIFICATION; REMEDIES.....................................................................................42
7.1. Agreement by Shareholders to Indemnify.............................................................42
7.2. Matters Involving Third Parties....................................................................43
7.3. Appointment of Shareholders' Representative........................................................44
8. TERMINATION...................................................................................................44
8.1. Termination Events.................................................................................44
9. MISCELLANEOUS.................................................................................................45
9.1. Notices............................................................................................45
9.2. Further Assurances.................................................................................48
9.3. Waiver.............................................................................................48
9.4. Entire Agreement and Modification..................................................................48
9.5. Assignments, Successors and No Third-Party Rights..................................................48
9.6. Pooling of Interests...............................................................................49
9.7. Section Headings, Construction.....................................................................49
9.8. Time of Essence....................................................................................49
9.9. Governing Law......................................................................................49
9.10. Counterparts......................................................................................49
9.11. Reservation of Rights With Respect to Gwaltney Dispute............................................50
</TABLE>
EXHIBITS:
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Certificate of Merger
Exhibit B-1 Employment Agreement of Reid W. Simmons
Exhibit B-2 Employment Agreement of James C. Davis, D.M.D.
Exhibit C Non-Competition Agreement
Exhibit D Escrow Agreement
Exhibit E Registration Rights Agreement
Exhibit F Affiliate's Agreement
Exhibit G Legal Opinion of Self & Davis, LLP
Exhibit H Legal Opinion of Morris, Manning & Martin, L.L.P.
</TABLE>
iii
<PAGE> 5
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is entered into
as of the 8th day of February, 1999, by and among OMSYSTEMS, a Georgia
corporation (the "Company"), the individuals who are Shareholders of the Company
as of the date hereof identified on SCHEDULE 1 hereto (hereinafter together with
such other parties who may become Shareholders of the Company after the date
hereof, but prior to the Effective Time of Merger, referred to collectively as
the "Shareholders"), INFOCURE CORPORATION, a Delaware Corporation ("InfoCure")
and INFOCURE SYSTEMS, INC., a Georgia corporation which is a wholly-owned
subsidiary of InfoCure ("ISI").
BACKGROUND
A. The respective Boards of Directors of the Company and the
Shareholders, as the sole Shareholders of the Company, deem it advisable and in
the best interests of the Company, ISI and InfoCure that the Company merge with
and into ISI pursuant to this Agreement and the Certificate of Merger
substantially in the form of EXHIBIT A attached hereto (the "Certificate of
Merger") whereby ISI will be the surviving corporation. Upon the Merger, each
issued and outstanding share of common stock of the Company, $0.01 value per
share (the "Company Common Stock"), will be converted into the right to receive
a certain number of shares of common stock, $.001 par value per share, of
InfoCure ("InfoCure Common Stock"), such number to be determined as provided
herein.
B. The Company, InfoCure, ISI and the Shareholders desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of section 368(a)(2)(D)
thereof.
D. The parties intend that the Merger be accounted for as a pooling of
interests for financial reporting purposes.
E. Concurrently with the consummation of the Merger and as an
inducement to ISI and InfoCure to enter into this Agreement, each of the
Shareholders will enter into (i) the Escrow Agreement in the form of EXHIBIT D
and (ii) a Registration Rights Agreement in the form of EXHIBIT E, and each of
REID W. SIMMONS, an individual resident of the State of Georgia ("Simmons") and
JAMES C. DAVIS, D.M.D., an individual resident of the State of Georgia ("Davis")
are entering into (i) a Non-Competition Agreement in the form of EXHIBIT C; (ii)
an Employment Agreement in the form of EXHIBIT B-1 or EXHIBIT B-2, as applicable
and (iii) an Affiliate's Agreement in the form of EXHIBIT E.
<PAGE> 7
NOW, THEREFORE, in consideration of the premises, the mutual
agreements, provisions and covenants herein contained and other good and
valuable consideration, the parties hereto hereby agree as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
1.1. "AFFILIATE" is used in this Agreement to indicate a relationship
with one (1) or more persons and when used shall mean any corporation or
organization of which such person is an executive officer, director or partner
or is directly or indirectly the beneficial owner of ten percent (10%) or more
of any class of equity securities or financial interest therein; any trust or
other estate in which such person has a beneficial interest or as to which such
person serves as trustee or in any similar fiduciary capacity; any relative or
spouse of such person, or any relative of such spouse (such relative being
related to the person in question within the second degree); or any person that
directly, or indirectly through one (1) or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
1.2. "AVERAGE PER SHARE CLOSING PRICE" means the average closing price
for the InfoCure Common Stock as reported on NASDAQ for the five (5) day trading
period ending on the day immediately preceding the Closing Date.
1.3. "BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits of this Agreement and the Contemplated
Transactions to such Person.
1.4. "BREACH" means a "breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement and will be deemed to have occurred if there is or
has been any inaccuracy in or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
1.5. "CLOSING" is defined in this Agreement in Section 2.8.
1.6. "CLOSING DATE" is referred to herein as the date on which the
Closing occurs.
1.7. "COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect
on the financial condition, results of operation, business or properties of the
Company.
1.8. "CONSENT" means any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
1.9. "CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including, without limitation:
2
<PAGE> 8
A. The Merger; and
B. The performance by ISI, InfoCure, the Shareholders and the
Company of their respective covenants and obligations under this Agreement.
1.10. "CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.11. "DAMAGES" means any loss, liability, claim, damages (including,
without limitation, incidental and consequential damages), expense (including,
without limitation, costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third party.
1.12. "DISCLOSURE SCHEDULE" means the disclosure schedule delivered by
the Company and the Shareholders to ISI and InfoCure concurrently with the
execution and delivery of this Agreement.
1.13. "EFFECTIVE TIME" is defined in this Agreement in Section 2.3.
1.14. "ENCUMBRANCE" means any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind, including, but not limited to,
any restriction on the use, voting, transfer, receipt of income or other
exercise of any attributes of ownership.
1.15. "ENVIRONMENTAL REQUIREMENTS" means federal, state and local laws
relating to pollution or protection of the environment, including laws or
provisions relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials, substances, or wastes
into air, surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials, substances, or wastes.
1.16. "ERISA" means the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
1.17. "FACILITIES" means any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned or operated by the Company.
1.18. "GAAP" means generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the financial
statements referred to in Section 3.4. were prepared.
1.19. "GOVERNMENTAL AUTHORIZATION" means any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
3
<PAGE> 9
1.20. "GOVERNMENTAL BODY" means any domestic or foreign national, state
or municipal or other local government or multinational, state or municipal or
other local government or multinational body, any subdivision, agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
1.21. "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.22. "KNOWLEDGE" means an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter, or a prudent individual given his position
with the Company could be expected to discover or otherwise become aware of such
fact or other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving time or has at any time served within the last five (5) years as a
director, officer, partner, executor or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
1.23. "LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
1.24. "ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
1.25. "ORDINARY COURSE OF BUSINESS" means an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
A. Such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
B. Such action is not required to be authorized by the board
of directors of such Person or by any Person or group of Persons exercising
similar authority.
1.26. "ORGANIZATIONAL DOCUMENTS" means (i) the Articles of
Incorporation and the Bylaws of a corporation; (ii) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person and (iii) any amendment to any of the foregoing.
1.27. "PERCENTAGE OWNERSHIP" means the percentage of Company Common
Stock owned by each Shareholder immediately prior to the Merger, as shown on
SCHEDULE 3.3 hereof.
1.28. "PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
1.29. "PLAN" is defined in Section 3.13.A.
4
<PAGE> 10
1.30. "PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.31. "RELATED PERSON" means with respect to a particular individual:
A. Each other member of such individual's Family;
B. Any Person that is directly or indirectly controlled by
such individual or one (1) or more members of such individual's Family;
C. Any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
D. Any Person with respect to which such individual or one (1)
or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
A. Any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
B. Any Person that holds a Material Interest in such specified
Person;
C. Each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
D. Any Person in which such specified Person holds a Material
Interest;
E. Any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
F. Any Related Person of any individual described in clause B.
or C.
For purposes of this definition, (i) the "Family" of an individual
includes (1) the individual's spouse and former spouses; (2) any other natural
person who is related to the individual or the individual's spouse within the
second degree and (3) any other natural person who resides with such individual
and (ii) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least five percent (5%) of
the outstanding voting power of a Person or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or equity interests in a Person.
5
<PAGE> 11
1.32. "REPRESENTATIVE" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.33. "SECURITIES ACT" means the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.34. "TAX RETURNS" means any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Body in connection with the
determination, assessment or collection of any Taxes or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
1.35. "TAXES" means all taxes, charges, fees, levies, interest,
penalties, additions to tax or other assessments, including, but not limited to,
income, excise, property, sales, use, value added and franchise taxes and
customs duties, imposed by any Governmental Body and any payments with respect
thereto required under any tax-sharing agreement.
1.36. "THREATENED" means a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or any other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future.
2. MERGER.
2.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Georgia Business Corporation Code
(the "GBCC"), the Company shall be merged with and into ISI at the Effective
Time (the "Merger"), the separate existence of the Company shall cease, and ISI
shall continue as the surviving corporation under the corporate name it
possesses immediately prior to the Effective Time. (ISI is sometimes hereinafter
referred to as the "Surviving Corporation").
2.2. Effect of the Merger. The Surviving Corporation shall possess all
the rights, powers, franchises and authority, both public and private, and be
subject to all the restrictions, disabilities and duties, of the Company; shall
be vested with all assets and property, real, personal and mixed, and every
interest therein, wherever located, belonging to the Company; and shall be
liable for all the obligations and liabilities of the Company, all with the
effect set forth in the GBCC.
2.3. Consummation of the Merger. On the Closing Date, the parties
hereto will cause the Merger to be consummated by filing with the Secretary of
State of the State of Georgia the Certificate of Merger (the time of such filing
being the "Effective Time").
2.4. Articles of Incorporation; Bylaws; Directors and Officers. The
Articles of Incorporation, as amended, of ISI shall be the Articles of
Incorporation of the Surviving
6
<PAGE> 12
Corporation and thereafter shall continue to be its Articles of Incorporation
(until amended as provided under the GBCC).
The Bylaws of ISI, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation and thereafter shall
continue to be its bylaws (until amended as provided therein and under the
GBCC).
2.5. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of ISI, the Company or the
Shareholders:
A. Each share of the capital stock of ISI issued and
outstanding immediately prior to the Effective Time shall continue to be issued
and outstanding and shall not be affected by the Merger.
B. Each share of the common stock of the Company (the "Company
Common Stock") issued and outstanding as of the Effective Time shall be
converted, subject to Section 8.1.C., into the right to receive 114.4 shares of
InfoCure Common Stock (the "Exchange Ratio").
C. As of the Effective Time, all such shares of the Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent only the right to
receive a certificate representing the shares of InfoCure Common Stock into
which such Company Common Stock was converted in the Merger. The holders of such
certificates previously evidencing such shares of the Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of the Company Common Stock as of the
Effective Time except as otherwise provided herein or by law. Such certificates
previously representing shares of the Company Common Stock shall be exchanged
for certificates representing whole shares of InfoCure Common Stock issued in
consideration therefor upon the surrender of such certificates in accordance
with the provisions of this Section 2.5.C., without interest. No fractional
shares of InfoCure Common Stock will be issued in connection with the Merger,
but in lieu thereof, the holder of any shares of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of InfoCure Common Stock
shall receive cash in an amount equal to the value of such fractional shares,
which shall be equal to the fraction of a share of InfoCure Common Stock that
would otherwise be issued multiplied by Twenty-Four and No/100 Dollars ($24.00).
2.6. Deposit of Shares in Escrow. Upon issuance of the certificates
representing the InfoCure Common Stock issuable to the Shareholders by virtue of
the Merger, InfoCure shall cause to be delivered into escrow stock certificates
representing one hundred fourteen thousand four hundred (114,400) shares of
InfoCure Common Stock (the "Escrow Shares"), in accordance with the terms of the
Escrow Agreement in the form of EXHIBIT D hereto. The Escrow Agreement sets
forth the conditions under which the Escrow Shares shall be delivered to the
Shareholders.
2.7. Closing. Subject to termination of this Agreement as provided in
Section 8., the closing of the transactions provided for herein (the "Closing")
shall take place at the offices of
7
<PAGE> 13
Morris, Manning & Martin, L.L.P., Suite 1600, 3343 Peachtree Road, N.E.,
Atlanta, Georgia 30326 at 2:00 P.M., Eastern Standard Time, on or before
February 12, 1999.
2.8. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation or InfoCure shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of the Company, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
The Company and the Shareholders, jointly and severally, represent and
warrant to ISI and InfoCure as follows:
3.1. Organization, Good Standing, Corporate Power and Subsidiaries.
A. SCHEDULE 3.1 of the Disclosure Schedule contains a complete
and accurate list of the Company's name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number of
shares held by each).
The Company is a corporation duly organized, validly existing, and in
good standing under the laws of Georgia, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under its Contracts.
The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified or licensed would not
result in a Company Material Adverse Effect.
B. The Company has delivered to ISI copies of the
Organizational Documents of the Company, as currently in effect.
C. The Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
3.2. Authority; No Conflict.
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A. The Company has the corporate right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement and
all agreements to which the Company is or will be a party that are required to
be executed pursuant to this Agreement (the "Company Ancillary Agreements"). The
execution, delivery and performance of this Agreement and the Company Ancillary
Agreements have been duly and validly approved by the Company Board of Directors
and the Shareholders, as required by applicable law.
This Agreement and the Company Ancillary Agreements are, or when
executed and delivered by the Company will be, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies;
provided, however, that the Company Ancillary Agreements will not be effective
until the earlier of the date set forth therein or the Effective Time.
The Company has the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and the Company Ancillary
Agreements and to perform its obligations under this Agreement and the Company
Ancillary Agreements.
B. Except as set forth in SCHEDULE 3.2 of the Disclosure
Schedule, neither the execution and delivery of this Agreement and the Company
Ancillary Agreements nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) Contravene, conflict with, or result in a
violation of (1) any provision of the Organizational Documents of the Company or
(2) any resolution adopted by the Board of Directors or the stockholders of the
Company;
(ii) Contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which the
Company, or any of the assets owned or used by the Company, may be subject;
(iii) Subject to the filing of the Certificate of
Merger with the Georgia Secretary of State, contravene, conflict with, or result
in a violation of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that otherwise relates
to the business of, or any of the assets owned or used by the Company;
(iv) Cause the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) To the Company's Knowledge, cause any of the
assets owned by the Company to be reassessed or revalued by any taxing authority
or other Governmental Body;
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<PAGE> 15
(vi) Contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract; or
(vii) Result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by the
Company.
C. Except as set forth in SCHEDULE 3.2 of the Disclosure
Schedule, the Company is not or will not be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement and the Company Ancillary Agreements or the consummation or
performance of any of the Contemplated Transactions.
3.3. Capitalization. The total authorized capital stock of the Company
consists of ten thousand (10,000) shares of Common Stock par value per share, of
which ten thousand (10,000) shares are issued and outstanding as of the Closing
Date, and all of which issued and outstanding shares of the Company Common stock
are held of record and (assuming exercise of all outstanding options) owned by
the Persons set forth on SCHEDULE 3.3.
All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Other than
as set forth on SCHEDULE 3.3, there are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of the Company.
None of the outstanding equity securities or other securities of the
Company were issued in violation of the Securities Act or applicable state
securities laws. The Company does not own, nor does it have any Contract to
acquire, any equity securities or other securities of any Person (other than the
Company) or any direct or indirect equity or ownership interest in any other
business.
Except as disclosed on SCHEDULE 3.3, there are no stock appreciation
rights, options, warrants, conversion privileges or pre-emptive or other rights
or agreements outstanding to purchase or otherwise acquire any of the Company's
capital stock; there are no options, warrants, conversion privileges or
pre-emptive or other rights or agreements to which the Company is a party
involving the purchase or other acquisition of any share of the Company's
capital stock; there is no liability for dividends accrued, but unpaid; and
there are no voting agreements, right of first refusal or other restrictions
(other than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of the Company's outstanding securities.
3.4. Financial Statements. The Company has delivered to ISI and
InfoCure, as set forth on SCHEDULE 3.4, the audited balance sheet of the Company
as of December 31, 1998, and the related statements of income, changes in
stockholders' equity, and cash flow for the fiscal year then ended, prepared by
the accounting firm of BDO Seidman, L.L.P. in accordance with GAAP consistently
applied (collectively, the "Financial Statements").
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The Financial Statements and notes, if any, have been prepared on an
accrual basis and fairly present in all material respects the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP.
No financial statements of any Person, other than the Company, are
required by GAAP to be included in the Financial Statements of the Company.
3.5. Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to ISI and InfoCure, are complete and correct in all material respects
and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records
of all meetings held of, and corporate action taken by, the stockholders, the
Board of Directors, and committees of the Board of Directors of Company, and no
material action has been taken at any meeting for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.6. Real Property Interests. The Company owns no real property.
SCHEDULE 3.6 of the Disclosure Schedule contains a complete and accurate list of
all leaseholds or other interests in real property of the Company. The Company
has delivered or made available to ISI and InfoCure copies of the lease
agreements and other instruments by which the Company acquired such leasehold
and other real property interests.
3.7. Condition and Sufficiency of Assets. Except as set forth on
SCHEDULE 3.7 of the Disclosure Schedule, to the Company's Knowledge, the
buildings, plants, structures and equipment of the Company are structurally
sound, are in good operating condition and repair and are adequate for the uses
to which they are being put.
3.8. Accounts Receivable. All accounts receivable of the Company that
are reflected on the Financial Statements or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or
will be as of the Closing Date current and collectible net of the respective
reserves shown on the Financial Statements or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice).
Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within one hundred fifty
(150) days after the later of: (i) the Closing Date or (ii) the day on which it
first becomes due and payable. To the Knowledge of the Company, there is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
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SCHEDULE 3.8 of the Disclosure Schedule contains a materially complete
and accurate list of all Accounts Receivable as of December 31, 1998, which list
sets forth the aging of such Accounts Receivable.
3.9. Inventory. All inventory of the Company, whether or not reflected
in the Financial Statements, consists of a quality and quantity usable and
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Financial Statements or on the accounting records of
the Company as of the Closing Date, as the case may be.
The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
3.10. No Undisclosed Liabilities. Except as set forth in SCHEDULE 3.10
of the Disclosure Schedule, the Company has no material liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for liabilities or obligations
reflected or reserved against in the Financial Statements and current
liabilities incurred in the Ordinary Course of Business since December 31, 1998.
3.11. Taxes.
A. Except as set forth on SCHEDULE 3.11 to the Disclosure
Schedule and except for sales, use and value added taxes (with respect to which
no representations or warranties are given under this Agreement), the Company
has timely filed all Tax Returns and reports required to be filed by it,
including, without limitation, all federal, state and local Tax Returns, and has
paid in full or made adequate provision by the establishment of reserves for all
taxes and other charges which have become due or which are attributable to the
conduct of the Company's business prior to Closing. The Company will continue to
make adequate provision for all such taxes and other charges for all periods
through the Closing Date.
Except as set forth on SCHEDULE 3.11 to the Disclosure Schedule, the
Company has no Knowledge of any tax deficiency proposed or Threatened against
the Company. There are no tax liens upon any property or assets of the Company
to secure the payment of any delinquent taxes.
Except as set forth on SCHEDULE 3.11 to the Disclosure Schedule, the
Company has made all payments of estimated taxes when due in amounts sufficient
to avoid the imposition of any penalty.
B. Except as set forth on SCHEDULE 3.11, all taxes and other
assessments and levies which the Company was required by law to withhold or to
collect have been duly withheld and collected, and have been paid over to the
proper governmental entity.
C. Except as set forth in SCHEDULE 3.11 to the Disclosure
Schedule, the federal and state income Tax Returns and local Tax Returns, if
any, of the Company have never been audited by the income tax authorities, nor
are any such audits in process. Except as set forth in SCHEDULE 3.11 to the
Disclosure Schedule, there are no outstanding agreements or waivers
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extending the statute of limitations applicable to any federal or state income
Tax Returns of the Company for any period.
D. Under its contracts with its customers for sales or
licenses of Software (as defined in Section 3.22. below), to the Knowledge of
the Company, such customers are liable for any and all sales or use taxes
imposed by virtue of or with respect to such sales or licenses.
E. The Company has a taxable year ending on December 31 in
each year.
F. There are no contracts, agreements, plans or arrangements,
including, without limitation, the provisions of this Agreement, covering any
employee's or former employee's employment with the Company that, individually
or collectively, could give rise to the payment of any amount (or a portion
thereof) that would not be deductible pursuant to Sections 280G, 404 or 162 of
the Code.
G. The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
applied to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
H. The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's books and records in all
material respects.
3.12. No Material Adverse Change. Since December 31, 1998, there has
not been any material adverse change in the business, operations, properties,
assets, or financial condition of the Company, and no event has occurred and no
circumstance exists that may result in such a material adverse change other than
with respect to general domestic or international economic conditions.
3.13. Employee Benefits Matters.
A. SCHEDULE 3.13.1 lists all plans, programs, and similar
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of the Company or any other party that provide benefits or
compensation to, or for the benefit of, current or former employees of the
Company ("Plan" or "Plans"). Except as set forth on SCHEDULE 3.13.1 to the
Disclosure Schedule only current and former employees of the Company participate
in the Plans. Copies of all Plans and, to the extent applicable, all related
trust agreements, actuarial reports, and valuations for the most recent three
(3) years, all summary plan descriptions, prospectuses, Annual Report Form 5500s
or similar forms (and attachments thereto) for the most recent three (3) years,
all Internal Revenue Service determination letters, and any related documents
requested by ISI or InfoCure, including all amendments, modifications and
supplements thereto, have been delivered to ISI or InfoCure, and all of the same
are or will be true, correct and complete in all material respects.
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<PAGE> 19
B. With respect to each Plan to the extent applicable:
(i) No litigation or administrative or other
proceeding is pending involving such Plan, nor to the Company's Knowledge is any
litigation or administrative or other proceeding Threatened involving such Plan;
(ii) To the Knowledge of the Company, such Plan has
been administered and operated in substantial compliance with, and has been
amended to comply with all applicable laws, rules, and regulations, including,
without limitation, ERISA, the Internal Revenue Code, and the regulations issued
under ERISA and the Internal Revenue Code;
(iii) The Company and its predecessors, if any, have
made and as of the Closing Date will have made or accrued, all payments and
contributions required, or reasonably expected to be required, to be made under
the provisions of such Plan or required to be made under applicable laws, rules
and regulations, with respect to any period prior to the Closing Date, such
amounts to be determined using the ongoing actuarial and funding assumptions of
the Plan;
(iv) Such Plan is fully funded in an amount
sufficient to pay all liabilities accrued (including liabilities and obligations
for health care, life insurance and other benefits after termination of
employment) and claims incurred to the date hereof;
(v) On the Closing Date such Plan will be fully
funded in an amount sufficient to pay all liabilities accrued (including
liabilities and obligations for health care, life insurance and other benefits
after termination of employment) and claims incurred to the Closing Date, or
adequate reserves will be set up on the Company's books and records, or paid-up
insurance will be provided therefor; and
(vi) Such Plan has been administrated and operated
only in the ordinary and usual course and in accordance with its terms.
3.14. Compliance With Legal Requirements; Governmental Authorizations.
A. Except as set forth in SCHEDULE 3.14 of the Disclosure
Schedule:
(i) The Company is, and at all times since December
31, 1998 has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets except where the failure to comply with a Legal
Requirement would not have a Company Material Adverse Effect;
(ii) No event has occurred or circumstance exists
that (with or without notice or lapse of time) (1) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement or (2) to the Company's Knowledge, may give rise to
any obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature except for events or
circumstances which in the aggregate would not have a Company Material Adverse
Effect; and
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(iii) The Company has not received, at any time since
December 31, 1998, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (1) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement or (2) any actual, alleged, possible, or potential obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
B. SCHEDULE 3.14 of the Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by the Company and that, in each case, is material to the
conduct of the Company's business. Each Governmental Authorization listed or
required to be listed in SCHEDULE 3.14 of the Disclosure Schedule is valid and
in full force and effect. Except as set forth in SCHEDULE 3.14 of the Disclosure
Schedule:
(i) The Company is, and at all times since December
31, 1998 has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in
SCHEDULE 3.14 of the Disclosure Schedule;
(ii) No event has occurred or circumstance exists
that may (with or without notice or lapse of time) (1) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
SCHEDULE 3.14 of the Disclosure Schedule or (2) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in SCHEDULE 3.14 of the Disclosure Schedule;
(iii) The Company has not received, at any time since
December 31, 1998, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (1) any actual or
alleged violation of or failure to comply with any term or requirement of any
Governmental Authorization or (2) any actual or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) All applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be listed
in SCHEDULE 3.14 of the Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in SCHEDULE 3.14 of the
Disclosure Schedule collectively constitute all of the Governmental
Authorizations that are material to the conduct of the Company's business in the
manner it is currently conducted and to operate such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
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3.15. Legal Proceedings; Orders.
A. Except as set forth in SCHEDULE 3.15 of the Disclosure
Schedule, there is no pending Proceeding:
(i) That has been commenced by or against the Company
and received by or on behalf of the Company or, to the Knowledge of the Company,
that otherwise relates to or may affect the business of, or any of the assets
owned or used by the Company; or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of the Company, (i) no such Proceeding has been
Threatened and (ii) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. The
Company has delivered to ISI and InfoCure copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
SCHEDULE 3.15 of the Disclosure Schedule. The Proceedings listed in SCHEDULE
3.15 of the Disclosure Schedule will not have a Company Material Adverse Effect.
B. Except as set forth in SCHEDULE 3.15 of the Disclosure
Schedule:
(i) There is no Order to which the Company, or any of
the assets owned or used by the Company, is subject; and
(ii) No officer, director, or, to the Knowledge of
the Company, agent, or employee of the Company is subject to any Order that
prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company.
C. Except as set forth in SCHEDULE 3.15 of the Disclosure
Schedule:
(i) The Company is, and at all times since December
31, 1998 has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or has been
subject, except where the failure to comply would not have a Company Material
Adverse Effect;
(ii) To the Knowledge of the Company, no event has
occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is subject; and
(iii) The Company has not received, at any time since
December 31, 1998, any written notice from any Governmental Body or any other
Person regarding any actual or alleged violation of, or failure to comply with,
any term or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is or has been subject.
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3.16. Absence of Certain Changes and Events. Except as set forth in
SCHEDULE 3.16 of the Disclosure Schedule, since December 31, 1998, the Company
has conducted its business only in the Ordinary Course of Business and there has
not been any:
A. Change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
B. Amendment to the Organizational Documents of the Company;
C. Payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
D. Adoption of, or substantial increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
E. Damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance that had a Company Material
Adverse Effect;
F. Entry into, termination of, or receipt of notice of
termination of any Contract or transaction involving a total remaining
commitment by or to the Company of at least Ten Thousand and No/100 Dollars
($10,000.00);
G. Sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Software and Intangibles;
H. Cancellation or waiver of any claims or rights with a value
to the Company in excess of Five Thousand and No/100 Dollars ($5,000.00);
I. Material change in the accounting methods used by the
Company; or
J. Agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17. Contracts; No Defaults.
A. SCHEDULE 3.17(a) of the Disclosure Schedule contains a
complete and accurate list, and the Company has delivered to ISI and InfoCure
true and complete copies, of:
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<PAGE> 23
(i) Each type of customer Contract in existence as of
the date of this Agreement that involves performance of services or delivery of
goods or materials by the Company of an amount or value in excess of Seven
Thousand Five Hundred and No/100 Dollars ($7,500.00);
(ii) Except for customer Contracts and inventory and
equipment purchase orders incurred in the Ordinary Course of Business, each
Contract that involves performance of services or delivery of goods or materials
to the Company of an amount or value in excess of Seven Thousand Five Hundred
and No/100 Dollars ($7,500.00);
(iii) Except for customer Contracts and inventory and
equipment purchase orders incurred in the Ordinary Course of Business, each
Contract that was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company in excess of Seven Thousand
Five Hundred and No/100 Dollars ($7,500.00);
(iv) Each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than Seven Thousand Five Hundred and No/100
Dollars ($7,500.00) and with terms of less than one (1) year);
(v) Each licensing agreement or other Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Software and Intangibles;
(vi) Each collective bargaining agreement and other
Contract to or with any labor union or other employee representative of a group
of employees;
(vii) Each joint venture, partnership, and other
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) Each Contract containing covenants that in any
way purport to restrict the business activity of the Company or any Affiliate of
the Company or limit the freedom of the Company or any Affiliate of the Company
to engage in any line of business or to compete with any Person;
(ix) Each Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(x) Each power of attorney relating to the Company
that is currently effective and outstanding;
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<PAGE> 24
(xi) Each Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(xii) Each Contract for capital expenditures in
excess of Seven Thousand Five Hundred and No/100 Dollars ($7,500.00);
(xiii) Each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by the
Company other than in the Ordinary Course of Business; and
(xiv) Each amendment, supplement, and modification in
respect of any of the foregoing.
B. Except as set forth in SCHEDULE 3.17(b) of the Disclosure
Schedule, to the Knowledge of the Company, no officer, director, agent,
employee, consultant, or contractor of the Company is bound by any Contract that
purports to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (i) engage in or continue any conduct, activity, or
practice relating to the business of the Company or (ii) assign to the Company
or to any other Person any rights to any invention, improvement, or discovery.
C. Except as set forth in SCHEDULE 3.17(c) of the Disclosure
Schedule, each Contract identified or required to be identified in SCHEDULE
3.17(a) of the Disclosure Schedule is in full force and effect.
D. Except as set forth in SCHEDULE 3.17(d) of the Disclosure
Schedule:
(i) The Company is, and at all times since December
31, 1998 has been, in full compliance with all material terms and requirements
of each Contract involving an amount of value in excess of Five Thousand and
No/100 Dollars ($5,000.00) under which such Company has or had any obligation or
liability or by which such Company or any of the assets owned or used by such
Company is or was bound;
(ii) Each other Person that has or had any obligation
or liability under any Contract involving an amount of value in excess of Five
Thousand and No/100 Dollars ($5,000.00) under which the Company has or had any
rights is, and at all times since December 31, 1998 has been, in full compliance
with all material terms and requirements of such Contract;
(iii) No event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any material
Contract involving an amount of value in excess of Five Thousand and No/100
Dollars ($5,000.00); and
(iv) The Company has not given to or received from
any other Person, at any time since December 31, 1998, any notice or other
communication (whether oral or
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written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
E. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
F. The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18. Insurance.
A. The Company has delivered to ISI and InfoCure:
(i) True and complete copies of all policies of
insurance to which the Company is a party;
(ii) True and complete copies of all pending
applications for policies of insurance; and
(iii) Any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
B. Except as set forth on SCHEDULE 3.18(b) of the Disclosure
Schedule:
(i) To the Company's Knowledge, all policies to which
the Company is a party or that provide coverage to the Company, or any director
of the Company:
(1) Are in full force and effect, except as
to matters or defaults which in the aggregate, would not have a Company Material
Adverse Effect;
(2) Taken together in the reasonable
judgment of the Company, provide adequate insurance coverage for the assets and
the operations of the Company for all risks to which the Company is normally
exposed;
(3) Are sufficient for compliance with all
Legal Requirements and Contracts to which the Company is a party or by which it
is bound;
(4) Will continue in full force and effect
following the consummation of the Contemplated Transactions; and
(5) Do not provide for any retrospective
premium adjustment or other experienced-based liability on the part of the
Company.
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(ii) The Company has not received any notice of
cancellation or other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due and has
otherwise performed all of its obligations under each policy to which the
Company is a party or that provides coverage to the Company or any director
thereof.
(iv) The Company has given notice to the insurer of
all existing claims that may be insured thereby.
3.19. Environmental Matters. Except as set forth in SCHEDULE 3.19 of
the Disclosure Schedule, the Company has obtained and is in compliance with all
permits, licenses and other authorizations (collectively, "Permits") required to
do business by Environmental Requirements. To the Company's Knowledge, there are
no conditions, circumstances, activities, practices, incidents, or actions
(collectively, "Conditions") resulting from the conduct of its business which
Conditions may reasonably form the basis of any claim or suit against the
Company based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling by the Company, or the
emission, discharge, release or Threatened release by the Company into the
environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes.
3.20. Employees.
A. SCHEDULE 3.20 of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation and any change in
compensation since December 31, 1998; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other employee benefit plan or any director Plan.
B. No employee or director of the Company is to the Company's
Knowledge a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the performance
of his or her duties as an employee or director of the Company or the Surviving
Corporation or (ii) the ability of the Company or the Surviving Corporation to
conduct its business in the manner presently conducted, including any
Proprietary Rights Agreement with the Company by any such employee or director.
To the Company's Knowledge, no director, officer, or other key employee of the
Company intends to terminate his employment with the Company or, following the
Merger, with the Surviving Corporation.
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C. SCHEDULE 3.20 of the Disclosure Schedule also contains a
complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage and other benefits.
D. The Company has no employment contract or consulting
agreement currently in effect that is not terminable at will without penalty or
payment of compensation by the Company.
E. The Company (i) has never been and is not now subject to a
union organizing effort; (ii) is not subject to any collective bargaining
agreement with respect to any of its employees; (iii) is not subject to any
other contract, written or oral, with any trade or labor union, employee's
association or similar organization and (iv) to its Knowledge, has no material
current labor dispute.
3.21. Government Contracts. The Company has no business contracts with
any independent or executive agency, division, subdivision, audit group or
procuring office of the federal government or of a state government, including
any prime contractor of the federal government and any higher level
subcontractor of a prime contractor of the federal government, and including any
employees or agents thereof, in each case acting in such capacity.
3.22. Intellectual Property Rights of the Company.
A. Definitions. As used in this Agreement, and in addition to
any other terms defined in this Agreement, the following terms shall have the
following meanings.
(i) "Software" means any computer program, operating
system, applications system, firmware or software of any nature, whether
operational, under development or inactive, including all object code, source
code, technical manuals, compilation procedures, execution procedures, flow
charts, programmers notes, user manuals and other documentation thereof, whether
in machine-readable form, programming language or any other language or symbols
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
(ii) "Owned Software" means all Software owned by the
Company, whether purchased from a third party, developed by or on behalf of the
Company, currently under development or otherwise.
(iii) "Customer Software" means all Software, other
than the Owned Software, that is either (1) offered or provided by Company,
directly or through Distributors, to customers of the Company or (2) used by the
Company to provide information or services to customers of Company for a fee.
(iv) "Company Software" means the Owned Software and
the Customer Software.
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(v) "Other Software" means all Software, other than
the Company Software, that is licensed by the Company from third parties or
otherwise used by the Company for any purpose whatsoever.
(vi) "Distributor" means the Company and any other
person or entity that has been authorized by the Company to sell, license or
offer to sell or license any Owned Software, other than an employee of Company.
Distributors may include, without limitation, value added resellers, original
equipment manufacturers, dealers, sales agents, and distributors.
(vii) "Distributor Agreement" means a license
agreement or other written or oral agreement or permission between the Company
and a Distributor.
(viii) "Customer License Agreement" means a license
agreement or other written or oral agreement or permission, other than a
Distributor Agreement, by which the Company has granted to any third party any
rights regarding the Company Software or any Intangibles thereof.
(ix) "Supplier License Agreement" means a license
agreement or other written or oral agreement or permission by which a third
party has granted to the Company any rights regarding any Software or any
Intangibles thereof.
(x) "Registration" means any governmental filing,
whether federal, state, local, foreign or otherwise, related to Software or any
Intangible, including, without limitation, all registrations of patents,
copyrights, trademarks, service marks, trade names, and maskworks, and all
re-issues, divisions, continuations, renewals, extensions and
continuations-in-part thereof.
(xi) "Intangible" means:
(1) Patents, patent applications, patent
disclosures, all re-issues, divisions, continuations, renewals, extensions and
continuation-in-parts thereof and improvements thereto;
(2) Trademarks, service marks, trade dress,
logos, trade names, and corporate names and registrations and applications for
Registration thereof and all goodwill associated therewith;
(3) Copyrights, Registrations thereof and
applications for Registration thereof;
(4) Maskworks, Registrations thereof and
applications for Registration thereof;
(5) Trade secrets and confidential business
information (including ideas, formulas, compositions, inventions, whether
patentable or unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research and development
information, drawings, flow charts, processes, ideas,
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specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information);
(6) All rights necessary to prevent claims
of invasion of privacy, right of publicity, defamation, infringement of moral
rights, or any other causes of action arising out of the use, adaptation,
modification, reproduction, distribution, sale, or exhibition of the applicable
Software;
(7) All income, royalties, Damages and
payments due at Closing or thereafter with respect to the Owned Software,
Customer Software, Other Software, or other Intangibles and all other rights
thereunder including, without limitation, Damages and payments for past, present
or future infringements or misappropriations thereof, the right to sue and
recover for past, present or future infringements or misappropriations thereof;
(8) All rights to use all of the foregoing
forever; and
(9) All other rights in, to, and under the
foregoing in all countries.
B. Identification.
(i) SCHEDULE 3.22(b)(i) of the Disclosure Schedule
contains an accurate and complete list and description (including a name,
product description, the language in which it is written and the type of
hardware platform(s) on which it runs) of the following:
(1) All Owned Software;
(2) All Customer Software; and
(3) All Other Software.
(ii) SCHEDULE 3.22(b)(ii) to the Disclosure Schedule:
(1) Contains a complete list of each
Registration of the Company;
(2) Identifies each pending Registration of
the Company;
(3) Identifies each application for or
Registration by the Company regarding the Intangibles and Software of the
Company which have been withdrawn, abandoned, or have lapsed or been denied;
and
(4) Specifies any advice to the Company with
respect to each such Registration or protectability of the Intangibles and
Software, summarizing such advice. SCHEDULE 3.22 indicates the Company's basis
for its claim of ownership of such items or the source of the Company's right to
use such items.
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(iii) SCHEDULE 3.22(b)(iii) to the
Disclosure Schedule identifies each Customer License Agreement, together with
the term thereof, and each source code escrow agreement entered into by the
Company and relating to any Intangibles and Software identified in such Customer
License Agreement.
(iv) SCHEDULE 3.22(b)(iv) to the Disclosure
Schedule identifies each Distributor Agreement, together with the term thereof,
and each source code escrow agreement entered into by the Company and relating
to any Intangibles and Software identified in such Distributor Agreement.
(v) SCHEDULE 3.22(b)(v) to the Disclosure
Schedule identifies each Supplier License Agreement, together with the term
thereof, all royalties or other amounts due thereon, and each source code escrow
agreement entered into by the provider or licensor thereof running to the
benefit of the Company and relating to any Intangibles and Software identified
in such Supplier License Agreement.
C. Ownership and Right to License.
(i) Except as set forth in SCHEDULE 3.22(c) of the
Disclosure Schedule, the Company owns the Owned Software and Intangibles
attributable to the Owned Software, as used or required to operate the Company's
businesses as currently conducted, free and clear of any liens, claims, charges
or encumbrances which would materially affect the use of the Owned Software in
connection with the operation of the Company's business as currently conducted.
(ii) Except as set forth in SCHEDULE 3.22(c) of the
Disclosure Schedule, the Company has received written license agreements
granting the full right to use all of the Customer Software and Other Software,
and Intangibles attributable thereto, as used or required to operate the
Company's businesses as currently conducted, free and clear of any liens, claims
charges or encumbrances which would materially and adversely affect the use of
such Software in connection with the operation of the Company's business as
currently conducted. Neither the Company nor the Shareholders have any Knowledge
that such written license agreements are from a source other than a Person who
is authorized to grant the rights granted to Company therein.
(iii) Except as set forth in SCHEDULE 3.22(c), no
rights of any third party not previously obtained are necessary to market,
license, sell, modify, update, and/or create derivative works for any Software
as to which the Company takes any such action in its business as currently
conducted and as contemplated in the future in accordance with the Company's
written business plans.
(iv) Except as set forth in SCHEDULE 3.22(c) of the
Disclosure Schedule, none of the Software or Intangibles listed in SCHEDULE
3.22, or their respective past or current uses by or through the Company have
violated or infringed upon, or is violating or infringing upon, any Software,
patent, copyright, trade secret or other Intangible of any Person. The Company
has adequately maintained all trade secrets and copyrights with respect to the
Owned Software.
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The Company has substantially performed all obligations imposed upon
the Company with regard to the Customer Software and Other Software which are
required to be performed by the Company on or prior to the date hereof, and
neither the Company nor, to the Knowledge of the Company and the Shareholders,
any other party, is in breach of or default thereunder in any material respect,
nor to Knowledge of the Company and the Shareholders, is there any event which
with notice or lapse of time or both would constitute a default thereunder.
(v) Except as set forth in SCHEDULE 3.22(c) of the
Disclosure Schedule, to the Knowledge of the Company and the Shareholders, no
Person is violating or infringing upon, or has violated or infringed upon at any
time, any of the Company's rights to any of the Software or Intangibles listed
in SCHEDULE 3.22.
(vi) None of the Software or Intangibles listed in
SCHEDULE 3.22 are owned by or registered in the name of any current or former
owner, shareholder, partner, director, executive, officer, employee, salesman,
agent, customer, or contractor of the Company, nor does any such Person have any
interest therein or right thereto, including, but not limited to, the right to
royalty payments. Except as set forth in SCHEDULE 3.22, the Company has not
granted any third party any exclusive rights related to any Owned Software.
(vii) No litigation is pending and no claim has been
made against the Company or, to the Knowledge of the Company and the
Shareholders, is Threatened, which contests the right of the Company to sell or
license to any Person or entity or use any of the Owned Software, Customer
Software or Other Software. No former employer of any employee or consultant of
the Company has made a claim against the Company or, to the Knowledge of the
Company and the Shareholders against any other Person, that the Company or such
employee or consultant is misappropriating or violating the Intangibles of such
former employer.
(viii) The Company is not a party to nor bound by
and, upon the consummation of the Contemplated Transactions, ISI will not be a
party to or bound by (as a result of any acts or agreements of the Company), any
license or other agreement requiring the payment by the Company or their assigns
of any royalty or license payment, excluding such agreements relating to the
Customer Software or Other Software to the extent such royalty or license
payment is expressly set forth in SCHEDULE 3.22.
(ix) Except as set forth in SCHEDULE 3.22(c), the
Owned Software, Customer Software, and Other Software and the information used
by the Company, and the Intangibles thereunder, are fully transferable to ISI.
(x) No Software other than the Owned Software,
Customer Software and Other Software is required to operate the business of the
Company as currently conducted.
(xi) The Company has supplied ISI with correct and
complete copies of representative Customer License Agreements, Distributor
Agreements and Supplier License Agreements. Except as set forth in SCHEDULE
3.22(c), all Customer License Agreements, Distributor Agreements and Supplier
License Agreements may be assigned to ISI free of cost or expense without
obtaining the consent or approval of any other Person. Other than the term of
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the license grant and the consideration paid for such license grant, the terms
and conditions of all Customer License Agreements entered into between the
Company and any customer of Company are not materially different from the terms
and conditions of the copies of representative Customer License Agreements
provided to ISI.
(xii) SCHEDULE 3.22(c) identifies all individuals who
have contributed to the development of the Owned Software.
D. Performance.
(i) Except as set forth in SCHEDULE 3.22(d)(i) of the
Disclosure Schedule, the Company Software substantially:
(1) Performs in accordance with all Company
published specifications for the Company Software;
(2) Complies with all Company published
documentation, descriptions and literature with respect to the Company Software;
and
(3) Complies with all representations,
warranties and other requirements specified in all Customer License Agreements
and Distributor Agreements.
Except as set forth in SCHEDULE 3.22(d)(i), no claim has been made or,
to the Knowledge of the Company, is Threatened, that the Company Software
substantially fails to perform as set forth in the immediately preceding
sentence.
(ii) Except as set forth in SCHEDULE 3.22(d)(ii), the
Company has substantially complied with all Customer License Agreements,
Distributor Agreements and Supplier License Agreements, and to the Knowledge of
the Company and the Shareholders, except as set forth in SCHEDULE 3.22, all
other parties to such agreements have substantially complied with all provisions
thereof and no default or event of default exists under any of the Customer
License Agreements, Distributor Agreements and Supplier License Agreements.
(iii) Except as set forth in SCHEDULE 3.22(d)(iii),
with respect to the Company Software:
(1) The Company maintains machine-readable
master-reproducible copies, reasonably complete technical documentation and/or
user manuals for the most current releases or versions thereof and for all
earlier releases or versions thereof currently being supported by the Company.
(2) In each case, the machine-readable copy
substantially conforms to the corresponding source code listing.
(3) Such Company Software for which the
Company possesses source code is written in the language set forth in SCHEDULE
3.22, for use on the hardware set forth in SCHEDULE 3.22 with standard operating
systems.
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E. Such Company Software for which the Company possesses
source code can be maintained and modified by reasonably competent programmers
familiar with such language, hardware and operating systems.
F. Millennium Compliance. Except as set forth in SCHEDULE
3.22(e), the Owned Software and to the Knowledge of the Company and the
Shareholders, the Customer Software and Other Software, are "Millennium
Compliant." For the purposes of this Agreement "Millennium Compliant" means:
(i) The functions, calculations, and other computing
processes of the Owned Software, Customer Software and Other Software
(collectively, "Processes") perform in an accurate manner regardless of the date
in time on which the Processes are actually performed and regardless of the date
input to the Owned Software, Customer Software, and Other Software, whether
before, on, or after January 1, 2000, and whether or not the dates are affected
by leap years;
(ii) The Owned Software, Customer Software, and Other
Software accept, store, sort, extract, sequence, and otherwise manipulate date
inputs and date values, and return and display date values, in an accurate
manner regardless of the dates used, whether before, on, or after January 1,
2000;
(iii) The Owned Software, Customer Software, and
Other Software will function without interruptions caused by the date in time on
which the Processes are actually performed or by the date input to the Owned
Software, Customer Software, and Other Software, whether before, on, or after
January 1, 2000;
(iv) The Owned Software, Customer Software, and Other
Software accept and respond to two (2) digit year and four (4) digit year date
input in a manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner;
(v) The Owned Software, Customer Software, and Other
Software display, print, and provide electronic output of date information in
ways that are unambiguous as to the determination of the century; and
(vi) The Owned Software, Customer Software, and Other
Software have been tested by the Company to determine whether the Owned
Software, Customer Software, and Other Software are Millennium Compliant. The
Company shall deliver the test plans and results of such tests upon written
request from ISI. The Company shall notify ISI immediately of the results of any
tests or any claim or other information that indicates the Owned Software,
Customer Software, and Other Software are not Millennium Compliant.
G. Trade Secrets and Confidential Information. Without
limiting any of the foregoing representations and warranties contained in the
preceding subparagraphs of this Section 3.22., to the Knowledge of the Company
and the Shareholders, no current or former owner, shareholder, partner,
director, executive, officer, employee, salesman, agent, customer, or contractor
of the Company has disclosed to (without proper obligation of confidentiality)
or
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otherwise used or utilized on behalf of any Person other than the Company, any
trade secrets or proprietary information, including, without limitation, the
source codes for Company Software.
All Customer License Agreements, Distributor Agreements, software
development agreements, and any other written agreement between the Company and
any third party in which trade secrets or confidential information of the
Company, the Company's customers, agents, or suppliers are disclosed binds the
recipient thereof to take reasonable steps to protect the proprietary rights of
the Company and their customers, agents, and suppliers in such trade secrets and
confidential information.
3.23. Certain Payments. Neither the Company nor to the Shareholders'
Knowledge any director, officer, agent, or employee of the Company, nor any
other Person associated with or acting for or on behalf of the Company, has
directly or indirectly:
A. Made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services in violation of any
Legal Requirement.
B. Established or maintained any fund or asset on behalf of
the Company that has not been recorded in the books and records of the Company.
3.24. Relationships With Related Persons. Except as set forth in
SCHEDULE 3.24 of the Disclosure Schedule, no Related Person of the Company has,
or since December 31, 1998, has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Company's businesses.
No Related Person of the Company owns, or since December 31, 1998, has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has:
A. A material financial interest in any transaction with the
Company; or
B. Engaged in competition with the Company with respect to any
line of the products or services of the Company (a "Competing Business") in any
market presently served by the Company except for ownership of less than five
percent (5%) of the outstanding capital stock of any Competing Business that is
publicly traded on any recognized exchange or in the over-the-counter market.
Except as set forth in SCHEDULE 3.24 of the Disclosure Schedule, no
Related Person of the Company is a party to any Contract or commitment with the
Company.
3.25. Brokers or Finders. None of the Shareholders, the Company or
their respective agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.26. Disclosure. No representation or warranty made by the Company or
the Shareholders in this Agreement or in the Disclosure Schedule, nor any
document, written
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information, statement, financial statement, certificate or exhibit prepared and
furnished or to be prepared and furnished by the Company or the Shareholders or
their respective representatives pursuant hereto or in connection with the
transactions contemplated hereby, when taken together, contains or contained (as
of the date made) any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements or facts contained
herein or therein not misleading in light of the circumstances under which they
were made.
4. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF ISI AND INFOCURE.
ISI and InfoCure, jointly and severally, hereby represent and warrant
to the Company and the Shareholders as follows:
4.1. Organization. Each of ISI and InfoCure is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and ISI and InfoCure each has all requisite
corporate power and authority to own, lease and operate its assets and to carry
on its business as now being conducted. Each of ISI and InfoCure is duly
qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of ISI, InfoCure or their respective
subsidiaries taken as a whole.
4.2. Authorization. Each of ISI and InfoCure has full corporate power
and authority to execute and deliver this Agreement and to perform its
respective obligations under this Agreement and to consummate the Merger and the
other transactions contemplated hereby (the "InfoCure/ISI Ancillary
Agreements"). The execution and delivery of this Agreement by ISI and InfoCure
and the performance by ISI and InfoCure of their respective obligations
hereunder and the consummation of the Merger, the InfoCure/ISI Ancillary
Agreements and the other transactions provided for herein have been duly and
validly authorized by all necessary corporate action on the part of each of ISI
and InfoCure. This Agreement and the InfoCure/ISI Ancillary Agreements have been
duly executed and delivered by each of ISI and InfoCure and each constitutes the
legal, valid and binding agreement of ISI and InfoCure, enforceable against each
of ISI and InfoCure in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. Each other agreement to be executed by
ISI and InfoCure in connection with this Agreement will be duly executed and
delivered by ISI and InfoCure in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
4.3. Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the
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Organizational Documents of ISI or InfoCure; (ii) any Contract material to the
business and operations of ISI or InfoCure; (iii) any judgment, decree,
injunction or order of any court or governmental authority or agency to which
ISI or InfoCure is a party or by which ISI or InfoCure or any of their
respective properties is bound or (iv) any statute, law, regulation or rule
applicable to ISI or InfoCure, so as to have, in the case of subsections (ii)
through (iv) above, a material adverse effect on the assets, liabilities,
results of operations, financial condition, business or prospects of ISI or
InfoCure and their respective subsidiaries taken as a whole. Except for filing
of the Certificate of Merger, no Consent, approval, order or authorization of,
or registration, declaration or filing with, any government agency or public or
regulatory unit, agency, body or authority with respect to ISI or InfoCure is
required in connection with the execution, delivery or performance of this
Agreement by ISI or InfoCure or the consummation of the Contemplated
Transactions contemplated by this Agreement by ISI or InfoCure, the failure to
obtain which would have a material adverse effect upon the assets, liabilities,
results of operations, financial condition, business or prospects of ISI or
InfoCure and its subsidiaries taken as a whole.
4.4. Capitalization of InfoCure. The authorized capital stock of
InfoCure consists of fifteen million (15,000,000) shares of common stock, $.001
par value per share of which seven million four hundred thirty-two thousand two
hundred twenty-four (7,432,224) shares were issued and outstanding as of
December 31, 1998, and two million (2,000,000) shares of preferred stock, $.001
par value per share, of which eight hundred fifty thousand and sixty (850,060)
shares were issued and outstanding as of December 31, 1998. All shares of
InfoCure Common Stock outstanding as of the date hereof are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. None of
the outstanding shares of InfoCure Common Stock or other securities of InfoCure
was issued in violation of the Securities Act or applicable state securities
laws. The shares of InfoCure Common Stock to be issued pursuant to this
Agreement have been duly authorized and, when issued, will be validly issued,
fully paid, nonassessable, free of preemptive rights and in compliance with the
Securities Act and applicable state securities laws.
4.5. InfoCure SEC Reports. InfoCure has heretofore made available to
the Shareholders its Annual Report on Form 10-K for the transition period ended
December 31, 1997, its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998, its Current Reports on
Form 8-K or 8-K/A dated November 6, 1998, December 21, 1998 and December 23,
1998, the "InfoCure SEC Reports"). As of their respective dates, the InfoCure
SEC Reports did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Since September 30, 1998, there has been no material adverse
change in the assets, liabilities, results of operations, financial condition,
business or prospects of InfoCure and its subsidiaries taken as a whole, and
there are no existing facts or circumstances known to the senior management of
InfoCure reasonably likely to cause such a material adverse change, other than
with respect to general domestic or international economic conditions. Since
July 10, 1997, InfoCure has filed all forms, reports and documents with the
Securities and Exchange Commission required to be filed by it pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act, and the rules and regulations promulgated thereunder, each of
which complied as to form, at the time such form, document or report was
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filed, in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the applicable rules and regulations
promulgated thereunder.
4.6. Litigation. Except as may be disclosed in the InfoCure SEC
Reports, there are no suits, arbitrations, actions, claims, complaints,
grievances, investigations or proceedings pending or, to the Knowledge of
InfoCure or ISI, Threatened against InfoCure or ISI that, if resolved against
InfoCure or ISI could be reasonably expected to have a material adverse effect
on InfoCure or ISI on their ability to consummate the Merger and the other
transactions contemplated hereby.
4.7. Disclosure. No representation, warranty or covenant made by
InfoCure or ISI in this Agreement or any Exhibit hereto contains any untrue
statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not misleading.
4.8. Certain Proceedings. There is no pending Proceeding that has been
commenced against ISI or InfoCure that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the knowledge of ISI or InfoCure, no such
Proceeding has been Threatened.
4.9. Brokers or Finders. Neither ISI or InfoCure nor any of their
respective officers or agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5. COVENANTS OF THE PARTIES.
The parties hereto hereby agree as follows with respect to the period
from and after the date of this Agreement.
5.1. Mutual Covenants.
A. General. Each of the parties shall use its reasonable
efforts to take all action and to do all things necessary, proper or advisable
to consummate the Merger and the transactions contemplated by this Agreement
(including, without limitation, using its reasonable efforts to cause the
conditions set forth in this Section 5. for which they are responsible to be
satisfied as soon as reasonably practicable and to prepare, execute and deliver
such further instruments and take or cause to be taken such other and further
action as any other party hereto shall reasonably request).
B. Governmental Matters. Each of the parties shall use its
reasonable efforts to take any action that may be necessary, proper or advisable
in connection with any other notices to, filings with, and authorizations,
consents and approvals of any Governmental Body or other third party that it may
be required to give, make or obtain in connection with the Merger.
C. Pooling of interests. Each of the parties shall use its
Best Efforts to cause the Merger to qualify for pooling of interests accounting
treatment for financial reporting purposes. Neither the Company nor any
Shareholder or affiliate of the Company shall knowingly
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take any action that would jeopardize the treatment of the Merger as a "pooling
of interests" for accounting purposes.
D. Tax-Deferred Treatment. Each of the parties shall use its
reasonable efforts to cause the Merger to constitute a tax-deferred
"reorganization" under section 368(a) of the Code.
E. Expenses. Except as expressly otherwise provided herein,
ISI and InfoCure on the one hand, and the Company on the other hand (but only up
through the Effective Time), shall bear its respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants. After the Effective Time, the
Shareholders shall be solely responsible for such fees and expenses relating to
themselves or the Company. In the case of termination of this Agreement, the
obligation of each party to pay its own expenses shall be subject to any rights
of such party arising from a breach of this Agreement by the other party.
F. Public Announcements. Unless otherwise required by
applicable laws, at all times prior to the earlier of the Effective Time or
termination of this Agreement pursuant to Section 8.1., the Company and InfoCure
shall consult with each other before issuing any press release with respect to
the Merger and shall not issue any such press release prior to such
consultation.
G. Access. From and after the date of this Agreement until the
Effective Time (or the termination of this Agreement), the Company, on the one
hand, and ISI and InfoCure, on the other hand, shall permit Representatives of
the other to have appropriate access at all reasonable times to the other's
premises, properties, books, records, contracts, tax records, documents,
customers and suppliers, and any information obtained by any party pursuant to
this Section 5.1.G. shall be subject to the provisions of the mutual
confidentiality agreement between them dated July 9, 1998, and the
confidentiality provisions of that certain Letter of Intent between the parties
dated January 7, 1999, which agreements remain in full force and effect.
H. Filing of 1998 and 1999 Short Period Income Tax Returns of
Company. Messrs. Davis and Simmons shall have prepared and shall file or cause
to be filed, at the expense of the Company, with the appropriate federal, state
and local government agencies (hereinafter, "Taxing Authorities"), within the
time prescribed by law, all required federal, state and local income tax returns
of the Company for calendar year 1998 and for the income tax period from January
1, 1999, to immediately prior to the Effective Date (the "Final Returns"), and
Shareholders shall be jointly and severally obligated to pay and shall pay,
prior to delinquency, all taxes due with respect to the Final Returns, which
shall include, without limitation, all taxes arising from all operations and
activities of the Company prior to the Effective Date. Prior to the filing of
the Final Returns, Simmons shall be appointed an officer of ISI and/or InfoCure,
in addition to any other officer position Simmons may hold pursuant to his
Employment Agreement, ("Tax Officer") for the sole purpose of causing to be
prepared and signing and filing the Final Returns, and Simmons shall have no
authority of any other kind or nature whatsoever and no ability to bind ISI
and/or InfoCure to any obligation or commitment whatsoever as Tax
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Officer. The Final Returns shall be signed by Simmons, in his capacity as Tax
Officer, and by the certified public accounting firm (anticipated to be Babush
Neiman Kornman & Johnson, LLP) which prepares the Final Returns; and immediately
after the Final Returns are signed by Simmons, his position as Tax Officer shall
automatically terminate. At least ten (10) business days prior to the date the
Final Returns are filed, Simmons shall deliver copies of the proposed Final
Returns to ISI and InfoCure for their review and comment. If any Taxing
Authority, such as, but not limited to, the Internal Revenue Service or the
Georgia Department of Revenue, issues a notice of deficiency to ISI and/or
InfoCure with respect to the Final Returns, ISI shall be the party entitled to
contest any such deficiency notice; provided, however, that if the Shareholders,
or any of the Shareholders, would be obligated to pay such taxes, or to
indemnify ISI and/or InfoCure, for, any tax deficiency or liability related
thereto, then (i) the Shareholders, as a group, hereby appoint Messrs. Simmons
and Davis as their representatives, together with an attorney or accountant of
Messrs. Simmons and Davis (whose fees and expenses shall be borne by
Shareholders), to participate in the contesting of such deficiency and (ii)
neither ISI or InfoCure shall settle or compromise the liability with respect
thereto without the prior written consent of Messrs. Simmons and Davis, which
consent shall not be unreasonably withheld; provided, that Messrs. Simmons and
Davis shall be entitled to consent to any such settlement or compromise on
behalf of all of the Shareholders. In the event ISI or InfoCure requests, in
writing, a consent of Messrs. Simmons and Davis for any such settlement or
compromise and Messrs. Simmons and Davis fail to respond to such request within
twenty (20) days of the delivery thereof, then such failure to respond shall
constitute consent to such settlement or compromise that shall be binding on the
Shareholders.
I. Filing of Amended Income Tax Returns of Company. At any
time after the Effective Date, Messrs. Davis and Simmons shall have the
authority to have prepared and file or cause to be filed, at the expense of
Messrs. Davis and Simmons, with the appropriate federal, state and local
government agencies (hereinafter, "Taxing Authorities"), within the time
prescribed by law, any appropriate or required federal, state and local income
tax returns of the Company for any periods ending prior to the Effective Date
(the "Amended Returns"), and Shareholders shall be (i) jointly and severally
obligated to pay and shall pay any taxes due with respect to the Amended
Returns, which shall include, without limitation, all taxes arising from all
operations and activities of the Company prior to the Effective Date and (ii)
entitled to receive any income tax refunds generated as a result of any such
Amended Returns. ISI and/or InfoCure hereby irrevocably appoint Simmons an
officer of ISI and/or InfoCure, in addition to any other officer position
Simmons may hold pursuant to his Employment Agreement, ("Tax Officer") for the
sole purpose of causing to be prepared and signing and filing the Amended
Returns, and Simmons shall have no authority of any other kind or nature
whatsoever and no ability to bind ISI and/or InfoCure to any obligation or
commitment whatsoever as Tax Officer. The Amended Returns shall be signed by
Simmons, in his capacity as Tax Officer, and by the certified public accounting
firm (anticipated to be Babush Neiman Kornman & Johnson, LLP) which prepares the
Amended Returns. Immediately after the Amended Returns are filed, Simmons shall
deliver copies of the Amended Returns to ISI and InfoCure. If any Taxing
Authority, such as, but not limited to, the Internal Revenue Service or the
Georgia Department of Revenue, issues a notice of deficiency to ISI and/or
InfoCure with respect to the Amended Returns, ISI shall be the party entitled to
contest any such deficiency notice; provided, however, that if the Shareholders,
or any
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of the Shareholders, would be obligated to pay such taxes, or to indemnify ISI
and/or InfoCure, for, any tax deficiency or liability related thereto, then (i)
the Shareholders, as a group, hereby appoint Messrs. Simmons and Davis as their
representatives, together with an attorney or accountant of Messrs. Simmons and
Davis (whose fees and expenses shall be borne by Shareholders), to participate
in the contesting of such deficiency and (ii) neither ISI or InfoCure shall
settle or compromise the liability with respect thereto without the prior
written consent of Messrs. Simmons and Davis, which consent shall not be
unreasonably withheld; provided, that Messrs. Simmons and Davis shall be
entitled to consent to any such settlement or compromise on behalf of all of the
Shareholders. In the event ISI or InfoCure requests, in writing, a consent of
Messrs. Simmons and Davis for any such settlement or compromise and Messrs.
Simmons and Davis fail to respond to such request within twenty (20) days of the
delivery thereof, then such failure to respond shall constitute consent to such
settlement or compromise that shall be binding on the Shareholders.
5.2. Covenants of the Company.
A. Conduct of the Company's Operations. During the period from
the date of this Agreement to the Effective Time or the date of termination of
this Agreement, the Company shall use its reasonable efforts to maintain and
preserve its business organization and to retain the services of its officers
and key employees and maintain relationships with customers, suppliers and other
third parties to the end that their goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company shall not, except as otherwise expressly contemplated by this
Agreement and the transactions contemplated hereby, without the prior written
consent of ISI:
(i) Sell, transfer, lease, pledge, mortgage, encumber
or otherwise dispose of any of its personal property or assets other than sales
or leases of inventory or licensing of Intellectual Property Assets made in the
ordinary course of business.
(ii) Make or propose any changes in its Articles of
Incorporation or Bylaws.
(iii) Merge or consolidate with any other person or
acquire a material amount of assets or capital stock of any other person or
enter into any confidentiality agreement with any person other than in the
Ordinary Course of Business.
(iv) Other than for normal borrowings in the Ordinary
Course of Business under the Company's existing working capital credit facility,
incur, create, assume or otherwise become liable for indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for obligations of any other individual, corporation or
other entity, except in the Ordinary Course of Business.
(v) Create any subsidiaries.
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(vi) Enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to, any officer, director,
consultant or employee other than salary increases granted in the ordinary
course of business.
(vii) Change its method of doing business or change any
material method or principle of accounting in a manner that is inconsistent with
past practice.
(viii) Settle any Proceeding, whether now pending or hereafter
made or brought involving an amount in excess of Ten Thousand and No/100 Dollars
($10,000.00).
(ix) Modify, amend or terminate, or waive, release or assign
any material rights or claims with respect to, any material Contract to which
the Company is a party or any confidentiality agreement to which the Company is
a party.
(x) Incur or commit to any capital expenditures, obligations
or liabilities in respect thereof which in the aggregate exceed or would exceed
Ten Thousand and No/100 Dollars ($10,000.00) on a cumulative basis.
(xi) Issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract with respect
to the issuance or sale of any securities of the Company, or rights or
obligations convertible into or exchangeable for any securities of the Company,
or alter the terms of any presently outstanding options or make any changes, by
split-up, combination, reorganization or otherwise in the capital structure of
the Company.
(xii) Declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock.
(xiii) Agree in writing or otherwise to take any of the
foregoing actions.
B. Notification of Certain Matters. The Company and the Shareholders
shall give prompt notice to ISI and InfoCure of the occurrence or non-occurrence
of any event the occurrence or nonoccurrence of which would cause (i) any
Company or Shareholder representation or warranty contained in this Agreement to
be untrue or inaccurate at or prior to the Effective Time or (ii) any failure of
the Company or any Shareholder to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.2.B. shall
not limit or otherwise affect the remedies available hereunder to ISI and
InfoCure.
C. Intellectual Property Matters. The Company shall use its reasonable
efforts to preserve its ownership rights to all of the intellectual property
("Intellectual Property") described in Section 3.22. free and clear of any
Encumbrances and shall use its reasonable efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service mark, trade name or copyright that forms a part of the Intellectual
Property or any misappropriation or disclosure of any trade secret, confidential
information or know-how that forms a part of the Intellectual Property.
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D. No Solicitation. The Company agrees that during the term of
this Agreement or until the consummation of the Merger, it shall not, and shall
not authorize or permit any of its directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving the Company, or
acquisition or sale of any capital stock (other than upon exercise of
outstanding options of the Company) or any material portion of the assets
(except for acquisition of assets in the Ordinary Course of Business consistent
with past practice) of the Company, or any combination of the foregoing (a
"Company Competing Transaction"), or negotiate, explore or otherwise engage in
discussions with any person other than ISI and InfoCure or its directors,
officers, employees, agents and representatives, with respect to any Company
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement.
6. CONDITIONS.
6.1. Mutual Conditions. The obligations of the parties hereto to
consummate the Merger shall be subject to fulfillment of the following
conditions:
A. No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule or
regulation shall have been enacted by any Governmental Body which prevents the
consummation of the Merger.
B. InfoCure shall have received a letter, in form and
substance reasonably satisfactory to InfoCure, from BDO Seidman, L.L.P. dated
the Effective Time stating that the Merger will qualify as a pooling of
interests transaction under Opinion No. 16 of the Accounting Principles Board
and that the Company on or before the Effective Time has taken no action that
could adversely affect the qualification of the Merger as a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board.
C. No Proceeding shall be instituted by any Governmental Body
which seeks to prevent consummation or the Merger or seeking material damages in
connection with the transactions contemplated hereby which continues to be
outstanding.
6.2. Conditions to Obligations of ISI and InfoCure. The obligations of
ISI and InfoCure to consummate the Merger and the transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by ISI and InfoCure:
A. Neither any investigation of the Company by ISI or
InfoCure, nor the Disclosure Schedule or any supplement thereto nor any other
document delivered to ISI and InfoCure as contemplated by this Agreement, shall
have revealed any facts or circumstances which, in the sole and exclusive
judgment of ISI and InfoCure, reflect in a material adverse way on the financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business, operations or prospects of the Company.
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B. The representations and warranties of the Company and the
Shareholders set forth in Section 3. shall be true and correct in all material
respects on the date hereof and on and as of the Closing Date as though made on
and as of the Closing Date (except for representations and warranties made as of
a specified date, which need be true and correct only as of the specified date).
C. The Company and Shareholders shall have performed in all
material respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by such
parties hereunder prior to the Effective Time.
D. Since the date of this Agreement, there shall not have been
any material adverse change in the assets, liabilities, results of operations,
business or financial condition of the Company or any material adverse effect on
the ability of the Company to consummate the transactions contemplated hereby.
E. The Company shall have furnished ISI and InfoCure with a
certificate dated the Closing Date signed on behalf of it by its President to
the effect that the conditions set forth in Sections 6.2.B., C. and D. have been
satisfied.
F. The Shareholders shall have executed the Registration
Rights Agreement, in the form attached hereto as EXHIBIT E.
G. The Company and each of the Shareholders shall have
executed the Escrow Agreement, in the form attached hereto as EXHIBIT D.
H. Each of Simmons and Davis shall have executed a
Non-Competition Agreement in the form attached hereto as EXHIBIT C.
I. Each of Simmons and Davis shall have executed an
Affiliate's Agreement in the form attached hereto as EXHIBIT F.
J. Simmons shall have executed an Employment Agreement, in the
form of which is attached hereto as EXHIBIT B-1.
K. Davis shall have executed an Employment Agreement, in the
form attached hereto as EXHIBIT B-2.
L. ISI and InfoCure shall have received the legal opinion,
dated the Closing Date, of Self & Davis, LLP, counsel to the Company and the
Shareholders, in substantially the form attached hereto as EXHIBIT G.
M. The Company and the Shareholders shall have obtained all
material consents, waivers, approvals, authorizations or orders and made all
filings in connection with the authorization, execution and delivery of this
Agreement by the Company and the Shareholders and the consummation by each of
the transactions contemplated hereby.
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6.3. Conditions to Obligations of the Company and the Shareholders. The
obligations of the Company and the Shareholders to consummate the Merger and the
other transactions contemplated hereby shall be subject to the fulfillment of
the following conditions unless waived by the Company and the Shareholders:
A. The representations and warranties of ISI and InfoCure set
forth in Section 4. shall be true and correct in all material respects on the
date hereof and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a specified
date, which need be true and correct only as of the specified date).
B. Each of ISI and InfoCure shall have performed in all
material respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
C. Since the date of this Agreement, there shall not have been
any material adverse change in the assets, liabilities, results of operations,
business or financial condition of ISI and InfoCure or any material adverse
effect on the ability of ISI and InfoCure to consummate the transactions
contemplated hereby.
D. Each of ISI and InfoCure shall have furnished the Company
with a certificate dated the Closing Date signed on its behalf by its Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 6.3.A., B. and C. have been satisfied.
E. ISI shall have executed the Employment Agreements, in the
forms attached hereto as EXHIBITS B-1 and B-2.
F. The Company shall have received the legal opinion, dated
the Closing Date, of Morris, Manning & Martin, L.L.P., counsel to ISI and
InfoCure, substantially in the form attached hereto as EXHIBIT H.
G. InfoCure shall have executed the Registration Rights
Agreement in the form attached hereto as EXHIBIT E.
H. ISI and InfoCure shall have executed the Escrow Agreement
in the form attached hereto as EXHIBIT F.
I. ISI and InfoCure shall have obtained all material consents,
waivers, approvals, authorizations or orders and made all filings in connection
with the authorization, execution and delivery of this Agreement by ISI and
InfoCure and the consummation by them of the transactions contemplated hereby.
7. INDEMNIFICATION; REMEDIES.
7.1. Agreement by Shareholders to Indemnify. Subject to the limitations
set forth in Section 7.1.1 and in Section 7.1.2, the Shareholders, severally and
not jointly, in proportion to each Shareholder's relative Percentage Ownership,
agree that they will indemnify and hold ISI
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and InfoCure harmless in respect of the aggregate of all indemnifiable Damages
of ISI and InfoCure.
For this purpose, "indemnifiable Damages" of ISI or InfoCure means the
aggregate of all Damages incurred or suffered by ISI and InfoCure resulting
from:
A. Any inaccurate representation or warranty made by the
Company or the Shareholders in or pursuant to this Agreement; or
B. Any breach of or default in the performance of any of the
covenants or agreements made by the Company or the Shareholders in this
Agreement.
The foregoing obligation of the Shareholders to indemnify InfoCure and
ISI shall be subject to each of the following principles or qualifications:
7.1.1 All representations, warranties and covenants of the
Company, the Shareholders, ISI and InfoCure contained in this Agreement will
remain operative and in full force and effect for a period ending on the earlier
of (i) one (1) year after the Closing and (ii) publication of audited combined
financial statements of InfoCure and the Company for the fiscal year ended
December 31, 1999.
7.1.2 In seeking indemnification for any indemnifiable Damages
otherwise payable to ISI or InfoCure under this Agreement following the Closing,
ISI and InfoCure, as the case may be, shall exercise its remedies only with
respect to those certain escrow shares deposited in escrow pursuant to the
Escrow Agreement. Notwithstanding the foregoing, the Shareholders shall be
responsible for indemnifiable Damages only to the extent that the aggregate
amount of such indemnifiable Damages exceeds Three Hundred Thousand and No/100
Dollars ($300,000.00) and then only for the amount of such excess up to the
amount of the escrow shares deposited in escrow pursuant to the Escrow
Agreement.
7.2. Matters Involving Third Parties. If any third party shall notify
ISI or InfoCure (the "Indemnified Party") with respect to any matter which may
give rise to a claim by ISI or InfoCure for indemnification against the
Shareholders (collectively the "Indemnifying Party") under this Section 7. (a
"Third Party Claim") then the Indemnified Party shall notify the Indemnifying
Party promptly; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability or obligation hereunder unless (and then solely to the extent
that) the Indemnifying Party thereby is Damaged.
If the Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party;
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B. The Indemnified Party may retain separate co-counsel at its
sole cost and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel to the extent the
Indemnified Party concludes that the counsel the Indemnifying Party has selected
has a conflict of interest);
C. The Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnified Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably).
If (i) the Indemnifying Party fails to notify the Indemnified Party
within fifteen (15) days after the Indemnified Party has given notice of the
matter that the Indemnifying Party is assuming the defense thereof or (ii) the
Indemnifying Party notifies the Indemnified Party within fifteen (15) days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is not assuming the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it may deem appropriate.
7.3. Appointment of Shareholders' Representative. Each Shareholder
constitutes and appoints Reid W. Simmons and James C. Davis, D.M.D.
(collectively the "Shareholders' Representative") as his true and lawful
attorney-in-fact to act for and on behalf of such Shareholders in all matters
relating to or arising out of this Section 7. and the liability or asserted
liability of such Shareholder, hereunder, including specifically, but without
limitation, accepting and agreeing to the liability of such Shareholder with
respect to any indemnification claim, objecting to any indemnification claim,
disputing the liability of such Shareholder, or the amount of such liability,
with respect to any indemnification claim and prosecuting and resolving such
dispute as herein provided, accepting the defense, compromise and settlement of
any Third Party Claim on behalf of such Shareholder or refusing to accept the
same, settling and compromising the liability of such Shareholder hereunder,
instituting and prosecuting such actions (including arbitration proceedings) as
the Shareholders' Representative shall deem appropriate in connection with any
of the foregoing, retaining counsel, accountants, appraisers and other advisers
in connection with any of the foregoing, all for the account of the Shareholder,
such Shareholder agreeing to be fully bound by the acts, decisions and
agreements of the Shareholder Representative taken and done pursuant to the
authority herein granted. Each Shareholder hereby agrees to indemnify and to
save and hold harmless the Shareholders' Representative from any liability
incurred by the Shareholders' Representative based upon or arising out of any
act, whether of omission or commission, of the Shareholders' Representative
pursuant to authority herein granted, other than acts, whether of omission or
commission, of the Shareholders' Representative that constitute willful
misconduct in the exercise by the Shareholders' Representative of the authority
herein granted. The death or incapacity of any Shareholder shall not terminate
the authority and agency of the Shareholders' Representative. In the event of
the resignation of either Reid W. Simmons or James C. Davis, D.M.D., the other
party shall continue
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as Shareholders' Representative hereunder and in the event of the resignation of
such other party, the resigning Shareholders' Representative shall appoint a
successor either from among the Shareholders or who shall otherwise be
acceptable to ISI and InfoCure and who shall agree in writing to accept such
appointment, and the resigning Shareholders' Representative's resignation shall
not be effective until such a successor shall exist. If the Shareholders'
Representative is a natural person and if such Shareholders' Representative
should die or become incapacitated, then his successor shall be appointed within
thirty (30) days of his death or incapacity by a majority of the Shareholders
and such successor either shall be a Shareholder or shall otherwise be
acceptable to InfoCure. The choice of a successor Shareholders' Representative
appointed in any manner permitted above shall be final and binding upon all of
the Shareholders. The decisions and actions of any successor Shareholders'
Representative shall be, for all purposes, those of a Shareholders'
Representative as if originally named herein.
8. TERMINATION.
8.1. Termination Events. This Agreement may, by written notice given at
or prior to the Closing Date in the manner hereinafter provided, be terminated:
A. By either ISI and InfoCure, on the one hand, or the Company
and the Shareholders, on the other hand, if a material Breach shall be made by
the other parties hereto with respect to the due and timely performance of any
of its covenants and agreements contained herein, or with respect to the
material compliance with any of its representations, warranties or covenants,
and such breach cannot be cured prior to the Closing Date and has not been
waived;
B. (i) By ISI and InfoCure, if all of the conditions set forth
in Sections 6.1. and 6.2. shall not have been satisfied on or before the Closing
Date, other than through failure of ISI or InfoCure to fully materially comply
with its obligations hereunder, and such conditions shall not have been waived
by the ISI and InfoCure on or before such date; or
(ii) By the Company and the Shareholders if all of
the conditions set forth in Sections 6.1. and 6.3. shall not have been satisfied
on or before the Closing Date, other than through failure of the Company or the
Shareholders to fully materially comply with its obligations hereunder, and such
conditions shall not have been waived by the Company on or before such date;
C. By the Shareholders if the Average Per Share Closing Price
is less than Twenty-Four and No/100 Dollars ($24.00) and the Shareholders have
provided notice to ISI and InfoCure of their intention to terminate this
Agreement pursuant to this provision, unless InfoCure and ISI provide notice to
the Shareholders within twenty-four (24) hours of receipt of the Shareholders'
notice hereunder of InfoCure's agreement to increase the Exchange Ratio to an
amount equal (i) the product of (1) the quotient determined by dividing
Twenty-Four and No/100 Dollars ($24.00) by the Average Per Share Closing Price,
multiplied by (2) 1,144,000, divided by (ii) ten thousand (10,000) shares;
D. By mutual consent of the Company, ISI and InfoCure; or
42
<PAGE> 48
E. By either the Company and the Shareholders or ISI and
InfoCure if the Closing shall not have occurred, other than through failure of
any such party to materially fulfill its obligations hereunder, on or before
March 15, 1999, or such later date as may be agreed upon by the parties.
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
9. MISCELLANEOUS.
9.1. Notices. Except as otherwise set forth herein, all notices given
in connection with this Agreement shall be in writing and shall be delivered
either by personal delivery, by telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by express courier or
delivery service, addressed to the parties hereto at the following addresses:
A. Shareholders: At the addresses set forth on SCHEDULE 1 hereto.
43
<PAGE> 49
With a copy to:
Self & Davis, LLP
Platinum Tower
400 Interstate North Parkway
Suite 1650
Atlanta, Georgia 30339
Attention: J. Phillip Self, Esq.
Fax No.: (770) 563-9330
B. Company:
OMSystems, Inc.
3120 Crossing Park, N.W.
Norcross, Georgia 30071
Attention: Reid W. Simmons
James C. Davis, D.M.D.
Fax No.: (770) 263-7719
With a copy to:
Self & Davis, LLP
Platinum Tower
400 Interstate North Parkway, Suite 1650
Atlanta, Georgia 30339
Attention: J. Philip Self, Esq.
Fax No.: (770) 563-9330
C. ISI and InfoCure:
InfoCure Corporation
1765 The Exchange
Suite 450
Atlanta, Georgia 30339
Attention: Richard E. Perlman
Fax No.: (770) 857-1300
With a copy to:
Morris, Manning & Martin, L.L.P.
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Richard L. Haury, Jr., Esq.
Fax No.: (404) 365-9532
44
<PAGE> 50
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given (i) when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means) and (ii) when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail,
return receipt requested.
9.2. Further Assurances. The parties hereto agree to furnish upon
request to each other such further information, to execute and deliver to each
other such other documents, and to do such other acts and things, all as the
other party hereto may at any time reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to herein.
9.3. Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay on the
part of any party in exercising any right, power or privilege under this
Agreement or the documents referred to herein shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law, no
claim or right arising out of this Agreement or the documents referred to herein
can be discharged by one party hereto, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party
hereto; no waiver which may be given by a party hereto shall be applicable
except in the specific instance for which it is given; and no notice to or
demand on one party hereto shall be deemed to be a waiver of any obligation of
such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to herein.
9.4. Entire Agreement and Modification. This Agreement, including all
exhibits and schedules hereto, are intended by the parties to this Agreement as
a final expression of their agreement with respect to the subject matter hereof,
and are intended as a complete and exclusive statement of the terms and
conditions of that agreement. This Agreement may not be modified, rescinded or
terminated orally, and no modification, rescission, termination or attempted
waiver of any of the provisions hereof (including this Section) shall be valid
unless in writing and signed by the party against whom the same is sought to be
enforced.
9.5. Assignments, Successors and No Third-Party Rights. This Agreement
shall apply to and be binding in all respect upon, and shall inure to the
benefit of, the successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person or entity other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement, or any provision
hereof, it being the intention of the parties hereto that this Agreement and all
of its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement, their successors and assigns, and for the benefit of
no other person or entity; provided, however, that the parties hereto consent to
the assignment of interests in this Agreement, including all exhibits and
schedules hereto, as collateral security for the obligations of InfoCure and ISI
following the Closing to FINOVA Capital Corporation.
45
<PAGE> 51
9.6. Pooling of Interests. If any provision of this Agreement or the
application of any such provision to any person or circumstance precludes the
use of "pooling of interests" accounting treatment in connection with the
transactions contemplated by this Agreement, then such provision shall be of no
force and effect to the extent, and solely to the extent necessary to preserve
such accounting treatment and in the event, the remainder of this Agreement
shall not be affected, and in lieu of such provision there shall be added as
part of this Agreement a provision as similar in terms as may be possible for
the transactions contemplated by this Agreement to be treated as a "pooling of
interests" for accounting purposes.
9.7. Section Headings, Construction. The headings of articles and
sections contained in this Agreement are provided for convenience only. They
form no part of this Agreement and shall not affect its construction or
interpretation. All references to articles and sections in this Agreement refer
to the corresponding articles and sections of this Agreement. All words used
herein shall be construed to be of such gender or number as the circumstances
require. Unless otherwise specifically noted, the words "herein," "hereof,"
"hereby," "hereinabove," "hereinbelow," "hereunder," and words of similar
import, refer to this Agreement as a whole and not to any particular section,
subsection, paragraph, clause or other subdivision hereof.
9.8. Time of Essence. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
9.9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
UNDER, THE LAWS OF THE STATE OF GEORGIA WITHOUT REGARD TO CONFLICTS OF LAWS, ALL
RIGHTS AND REMEDIES BEING GOVERNED BY SUCH LAWS.
9.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same agreement.
9.11. Reservation of Rights With Respect to Gwaltney Dispute. The
parties hereto acknowledge that a bona fide dispute exists related to the
interpretation and enforceability of Option Agreement by and between Gwaltney
and Davis and Simmons dated March 30, 1990, as amended (hereinafter the
"Gwaltney Option Agreement"). The parties acknowledge that Davis and Simmons
have maintained the position that Gwaltney has by his conduct waived his rights
to acquire OMS Common stock pursuant to the Gwaltney Option Agreement. The
parties further acknowledge that Gwaltney has maintained the position that
Gwaltney has not by his conduct waived any rights to acquire OMS Common Stock
pursuant to the Gwaltney Option Agreement. It is the mutual desire of all
parties that they be permitted to execute the Agreement and the Ancillary
Agreements without in any way prejudicing their respective positions regarding
the aforementioned dispute concerning the Gwaltney Option Agreement. Therefore
the parties hereto each specifically reserve any right to pursue any claim
concerning the Gwaltney Option Agreement. The parties acknowledge that the
Agreement and the Ancillary Agreements shall not be deemed an admission against
the interests of any party regarding the Gwaltney Option Agreement. Without
limiting the generality of the foregoing, by the execution of the Agreement and
the Ancillary Agreement and the issuance and exchange of any stock by any of the
parties hereto:
46
<PAGE> 52
A. Gwaltney specifically acknowledges and agrees that Davis
and Simmons have hereby reserved the right to seek a judicial determination of
their aforementioned claim that Gwaltney has waived his rights to acquire OMS
Common stock pursuant to the Gwaltney Option Agreement.
B. Davis and Simmons acknowledge and agree that Gwaltney is
not admitting that Gwaltney has waived any rights that he has in connection with
the Gwaltney Option Agreement and that Gwaltney reserves the right to seek a
judicial determination of Gwaltney's rights to acquire OMS Common stock pursuant
to the Gwaltney Option Agreement.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
47
<PAGE> 53
IN WITNESS WHEREOF, the Company, ISI and InfoCure, by their duly
authorized officers and the Shareholders, individually, have each caused this
Agreement and Plan of Merger to be executed as of the date first written above.
INFOCURE:
InfoCure Corporation
By: /s/
Name: Frederick L. Fine
Title: President
ISI:
InfoCure Systems, Inc.
By: /s/
Name: Frederick L. Fine
Title: President
COMPANY:
OMSystems, Inc.
By: /s/
Name: Reid W. Simmons
Title: President
48
<PAGE> 54
SHAREHOLDERS:
/s/ (SEAL)
Reid W. Simmons
/s/ (SEAL)
James C. Davis, D.M.D.
49
<PAGE> 55
SCHEDULE 1
SHAREHOLDER ADDRESS TELECOPY NUMBER
Reid W. Simmons 8660 River Trace
Roswell, Georgia 30076
James C. Davis, D.M.D. 3564 Tuxedo Road
Atlanta, Georgia 30305
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
INFOCURE CORPORATION
The undersigned, for the purpose of organizing a stock corporation
under the provisions and subject to the requirements of the laws of the State
of Delaware, hereby certifies that:
FIRST: The name of the corporation is INFOCURE CORPORATION.
SECOND: The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware
19805; and the name of the registered agent of the corporation is
Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is fifty million (50,000,000) shares which are
divided into ten million (10,000,000) shares of preferred stock with a
par value of $.001 each, and forty million (40,000,000) shares of
common stock with a par value of $.001 each.
Subject to the provisions of Section 151 of the General Corporation Law
of the State of Delaware, the board of directors of the corporation is
authorized to determine, without shareholder action, the powers,
designations, preferences, limitations, voting power and relative,
participating, optional and other special rights and qualifications,
limitations and restrictions of the preferred stock, including without
limitation, the relative rights of any class of shares of preferred
stock, each series within a class, the number of shares within each
class and series and the dividend rights, conversion rights and terms
of redemption (including sinking fund provisions and liquidation
preferences), all to the fullest extent now or hereafter permitted by
the General Corporation Law of the State of Delaware. Each holder of
shares of common stock shall be entitled to one vote for each share of
common stock held of record on all matters on which the holders of
common stock are entitled to vote.
FIFTH: The name and mailing address of the incorporator are as follows:
Ugo F. Ippolito, Esq.
Glass, McCullough, Sherrill & Harrold
1409 Peachtree Street, NE
Atlanta, Georgia 30309
SIXTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver(s) appointed
for this corporation under the provisions of Section 291 of Title 8 of
the Delaware Code or on the application of trustees in dissolution or
of any receiver(s) appointed for this corporation under the provisions
of
<PAGE> 2
Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by statute
or applicable law, the board of directors is expressly authorized to
adopt, amend and repeal the bylaws of the corporation.
EIGHTH: The personal liability of the directors of the corporation to the
corporation and its shareholders is hereby eliminated or limited to the
fullest extent permitted by the provisions of Section 102(b)(7) of the
General Corporation Law of Delaware, as the same may be hereafter
amended and supplemented.
Signed on this 25th day of November, 1996.
/s/ Ugo F. Ippolito
-----------------------------
Ugo F. Ippolito, Incorporator
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INFOCURE CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
INFOCURE CORPORATION
2. The certificate of incorporation is hereby amended as follows:
(a) By deleting Article FOURTH in its entirety and by substituting in
lieu thereof the following:
"FOURTH: The aggregate number of shares of all classes of the capital
stock which the corporation shall have authority to issue is thirty
million (30,000,000) shares which are divided into five million
(5,000,000) of preferred stock with a par value of $.001 each, and
twenty-five million (25,000,000) shares of common stock with a par
value of $.001 each."
Subject to the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the board of directors of the
corporation is authorized to determine, without shareholder action,
the powers, designations, preferences, limitations, voting power and
relative, participating, optional and other special rights and
qualifications, limitations and restrictions of the preferred stock,
including without limitation, the relative rights of any class of
shares of preferred stock, each series within a class, the number of
shares within each class and series and the dividend rights,
conversion rights and terms of redemption (including sinking fund
provisions and liquidation preferences), all to the fullest extent now
or hereafter permitted by the General Corporation Law of the State of
Delaware.
Each holder of shares of common stock shall be entitled to one vote
for each share of common stock held of record on all matters on which
the holders of common stock are entitled to vote.
<PAGE> 4
3. The amendment of the certificate of incorporation herein certified
have been duly adopted by the written consent of the directors and
shareholders in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
Signed and attested to on March 12, 1997.
/s/ Frederick L. Fine
----------------------------
Frederick L. Fine, President
Attest:
/s/ James K. Price
- ------------------
Secretary
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INFOCURE CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is
INFOCURE CORPORATION
2. The certificate of incorporation is hereby amended as follows:
(a) By deleting Article FOURTH in its entirety and by
substituting in lieu thereof the following:
"FOURTH: The aggregate number of shares of all classes of the
capital stock which the corporation shall have authority to
issue is seventeen million (17,000,000) shares which are
divided into two million (2,000,000) shares of preferred stock
with a par value of $.001 each, and fifteen million
(15,000,000) shares of common stock with a par value of $.001
each."
Subject to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the board of
directors of the corporation is authorized to determine,
without shareholder action, the powers, designations,
preferences, limitations, voting power and relative,
participating, optional and other special rights and
qualifications, limitations and restrictions of the preferred
stock, including without limitation, the relative rights of
any class of shares of preferred stock, each series within a
class, the number of shares within each class and series and
the dividend rights, conversion rights and terms of redemption
(including sinking fund provisions and liquidation
preferences), all to the fullest extent now or hereafter
permitted by the General Corporation Law of the State of
Delaware.
Each holder of shares of common stock shall be entitled to one
vote for each share of common stock held of record on all
matters on which the holders of common stock are entitled to
vote.
3. The amendment of certificate of incorporation herein certified
has been duly adopted by the written consent of the directors and shareholders
in accordance with the provisions of Sections 228 and 242 of the General
corporation Law of the State of Delaware.
<PAGE> 6
Signed and attested to on May 1, 1997.
/s/ Frederick L. Fine
----------------------------
Frederick L. Fine, President
Attest:
/s/ James K. Price
- -------------------------
James K. Price, Secretary
<PAGE> 7
CERTIFICATE AND STATEMENT OF ISSUANCE, DESIGNATIONS,
PREFERENCES AND RIGHTS OF CONVERTIBLE
REDEEMABLE PREFERRED STOCK, SERIES A,
OF
INFOCURE CORPORATION
InfoCure Corporation, a corporation organized and existing under the
Delaware General Corporation Law, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of said corporation, and pursuant to the
provisions of Section 151 of the Delaware General Corporation Law, the Board of
Directors adopted a resolution providing for the issuance of one series of
preferred stock of said corporation and fixing the designations, voting powers,
preferences, and relative, participating, optional and other special rights,
and qualifications, limitations or restrictions thereof, which resolution
setting forth such matters (hereinafter referred to as the "Designation") is as
follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of InfoCure Corporation (the "Company") by Article Fourth of the Certificate of
Incorporation of the Company, the Board of Directors of the Company (i) does
hereby provide for the issuance of one series of preferred stock, $.001 par
value per share (the "Original Price"), of the Company to be designated
"Convertible Redeemable Preferred Stock, Series A" (the "Series A Stock") and
(ii) does hereby fix and herein state and express the designations, voting
powers, preferences, and relative, participating, optional and other special
rights, and qualifications, limitations or restrictions thereon, of the Series
A Stock of the Company, as follows:
1. Rank. All shares of Series A Stock shall have preferences, limitations
and relative rights identical with each other; and all shares of Series A Stock
shall have such preferences and relative rights expressly provided in this
Designation.
2. Designation of the Number of Shares. The Series A Stock shall consist
of 850,000 shares, shall be entitled to dividends when, as and if declared
pursuant to Paragraph 3, shall be entitled to a preference in liquidation as
provided in Paragraph 4, shall be redeemable as provided in Paragraph 5, shall
be convertible as provided in Paragraph 6, and shall be entitled to vote as
provided in Paragraph 7.
3. Dividends. If and whenever the Company shall declare and pay a dividend
or other distribution in respect of its Common Stock (as hereinafter defined),
the Company shall concurrently therewith declare and pay a dividend to the
holders of Series A Stock in an amount per share equal to the amount per share
of the dividend in respect of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Series A Stock is then
convertible. The Series A Stock shall further be entitled to such dividend
rights as are provided pursuant to Paragraph 5(a) of this Designation.
4. Liquidation Preference.
(a) In the event of a dissolution, liquidation or winding-up of the
Company (whether voluntary or involuntary), after payment or provision for
payment of debts, but before any distribution to the holders of Common Stock or
any other class or series of the Company's capital stock then outstanding
(collectively, the "Common Stock"), the holders of the Series A Stock then
outstanding shall be entitled to receive the following amounts:
The holders of the Series A Stock shall receive an amount per share
equal to the "Preferential Amount" (as hereinafter defined); provided
however, that (i) if the assets to be distributed to the holders of the
Series A Stock shall be insufficient to permit the payment to such
<PAGE> 8
shareholders of the full Preferential Amount, then all of the assets of
the Company to be distributed shall be distributed ratably to the holders
of the Series A Stock; and (ii) and whenever the Company shall make a
distribution in the event of any dissolution, liquidation or winding-up of
the Company (whether voluntary or involuntary) to the holders of Common
Stock, to the extent such distribution then or theretofore made (after
taking into account all distributions that would be necessary to satisfy
the Preferential Amounts due to holders of the Series A Stock) exceeds or
would exceed an aggregate amount per share of Common Stock equal to the
Preferential Amount divided by the number of shares of Common Stock into
which each share of Series A Stock is then convertible, the Company, in
lieu of distributing the Preferential Amount to the holders of Series A
Stock, shall concurrently with the making of such distribution to the
holders of Common Stock make a distribution in an amount per share to the
holders of Series A Stock equal to the amount per share distributed to the
holders of Common Stock multiplied by the number of shares of Common Stock
into which each share of Series A Stock is then convertible, to the end
that the holders of Series A Stock Preferred Stock, on an "as-converted"
basis, shall share equally with the holders of Common Stock in such
greater distribution. As used herein, the term "Preferential Amount" means
an amount initially equal to $10.00 per share of Series A Stock plus
accumulated but unpaid dividends thereon, subject to adjustment as
provided herein (including any adjustment pursuant to Paragraph 8 in
respect of a Capital Return Event).
(b) A consolidation, merger or reorganization of the Company with or into
any other corporation or corporations, or a sale, or a series of related sales,
of all or substantially all of the assets of the corporation (other than a
transaction in which the Company is the surviving corporation, and either (i)
the Common Stock is not exchanged, converted or reclassified or (ii) the Common
Stock is reclassified in a manner contemplated by the parenthetical clause
within Paragraph 6(d)(i)(D) of this Designation without effecting any change in
the beneficial ownership of the Company) shall be deemed to be a liquidation,
dissolution or winding-up for the purpose of this Paragraph 4 as to any or all
shares of Series A Stock in respect of which the holder or holders thereof
notify the Company in writing, within 30 days of the effective date of such
transaction, of such holder(s)' election to apply this Paragraph 4(b). The
provisions of Paragraph 6(e) shall not apply to any shares of Series A Stock in
respect of which the holders have elected to apply this Paragraph 4(b).
5. Redemption.
Except to the extent hereinafter provided, no holder of Series A Stock
shall have the right solely by virtue of holding such stock to require
redemption of such shares nor, except to the extent hereinafter provided, shall
the Company have the right to call or require redemption of any shares of Series
A Stock.
(a) The Company shall on the "Mandatory Redemption Date" (as hereinafter
defined) redeem all outstanding shares of Series A Stock ("Mandatory
Redemption"), out of funds legally available therefor, at a per share
redemption price equal to the Preferential Amount. As used herein, the term
"Mandatory Redemption Date" means the fifth anniversary of the date of original
issuance of the Series A Stock ("the "Original issue Date"). In the event the
Company does not have sufficient funds available to redeem all shares of Series
A Stock on the Mandatory Redemption Date, all outstanding shares of Series A
Stock shall from and after such date accrue dividends, payable not less
frequently than quarterly, in cash or in kind at the option of each holder of
such outstanding shares, at a per annum rate of eighteen percent (18%). Such
dividends shall be cumulative until paid.
(b) Each holder of Series Stock may, at the election of such holder,
require the Company to redeem all or any part of the shares of Series A Stock
held by such person (an "Optional Redemption") at any time on or after an
"Optional Redemption Event Date" at a per share redemption price equal to the
Preferential Amount. As used herein, the term "Optional Redemption Event Date"
means the first to occur of (i) the first date
<PAGE> 9
as of which a "Change in Control" (as hereinafter defined) has taken place in
respect of the Company or (ii) the first date on or after the third anniversary
of the Original Issue Date as of which the Company is under no restriction
pursuant to a bona fide material loan agreement with one or more commercial
banks acting as lender or lenders thereunder, which loan agreement is binding
upon the Company and prohibits the Company from redeeming the Series A Stock. As
used herein, a "Change in Control" will be deemed to have taken place in respect
of the Company if (x) during any one-year period 50% or more of the voting stock
of the Company held by affiliates of the Company (as identified in the Company's
proxy materials filed under the Securities Exchange Act of 1934, as amended)
does not continue to be held by such affiliates, and (y) at any time within one
year of such change in the affiliates' stockholdings a majority of persons
serving as directors of the Company cease to be directors, or the Company's
Board of Directors is expanded in such a manner as to cause directors in office
at the beginning of any such one-year period to cease to constitute a majority
of the Board of Directors. The Company shall promptly notify then record holders
of Series A Stock in writing upon the occurrence of any Optional Redemption
Event Date. In addition, the Company shall provide to the Placement Agent
engaged by the Company in connection with the original issuance and sale of the
Series A Stock (the "Placement Agent"), a calculation of the Preferential Amount
which holders of the Series A Stock would be entitled to receive upon any such
redemption.
(c) Any holder of Series A Stock desiring to exercise its right of
redemption under Paragraph 5(b) shall give written notice (the "Redemption
Notice") to the Company's corporate secretary at the Company's principal
executive offices setting forth the intent of the redeeming party to exercise
the right of redemption at least thirty (30) days before the date fixed herein
or otherwise specified in such notice for the redemption payment (the
"Redemption Date") and further specifying in such Redemption Notice the number
of shares to be redeemed and the Redemption Date.
(d) On or before each Redemption Date (regardless of whether such
redemption is made under Paragraph 5(a) or 5(b) above), each holder of shares
of Series A Stock to be redeemed shall surrender the certificate or
certificates representing such shares to the Company, in the manner and at the
price designated in the Redemption Notice, and thereupon the redemption price
for such shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. In the event that less than all of
the shares represented by such certificate are redeemed, a new certificate
representing the unredeemed shares shall be issued to the holder of such
shares. In the event any holder of shares of Series A Stock shall fail to
surrender a certificate or certificates representing such shares to the
Company, then such certificate or certificates shall thereafter represent only
the right of such holder to receive the price designated in the Redemption
Notice, and such price shall be paid only upon receipt by the Company of such
certificate or certificates, or customary documentation providing for
indemnification of the Company in respect of any lost certificates.
6. Conversion.
(a) Each share of Series A Stock shall be convertible into Common Stock,
at the then applicable Conversion Price, at any time prior to 12:00 noon,
Atlanta, Georgia time, on the Redemption Date in respect of such share under
Paragraph 5 above, and from time to time, at the option of the holder thereof.
Before any holder of Series A Stock shall be entitled to convert such stock
into shares of Common Stock, the holder shall surrender the certificate or
certificates therefor, duly endorsed, to the Company and shall give written
notice, duly executed, to the Company of such election to convert the same and
shall state the number of shares of Series A Stock being converted. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of the surrender of the shares of Series A Stock to be
converted, and the holder of such shares shall be treated for all purposes as
the record holder of such shares of Common Stock on such date. The Company
shall remain obligated for any and all dividends accumulated through the date
of conversion. Each share of Series A Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Price upon the
closing of a firm underwritten public
<PAGE> 10
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of shares of the Company's
Common Stock at a price per share of Common Stock, prior to underwriting
commissions and offering expenses, of not less than $10.00 per share
(appropriately adjusted for any stock split, dividend, combination,
recapitalization or the like) and a net offering price (after deduction of
underwriter commissions and offering expenses) of not less than $20,000,000. In
the event of the automatic conversion of the Series A Stock upon a public
offering as aforesaid, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Series A Stock shall not be deemed to have
converted such Series A Stock until the closing of such sale of securities.
(b) The price at which shares of Common Stock shall be deliverable upon
conversion of the Series A Stock shall be called the "Conversion Price," as
determined in accordance with this Paragraph 6. Each share of Series A Stock
shall be convertible into such number of fully paid and non-assessable shares
of Common Stock as is determined by dividing the Original Price of each share
of Series A Stock by the Conversion Price applicable to such series in effect
at the time of conversion. The initial Conversion Price for each share of
Series A Stock shall be $8.50, subject to adjustment as set forth at Paragraph
5(d) below.
(c) No fractional shares of Common Stock shall be issued upon conversion
of the Series A Stock, and in lieu of any fractional shares to which the holder
would otherwise be entitled, the Company shall pay cash equal to such fraction
multiplied by the applicable Conversion Price.
(d) The initial Conversion Price shall be subject to adjustment at any
time or from time to time as provided herein:
(i) In case the Company shall at any time or from time to
time after the Original Issue Date (A) pay a dividend with respect to its
Common Stock in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock, (C) combine its outstanding shares of Common Stock into a smaller
number of shares, or (D) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), the conversion privilege and the Conversion Price in
effect immediately prior to such action shall be proportionately adjusted so
that the holder of any shares of Series A Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of shares of
capital stock of the Company which it would have owned or have been entitled to
receive immediately following the happening of any of the events described
above, had such Series A Stock been converted immediately prior thereto. An
adjustment made pursuant to this clause (d)(i) shall become effective
retroactively immediately after the record date in the case of a dividend with
respect to the Common Stock in shares of capital stock and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made pursuant
to this clause (d)(i), the holder of any shares of Series A Stock thereafter
surrendered for conversion shall become entitled to receive shares of two or
more classes of capital stock of the Company, the Board of Directors and
holders of a majority of outstanding shares of Series A Stock shall determine
the allocation of the adjusted Conversion Price between or among shares of such
classes of capital stock, or in the event they are unable to determine such
allocation within 30 days following such record date or effective date, such
determination will be made by an independent accounting firm (other than the
Company's usual auditing firm) selected by the Board of Directors.
(ii) In case the Company shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding any dividend
payable solely in cash), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such distribution
by a fraction, (A) the numerator of which shall be the current Market Price per
share (determined as provided in Paragraph 6(d)(iii) below) of the Common Stock
on the record date for the distribution less the
<PAGE> 11
then fair market value (as determined by agreement between the Company and
holders of Series A Stock outstanding at the time of such determination
representing more than 50% of the number of shares of Common Stock into which
each share of Series A Stock is convertible) of the portion of the assets or
evidences of indebtedness or subscription rights, warrants or other securities
so distributed applicable to one share of Common Stock, and (B) the denominator
of which shall be such current Market Price per share of the Common Stock. Such
adjustment shall become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(iii) For the purpose of any computation under this Paragraph
6(d), the current "Market Price" per share of Common Stock on any date (the
"Market Price") shall be deemed to be the closing price of the Common Stock on
the principal national securities exchange on which the Common Stock is then
listed or admitted to trading or the NASDAQ National Market System, if the
Common Stock is then listed or admitted to trading on any national securities
exchange or in such market system. The closing price shall be the last reported
sale price, or, in case no such sale takes place on such day, the average of
the closing bid and asked price, as reported by said exchange or market system.
If the Common Stock is not then so listed on a national securities exchange or
in such market system, the Market Price shall be deemed to be the mean between
the representative closing bid and asked prices of the Common Stock in the
over-the- counter market as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or, if the Common Stock is not
then quoted by NASDAQ, as furnished by any member of the National Association
of Securities Dealers, Inc. ("NASD") selected from time to time by the Company
for that purpose. If no member of NASD furnishes quotes with respect to the
Common Stock of the Company, the Market Price shall be determined by agreement
between the Company and holders of Series A Stock outstanding at the time of
such determination representing more than 50% of the number of shares of Common
Stock into which each share of Series A Stock is convertible.
(iv) In the event the Company at any time after the Original
Issue Date sells any shares of its Common Stock or any securities convertible
into its Common Stock and the net price received by the Company from the sale
of such Common Stock or securities plus any additional amounts received on the
conversion of such securities into Common Stock is less than the then-current
Conversion Price, or in the event of the exercise of any options or warrants
(other than any options or warrants previously deemed to have been exercised
pursuant to Paragraph 6(d)(ix) below) to purchase its Common Stock for a net
price less than the current Conversion Price, the Conversion Price shall
thereafter be reduced, as of the opening of business on the date of such issue
or sale, (A) to a price equal to the per share price received by the Company in
connection with any such sale or disposition that occurs (or is deemed to
occur) on or prior to the first anniversary of the Original Issue Date; and (B)
in the case of all other sales or dispositions, to a price determined by
multiplying the Conversion Price in effect prior to such issuance by a
fraction, (I) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus the number of
shares of Common Stock that the aggregate consideration received by the Company
for the total number of additional shares of Common Stock so issued would
purchase at such Conversion Price, and (II) the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issue or sale plus the number of such additional shares of Common Stock so
issued. Notwithstanding the foregoing, the Conversion Price will not be reduced
under this clause (iv) in respect of issuance of (X) shares issued pursuant to
the Company's Employee Stock Option Plans, Employee Stock Purchase Plans or
401(k) Benefit Plans in existence on the Original Issue Date, or any
predecessor plans in respect of such plans; (Y) shares issued for any valid
corporate purpose, provided that the aggregate of all shares issued under these
provisions (Y) and (X) shall not in the aggregate exceed 1,147,330 shares of
Common Stock, prior to adjustment (the "Minimum Share Amount"); and (Z) shares
issues (or issuable at any later time) as consideration for bona fide business
acquisitions approved by the Company's Board of Directors.
(v) In the event the "Average Market Price" of a share of
Common Stock is lower than $8.50 on the first anniversary of the Original Issue
Date, the Conversion
<PAGE> 12
Price in effect from after such anniversary shall be reduced to such Average
Market Price on such date. As used herein, the term "Average Market Price" means
the arithmetic average of the Market Prices of the Common Stock as determined
pursuant to clause (iii) above, for the trading days within the thirty-day
period immediately preceding (and if such anniversary date is a trading date,
ending upon) such first anniversary date; provided however, that, in the event a
Return of Capital Event (as hereinafter defined) has taken place and the
Conversion Price (as calculated according to this clause (v)), when applicable
to the shares of Series A Stock remaining on the first anniversary of the
Original Issue Date, would cause the Company to issue an aggregate number of
shares of Common Stock exceeding the Maximum Share Amount, in connection with
the conversion of the Series A Stock, then the Conversion Price shall be
increased to a price, not to exceed $7.41 per share, that would result in the
Company issuing no more than the Maximum Share Amount in connection with the
conversion, in the aggregate, of all shares of the Series A Stock; and provided
further, that the Conversion Price shall never be set at less than $6.75
pursuant to this clause (v).
(vi) No adjustment in the Conversion Price shall be required
unless such adjustment would require a decrease of at least one-tenth of a cent
($.001) per share in such price (and no adjustment shall increase the
Conversion Price except in the case of reverse stock splits or other
transactions involving a combination of shares of common stock); provided, that
any adjustments which by reason of this clause (d)(vi) are not required to be
made shall be carried forward and then taken into account in any subsequent
adjustment; provided, further, that adjustment in the Conversion Price shall be
required and made in accordance with the provisions of this Designation, other
than this clause (d)(vi), not later than such time as may be required in order
to preserve the tax-free nature of a distribution (within the meaning of
Section 305 of the United States Internal Revenue Code of 1986, as amended) to
the holders of Series A Stock and/or Common Stock. No adjustment shall be made
in the Conversion Price pursuant to clause (d)(iv) or d(v) unless such
adjustment will result in a Conversion Price, after giving effect to such
adjustment, that is lower than the Conversion Price in effect prior to giving
effect to such adjustment; and in the event adjustments are made in the
Conversion Price separately under clauses (iv) and (v) above, the lowest such
price in effect at any given time shall be the applicable Conversion Price in
effect at such time.
(vii) Anything in this Paragraph 6 to the contrary
notwithstanding, the Company shall be entitled (but shall not be required) to
make such reductions in the Conversion Price, in addition to those required by
this Paragraph 6, as it, in its discretion, shall determine to be advisable in
order that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities or distribution of securities convertible into or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(viii) In case of the issuance of additional shares of Common
Stock for cash, the consideration received by the Company therefor shall be
deemed to be the net cash proceeds received by the Company for such shares
after deducting any commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the issuance
of such shares.
(ix) In case of the issuance or grant by the Company in any
manner of (A) securities that are convertible into or exchangeable for Common
Stock or (B) any rights or options to purchase Common Stock or securities
convertible into or exchangeable for Common Stock (including, for purposes
hereof, any earn-out rights or similar rights, but excluding for all purposes
hereunder any securities, the issuance of which does not give rise to any
adjustment in the Conversion Price pursuant to Paragraph 6(d)(iv)), the Company
shall be deemed to have issued the maximum number of shares of Common Stock
deliverable upon the exercise of such rights or options, as the case may be,
for, (X) in the case of an issue or grant of any such rights or options to
purchase shares of Common Stock or securities convertible into or exchangeable
for Common Stock, a consideration equal to the sum of the total amount, if any,
received by the Company as consideration for the issue or grant of such rights
or options, plus the minimum aggregate amount of additional consideration, if
any, payable to the
<PAGE> 13
Company upon the exercise of such rights or options, plus, in the case of rights
or options to purchase securities convertible into or exchange for Common Stock,
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange of such securities at the time such
securities first become convertible or exchangeable, or (Y) in the case of an
issuance of securities convertible into or exchangeable for Common Stock
otherwise than where such securities are issuable upon the exercise of any such
rights or options, the total amount, if any, received by the Company as
consideration for the issue of such securities plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange of such securities at the time such securities first become
convertible or exchangeable, or, (Z) in the case of an issuance or grant of such
rights or options to purchase Common Stock where no minimum price is specified
and such shares are to be delivered at an option price related to the Market
Price of the subject shares, a consideration equal to the sum of the total
amount, if any, received by the company as consideration for the issue or grant
of such rights or options plus an aggregate option price bearing the same
relation to the Market Price of the subject shares, at the time such rights or
options were granted, provided, that, as to such rights or options, such further
adjustment as shall be necessary on the basis of the actual option price at the
time of exercise shall be made at such time if the actual option price is less
than the aforesaid assumed option price. No further adjustments of the
Conversion Price shall be made as a result of the actual issue of shares of
Common Stock of the Company referred to in this clause (d)(ix). If any such
rights, options or convertible or exchangeable securities shall expire or be
surrendered without having been exercised, converted or exchanged, the
Conversion Price adjusted upon the issuance of such rights, options or
convertible or exchangeable securities shall be readjusted to the Conversion
Price that would have been in effect had an adjustment been made on the basis
that only the shares of Common Stock actually issued, if any, on the exercise of
such rights or options or the conversion or exchange of such securities were
issued or sold for the consideration actually received by the Company upon such
exercise, conversion or exchange, plus the consideration, if any, actually
received by the Company for the granting of all such rights or options that were
exercised or the issuance of the convertible or exchangeable securities that
were converted or exchanged. In case the consideration received or receivable by
the Company for the issue, grant or sale of any of the securities referred to
above shall be a consideration other than cash or a consideration a part of
which shall be other than cash, the amount of the consideration other than cash
received or receivable by the Company shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company and a majority of the holders of Series A Stock.
(e) Subject to the provisions of Paragraph 4(b), in case of any capital
reorganization or of any reclassification of the Common Stock of the Company,
or in case of the consolidation of the Company with, or the merger of the
Company into, any other corporation, or of the sale of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation, the Series A Stock shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger or sale be convertible
into the number of shares of stock or other securities or property of the
Company, or of the corporation resulting from such consolidation or surviving
such merger or to which such sale shall be made, as the case may be, to which
the holder of Common Stock issuable (at the time of such capital
reorganization, reclassification of Common Stock, consolidation, merger or
sale) upon exercise of the conversion privilege of the Series A Stock would
have been entitled upon such capital reorganization, reclassification of Common
Stock, consolidation, merger or sale had the conversion privilege of the Series
A Stock been exercised prior thereto, and in any case, if necessary, the
provisions set forth in this Paragraph 6 regarding the rights and interest
thereafter of the holders of Series A Stock shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the exercise of the
conversion privilege of the Series A Stock. The operation of this Paragraph
6(e) shall not limit any rights of holders of Series A Stock under Paragraph
5(b) hereof.
(f) If any date shall be fixed by the Company as the date as of which
holders of Common Stock (i) shall be entitled to receive any dividend or any
distribution upon
<PAGE> 14
the Common Stock of the Company, (ii) shall be offered any subscription or other
rights, or (iii) shall be entitled to participate in any capital reorganization,
reclassification of Common Stock, consolidation, merger or sale, described in
Paragraph 6(e) above, or in any liquidation, dissolution or winding-up of the
Company, the Company shall cause notice thereof (specifying such date) to be
mailed to the holders of the Series A Stock and the Placement Agent, at the last
address provided by such holder for purposes of receiving notice, at least
thirty (30) days prior to the date of consummation of the transaction described
in the notice.
(g) The issuance of stock certificates on conversion of the Series A Stock
shall be made without charge to the exercising holder of Series A Stock for any
tax for the issuance thereof. The Company shall not, however, be required to
pay any tax that may be payable on any transfer involved in the issue and
delivery of stock in any name other than that of the registered holders of
Series A Stock, and the Company shall not be required to issue or deliver any
such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.
(h) The Company shall at all times reserve and keep available out of its
authorized but unissued stock for the purpose of effecting the conversion of
the Series A Stock, such number of its duly authorized shares of Common Stock
as shall from time to time be sufficient to effect the conversion of the Series
A Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the Series A
Stock at the Conversion Price then in effect, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for this purpose.
(i) The Company covenants that all shares of Common Stock that may be
issued upon conversion of the Series A Stock will upon issue be fully paid and
nonassessable and free of all taxes, liens and charges for the issue thereof.
(j) In each case of any adjustment or readjustment of the Conversion Price
for the number of shares of Common Stock or other securities issuable upon
conversion of the Series A Stock, the Company shall compute such adjustment or
readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Stock at the
address last provided by such holder for purposes of receiving notice. The
certificate shall set forth such adjustment or readjustment showing in detail
the facts upon which such adjustment or readjustment is based on including a
statement of:
(i) The consideration received or to be received by the Company for
any additional shares of Common Stock issued or sold or deemed to have been
issued or sold;
(ii) The adjusted or readjusted Conversion Price for the Series A
Stock; and
(iii) The number of additional shares of Common Stock and the type and
amount, if any, of other property which would be received upon conversion
of the adjusted or readjusted Conversion Price for the Series A Stock.
(k) The Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but the Company will at all
times and in good faith assist in the carrying out of all of the provisions of
this Paragraph 6 and in the taking of all such actions as may be necessary and
appropriate to protect the conversion rights of the holders of Series A Stock
against impairment.
(l) Successive adjustments will be made pursuant to Paragraph 6(d)(iv) for
each
<PAGE> 15
transaction of the type described in such provision; and for each such
transaction, appropriate adjustments shall also be made in the specified prices
set forth in clause (v) and clause (vi) of Paragraph 6(d) (e.g., "$8.50,"
"$6.75," etc.) to fully reflect and take into account the economic effect of
such transaction as to the Common Stock.
7. Voting.
Except as otherwise expressly provided hereafter or as required by law,
the holder of each share of Series A Stock shall be entitled to vote on all
matters and shall be entitled to such number of votes as is equal to the
largest number of full shares of Common Stock into which each share of Series A
Stock could be converted, pursuant to and as determined under Paragraph 6
herein, on the record date for the determination of shareholders entitled to
vote on such matters or, if no record date is established, on the date such
vote is taken or any written consent of shareholders is solicited. Except as
required by law or otherwise expressly provided herein, shares of Series A
Stock and shares of Common Stock shall be voted together as a single class and
not as separate classes. The affirmative vote of the holders of at least
66-2/3% of the outstanding Series A Stock, voting separately as a class, shall
be necessary in order for the Company to effect any change in (i) any scheduled
redemption dates set forth in this Designation, the number of shares to be
redeemed on such dates or the redemption price payable thereon, (ii) the amount
payable to the holders of Series A Stock upon the liquidation, dissolution or
winding up of the Company or the relative priority thereof, (iii) the
conversion ratio or the Conversion Price set forth in this Designation, (iv)
the creation or issuance of any shares of a class having any preference in
liquidation to the Series a Stock, or (v) the provisions of this Paragraph 7.
The affirmative vote of the holders of at least a majority of the outstanding
Series A Stock, voting separately as a class, shall be necessary in order for
the Company to effect any other change in the rights, preferences, powers or
privileges of the Series A Stock.
8. Return of Capital.
As provided in the Subscription Agreements in respect of the issuance
to and purchase by the original holders of the Series A Stock, if a Capital
Return Event takes place, then in such event the Company will be required
pursuant to such Subscription Agreements to return a portion of the original
purchase and subscription price of the Series A Stock, all in accordance with
the terms of such Subscription Agreements, and the Preferential Amount per
share shall be reduced in a per share amount equal to the amount of capital so
returned in respect of each such share of Series A Stock. A "Capital Return
Event" shall take place for purposes hereof in the event that on or before June
30, 1998, the Stockholders of the Company have not duly approved and ratified
the issuance by the Company of the Series A Stock.
<PAGE> 16
IN WITNESS WHEREOF, InfoCure Corporation has caused this Statement to be
signed by Frederick L. Fine, its President and Chief Executive Officer, and its
corporate seal to be hereto affixed and attested by James K. Price, its
Secretary, this 6th day of February, 1998.
INFOCURE CORPORATION (CORPORATE SEAL)
(CORPORATE SEAL)
By: /s/ Frederick L. Fine
---------------------
Frederick L. Fine
President and Chief
Executive Officer
ATTEST:
/s/ James K. Price
- -------------------------
James K. Price, Secretary
<PAGE> 17
STATE OF DELAWARE
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR
IN THE CERTIFICATE OF DESIGNATION
FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF DELAWARE
ON FEBRUARY 9, 1998
INFOCURE CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware DOES HEREBY
CERTIFY THAT:
1. The name of the corporation is InfoCure Corporation.
2. A Certificate of Designation was filed with the Secretary of State of
Delaware on February 9, 1998 and that said Certificate requires correction
as permitted by Section 103 of the General Corporation law of the State of
Delaware.
3. The inaccuracies or defects of said Certificate, and the corrections
therefor, are as follows:
(a)(i) Clause (i) of the paragraph on the first page of the Certificate
beginning with the word "RESOLVED" currently reads as follows:
"(i) does hereby provide for the issuance of one series of
preferred stock, $.001 par value per share (the "Original
Price"), of the Company to be designated "Convertible Redeemable
Preferred Stock, Series A (the "Series A Stock") and"
(a)(ii) Such Clause (i) is corrected to read as follows:
"(i) does hereby provide for the issuance of one series of
preferred stock, $.001 par value per share, of the Company to be
designated "Convertible Redeemable Preferred Stock, Series A (the
"Series A Stock"), which shall be issued at an original issuance
price of $10.00 per share (the "Original Price") and"
(b)(i) The second sentence of Paragraph 6(b) of the Certificate
currently reads as follows:
"Each share of Series A Stock shall be convertible into such
number of fully paid and non-assessable shares of Common Stock as
is determined by dividing the Original Price of each share of
Series A Stock by the Conversion Price applicable to such series
in effect at the time of conversion."
(b)(ii) Such second sentence of Paragraph 4(b) of the Certificate is
corrected to read as follows:
<PAGE> 18
"All shares of Series A Stock surrendered for conversion by the
holder thereof shall be convertible into such number of fully
paid and non-assessable shares of Common Stock as is determined
by dividing the aggregate Original Price of all such shares of
Class A Stock surrendered by such holder for conversion hereunder
by the Conversion Price in effect at the time of conversion."
(c)(i) The second clause of the first sentence of Paragraph 7 of the
Certificate currently reads as follows:
". . . the holder of each share of Series A Stock shall be
entitled to vote on all matters and shall be entitled to such
number of votes as is equal to the largest number of full shares
of Common Stock into which each share of Series A Stock could be
converted . . ."
(c)(ii) Such second clause of the first sentence of Paragraph 7 of the
Certificate is corrected to read as follows:
" . . . each holder of shares of Series A Stock shall be entitled
to vote on all matters and shall be entitled to such number of
votes as is equal to the largest number of full shares of Common
Stock into which the shares of Series A Stock could be converted
. . ."
IN WITNESS WHEREOF, said InfoCure Corporation has caused this
certificate to be signed by James K. Price, its Secretary, this 14th day of
January, 1999.
INFOCURE CORPORATION
By: /s/ James K. Price
-------------------------
James K. Price, Secretary
<PAGE> 19
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INFOCURE CORPORATION
1. The name of the corporation (hereinafter the "Corporation") is:
INFOCURE CORPORATION
2. The Certificate of Incorporation is hereby amended as follows:
(a) By deleting Article FOURTH in its entirety and by substituting in
lieu thereof the following:
FOURTH: The aggregate number of shares of all classes of the capital
stock which the Corporation shall have authority to issue is two
hundred two million (202,000,000) shares which are divided into two
million (2,000,000) shares of preferred stock with a par value of
$.001 each, and two hundred million (200,000,000) shares of common
stock with a par value of $.001 each.
Subject to the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the board of directors of the
corporation is authorized to determine, without shareholder action,
the powers, designations, preferences, limitations, voting power and
relative, participating, optional and other special rights and
qualifications, limitations and restrictions of the preferred stock,
including without limitation, the relative rights of any class of
shares of preferred stock, each series within a class, the number of
shares within each class and series and the dividend rights,
conversion rights and terms of redemption (including sinking fund
provisions and liquidation preferences), all to the fullest extent
now or hereafter permitted by the General Corporation Law of the
State of Delaware.
Each holder of shares of common stock shall be entitled to one vote
for each share of common stock held of record on all matters on which
the holders of common stock are entitled to vote.
3. The Amendment of Certificate of Incorporation herein certified has been
duly adopted by the written consent of the directors and stockholders in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
<PAGE> 20
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by a duly authorized officer on the 5th day of March, 1999.
INFOCURE CORPORATION
By: /s/ Frederick L. Fine
----------------------------
Frederick L. Fine, President
ATTEST:
/s/ James K. Price
- -------------------------
James K. Price, Secretary
<PAGE> 1
EXHIBIT 3.2
INFOCURE CORPORATION
SECOND AMENDED AND RESTATED BYLAWS
Adopted as of March 30, 2000
ARTICLE I
OFFICES
InfoCure Corporation (the "Corporation") shall at all times maintain a
registered office in the State of Delaware and a registered agent at that
address, but may have other offices located in or outside of the State of
Delaware as the Board of Directors may, from time to time, determine.
ARTICLE II
STOCKHOLDERS' MEETINGS
2.1 Places of Meetings. All meetings of stockholders shall be
held at such place or places in or outside of the State of Delaware as the
Board of Directors may, from time to time, determine or as may be designated in
the notice of meeting or waiver of notice thereof, subject to any provisions of
the laws of the State of Delaware.
2.2 Annual Meetings.
A. The annual meeting of stockholders for the election
of directors and the transaction of such other business as may properly come
before the meeting shall be held on such date and at such time as may be
designated, from time to time, by the Board of Directors. Written notice of the
time and place of the annual meeting shall be given by mail to each stockholder
entitled to vote thereat at the address of such stockholder as it appears on
the records of the Corporation, not less than ten (10) nor more than sixty (60)
days prior to the scheduled date thereof, unless such notice is waived as
provided by Article IX of these Bylaws.
B. Stockholders may, unless the Certificate of
Incorporation otherwise provides, act by written consent to elect directors;
provided, however, that, if such consent is less than unanimous, such action by
written consent may be in lieu of holding an annual meeting only if all of the
directorships to which directors could be elected at an annual meeting held at
the effective time of such action are vacant and are filled by such action.
2.3 Special Meetings. Special meetings of stockholders may be
called at any time by the Board of Directors or the Chairman of the Board of
Directors stating the specific purpose or purposes thereof. Written notice of
the time, place and specific purposes of such meeting shall be given by mail to
each stockholder entitled to vote thereat at the address of such stockholder as
it appears on the records of the Corporation, not less than ten (10) nor more
than sixty (60) days prior to the scheduled date thereof, unless such notice is
waived as provided by Article IX of these Bylaws.
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2.4 Adjournments. Any meeting of stockholders, annual or special,
may adjourn, from time to time, to reconvene at the same or some other place,
and notice need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.5 Voting. At all meetings of stockholders, each stockholder
entitled to vote on the record date, as determined under Article VI, Section
6.3 of these Bylaws or, if not so determined, as prescribed under the General
Corporation Law of the State of Delaware, shall be entitled to one (1) vote for
each share of stock standing of record in the name of such stockholder, subject
to any restrictions or qualifications set forth in the Certificate of
Incorporation or any amendment thereto.
2.6 Quorum. At any meeting of stockholders, one-third (1/3) of
the number of shares of stock outstanding and entitled to vote thereat, present
in person or by proxy, shall constitute a quorum, but a smaller interest may
adjourn any meeting, from time to time, and the meeting may be held as
adjourned without further notice, subject to such limitations as may be imposed
under Section 2.4 hereof or the General Corporation Law of the State of
Delaware. When a quorum is present at any meeting, a majority of the number of
shares of stock entitled to vote present thereat shall decide any question
brought before such meeting unless the question is one upon which a different
vote is required by the General Corporation Law of the State of Delaware, the
Certificate of Incorporation or these Bylaws, in which case such express
provision shall govern. Shares of its own stock belonging to the Corporation or
to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation or any subsidiary of the Corporation to vote
stock, including, but not limited to, its own stock, held by it in a fiduciary
capacity.
2.7 Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in his absence by the Vice Chairman of
the Board, if any, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
2.8 Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after
three (3) years from its date, unless the proxy provides for a longer period. A
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an
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instrument in writing revoking the proxy or by delivering a proxy in accordance
with applicable law bearing a later date to the Secretary of the Corporation.
Voting at meetings of stockholders need not be by written ballot. At all
meetings of stockholders for the election of directors a plurality of the votes
cast shall be sufficient to elect. All other elections and questions shall,
unless otherwise provided by the Certificate of Incorporation, these Bylaws,
the rules or regulations of any stock exchange applicable to the Corporation,
as otherwise provided by law or pursuant to any regulation applicable to the
Corporation, be decided by the affirmative vote of the holders of a majority in
voting power of the shares of stock of the Corporation which are present in
person or by proxy and entitled to vote thereon.
2.9 List of Stockholders. At least ten (10) days before every
meeting, a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of and the number of
shares registered in the name of each stockholder, shall be prepared by the
Secretary or the transfer agent in charge of the stock ledger of the
Corporation. Such list shall be open for examination by any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall represent conclusive
evidence as to who are the stockholders entitled to examine such list or the
books of the Corporation or to vote in person or by proxy at such meeting.
2.10 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which minutes of proceedings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall, to the extent required by law, be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by
a sufficient number of holders or members to take action were delivered to the
Corporation.
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2.11 Stockholder Proposals at Annual Meetings.
A. Business may be properly brought before an Annual
Meeting of stockholders by a stockholder only upon the stockholder's timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than sixty (60) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth (10th) day following the earlier of the day on which such notice of the
date of the meeting was mailed or the date on which such public disclosure was
made.
B. The stockholder's notice to the Secretary of the
Corporation shall set forth as to each matter the stockholder proposes to bring
before the Annual Meeting: (i) a brief description of the proposal desired to
be brought before the Annual Meeting and the reasons for conducting such
business at the Annual Meeting; (ii) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business and any
other stockholders known by such stockholder to be supporting such proposal;
(iii) the class and number of shares of the Corporation's stock that are
beneficially owned by the stockholder on the date such stockholder gives notice
to the Secretary of the Corporation, and the number of shares of the
Corporation's capital stock that are beneficially owned on such date by any
other stockholder known to be supporting such proposal and (iv) any financial
interest of the stockholder in such proposal.
C. The Chairman of the Board of Directors or other
presiding officer of the Annual Meeting shall determine and declare at the
Annual Meeting whether the stockholder proposal was made in accordance with the
terms of this Section 2.11. If such Chairman or other presiding officer
determines that such stockholder proposal was not made in accordance with the
terms of this Section 2.11, he or she shall so declare at the Annual Meeting
and such proposal shall not be acted upon at such Annual Meeting.
D. This provision shall not prevent the consideration
and approval or disapproval at the Annual Meeting of reports of officers,
directors and committees of the Board of Directors, but in connection with such
reports, no new business shall be acted upon at such Annual Meeting unless
stated, filed and received as herein provided.
E. For purposes of this Section 2.11, any
adjournment(s) or postponement(s) of the original meeting whereby the meeting
will reconvene within thirty (30) days from the original date shall be deemed
for purposes of notice to be a continuation of the original meeting and no
business may be brought before any such reconvened meeting unless pursuant to a
notice of such business which was timely for the meeting on the date originally
scheduled.
F. Notwithstanding the foregoing, nothing in this
Section 2.11 shall be interpreted or construed to require the inclusion of
information about any such proposal in any proxy statement distributed by the
Corporation at the direction of or on behalf of the Corporation.
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2.12 Notice of Stockholder Nominees.
A. Nominations of persons for election to the Board of
Directors shall be made only at an Annual or Special Meeting of the
stockholders called for that purpose and only (i) by or at the direction of
the Board of Directors or (ii) by any stockholder entitled to vote for the
election of directors at the meeting who complies with the notice procedures
set forth in this Section 2.12 of this Article II for Annual Meetings. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
meeting; provided, however, that in the event that less than sixty (60) days
notice or prior public disclosure of the date of the meeting is give or made
to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth (10th) days following the
earlier of the day on which such notice of the date of the meeting was mailed
or the date on which such public disclosure was made.
B. The stockholder's notice to the Corporation pursuant
to this Section 2.12 shall set forth: (i) as to each person that the
stockholder proposes to nominate for election or reelection as a director, (1)
the name, age, business address and residence address of such proposed nominee;
(2) the principal occupation or employment of such proposed nominee; (3) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by such proposed nominee and (4) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to SCHEDULE 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (ii) as to the
stockholder giving such notice, (1) the name and address, as they appear on the
Corporation's books, of such stockholder; (2) the class and number of shares of
the Corporation's stock that are beneficially owned by the stockholder on the
date of such notice. The Corporation may require any proposed nominee to
furnish such other information as may be reasonably required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation.
C. The presiding officer of the meeting shall determine
and declare at the meeting whether the nomination was made in accordance with
the terms of this Section 2.12. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Section 2.12, he
or she shall so declare at the meeting that any such defective nomination shall
be disregarded.
2.13 Inspectors of Election. The Corporation may, and shall if
required by law, in advance of any meeting of stockholders, appoint one (1) or
more inspectors of election, who may be employees of the Corporation, to act at
the meeting or any adjournment thereof and to make a written report thereof.
The Corporation may designate one (1) or more persons as alternate inspectors
to replace any inspector who fails to act. In the event that no inspector so
appointed or designated is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one (1) or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector or
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inspectors so appointed or designated shall (i) ascertain the number of shares
of capital stock of the Corporation outstanding and the voting power of each
such share; (ii) determine the shares of capital stock of the Corporation
represented at the meeting and the validity of proxies and ballots; (iii) count
all votes and ballots; (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors and (v) certify their determination of the number of shares of
capital stock of the Corporation represented at the meeting and such
inspectors' count of all votes and ballots. Such certification and report shall
specify such other information as may be required by law. In determining the
validity and counting of proxies and ballots cast at any meeting of
stockholders of the Corporation, the inspectors may consider such information
as is permitted by applicable law. No person who is a candidate for an office
at an election may serve as an inspector at such election.
2.14 Conduct of Meetings. The date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
ARTICLE III
BOARD OF DIRECTORS
3.1 Powers. The business and affairs of the Corporation shall be
carried on by or under the direction of the Board of Directors, which shall
have all the powers authorized by the General Corporation Law of the State of
Delaware, subject to such limitations as may be provided by the Certificate of
Incorporation or these Bylaws.
3.2 Composition of the Board. The Board shall consist of not
fewer than three (3) members and not more than twelve (12) members, the exact
number of authorized directors within such range to be fixed, from time to
time, by a resolution of the Board of Directors adopted by the affirmative vote
of at least a majority of the total number of authorized directors most
recently fixed by the Board of Directors. At each annual meeting the
stockholders shall elect the directors, who shall serve until their successors
are elected and qualified. No reduction
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in the authorized number of members of the Board of Directors shall have the
effect of removing any director from office before that director's term of
office expires.
3.3 Qualification of Directors. Each director shall be a natural
person at least eighteen (18) years old. Directors need not be stockholders,
nor need they be residents of the State of Delaware.
3.4 Compensation. The Board of Directors, or a committee thereof,
may, from time to time, by resolution authorize the payment of fees or other
compensation to the directors for services as such to the Corporation,
including, but not limited to, fees for serving as members of the Board of
Directors or any committee thereof and for attendance at meetings of the Board
of Directors or any committee thereof, and may determine the amount of such
fees and compensation. Directors shall in any event be paid their reasonable
travel and other expenses for attendance at all meetings of the Board or
committees thereof. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor in amounts authorized or otherwise approved, from time to
time, by the Board of Directors or any committee thereof.
3.5 Meetings and Quorum. Meetings of the Board of Directors may
be held either in or outside of the State of Delaware. A quorum shall be
one-third (1/3) of the then authorized number of directors. Except as otherwise
provided in the Bylaws, all resolutions adopted and all business transacted by
the Board shall require the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present. The Chairman of the Board
or, in his absence, and if the President is a director, the President shall
preside at all meetings of the Board. If the Chairman of the Board is not
present and if the President is not present or is not a director, the Board
shall select a director as chairman for each meeting.
The Board of Directors shall, at the close of each annual meeting of
stockholders and without further notice other than these Bylaws, if a quorum of
directors is then present or as soon thereafter as may be convenient, hold a
regular meeting for the election of officers and the transaction of any other
business. At such meeting they shall elect a President, a Secretary and a
Treasurer, and such other officers as they deem proper, none of whom except the
Chairman of the Board, if elected, need be members of the Board of Directors.
The Board of Directors may, from time to time, provide for the holding
of regular meetings with or without notice and may fix the times and places at
which such meetings are to be held. Meetings other than regular meetings may be
called at any time by the President or the Chairman of the Board of Directors
and must be called by the President or the Secretary or an Assistant Secretary
upon the request of any director.
Notice of each meeting, other than a regular meeting (unless required
by the Board of Directors), shall be given to each director by mailing the same
to each director at his or her residence or business address at least five (5)
business days before the meeting or by delivering the same to him personally or
by telephone, telegraph or telecopier at least two (2) business days before the
meeting unless, in case of exigency, the Chairman of the Board of Directors,
the President or the Secretary shall prescribe a shorter notice to be given
personally or by telephone,
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telegraph, telecopier, cable or wireless to all or any one (1) or more of the
directors at their respective residences or places of business. Notice by mail
shall be deemed to be given at the earlier of (i) receipt thereof or (ii) five
(5) days after it is deposited in the United States mail with first-class
postage affixed thereon. Notice to directors may also be given by telecopier
transmission to the director's telecopier transmission number supplied for the
purpose of telecopier transmissions and, upon actual confirmation of such
receipt by the director, such notice shall be deemed to be given as of the date
and time of telephonic confirmation of receipt. Telephonic notice shall be
deemed given at such a time as such notice is actually provided to the director.
Notice of any meeting shall state the time and place of such meeting,
but need not state the purposes thereof unless otherwise required by the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation, the Bylaws or by the order of the Board of Directors.
3.6 Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, provide for an Audit Committee,
a Compensation Committee and an Executive Committee and one (1) or more other
committees consisting of one (1) or more directors and shall elect the members
thereof to serve at the pleasure of the Board of Directors and may designate
one (1) of such members to act as chairman thereof. The Board of Directors may
at any time change the membership of any committee, fill vacancies in it,
designate alternate members to replace any absent or disqualified members at
any meeting of such committee, or dissolve it. Any member of any such committee
may resign from such committee at any time by giving written notice to the
Chairman of the Board, if any, the President or Secretary of the Corporation,
and unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. During the intervals between the
meetings of the Board of Directors, the Executive Committee (if one shall have
been constituted) shall possess and may exercise any or all of the powers of
the Board of Directors in the management or direction of the business and
affairs of the Corporation and under the Bylaws to the extent authorized by
resolution adopted by a majority of the whole Board of Directors and subject to
such limitations as may be imposed by the General Corporation Law of the State
of Delaware.
Each committee may determine its rules of procedure and the notice to
be given of its meetings (although in the absence of any special notice
procedure, the notice provisions of Section 3.5 hereof shall govern), and it
may appoint such other committees and assistants as it shall, from time to
time, deem necessary. A majority of the members of each committee shall
constitute a quorum. Each committee shall keep minutes or other records of its
proceedings and shall report its actions to the Board as requested and at
regularly scheduled meetings of the Board.
3.7 Conference Telephone Meetings. Any one (1) or more members of
the Board of Directors or any committee thereof may participate in a meeting by
means of a conference telephone call or other similar communication equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
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3.8 Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
such committee.
ARTICLE IV
OFFICERS
4.1 Titles and Election. The officers of the Corporation shall be
the President and the Secretary all of whom shall initially be elected as soon
as convenient by the Board of Directors and thereafter, in the absence of
earlier resignations or removals, shall be elected at the first meeting of the
Board of Directors following each annual meeting of stockholders. Each officer
shall hold office at the pleasure of the Board of Directors except as may
otherwise be approved by the Board of Directors, or until his or her earlier
resignation, removal under these Bylaws or other termination of his or her
employment. Any person may hold more than one (1) office if the duties can be
adequately performed by the same person and to the extent permitted by the
General Corporation Law of the State of Delaware.
The Board of Directors, in its discretion, may also at any time elect
or appoint a Chairman of the Board of Directors, a Vice Chairman, a Chief
Executive Officer, one (1) or more Vice Presidents, one (1) or more Senior or
Executive Vice Presidents, a Chief Operating Officer, a Chief Financial
Officer, a Treasurer and one (1) or more Assistant Secretaries and Assistant
Treasurers and such other officers as it may deem advisable, each of whom shall
hold office at the pleasure of the Board of Directors, except as may otherwise
be approved by the Board of Directors, or until his or her earlier death,
resignation, retirement, removal or other termination of employment, and shall
have such authority and shall perform such duties as may be prescribed or
determined, from time to time, by the Board of Directors or in case of officers
other than the Chairman of the Board, if not prescribed or determined by the
Board of Directors, the President or the then senior executive officer may
prescribe or determine. The Board of Directors may require any officer or other
employee or agent to give bond for the faithful performance of his or her
duties in such form and with such sureties as the Board may require.
4.2 Duties. Subject to such extension, limitations and other
provisions as the Board of Directors may, from time to time, prescribe or
determine, the following officers shall have the following powers and duties:
A. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if one is elected, shall be a director and, when
present, shall preside at all meetings of the stockholders and of the Board of
Directors.
B. Chief Executive Officer. The Chief Executive Officer
shall be charged with general supervision of the management and policy of the
Corporation and shall have such other powers and perform such other duties as
the Board of Directors may prescribe, from time to time. The Chief Executive
Officer shall (subject to the presence of the Chairman of the Board of
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Directors, if one exists) preside at all meetings of the stockholders and, if
he is a director, at all meetings of the Board of Directors.
C. President. The President shall exercise the powers
and authority and perform all of the duties commonly incident to his or her
office and shall perform such other duties as the Board of Directors shall
specify, from time to time.
D. Vice Presidents. The Vice President or Vice
Presidents shall perform such duties as may be assigned to them, from time to
time, by the Board of Directors or by the President if the Board of Directors
does not do so. In the absence or disability of the President, the Executive
Vice Presidents in order of seniority, or if none, the Senior Vice Presidents
in order of seniority, or if none, the Vice Presidents in order of seniority,
may, unless otherwise determined by the Board of Directors, exercise the powers
and perform the duties pertaining to the office of President, except that if
one (1) or more Vice Presidents has been elected or appointed, the person
holding such office in order of seniority shall exercise the powers and perform
the duties of the office of President.
E. Secretary. The Secretary or in his or her absence an
Assistant Secretary shall keep the minutes of all meetings of stockholders and
of the Board of Directors and any committee thereof, give and serve all
notices, attend to such correspondence as may be assigned to him or her, keep
in safe custody the seal of the Corporation, and affix such seal to all such
instruments properly executed as may require it, shall perform all of the
duties commonly incident to his or her office and shall have such other duties
and powers as may be prescribed or determined, from time to time, by the Board
of Directors or by the President if the Board of Directors does not do so.
F. Treasurer. The Treasurer or in his or her absence an
Assistant Treasurer, subject to the order of the Board of Directors, shall have
the care and custody of the monies, funds, securities, valuable papers and
documents of the Corporation (other than his or her own bond, if any, which
shall be in the custody of the President), and shall have, under the
supervision of the Board of Directors, all the powers and duties commonly
incident to his or her office. He or she shall deposit all funds of the
Corporation in such bank or banks, trust company or trust companies, or with
such firm or firms doing a banking business as may be designated by the Board
of Directors or by the President if the Board of Directors does not do so. He
or she may endorse for deposit or collection all checks, notes and similar
instruments payable to the Corporation or to its order. He or she shall keep
accurate books of account of the Corporation's transactions, which shall be the
property of the Corporation, and together with all of the property of the
Corporation in his or her possession, shall be subject at all times to the
inspection and control of the Board of Directors. The Treasurer shall be
subject in every way to the order of the Board of Directors, and shall render
to the Board of Directors and/or the President of the Corporation, whenever
they may require it, an account of all his or her transactions and of the
financial condition of the Corporation. In addition to the foregoing, the
Treasurer shall have such duties as may be prescribed or determined, from time
to time, by the Board of Directors or by the President if the Board of
Directors does not do so.
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G. Assistant Secretaries and Treasurers. Assistants to
the Secretaries and Treasurers may be appointed by the President or elected by
the Board of Directors and shall perform such duties and have such powers as
shall be delegated to them by the President or the Board of Directors.
H. Other Officers. The other officers, if any, shall
perform such duties and exercise such powers as the Board of Directors shall
request or delegate and, unless the Board otherwise provides, shall perform
such other duties as are generally performed by officers in such position.
4.3 Delegation of Authority. The Board of Directors may at any
time delegate the powers and duties of any officer for the time being to any
other officer, director or employee.
4.4 Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors or a committee thereof,
and the fact that any officer is a director shall not preclude such officer
from receiving compensation or from voting upon the resolution providing the
same.
ARTICLE V
RESIGNATIONS, VACANCIES AND REMOVALS
5.1 Resignations. Any director or officer may resign at any time
by giving written notice thereof to the Board of Directors, the Chairman of the
Board of Directors, the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time be not specified,
upon receipt thereof, and unless otherwise specified therein or in these
Bylaws, the acceptance of any resignation shall not be necessary to make it
effective.
5.2 Vacancies.
A. Directors. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board, or by the sole remaining
director, as the case may be, or, if the vacancy is not so filled, or if no
director remains, by the stockholders. A director elected to fill a vacancy
shall serve until the next election of directors by the stockholders and the
election and qualification of the successor.
B. Officers. The Board of Directors may at any time or,
from time to time, fill any vacancy among the officers of the Corporation.
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5.3 Removals.
A. Directors. At any meeting of the stockholders with
respect to which notice of such purpose has been given, the entire Board or any
individual director may be removed, with or without cause, by the affirmative
vote of the holders of a majority of the shares of stock of the Corporation
entitled to vote at an election of directors.
B. Officers. Subject to the provisions of any validly
existing agreement, the Board of Directors may at any meeting remove from
office any officer, with or without cause, and may appoint a successor.
ARTICLE VI
CAPITAL STOCK
6.1 Certificates of Stock. Every stockholder shall be entitled to
a certificate or certificates for shares of the capital stock of the
Corporation in such form as may be prescribed or authorized by the Board of
Directors, duly numbered and setting forth the number and kind of shares
represented thereby. Such certificates shall be signed by the President or a
Vice President, unless some other person is hereunto specifically authorized as
provided in Section 4.3 of these Bylaws, and by the Treasurer or an Assistant
Treasurer or by the Secretary or an Assistant Secretary. Any or all of such
signatures may be in facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate has ceased to be
such officer, transfer agent or registrar before the certificate has been
issued, such certificate may nevertheless be issued and delivered by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
6.2 Transfer of Stock. Shares of the capital stock of the
Corporation shall be transferable only upon the books of the Corporation upon
the surrender of the certificate or certificates properly assigned and endorsed
for transfer. If the Corporation has a transfer agent or registrar acting on
its behalf, the signature of any officer or representative thereof may be in
facsimile.
The Board of Directors may appoint a transfer agent and one (1) or
more co-transfer agents and a registrar and one (1) or more co-registrars and
may make or authorize such agents to make all such rules and regulations deemed
expedient concerning the issue, transfer and registration of shares of stock.
6.3 Record Dates. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend, or to
express consent to corporate action in writing without a meeting, or in order
to make a determination of stockholders for any other proper purposes, the
Corporation's stock transfer books shall not be closed, but a record date shall
be set by the Board of Directors and, upon that date, the Corporation or its
transfer agent shall take a record of the stockholders without actually closing
the stock transfer books. Such record date shall not be more than sixty
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<PAGE> 13
(60) days, nor less than ten (10) days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If no such record date is fixed by the Board, the record date shall be
that prescribed by the General Corporation Law of the State of Delaware.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may, in their
discretion, fix a new record date for the adjourned meeting.
6.4 Lost Certificates. In case of loss or mutilation or
destruction of a stock certificate, a duplicate certificate may be issued upon
such terms as may be determined or authorized by the Board of Directors or the
Executive Committee (if one has been appointed), or by the President if the
Board of Directors or the Executive Committee does not do so.
ARTICLE VII
FISCAL YEAR, BANK DEPOSITS, CHECKS, ETC.
7.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
7.2 Bank Deposit Checks. The funds of the Corporation shall be
deposited in the name of the Corporation or of any division thereof in such
banks or trust companies in the United States or elsewhere as may be
designated, from time to time, by the Board of Directors or by such officer or
officers as the Board of Directors may authorize to make such designations.
All checks, drafts or other orders for the withdrawal of funds from
any bank account shall be signed by such person or persons as may be
designated, from time to time, by the Board of Directors. The signatures on
checks, drafts or other orders for the withdrawal of funds may be in facsimile
if authorized in the designation.
ARTICLE VIII
BOOKS AND RECORDS
8.1 Place of Keeping Books. The books and records of the
Corporation may be kept within or outside of the State of Delaware.
8.2 Examination of Books. Except as may otherwise be provided by
the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the power to
determine, from time to time, whether and to what extent and at what times and
places and under what conditions any of the accounts, records and books of the
Corporation are to be open to the inspection of any stockholder. No stockholder
shall have any right to inspect any account or book or document of the
Corporation except as prescribed by law or authorized by express resolution of
the stockholders or of the Board of Directors.
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ARTICLE IX
NOTICES
9.1 Requirements of Notice. Whenever notice is required to be
given by statute, the Certificate of Incorporation or these Bylaws, except as
otherwise provided in Section 3.5 hereof, it shall not mean personal notice
unless so specified, but such notice may be given in writing by depositing the
same in a post office, letter box or mail chute postage prepaid and addressed
to the person to whom such notice is directed at the address of such person on
the records of the Corporation, and such notice shall be deemed given at the
time when the same shall be thus mailed.
9.2 Waivers. Any stockholder, director or officer may, in writing
or by telegram or cable, at any time waive any notice or other formality
required by law, the Certificate of Incorporation or these Bylaws. Such waiver
of notice, whether given before or after any meeting or action, shall be deemed
equivalent to notice. Presence of a stockholder either in person or by proxy at
any meeting of stockholders and presence of any director at any meeting of the
Board of Directors shall constitute a waiver of such notice as may be required
by law, the Certificate of Incorporation or these Bylaws, unless such presence
is solely for the purpose of objecting to the lack of notice and such objection
is stated at the commencement of the meeting.
ARTICLE X
SEAL
The corporate seal of the Corporation shall be in such form as the
Board of Directors shall determine, from time to time, and may consist of a
facsimile thereof or the word "SEAL" enclosed in parentheses or brackets. The
corporate seal of the Corporation shall not be necessary to validate or
authenticate any instrument duly executed by the Corporation or to render any
such instrument enforceable against the Corporation.
ARTICLE XI
POWERS OF ATTORNEY
The Board of Directors may authorize one (1) or more of the officers
of the Corporation to execute powers of attorney delegating to named
representatives or agents power to represent or act on behalf of the
Corporation, with or without the power of substitution.
In the absence of any action by the Board of Directors, any officer of
the Corporation may execute, for and on behalf of the Corporation, waivers of
notice of meetings of stockholders and proxies, or may vote shares directly,
for such meetings of any company in which the Corporation may hold voting
securities.
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ARTICLE XII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
12.1 Definitions. As used in this article, the term "Person" means
any past, present or future director, officer or employee of the Corporation or
any subsidiary of the Corporation.
12.2 Indemnification Granted. The Corporation shall indemnify, to
the full extent and under the circumstances permitted by the General
Corporation Law of the State of Delaware in effect, from time to time, any
Person, made or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such Person is or was or with his
or her consent is named by the Corporation as being or about to become a
director of the Corporation or any subsidiary thereof, or is or was an officer
or employee of the Corporation or any subsidiary thereof, or is or was an
employee or agent of the Corporation or any subsidiary thereof, or is or was
serving at the specific request of the Corporation as a director, officer,
employee or agent of another company or other enterprise in which the
Corporation owns or owned, directly or indirectly, an equity interest or of
which it may be a creditor.
12.3 Prepayment of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) incurred by a Person in defending any
proceeding in advance of its final disposition; provided, however, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Person to repay all amounts advanced if it should be ultimately
determined that the Person is not entitled to be indemnified under this Article
XII or otherwise.
12.4 Claims. If a claim for indemnification or payment of expenses
under this Article XII is not paid in full within sixty (60) days after a
written claim therefor by the Person has been received by the Corporation, the
Person may file suit to recover the unpaid amount of such claim, and, if
successful in whole or in part, shall be entitled to be paid the expenses of
prosecuting such claim. In any such action the Corporation shall have the
burden of proving that the Person is not entitled to the requested
indemnification or payment of expense under applicable law.
12.5 Nonexclusivity of Rights. The rights conferred on any Person
by this Article XII shall not be exclusive of any other rights which such
Person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, and shall continue as to a Person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors, administrators and other legal representatives
of such Person.
12.6 Other Sources. The Corporation's obligation, if any, to
indemnify or to advance expenses to any Person who was or is serving at its
request as a director, officer, employee or agent of another company,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Person may collect as indemnification or advancement
of expenses from such other company, partnership, joint venture, trust,
enterprise or non-profit enterprise.
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12.7 Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article XII shall not adversely affect any right
or protection hereunder of any Person in respect of any act or omission
occurring prior to the time of such repeal or modification.
12.8 Insurance. The Corporation may purchase and maintain
insurance at its expense, to protect itself and any such person against any
such liability, cost, payment or expense whether or not the Corporation would
have the power to indemnify such person or entity against such liability.
12.9 Miscellaneous. Subject to the limitations set forth in the
General Corporation Law of the State of Delaware, the Board of Directors may
also on behalf of the Corporation grant indemnification to any individual other
than a Person to such extent and in such matter as the Board of Directors in
its sole discretion may, from time to time, and at any time determine.
It is not intended that the provisions of this Article XII be
applicable to, and they are not to be construed as granting indemnity with
respect to, matters as to which indemnification would be in contravention of
the laws of Delaware or of the United States of America, whether as a matter of
public policy or pursuant to statutory provision.
ARTICLE XIII
INTERESTED DIRECTOR TRANSACTIONS
13.1 Interested Directors; Quorum. No contract or transaction
between the Corporation and one (1) or more of its directors or officers, or
between the Corporation and any other company, partnership, association, or
other organization in which one (1) or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
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ARTICLE XIV
AMENDMENTS
14.1 Amendment or Repeal. Except as provided otherwise by the laws
of the State of Delaware or the Certificate of Incorporation, these Bylaws may
be amended or repealed either:
A. At any meeting of stockholders at which a quorum is
present by vote of a majority of the number of shares of stock entitled to vote
present in person or by proxy at such meeting as provided in Article II of
these Bylaws; provided that the notice of such meeting of stockholders or
waiver of notice thereof contains a statement of the substance of the proposed
amendment or repeal; or
B. At any meeting of the Board of Directors by a
majority vote of the directors then in office.
14.2 Stockholder Proposals. Any stockholder who intends to propose
that any provision of these Bylaws be amended by action of the stockholders
shall notify the Secretary of the Corporation in writing of the amendment or
amendments which such stockholder intends to propose not later than one hundred
eighty (180) days prior to a request by such stockholder to call a special
meeting for such purpose or, if such proposal is intended to be made at an
annual meeting of stockholders, not later than the latest date permitted for
submission of stockholder proposals by Rule 14a-8 under the Securities Exchange
Act of 1934. Such notice to the Secretary shall include the text of the
proposed amendment or amendments and a brief statement of the reason or reasons
why such stockholder intends to make such proposal.
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<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
AND AGREEMENT TO ACCELERATE CERTAIN
NON-QUALIFIED STOCK OPTIONS
WHEREAS, there is now existing an Employment Agreement (the
"Agreement"), by and between INFOCURE CORPORATION, a Delaware Corporation
("Company") and FREDERICK L. FINE ("Executive"), dated July 1, 1998;
WHEREAS, the Company and the Executive desire to set forth the terms by
which Executive will continue his employment as the Company's President and
Chief Executive Officer, and to modify the existing Agreement between the
parties;
WHEREAS, the Company granted Executive an option to purchase
thirty-five thousand (35,000) shares of common stock of the Company at an
exercise price of Twelve and 25/100 Dollars ($12.25) per share, as evidence by a
Non-Qualified Stock Option Grant Certificate dated June 1, 1998 (the "June 1,
1998 Certificate");
WHEREAS, the Company granted Executive an option to purchase one
hundred forty thousand (140,000) shares of common stock of the Company at an
exercise price of Thirteen and 50/100 Dollars ($13.50) per share, as evidenced
by a Non-Qualified Stock Option Grant Certificate dated October 23, 1998 (the
"October 23, 1998 Certificate");
WHEREAS, the Company granted Executive an option to purchase two
hundred twenty thousand (220,000) shares of common stock of the Company at an
exercise price of Thirty-Five and No/100 Dollars ($35.00) per share, as
evidenced by a Non-Qualified Stock Option Grant Certificate dated June 9, 1999
(the "June 9, 1999 Certificate"); and
WHEREAS, the Company wishes to provide for one hundred percent (100%)
vesting of all outstanding stock options granted to Executive upon a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and in the Agreement, and the
performance of each, the Company and Executive hereby agree to amend the
Agreement as follows:
1. The last sentence of Section 2.B. is deleted.
2. The following Section 2.G. is added following Section 2.F.:
G. Other Compensation. During the term of this Agreement, in
addition to the Base Salary as provided in Section 2.A. or Incentive
Compensation as provided in Section 2.B. above, Executive shall receive
other compensation, as described in EXHIBITS C through E, which are
attached hereto and shall constitute a part of this Agreement.
3. The last paragraph of Section 4.C. is deleted and replaced by the
following paragraphs:
<PAGE> 2
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a change (herein a "Change") in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company (as such phrases are
interpreted under Section 280G(b)(2)(A)(i) of the Internal Revenue Code
of 1986, as amended (the "Code")), a licensed certified public
accountant (herein the "Selected Accountant") shall be selected by the
Company and the Executive for the purpose of making a determination as
to whether the Executive shall have any liability for a tax under Code
ss. 4999 due to such "Change." If the Selected Accountant shall
determine that the aggregate payments made to the Executive pursuant to
this Agreement and any other payments to the Executive from the Company
which constitute "parachute payments" (as defined in Code ss.
280G(b)(2)(A)) would be subject to the excise tax under Code ss. 4999
(collectively the "aggregate payments"), then the Executive shall be
entitled to receive an additional payment (herein the "Gross-Up
Payment") in an amount determined by the Selected Accountant such that
after payment by the Executive of all taxes (including any federal or
state income taxes and Code ss. 4999 excise tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to
such taxes, the Executive retains from the Gross-Up Payment an amount
equal to the Code ss. 4999 excise tax imposed upon the aggregate
payments. If the Selected Accountant shall determine that no Code ss.
4999 excise tax is payable by the Executive, it shall furnish the
Executive with a written opinion that the Executive has substantial
authority not to report any Code ss. 4999 excise tax on the Executive's
federal income tax return. All fees and disbursements of the Selected
Accountant shall be paid by the Company.
If the Executive is subsequently required by any governmental
agency to make a payment of any Code ss. 4999 excise tax (and a payment
of any interest or penalties with respect thereto), then the Selected
Accountant shall determine the amount of such payments and any such
payments shall be promptly paid by the Company to or for the benefit of
the Executive. The Executive shall notify the Company in writing within
fifteen (15) days of any claim by a governmental agency that, if
successful, would require the payment by the Company of a Gross-Up
Payment under the foregoing provisions of this Agreement. If the
Company notifies the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide the
indemnification as required by the preceding sentences, the Executive
shall (i) give the Company any information reasonably requested by the
Company relating to such claim; (ii) take such action in connection
with contesting such claim as the Company shall reasonably request in
writing, from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company; (iii) cooperate with the Company in
good faith in order to effectively contest such claim and (iv) permit
the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Code ss. 4999
excise tax or
Page 2 of 4
<PAGE> 3
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. The Company shall control all proceedings taken in connection
with such contest; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Code ss. 4999 excise tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or
with respect to any imputed income with respect to such advance. If
after the receipt by the Executive of an amount advanced by the Company
pursuant to the previous sentences, the Executive becomes entitled to
receive any refund with respect to such amount paid, the Executive
shall within ten (10) days pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto).
4. The last paragraph of Section 4.D. of the Agreement is deleted and
replaced by the following paragraph:
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;
(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 EXHIBIT C; or
(vi) Any failure by the Company to grant to Executive not
later than June 10, 1999, stock options in the amount and on terms set
forth on EXHIBIT E.
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.
Page 3 of 4
<PAGE> 4
5. Section 7.A. of the Agreement is amended by striking the phrase "twelve
(12) months" and inserting in lieu thereof the phrase "twenty-four (24)
months" each place it appears.
6. SCHEDULE A to the Agreement shall be renamed EXHIBIT C.
7. SCHEDULE B to the Agreement shall be renamed EXHIBIT D.
8. EXHIBIT E which is attached hereto shall be attached to the Agreement
and made a part thereof.
9. The effective date for each and every provision of this Amendment shall
be the date of execution noted below.
10. Except as specifically amended above, the Agreement shall remain
unchanged and, as amended herein, shall remain in full force and
effect.
Furthermore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and in the Agreement, and the performance of each,
the Company and Executive hereby further agree to accelerate the vesting on the
options granted evidenced by the June 1, 1998 Certificate, the October 23, 1998
Certificate and the June 9, 1999 Certificate in the event of a Change in Control
(as defined in Section 4.C. of the Agreement) so that such options shall
immediately become fully (100%) vested and exercisable in such event.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Employment Agreement and Agreement to Accelerate Certain Nonqualified Stock
Options to be effective as of June 9, 1999.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
---------------------------------------
Title: Chairman
------------------------------------
EXECUTIVE:
/s/ Frederick L. Fine
------------------------------------------
Frederick L. Fine
Page 4 of 4
<PAGE> 5
EXHIBIT E
A non-qualified option to purchase two hundred twenty thousand
(220,000) shares of Company's common stock at an exercise price equal to fair
market value on the date of grant, vesting over four (4) years from the date of
grant, with such other terms and provisions as may be set forth in a written
option agreement or option certificate executed by the parties.
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
AND AGREEMENT TO ACCELERATE CERTAIN
NON-QUALIFIED STOCK OPTIONS
WHEREAS, there is now existing an Employment Agreement (the
"Agreement"), by and between INFOCURE CORPORATION, a Delaware Corporation
("Company") and JAMES K. PRICE ("Executive"), dated July 1, 1998;
WHEREAS, the Company and the Executive desire to set forth the terms by
which Executive will continue his employment as the Company's Executive Vice
President, and to modify the existing Agreement between the parties;
WHEREAS, the Company granted Executive an option to purchase thirty
thousand (30,000) shares of common stock of the Company at an exercise price of
Twelve and 25/100 Dollars ($12.25) per share, as evidence by a Non-Qualified
Stock Option Grant Certificate dated June 1, 1998 (the "June 1, 1998
Certificate");
WHEREAS, the Company granted Executive an option to purchase one
hundred thirty thousand (130,000) shares of common stock of the Company at an
exercise price of Thirteen and 50/100 Dollars ($13.50) per share, as evidenced
by a Non-Qualified Stock Option Grant Certificate dated October 23, 1998 (the
"October 23, 1998 Certificate");
WHEREAS, the Company granted Executive an option to purchase two
hundred twenty thousand (220,000) shares of common stock of the Company at an
exercise price of Thirty-Five and No/100 Dollars ($35.00) per share, as
evidenced by a Non-Qualified Stock Option Grant Certificate dated June 9, 1999
(the "June 9, 1999 Certificate"); and
WHEREAS, the Company wishes to provide for one hundred percent (100%)
vesting of all outstanding stock options granted to Executive upon a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and in the Agreement, and the
performance of each, the Company and Executive hereby agree to amend the
Agreement as follows:
1. The last sentence of Section 2.B. is deleted.
2. The following Section 2.G. is added following Section 2.F.:
G. Other Compensation. During the term of this Agreement, in
addition to the Base Salary as provided in Section 2.A. or Incentive
Compensation as provided in Section 2.B. above, Executive shall receive
other compensation, as described in EXHIBITS C through E, which are
attached hereto and shall constitute a part of this Agreement.
3. The last paragraph of Section 4.C. is deleted and replaced by the
following paragraphs:
<PAGE> 2
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a change (herein a "Change") in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company (as such phrases are
interpreted under Section 280G(b)(2)(A)(i) of the Internal Revenue Code
of 1986, as amended (the "Code")), a licensed certified public
accountant (herein the "Selected Accountant") shall be selected by the
Company and the Executive for the purpose of making a determination as
to whether the Executive shall have any liability for a tax under Code
ss. 4999 due to such "Change." If the Selected Accountant shall
determine that the aggregate payments made to the Executive pursuant to
this Agreement and any other payments to the Executive from the Company
which constitute "parachute payments" (as defined in Code ss.
280G(b)(2)(A)) would be subject to the excise tax under Code ss. 4999
(collectively the "aggregate payments"), then the Executive shall be
entitled to receive an additional payment (herein the "Gross-Up
Payment") in an amount determined by the Selected Accountant such that
after payment by the Executive of all taxes (including any federal or
state income taxes and Code ss. 4999 excise tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to
such taxes, the Executive retains from the Gross-Up Payment an amount
equal to the Code ss. 4999 excise tax imposed upon the aggregate
payments. If the Selected Accountant shall determine that no Code ss.
4999 excise tax is payable by the Executive, it shall furnish the
Executive with a written opinion that the Executive has substantial
authority not to report any Code ss. 4999 excise tax on the Executive's
federal income tax return. All fees and disbursements of the Selected
Accountant shall be paid by the Company.
If the Executive is subsequently required by any governmental
agency to make a payment of any Code ss. 4999 excise tax (and a payment
of any interest or penalties with respect thereto), then the Selected
Accountant shall determine the amount of such payments and any such
payments shall be promptly paid by the Company to or for the benefit of
the Executive. The Executive shall notify the Company in writing within
fifteen (15) days of any claim by a governmental agency that, if
successful, would require the payment by the Company of a Gross-Up
Payment under the foregoing provisions of this Agreement. If the
Company notifies the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide the
indemnification as required by the preceding sentences, the Executive
shall (i) give the Company any information reasonably requested by the
Company relating to such claim; (ii) take such action in connection
with contesting such claim as the Company shall reasonably request in
writing, from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company; (iii) cooperate with the Company in
good faith in order to effectively contest such claim and (iv) permit
the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Code ss. 4999
excise tax or
Page 2 of 4
<PAGE> 3
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. The Company shall control all proceedings taken in connection
with such contest; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Code ss. 4999 excise tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or
with respect to any imputed income with respect to such advance. If
after the receipt by the Executive of an amount advanced by the Company
pursuant to the previous sentences, the Executive becomes entitled to
receive any refund with respect to such amount paid, the Executive
shall within ten (10) days pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto).
4. The last paragraph of Section 4.D. of the Agreement is deleted and replaced
by the following paragraph:
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;
(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 EXHIBIT C; or
(vi) Any failure by the Company to grant to Executive not
later than June 10, 1999, stock options in the amount and on terms set
forth on EXHIBIT E.
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.
Page 3 of 4
<PAGE> 4
5. Section 7.A. of the Agreement is amended by striking the phrase "twelve
(12) months" and inserting in lieu thereof the phrase "twenty-four (24)
months" each place it appears.
6. SCHEDULE A to the Agreement shall be renamed EXHIBIT C.
7. SCHEDULE B to the Agreement shall be renamed EXHIBIT D.
8. EXHIBIT E which is attached hereto shall be attached to the Agreement
and made a part thereof.
9. The effective date for each and every provision of this Amendment shall
be the date of execution noted below.
10. Except as specifically amended above, the Agreement shall remain
unchanged and, as amended herein, shall remain in full force and
effect.
Furthermore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and in the Agreement, and the performance of each,
the Company and Executive hereby further agree to accelerate the vesting on the
options granted evidenced by the June 1, 1998 Certificate, the October 23, 1998
Certificate and the June 9, 1999 Certificate in the event of a Change in Control
(as defined in Section 4.C. of the Agreement) so that such options shall
immediately become fully (100%) vested and exercisable in such event.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Employment Agreement and Agreement to Accelerate Certain Nonqualified Stock
Options to be effective as of June 9, 1999.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
--------------------------------------
Title: Chairman
-----------------------------------
EXECUTIVE:
/s/ James K. Price
-----------------------------------------
James K. Price
Page 4 of 4
<PAGE> 5
EXHIBIT E
A non-qualified option to purchase two hundred twenty thousand
(220,000) shares of Company's common stock at an exercise price equal to fair
market value on the date of grant, vesting over four (4) years from the date of
grant, with such other terms and provisions as may be set forth in a written
option agreement or option certificate executed by the parties.
<PAGE> 1
EXHIBIT 10.6
AMENDMENT TO EMPLOYMENT AGREEMENT
AND AGREEMENT TO ACCELERATE CERTAIN
NON-QUALIFIED STOCK OPTIONS
WHEREAS, there is now existing an Employment Agreement (the
"Agreement"), by and between INFOCURE CORPORATION, a Delaware Corporation
("Company") and RICHARD E. PERLMAN ("Executive"), dated January 1, 1998;
WHEREAS, the Company and the Executive desire to set forth the terms by
which Executive will continue his employment as the Company's Chairman of the
Board and Chief Financial Officer, and to modify the existing Agreement between
the parties;
WHEREAS, the Company granted Executive an option to purchase thirty
thousand (30,000) shares of common stock of the Company at an exercise price of
Twelve and 25/100 Dollars ($12.25) per share, as evidence by a Non-Qualified
Stock Option Grant Certificate dated June 1, 1998 (the "June 1, 1998
Certificate");
WHEREAS, the Company granted Executive an option to purchase one
hundred thirty thousand (130,000) shares of common stock of the Company at an
exercise price of Thirteen and 50/100 Dollars ($13.50) per share, as evidenced
by a Non-Qualified Stock Option Grant Certificate dated October 23, 1998 (the
"October 23, 1998 Certificate");
WHEREAS, the Company granted Executive an option to purchase two
hundred twenty thousand (220,000) shares of common stock of the Company at an
exercise price of Thirty-Five and No/100 Dollars ($35.00) per share, as
evidenced by a Non-Qualified Stock Option Grant Certificate dated June 9, 1999
(the "June 9, 1999 Certificate"); and
WHEREAS, the Company wishes to provide for one hundred percent (100%)
vesting of all outstanding stock options granted to Executive upon a change in
control of the Company.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and in the Agreement, and the
performance of each, the Company and Executive hereby agree to amend the
Agreement as follows:
1. The last sentence of Section 2.B. is deleted.
2. The following Section 2.G. is added following Section 2.F.:
G. Other Compensation. During the term of this Agreement, in
addition to the Base Salary as provided in Section 2.A. or Incentive
Compensation as provided in Section 2.B. above, Executive shall receive
other compensation, as described in EXHIBITS C through E, which are
attached hereto and shall constitute a part of this Agreement.
3. The last paragraph of Section 4.C. is deleted and replaced by the
following paragraphs:
<PAGE> 2
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a change (herein a "Change") in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company (as such phrases are
interpreted under Section 280G(b)(2)(A)(i) of the Internal Revenue Code
of 1986, as amended (the "Code")), a licensed certified public
accountant (herein the "Selected Accountant") shall be selected by the
Company and the Executive for the purpose of making a determination as
to whether the Executive shall have any liability for a tax under Code
ss. 4999 due to such "Change." If the Selected Accountant shall
determine that the aggregate payments made to the Executive pursuant to
this Agreement and any other payments to the Executive from the Company
which constitute "parachute payments" (as defined in Code ss.
280G(b)(2)(A)) would be subject to the excise tax under Code ss. 4999
(collectively the "aggregate payments"), then the Executive shall be
entitled to receive an additional payment (herein the "Gross-Up
Payment") in an amount determined by the Selected Accountant such that
after payment by the Executive of all taxes (including any federal or
state income taxes and Code ss. 4999 excise tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to
such taxes, the Executive retains from the Gross-Up Payment an amount
equal to the Code ss. 4999 excise tax imposed upon the aggregate
payments. If the Selected Accountant shall determine that no Code ss.
4999 excise tax is payable by the Executive, it shall furnish the
Executive with a written opinion that the Executive has substantial
authority not to report any Code ss. 4999 excise tax on the Executive's
federal income tax return. All fees and disbursements of the Selected
Accountant shall be paid by the Company.
If the Executive is subsequently required by any governmental
agency to make a payment of any Code ss. 4999 excise tax (and a payment
of any interest or penalties with respect thereto), then the Selected
Accountant shall determine the amount of such payments and any such
payments shall be promptly paid by the Company to or for the benefit of
the Executive. The Executive shall notify the Company in writing within
fifteen (15) days of any claim by a governmental agency that, if
successful, would require the payment by the Company of a Gross-Up
Payment under the foregoing provisions of this Agreement. If the
Company notifies the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide the
indemnification as required by the preceding sentences, the Executive
shall (i) give the Company any information reasonably requested by the
Company relating to such claim; (ii) take such action in connection
with contesting such claim as the Company shall reasonably request in
writing, from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney
reasonably selected by the Company; (iii) cooperate with the Company in
good faith in order to effectively contest such claim and (iv) permit
the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Code ss. 4999
excise tax or
Page 2 of 4
<PAGE> 3
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. The Company shall control all proceedings taken in connection
with such contest; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from
any Code ss. 4999 excise tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or
with respect to any imputed income with respect to such advance. If
after the receipt by the Executive of an amount advanced by the Company
pursuant to the previous sentences, the Executive becomes entitled to
receive any refund with respect to such amount paid, the Executive
shall within ten (10) days pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto).
4. The last paragraph of Section 4.D. of the Agreement is deleted and replaced
by the following paragraph:
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;
(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 EXHIBIT C; or
(vi) Any failure by the Company to grant to
Executive not later than June 10, 1999, stock options in the amount and
on terms set forth on EXHIBIT E.
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.
Page 3 of 4
<PAGE> 4
5. Section 7.A. of the Agreement is amended by striking the phrase "twelve
(12) months" and inserting in lieu thereof the phrase "twenty-four (24)
months" each place it appears.
6. SCHEDULE A to the Agreement shall be renamed EXHIBIT C.
7. SCHEDULE B to the Agreement shall be renamed EXHIBIT D.
8. EXHIBIT E which is attached hereto shall be attached to the Agreement
and made a part thereof.
9. The effective date for each and every provision of this Amendment shall
be the date of execution noted below.
10. Except as specifically amended above, the Agreement shall remain
unchanged and, as amended herein, shall remain in full force and
effect.
Furthermore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and in the Agreement, and the performance of each,
the Company and Executive hereby further agree to accelerate the vesting on the
options granted evidenced by the June 1, 1998 Certificate, the October 23, 1998
Certificate and the June 9, 1999 Certificate in the event of a Change in Control
(as defined in Section 4.C. of the Agreement) so that such options shall
immediately become fully (100%) vested and exercisable in such event.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Employment Agreement and Agreement to Accelerate Certain Nonqualified Stock
Options to be effective as of June 9, 1999.
COMPANY:
InfoCure Corporation
By: /s/ Frederick Fine
--------------------------------------
Title: President & CEO
-----------------------------------
EXECUTIVE:
/s/ Richard E. Perlman
-----------------------------------------
Richard E. Perlman
Page 4 of 4
<PAGE> 5
EXHIBIT E
A non-qualified option to purchase two hundred twenty thousand
(220,000) shares of Company's common stock at an exercise price equal to fair
market value on the date of grant, vesting over four (4) years from the date of
grant, with such other terms and provisions as may be set forth in a written
option agreement or option certificate executed by the parties.
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between INFOCURE
CORPORATION, a Delaware corporation ("Company") and JAMES A. COCHRAN
("Executive") is hereby entered into as of the second (2nd) day of August, 1999
(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 Chief Financial
Officer during the term of his employment as set forth in this Agreement and
Executive hereby accepts such employment. Executive shall report to the
President and Board of Directors of Company and shall have duties and
responsibilities as set forth on EXHIBIT A and/or as may be assigned, from time
to time, by the President and Board of Directors of Company (the "Duties").
B. 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 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 Disability (as defined in Section 4.B. herein), the
payment of such Base Salary shall be reduced by an amount equal to any
disability payments paid to the Executive from a disability program sponsored
by the Company.
B. Incentive Compensation Program. From time to time,
the Company's Board of Directors may, in its sole and absolute discretion,
establish an incentive compensation
<PAGE> 2
program based on the achievement of certain revenue and/or profit goals and/or
other goals. During the Term of this Agreement, in addition to his Base Salary
as provided in Section 2.A., the Executive may be entitled to receive incentive
compensation pursuant to such program. Upon the establishment of such incentive
compensation program, the parties shall enter into an agreement setting forth
the terms of such program and the Executive's eligibility to participate
therein, which agreement shall be attached hereto as EXHIBIT B and which shall
constitute a part of this Agreement.
C. Other Compensation. During the term of this
Agreement, in addition to the Base Salary as provided in Section 2.A. or
Incentive Compensation as provided in Section 2.B. above, Executive shall
receive other compensation, as described in EXHIBIT C which is attached hereto
and shall constitute a part of this Agreement.
D. Employee Benefit Programs. Executive shall be
eligible to participate in all employee benefit programs generally available to
senior executive officer of the Company; including health, life, disability and
other insurance 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.
E. Vacation. Executive shall accrue four (4) weeks of
vacation during each calendar year during the term of this Agreement (with such
vacation time pro-rated for 1999). 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.
F. Automobile Allowance. Executive shall be entitled to
receive an automobile allowance of One Thousand and No/100 Dollars ($1,000.00)
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.
G. Business Expenses. Executive shall be entitled to an
expense allowance of Five Hundred and No/100 Dollars ($500.00) per month under
a nonaccountable plan (as defined in Treas. Reg. ss. 1.62-2(c)(3)), and shall
be included in the Executive's income. Additionally, 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 under an accountable plan (as
defined in Treas. Reg. ss. 1.62-2(c)(2)).
3. Term. The term of employment of Executive under this
Agreement shall be for a period of three (3) years (the "Term") commencing on
the date hereof and ending on the third (3rd) anniversary thereof, subject to
earlier termination as provided in Section 4.
2
<PAGE> 3
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.
(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
3
<PAGE> 4
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 persons: one 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 Specialist shall be appointed by
Executive; and a third Specialist shall be appointed by the two 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
4
<PAGE> 5
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,
in the event of a change (herein a "Change") in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company (as such phrases are interpreted under Section
280G(b)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the
"Code")), a licensed certified public accountant (herein the "Selected
Accountant") shall be selected by the Company and the Executive for the purpose
of making a determination as to whether the Executive shall have any liability
for a tax under Code ss. 4999 due to such "Change." If the Selected Accountant
shall determine that the aggregate payments made to the Executive pursuant to
this Agreement and any other payments to the Executive from the Company which
constitute "parachute payments" (as defined in Code ss. 280G(b)(2)(A)) would be
subject to the excise tax under Code ss. 4999 (collectively the "aggregate
payments"), then the Executive shall be entitled to receive an additional
payment (herein the "Gross-Up Payment") in an amount determined by the Selected
Accountant such that after payment by the Executive of all taxes (including any
federal or state income taxes and Code ss. 4999 excise tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to such
taxes, the Executive retains from the Gross-Up Payment an amount equal to the
Code ss. 4999 excise tax imposed upon the aggregate payments. If the Selected
Accountant shall determine that no Code ss. 4999 excise tax is payable by the
Executive, it shall furnish the Executive with a written opinion that the
Executive has substantial authority not to report any Code ss. 4999 excise tax
on the Executive's federal income tax return. All fees and disbursements of the
Selected Accountant shall be paid by the Company.
If the Executive is subsequently required by any governmental agency
to make a payment of any Code ss. 4999 excise tax (and a payment of any
interest or penalties with respect thereto), then the Selected Accountant shall
determine the amount of such payments and any such payments shall be promptly
paid by the Company to or for the benefit of the Executive. The Executive shall
notify the Company in writing within fifteen (15) days of any claim by a
governmental agency that, if successful, would require the payment by the
Company of a Gross-Up Payment under the foregoing provisions of this Agreement.
If the Company notifies the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide the indemnification as
required by the preceding sentences, the Executive shall (i) give the Company
any information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing, from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company; (iii) cooperate with the Company
in good faith in order to effectively contest such claim and (iv) permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
5
<PAGE> 6
harmless, on an after-tax basis, for any Code ss. 4999 excise tax or income
tax, including interest and penalties with respect thereto, imposed as a result
of such representation and payment of costs and expenses. The Company shall
control all proceedings taken in connection with such contest; provided,
however, that if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to the
Executive, and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Code ss. 4999 excise tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance. If after the
receipt by the Executive of an amount advanced by the Company pursuant to the
previous sentences, the Executive becomes entitled to receive any refund with
respect to such amount paid, the Executive shall within ten (10) days pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
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 20, 1999 stock options in the amount and on
terms set forth on EXHIBIT C.
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
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<PAGE> 7
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 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> 8
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 twenty-four (24) 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
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<PAGE> 9
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.
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<PAGE> 10
14. Notice. Whenever any notice is required hereunder, it shall
be given in writing addressed as follows:
<TABLE>
<S> <C>
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 A. Cochran
2552 Berwick Walk
Snellville, Georgia 30078
</TABLE>
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]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 2nd day of August, 1999.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
----------------------------------------
Its: Chairman
----------------------------------------
EXECUTIVE:
/s/ James A. Cochran
-----------------------------------(SEAL)
James A. Cochran
11
<PAGE> 12
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Duties of Executive
OVERALL RESPONSIBILITY:
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.
12
<PAGE> 13
EXHIBIT B
TO EMPLOYMENT AGREEMENT
Incentive Compensation
13
<PAGE> 14
EXHIBIT C
TO EMPLOYMENT AGREEMENT
A non-qualified option to purchase two hundred seventy-six thousand
one hundred twenty (276,120) shares of Company's common stock at an exercise
price of $16.75 per share, vesting in equal annual amounts over four (4) years
from the date of grant, and an incentive stock option to purchase twenty-three
thousand eight hundred eighty (23,880) shares of Company's common stock at an
exercise price of $16.75 per share, vesting in equal annual amounts over four
(4) years from the date of grant.
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<PAGE> 1
EXHIBIT 10.8
LOAN AGREEMENT
DATED AS OF AUGUST 11, 1999
BY AND AMONG
INFOCURE CORPORATION,
INFOCURE SYSTEMS, INC.
AND
THOROUGHBRED ACQUISITION, INC.
AS BORROWERS,
AND
FINOVA CAPITAL CORPORATION,
AS LENDER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I 1
DEFINITIONS AND DETERMINATIONS 1
1.1 Definitions 1
1.2 Time Periods 20
1.3 Accounting Terms and Determinations 20
1.4 References 21
1.5 Lender's Discretion 21
1.6 Borrower's or Borrowers' Knowledge 21
ARTICLE II 21
LOANS AND TERMS OF PAYMENT; SYNDICATION 21
2.1 Loans 21
2.1.1 Term Loan A 21
2.1.2 Revolving Loan 22
2.2 Use of Proceeds, Notes and Reborrowing 23
2.2.1 Use of Proceeds 23
2.2.2 Notes 23
2.2.3 Reborrowing 23
2.3 Interest 23
2.3.1 Interest Rates and Payment 23
2.3.2 Default Rate 23
2.3.3 Interest and Fees Computation 23
2.3.4 Maximum Interest 24
2.4 Procedure for Borrowing under the Revolving Loan Commitment 24
2.5 Conversion and Continuation Elections 25
2.6 Scheduled Principal Repayments 26
2.6.1 Term Loan A 26
2.6.2 Revolving Loan 26
2.6.3 Final Payment 27
2.7 Late Charges 27
2.8 Optional/Voluntary and Mandatory Prepayments; Prepayment Premium; and Fee Acceleration 27
2.8.1 Voluntary Prepayments 27
2.8.2 Mandatory Prepayments 28
2.8.3 Prepayment Premium and Acceleration of Fees 30
2.9 Commitment Fee 31
2.10 Unused Commitment Fee 31
2.11 Annual Fee 31
2.12 Success Fee 31
2.13 Payments after Event of Default 31
2.14 Method of Payment; Good Funds 31
2.15 Syndication 32
</TABLE>
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<TABLE>
<S> <C>
ARTICLE III 32
SECURITY 32
ARTICLE IV 33
CONDITIONS OF CLOSING AND ADVANCES; ACQUISITIONS 33
4.1 Closing; Conditions of Initial Loans 33
4.1.1 Representations and Warranties 33
4.1.2 Related Transactions 33
4.1.3 Delivery of Documents 33
4.1.4 Performance; No Default 34
4.1.5 Opinions of Counsel 35
4.1.6 Approval of Loan Documents and Security Interests 35
4.1.7 Security Interests 35
4.1.8 Licenses 35
4.1.10 Financial Statements, Reports and Projections; Inspection 35
4.1.11 Material Adverse Effect 35
4.1.12 Use of Assets 35
4.1.13 Broker Fees 35
4.1.14 Insurance; Survey 36
4.1.15 Intentionally Omitted 36
4.1.16 Payment of Fees, Expenses and Loans 36
4.2 Conditions to the Disbursement of the Term Loan A and all Advances 37
4.2.1 Notice of Borrowing 37
4.2.2 Continuation of Representations and Warranties 37
4.2.3 No Existing Default 37
4.2.4 Subsidiary 37
4.3 Conditions to Certain Loans 38
4.3.1 Evidence of Perfected First Priority Security Interest 38
4.3.2 Approval 38
4.3.3 Additional Documentation 38
4.3.4 Acquisition Funding Fee 39
4.4 Additional Conditions to the Disbursement of the proceeds of the Term Loan A 39
4.4.1 Real Estate Acquisition 39
4.4.2 Delivery of Documents 39
4.4.3 Compliance with Certain Provisions of this Loan Agreement 40
4.4.4 Opinions of Counsel 40
4.4.5 Appraisals and Percentage of Acquisition Price 40
4.4.6 Miscellaneous 40
ARTICLE V 41
REPRESENTATIONS AND WARRANTIES 41
</TABLE>
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<TABLE>
<S> <C>
5.1 Existence and Power 41
5.2 Authority 41
5.3 Capital Stock and Related Matters 41
5.3.1 Capital Stock 41
5.3.2 Restrictions 41
5.4 Binding Agreements 42
5.5 Business and Property of Borrower 42
5.5.1 Business and Property 42
5.5.2 Licenses 42
5.5.3 Operating Agreements 42
5.5.4 Facility Sites 42
5.5.5 Leases 42
5.5.6 Real Estate 43
5.5.7 Operation and Maintenance of Equipment 43
5.5.8 License Agreements 43
5.6 Title to Property; Liens 43
5.7 Projections and Financial Statements 43
5.7.1 Financial Statements 43
5.7.2 Projections 44
5.8 Litigation 44
5.9 Defaults in Other Agreements; Consents; Conflicting Agreements 44
5.10 Taxes 45
5.11 Compliance with Applicable Laws 45
5.12 Patents, Trademarks, Franchises, Agreements 45
5.13 Regulatory Matters 45
5.14 Environmental Matters 46
5.15 Application of Certain Laws and Regulations 46
5.15.1 Investment Borrower Act 46
5.15.2 Holding Borrower Act 46
5.15.3 Foreign or Enemy Status 46
5.15.4 Regulations as to Borrowing 46
5.16 Margin Regulations 46
5.17 Other Indebtedness 47
5.18 No Misrepresentation 47
5.19 Employee Benefit Plans 47
5.19.1 No Other Plans 47
5.19.2 ERISA and Code Compliance and Liability 47
5.19.3 Funding 47
5.19.4 Prohibited Transactions and Payments 48
5.19.5 No Termination Event 48
5.19.6 ERISA Litigation 48
5.20 Employee Matters 48
5.20.1 Collective Bargaining Agreements; Grievances 48
5.20.2 Claims Relating to Employment 48
5.21 Burdensome Obligations 49
5.22 Insurance 49
</TABLE>
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<TABLE>
<S> <C>
5.23 Subsidiaries 49
5.24 Year 2000 49
ARTICLE VI 50
AFFIRMATIVE COVENANTS 50
6.1 Legal Existence; Good Standing 50
6.2 Inspection 50
6.3 Financial Statements and Other Information 50
6.3.1 Intentionally Omitted 50
6.3.2 Quarterly Statements; Compliance Certificate 50
6.3.3 Annual Statements 51
6.3.4 Intentionally Omitted 51
6.3.5 Audit Reports 51
6.3.6 Notice of Defaults; Loss 51
6.3.7 Notice of Suits, Adverse Events 52
6.3.8 Reports to Shareholders, Creditors and Governmental Bodies 52
6.3.9 ERISA Notices and Requests 52
6.3.10 Other Information 53
6.4 Reports to Governmental Bodies and Other Persons 54
6.5 Maintenance of Licenses, Franchises and Other Agreements 54
6.6 Insurance 54
6.6.1 Maintenance of Insurance 54
6.6.2 Proceeds 54
6.7 Future Leases 55
6.8 Future Acquisitions of Real Estate 55
6.9 Environmental Matters 55
6.10 Compliance with Laws 56
6.11 Taxes and Claims 56
6.12 Maintenance of Properties 56
6.13 Governmental Approvals 56
6.14 Year 2000 56
6.15 Further Assurances 56
6.16 Landlord Consents 57
6.17 Restricted Foreign Subsidiaries 57
6.18 Lien Waivers 57
ARTICLE VII 57
NEGATIVE COVENANTS 57
7.1 Borrowing 58
7.2 Liens 58
7.3 Mergers and Acquisitions 58
7.4 Contingent Liabilities/Obligations 59
7.5 Distributions/Restricted Junior Payments 59
7.6 Capital Expenditures 59
</TABLE>
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<TABLE>
<S> <C>
7.7 Payments of Indebtedness for Borrowed Money 59
7.8 Investments; Loans 59
7.9 Fundamental Business Changes 60
7.10 Facility Sites 60
7.11 Sale or Transfer of Assets 61
7.12 Amendment of Documents 61
7.13 Acquisition of Additional Properties 61
7.14 Issuance of Capital Stock or Other Similar Interests 61
7.15 Transactions with Affiliates 62
7.16 Compliance with ERISA 62
7.17 Minimum Net Worth 63
7.18 Maximum Leverage Ratio 63
7.19 Minimum Total Debt Service Coverage Ratio 63
7.20 Subsidiaries 64
7.21 Acquisitions 64
ARTICLE VIII 67
DEFAULT AND REMEDIES 67
8.1 Events of Default 67
8.1.1 Default in Payment 67
8.1.2 Breach of Covenants 67
8.1.3 Breach of Warranty 67
8.1.4 Default Under Other Indebtedness for Borrowed Money 67
8.1.5 Bankruptcy 68
8.1.6 Judgments 68
8.1.7 Impairment of Licenses; Other Agreements 68
8.1.8 Collateral 69
8.1.9 Plans 69
8.1.10 Change in Control 69
8.2 Acceleration of Borrower's Obligations 70
8.3 Remedies on Default 70
8.3.1 Enforcement of Security Interests 70
8.3.2 Other Remedies 70
8.4 Application of Funds 71
8.4.1 Expenses 71
8.4.2 Borrowers' Obligations 71
8.4.3 Surplus 71
8.5 Performance of Borrowers' Obligations 71
ARTICLE IX 72
CLOSING 72
ARTICLE X 72
</TABLE>
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<TABLE>
<S> <C>
EXPENSES AND INDEMNITY 72
10.1 Attorneys' Fees and Other Fees and Expenses 72
10.1.1 Fees and Expenses for Preparation of Loan Documents 72
10.1.2 Fees and Expenses in Enforcement of Rights or Defense of Loan Documents 72
10.2 Indemnity 73
10.2.1 Brokerage Fees 73
10.2.2 General 73
10.2.3 Operation of Collateral; Joint Venturers 73
10.2.4 Environmental Indemnity 73
ARTICLE XI 74
TAXES, YIELD PROTECTION AND ILLEGALITY 74
11.1 Taxes. 74
11.2 Illegality 75
11.3 Increased Costs and Reduction of Return 75
11.4 Funding Losses 76
11.5 Inability to Determine Rates 77
11.6 Reserves on LIBOR Rate Loans 77
11.7 Certificates of Lenders 77
11.8 Survival 77
ARTICLE XII 77
MISCELLANEOUS 77
12.1 Notices 77
12.2 Survival of Loan Agreement; Indemnities 79
12.3 Further Assurance 79
12.4 Taxes and Fees 79
12.5 Severability 79
12.6 Waiver 79
12.7 Modification of Loan Documents 80
12.8 Captions 80
12.9 Successors and Assigns 80
12.10 Remedies Cumulative 80
12.11 Entire Agreement; Conflict 80
12.12 APPLICABLE LAW 80
12.13 JURISDICTION AND VENUE 80
12.14 WAIVER OF RIGHT TO JURY TRIAL 81
12.15 TIME OF ESSENCE 81
12.16 Estoppel Certificate 81
12.17 Consequential Damages 81
12.18 Counterparts 82
12.19 No Fiduciary Relationship 82
12.20 Notice of Breach by Lender 82
</TABLE>
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<TABLE>
<S> <C>
12.21 Joint and Several Obligations 82
</TABLE>
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LIST OF EXHIBITS TO LOAN AGREEMENT
Exhibit 1.1(A) - Compliance Certificate
Exhibit 1.1(B) - Notice of Borrowing
Exhibit 1.1(C) - Notice of Conversion / Continuation
Exhibit 1.1(D) - Existing Subordinated Indebtedness
Exhibit 5.3.1 - Subsidiary Equity Interests
Exhibit 5.5.1 - Business and Property
Exhibit 5.5.2 - Licenses
Exhibit 5.5.3 - Operating Agreements
Exhibit 5.5.4 - Facility Sites
Exhibit 5.5.5 - Leases
Exhibit 5.5.6 - Real Estate
Exhibit 5.5.8 - License Agreements
Exhibit 5.7.1 - Financial Statements
Exhibit 5.7.2 - Projections
Exhibit 5.8 - Litigation
Exhibit 5.12 - Intellectual Property
Exhibit 5.19.1 - Employee Benefit Plans
Exhibit 5.20.1 - Collective Bargaining
Exhibit 7.1 - Existing Indebtedness
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LOAN AGREEMENT
This LOAN AGREEMENT, dated as of August 11, 1999 (this "Loan
Agreement"), is among INFOCURE CORPORATION, a Delaware corporation ("InfoCure
Corporation"), INFOCURE SYSTEMS, INC., a Georgia corporation ("InfoCure
Systems"), THOROUGHBRED ACQUISITION, INC., a Georgia corporation
("Thoroughbred") (InfoCure Corporation, InfoCure Systems and Thoroughbred
hereinafter are referred to individually as a "Borrower" and collectively as
"Borrowers"), and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender").
PRELIMINARY STATEMENT:
WHEREAS, Borrowers have requested, and Lender has agreed to make
available to Borrowers, a revolving credit facility and a term loan upon and
subject to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND DETERMINATIONS
1.1 DEFINITIONS. As used in this Loan Agreement and in the other Loan
Documents, unless otherwise expressly indicated herein or therein, the following
terms shall have the following meanings (such meanings to be applicable equally
to both the singular and plural forms of the terms defined):
Accounting Changes - as defined in Section 1.3.
Acquisition means any transaction or series of related
transactions for the purpose of or resulting in, directly or
indirectly, (a) the acquisition of all or substantially all of the
assets of a Person, or of any business or division of a Person, (b) the
acquisition of in excess of fifty percent (50%) of the capital stock,
partnership interests or other equity interests of a Person or
otherwise causing a Person to become a Subsidiary of any Borrower or
(c) a merger or consolidation or any other combination with another
Person (other than a Person that is a wholly-owned Subsidiary of a
Borrower) provided that a Borrower or a wholly-owned Subsidiary of a
Borrower is the surviving Person.
Acquisition Documents - as defined in subsection 4.3.3.
Acquisition Funding Fee - as defined in subsection 4.3.4.
1
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ADA means the Americans with Disabilities Act of 1990, as
amended, any successor statute thereto, and the rules and regulations
promulgated thereunder, as in effect from time to time.
Adjusted EBITDA means, as of any determination date, without
duplication, the sum of (a) EBITDA of Borrowers and their
Subsidiaries(other than the Restricted Foreign Subsidiaries) on a
consolidated basis for the period in question and except to the extent
intended to be included in clauses (1), (2) or (3) below, plus (b) the
sum of the following:
(1) with respect to each Target owned by any Borrower or
any Subsidiary of any Borrower for which Lender has
not received financial statements for at least one
quarter pursuant to subsection 6.3.2, the sum of Pro
Forma EBITDA for each such Target; plus
(2) with respect to any Target owned by any Borrower or
any Subsidiary of any Borrower for one full quarter
or more for which Lender has received the financial
statements for such quarters required pursuant to
subsection 6.3.2, but owned by any such Person for
less than four full quarters, the product obtained by
multiplying EBITDA of such Target for the full
quarters that such Target has been owned by such
Person for which Lender has received such financial
statements by a fraction, the numerator of which is
four (4) and the denominator of which is the number
of full quarters that such Target has been owned by
such Person for which Lender has received such
financial statements; plus
(3) with respect to any Target owned by any Borrower or
any Subsidiary of any Borrower for four (4) full
quarters or more for which Lender has received
financial statements for not less than a four-quarter
period, EBITDA of such Target for the trailing
four-quarter period ending on the last day of the
immediately preceding the quarter for which Lender
has received such financial statements.
Advance means any advance of the Revolving Loan.
Affiliate means, as to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such
Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the
other Person, whether through the ownership of voting securities, by
contract or otherwise. Without limitation, any director, executive
officer or beneficial owner of five percent (5%) or more of the equity
of a Person shall, for purposes of this Loan Agreement, be deemed to
control the other Person. Notwithstanding the foregoing, Lender shall
not be deemed to be an "Affiliate" of any Borrower or any Subsidiary of
any Borrower.
Annual Fee - as defined in Section 2.11.
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Applicable Margin means, with respect to LIBOR Rate Loans and
Base Rate Loans, respectively, the applicable LIBOR margin or Base Rate
margin in effect from time to time determined based upon the applicable
Leverage Ratio then in effect pursuant to the appropriate column under
the table below:
<TABLE>
<CAPTION>
LIBOR Base Rate
Leverage Ratio Margin Margin
-------------- ------ ------
<S> <C> <C>
less than 1.50 to 1.00 2.00% 0.50%
greater than or equal to
1.50 to 1.00, but less than
or equal to 2.00 to 1.00 2.25% 0.75%
greater than 2.00 to 1.00 2.75% 1.25%
</TABLE>
The Applicable Margin shall be adjusted from time to time upon delivery
to Lender of the quarterly financial statements required to be
delivered pursuant to subsection 6.3.2 hereof, accompanied by a written
calculation of the Leverage Ratio certified by a Responsible Officer as
of the end of the fiscal quarter for which such financial statements
are delivered, which calculation may be contained in a Compliance
Certificate. If such calculation indicates that the Applicable Margin
shall increase or decrease, then on the first day of the month
following the date of delivery of such financial statements and written
calculation, the Applicable Margin shall be adjusted in accordance
therewith; provided, however, that if Borrowers shall fail to deliver
any such financial statements and written calculation for any such
fiscal quarter by the date required pursuant to subsection 6.3.2, then,
effective as of the first day of the month following the end of the
fiscal quarter for which such financial statements were to have been
delivered and continuing through the first day of the month following
the date (if ever) on which such financial statements and such written
calculation are finally delivered, the Applicable Margin shall be
conclusively presumed to equal the highest Applicable Margin specified
in the pricing table set forth above.
Approved Replacement means, with respect to any person, a
person reasonably acceptable to Lender hired or engaged by Borrowers to
replace and perform the tasks of another person whose employment or
occupancy of an office shall have ceased for any reason, which
replacement shall have occurred on or before the ninetieth (90th) day
after the cessation of the employment of or office occupancy by such
other person.
Assignment of Leases means an assignment of leases executed by
any Borrower or any Subsidiary of any Borrower, in form and substance
satisfactory to Lender.
Bankruptcy Code means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. 101, et seq.), any successor statute thereto, and the
rules, regulations and legally binding policies promulgated thereunder,
as amended and in effect from time to time.
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<PAGE> 13
Base Rate means, at any time and from time to time, the higher
of (i) the per annum rate of interest announced or published publicly
from time to time by Citibank, N.A. in New York, New York as its
corporate base (or equivalent) rate of interest (which rate (a) shall
change automatically without notice and simultaneously with each change
in such corporate base rate, (b) is a reference rate and (c) does not
necessarily represent the lowest or best rate actually charged to any
customer by Citibank, N.A. in New York, New York) and (ii) the sum of,
for any day, (a) the weighted average (rounded upwards, if necessary,
to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day
by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by it, plus (b) 0.50%.
Base Rate Loan means a Loan that bears interest based on the
Base Rate.
Basic Financial Statements - as defined in subsection 6.3.3.
Borrower means any of the Borrowers.
Borrowers means collectively, InfoCure Corporation, InfoCure
Systems and Thoroughbred.
Borrowers' Obligations means, collectively, (i) any and all
Loans, Indebtedness, liabilities, obligations and fees due or to become
due, whether now existing or hereafter arising, of Borrowers and their
Subsidiaries to Lender (or any other Person required to be indemnified)
pursuant to the terms of this Loan Agreement, any other Loan Document,
any Rate Contracts (to the extent between any Borrower and Lender or
any Affiliate of Lender) or otherwise, including, without limitation,
the Unused Commitment Fee, the Annual Fee, the Success Fee, any
Acquisition Funding Fees and indemnification obligations, and (ii) the
performance of the covenants of Borrowers and their Subsidiaries
contained in the Loan Documents.
Business Day means any day other than a Saturday, Sunday or
other day on which banks in Phoenix, Arizona or New York, New York are
required to close and, if the applicable Business Day relates to any
LIBOR Rate Loan, a day on which dealings are carried on in the London
interbank market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Body, or any other
law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of Lender or of any corporation
controlling Lender.
Capital Expenditures means for any period and with respect to
any Person, the aggregate of all (i) payments that are made or
liabilities that are incurred by such Person
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<PAGE> 14
and its Subsidiaries for the lease, purchase, improvement, construction
or use of any Property, the value or cost of which under GAAP is
required to be capitalized and appears on such Person's consolidated
balance sheet in the category of property, plant or equipment, and (ii)
Capital Expenditures/Research and Development Costs, in any case,
without regard to the manner in which such payments or the instruments
pursuant to which they are made are characterized by such Person or any
other Person.
Capital Expenditures/Research and Development Costs means for
any period and with respect to any Person, the aggregate of all
expenditures by and costs of such Person and its Subsidiaries for
research and development which are capitalized, in accordance with
GAAP, on a consolidated balance sheet of such Person and its
Subsidiaries.
Capitalized Lease means any lease of Property, the obligations
for the rental of which are required to be capitalized in accordance
with GAAP.
Chief Financial Officer means the chief financial officer or
treasurer of InfoCure Corporation.
Closing means the initial Advance of the Revolving Loan on the
Closing Date.
Closing Date means the date on which all conditions precedent
set forth in Section 4.1 are satisfied or waived by Lender.
Code means the Internal Revenue Code of 1986, any successor
statute thereto, and the rules, regulations and legally binding
policies promulgated thereunder, as amended and in effect from time to
time.
Collateral means collectively, (i) all existing and
after-acquired Property of Borrowers and their Subsidiaries, including,
without limitation, all existing and after-acquired accounts,
machinery, equipment, inventory, goods, fixtures, chattel paper,
investment property, instruments, documents, deposit accounts and
general intangibles, (ii) the Subsidiary Equity Interests and (iii) all
proceeds of the foregoing.
Collateral Documents means, collectively, the Security
Agreement, the Assignment of Leases, the Mortgages, the Pledge
Agreement, the Subsidiary Guaranty, the Subsidiary Security Agreement
and all other security agreements, mortgages, deeds of trust, patent
and trademark assignments, lease and other assignments, guarantees and
other similar agreements, and all amendments, restatements,
modifications or supplements thereof or thereto, between any Borrower
or any Subsidiary of any Borrower and Lender now or hereafter delivered
to Lender pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable
documents now on file or hereafter filed in accordance with the UCC or
comparable law) against any Borrower or any Subsidiary of any Borrower
as debtor in favor of Lender, as secured party.
Commitment Fee - as defined in Section 2.9.
5
<PAGE> 15
Commitments means, collectively, the Revolving Loan Commitment
and the Term Loan Commitment.
Compliance Certificate means a compliance certificate executed
by the Chief Financial Officer, in substantially the form of EXHIBIT
1.1(A) hereto.
Consolidated Net Income means, for any period, the net income
of Borrowers and their Subsidiaries(other than the Restricted Foreign
Subsidiaries) for such period, on a consolidated basis, computed in
accordance with GAAP.
Consolidated Net Worth means, as of any date of determination,
the net worth of Borrowers and their Subsidiaries (other than the
Restricted Foreign Subsidiaries) on such date, on a consolidated basis,
computed in accordance with GAAP, plus non-cash charges incurred by any
Borrower or any Subsidiary of any Borrower (other than the Restricted
Foreign Subsidiaries) during the applicable period in connection with
any Acquisition, provided, that (i) such charges are so incurred and
recognized on or before the three hundred sixtieth (360th) day after
the consummation of such Acquisition and (ii) the aggregate amount of
such charges shall have been fixed or determined prior to such
consummation.
Conversion Date means any date on which Borrowers convert a
Base Rate Loan to a LIBOR Rate Loan or a LIBOR Rate Loan to a Base Rate
Loan.
Contribution Agreement means a contribution agreement between
the Borrowers, in form and substance satisfactory to Lender.
Default Rate means (i) with respect to the Term Loan A, a rate
equal to the Base Rate then in effect, plus three percent (3.0%) per
annum, (ii) with respect to the Revolving Loan (including, without
limitation, from and after the Term Conversion Date, the Term Loan B
Portion of the Revolving Loan), a rate equal to the Base Rate or the
LIBOR, as the case may be, plus the Applicable Margin then in effect,
plus 2.0% per annum and (iii) with respect to any other amounts which
may be owing by Borrowers to Lender pursuant to this Loan Agreement,
the other Loan Documents or otherwise, a rate equal to the greater of
(i) and (ii) of this definition.
Default Rate Period means a period of time commencing on the
date an Event of Default has occurred and ending on the date that such
Event of Default is cured or waived in writing by Lender.
DISC means DISC Computer Systems, Inc., a Minnesota
corporation.
Disposition means (a) the sale, lease, conveyance or other
disposition of Property, other than sales or other dispositions
expressly permitted under clause (i) and (ii) of Section 7.11, and (b)
the sale or transfer by any Borrower or any Subsidiary of any
6
<PAGE> 16
Borrower of any equity securities issued by any Subsidiary of any
Borrower and held by such transferor Person.
EBITDA means for any period, without duplication, net income
(or loss) for the applicable period of measurement of Borrowers and
their Subsidiaries (other than the Restricted Foreign Subsidiaries) (or
such other Persons as the context may require) on a consolidated basis
determined in accordance with GAAP, plus the sum of the following to
the extent deducted in determining such net income: (i) losses from
sales, transactions, exchanges and other dispositions of Property and
other extraordinary losses not in the ordinary course of business; (ii)
interest, fees and other charges paid or accrued on Indebtedness for
Borrowed Money; (iii) depreciation and amortization of Property; and
(iv) income taxes which are accrued or paid during such period, less
gains from sales, transactions, exchanges and other dispositions of
Property and other extraordinary gains not in the ordinary course of
business to the extent included in determining such net income;
provided, however, that for any date of determination occurring before
December 31, 1999, consolidated EBITDA of Borrowers and their
Subsidiaries shall equal the product obtained by multiplying
consolidated EBITDA of Borrowers and their Subsidiaries for the full
quarters of 1999 for which Lender has received financial statements for
Borrowers and their Subsidiaries pursuant to subsection 6.3.2 by a
fraction, the numerator of which is four (4) and the denominator of
which is the number of full quarters that have occurred in 1999 for
which Lender has received such financial statements.
Employee Benefit Plan means any employee benefit plan within
the meaning of Section 3(3) of ERISA which (i) is maintained for
employees of any Borrower or any ERISA Affiliates of any Borrower or
(ii) has at any time within the preceding six (6) years been maintained
for the employees of such Borrower or any current or former ERISA
Affiliates of any Borrower.
Environmental Certificate means an environmental certificate
executed by Borrowers, in form and substance satisfactory to Lender.
Environmental Laws means any and all federal, state and local
laws that relate to or impose liability or standards of conduct
concerning public or occupational health and safety or protection of
the environment, as now or hereafter in effect and as have been or
hereafter may be amended or reauthorized, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C Section 9601 et seq.), the Hazardous Materials
Transportation Act (42 U.S.C. Section 1802 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Clean Air Act (42 U.S.C. Section 7901 et seq.), the National
Environmental Policy Act (42 U.S.C. Section 4231, et seq.), the Refuse
Act (33 U.S.C. Section 407, et seq.), the Safe Drinking Water Act (42
U.S.C. Section 300(f) et seq.), the Occupational Safety and Health Act
(29 U.S.C. Section 651 et seq.), and all rules, regulations, codes,
ordinances and guidance documents promulgated or published thereunder,
and the provisions of any licenses, permits, orders and decrees issued
pursuant to any of the foregoing.
7
<PAGE> 17
ERISA means the Employee Retirement Income Security Act of
1974, and any successor statute thereto, and the rules, regulations and
legally binding policies promulgated thereunder, as amended and in
effect from time to time.
ERISA Affiliate means any Person who is a member of a group
which is under common control with any Borrower, who together with such
Borrower is treated as a single employer within the meaning of Section
414(b), (c) and (m) of the Code.
Event of Default means any of the Events of Default set forth
in Section 8.1.
Excess Cash Flow means, for any period, (i) the Operating Cash
Flow of Borrowers for such period, minus (ii) the aggregate of the
following for such period: (A) Total Debt Service and (B) income taxes
paid by Borrowers and their Subsidiaries (other than the Restricted
Foreign Subsidiaries) during such period.
Excess Interest - as defined in subsection 2.3.4.
Existing FINOVA Indebtedness means Indebtedness of Borrowers
owing to Lender under current credit facilities provided by Lender to
Borrowers, including principal, interest, fees and any other amounts
owing in respect thereof, the aggregate amount of which shall be
refinanced on the Closing Date with a portion of the proceeds of the
Loans.
FINOVA means FINOVA Capital Corporation, a Delaware
corporation.
Fiscal Year means the fiscal year of Borrowers and their
Subsidiaries for financial accounting purposes, which fiscal year ends
on December 31. For example, a reference to the 1999 Fiscal Year of
Borrowers shall be deemed to refer to Borrowers' Fiscal Year ended
December 31, 1999.
Funding Date means the date of disbursement of the Term Loan A
or any Advance of the Revolving Loan, as applicable.
GAAP means generally accepted accounting principles as in
effect from time to time, which shall include but shall not be limited
to the official interpretations thereof by the Financial Accounting
Standards Board or any successor thereto.
Good Funds means United States Dollars available in Federal
funds to Lender at or before 2:00 p.m., Phoenix time, on a Business
Day.
Governmental Body means any foreign, federal, state, municipal
or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof or any court or
arbitrator.
8
<PAGE> 18
Hazardous Materials means any hazardous, toxic, dangerous or
other waste, substance or material defined as such in, regulated by or
for purposes of any Environmental Law.
Incipient Default means any event, circumstance or condition
which, with the giving of notice, the lapse of time, or both, would
constitute an Event of Default.
Indebtedness means all liabilities, obligations and reserves,
contingent or otherwise, which, in accordance with GAAP, would be
reflected as a liability on a balance sheet or would be required to be
disclosed in a financial statement, including, without duplication: (i)
Indebtedness for Borrowed Money, (ii) obligations secured by any Lien
upon Property, (iii) guaranties, letters of credit and other contingent
obligations and (iv) liabilities in respect of unfunded vested benefits
under any Pension Plan or in respect of withdrawal liabilities incurred
under ERISA by any Borrower or any of its ERISA Affiliates to any
Multiemployer Plan.
Indebtedness for Borrowed Money means, without duplication,
all (i) Indebtedness in respect of borrowed money, (ii) Indebtedness
evidenced by a note, debenture or other like written obligation to pay
money (including, without limitation, all of Borrowers' Obligations and
Permitted Senior Indebtedness), (iii) Indebtedness in respect of rent
or hire of Property under Capitalized Leases or for the deferred
purchase price of Property or services, (iv) Indebtedness in respect of
obligations under conditional sales or other title retention
agreements, (v) all net obligations with respect to Rate Contracts and
(vi) all guaranties of any or all of the foregoing.
InfoCure Corporation - as defined in the Preamble of this Loan
Agreement.
InfoCure Systems - as defined in the Preamble of this Loan
Agreement.
Interest Payment Date means (i) with respect to any LIBOR Rate
Loan (other than a LIBOR Rate Loan having an Interest Period of six (6)
months), the last day of each Interest Period applicable to such Loan,
(ii) with respect to any LIBOR Rate Loan having an Interest Period of
six (6) months, the last day of each three (3) month interval, and
(iii) with respect to Base Rate Loans, the first Business Day of each
quarter.
Interest Period means, with respect to any LIBOR Rate Loan,
the period commencing on the Business Day the Loan is disbursed or
continued or on the Conversion Date on which the Loan is converted to
the LIBOR Rate Loan and ending on the date one, two, three or six
months thereafter, as selected by Borrowers in their Notice of
Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period pertaining to a LIBOR Rate
Loan would otherwise end on a day which is not a Business Day,
that Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Business Day;
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<PAGE> 19
(ii) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at
the end of such Interest Period;
(iii) no Interest Period for the Term Loan B Portion,
any Advance of the Revolving Loan or any portion thereof shall
extend beyond the last scheduled payment date therefor; and
(iv) no Interest Period applicable to the Term Loan B
Portion, any Advance of the Revolving Loan or any portion
thereof shall extend beyond any date upon which is due any
scheduled principal payment in respect of the Term Loan B
Portion or such Advance unless the Principal Balance of the
Term Loan B Portion or such Advance represented by Base Rate
Loans or by LIBOR Rate Loans having Interest Periods that will
expire on or before such date is equal to or in excess of the
amount of such principal payment.
Landlord means a lessor under a Lease.
Landlord Consent means a consent from a Landlord in form and
substance satisfactory to Lender.
Lease means any lease of real estate under which any Borrower
or any Subsidiary of any Borrower is the lessee or sublessee.
Leasehold Property means any real estate which is the subject
of a Lease.
Leverage Ratio means, as of any date of determination, the
ratio of (i) the aggregate amount of all Indebtedness for Borrowed
Money of Borrowers and their Subsidiaries as of such date to (ii) the
amount by which (a) Adjusted EBITDA of Borrowers and their Subsidiaries
(other than the Restricted Foreign Subsidiaries) for the twelve-month
period ending on such date, exceeds (b) the aggregate amount of Capital
Expenditures/Research and Development Costs made, incurred or otherwise
recognized by Borrowers and their Subsidiaries during such period.
LIBOR means, for each Interest Period, the offered rate per
annum for deposits of Dollars for the applicable Interest Period that
appears on Telerate Page 3750 as of 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such Interest Period.
If no such offered rate exists, such rate shall be the rate of interest
per annum, as determined by Lender (rounded upwards, if necessary, to
the nearest 1/16 of 1%) at which deposits of United States dollars in
immediately available funds are offered at 11:00 A.M. (London, England
time) two (2) Business Days prior to the first day in such Interest
Period by major financial institutions reasonably satisfactory to
Lender in the London interbank market for such Interest Period for the
applicable principal amount on such date of determination.
10
<PAGE> 20
LIBOR Rate Loan means a Loan that bears interest based on
LIBOR.
License Agreements means all license agreements pursuant to
which any Borrower or any Subsidiary of any Borrower is licensed to use
the computer software or similar Property of any other Person in
connection with the business of such Borrower or such Subsidiary.
Licenses means all licenses, permits, consents, approvals and
authority issued by any Governmental Body in connection with the
operation of the business of any Borrower or any Subsidiary of any
Borrower.
Lien means any mortgage, pledge, assignment, lien, charge,
encumbrance or security interest of any kind, or the interest of a
vendor or lessor under any conditional sale agreement, Capitalized
Lease or other title retention agreement.
Loan Agreement means this Loan Agreement and any amendments or
supplements hereto and restatements hereof.
Loan Documents means, collectively, this Loan Agreement, the
Notes, the Environmental Certificates, the Contribution Agreement, the
Subsidiary Guaranty, the Collateral Documents, the Warrants, all
agreements, documents and instruments delivered to Lender in connection
therewith and all Rate Contracts between any Borrower and Lender (or
any Affiliate of Lender), including, without limitation, any
subordination agreements covering or otherwise relating to any of the
Subordinated Indebtedness, including, without limitation, the
Thoroughbred Subordination Agreement.
Loans means, collectively, the Term Loan and the Revolving
Loan or any portion thereof, and may mean a Base Rate Loan or a LIBOR
Rate Loan. Such term shall include the Term Loan B Portion upon
conversion of the Revolving Loan as provided in subsection 2.l.2.
Loan Year means a period of time from the Closing Date or any
anniversary of the Closing Date to the immediately succeeding
anniversary of the Closing Date.
Material Adverse Effect means (i) a material adverse effect
upon or change in the business, operations, Property, profits or
condition (financial or otherwise) of Borrower and their respective
Subsidiaries taken as a whole or upon the validity, enforceability or
priority of the Security Interests or (ii) a material impairment of the
ability of Borrowers and their Subsidiaries taken as a whole to perform
their obligations under any Loan Document or of Lender to enforce or
collect any of Borrowers' Obligations.
Maximum Rate - as defined in subsection 2.3.4.
Medical Software Management means Medical Software Management,
Inc., a Georgia corporation.
11
<PAGE> 21
Mortgage means any mortgage, deed of trust or other document
creating a Lien on any parcel of Real Estate in favor of Lender, in
form and substance satisfactory to Lender.
Multiemployer Plan means any multiemployer plan as defined
pursuant to Section 3(37) of ERISA to which any Borrower or any ERISA
Affiliate of any Borrower makes, or accrues an obligation to make
contributions, or has made, or been obligated to make, contributions
within the preceding six (6) years.
Net Issuance Proceeds means, in respect of any issuance of
debt or equity, cash proceeds or non-cash proceeds received or
receivable in connection therewith, net of reasonable out-of-pocket
costs and expenses paid or incurred in connection therewith in favor of
any Person not an Affiliate of any Borrower; provided, however, that
the term "Net Issuance Proceeds" shall not include any proceeds (i)
received by InfoCure Corporation in connection with the issuance of
stock to its employees in the ordinary course of business pursuant to a
stock option plan maintained by InfoCure Corporation or (ii) of the
Loans.
Net Proceeds means proceeds in cash, checks or other cash
equivalent financial instruments (including cash equivalents) as and
when received by the Person making a Disposition, net of: (a) the
direct costs relating to such Disposition excluding amounts payable to
any Borrower or any Affiliate of any Borrower, (b) sale, use or other
transaction taxes paid or payable as a result thereof and (c) amounts
required to be applied to repay principal, interest and prepayment
premiums and penalties on Indebtedness secured by a Lien on the asset
which is the subject of such Disposition.
Notes means collectively, the Term Loan A Note and the
Revolving/Term Loan Note.
Notice of Borrowing means a notice given by Borrowers to
Lender pursuant to either Section 4.2.1 or clause (ii) of subsection
2.1.1, in any case in substantially the form of EXHIBIT 1.1(B) hereto.
Notice of Conversion/Continuation means a notice given by
Borrowers to Lender pursuant to Section 2.5(b), in substantially the
form of EXHIBIT 1.1(C) hereto.
Operating Agreements means all right-of-entry agreements,
access agreements, advertising contracts, equipment leases, agreements
pursuant to which any Person provides electronic data service to any
Borrower or any Subsidiary of any Borrower, service contracts and
similar agreements relating to the operation of the business of any
Borrower or any Subsidiary of any Borrower, excluding Leases.
Operating Cash Flow means, for any period, EBITDA of Borrowers
and their Subsidiaries (other than the Restricted Foreign Subsidiaries)
for such period, less Capital Expenditures made or incurred by
Borrowers and their Subsidiaries during such period.
12
<PAGE> 22
Operating Lease means any lease which, under GAAP, is not
required to be capitalized.
PBGC means the Pension Benefit Guaranty Corporation or any
Governmental Body succeeding to the functions thereof.
Pension Plan means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Part 3 of
Title I of ERISA, Title IV of ERISA, or Section 412 of the Code and
which (i) is maintained for employees of any Borrower or any of its
ERISA Affiliates of any Borrower, or (ii) has at any time within the
preceding six (6)years been maintained for the employees of any
Borrower or any current or former ERISA Affiliates of any Borrower.
Permitted Liens means any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges,
which either are (a) not delinquent or (b) being
contested diligently and in good faith by appropriate
proceedings, and as to which the applicable Borrower
or Subsidiary of a Borrower has set aside reserves on
its books which are satisfactory to Lender;
(iv) statutory Liens, such as mechanic's, materialman's,
warehouseman's, carrier's or other like Liens,
incurred in good faith in the ordinary course of
business, provided that the underlying obligations
relating to such Liens are paid in the ordinary
course of business, or are being contested diligently
and in good faith by appropriate proceedings and as
to which the applicable Borrower has set aside
reserves on its books satisfactory to Lender, or the
payment of which obligations are otherwise secured in
a manner satisfactory to Lender;
(v) zoning ordinances, easements, licenses, reservations,
provisions, covenants, conditions, waivers or
restrictions on the use of Property and other title
exceptions, in each case, that are acceptable to
Lender;
(vi) Liens in respect of judgments or awards with respect
to which no Event of Default would exist pursuant to
subsection 8.1.6;
(vii) Liens to secure payment of insurance premiums (a) to
be paid in accordance with applicable laws in the
ordinary course of business relating to payment of
worker's compensation, or (b) that are required for
the participation in any fund in connection with
worker's compensation,
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<PAGE> 23
unemployment insurance, old-age pensions or other
social security programs; and
(viii) Liens in favor of Security National Bank evidenced by
the Real Estate/Macon Mortgage.
Permitted Prior Liens means any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii) and
(iv) of the definition of Permitted Liens that are
accorded priority to the Security Interests by law;
and
(iii) the Permitted Liens described in clauses (v) and
(vii) of the definition of Permitted Liens, subject
to the limitations set forth therein.
Permitted Senior Indebtedness means Indebtedness, other than
Borrowers' Obligations, incurred to purchase tangible personal property
or Indebtedness incurred to lease tangible personal property pursuant
to Capitalized Leases, provided that (i) such aggregate Indebtedness of
Borrowers existing as of the Closing Date shall not exceed $4,000,000
in the aggregate, (ii) during any Loan Year after the Closing Date, the
aggregate amount of such Indebtedness of Borrowers and their
Subsidiaries at any one time outstanding during such Loan Year shall
not exceed $10,000,000 and principal payments made with respect to such
Indebtedness during such Loan Year shall not exceed $3,000,000 in the
aggregate, and (iii) no Event of Default exists at the time or will be
caused as a result of the incurrence of any Indebtedness described in
clause (ii) of this definition.
Permitted Senior Indebtedness Liens means Liens that secure
Permitted Senior Indebtedness, provided that each such Lien attaches
only to the Property purchased or leased with the proceeds of the
Permitted Senior Indebtedness incurred with respect to such Property.
Person means any individual, firm, corporation, business
enterprise, trust, association, joint venture, partnership, limited
liability company or partnership, Governmental Body or other entity,
whether acting in an individual, fiduciary or other capacity.
Pledge Agreement means, collectively, the pledge agreements
executed by InfoCure Corporation and such other Persons, pursuant to
which Lender is granted a first Lien upon the Subsidiary Equity
Interests, in form and substance satisfactory to Lender.
Prepayment Premium - as defined in subsection 2.8.3.
Principal Balance means the unpaid principal balance of the
Loans or any specified portion thereof outstanding from time to time.
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Pro Forma EBITDA means, with respect to any Target, EBITDA for
such Target for the most recent twelve-month period (or, if otherwise
designated, for any other applicable period or periods) for which
financial statements are available at the time of determination
thereof, adjusted for verifiable expense reductions which are expected
to be realized, calculated by Borrowers and approved by Lender pursuant
to Section 7.21.
Property means all types of real, personal or mixed property
and all types of tangible or intangible property.
Qualified Depository means a member bank of the Federal
Reserve System having a combined capital and surplus of at least
$100,000,000.
Rate Contracts means swap agreements (as such term is defined
in Section 101 of the Bankruptcy Code) and any other agreements or
arrangements designed to provide protection against fluctuations in
interest or currency exchange rates.
Real Estate means any real estate which is owned, beneficially
or otherwise, by any Borrower or any Subsidiary of any Borrower and
shall include, after the consummation of the Real Estate Acquisition
and, prior to such consummation, for purposes of Section 4.4, the real
property that is the subject of the Real Estate Acquisition.
Real Estate/Macon means the Real Estate owned by InfoCure
Systems located in Bibb County, Georgia and covered by and subject to
the Real Estate/Macon Mortgage.
Real Estate/Macon Mortgage means that certain Real Estate Deed
to Secure Debt dated as of May 15, 1998 made from Macon Systems
Management, LLC to Security National Bank, filed for record on May 29,
1998 and recorded in Deed Book 4185, Page 94, Records of Bibb County,
Georgia, as amended by that certain Assumption, Release and Consent
Agreement by and between Macon Systems Management, LLC, Manuel A.
DelaRosa, George A. Barnes, InfoCure Systems and Security National
Bank, dated February 10, 1999, filed for record on February 12, 1999
and recorded in Deed Book 4371, Page 234, Records of Bibb County,
Georgia.
Real Estate Acquisition means the acquisition by InfoCure
Corporation or any of its Subsidiaries (other than a Restricted Foreign
Subsidiary) of the real property located in Cobb County, Georgia, and
all improvements thereon, and commonly known as 1765 The Exchange,
Atlanta, Georgia 30339.
Real Estate Acquisition Documents means, collectively, that
certain Agreement of Sale among Highwoods Reality Limited Partnership,
a North Carolina limited partnership, InfoCure Corporation, Chicago
Title Insurance Company, CB Richard Ellis, Inc. and Hailey Realty
Company, Inc., together with all agreements, documents and instruments
executed and/or delivered in connection therewith, in each case in form
and substance satisfactory to Lender.
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<PAGE> 25
Real Estate Funding Date means the date on which all
conditions precedent contained in Sections 4.2 and 4.4 have been
satisfied and the proceeds of the Term Loan A shall have been funded.
Related Transactions means the Acquisitions and the Real
Estate Acquisition.
Related Transaction Documents means the Acquisition Documents
and the Real Estate Acquisition Documents.
Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Body, in each case applicable to or
binding upon such Person or any of its Property or to which such Person
or any of its Property is subject.
Restricted Foreign Subsidiaries means, collectively, InfoCure
Australia Pty Limited and Devage Pty Limited, each a company organized
under the laws of Australia.
Responsible Officer means the Chief Executive Officer or the
president of InfoCure Corporation, or any other officer having
substantially the same authority and responsibility; or, with respect
to compliance with financial covenants, the chief financial officer or
the treasurer of InfoCure Corporation, or any other officer having
substantially the same authority and responsibility.
Revolving Loan means the revolving loan in the maximum amount
of $91,295,000 (subject to reduction in accordance with the terms of
this Loan Agreement) to be made by Lender to Borrowers pursuant to
subsection 2.1.2.
Revolving Loan Commitment means, at any time, the commitment
of Lender to make Advances of the Revolving Loan in accordance with the
terms of this Loan Agreement.
Revolving/Term Loan Note means a promissory note of Borrowers
payable to the order of Lender evidencing Indebtedness of Borrowers
under the Revolving Loan Commitment.
Securities Act means the Securities Act of 1933, the
Securities Exchange Act of 1934, any successor statute thereto, and the
rules, regulations and legally binding policies of the Securities
Exchange Commission promulgated thereunder, as amended and in effect
from time to time.
Security Interests means the Liens in the Collateral granted
to Lender pursuant to the Collateral Documents and any other agreement,
document or instrument now or hereafter executed by any Borrower, any
Subsidiary of any Borrower or any other Person which purports to grant
a Lien on the Property of such Borrower, such Subsidiary or such other
Person in favor of Lender.
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<PAGE> 26
Security Agreement means a security agreement made by
Borrowers in favor of Lender, in form and substance satisfactory to
Lender.
Stated Rate - as defined in subsection 2.3.4.
StrategiCare means StrategiCare, Inc., a Minnesota
corporation.
Subordinated Indebtedness means the Indebtedness described on
EXHIBIT 1.1(D) and all other Indebtedness for Borrowed Money of any
Borrower or any Subsidiary of any Borrower which is subordinated in
right of payment and action to Borrowers' Obligations, including,
without limitation, Indebtedness for Borrowed Money incurred in
connection with Acquisitions permitted hereunder and the Indebtedness
for Borrowed Money evidenced by the Thoroughbred Note, but specifically
excluding the Indebtedness for Borrowed Money described on EXHIBIT 7.1
hereto.
Subsidiary of a Person means any other Person of which more
than fifty percent (50%) of the voting stock or other equity interests
(in the case of Persons other than corporations) is owned or
controlled, directly or indirectly, by such Person, or one or more of
the Subsidiaries of such Person, or any combination thereof.
Subsidiary Equity Interests means all of the issued and
outstanding capital stock, partnership and limited liability company
interests and other equity interests, any all warrants, options and
other rights to purchase or otherwise acquire any capital stock,
partnership and limited liability company interests or other equity
interests, of the Subsidiaries of InfoCure Corporation (including,
without limitation, InfoCure Systems, Thoroughbred, DISC, StrategiCare,
Medical Software Management and, to the extent a pledge of the equity
interests of such Persons is required by Section 6.17, the Restricted
Foreign Subsidiaries).
Subsidiary Guaranty means the guaranty made by the
Subsidiaries of Borrowers (other than the Restricted Foreign
Subsidiaries, unless required by Section 6.17) in favor of Lender, in
form and substance satisfactory to Lender.
Subsidiary Security Agreement means the security agreement
made by the Subsidiaries of Borrowers (other than the Restricted
Foreign Subsidiaries, unless required by Section 6.17) in favor of
Lender, in form and substance satisfactory to Lender.
Success Fee - as defined in Section 2.12.
Target means (i) any other Person engaged in business
activities primarily related to the business activities of Borrowers or
(ii) a business unit or asset group of any other Person which is used
in business activities primarily related to the business activities of
Borrowers, in each case acquired or proposed to be acquired in an
Acquisition; provided, that, with respect to the calculation of
Adjusted EBITDA, the term "Target" shall be deemed also to include any
Person or business unit or asset group of any other Person
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<PAGE> 27
that shall have been acquired by any Borrower during the twelve-month
period ending on the Closing Date.
Term Conversion Date means the second anniversary of the
Closing Date, or, if such date is not a Business Day, the Business Day
immediately preceding the second anniversary of the Closing Date.
Term Loan A means the term loan in the maximum amount of
$8,705,000 to be made by Lender to Borrowers pursuant to subsection
2.1.1.
Term Loan A Note means a promissory note of Borrowers payable
to the order of Lender evidencing the Indebtedness of Borrowers to
Lender resulting from the Term Loan A made to Borrowers by Lender.
Term Loan B Portion - as defined in subsection 2.6.2.
Term Loan Commitment means the commitment of Lender to make
the Term Loan A in accordance with the terms of this Agreement.
Termination Event means (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder; or (ii)
the withdrawal of any Borrower or any ERISA Affiliate of any Borrower
from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2); or (iii) the termination of
a Pension Plan, the filing of a notice of intent to terminate a Pension
Plan or the treatment of a Pension Plan amendment as a termination
under Section 4041 of ERISA; or (iv) the institution of proceedings to
terminate, or the appointment of a trustee with respect to, any Pension
Plan by the PBGC; or (v) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; or
(vi) the partial or complete withdrawal of any Borrower or any ERISA
Affiliate of any Borrower from a Multiemployer Plan; or (vii) the
imposition of a lien pursuant to Section 412 of the Code or Section 302
of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections
4241 or 4245 of ERISA; or (ix) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or
the institution by the PBGC of proceedings to terminate a Multiemployer
Plan under Section 4042 of ERISA.
Thoroughbred - as defined in the Preamble of this Loan
Agreement.
Thoroughbred Note means that certain Convertible Subordinated
Non-Negotiable Promissory Note dated October 23, 1998 in the original
principal amount of $10,000,000 made by InfoCure Corporation payable to
the order of Reynolds and Reynolds Holdings, Inc.
Thoroughbred Subordination Agreement means that certain
Subordination Agreement dated as of October 23, 1998 between InfoCure
Corporation and Reynolds
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<PAGE> 28
and Reynolds Holdings, Inc., as amended, modified, supplemented,
restated or reaffirmed from time to time with the consent of the
parties thereto.
Total Debt Service means during any period, all payments of
principal, interest, premium, loan fees and other charges with respect
to Indebtedness for Borrowed Money of Borrowers and their Subsidiaries
(including, without limitation, Borrowers' Obligations, Permitted
Senior Indebtedness and Subordinated Indebtedness), which payments are
required or permitted to be made pursuant to this Loan Agreement and
are due and payable during such period.
Total Debt Service Coverage Ratio means the ratio of (i)
Operating Cash Flow of Borrowers and their Subsidiaries for the
twelve-month period ending on the last day of any quarter to (ii) Total
Debt Service of Borrowers and their Subsidiaries for such twelve-month
period.
UCC or Uniform Commercial Code means the Uniform Commercial
Code as in effect in the State of Arizona.
Unused Commitment Fee - as defined in Section 2.10.
Warrants means, collectively, (i) that certain Warrant
Agreement with an original issue date of January 21, 1999 issued by
Borrower to and for the benefit of Lender and (ii) that certain Warrant
Agreement with an original issue date of October 23, 1998 issued by
Borrower to and for the benefit of Lender.
1.2 TIME PERIODS. In this Loan Agreement and the other Loan Documents,
in the computation of periods of time from a specified date to a later specified
date, (i) the word "from" means "from and including," (ii) the words "to" and
"until" each mean "to, but excluding" and (iii) the words "through," "end of"
and "expiration" each mean "through and including." Unless otherwise specified,
all references in this Loan Agreement and the other Loan Documents to (i) a
"month" shall be deemed to refer to a calendar month, (ii) a "quarter" shall be
deemed to refer to a calendar quarter and (iii) a "year" shall be deemed to
refer to a calendar year.
1.3 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms not
specifically defined herein shall be construed, all accounting determinations
hereunder shall be made and all financial statements required to be delivered
pursuant hereto shall be prepared in accordance with GAAP as in effect at the
time of such interpretation, determination or preparation, as applicable. In the
event that any Accounting Changes (as hereinafter defined) occur and such
changes result in a change in the method of calculation of financial covenants,
standards or terms contained in this Loan Agreement, then Borrowers and Lender
agree to enter into negotiations to amend such provisions of this Loan Agreement
so as to reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of Borrower shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
For purposes hereof, "Accounting Changes" shall mean (i) changes in generally
accepted accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants
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<PAGE> 29
(or any successor thereto) or other appropriate authoritative body and (ii)
changes in accounting principles as approved by the Borrowers' accountants.
1.4 REFERENCES. All references in this Loan Agreement to "Article,"
"Section," "subsection," "subparagraph," "clause" or "Exhibit," unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
1.5 LENDER'S DISCRETION. Whenever the terms "satisfactory to Lender,"
"determined by Lender," "acceptable to Lender," "Lender shall elect," "Lender
shall request," "at the option or election of Lender," or similar terms are used
in the Loan Documents, except as otherwise specifically provided therein, such
terms shall mean satisfactory to, at the election or option of, determined by,
acceptable to or requested by Lender, in its sole and unlimited discretion.
1.6 BORROWER'S OR BORROWERS' KNOWLEDGE. Any statements,
representations or warranties in the Loan Documents that are based upon the
knowledge or best knowledge of a Borrower or an officer thereof shall be deemed
to have been made after due inquiry by the officer making such statements,
representations or warranties on behalf of such Borrower or himself or herself,
as applicable, with respect to the matter in question, and no Borrower shall be
imputed with knowledge of any fact or circumstance unless a Responsible Officer
of such Borrower shall have or should have had actual knowledge of such fact or
circumstance.
ARTICLE II
LOANS AND TERMS OF PAYMENT; SYNDICATION
2.1 LOANS.
2.1.1 TERM LOAN A. The Term Loan A shall consist of a term
loan from Lender to Borrowers in an aggregate amount requested by
Borrowers not to exceed $8,705,000, subject to subsection 2.1.3. Lender
shall disburse the proceeds of the Term Loan A to or as directed by
Borrowers on or before the second anniversary of the Closing Date, upon
the satisfaction of the following conditions for each and every advance
thereof:
(i) all of the terms and conditions set forth in
Section 4.2 and 4.4 shall have been satisfied;
(ii) with respect to any such advance occurring after
the Closing Date, not less than two (2) Business Days prior to
the date upon which Borrowers desire to borrow any portion of
the proceeds of the Term Loan A, Borrowers shall have
delivered to Lender a Notice of Borrowing;
(iii) no Incipient Default or Event of Default shall
exist at the time such Notice of Borrowing is delivered to
Lender or on the requested date of
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<PAGE> 30
disbursement, or be caused as a result of the incurrence of
such Indebtedness for Borrowed Money by Borrowers; and
(iv) Lender shall have received (A) evidence (in the
form of invoices or otherwise) satisfactory to Lender which
supports the amount of the requested advance of the Term Loan
A, (B) any lien waivers requested by Lender, including,
without limitation, mechanic's lien waivers, in any case in
form and substance satisfactory to Lender, and (C) a date down
endorsement to the title policy in favor of Lender, as
insured, covering the applicable Real Estate.
2.1.2 REVOLVING LOAN. Lender agrees, on the terms and
conditions hereinafter set forth, to make Advances of the Revolving
Loan to Borrowers on any Business Day during the period from the
Closing Date to the day immediately preceding August 11, 2002 in an
aggregate amount not to exceed at any time outstanding $91,295,000,
subject to subsection 2.1.3 and reduction from time to time pursuant to
the terms of this Loan Agreement. Borrowers agree and acknowledge that
on the Closing Date, without giving effect to any other Loans requested
by Borrowers on such date, $12,149,250.00 shall be deemed outstanding
under the Revolving Loan, which amount shall be deemed to have
refinanced the Existing FINOVA Indebtedness. Notwithstanding anything
contained herein to the contrary, Lender shall not be required or
obligated to make additional Advances of the Revolving Loan Commitment
from and after August 10, 2002.
2.1.3 SUBORDINATION PROVISIONS. Notwithstanding anything
contained herein or any other Loan Document to the contrary, and
without limiting any other term or provision of this Loan Agreement or
any other Loan Document, Lender shall not be required or obligated to
make any Advance or advance of the Term Loan A if, as a result thereof,
the Principal Balance or any portion thereof would not constitute
senior indebtedness or any other similar term or concept under any
effective subordination agreement or terms governing any Subordinated
Indebtedness (including, without limitation, the Indebtedness evidenced
by the Thoroughbred Note) or otherwise be senior in right of payment
and collection to any Subordinated Indebtedness at least to the extent
any other portion of the Principal Balance is senior in right of
payment and collection to any such Subordinated Indebtedness. Without
limiting the foregoing, so long as the Thoroughbred Note remains
outstanding Lender shall not be required or obligated to make any
Advance or advance of the Term Loan A if the result thereof would cause
the Principal Balance to exceed $75,000,000 (or such other limit on
"Senior indebtedness" (as defined in the Thoroughbred Subordination
Agreement) that from time to time may be set or present under the terms
of the Thoroughbred Subordination Agreement).
2.2 USE OF PROCEEDS, NOTES AND REBORROWING.
2.2.1 USE OF PROCEEDS. The proceeds of the (i) Term Loan A
shall be used solely to consummate the Real Estate Acquisition and (ii)
Revolving Loan shall be used solely for consummating Acquisitions to
the extent permitted hereunder and to pay related transaction costs;
provided that a maximum amount of $15,000,000 at any one time
outstanding of the Revolving Loan may be used for working capital
purposes.
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2.2.2 NOTES. The Term Loan A and the Revolving Loan
(including, without limitation, the Term Loan B Portion thereof) shall
be evidenced by the Term Loan A Note and the Revolving/Term Loan Note,
respectively.
2.2.3 REBORROWING. Borrowers may not reborrow all or any
portion of the Term Loan A or, from and after the Term Conversion Date,
the Revolving Loan. Subject to the terms and conditions of this
Agreement, Borrowers from time to time may reborrow all or any portion
of the Revolving Loan which is repaid or prepaid through the date
immediately preceding the Term Conversion Date.
2.3 INTEREST.
2.3.1 INTEREST RATES AND PAYMENT. Except as provided in
subsection 2.3.2 and subject to the provision contained in Section 2.4,
(i) the Principal Balance of the Term Loan A shall bear interest at a
per annum rate equal to the Base Rate, plus one percent (1.0%) and (ii)
the Revolving Loan (including, without limitation, the Term Loan B
Portion thereof) shall bear interest at a per annum rate equal to the
LIBOR or the Base Rate, as the case may be, plus the Applicable Margin.
Interest shall be payable in arrears on each Interest Payment Date.
Interest also shall be paid on the date of any payment or prepayment of
the Loans pursuant to Sections 2.6 and 2.8.
2.3.2 DEFAULT RATE. During a Default Rate Period, Borrowers'
Obligations shall bear interest at the applicable Default Rate.
2.3.3 INTEREST AND FEES COMPUTATION. Computations of interest
on LIBOR Rate Loans, fees and all other Borrowers' Obligations (other
than Base Rate Loans) shall be computed on the basis of a year
consisting of 360 days and charged for the actual number of days during
the period for which such interest and fees are being charged.
Computations of interest on Base Rate Loans shall be computed on the
basis of a year consisting of 365 days (or, in the case of a leap year,
366 days) and charged for the actual number of days during the period
for which such interest is being charged. In computing interest and
fees, the date of funding shall be included and the date of payment
shall be excluded.
2.3.4 MAXIMUM INTEREST. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, Lender shall
not collect a rate of interest on any obligation or liability due and
owing by Borrowers to Lender in excess of the maximum contract rate of
interest permitted by applicable law (such excess referred to as
"Excess Interest"). Lender and Borrowers agree that the interest laws
of the State of Arizona shall govern the relationship among them and
understand and believe that the transactions contemplated by the Loan
Documents comply with the usury laws of the State of Arizona, but in
the event of a final adjudication to the contrary, Borrowers shall be
obligated to pay, nunc pro tunc, to Lender only such interest as then
shall be permitted by the laws of the state found to govern the
contract relationship among Lender and Borrowers. If any Excess
Interest is provided for or determined by a court of competent
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<PAGE> 32
jurisdiction to have been provided for in this Loan Agreement or any
other Loan Document, then in such event (i) no Borrower shall be
obligated to pay such Excess Interest, (ii) any Excess Interest
collected by Lender shall be, at Lender's option, (A) applied to the
Principal Balance in such manner as Lender may elect or to accrued and
unpaid interest not in excess of the maximum rate permitted by
applicable law (the "Maximum Rate") or (B) refunded to the payor
thereof, (iii) the interest rates provided for herein (the "Stated
Rate") shall be automatically reduced to the Maximum Rate and the Loan
Documents shall be deemed to have been, and shall be, modified to
reflect such reduction and (iv) no Borrower shall have any action
against Lender for any damages arising out of the payment or collection
of such Excess Interest; provided, however, that if at any time
thereafter the Stated Rate is less than the Maximum Rate, Borrowers
shall, to the extent permitted by law, continue to pay interest at the
Maximum Rate until such time as the total interest received by Lender
is equal to the total interest which Lender would have received had the
Stated Rate been (but for the operation of this provision) the interest
rate payable. Thereafter, the interest rate payable shall be the Stated
Rate unless and until the Stated Rate again exceeds the Maximum Rate,
in which event the provisions contained in this subsection 2.3.4 shall
again apply.
2.4 PROCEDURE FOR BORROWING UNDER THE REVOLVING LOAN COMMITMENT. (a)
The Term Loan A and each Advance of the Revolving Loan shall be made upon the
Borrowers' irrevocable written notice delivered to Lender in the form of a
Notice of Borrowing, which notice must be received by Lender prior to 10:30 a.m.
(Chicago time) (i) on the requested Funding Date in the case of each Advance
equal to or less than $1,000,000 and in the case of the Term Loan A and the
Advance to be made on the Closing Date, (ii) on the date which is one (1)
Business Day prior to the requested Funding Date of each Advance in excess of
$1,000,000 but equal to or less than $3,000,000 and (iii) on the day which is
two (2) Business Days prior to the requested Funding Date in the case of each
Advance in excess of $3,000,000; provided, that with respect to Advances
subsequent to the Closing Date, Borrowers may give notice of the requested
Advance to Lender by telephone call, with such notice confirmed not later than
the following Business Day by delivery to Lender of a signed Notice of
Borrowing; and further provided, that Borrowers shall be permitted to notify
Lender of the revocation of such Notice of Borrowing no later than noon (New
York time) on the relevant proposed Funding Date without incurring any cost,
expense or other liability arising from such revocation. Each such Notice of
Borrowing shall specify:
(I) the amount of the Advance (which shall be in an aggregate
minimum principal amount of $500,000 and multiples of $50,000 in excess
thereof);
(II) the requested Funding Date, which shall be a Business
Day;
(III) whether the Advance is to be comprised of LIBOR Rate
Loans or Base Rate Loans; and
(IV) if the Advance is to be LIBOR Rate Loans, the Interest
Period applicable to such Advance.
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provided, however, that with respect to the Advance to be made on the Closing
Date and the Term Loan A, such Advance and the Term Loan A will be a Base Rate
Loan only and shall remain so for not less than three (3) Business Days after
the Closing Date or the Real Estate Funding Date, as applicable.
(b) Unless otherwise required by Lender, the proceeds of each requested
Advance after the Closing Date will be made available to Borrowers by Lender by
wire transfer (or ACH transfer) of such amount to Borrowers pursuant to the wire
transfer instructions specified on the signature page hereto.
2.5 CONVERSION AND CONTINUATION ELECTIONS. (a) Borrowers may upon
irrevocable (subject to subsection 11.2(c) and Section 11.5) written notice to
Lender in accordance with subsection 2.5(b) elect to (i) convert on any Business
Day any Base Rate Loan into a LIBOR Rate Loan or (ii) elect to continue on the
last day of the applicable Interest Period any LIBOR Rate Loan having an
Interest Period maturing on such day or (iii) elect to renew on the last day of
the applicable Interest Period any LIBOR Rate Loan having an Interest Period
maturing on such day, in each instance, in whole or in part in an amount not
less than $500,000, or that is in an integral multiple of $50,000 in excess
thereof.
(b) Borrowers shall deliver a Notice of Conversion/Continuation to be
received by Lender not later than 10:30 a.m. (Chicago time) at least three (3)
Business Days in advance of the requested Conversion Date or continuation date,
specifying:
(i) the proposed Conversion Date or continuation date;
(ii) the aggregate amount of Loans to be converted or renewed;
and
(iii) the duration of the requested Interest Period with
respect to the Loans to be converted or continued as LIBOR Rate Loans.
(c) If upon the expiration of any Interest Period applicable to LIBOR
Rate Loans, Borrowers have failed to select timely a new Interest Period to be
applicable to such LIBOR Rate Loans or if any Incipient Default or Event of
Default shall then exist, Borrowers shall be deemed to have elected to convert
such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
(d) Lender will, with reasonable promptness, notify Borrowers of each
determination of a LIBOR Rate; provided that any failure to do so shall not
relieve Borrowers of any liability hereunder or provide the basis for any claim
against Lender.
(e) Unless Lender shall otherwise agree, during the existence of an
Event of Default, Borrowers may not elect to have any Loan converted into or
continued as a LIBOR Rate Loan.
(f) Notwithstanding any other provision contained in this Agreement,
after giving effect to any Advance, or to any continuation or conversion of any
Loans, there shall not be more than five (5) different Interest Periods in
effect at any time.
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2.6 SCHEDULED PRINCIPAL REPAYMENTS.
2.6.1 TERM LOAN A. The Principal Balance of the Term Loan A
shall be paid in twenty (20) consecutive quarterly installments on the
first Business Day of each quarter, commencing with the first Business
Day of October, 1999. Such installments shall be in the following
amounts: the first nineteen (19) installments shall be in an amount
equal to $77,562.50, and the last such installment shall be in an
amount equal to the then Principal Balance of the Term Loan A.
2.6.2 REVOLVING LOAN. The Principal Balance of the Revolving
Loan as of the Term Conversion Date shall convert into the senior
amortizing term loan (the "Term Loan B Portion" of the Revolving Loan).
Such Term Loan B Portion shall be paid in installments on the dates and
in the respective amounts shown below:
<TABLE>
<CAPTION>
Amount of Payment (expressed as a
percentage of the Principal Balance
of the Revolving Loan on the
Date of Payment Term Conversion Date)
--------------- ---------------------
<S> <C>
October 1, 2001 5.00%
January 1, 2002 5.00%
April 1, 2002 5.00%
July 1, 2002 5.00%
October 1, 2002 5.00%
January 1, 2003 5.00%
April 1, 2003 5.00%
July 1, 2003 5.00%
October 1, 2003 5.00%
January 1, 2004 5.00%
April 1, 2004 5.00%
June 30, 2004 45.00%
</TABLE>
The Principal Balance of each Advance of the Revolving Loan
made on or after the Term Conversion Date shall be payable in
consecutive quarterly installments on the first Business Day of each
quarter, commencing with the first Business Day of the first quarter
immediately succeeding the quarter in which the Funding Date of such
Advance occurs. Subject to subsection 2.6.3, each such installment
shall be equal to five percent (5.00%) of the initial Principal Balance
of such Advance.
2.6.3 FINAL PAYMENT. The then remaining Principal Balance of
the Term Loan A and the Revolving Loan (including, without limitation,
the Term Loan B Portion thereof), and any other sums which then are due
and payable pursuant to the terms of the Loan Documents, shall be due
and payable on June 30, 2004.
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2.7 LATE CHARGES. If a payment of principal, interest or any fee to be
made pursuant to this Loan Agreement becomes past due for a period in excess of
five (5) days, Borrowers shall pay to Lender on demand a late charge of five
percent (5.0%) of the amount of such overdue payment.
2.8 OPTIONAL/VOLUNTARY AND MANDATORY PREPAYMENTS; PREPAYMENT PREMIUM;
AND FEE ACCELERATION.
2.8.1 VOLUNTARY PREPAYMENTS. Borrowers may at any time and
from time to time voluntarily prepay all or any portion of the
Principal Balance, subject to the following terms and conditions:
(a) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF
PREPAYMENTS. Not less than ten (10) days prior to the date
upon which Borrowers desire to make any such voluntary
prepayment, Borrowers shall deliver to Lender notice of their
intention to prepay, which notice shall state the prepayment
date and the amount of the Principal Balance to be prepaid. No
partial prepayment of the Principal Balance shall be in an
amount less than $100,000 or integral multiples of $100,000 in
excess thereof. A voluntary prepayment of the Principal
Balance shall not be made more frequently than once each
month. If Borrowers deliver to Lender a notice of prepayment
and fail to make such prepayment, Borrowers shall reimburse
Lender on demand for any actual out-of-pocket loss, cost
and/or expense incurred by Lender as a result of Lender's
reliance on such notice.
(b) ADDITIONAL PAYMENTS. Concurrently with any
prepayment pursuant to this subsection 2.8.1, Borrowers shall
pay to Lender (i) accrued and unpaid interest on the Principal
Balance which is being prepaid to the date on which Lender is
in receipt of Good Funds, (ii) any amounts required to be paid
in connection therewith pursuant to subsection 2.8.3 and
Section 11.4 and (iii) any other sums which are due and
payable pursuant to the terms of any of the Loan Documents.
(c) APPLICATION OF VOLUNTARY PREPAYMENTS. Voluntary
partial prepayments of (i) the Term Loan A prior to the Term
Conversion Date shall be applied against scheduled
installments of the Term Loan A in inverse order of maturity
and (ii) the Loans after the Term Conversion Date shall be
applied in the following order of priority: (i) first, against
scheduled installments of the Term Loan A in inverse order of
maturity; and (ii) lastly, against scheduled installments of
the Term Loan B Portion and any other Advances of the
Revolving Loan in inverse order of maturity and, to the extent
the principal installments of the Term Loan B Portion or two
or more Advances shall have the same date of maturity, such
prepayment shall be applied to the Principal Balance thereof
on a pro rata basis. Unless a notice of prepayment indicates
otherwise, amounts voluntarily prepaid shall be applied first
to any Base Rate Loans then outstanding and then to
outstanding LIBOR Rate Loans with the shortest Interest
Periods remaining.
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(d) VOLUNTARY COMMITMENT REDUCTIONS. (a) In the event
of a prepayment in full of the Principal Balance prior to
August 11, 2002, Borrowers shall have the right to permanently
terminate the Revolving Loan Commitment upon at least thirty
(30) days' prior written notice to Lender and (b) prior to
August 11, 2002, Borrowers shall have the right from time to
time upon at least thirty (30) days' prior written notice to
Lender to permanently reduce the Revolving Loan Commitment in
minimum increments of $5,000,000 provided that after giving
effect to any such reduction, the then reduced Revolving Loan
Commitment shall exceed the Principal Balance of the Revolving
Loan by not less than $1,000,000.
2.8.2 MANDATORY PREPAYMENTS.
(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 December 31, 2001, Borrowers shall pay to Lender an
amount equal to fifty percent (50%) 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 Lender the audited financial statements for such
Fiscal Year pursuant to subsection 6.3.3.
(b) DISPOSITIONS. If any Borrower or any Subsidiary
of any Borrower at any time or from time to time shall make or
agree to make a Disposition and the aggregate amount of the
Net Proceeds received by such Person in connection with such
Disposition and all other Dispositions occurring during the
then current Fiscal Year of Borrowers exceeds $1,000,000, then
Borrowers shall promptly notify Lender of such proposed
Disposition (including the amount of the estimated Net
Proceeds to be received by Borrowers in respect thereof). In
the event that Borrowers reasonably expect the Net Proceeds of
such Disposition, or a portion thereof, to be reinvested in
productive assets of a kind then used or useable in the
business of Borrowers and their Subsidiaries within ninety
(90) days, then Borrowers may use the Net Proceeds (or such
portion thereof) for such purpose. In the event either
Borrowers do not reasonably expect the Net Proceeds of such
Disposition, or any portion thereof, to be so used or
Borrowers do not reinvest such Net Proceeds within ninety (90)
days, Borrowers shall deliver 100% of such Net Proceeds to
Lender as a prepayment of the Loans.
(c) EQUITY ISSUANCES. If any Borrower or any
Subsidiary of any Borrower shall issue equity securities
(other than issuances by any Subsidiary of any Borrower to
such Borrower or a wholly-owned Subsidiary of such Borrower),
Borrowers shall promptly notify Lender of the estimated Net
Issuance Proceeds of such issuance to be received by such
Borrower or such Subsidiary in respect thereof and, if any
Event of Default shall exist on the date of either such
issuance or such Borrower's receipt of such Net Issuance
Proceeds, or if any Event of Default shall result from the
consummation of such issuance, promptly upon receipt by
Borrowers of the Net Issuance Proceeds of such issuance,
Borrowers
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shall deliver to Lender 100% of such Net Issuance Proceeds as
a prepayment of the Principal Balance. Net Issuance Proceeds
shall not include net proceeds from sale or issuance of equity
securities of InfoCure Corporation used to pay for, or in
connection with, Acquisitions permitted hereunder.
(d) PREPAYMENTS IN RESPECT OF EXERCISE OF REMEDIES.
Concurrently with any payment of the Principal Balance
received by Lender resulting from the exercise by Lender of
any remedy available to Lender subsequent to the occurrence of
an Event of Default and the acceleration of Borrowers'
Obligations, Borrowers shall pay to Lender a prepayment
premium and such other amounts, as applicable, based on the
Principal Balance in accordance with subsection 2.8.3 and
Section 11.4.
(e) APPLICATION OF MANDATORY PREPAYMENTS. Prepayments
received by Lender pursuant to this subsection 2.8.2 shall be
applied in the following order of priority to the payment of:
(i) any and all sums which are due and payable pursuant to the
terms of the Loan Documents, except the Principal Balance and
accrued and unpaid interest thereon but specifically including
fees payable in accordance with Section 11.4 and subsection
2.8.3; (ii) accrued and unpaid interest on the portion of the
Principal Balance being prepaid; (iii) any other accrued and
unpaid interest which is unpaid; (iv) from and after the Term
Conversion Date, the installments of the Principal Balance of
the Term Loan B Portion and any other Advances of the
Revolving Loan then outstanding in inverse order of maturity
on a pro rata basis between or among any installments thereof
due on the same date, if any; (v) the installments of the
Principal Balance of the Term Loan A in inverse order
maturity; and (vi) prior to the Term Conversion Date, the
Revolving Loan. To the extent permitted by the foregoing
sentence, amounts prepaid shall be applied first to any Base
Rate Loans then outstanding and then to outstanding LIBOR Rate
Loan with the shortest Interest Periods remaining. Together
with each prepayment under this subsection 2.8.2, Borrowers
shall pay any amounts required pursuant to subsection 2.8.3
and Section 11.4.
(f) MANDATORY PREPAYMENT OF THE TERM LOAN A.
Notwithstanding anything contained in this Loan Agreement to
the contrary, Borrowers shall make a mandatory prepayment in
full of the Term Loan A concurrently with any prepayment in
full of the Revolving Loan and the Commitments automatically
shall terminate concurrently therewith.
2.8.3 PREPAYMENT PREMIUM AND ACCELERATION OF FEES.
(a) Any prepayment of the Principal Balance (other
than a prepayment made pursuant to subsection 2.8.2(a) and any
partial repayment of the Revolving Loan prior to the Term
Conversion Date, but specifically including any repayment or
prepayment of the Revolving Loan in full) shall be accompanied
by a payment (a "Prepayment Premium") of (i) three percent
(3%) of the amount so prepaid if
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such prepayment occurs during the first Loan Year (provided,
that, with respect to any repayment or prepayment of the
Revolving Loan in full during such period, the Prepayment
Premium in respect thereof shall equal three percent (3%) of
the highest Principal Balance of the Revolving Loan that was
outstanding (i.e., the peak utilization of the Revolving Loan
Commitment) during the period from and including the Closing
Date and ending on the date such prepayment shall be made);
(ii) two percent (2%) of the amount so prepaid if such
prepayment occurs during the second Loan Year (provided, that,
with respect to any repayment or prepayment of the Revolving
Loan in full during such period, the Prepayment Premium in
respect thereof shall equal two percent (2%) of the highest
Principal Balance of the Revolving Loan that was outstanding
(i.e., the peak utilization of the Revolving Loan Commitment)
during the period from and including the Closing Date and
ending on the date such prepayment shall be made); and (iii)
one percent (1%) of the amount so prepaid if such prepayment
occurs during the third Loan Year.
(b) In addition to the premiums calculated pursuant
to (a) above or otherwise, any prepayment of the Principal
Balance in whole shall be accompanied by (i) a payment equal
to the product obtained by multiplying six (6), multiplied by
the amount of the Unused Commitment Fee charged pursuant to
Section 2.10 most recent to the date of such prepayment and
(ii) a payment equal to the product obtained by multiplying
the original amount of the Revolving Loan Commitment
multiplied by one-quarter of one percent (0.25%).
2.9 COMMITMENT FEE. Borrowers shall pay to Lender on the Closing Date
a commitment fee equal to $500,000 (the "Commitment Fee"), which fee shall be
deemed fully earned on the Closing Date.
2.10 UNUSED COMMITMENT FEE. From and after the Closing Date through
August 10, 2002, Borrowers shall pay to Lender a fee (the "Unused Commitment
Fee") on the first Business Day of each quarter, commencing with the month of
October, 1999, in an amount equal to the product of (i) the amount by which (a)
the Revolving Loan Commitment exceeds (b) the average daily outstanding
Principal Balance of the Revolving Loan during the immediately preceding
quarter, multiplied by (ii) one-quarter of one percent (0.25%) per annum.
2.11 ANNUAL FEE. Borrowers shall pay to Lender on first anniversary of
the Closing Date an annual maintenance and administration fee equal to the
product obtained by multiplying the amount of the Revolving Loan Commitment in
effect on such date multiplied by one-quarter of one percent (0.25%) (the
"Annual Fee"), which Annual Fee shall be deemed fully earned and due and payable
on each such anniversary.
2.12 SUCCESS FEE. On December 15, 1999, Borrowers shall pay to Lender
a success fee of $540,000 (the "Success Fee"), which fee shall be deemed fully
earned as of the Closing Date.
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2.13 PAYMENTS AFTER EVENT OF DEFAULT. All payments received by Lender
during the existence of an Event of Default shall be applied in accordance with
Section 8.4.
2.14 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made pursuant
to the Loan Documents by Borrowers shall be made by wire transfer of Good Funds
to the account of Lender at Citibank, N.A., 399 Park Avenue, New York, New York,
ABA 021000089, Credit: FINOVA Capital Corporation, Credit Account No. 40701338,
Reference: InfoCure Loan, Attn: Mary Kay Ross, or to such other account as
Lender shall notify Borrowers. All payments (including prepayments) to be made
by Borrowers on account of principal, interest, fees and other amounts required
hereunder shall be made without off-set, recoupment or counterclaim. Borrowers
hereby authorize Lender to make an Advance (which shall be a Base Rate Loan) for
payments of interest, principal, fees (including, without limitation, the
Success Fee, the Unused Commitment Fee, the Annual Fee and any Acquisition
Funding Fee), costs and expenses payable by Borrowers or any of their respective
Subsidiaries to Lender hereunder or under any of the other Loan Documents.
2.15 SYNDICATION. Borrowers agree and acknowledge that (i) Lender
shall have the right at any time to sell, assign and transfer any portion of its
loan position to one or more lenders or otherwise syndicate the transaction
contemplated by this Loan Agreement, (ii) in connection with any such sale,
assignment, transfer or syndication, Lender 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
Loan Documents which have or hereafter may be provided to or obtained by Lender,
(iii) until successful completion of the initial syndication of the Loans and
the Commitments, in the event such initial syndication of the Loans and
Commitments by Lender shall prove to be impracticable, Borrowers agree to
restructure the credit facilities evidenced by this Loan Agreement and the other
Loan Documents and, in furtherance thereof, Lender may change pricing or make
structural changes to the Loans and this Loan Agreement if Lender determines
that such changes are reasonably required in order to ensure successful
syndication of the Loans and Commitments on terms which are acceptable to
Lender. In connection with any such sale, assignment, transfer or syndication
contemplated by this Section 2.15, Borrowers agree and acknowledge that (i)
Lender and Borrowers will be required to re-document the transactions
contemplated by this Loan Agreement and the other Loan Documents, which
re-documentation shall contain such terms, agreements, provisions, covenants,
representations and warranties customarily contained in Lender's syndicated
transactions, and (ii) the costs, fees, disbursements and expenses (including
attorneys' fees and expenses) for any such re-documentation shall be borne
solely by Borrowers.
ARTICLE III
SECURITY
Borrowers' Obligations shall be secured by a Lien upon all of the
Collateral, which at all times shall be superior and prior to all other Liens
(except Permitted Prior Liens), and unconditionally guaranteed by each
Subsidiary of each Borrower (other than the Restricted Foreign Subsidiaries,
unless required by Section 6.17).
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ARTICLE IV
CONDITIONS OF CLOSING AND ADVANCES; ACQUISITIONS
4.1 CLOSING; CONDITIONS OF INITIAL LOANS. This Loan Agreement
shall not be deemed to be effective, and Lender shall not be obligated to
disburse any proceeds of the Loans or make the initial Advances of the Revolving
Loan or, if applicable, the initial advance of Term Loan A, until all of the
following conditions precedent shall have been satisfied in a manner, form and
substance satisfactory to Lender:
4.1.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date
the representations and warranties of each Borrower and each of their
respective Subsidiaries set forth in the Loan Documents and the Related
Transaction Documents to which such Person is a party shall be true and
correct.
4.1.2 RELATED TRANSACTIONS. The Related Transactions shall
have closed in the manner contemplated by the Related Transaction
Documents and shall otherwise be in form and substance satisfactory to
Lender.
4.1.3 DELIVERY OF DOCUMENTS. The following shall have been
delivered to Lender, each duly authorized and executed, where
applicable:
(a) this Loan Agreement, the Notes, an
Environmental Certificate and a Contribution Agreement;
(b) good standing certificates for each Borrower
and each Subsidiary of each Borrower from each of the states
in which such Person is organized, maintains facilities or
business locations or otherwise conducts material business,
each dated a recent date prior to the Closing Date;
(c) copies of (i) the articles of incorporation
of each Borrower and each Subsidiary of each Borrower,
together with all current and proposed amendments thereto,
certified by the Secretary of State of the state in which each
such Person is organized as of a recent date prior to the
Closing Date; (ii) the by-laws of each Borrower and each
Subsidiary of each Borrower, together with all current and
proposed amendments thereto, certified by the corporate
secretary of each such Person, (iii) copies of resolutions
adopted by the board of directors of each Borrower and each
Subsidiary of each Borrower, each authorizing the execution
and delivery by each such Borrower of the Loan Documents and
the Related Transaction Documents to which each such Person is
a party and the consummation of the transactions contemplated
thereby, certified as of the Closing Date by the corporate
secretary of each such Person;
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(d) signature and incumbency certificates of the
officers of each Borrower and each Subsidiary of each
Borrower;
(e) the Collateral Documents, in appropriate
form for recording where necessary, and such Loan Documents
executed by DISC, StrategiCare and Medical Software
Management, or by Borrowers in respect thereof, including,
without limitation, the Subsidiary Guaranty and the Subsidiary
Security Agreement, so that Borrowers shall have complied with
Section 6.15;
(f) certified copies or executed originals of
each of the following:
(1) all Leases;
(2) all Licenses;
(3) all material License Agreements;
(4) all material Operating Agreements;
and
(5) all instruments and documents
evidencing Permitted Senior
Indebtedness existing as of the
Closing Date;
(g) subordination agreements and/or
reaffirmation of subordination in respect of all Subordinated
Indebtedness outstanding as of the Closing Date;
(h) a Landlord Consent from each Landlord under
each Lease (except to the extent previously delivered to
Lender pursuant to the requirements of previous credit
facilities provided to Borrowers by Lender);
(i) such other agreements, instruments,
documents, certificates, consents, waivers and opinions as
Lender reasonably may request; and
(j) original stock certificates representing the
Subsidiary Equity Interests as of the date hereof and
assignments separate from certificate executed in blank.
4.1.4 PERFORMANCE; NO DEFAULT. Each Borrower and each
Subsidiary of each Borrower shall have performed and complied with all
agreements and conditions contained in the Loan Documents and the
Related Transaction Documents to be performed by or complied with by
such Person prior to or at the Closing, and no Event of Default or
Incipient Default shall then exist or result from the making of the
Term Loan or any Advance on the Closing Date.
4.1.5 OPINIONS OF COUNSEL. Lender shall have received an
opinion dated the Closing Date from Morris, Manning & Martin, counsel
to Borrowers and their Subsidiaries, and such other opinions as Lender
may request.
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4.1.6 APPROVAL OF LOAN DOCUMENTS AND SECURITY INTERESTS.
Lender shall have received evidence that the approval or consent shall
have been obtained from all Governmental Bodies and all other Persons
whose approval or consent is required to enable Borrowers and their
Subsidiaries to (a) enter into and perform their respective obligations
under the Loan Documents and the Related Transaction Documents to which
each such Person is a party and (b) grant the Security Interests to
Lender.
4.1.7 SECURITY INTERESTS. All filings of Uniform
Commercial Code financing statements, all recordings of Mortgages and
all other filings and actions necessary to perfect and maintain the
Security Interests as first, valid and perfected Liens in the Property
covered thereby, subject only to Permitted Prior Liens, shall have been
filed or taken and Lender shall have received such UCC, state and
federal tax Lien, pending suit, judgment and other Lien searches as it
deems necessary to confirm the foregoing.
4.1.8 LICENSES. Lender shall have received evidence that
(a) each Borrower and each Subsidiary of each Borrower is the licensee
of all Licenses necessary for the operation of its business and (b)
such Licenses are in full force and effect as of the Closing Date and
no event has occurred which could result in the termination, revocation
or non-renewal of any such License.
4.1.10 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS;
INSPECTION. Lender shall have received the financial statements
described in EXHIBIT 5.7.1 and the projections described in EXHIBIT
5.7.2. Each Borrower shall have arranged for representatives of Lender
to visit and inspect its offices and properties.
4.1.11 MATERIAL ADVERSE EFFECT. No event shall have
occurred since March 31, 1999 which has had or could have a Material
Adverse Effect. No litigation or governmental proceedings or
investigation shall be pending, which in the opinion of Lender could,
if adversely determined, have a Material Adverse Affect.
4.1.12 USE OF ASSETS. Lender shall be satisfied that each
Borrower at all times shall be entitled to the use and quiet enjoyment
of all Property necessary for the continued ownership and operation of
the business conducted by such Borrower, including, without limitation,
the use of equipment, fixtures, Licenses, offices and means of ingress
and egress thereto, necessary for the operation of such business.
4.1.13 BROKER FEES. If the services of a broker or other
agent have been used in connection with the Loans, all fees owed to
such broker or agent shall have been paid by Borrowers and Lender shall
have received evidence of such payment.
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4.1.14 INSURANCE; SURVEY.
(a) BUSINESS AND FLOOD INSURANCE. At least three
(3) Business Days prior to the Closing Date Borrowers shall
have delivered to Lender evidence satisfactory to Lender (i)
of flood insurance with respect to each parcel of Real Estate
other than a parcel as to which Borrowers have supplied Lender
evidence that the improvements located on such parcel are not
in a flood hazard area and (ii) that all insurance coverage
required pursuant to Section 6.6 is in full force and effect
and all premiums then due thereon have been paid in full.
(b) REAL ESTATE; LEASEHOLD PROPERTY. Lender
shall have received an ALTA mortgagee's policy of title
insurance (ALTA Revised 1987 Form) in favor of Lender with
respect to each parcel of Real Estate, issued by a title
company and in an amount showing that the applicable Borrower
or Subsidiary of a Borrower has good and marketable title to
each such parcel of Real Estate and insuring that the Mortgage
covering such parcel constitutes a valid Lien on such
Borrower's or Subsidiary's interest in such parcel, subject
only to Permitted Prior Liens. Each policy shall insure over
all survey and other general exceptions contained therein and
shall include such affirmative endorsements as may be required
by Lender, including, without limitation, comprehensive
endorsement no. 1, contiguity (if applicable), usury, doing
business, variable rate, tie-in, restrictions (where
applicable), encroachment (where applicable), 3.1 zoning
(including parking), last dollar, tax parcel, survey,
location, access and future advances. Lender shall have
received copies of and found satisfactory the provisions of
each document referred to in each such policy.
(c) PREMIUMS. Lender shall have received
evidence that all premiums with respect to such title
insurance have been paid by Borrowers.
(d) SURVEY. Lender shall have received an
"as-built" survey of each parcel of Real Estate dated not
earlier than 45 days prior to the Closing Date, certified to
Lender and the title company as being drawn in compliance with
the American Land Title Association and American Congress on
Surveying and Mapping Standards (as adopted in 1997),
containing a flood plain certification and showing no matters
or exceptions which are not Permitted Liens and otherwise in
sufficient detail as to permit the elimination of any survey
exceptions to the title policies described above.
4.1.15 INTENTIONALLY OMITTED.
4.1.16 PAYMENT OF FEES, EXPENSES AND LOANS. Borrowers shall
have paid (a) the Commitment Fee, (b) all fees and expenses described
in subsection 10.1.1 incurred in connection with the Loans (including
attorneys' fees and expenses), (c) all outstanding premiums, fees and
expenses incurred by Lender pursuant to previous credit facilities
provided by Lender to Borrowers, the amount of which equals $58,529.53,
and (d) all loans, interest, fees and other amounts outstanding under
all then existing credit facilities
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provided to Borrowers by Lender, including, without limitation, the
Existing FINOVA Indebtedness in the aggregate amount of $12,149,250.00.
4.2 CONDITIONS TO THE DISBURSEMENT OF THE TERM LOAN A AND ALL
ADVANCES. The obligation of Lender to disburse the proceeds of the Term Loan A
or make any Advance after the Closing Date, or to continue or convert any Loan
hereunder, is subject to the satisfaction of the following conditions precedent
on the relevant Funding Date, Conversion Date or continuation date, each in a
manner, form and substance satisfactory to Lender:
4.2.1 NOTICE OF BORROWING or Notice of
Continuation/Conversion. Lender shall have received a Notice of
Borrowing or a Notice of Continuation/Conversion, as applicable, in
accordance with Section 2.4 or Section 2.5;
4.2.2 CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by each Borrower contained in
Article 5 shall be true and correct in all material respects on and as
of the applicable Funding Date, or continuation date or Conversion Date
with the same effect as if made on and as of such Funding Date or
continuation date or Conversion Date (except to the extent such
representations and warranties (i) expressly refer to an earlier date,
in which case they shall be true and correct in all material respects
as of such earlier date, or (ii) are not true and correct due to events
or conditions, the occurrence or existence of which are not prohibited
by this Loan Agreement or the other Loan Documents and which do not, in
and of themselves, constitute an Incipient Default or an Event of
Default);
4.2.3 NO EXISTING DEFAULT. No Incipient Default or Event
of Default shall exist or shall result from such Advance or
continuation or conversion; and
4.2.4 SUBSIDIARY. Each Borrower shall have pledged the
stock or other equity interest of each of its Subsidiaries (or the
subject Target in the case of an Acquisition), except, unless otherwise
required by Section 6.17, the Restricted Subsidiaries, to Lender and
shall have delivered, or caused to be delivered, to Lender, to the
extent not previously delivered, the items described in subsections
4.1.3(b) and (c), with respect to each such Subsidiary (or Target, as
applicable). In addition, each such Subsidiary (or the subject Target
in the case of an Acquisition) shall have guaranteed Borrowers'
Obligations and shall have granted to Lender a security interest in all
of such Subsidiary's (or Target's, as applicable) property to secure
such guaranty.
Each Notice of Borrowing and Notice of Continuation/ Conversion submitted by
Borrowers hereunder shall constitute a representation and warranty by Borrowers
hereunder, as of the date of each such notice or application and as of the date
of each Advance or continuation or conversion, as applicable, that the
conditions in Section 4.2 are satisfied.
4.3 CONDITIONS TO CERTAIN LOANS. The right of any Borrower or any
Subsidiary of any Borrower to make an Acquisition, and the obligation of Lender
to make any Advance of the Revolving Loan the proceeds of which are to be used
to finance all or a portion of the purchase
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price of an Acquisition, shall be subject to the satisfaction of all of the
following conditions in a manner, form and substance satisfactory to Lender:
4.3.1 EVIDENCE OF PERFECTED FIRST PRIORITY SECURITY
INTEREST. With respect to the Target acquired or financed with the
proceeds of an Advance, and prior to the funding of such Advance,
Lender shall have been granted a first priority Lien on and security
interest in such Target, and shall have received, without limitation,
the items described in subsection 4.1.3(b), (c) and (d) and Section
6.15, and shall have received evidence of the proper filing in all
required filing offices of duly executed UCC financing statements or
amendments to existing financing statements with respect to such
Target, perfecting the first priority security interest of Lender in
such Property. In the event real property is being acquired in
connection with such Acquisition, Lender shall have received a fully
executed Mortgage, together with an ALTA lender's title insurance
policy issued by a title insurer reasonably satisfactory to Lender in
an amount reasonably satisfactory to Lender insuring that the Mortgage
is a valid and enforceable first priority Lien on the respective
Property, free and clear of all defects, encumbrances and Liens, other
than Permitted Liens. In addition, Lender shall have received then
current surveys, certified to Lender by a licensed surveyor sufficient
to allow the issuer of Lender's title insurance policy to issue such
policy without a survey exception and an environmental site assessment
prepared by a qualified firm reasonably acceptable to Lender.
4.3.2 APPROVAL. Lender shall have approved such
Acquisition in accordance with Section 7.21, if such approval is
necessary.
4.3.3 ADDITIONAL DOCUMENTATION.
(i) Lender shall have received complete
executed or conformed copies of each document,
instrument and agreement executed in connection with
such Acquisition (collectively, the "Acquisition
Documents"), all of which shall be subject to
Lender's review and approval;
(ii) such Acquisition Documents shall be in
full force and effect and no material term or
condition thereof shall have been amended, modified
or waived after the execution thereof (other than
solely to extend the date by which the Acquisition is
required to occur) except with the prior written
consent of Lender;
(iii) none of the parties to any of such
Acquisition Documents shall have failed to perform
any material obligation or covenant required to be
performed or complied with on or before the
applicable Funding Date;
(iv) Lender shall have received a collateral
assignment of the seller's representations,
warranties and indemnities to Borrowers or their
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Subsidiaries under the Acquisition Documents and the
applicable seller parties shall have consented
thereto in writing; and
(v) such other agreements, instruments,
documents, certificates, consents, waivers and
opinions as Lender reasonably may request (including
without limitation, opinions from the sellers'
counsel).
4.3.4 ACQUISITION FUNDING FEE. Borrowers shall have paid
to Lender, on the applicable Funding Date, an acquisition funding fee
(each, an "Acquisition Funding Fee") equal to three percent (3.0%) of
the amount of the Advance requested by Borrowers to consummate such
Acquisition, provided, that, prior to December 15, 1999 Borrowers shall
be required to pay to Lender an Acquisition Funding Fee (or any portion
thereof) only to the extent the aggregate amount of all Acquisition
Funding Fees received by Lender in respect of Acquisitions which shall
have occurred during the period commencing on the Closing Date and
ending on December 15, 1999, which shall have been payable but for the
operation of this proviso, exceeds $540,000.
4.4 ADDITIONAL CONDITIONS TO THE DISBURSEMENT OF THE PROCEEDS OF
THE TERM LOAN A. The obligation of Lender to disburse any proceeds or advances
of the Term Loan A is subject to the satisfaction of the following additional
conditions precedent on the applicable Real Estate Funding Date, each in a
manner, form and substance satisfactory to Lender:
4.4.1 REAL ESTATE ACQUISITION. The Real Estate Acquisition
shall have closed in the manner contemplated by the Real Estate
Acquisition Documents and shall otherwise be in form and substance
satisfactory to Lender, and none of the parties to any of such
Acquisition Documents shall have failed to perform any material
obligation or covenant required to be performed or complied with by
such Person.
4.4.2 DELIVERY OF DOCUMENTS. The following shall have been
delivered to Lender, each duly authorized and executed, where
applicable:
(a) a Mortgage covering the Real Estate that is
the subject of the Real Estate Acquisition;
(b) copies of the resolutions adopted by the
board of directors of each Borrower authorizing the execution
and delivery by such Borrower of the Real Estate Acquisition
Documents and the Loan Documents executed and delivered in
connection therewith to which such Person is a party and the
consummation of the transactions contemplated thereby,
certified as of the Real Estate Closing Date by the corporate
secretary of each such Person;
(c) signature and incumbency certificates of the
officers of each Borrower and each Subsidiary of each
Borrower;
(d) certified copies or executed originals of
the Real Estate Acquisition Documents;
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(e) a collateral assignment of the seller's
representations, warranties and indemnities to Borrowers under
the Real Estate Acquisition Documents and the applicable
seller parties shall have consented thereto in writing; and
(f) such other agreements, instruments,
documents, certificates, consents, waivers and opinions as
Lender reasonably may request (including without limitation,
opinions from the sellers' counsel).
4.4.3 COMPLIANCE WITH CERTAIN PROVISIONS OF THIS LOAN
AGREEMENT. Borrowers shall have complied with subsections 2.1.1,
4.1.11 and 4.1.14 and Sections 6.8 and 6.9 and, if necessary, Section
6.15.
4.4.4 OPINIONS OF COUNSEL. Lender shall have received an
opinion dated the Real Estate Funding Date from Morris, Manning &
Martin, counsel to Borrowers and their Subsidiaries, and such other
opinions as Lender may request.
4.4.5 APPRAISALS AND PERCENTAGE OF ACQUISITION PRICE.
Lender shall have received an appraisal of the Real Estate that is the
subject of the Real Estate Acquisition conducted by a firm acceptable
to Lender, and the Term Loan A shall be in an aggregate amount
$8,705,000.
4.4.6 MISCELLANEOUS. Lender shall have received and
approved (i) a property condition assessment on such Real Estate
performed by Lender, (ii) copies of all existing leases and assignments
thereof, (iii) evidence of Borrowers' compliance with all applicable
zoning laws in respect of such Real Estate and (iv) prior to any
disbursement of any advance the proceeds of which are to be used by
Borrowers for improvements or build-outs of the applicable Real Estate,
all build-out and improvement plans for such Real Estate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant to Lender as follows (after giving
effect to the Related Transactions):
5.1 EXISTENCE AND POWER. Each Borrower and each Subsidiary of
each Borrower is a corporation duly formed, validly existing and in good
standing under the laws of the state (or country) of its incorporation, and each
Borrower and each Subsidiary of each Borrower has all requisite power and
authority to own its Property and to carry on its business as now conducted and
as proposed to be conducted following the Closing Date, and is in good standing
and authorized to do business in each jurisdiction in which the failure so to
qualify would be a Material Adverse Effect.
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5.2 AUTHORITY. Each Borrower and each Subsidiary of each Borrower
has full power and authority to enter into, execute, deliver and carry out the
terms of the Loan Documents and the Related Transaction Documents to which it is
a party and to incur the obligations provided for therein, all of which have
been duly authorized by all proper and necessary action and are not prohibited
by the organizational instruments of such Person.
5.3 CAPITAL STOCK AND RELATED MATTERS.
5.3.1 CAPITAL STOCK. There is set forth in EXHIBIT 5.3.1 a
complete description of the Subsidiary Equity Interests, all of which
are validly issued, fully paid and non-assessable, and have been issued
and sold in compliance with all applicable federal and state laws,
rules and regulations, including, without limitation, all so-called
"Blue-Sky" laws. The Subsidiary Equity Interests is owned beneficially
and of record by the Persons set forth on EXHIBIT 5.3.1 and in the
amounts therein described, free and clear of all Liens except the
Security Interests. Borrowers represent and warrant to Lender that no
shares of preferred stock of any class of InfoCure Corporation is
issued and outstanding on the date hereof.
5.3.2 RESTRICTIONS. Neither any Borrower nor any
Subsidiary of any Borrower (i) is a party to or has knowledge of any
agreements restricting the transfer of Subsidiary Equity Interests,
except the Loan Documents, (ii) has issued any rights which can be
convertible into or exchangeable or exercisable for any of Subsidiary
Equity Interests, or any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, any of Subsidiary Equity Interests
or any securities convertible into or exchangeable or exercisable for
any of Subsidiary Equity Interests and (iii) is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of Subsidiary Equity Interests or any convertible rights
or options with respect thereto.
5.4 BINDING AGREEMENTS. This Loan Agreement, the other Loan
Documents and the Related Transaction Documents, when executed and delivered,
will constitute the valid and legally binding obligations of each Borrower and
each Subsidiary of each Borrower to the extent such Person is a party thereto,
enforceable against such Person in accordance with their respective terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and (ii)
equitable principles (whether or not any action to enforce such document is
brought at law or in equity).
5.5 BUSINESS AND PROPERTY OF BORROWER.
5.5.1 BUSINESS AND PROPERTY. Each Borrower and each
Subsidiary of each Borrower is the owner of all Property and the holder
of all Leases, Licenses and Operating Agreements necessary to conduct
its business as now conducted. Neither any Borrower nor any Subsidiary
of any Borrower engages or proposes to engage in any business or
activity other than as set forth in EXHIBIT 5.5.1.
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5.5.2 LICENSES. There is set forth in EXHIBIT 5.5.2 a
description of all Licenses which have been issued or assigned to
Borrowers and their respective Subsidiaries. All of such Licenses are
in full force and effect and have been duly issued in the name of, or
validly assigned to, the applicable Borrower or Subsidiary of a
Borrower, no default or breach exists thereunder and each Borrower and
each Subsidiary of each Borrower has full power and authority
thereunder to conduct its business.
5.5.3 OPERATING AGREEMENTS. There is set forth in EXHIBIT
5.5.3 a description of all material Operating Agreements with respect
to the businesses of Borrowers and their Subsidiaries. All of Operating
Agreements are in full force and effect and no event has occurred which
could result in the cancellation or termination of any such Operating
Agreement or the imposition thereunder of any liability upon any
Borrower or any Subsidiary of any Borrower which could have a Material
Adverse Effect.
5.5.4 FACILITY SITES. There is set forth in EXHIBIT 5.5.4
the location of the chief executive office of each Borrower and each
Subsidiary of each Borrower and all other locations of such Persons'
Property.
5.5.5 LEASES. There is set forth in EXHIBIT 5.5.5 a list
of all Leases, together with a complete and accurate address of each
parcel of Leasehold Property. Each Lease is in full force and effect,
there has been no material default in the performance of any of its
terms or conditions by any party thereto, and no claims of default have
been asserted with respect thereto.
5.5.6 REAL ESTATE. There is set forth in EXHIBIT 5.5.6 a
complete and accurate address and legal description of each parcel of
Real Estate. The present and contemplated use of the Leasehold Property
and the Real Estate is in compliance with all applicable zoning
ordinances and regulations and other laws and regulations, the
violation of which could have a Material Adverse Effect.
5.5.7 OPERATION AND MAINTENANCE OF EQUIPMENT. Neither any
Borrower nor any Subsidiary of any Borrower owning or operating any
equipment necessary for the operation of its business has used,
operated or maintained the same in a manner which now or hereafter
could result in the cancellation or termination of the right of such
Person to use or make use of the same or which could result in any
material liability of such Person for damages in connection therewith.
All of the equipment and other tangible personal property owned by each
Borrower and each Subsidiary of each Borrower is, in all material
respects, in good operating condition and repair and has been used,
operated and maintained in substantial compliance with all applicable
laws, rules and regulations.
5.5.8 LICENSE AGREEMENTS. There is set forth in EXHIBIT
5.5.8 a description of all material License Agreements with respect to
the businesses of Borrowers and their respective Subsidiaries. All such
License Agreements are in full force and effect and no event has
occurred which could result in the cancellation or termination of any
such License Agreement or the imposition thereunder of any liability
upon any Borrower or any Subsidiary of any Borrower which could have a
Material Adverse Effect.
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5.6 TITLE TO PROPERTY; LIENS. Each Borrower and each Subsidiary
of each Borrower has (i) good and marketable title to all of its Property,
except (A) any License which cannot be transferred without the consent of a
Governmental Body and (B) the portion thereof consisting of a leasehold estate
and (ii) a valid leasehold estate in each portion of its Property which consists
of a leasehold estate. All of such Property is free and clear of all Liens,
except Permitted Liens. Upon the proper filing with the appropriate Governmental
Bodies of the Mortgages and appropriate Uniform Commercial Code financing
statements, the applicable Loan Documents will create valid and perfected Liens
in the Property described therein, subject only to Permitted Prior Liens.
5.7 PROJECTIONS AND FINANCIAL STATEMENTS.
5.7.1 FINANCIAL STATEMENTS. Borrowers have delivered to
Lender the financial statements described in EXHIBIT 5.7.1 pertaining
to the operations of Borrowers and their respective Subsidiaries. Such
financial statements present fairly in all material respects the
results of operations of the business of each Borrower and its
Subsidiaries for the periods covered thereby and the financial
condition of such Borrower and its Subsidiaries as of the dates
indicated therein. All of such financial statements have been prepared
in conformity with GAAP, subject to normal year-end adjustments and the
absence of footnotes. Since March 31, 1999, there has been no change
which has had or could have a Material Adverse Effect. Borrowers also
have delivered to Lender a pro-forma balance sheet of each Borrower and
its Subsidiaries as of the Closing Date. Such pro-forma balance sheets,
which assume the consummation of the transactions contemplated by the
Documents, present fairly in all material respects the anticipated
financial condition of each Borrower and its Subsidiaries as of the
Closing Date.
5.7.2 PROJECTIONS. Borrowers have delivered to Lender the
projections described in EXHIBIT 5.7.2 of the future operations of each
Borrower and its Subsidiaries. Such projections represent the best,
good faith estimates of Borrowers as of the Closing Date of the future
financial performance of Borrowers and their Subsidiaries.
5.8 LITIGATION. There is set forth in EXHIBIT 5.8 a description
of all actions and suits, arbitration proceedings and claims pending or, to the
best knowledge of Borrowers, threatened against any Borrower or any Subsidiary
of any Borrower or maintained by any Borrower or any Subsidiary of any Borrower
at law or in equity or before any Governmental Body. None of the matters set
forth in such EXHIBIT 5.8, if adversely determined, could have a Material
Adverse Effect.
5.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING
AGREEMENTS. Except as otherwise disclosed herein, neither any Borrower nor any
Subsidiary of any Borrower is in default under any agreement to which such
Person is a party or by which such Person or any of the Property of such Person
is bound, the effect of which default could have a Material Adverse Effect. No
authorization, consent, approval or other action by, and no notice to or filing
with, any Governmental Body or any other Person which has not already been
obtained, taken or filed, as applicable, is required (i) for the due execution,
delivery or performance by any Borrower or
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any Subsidiary of any Borrower of any of the Loan Documents and the Related
Transaction Documents to which such Person is a party or (ii) as a condition to
the validity or enforceability of any of the Loan Documents or Related
Transaction Documents to which any Borrower or any Subsidiary of any Borrower is
a party or any of the transactions contemplated thereby or the priority of the
Security Interests, except for certain filings to establish and perfect the
Security Interests. No provision of any mortgage, indenture, contract,
agreement, statute, rule, regulation, judgment, decree or order binding on any
Borrower or any Subsidiary of any Borrower or affecting the Property of any
Borrower or any Subsidiary of any Borrower conflicts with, or requires any
consent which has not already been obtained under, or would in any way prevent
the execution, delivery or performance of the terms of any of the Loan Documents
or Related Transaction Documents or affect the validity or priority of the
Security Interests. The execution, delivery or performance of the terms of the
Loan Documents and the Related Transaction Documents will not constitute a
default under, or result in the creation or imposition of, or obligation to
create, any Lien upon the Property of any Borrower or any Subsidiary of any
Borrower pursuant to the terms of any such mortgage, indenture, contract or
agreement, other than the Loan Documents.
5.10 TAXES. Each Borrower and each Subsidiary of each Borrower has
filed all tax returns required to be filed, and has paid, or made adequate
provision for the payment of, all taxes shown to be due and payable on such
returns or in any assessments made against any such Person, and no tax Liens
have been filed and no claims are being asserted in respect of such taxes which
are required by GAAP to be reflected in the financial statements of any Borrower
or any Subsidiary of any Borrower and are not so reflected therein. The charges,
accruals and reserves on the books of each Borrower and each Subsidiary of each
Borrower with respect to all federal, state, local and other taxes are
considered by the management of each such Person to be adequate, and there is no
unpaid assessment which is or might be due and payable by any such Person or
create a Lien against any such Person's Property, except such assessments as are
being contested in good faith and by appropriate proceedings diligently
conducted, and for which adequate reserves have been set aside in accordance
with GAAP. None of the tax returns of any Borrower or any Subsidiary of any
Borrower are under audit.
5.11 COMPLIANCE WITH APPLICABLE LAWS. Neither any Borrower nor any
Subsidiary of any Borrower is in default in respect of any judgment, order,
writ, injunction, decree or decision of any Governmental Body, which default
could have a Material Adverse Effect. Except as otherwise provided herein, each
Borrower and each Subsidiary of each Borrower is in compliance in all material
respects with all applicable laws, statutes and regulations, including, without
limitation, health-care related laws (including anti-fee splitting laws,
corporate practice of medicine laws and fraud and abuse laws), all Environmental
Laws, ERISA, ADA and all laws and regulations relating to unfair labor
practices, equal employment opportunity and employee safety, of all Governmental
Bodies, a violation of which could have a Material Adverse Effect. No
condemnation, eminent domain or expropriation has been commenced or, to the best
knowledge of Borrowers, threatened against the Property of any Borrower or any
Subsidiary of any Borrower.
5.12 PATENTS, TRADEMARKS, FRANCHISES, AGREEMENTS. There is set
forth on EXHIBIT 5.12 a description of all patents, patent applications,
trademarks, trademark applications,
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copyrights and copyright applications owned or used by each Borrower and each
Subsidiary of each Borrower. Each Borrower and each Subsidiary of each Borrower
owns, possesses or has the right to use all patents, trademarks, service marks,
trade names, copyrights, franchises and rights with respect thereto, necessary
for the conduct of its business, without any known conflict with the rights of
others and, in each case, free of any Liens.
5.13 REGULATORY MATTERS. Each Borrower and each Subsidiary of each
Borrower (i) has duly and timely filed all reports, statements of account and
other filings which are required to be filed by such Person under any applicable
law, rule or regulation of any Governmental Body, the non-filing of which could
have a Material Adverse Effect, and (ii) is in compliance with all such laws,
rules and regulations, the noncompliance with which could have a Material
Adverse Effect.
5.14 ENVIRONMENTAL MATTERS. To the best of Borrowers' knowledge,
each Borrower and each Subsidiary of each Borrower is in compliance with all
applicable Environmental Laws and no portion of the Real Estate or Leasehold
Property has been used as a land fill. To the best of Borrowers' knowledge there
currently are not any known Hazardous Materials generated, manufactured,
released, stored, buried or deposited over, beneath, in or on (or used in the
construction and/or renovation of) the Real Estate or Leasehold Property in
violation of applicable Environmental Laws.
5.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS. Neither any
Borrower nor any Affiliate of any Borrower is:
5.15.1 INVESTMENT BORROWER ACT. An "investment company," or
a company "controlled" by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
5.15.2 HOLDING BORROWER ACT. A "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company,"
as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
5.15.3 FOREIGN OR ENEMY STATUS. (i) An "enemy" or an "ally
of an enemy" within the meaning of Section 2 of the Trading with the
Enemy Act, (ii) a "national" of a foreign country designated in
Executive Order No. 8389, as amended, or of any "designated enemy
country" as defined in Executive Order No. 9095, as amended, of the
President of the United States of America, in each case within the
meaning of such Executive Orders, as amended, or of any regulation
issued thereunder, (iii) a "national of any designated foreign country"
within the meaning of the Foreign Assets Control Regulations or of the
Cuban Assets Control Regulations of the United States of America (Code
of Federal Regulations, Title 31, Chapter V, Part 515, Subpart B, as
amended), or (iv) an alien or a representative of any alien or foreign
government within the meaning of Section 310 of Title 47 of the United
States Code.
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5.15.4 REGULATIONS AS TO BORROWING. Subject to any statute or
regulation which regulates the incurrence of any Indebtedness for
Borrowed Money, including, without limitation, statutes or regulations
relative to common or interstate carriers or to the sale of
electricity, gas, steam, water, telephone, telegraph or other public
utility services.
5.16 MARGIN REGULATIONS. None of the transactions contemplated by
this Loan Agreement, any of the other Loan Documents or any of the Related
Transaction Documents, including the use of the proceeds of the Loans, will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including, without
limitation, Regulations T, U and X, and neither any Borrower nor any Subsidiary
of any Borrower owns or intend to carry or purchase any "margin security" within
the meaning of such Regulation U.
5.17 OTHER INDEBTEDNESS. After giving effect to the Closing and
the Related Transactions, on the Closing Date neither any Borrower nor any
Subsidiary of any Borrower shall have any Indebtedness for Borrowed Money,
except (i) Borrowers' Obligations, (ii) Permitted Senior Indebtedness and (iii)
Indebtedness for Borrowed Money otherwise permitted under Section 7.1.
5.18 NO MISREPRESENTATION. To the best of Borrowers' knowledge
neither this Loan Agreement nor any other Loan Document, certificate,
information or report furnished or to be furnished by or on behalf of any
Borrower or any Subsidiary of any Borrower to Lender in connection with any of
the transactions contemplated hereby or thereby, contains or will contain a
misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements contained herein or
therein, taken as a whole, not misleading in the light of the circumstances
under which such statements were made. There is no fact, other than information
known to the public generally, known to or reasonably foreseen by Borrowers
after diligent inquiry, that could have a Material Adverse Effect that has not
expressly been disclosed to Lender in writing.
5.19 EMPLOYEE BENEFIT PLANS.
5.19.1 NO OTHER PLANS. Neither any Borrower nor any ERISA
Affiliate of any Borrower maintains or contributes to, or has any
obligation under, any Employee Benefit Plan other than those identified
on EXHIBIT 5.19.1. Borrowers have provided Lender accurate and complete
copies of all material contracts, agreements and documents described on
EXHIBIT 5.19.1.
5.19.2 ERISA AND CODE COMPLIANCE AND LIABILITY. Each
Borrower and each ERISA Affiliate of each Borrower is in compliance
with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee
Benefit Plans except where failure to comply would not result in a
material liability to any Borrower or such other Person and except for
any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. Each
Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service
to be so
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qualified, and each trust related to such plan has been determined to
be exempt under Section 401(a) of the Code. No material liability has
been incurred by any Borrower or any ERISA Affiliate of any Borrower
which remains unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan or any Multiemployer Plan.
5.19.3 FUNDING. No Pension Plan has been terminated, nor
has any accumulated funding deficiency (as defined in Section 412 of
the Code) been insured (without regard to any waiver granted under
Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested with respect to any Pension
Plan, nor has any Borrower or any ERISA Affiliate of any Borrower
failed to make any contributions or to pay any amounts due and owing as
required by Section 412 of the Code, Section 302 of ERISA or the terms
of any Pension Plan prior to the due dates of such contributions under
Section 412 of the Code or Section 302 of ERISA, nor has there been any
event requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or
4068 of ERISA with respect to any Pension Plan.
5.19.4 PROHIBITED TRANSACTIONS AND PAYMENTS. Neither any
Borrower nor any ERISA Affiliate of any Borrower has: (i) engaged in a
nonexempt "prohibited transaction" as such term is defined in Section
406 of ERISA or Section 4975 of the Code; (ii) incurred any liability
to the PBGC which remains outstanding other than the payment of
premiums and there are no premium payments which are due and unpaid;
(iii) failed to make a required contribution or payment to a
Multiemployer Plan; or (iv) failed to make a required installment or
other required payment under Section 412 of the Code.
5.19.5 NO TERMINATION EVENT. No Termination Event has
occurred or is reasonably expected to occur.
5.19.6 ERISA LITIGATION. No material proceeding, claim,
lawsuit and/or investigation is existing or, to the best knowledge of
Borrowers, threatened concerning or involving any (i) employee welfare
benefit plan (as defined in Section 3(1) of ERISA) currently maintained
or contributed to by any Borrower or any of ERISA Affiliate of any
Borrower, (ii) Pension Plan or (iii) Multiemployer Plan.
5.20 EMPLOYEE MATTERS.
5.20.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES. (i)
None of the employees of any Borrower or any Subsidiary of any Borrower
is subject to any collective bargaining agreement, (ii) except as
described in EXHIBIT 5.20.1, no petition for certification or union
election is pending with respect to the employees of any Borrower or
any Subsidiary of any Borrower and no union or collective bargaining
unit has sought such certification or recognition with respect to the
employees of any Borrower or any Subsidiary of any Borrower and (iii)
there are no strikes, slowdowns, work stoppages, unfair labor practice
complaints, grievances, arbitration proceedings or controversies
pending or, to the best knowledge of Borrowers, threatened against any
Borrower or any Subsidiary of any Borrower by any of such Person's
employees, other than employee
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grievances or controversies arising in the ordinary course of business
that could not in the aggregate have a Material Adverse Effect.
5.20.2 CLAIMS RELATING TO EMPLOYMENT. Neither any Borrower
nor, to Borrowers' best knowledge, any shareholder or employee of any
Borrower, is subject to any employment agreement or non-competition
agreement with any former employer or any other Person which agreement
could have a Material Adverse Effect due to (i) any information which
any Borrower would be prohibited from using under the terms of such
agreement or (ii) any legal considerations relating to unfair
competition, trade secrets or proprietary information.
5.21 BURDENSOME OBLIGATIONS. After giving effect to the
transactions contemplated by the Loan Documents and the Related Transaction
Documents, (i) neither any Borrower nor any Subsidiary of any Borrower (A) will
be a party to or be bound by any franchise, agreement, deed, lease or other
instrument, or be subject to any restriction, which is so unusual or burdensome
so as to cause, in the foreseeable future, a Material Adverse Effect and (B)
intends to incur, or believes that it will incur, debts beyond its ability to
pay such debts as they become due, and (ii) each Borrower and each Subsidiary of
each Borrower (A) owns and will own Property, the fair saleable value of which
is (I) greater than the total amount of its liabilities (including contingent
liabilities) and (II) greater than the amount that will be required to pay the
probable liabilities of its then existing debts as they become absolute and
matured, and (B) has and will have capital that is not unreasonably small in
relation to its business as presently conducted and as proposed to be conducted.
Borrowers do not presently anticipate that future expenditures needed to meet
the provisions of federal or state statutes, orders, rules or regulations will
be so burdensome so as to have a Material Adverse Effect.
5.22 INSURANCE. The Property of each Borrower and each Subsidiary
of each Borrower is insured with financially sound and reputable insurance
companies which are not Affiliates of any Borrower, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar Property in locales where such
Borrower or such Subsidiary operates.
5.23 SUBSIDIARIES. As of the Closing Date, (i) InfoCure
Corporation has no Subsidiaries other than InfoCure Systems, Thoroughbred, DISC,
Medical Software Management, StrategiCare and the Restricted Foreign
Subsidiaries and (ii) InfoCure Systems has no Subsidiaries other than DISC,
StrategiCare and Medical Software Management.
5.24 YEAR 2000. Each Borrower and each Subsidiary of each Borrower
has made an assessment of the microchip and computer-based systems and the
software used in its and its Subsidiaries' business and based upon such
assessment believes that it will be "Year 2000 Compliant" by October 1, 1999.
For purposes of this paragraph, "Year 2000 Compliant" means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business operations or financial condition of, any Borrower or any of its
Subsidiaries are able to interpret, store, transmit, receive and manipulate date
on and involving all calendar dates correctly and without causing any abnormal
ending scenarios in relation to dates in and after the year 2000.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Until all of Borrowers' Obligations are paid and performed in full and
the Commitments shall have terminated, each Borrower agrees that it shall, and
shall cause its Subsidiaries to:
6.1 LEGAL EXISTENCE; GOOD STANDING. Maintain its existence and
its good standing in the jurisdiction of its formation and its qualification in
each jurisdiction in which the failure so to qualify could have a Material
Adverse Effect.
6.2 INSPECTION. Permit representatives of Lender at any time to
(i) visit its offices, (ii) examine its books and records and accountants'
reports relating thereto, (iii) make copies or extracts therefrom, (iv) discuss
its affairs with its employees, (v) examine and inspect its Property and (vi)
meet and discuss its affairs with its accountants, and such accountants, as a
condition to their retention by Borrowers, are hereby irrevocably authorized by
Borrowers to fully discuss and disclose all such affairs with Lender.
6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a system
of accounting in accordance with GAAP and furnish to Lender:
6.3.1 INTENTIONALLY OMITTED.
6.3.2 QUARTERLY STATEMENTS; COMPLIANCE CERTIFICATE. As
soon as available and in any event within forty-five (45) days after
the close of each quarter of each year:
(a) the consolidated balance sheet of Borrowers
and their Subsidiaries and the consolidating balance sheet of
each Borrower and each Subsidiary of each Borrower as of the
end of such quarter, and
(b) the consolidated statements of operations of
Borrowers and their Subsidiaries, the consolidated statements
of cash flows of Borrowers and their Subsidiaries and the
consolidating statements of operations and cash flows for each
Borrower and each Subsidiary of each Borrower for such quarter
and for the period from the beginning of the then current year
to the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the
corresponding period in the preceding year, and showing a
comparison with the budget for such period,
all in reasonable detail, containing such information as Lender
reasonably may require, and certified by the Chief Financial Officer as
complete and correct, subject to normal year-end adjustments. Each such
financial statement shall be accompanied by a Compliance Certificate.
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6.3.3 ANNUAL STATEMENTS. As soon as available and in any
event within ninety (90) days after the close of each Fiscal Year:
(a) the audited consolidated balance sheet of
Borrowers and their Subsidiaries as of the end of such Fiscal
Year, the audited consolidated statements of operations, cash
flows and stockholders' equity of Borrowers and their
Subsidiaries (collectively, the "Basic Financial Statements"),
the audited consolidating balance sheet of each Borrower and
each Subsidiary of each Borrower as of the end of such Fiscal
Year, the audited consolidating statements of operations, cash
flows and stockholders' equity for each Borrower and each
Subsidiary of each Borrower for such Fiscal Year, the audited
statements of the consolidated and consolidating cash flows
for Borrowers and each Subsidiary of each Borrower for such
Fiscal Year, setting forth in each case in comparative form
the corresponding figures for the preceding Fiscal Year,
(b) an opinion of Borrower's accountants which
shall accompany the Basic Financial Statements, which opinion
shall be unqualified as to going concern and scope of audit,
stating that (i) the examination by the accountants in
connection with such Basic Financial Statements has been made
in accordance with generally accepted auditing standards, (ii)
such Basic Financial Statements have been prepared in
conformity with GAAP and in a manner consistent with prior
periods, and (iii) such Basic Financial Statements fairly
present in all material respects the financial position and
results of operations of the Borrowers and their Subsidiaries,
and
(c) a letter from the accountants stating that
the statements of cash flows were computed in accordance with
the requirements of this Loan Agreement.
6.3.4 INTENTIONALLY OMITTED.
6.3.5 AUDIT REPORTS. Promptly upon receipt thereof, a copy
of each report, other than the reports referred to in subsection 6.3.3,
including any so-called "management letter" or similar report,
submitted to any Borrower or any Subsidiary of any Borrower by the
accountants in connection with any annual, interim or special audit
made by the accountants of the books of such Borrower or such
Subsidiary.
6.3.6 NOTICE OF DEFAULTS; LOSS. Prompt written notice if:
(i) any Indebtedness of any Borrower or any Subsidiary of any Borrower
in excess of $100,000 is declared or shall become due and payable prior
to its declared or stated maturity, or called and not paid when due,
(ii) an event has occurred that enables the holder of any note, or
other evidence of such Indebtedness, certificate or security evidencing
any such Indebtedness to declare such Indebtedness due and payable
prior to its stated maturity, (iii) there shall occur and be continuing
an Incipient Default or Event of Default, accompanied by a statement
setting forth what action the Borrower proposes to take in respect
thereof, or
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(iv) any event shall occur which has or could have a Material Adverse
Effect, including the amount or the estimated amount of any loss or
depreciation or adverse effect.
6.3.7 NOTICE OF SUITS, ADVERSE EVENTS. Prompt written
notice of: (i) any citation, summons, subpoena, order to show cause or
other order naming any Borrower or any Subsidiary of any Borrower a
party to any proceeding before any Governmental Body which could have a
Material Adverse Effect and include with such notice a copy of such
citation, summons, subpoena, order to show cause or other order, (ii)
any lapse or other termination of any license, permit, franchise,
agreement or other authorization issued to any Borrower or any
Subsidiary of any Borrower by any Governmental Body or any other Person
that is material to the operation of the Business of such Borrower or
such Subsidiary, (iii) any refusal by any Governmental Body or any
other Person to renew or extend any such license, permit, franchise,
agreement or other authorization and (iv) any dispute between any
Borrower and any Governmental Body or any other Person, which lapse,
termination, refusal or dispute referred to in clauses (ii) and (iii)
above or in this clause (iv) could have a Material Adverse Effect.
6.3.8 REPORTS TO SHAREHOLDERS, CREDITORS AND GOVERNMENTAL
BODIES.
(a) Promptly upon becoming available, copies of
all financial statements, reports, notices and other
statements sent or made available generally by any Borrower to
its shareholders or members, of all regular and periodic
reports and all registration statements and prospectuses filed
by such Borrower with any securities exchange or with the
Securities and Exchange Commission or any Governmental Body
succeeding to any of its functions, and of all statements
generally made available by any Borrower or any Subsidiary of
any Borrower or others concerning material developments in the
business of such Borrower or such Subsidiary.
(b) Promptly upon becoming available, copies of
any periodic or special reports filed by any Borrower or any
Subsidiary of any Borrower with any Governmental Body or
Person, if such reports indicate any material change in the
business, operations, affairs or condition of such Borrower,
or if copies thereof are requested by Lender, and copies of
any material notices and other communications from any
Governmental Body or Person which specifically relate to any
Borrower or any Subsidiary of any Borrower.
6.3.9 ERISA NOTICES AND REQUESTS.
(a) With reasonable promptness, and in any event
within thirty (30) days after occurrence of any of the
following such Borrower will give notice of and/or deliver to
Lender copies of: (i) the establishment of any new material
Employee Benefit Plan, Pension Plan or Multiemployer Plan;
(ii) the commencement of contributions to any Employee Benefit
Plan, Pension Plan or Multiemployer Plan to which any Borrower
or any ERISA Affiliate of any Borrower was not previously
contributing or any increase in the benefits of any
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existing Employee Benefit Plan, Pension Plan or Multiemployer
Plan; (iii) each funding waiver request filed with respect to
any Employee Benefit Plan and all communications received or
sent by any Borrower or any ERISA Affiliate of any Borrower
with respect to such request; and (iv) the failure of any
Borrower or any ERISA Affiliate of any Borrower to make a
required installment or payment under Section 302 of ERISA or
Section 412 of the Code by the due date.
(b) Promptly and in any event within ten (10)
days of becoming aware of the occurrence of or forthcoming
occurrence of any (i) Termination Event or (ii) "prohibited
transaction", as such term is defined in Section 406 of ERISA
or Section 4975 of the Code, in connection with any Pension
Plan or any trust created thereunder Borrowers shall deliver
to Lender a notice specifying the nature thereof, what action
Borrowers or their ERISA Affiliate has taken, is taking or
proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto.
(c) With reasonable promptness but in any event
within ten (10) days after the occurrence of any of the
following, Borrowers shall deliver to Lender copies of: (i)
any favorable or unfavorable determination letter from the
Internal Revenue Service regarding the qualification of an
Employee Benefit Plan under Section 401(a) of the Code; (ii)
all notices received by any Borrower or any ERISA Affiliate of
any Borrower of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension
Plan; (iii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by any Borrower or any
ERISA Affiliate of any Borrower with the Internal Revenue
Service with respect to each Pension Plan; and (iv) all
notices received by any Borrower or any ERISA Affiliate of any
Borrower from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA. Borrowers promptly will notify Lender
in writing in the event any Borrower or any ERISA Affiliate of
any Borrower files or intends to file a notice of intent to
terminate any Pension Plan under a distress termination within
the meaning of Section 4041(c) of ERISA.
6.3.10 OTHER INFORMATION.
(a) Prompt notice of any change in the location
of any Property of any Borrower or any Subsidiary of any
Borrower which is material to or necessary for the continued
operation of such Person's business, any change in the name of
any Borrower or any Subsidiary of any Borrower, any sale or
purchase of Property outside the regular course of business of
any Borrower or any Subsidiary of any Borrower, and any change
in the business or financial affairs of any Borrower or any
Subsidiary of any Borrower, which change could have a Material
Adverse Effect.
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(b) Promptly upon request therefor, such other
information and reports relating to the past, present or
future financial condition, operations, plans and projections
of Borrowers and their Subsidiaries as Lender reasonably may
request from time to time.
6.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS. Timely file
all material reports, applications, documents, instruments and information
required to be filed pursuant to all rules, regulations or requests of any
Governmental Body or other Person having jurisdiction over the operation of the
business of Borrowers and their Subsidiaries, including, but not limited to,
such of the Loan Documents as are required to be filed with any such
Governmental Body or other Person pursuant to applicable rules and regulations
promulgated by such Governmental Body or other Person.
6.5 MAINTENANCE OF LICENSES, FRANCHISES AND OTHER AGREEMENTS.
Maintain in full force and effect at all times, and apply in a timely manner for
renewal of, all Licenses, trademarks, trade names, License Agreements and
Operating Agreements necessary for the operation of business of any Borrower or
any Subsidiary of any Borrower, the loss of any of which could have a Material
Adverse Effect.
6.6 INSURANCE.
6.6.1 MAINTENANCE OF INSURANCE. Maintain in full force and
effect at all times such property, casualty, business interruption and
other insurance required by Lender, all of which shall be written by
insurers, contain terms and be in amounts and forms satisfactory to
Lender, including public liability insurance, flood insurance required
pursuant to this Loan Agreement, workmen's compensation, builders'
risk, fire and extended coverage and flood insurance, with a standard
mortgagee clause endorsed thereon in favor of Lender which shall
provide, among other things, that the policies may not be canceled
without thirty (30) days' prior notice to Lender. Deliver to Lender,
from time to time as Lender may reasonably request, evidence of
compliance with this subsection 6.6.1.
6.6.2 PROCEEDS. Each Borrower hereby directs all insurers
under all policies of insurance to pay all proceeds payable thereunder
directly to Lender and each Borrower hereby authorizes Lender to
collect all such proceeds subject to Borrowers' rights as described
below in this subsection 6.6.2 to receive certain proceeds. Each
Borrower irrevocably appoints Lender (and all officers, employees or
agents designated by Lender) as such Borrower's true and lawful
attorney and agent in fact for the purpose of and with power to make,
settle and adjust claims under such policies of insurance, endorse the
name of such Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, and to make all
determinations and decisions with respect to such policies of
insurance. Each Borrower acknowledges that such appointment as attorney
and agent in fact is a power, coupled with an interest, and therefore
is irrevocable. Borrowers shall notify Lender promptly of any loss,
damage, destruction or other casualty to the Collateral in excess of
$20,000. If the proceeds of a casualty do not exceed $50,000 and no
Event of Default exists such proceeds shall be
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paid to the applicable Borrower or Subsidiary of any Borrower and
applied to repair or replace the Property which is the subject of such
casualty. If the proceeds of a casualty exceed $50,000 or an Event of
Default exists, at the option of Lender, such proceeds shall be applied
to the (i) payment of Borrowers' Obligations in accordance with Section
8.4 or (ii) repair or replacement of the Collateral. In the event the
proceeds are to be applied to the repair or replacement of Collateral,
the Collateral shall be repaired or replaced so as to be of at least
equal value and substantially the same character as prior to such loss,
damage, destruction or other casualty.
6.7 FUTURE LEASES. Deliver to Lender, concurrently with the
execution by any Borrower or any Subsidiary of any Borrower, as lessee, of any
Lease, an executed copy thereof and a Landlord's Consent to the assignment of
such Lease pursuant to an Assignment of Leases.
6.8 FUTURE ACQUISITIONS OF REAL ESTATE. Deliver to Lender
concurrently with the (i) execution by any Borrower or any Subsidiary of any
Borrower of any contract relating to the purchase by such Person of real estate,
an executed copy of such contract and (ii) closing of the purchase of such real
estate (A) a first mortgage or deed of trust in favor of Lender on such real
estate, in form and substance satisfactory to Lender, (B) a lender's policy of
title insurance, in such form and amount and containing such endorsements as
shall be satisfactory to Lender (C) an ALTA/ACSM survey of such real estate and
(D) such other documents and assurances with respect to such real estate as
Lender may require.
6.9 ENVIRONMENTAL MATTERS. At all times comply with, and be
responsible for, its obligations under all Environmental Laws applicable to the
Real Estate, the Leasehold Property and any other Property owned by any Borrower
or any Subsidiary of any Borrower or used by any such Person in the operation of
its business. Borrowers shall at their sole cost and expense (i) comply, and
cause their Subsidiaries to comply, in all respects with (A) any notice of any
violation or administrative or judicial complaint or order having been filed
against any such Person, any portion of any Leasehold Property or any other
Property owned by such Person or used by such Person in the operation of its
business alleging violations of any law, ordinance and/or regulation requiring
such Person to take any action in connection with the release, transportation
and/or clean-up of any Hazardous Materials, and (B) any notice from any
Governmental Body or any other Person alleging that such Person is or may be
liable for costs associated with a response or clean-up of any Hazardous
Materials or any damages resulting from such release or transportation, or (ii)
diligently contest, and cause their Subsidiaries to diligently contest, in good
faith by appropriate proceedings any demands set forth in such notices, provided
(A) reserves in an amount satisfactory to Lender to pay the costs associated
with complying with any such notice are established by such Person and (B) no
Lien would or will attach to the Property which is the subject of any such
notice as a result of any compliance by such Person which is delayed during any
such contest. Promptly upon receipt of any notice described in the foregoing
clause (i), Borrowers shall deliver a copy thereof to Lender.
6.10 COMPLIANCE WITH LAWS. Comply with all federal, state and
local laws, ordinances, requirements and regulations and all judgments, orders,
injunctions and decrees applicable to any Borrower or any Subsidiary of any
Borrower or their operations, the failure to comply with which could have a
Material Adverse Effect.
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6.11 TAXES AND CLAIMS. Pay and discharge all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any Property belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien (other than a Permitted Lien) upon the Property of any Borrower or any
Subsidiary of any Borrower, provided that so long as no Lien has attached to the
Property of any Borrower or any Subsidiary of any Borrower as a result of any of
the foregoing, neither any Borrower nor any Subsidiary of any Borrower shall be
required by this Section 6.11 to pay any such amount if the same is being
contested diligently and in good faith by appropriate proceedings and as to
which the applicable Person has set aside reserves on its books satisfactory to
Lender.
6.12 MAINTENANCE OF PROPERTIES. Maintain all of its Properties
necessary in the operation of its business in good working order and condition.
6.13 GOVERNMENTAL APPROVALS. Upon the exercise by Lender of any
power, right or privilege pursuant to the provisions of any of the Loan
Documents requiring any consent, approval or authorization of any Governmental
Body (including, without limitation, transfers of Licenses), promptly execute
and cause the execution of all applications, certificates, instruments and other
documents that Lender may be required to obtain for such consent, approval or
authorization.
6.14 YEAR 2000. Deliver to Lender such updated information as is
requested regarding the status of its efforts to become Year 2000 Compliant and
shall take such actions and commit such resources necessary to ensure that it
and its Subsidiaries will be Year 2000 Compliant by October 1, 1999.
6.15 FURTHER ASSURANCES. Promptly upon request of Lender, take
such additional actions as Lender may require from time to time in order to (i)
carry out more effectively the purposes of this Loan Agreement and the other
Loan Documents, (ii) subject to the Liens created by any of the Collateral
Documents any of the Property, rights or interests covered by any of the
Collateral Documents, (iii) perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and the Liens intended to be created
thereby and (iv) better assure, convey, grant, assign, transfer, preserve,
protect and confirm to Lender the rights granted or now or hereafter intended to
be granted to Lender under any Loan Document or under any other document
executed in connection therewith. Without limiting the generality of the
foregoing and except as otherwise approved in writing by Lender, Borrowers shall
cause each of their Subsidiaries to guaranty Borrowers' Obligations and to cause
each such Subsidiary to grant to Lender a security interest in all of such
Subsidiary's Property to secure such guaranty, and, in connection with
Acquisitions permitted hereunder, execute and deliver to Lender such other
agreements, documents and instruments as reasonably requested by Lender prior to
the consummation of any such Acquisition. Furthermore and except as otherwise
approved in writing by Lender, each Borrower shall pledge the stock or other
equity interests of each of its Subsidiaries to Lender to secure Borrowers'
Obligations.
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6.16 LANDLORD CONSENTS. Use its best efforts to obtain and deliver
to Lender, on or before the sixtieth (60) day after the Closing Date, a Landlord
Consent from the lessor and sublessor, as applicable, under each Lease under
which such Borrower or Subsidiary is a lessee or sublessee, except to the extent
a Landlord Consent from such lessor or sublessor, as applicable, shall have been
delivered previously to Lender.
6.17 RESTRICTED FOREIGN SUBSIDIARIES. If EBITDA generated by any
of the Restricted Foreign Subsidiaries or both of them during any quarter shall
account for or constitute ten percent (10%) or more of EBITDA generated by
Borrowers and their Subsidiaries during such quarter, comply with the provisions
of Section 6.15 in respect of the Restricted Foreign Subsidiaries and, among
other things, cause such Restricted Foreign Subsidiaries and such other
appropriate Persons to join in the execution of the Subsidiary Security
Agreement and the Subsidiary Guaranty.
6.18 LIEN WAIVERS. If Lender shall have approved any plans for
improvements and/or build-outs in respect of any Real Estate and permitted
Borrowers to consummate such improvements and/or build-outs, Borrowers shall
provide to Lender, and shall continue to provide to Lender on an on going basis
when and as requested by Lender, any lien waivers requested by Lender,
including, without limitation, mechanics' lien waivers, in form and substance
satisfactory to Lender, and a date down endorsement to the title policy in favor
of Lender, as insured, covering such Real Estate.
ARTICLE VII
NEGATIVE COVENANTS
Until all of Borrowers' Obligations are paid and performed in full and
the Commitments shall have terminated, no Borrower shall, or permit or cause any
of its Subsidiaries to:
7.1 BORROWING /INDEBTEDNESS. Create, incur, assume or suffer to
exist any liability for Indebtedness for Borrowed Money, except:
(i) the Borrowers' Obligations;
(ii) Permitted Senior Indebtedness;
(iii) Indebtedness for Borrowed Money evidenced by the
Thoroughbred Note;
(iv) other Subordinated Indebtedness disclosed to, and
approved by, Lender incurred or assumed in connection with Acquisitions
permitted hereunder;
(v) unsecured inter-company loans by any Borrower to any
other Borrower or its Subsidiaries (other than the Restricted Foreign
Subsidiaries), provided that the
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obligations of each obligor of such Indebtedness shall: (A) be
evidenced by promissory notes which shall have been pledged to Lender
as security for Borrowers' Obligations, (B) if required by Lender, be
subordinated in right of payment to Borrowers' Obligations on terms and
conditions acceptable to Lender and (C) have such other terms and
provisions as Lender may reasonably require;
(vi) other unsecured Indebtedness in an aggregate amount
not to exceed $2,500,000 at any one time outstanding (which shall
include the Indebtedness described on EXHIBIT 7.1 hereto); and
(vii) the Indebtedness in favor of Security National Bank
in an aggregate amount not to exceed $950,000, which is secured by the
Real Estate/Macon Mortgage.
7.2 LIENS. Create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except Permitted
Liens.
7.3 MERGERS AND ACQUISITIONS. Consolidate with or merge with or
into any Person, or acquire directly or indirectly all or substantially all of
the capital stock, equity interests or Property of any Person, except: (i)
Acquisitions otherwise permitted hereunder, (ii) any Subsidiary of InfoCure
Corporation may merge with or into any other Subsidiary of InfoCure Corporation
(other than a Restricted Foreign Subsidiary), provided that (A) no Event of
Default or Incipient Default would exist after giving effect to any such merger,
(B) Lender shall have received at least forty-five (45) days' prior written
notice of any such merger, (C) Borrowers and their Subsidiaries shall have
executed and delivered to Lender such instruments, agreements and documents as
Lender shall require to preserve the validity and priority of the Security
Interests in the Property transferred to the surviving Subsidiary in connection
with any such merger and (D) Lender shall have received such other instruments,
agreements and documents in connection with any such merger as Lender shall
require, including, without limitation, certified copies of the related plan of
merger and certificates of merger and (iii) any Subsidiary of InfoCure
Corporation (other than a Restricted Foreign Subsidiary) may merge with another
Person in connection with an Acquisition permitted hereunder provided such
Subsidiary is the continuing or surviving Person.
7.4 CONTINGENT LIABILITIES/OBLIGATIONS. Assume, guarantee,
endorse, contingently agree to purchase, become liable in respect of any letter
of credit, or otherwise become liable upon the obligation of any Person, except:
(i) liabilities arising from the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business, and (ii) the posting
of bonds to secure performance to the extent necessary in connection with its
business and similar transactions in the ordinary course of business.
7.5 DISTRIBUTIONS/RESTRICTED JUNIOR PAYMENTS. Make any dividends,
distributions or other shareholder expenditures with respect to its capital
stock or other equity interests or apply any of its Property to the purchase,
redemption or other retirement of, or set apart any sum for the payment of, or
make any other distribution by reduction of capital or otherwise in respect of,
any of such capital stock or equity interests (the following item, together with
those described
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in clause (ii) of Section 7.7, are referred to as "Restricted Payments"), except
any Subsidiary may make dividends or other distributions to InfoCure
Corporation.
7.6 CAPITAL EXPENDITURES. Make or incur any Capital Expenditures
(other than (i) Acquisitions permitted hereunder, (ii) the acquisition on the
Closing Date of the Real Estate that is the subject of the Real Estate
Acquisition Documents and (iii) improvements on such Real Estate to the extent
otherwise permitted hereunder) if the aggregate amount of Capital Expenditures
of Borrowers and their Subsidiaries for the twelve-month period ended on any
date exceeds (or would exceed after giving effect to the making thereof)
$8,000,000.
7.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY. Make any
voluntary or optional payment or prepayment of any Indebtedness for Borrowed
Money or make any payment in respect of Subordinated Indebtedness, other than
(i) in respect of Borrowers' Obligations, (ii) Indebtedness for Borrowed Money
of a type described in clause (vi) of Section 7.1 that does not constitute any
other Indebtedness for Borrowed Money Described in Section 7.1) and (iii)
regularly scheduled payments of interest and principal of the Indebtedness for
Borrowed Money evidenced by the Thoroughbred Note, provided that no Event of
Default or Incipient Default exists or would be created by the making of any
such payment under this clause (iii) and such payment otherwise is permitted
under the terms of the Thoroughbred Subordination Agreement, and, provided,
further, that nothing contained in this clause (iii) shall prohibit the
conversion of the Indebtedness for Borrowed Money evidenced by the Thoroughbred
Note into common stock of InfoCure Corporation.
7.8 INVESTMENTS; LOANS. At any time purchase or otherwise
acquire, hold or invest in the capital stock of, or any other interest in, any
Person (including the creation of any Subsidiary), or make any loan or advance
to, or enter into any arrangement for the purpose of providing funds or credit
to, or make any other investment, whether by way of capital contribution or
otherwise, in or with any Person, including, without limitation, any Affiliate,
except:
(i) investments in direct obligations of, or instruments
unconditionally guaranteed by, the United States of America or in
certificates of deposit issued by a Qualified Depository;
(ii) investments in commercial or finance paper which, at
the time of investment, is rated "A" or better by Moody's Investors
Service, Inc., or Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc., respectively, or at the equivalent rate by any of
their respective successors;
(iii) any interests in any money market account maintained,
at the time of investment, with a Qualified Depository, the investments
of which, at the time of investment, are restricted to the types
specified in clause (i) above;
(iv) unsecured inter-company loans otherwise permitted
under Section 7.1; and
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(v) Acquisitions permitted by Section 7.21, including
establishment or creation of, and equity investments in, wholly-owned
domestic Subsidiaries consented to by Lender in connection with such
Acquisitions.
All investments permitted pursuant to clauses (i), (ii) and (iii) of this
Section 7.8 shall have a maturity not exceeding one year.
7.9 FUNDAMENTAL BUSINESS CHANGES. Materially change the nature of
its business.
7.10 FACILITY SITES. Change the locations of its chief executive
office or other Property used in the operation of its business (except to the
extent Borrowers shall close any facilities at which such Property is located
(other than the locations of its chief executive office) and only to the extent
Borrowers shall have complied with the provisions of this Section 7.10 in
respect of the locations at which such Property is to be moved), unless (i)
Lender shall have received at least thirty (30) days' prior written notice
thereof, (ii) the applicable Borrower or Subsidiary shall have complied with all
applicable laws, rules and regulations and shall have received all required
consents and approvals from any Governmental Body, (iii) Lender shall have
received satisfactory evidence that such change could not reasonably be expected
to affect adversely the operations or business prospects of the applicable
Borrower or Subsidiary and (iv) the applicable Borrower or Subsidiary shall have
executed and delivered to Lender any documents, agreements and instruments
Lender may reasonably require in order to maintain the validity and priority of
the Security Interests, including, without limitation, UCC financing statements
and amendments.
7.11 SALE OR TRANSFER OF ASSETS. Sell, lease, assign, transfer or
otherwise dispose of any Property (whether in one transaction or a series of
transactions), or enter into any agreement to do any of the foregoing, except:
(i) the disposition of Property which is not material to
or necessary for the continued operation of its business;
(ii) obsolete or unusable items of equipment which
promptly are replaced with new items of equipment of like function and
comparable value to the obsolete or unusable items of equipment when
the same were new or not obsolete or unusable, provided such
replacement items of equipment shall become subject to the Security
Interests;
(iii) dispositions not otherwise permitted hereunder which
are made for fair market value and the mandatory prepayment, if any, in
the amount of the Net Proceeds of such disposition is made as provided
in subsection 2.8.2(b); provided, that (i) at the time of any such
disposition, no Event of Default shall exist or shall result from such
disposition, (ii) not less than the greater of eighty-five percent
(85%) of aggregate sales price from such disposition and the amount of
the mandatory prepayment required pursuant to subsection 2.8.2(b) shall
be paid in cash, (iii) the aggregate value of assets so sold by
Borrowers and their Subsidiaries, together, shall not exceed in any
year
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$1,000,000 and (iv) any non-cash portion of the sales price shall be
pledged to Lender as security for Borrowers' Obligations; and
(iv) as expressly permitted pursuant to Section 7.3.
7.12 AMENDMENT OF DOCUMENTS. Amend or modify (i) its articles of
incorporation (including any certificates of designations, preferences and
rights), bylaws or other corporate governance documents or organization
instruments, except (A) if required by law or (B) InfoCure Corporation may amend
its articles of incorporation in connection with the issuance of additional
capital stock permitted under Section 7.14, (ii) the Thoroughbred Note or the
Thoroughbred Subordination Agreement, (iii) any Acquisition Documents or (iv)
any Related Transaction Agreements to the extent reasonably expected to have a
Material Adverse Effect and, with respect to any such actions described in
clauses (i), (iii) or (iv), only to the extent such actions shall not be in a
manner adverse to Lender or the Collateral.
7.13 ACQUISITION OF ADDITIONAL PROPERTIES. Acquire any additional
Property except (i) such Property as is necessary to or useful in the operation
of its business, provided such acquisitions shall be subject to the conditions
and limitations set forth in this Loan Agreement, and (ii) acquisitions of
Property as are permitted pursuant to Section 7.3 and Section 7.21.
7.14 ISSUANCE OF CAPITAL STOCK OR OTHER SIMILAR INTERESTS. Issue
or sell, permit to be issued or sold, or otherwise consent to the transfer of,
any additional capital stock or equity interests or any interests convertible
into or exercisable for any such capital stock or additional equity interests,
except (i) the issuance of capital stock of InfoCure Corporation, provided that
(a) InfoCure Corporation shall not be required or permitted to pay cash
dividends, redeem such capital stock or make other distributions with respect
thereto and, without limiting the foregoing, any preferred stock of InfoCure
Corporation so issued shall not contain, provide for or otherwise have any
mandatory redemption or put rights during the term of this Loan Agreement or
until Borrowers' Obligations shall have been performed and paid in full and the
Commitments shall have terminated, and (b) Borrowers shall comply with the
provisions of subsection 2.8.2(c), (ii) the convertible rights granted pursuant
to promissory notes evidencing Subordinated Indebtedness or other Indebtedness
for Borrowed Money otherwise permitted hereunder and (iii) InfoCure Corporation
may issue, sell or otherwise transfer, and InfoCure Australia Pty Limited, a
company organized under the laws of Australia, may permit the issuance, sale or
other transfer, of the equity interests of InfoCure Australia Pty Limited,
provided that InfoCure Corporation shall continue to own and control at all
times (a) at least 51% of the issued and outstanding equity interests of
InfoCure Australia Pty Limited and (b) such percentage of the voting securities
of InfoCure Australia Pty Limited at least sufficient to enable InfoCure
Corporation to direct the direction of management and policies of such Person.
7.15 TRANSACTIONS WITH AFFILIATES. Sell, lease, assign, transfer
or otherwise dispose of any Property to any Affiliate of any Borrower, lease
Property, render or receive services or purchase assets from any such Affiliate,
or otherwise enter into any contractual relationship with any Affiliate, except:
(i) as expressly permitted by this Loan Agreement; and
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(ii) in the ordinary course of business and pursuant to
the reasonable requirements of the business of the applicable Borrower
or Subsidiary;
and, in the case of each of (i) and (ii) above, upon fair and reasonable terms
no less favorable to the applicable Borrower or Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of such Person and which are disclosed in writing to Lender.
7.16 COMPLIANCE WITH ERISA.
(i) Permit the occurrence of any Termination Event which
would result in a liability to any Borrower or any ERISA Affiliate of
any Borrower in excess of $250,000;
(ii) Permit the present value of all benefit liabilities
under all Pension Plans to exceed the current value of the assets of
such Pension Plans allocable to such benefit liabilities by more than
$250,000;
(iii) Permit any accumulated funding deficiency in excess
of $250,000 (as defined in Section 302 of ERISA and Section 412 of the
Code) with respect to any Pension Plan, whether or not waived;
(iv) Fail to make any contribution or payment to any
Multiemployer Plan which any Borrower or any ERISA Affiliate of any
Borrower may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto which results in or
is likely to result in a liability in excess of $250,000;
(v) Engage, or permit any Borrower or any ERISA Affiliate
of any Borrower to engage, in any "prohibited transaction" as such term
is defined in Section 406 of ERISA or Section 4975 of the Code for
which a civil penalty pursuant to Section 502(i) of ERISA or a tax
pursuant to Section 4975 of the Code in excess of $250,000 is imposed;
(vi) Permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to any Borrower or any ERISA Affiliate of any Borrower or
increase the obligation of any Borrower or any ERISA Affiliate of any
Borrower to a Multiemployer Plan which liability or increase,
individually or together with all similar liabilities and increases, is
material to any Borrower or any ERISA Affiliate of any Borrower; or
(vii) Fail, or permit any of its ERISA Affiliates to fail,
to establish, maintain and operate each Employee Benefit Plan in
compliance in all material respects with ERISA, the Code and all other
applicable laws and regulations and interpretations thereof.
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7.17 MINIMUM NET WORTH. Permit Consolidated Net Worth as of the last
day of any quarter to be less than the sum of (i) $85,000,000, plus (ii) an
aggregate amount equal to seventy-five percent (75%) of Consolidated Net Income
of Borrowers and their Subsidiaries (other than the Restricted Foreign
Subsidiaries) for each Fiscal Year of Borrowers and their Subsidiaries ending
after the date hereof, but prior to such date of determination (commencing with
the Fiscal Year ending December 31, 1999), for which Consolidated Net Income is
a positive amount (i.e., no reduction to the amount of Consolidated Net Worth
required to be maintained hereunder shall be permitted for any Fiscal Year in
which Consolidated Net Income is less than zero), plus 100% of Net Issuance
Proceeds generated during the period commencing with the Closing Date and ending
on such date of determination.
7.18 MAXIMUM LEVERAGE RATIO. Permit the Leverage Ratio, calculated as
of the last day of any quarter, to exceed 2.50 to 1.00.
7.19 MINIMUM TOTAL DEBT SERVICE COVERAGE RATIO. Permit the Total Debt
Service Coverage Ratio as of the last day of any quarter to be less than 1.50 to
1.00.
7.20 SUBSIDIARIES. Create or permit to exist any Subsidiary, except
(i) InfoCure Corporation may permit the existence of InfoCure Systems,
Thoroughbred, DISC, StrategiCare, Medical Software Management and the Restricted
Foreign Subsidiaries, (ii) InfoCure Systems may permit the existence of DISC,
StrategiCare and Medical Software Management and (iii) wholly-owned domestic
Subsidiaries in connection with Acquisitions permitted hereunder, provided that
each such Subsidiary shall have executed and delivered all agreements, documents
and instruments required under Section 6.15.
7.21 ACQUISITIONS. Consummate, or permit any of its Subsidiaries to
consummate, any Acquisitions unless the following shall have been satisfied in
connection therewith:
(a) If any Borrower or any Subsidiary of any Borrower desires to
make an Acquisition, Borrowers shall deliver, or cause to be delivered,
to Lender, (i) not less than thirty (30) Business Days prior to the
consummation of such potential Acquisition if such Acquisition shall
require the consent of Lender in accordance with the terms of this
Section 7.21 or (ii) not less than twenty (20) Business Days prior to
the consummation of such potential Acquisition if such Acquisition
shall not require the consent of Lender in accordance with the terms of
this Section 7.21, an acquisition summary with respect to the Target
and such potential Acquisition, such summary to include a reasonably
detailed description of the Target and its business (including
financial information) and operating results (including financial
statements), the terms and conditions, including economic terms, of the
proposed Acquisition, and Borrowers' calculation of Pro Forma EBITDA of
such Target;
(b) No Borrower shall consummate or permit any of its Subsidiaries
to consummate any Acquisition unless all of the following conditions
are satisfied:
(i) the Target must be in the same or related line of
business as Borrowers and provide healthcare information systems
services, must be a
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domestic corporation, partnership or limited liability company
(and the seller must be a domestic corporation, partnership or
limited liability company and the Target must be located within
the United States), must have generated positive Pro Forma EBITDA
for each of last two (2) years, the transaction must be structured
as an asset purchase by, or merger with, a wholly-owned domestic
Subsidiary of a Borrower or a stock purchase by a Borrower or a
wholly-owned domestic Subsidiary of a Borrower and Borrowers and
its Subsidiaries shall have complied with the provisions Section
6.15;
(ii) the Target must not have material contingent liabilities
unless either (x) such liabilities are cash collateralized
pursuant to appropriate escrow arrangements or are covered by
insurance or (y) such liabilities, individually and when combined
with contingent liabilities of Targets theretofore acquired by
Borrower, do not exceed, in the aggregate, $500,000;
(iii) (A) no Incipient Default or Event of Default shall have
occurred and be continuing or would arise as a result of such
Acquisition; (B) on a pro forma basis after giving effect to such
Acquisition, including the incurrence or assumption of
Indebtedness in connection therewith and the funding of any
Advance (and utilizing Pro Forma EBITDA for such Target), the
Leverage Ratio on a pro forma basis shall not exceed the maximum
ratio set forth in Section 7.18; and (C) Borrowers shall have
delivered to Lender a Compliance Certificate completed on a pro
forma basis after giving effect to such Acquisition, including the
incurrence or assumption of Indebtedness in connection therewith
and the funding of any Advances, and such Compliance Certificate
shall demonstrate pro forma compliance with Sections 7.17, 7.18
and 7.19;
(iv) Lender shall have approved such Acquisition in
accordance with the following:
(A) if (i) the Leverage Ratio (on a pro forma basis
after giving effect to such Acquisition, including the
incurrence or assumption of Indebtedness in connection
therewith and the funding of any Advance, and utilizing Pro
Forma EBITDA for such target) does not exceed 1.00 to 1.00 and
(ii) the aggregate purchase price (including payments under
non-compete agreements but excluding the fair market value of
any non-cash component of the purchase price) (the
"Acquisition Cost") for such Acquisition does not exceed
$20,000,000, then consent to such Acquisition shall not be
required; provided that such consent shall be required with
respect to the Acquisition which results in the aggregate
Acquisition Costs for all Acquisitions consummated during the
twelve-month period ending on the closing date (or applicable
Funding Date) of such Acquisition exceeding $40,000,000;
(B) if the Leverage Ratio (on a pro forma basis after
giving effect to such Acquisition, including the incurrence or
assumption of Indebtedness in connection therewith and the
funding of any Advance, and
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utilizing Pro Forma EBITDA for such Target) equals or exceeds
1.00 to 1.00, then Lender's consent to the Acquisition shall
be required only if (i) the Acquisition Cost for such
Acquisition exceeds $10,000,000 or (ii) the aggregate
Acquisition Costs for all Acquisitions consummated during the
twelve-month period ending on the closing date of such
Acquisition exceeds $25,000,000 (without limiting such clause
(ii), Lender's consent shall be required with respect to the
Acquisition which results in the aggregate Acquisition Costs
exceeding $25,000,000); and
(C) unless expressly not required above, Lender's
consent to Acquisitions shall be required;
(v) Lender's approval of the accuracy of Borrowers'
computation of Pro Forma EBITDA shall be required, notwithstanding
that consent to such Acquisition with respect to which Pro Forma
EBITDA is being determined may not be required; and
(vi) Borrowers shall have delivered to Lender an audit of the
Target and related Pro Forma EBITDA performed by an accounting
firm reasonably acceptable to Lender, and, in any such case, the
results thereof shall have been satisfactory to Lender, to the
extent either (a) such an audit (or similar audit or review) shall
have been required by the Securities Act or the Securities
Exchange Commission or (b) the respective Acquisition Cost exceeds
$15,000,000 (but only to the extent any proceeds of the Loans
shall be requested in connection with the consummation of such
Acquisition).
(c) It is understood and agreed that Lender's decision to consent
to an Acquisition, if required, shall be based upon Lender's evaluation
and approval of the business and financial condition of the Target and
review and approval of the Acquisition Documents in connection with the
proposed Acquisition.
(d) No later than ten (10) Business Days after Lender's receipt of
the acquisition summary, Lender will notify Borrowers, in writing,
whether or not Lender consents to the proposed Acquisition on the terms
set forth in the acquisition summary. Any failure on the part of Lender
either to grant or deny consent, in writing, the proposed Acquisition
within said ten (10) Business Day period shall constitute the denial of
consent by Lender of such Acquisition on the terms and conditions set
forth in the acquisition summary. If there is any material change to
the terms of the proposed Acquisition with respect to which the consent
of Lender is required (or any proposed Acquisition which, due to such
material change, shall or would require the consent of Lender), any
adverse change in Pro Forma EBITDA or any other material adverse change
to the Target which is the subject of such proposed Acquisition,
Borrowers shall notify Lender of the same and further consent will be
required, which consent will be granted or denied within ten (10)
Business Days of receipt of written notice of such material change. Any
failure either to grant or deny consent within said ten (10) Business
Day period shall constitute Lender's denial of consent. Any disclosures
in the acquisition summary shall be deemed consented to by Lender if
Lender has consented to the Acquisition.
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(e) The foregoing provisions do not impair, vitiate or affect the
conditions to Lender's obligations to fund Loans hereunder.
7.22 MINIMUM CURRENT RATIO. Permit the ratio of (i) consolidated
current assets of Borrowers and their Subsidiaries (other than the Restricted
Foreign Subsidiaries), determined in accordance with GAAP, as of any date to
(ii) consolidated current liabilities of Borrowers and their Subsidiaries (other
than the Restricted Foreign Subsidiaries), determined in accordance with GAAP,
less the amount of deferred revenues of Borrowers as of such date as accurately
reflected on the financial statements of Borrowers in accordance with GAAP, as
of such date to be less than 1.00 to 1.00.
ARTICLE VIII
DEFAULT AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under the Loan Documents:
8.1.1 DEFAULT IN PAYMENT. If Borrowers shall fail to pay all or
any portion of Borrowers' Obligations when the same become due and
payable.
8.1.2 BREACH OF COVENANTS.
(a) If any Borrower shall fail to observe or perform any
covenant or agreement made by or on behalf of such Person
contained in Section 6.1, 6.2, 6.3, 6.5, 6.6, 6.9, 6.11, 6.14 or
6.15 or in Article VII;
(b) If any Borrower or any Subsidiary of any Borrower shall
fail to observe or perform any covenant or agreement (other than
those referred to in subparagraph (a) above or specifically
addressed elsewhere in this Section 8.1) made by such Person in
any of the Loan Documents to which such Person is a party, and
such failure shall continue for a period of thirty (30) days after
written notice of such failure is given by Lender.
8.1.3 BREACH OF WARRANTY. If any representation or warranty made
by or on behalf of any Borrower or any Subsidiary of any Borrower in or
pursuant to any of the Loan Documents or in any instrument or document
furnished in compliance with the Loan Documents (including, without
limitation, any Compliance Certificate) shall prove to be false or
misleading in any material respect on the date made.
8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY. If (i)
any Borrower or any Subsidiary of any Borrower at any time shall be in
default (as principal or guarantor or other surety) in the payment of
any principal of or premium or interest on any Indebtedness for
Borrowed Money (other than Borrowers' Obligations) beyond the
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grace period, if any, applicable thereto and the aggregate amount of
such payments then in default beyond such grace period shall exceed
$1,000,000 or (ii) any default shall occur in respect of any issue of
Indebtedness for Borrowed Money of any Borrower or any Subsidiary of
any Borrower (other than Borrowers' Obligations) outstanding in a
principal amount of at least $1,000,000, or in respect of any agreement
or instrument relating to any such issue of Indebtedness for Borrowed
Money, and such default shall continue beyond the grace period, if any,
applicable thereto or (iii) any Borrower or any Subsidiary of any
Borrower at any time shall be in default under the Thoroughbred Note.
8.1.5 BANKRUPTCY.
(a) If any Borrower or any Subsidiary of any Borrower shall
(i) generally not be paying its debts as they become due, (ii)
file, or consent, by answer or otherwise, to the filing against it
of a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of
creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers for such
Borrower or Subsidiary, or for any substantial part of the
Property of such Borrower or Subsidiary or (v) be adjudicated
insolvent.
(b) If any Governmental Body of competent jurisdiction shall
enter an order appointing, without consent of such Borrower or
Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to any Borrower or any Subsidiary of
any Borrower, or with respect to any substantial part of the
Property belonging to any such Person, or if an order for relief
shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of any Borrower or any Subsidiary of any
Borrower or if any petition for any such relief shall be filed
against any Borrower and such petition shall not be dismissed or
stayed within sixty (60) days.
8.1.6 JUDGMENTS. If the aggregate amount of all judgments or
awards against Borrowers and their Subsidiaries exceeds $750,000 at any
one time outstanding, excluding judgments or awards (i) for which there
is full insurance and with respect to which the insurer has assumed
responsibility in writing, (ii) for which there is full indemnification
(upon terms and by credit worthy indemnitors which are satisfactory to
Lender) or (iii) which have not been discharged in full or stayed
pending appeal.
8.1.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS. If (i) any
Governmental Body shall (A) revoke, terminate, suspend or adversely
modify any License of any Borrower or any Subsidiary of any Borrower,
the non-continuation of which could have a Material Adverse Effect, or
(B) enter a final order or decision to suspend, revoke, terminate or
adversely modify any such License or (ii) there shall exist any
violation or default in the performance of, or a material failure to
comply with any agreement, or condition or term of any License or
License Agreement, which violation, default or
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failure could have a Material Adverse Effect, or any such License or
License Agreement shall cease to be in full force and effect, or (iii)
any Operating Agreement or License Agreement shall expire or be revoked
or terminated and not replaced by a substitute acceptable to Lender
within thirty (30) days after the date of such expiration, revocation
or termination, and such expiration, revocation or termination and
non-replacement could have a Material Adverse Effect.
8.1.8 COLLATERAL. If any material portion of the Collateral shall
be seized or taken by a Governmental Body or Person, or Borrowers and
their Subsidiaries shall fail to maintain or cause to be maintained the
Security Interests and priority of the Loan Documents as against any
Person, or the title and rights of any Borrower or any Subsidiary of
any Borrower to any material portion of the Collateral shall have
become the subject matter of litigation which reasonably could be
expected to result in impairment or loss of the security provided by
the Loan Documents.
8.1.9 PLANS. If an event or condition specified in subsection
6.3.9 hereof shall occur or exist with respect to any Plan or
Multiemployer Plan and, as a result of such event or condition,
together with all other such events or conditions, any Borrower or any
ERISA Affiliates of any Borrower shall incur, or in the opinion of
Lender be reasonably likely to incur, a liability to a Plan or
Multiemployer Plan or the PBGC (or any of them) which, in the
reasonable judgment of FINOVA, could have a Material Adverse Effect.
8.1.10 CHANGE IN CONTROL. If at any time (i) InfoCure Corporation
ceases to own and control all of the issued and outstanding Subsidiary
Equity Interests or (ii) any Person or any Persons acting together
which would constitute a "group" (a "Group") for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision thereto, other than a Group whose
nominees constitute a majority of the board of directors of InfoCure
Corporation as of the Closing Date, together with any Affiliates or
"Related Persons" (as defined in Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act or any successor provision
thereto) thereof, shall beneficially own 50% or more of the aggregate
voting power of all classes of capital stock of InfoCure Corporation
entitled to vote generally in the election of directors of InfoCure
Corporation; or (iii) any Person or Group, other than any Person or
Group whose nominees constituted a majority of the board of directors
of InfoCure Corporation as of the Closing Date, together with any
Affiliates or Related Persons thereof, shall succeed in having
sufficient of its or their nominees elected to the board of directors
of InfoCure Corporation, such that such nominees, when added to any
existing director remaining on the board of directors of InfoCure
Corporation after such election who is an Affiliate or a Related Person
of such Group, shall constitute a majority of the board of directors of
InfoCure Corporation; or (iv) Lender shall cease at any time to have a
first Lien on all of the issued and outstanding Subsidiary Equity
Interests.
8.1.11 CHANGE IN MANAGEMENT. If for any reason each of Richard E.
Perlman, Frederick L. Fine or James K. Price shall have ceased to (i)
hold the office or offices maintained by such Persons as of the Closing
Date, or (ii) otherwise perform the corporate and day to day management
functions performed by such Persons as of the
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Closing Date, and Borrowers shall have failed to engage or otherwise
hire an Approved Replacement for at least one of them. Thereafter, at
least one Approved Replacement must continue to hold the office or
offices maintained by such Person as of the date of hire or engagement
or otherwise perform the corporate and day to day management functions
performed by such Person as of such date (and Borrowers acknowledge
that the cessation thereof shall constitute an Event of Default
hereunder, unless replaced by another Approved Replacement, and, in
such case, the terms hereof shall apply to such Person).
8.1.12 INVALIDITY OF SUBORDINATION AGREEMENTS AND TERMS. The
subordination provisions of any agreement, document or instrument
governing any Subordinated Indebtedness (including, without limitation,
the Thoroughbred Subordination Agreement) shall, for any reason at any
time, be revoked or invalidated, or otherwise cease to be in full force
and effect, or any Borrower or any Subsidiary of any Borrower shall
contest in any manner the validity or enforceability thereof, or
Borrowers' Obligations shall for any reason not have the priority
contemplated by this Loan Agreement or such subordination provisions.
8.2 ACCELERATION OF BORROWER'S OBLIGATIONS. Upon the occurrence of:
(a) any Event of Default described in clauses (ii), (iii), (iv) or
(v) of subsection 8.1.5(a) or in subsection 8.1.5(b), all Commitments
shall terminate automatically and all of Borrowers' Obligations at that
time outstanding automatically shall mature and become due and payable,
and
(b) any other Event of Default, Lender, at any time (unless such
Event of Default shall have been waived in writing or remedied), at its
option, without further notice or demand may terminate the Commitments
and/or declare all of Borrowers' Obligations due and payable, whereupon
Borrowers' Obligations immediately shall mature and become due and
payable,
all without presentment, demand, protest or notice (other than the declaration
referred to in clause (b) above), all of which hereby are waived.
8.3 REMEDIES ON DEFAULT. If an Event of Default shall have occurred,
Lender, at its option, may:
8.3.1 ENFORCEMENT OF SECURITY INTERESTS. Enforce or cause to be
enforced any of the rights or remedies accorded to Lender under the
Loan Documents.
8.3.2 OTHER REMEDIES. Enforce or cause to be enforced any of the
rights or remedies accorded to Lender at equity or law, by virtue of
statute or otherwise.
8.4 APPLICATION OF FUNDS. Any funds received by Lender pursuant to the
exercise of any rights accorded to Lender pursuant to, or by the operation of
any of the terms of, any of the Loan Documents, including, without limitation,
insurance proceeds, condemnation proceeds or
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proceeds from the sale of Collateral, shall be applied to Borrowers' Obligations
in the following order of priority:
8.4.1 EXPENSES. First, to the payment of all fees and expenses
actually incurred, including, without limitation, court costs, fees of
appraisers, title charges, costs of maintaining and preserving the
Collateral, costs of sale, and all other costs incurred by Lender, in
exercising any rights accorded to Lender pursuant to the Loan Documents
or by applicable law, including, without limitation, reasonable
attorney's fees.
8.4.2 BORROWERS' OBLIGATIONS. Next, to the payment of Borrowers'
Obligations in such manner as Lender shall determine.
8.4.3 SURPLUS. Any surplus, to the Person or Persons entitled
thereto.
8.5 PERFORMANCE OF BORROWERS' OBLIGATIONS. If any Borrower or any
Subsidiary of any Borrower fails to (i) maintain in force and pay for any
insurance policy or bond which such Person is required to provide pursuant to
any of the Loan Documents, (ii) keep the Collateral free from all Liens except
for Permitted Liens, (iii) pay when due all taxes, levies and assessments on or
in respect of the Collateral, except as otherwise permitted pursuant to the
terms hereof, (iv) make all payments and perform all acts on the part of such
Person to be paid or performed in the manner required by the terms hereof and by
the terms of the other Loan Documents with respect to any of the Collateral,
including, without limitation, all expenses of protecting, storing, warehousing,
insuring, handling and maintaining the Collateral, (v) keep fully and perform
promptly any other of the obligations of such Person hereunder or under any of
the other Loan Documents, and (vi) keep fully and perform promptly the
obligations of such Borrower with respect to any issue of Indebtedness for
Borrowed Money secured by a Permitted Prior Lien, then Lender may (but shall not
be required to) procure and pay for such insurance policy or bond, place such
Collateral in good repair and operating condition, pay, contest or settle such
Liens or taxes or any judgments based thereon or otherwise make good any other
aforesaid failure of such Person. Borrowers shall reimburse Lender immediately
upon demand for all reasonable sums paid or advanced on behalf of any Borrower
or any Subsidiary of any Borrower for any such purpose, together with reasonable
and/or necessary costs and expenses (including reasonable attorneys' fees) paid
or incurred by Lender in connection therewith and interest on all sums advanced
from the date of advancement until repaid to Lender at the Default Rate
applicable thereto. All such sums advanced by Lender, with interest thereon,
immediately upon advancement thereof, shall be deemed to be part of Borrowers'
Obligations and secured by the Security Interests.
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ARTICLE IX
CLOSING
The Closing Date shall be such date as the parties shall determine, and
the Closing shall take place on such date, provided all conditions for the
Closing as set forth in this Loan Agreement have been satisfied or otherwise
waived by Lender. The Closing shall take place at the office of Katten Muchin &
Zavis or such other place as the parties hereto shall agree. Unless the Closing
occurs on or before August 30, 1999, this Loan Agreement shall terminate and be
of no further force or effect and, except for any obligations of Borrowers to
Lender pursuant to Article X, none of the parties hereto shall have any further
obligation to any other party.
ARTICLE X
EXPENSES AND INDEMNITY
10.1 ATTORNEYS' FEES AND OTHER FEES AND EXPENSES. Whether or not any
of the transactions contemplated by this Loan Agreement shall be consummated,
subject to the limitations set forth in subsection 10.1.1, Borrowers agree to
pay to Lender on demand all expenses incurred by Lender in connection with the
transactions contemplated hereby and in connection with any amendments,
modifications or waivers (whether or not the same become effective) under or in
respect of any of the Loan Documents, including, without limitation:
10.1.1 FEES AND EXPENSES FOR PREPARATION OF LOAN DOCUMENTS. All
expenses, disbursements (including, without limitation, charges for
required mortgagee's title insurance, lien searches, reproduction of
documents, long distance telephone calls and overnight express
carriers) and reasonable attorneys' fees, actually incurred by Lender
in connection with the (i) preparation and negotiation of the Loan
Documents or any amendments, modifications or waivers thereto or any
documents delivered pursuant thereto and (ii) administration of the
Loans.
10.1.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF
LOAN DOCUMENTS. Any expenses or other costs, including reasonable
attorneys' fees and expert witness fees, actually incurred by Lender in
connection with the enforcement or collection against any Borrower or
any Subsidiary of any Borrower of any provision of any of the Loan
Documents, and in connection with or arising out of any litigation,
investigation or proceeding instituted by any Governmental Body or any
other Person with respect to any of the Loan Documents, whether or not
suit is instituted, including, but not limited to, such costs or
expenses arising from the enforcement or collection against any
Borrower or any Subsidiary of any Borrower of any provision of any of
the Loan Documents in workout or restructuring any state or federal
bankruptcy or reorganization proceeding.
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10.2 INDEMNITY. Borrowers agree to indemnify and save Lender harmless
of and from the following:
10.2.1 BROKERAGE FEES. The fees, if any, of brokers and finders
engaged by Borrower.
10.2.2 GENERAL. Any loss, cost, liability, damage or expense
(including reasonable attorneys' fees and expenses) incurred by Lender
in investigating, preparing for, defending against, providing evidence,
producing documents or taking other action in respect of any commenced
or threatened litigation, administrative proceeding, suit instituted by
any Person or investigation under any law, including any federal
securities law, the Bankruptcy Code, any relevant state corporate
statute or any other securities law, bankruptcy law or law affecting
creditors generally of any jurisdiction, or any regulation pertaining
to any of the foregoing, or at common law or otherwise, relating,
directly or indirectly, to the transactions contemplated by or referred
to in, or any other matter related to, the Loan Documents.
10.2.3 OPERATION OF COLLATERAL; JOINT VENTURERS. Any loss, cost,
liability, damage or expense (including reasonable attorneys' fees and
expenses) incurred in connection with the ownership, operation or
maintenance of the Collateral, the construction of Lender and any
Borrower or any Subsidiary of any Borrower as having the relationship
of joint venturers or partners or the determination that Lender has
acted as agent for any Borrower or any Subsidiary of any Borrower.
10.2.4 ENVIRONMENTAL INDEMNITY. Any and all claims, losses,
damages, response costs, clean-up costs and expenses suffered and/or
incurred at any time by Lender arising out of or in any way relating to
the existence at any time of any Hazardous Materials in, on, under, at,
transported to or from, or used in the construction and/or renovation
of, any of the Real Estate or Leasehold Property, or otherwise with
respect to any Environmental Law, and/or the failure of any Borrower or
any Subsidiary of any Borrower to perform its obligations and covenants
hereunder with respect to environmental matters, including, but not
limited to: (i) claims of any Persons for damages, penalties, response
costs, clean-up costs, injunctive or other relief, (ii) costs of
removal and restoration, including fees of attorneys and experts, and
costs of reporting the existence of Hazardous Materials to any
Governmental Body, and (iii) any expenses or obligations, including
attorneys' fees and expert witness fees, incurred at, before and after
any trial or other proceeding before any Governmental Body or appeal
therefrom whether or not taxable as costs, including, without
limitation, witness fees, deposition costs, copying and telephone
charges and other expenses, all of which shall be paid by Borrowers to
Lender.
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ARTICLE XI
TAXES, YIELD PROTECTION AND ILLEGALITY
11.1 TAXES. (a) Any and all payments by Borrowers to Lender under this
Loan Agreement shall be made free and clear of, and without deduction or
withholding for, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of Lender, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by Lender's net income by the
jurisdiction under the laws of which such Lender, as the case may be, is
organized or maintains a lending office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes").
(b) In addition, Borrowers shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Loan Agreement
or any other Loan Documents (hereinafter referred to as "Other Taxes").
(c) Borrowers shall indemnify and hold harmless Lender for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 11.1) paid by Lender and
any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnification
shall be made within thirty (30) days from the date Lender makes written demand
therefor.
(d) If any Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to Lender,
then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 10.1) Lender receives an
amount equal to the sum it would have received had no such deductions
been made;
(ii) Borrowers shall make such deductions; and
(iii) Borrowers shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable
law.
(e) Within thirty (30) days after the date of any payment by Borrowers
of Taxes or Other Taxes, Borrowers shall furnish to Lender the original or a
certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to Lender.
(f) If Borrowers are required to pay additional amounts to Lender or
the Agent pursuant to subsection 11.1(d), then Lender shall use its reasonable
best efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its lending office so as to eliminate any such
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additional payment by Borrowers which may thereafter accrue if such change in
the judgment of Lender is not otherwise disadvantageous to such Lender.
11.2 ILLEGALITY. (a) If after the date hereof Lender shall determine
that the introduction of any Requirement of Law, or any change in any
Requirement of Law or in the interpretation or administration thereof, has made
it unlawful, or that any central bank or other Governmental Body has asserted
that it is unlawful, for Lender or its lending office to make LIBOR Loans, then,
on notice thereof by Lender to Borrowers, the obligation of Lender to make LIBOR
Rate Loans shall be suspended until Lender shall have notified Borrowers that
the circumstances giving rise to such determination no longer exists.
(b) Subject to clause (c) below, if Lender shall determine that it is
unlawful to maintain any LIBOR Rate Loan, Borrowers shall prepay in full all
LIBOR Rate Loans of Lender then outstanding, together with interest accrued
thereon, either on the last day of the Interest Period thereof if Lender may
lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately,
if Lender may not lawfully continue to maintain such LIBOR Rate Loans, together
with any amounts required to be paid in connection therewith pursuant to Section
11.4.
(c) If the obligation of Lender to make or maintain LIBOR Rate Loans
has been terminated, Borrowers may elect, by giving notice to Lender, that all
Loans which would otherwise be made shall be instead Base Rate Loans.
(d) Before giving any notice to Lender pursuant to this Section 11.2,
Lender shall designate a different lending office with respect to the LIBOR Rate
Loans if such designation will avoid the need for giving such notice or making
such demand and will not, in the judgment of Lender, be illegal or otherwise
disadvantageous to Lender.
11.3 INCREASED COSTS AND REDUCTION OF RETURN. (a) If Lender shall
determine that, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Body (whether
or not having the force of law) made, in the case of clause (i) or (ii)
subsequent to the date hereof, there shall be any increase in the cost to Lender
of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then
Borrowers shall be liable for, and shall from time to time, within thirty (30)
days of demand therefor by Lender, pay to Lender additional amounts as are
sufficient to compensate Lender for such increased costs.
(b) If Lender shall have determined that:
(i) the introduction of any Capital Adequacy Regulation;
(ii) any change in any Capital Adequacy Regulation;
(iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental
Body charged with the interpretation or administration thereof; or
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(iv) compliance by Lender (or its lending office) or any
corporation controlling Lender, with any Capital Adequacy Regulation;
affects the amount of capital required or expected to be maintained by Lender or
any corporation controlling Lender and (taking into consideration Lender's or
such corporation's policies with respect to capital adequacy and Lender's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment(s), loans, credits or obligations
under this Agreement, then, within thirty (30) days of demand of Lender,
Borrowers shall upon demand pay to Lender, from time to time as specified by
Lender, additional amounts sufficient to compensate Lender for such increase.
11.4 FUNDING LOSSES. Borrowers agree to reimburse Lender and to hold
Lender harmless from any loss or expense which Lender may sustain or incur as a
consequence of:
(a) the failure of Borrowers to make any payment or mandatory
prepayment of principal of any LIBOR Rate Loan (including payments made after
any acceleration thereof);
(b) the failure of Borrowers to borrow, continue or convert any Loan
after Borrowers have given (or is deemed to have given) a Notice of Borrowing or
a Notice of Conversion/ Continuation;
(c) the failure of Borrowers to make any prepayment after Borrowers
have given a notice in accordance with Section 2.8.1;
(d) the prepayment (including pursuant to subsection 2.8.1 and
subsection 2.8.2) of a LIBOR Rate Loan on a day which is not the last day of the
Interest Period with respect thereto; or
(e) the conversion pursuant to Section 2.5 of any LIBOR Rate Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans hereunder or from fees
payable to terminate the deposits from which such funds were obtained. Solely
for purposes of calculating amounts payable by Borrowers to Lender under this
Section 11.4 and under subsection 11.3(a): each LIBOR Rate Loan made by Lender
(and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR used in determining the
interest rate for such LIBOR Rate Loan by a matching deposit or other borrowing
in the interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such LIBOR Rate Loan is in fact so funded.
11.5 INABILITY TO DETERMINE RATES. If Lender shall have determined in
good faith that for any reason adequate and reasonable means do not exist for
ascertaining the LIBOR for any requested Interest Period with respect to a
proposed LIBOR Rate Loan or that the LIBOR applicable pursuant to subsection
2.3.1 for any requested Interest Period with respect to a proposed LIBOR Rate
Loan does not adequately and fairly reflect the cost to Lender of funding
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such Loan, Lender will forthwith give notice of such determination to Borrowers.
Thereafter, the obligation of Lender to make or maintain LIBOR Rate Loans
hereunder shall be suspended until Lender revokes such notice in writing. Upon
receipt of such notice, Borrowers may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If Borrowers do not revoke such
notice, Lender shall make, convert or continue the Loans, as proposed by
Borrowers, in the amount specified in the applicable notice submitted by
Borrowers, but such Loans shall be made, converted or continued as Base Rate
Loans.
11.6 RESERVES ON LIBOR RATE LOANS. Borrowers shall pay to Lender, as
long as Lender shall be required under regulations of the Federal Reserve Board
to maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each LIBOR
Rate Loan equal to actual costs of such reserves allocated to such Loan by
Lender (as determined by Lender in good faith, which determination shall be
conclusive absent demonstrative error), payable on each date on which interest
is payable on such Loan provided Borrowers shall have received at least fifteen
(15) days' prior written notice of such additional interest from Lender. If
Lender fails to give notice fifteen (15) days prior to the relevant Interest
Payment Date, such additional interest shall be payable fifteen (15) days from
receipt of such notice.
11.7 CERTIFICATES OF LENDERS. If Lender claims reimbursement or
compensation pursuant to this Article XI, Lender shall deliver to Borrowers a
certificate setting forth in reasonable detail the amount payable to Lender
hereunder and such certificate shall be conclusive and binding on Borrowers in
the absence of manifest error.
11.8 SURVIVAL. The agreements and obligations of Borrowers in this
Article XI shall survive the payment of all other Borrowers' Obligations.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. All notices and communications under this Loan Agreement
shall be in writing and shall be (i) delivered in person, (ii) sent by telecopy,
or (iii) mailed, postage prepaid, either by registered or certified mail, return
receipt requested, or by overnight express carrier, addressed in each case as
follows:
To Borrowers: c/o InfoCure Corporation
1765 The Exchange
Suite 400
Atlanta, Georgia 30339
Attention: Richard Perlman
Telecopy No.: (770) 857-1300
Copy to: Morris, Manning & Martin, L.L.P.
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1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1044
Attention: Richard L. Haury, Jr., Esq.
Telecopy No.: (404) 365-9532
To FINOVA: FINOVA Capital Corporation
311 South Wacker Drive
Suite 4400
Chicago, Illinois 60606
Attention: Tina Hughes, Vice President
or Portfolio Manager
Telecopy No.: (312) 322-3527
Copy to: FINOVA Capital Corporation
1850 N. Central Avenue
Phoenix, Arizona 85077
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
Copy to: Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Michael A. Jacobson, Esq.
Telecopy No.: (312) 902-1061
or to any other address or telecopy number, as to any of the parties hereto, as
such party shall designate in a written notice to the other parties hereto. All
notices sent pursuant to the terms of this Section 12.1 shall be deemed received
(i) if personally delivered, then on the Business Day of delivery, (ii) if sent
by telecopy before 2:00 p.m. Phoenix time, on the day sent if a Business Day or
if such day is not a Business Day or if sent after 2:00 p.m. Phoenix time, then
on the next Business Day, (iii) if sent by overnight, express carrier, on the
next Business Day immediately following the day sent, or (iv) if sent by
registered or certified mail, on the earlier of the fifth (5th) Business Day
following the day sent or when actually received. Any notice by telecopy shall
be followed by delivery on the next Business Day by overnight, express carrier
or by hand.
12.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES. All covenants,
agreements, representations and warranties made in this Loan Agreement and in
the certificates delivered pursuant hereto shall survive the making by Lender of
the Loans and the execution and delivery to Lender of the Notes and of all other
Loan Documents, and shall continue in full force and effect so long as any of
Borrowers' Obligations remain outstanding, unperformed or unpaid and the
Commitments have not been terminated. Notwithstanding the repayment of all
amounts due under the Loan Documents, the cancellation of the Notes and the
release and/or cancellation of any and all of the Loan Documents or the
foreclosure of any Liens on the Collateral or the termination of the
Commitments, the obligations of Borrowers to indemnify Lender with respect to
the expenses, damages, losses, costs and liabilities described in Section 10.2
shall survive until
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all applicable statute of limitations periods with respect to actions which may
be brought against Lender have run.
12.3 FURTHER ASSURANCE. From time to time, Borrowers shall execute and
deliver to Lender such additional documents as Lender reasonably may require to
carry out the purposes of the Loan Documents and to protect rights of Lender
thereunder, including, without limitation, using its best efforts in the event
any Collateral is to be sold to secure the approval by any Governmental Body of
any application required by such Governmental Body in connection with such sale,
and not take any action inconsistent with such sale or the purposes of the Loan
Documents.
12.4 TAXES AND FEES. Should any tax (other than taxes based upon the
net income of any Lender), recording or filing fees become payable in respect of
any of the Loan Documents, or any amendment, modification or supplement thereof,
Borrowers agree to pay the same on demand, together with any interest or
penalties thereon attributable to any delay by Borrowers in meeting any Lender
demand, and agrees to hold Lender harmless with respect thereto.
12.5 SEVERABILITY. In the event that any provision of this Loan
Agreement is deemed to be invalid by reason of the operation of any law, or by
reason of the interpretation placed thereon by any court or Governmental Body,
as applicable, this Loan Agreement shall be construed as not containing such
provision and the invalidity of such provision shall not affect the validity of
any other provisions hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and effect.
12.6 WAIVER. No delay on the part of Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege hereunder shall preclude other
or further exercise thereof, or be deemed to establish a custom or course of
dealing or performance between the parties hereto, or preclude the exercise of
any other right, power or privilege.
12.7 MODIFICATION OF LOAN DOCUMENTS. No modification or waiver of any
provision of any of the Loan Documents shall be effective unless the same shall
be in writing and signed by Borrowers and Lender, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Borrower in any case shall entitle
such Borrower to any other or further notice or demand in the same, similar or
other circumstances.
12.8 CAPTIONS. The headings in this Loan Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
12.9 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
12.10 REMEDIES CUMULATIVE. All rights and remedies of the parties
hereto, any other Loan Documents or otherwise, shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently. Lender shall not
be required to prosecute collection, enforcement or
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other remedies against any Borrower before proceeding against any other Borrower
or any Subsidiary of any Borrower or to enforce or resort to any security,
liens, collateral or other rights of Lender. One or more successive actions may
be brought against any Borrower and/or any Subsidiary of any Borrower, either in
the same action or in separate actions, as often as Lender deems advisable,
until all of Borrowers' Obligations are paid and performed in full and the
Commitments shall have terminated.
12.11 ENTIRE AGREEMENT; CONFLICT. This Loan Agreement and the other
Loan Documents executed prior or pursuant hereto constitute the entire agreement
among the parties hereto with respect to the transactions contemplated hereby or
thereby and supersede any prior agreements, whether written or oral, relating to
the subject matter hereof. In the event of a conflict between the terms and
conditions set forth herein and the terms and conditions set forth in any other
Loan Instrument, the terms and conditions set forth herein shall govern.
12.12 APPLICABLE LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF ARIZONA.
12.13 JURISDICTION AND VENUE. BORROWERS HEREBY AGREE THAT ALL ACTIONS
OR PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF
THE LOAN DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY,
OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF LENDER
INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH
LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION.
EACH BORROWER HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF SUCH
COURTS IN THE STATE OF ARIZONA. EACH BORROWER WAIVES ANY CLAIM THAT MARICOPA
COUNTY, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR
BORROWERS SET FORTH IN THIS SECTION 12.13 SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT BY OR LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM TO THE
EXTENT SUCH FORUM HAS JURISDICTION OR THE TAKING BY LENDER OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER JURISDICTION PERMITTED BY LAW, AND EACH BORROWER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
12.14 WAIVER OF RIGHT TO JURY TRIAL. LENDER AND BORROWERS ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN DOCUMENTS
OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY WILL BE
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TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
12.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY
BORROWERS OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
12.16 ESTOPPEL CERTIFICATE. Within fifteen (15) days after Lender
requests Borrowers to do so, Borrowers will execute and deliver to Lender a
statement certifying (i) that this Loan Agreement is in full force and effect
and has not been modified except as described in such statement, (ii) the date
to which interest and principal on the Notes have been paid, (iii) the Principal
Balance, (iv) whether or not to its knowledge an Incipient Default or Event of
Default has occurred and is continuing, and, if so, specifying in reasonable
detail each such Incipient Default or Event of Default of which they have
knowledge, (v) whether to its knowledge Borrowers have any defense, setoff or
counterclaim to the payment of the Notes in accordance with their terms, and, if
so, specifying each defense, setoff or counterclaim of which they have knowledge
in reasonable detail (including where applicable the amount thereof), and (vi)
as to any other matter reasonably requested by Lender.
12.17 CONSEQUENTIAL DAMAGES. Neither Lender nor any agent or attorney
of Lender shall be liable to Borrowers for consequential damages arising from
any breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Borrowers' Obligations.
12.18 COUNTERPARTS. This Loan Agreement may be executed by the parties
hereto in several counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
12.19 NO FIDUCIARY RELATIONSHIP. No provision in this Loan Agreement
or in any other Loan Document, and no course of dealing among the parties
hereto, shall be deemed to create any fiduciary duty by Lender to Borrowers or
their Subsidiaries.
12.20 NOTICE OF BREACH BY LENDER. Borrowers agree to give Lender
written notice of (i) any action or inaction by Lender or any agent or attorney
of Lender in connection with the Loan Documents that may be actionable against
Lender or any agent or attorney of Lender or (ii) any defense to the payment of
Borrowers' Obligations for any reason, including, but not limited to, commission
of a tort or violation of any contractual duty implied by law.
12.21 JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities
of Borrowers under this Loan Agreement, all other Loan Documents and any and all
other agreements, documents and instruments executed from time to time in
connection herewith or therewith constitute the joint and several obligations of
Borrowers.
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IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered
by each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
INFOCURE CORPORATION, a Delaware
corporation, INFOCURE SYSTEMS, INC.,
a Georgia corporation, and
THOROUGHBRED ACQUISITION, INC., a
Georgia corporation
By: /s/ Richard Perlman
-----------------------------------------------
Name: Richard Perlman
---------------------------------------------
A duly authorized officer of each Borrower
FEINS: InfoCure Corporation: 58-2271614
InfoCure Systems: 58-2359731
Thoroughbred: 58-2416900
Wire Transfer Instructions:
c/o InfoCure Corporation
NationsBank, Atlanta, Georgia
Account No. 3261311445
ABA No. 061000052
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/ Tina L. Hughes
-----------------------------------------------
Name: Tina L. Hughes
---------------------------------------------
Vice President
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EXHIBIT 10.15
AMENDMENT TO
INFOCURE CORPORATION
1996 STOCK OPTION PLAN
Pursuant to the power reserved in Section VIII of the InfoCure Corporation
1996 Stock Option Plan and in connection with the approval granted by the
shareholders of InfoCure Corporation, Section V, Available Shares and Stock
Adjustments, is hereby amended to delete "1,125,000" from the first sentence
thereof and to insert in its place "3,000,000."
This Amendment to the InfoCure Corporation 1996 Stock Option Plan shall be
effective as of the date that the shareholders of InfoCure Corporation adopted
the Amendment to the Plan.
INFOCURE CORPORATION
By: /s/ James K. Price
--------------------------------------
James K. Price
Executive Vice President and Secretary
Date: March 30, 2000
<PAGE> 1
EXHIBIT 10.16
AMENDMENT TO
INFOCURE CORPORATION
LENGTH-OF-SERVICE NONQUALIFIED STOCK OPTION PLAN
Pursuant to the power reserved in Section 16 of the InfoCure
Corporation Length-of-Service Stock Option Plan and in connection with the
approval granted by the shareholders of InfoCure Corporation, Section 3, Shares
Subject to Options, is hereby amended to delete "One hundred fifty thousand
(150,000)" from the first sentence thereof and to insert in its place "Five
hundred thousand (500,000)."
This Amendment to the InfoCure Corporation Length-of-Service Stock
Option Plan shall be effective as of the date that the shareholders of InfoCure
Corporation adopted the Amendment to the Plan.
INFOCURE CORPORATION
By: /s/ James K. Price
--------------------------------------
James K. Price
Executive Vice President and Secretary
Date: March 30, 2000
<PAGE> 1
EXHIBIT 10.17
AMENDMENT TO
INFOCURE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Pursuant to the power reserved in Section 16 of the InfoCure
Corporation Employee Stock Purchase Plan and in connection with the approval
granted by the shareholders of InfoCure Corporation, Section 4, Securities
Subject to the Plan, is hereby amended to delete "one hundred thousand
(100,000)" from the first sentence thereof and to insert in its place "one
hundred fifty thousand (150,000)."
This Amendment to the InfoCure Corporation Employee Stock Purchase Plan
shall be effective as of the date that the shareholders of InfoCure Corporation
adopted the Amendment to the Plan.
INFOCURE CORPORATION
By: /s/ James K. Price
---------------------------------------
James K. Price
Executive Vice President and Secretary
Date: March 30, 2000
<PAGE> 1
EXHIBIT 10.19
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into effectives of the ________ day of
__________, 199___, by and between InfoCure Corporation, a Delaware corporation
(the "Company") and Frederick L. Fine ("Employee").
WHEREAS, the Company and Employee are parties to that certain Restricted
Stock Award Agreement dated June 1, 1998 (the "Restricted Stock Agreement"),
whereby Employee was awarded thirty-five thousand (35,000) shares of the
Company's common stock (the "Bonus Shares"), subject to certain vesting
requirements;
WHEREAS, none of the Bonus Shares have vested as of the date hereof; and
WHEREAS, Employee and the Company desire to modify the Restricted Stock
Agreement so that in the event the Bonus Shares vest, the benefit is credited
under a deferred compensation arrangement.
FOR AND IN CONSIDERATION of the premises and mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Bonus Shares. In the event the Bonus Shares vest, Employee
irrevocably elects to have a benefit equivalent to the thirty-five thousand
(35,000) Bonus Shares credited to a deferred compensation account maintained by
the Company for the benefit of Employee.
2. Unfunded Nature of Benefit. The benefit contemplated
hereby is an unfunded promise to pay a benefit equivalent to the value of
thirty-five thousand (35,000) (subject to adjustment as provided in Section 4.
hereof) shares of the Company's common stock as of the date of payment. Any
funds which may be segregated for payment of this obligation of the Company
shall continue for all purposes to be a part of the general funds of the
Company and no person other than the Company shall by virtue of the provisions
of this Agreement have any interest in such funds.
3. Payment. Employee shall be entitled to receive a benefit
equivalent to the thirty-five thousand (35,000) Bonus Shares only upon
termination of his employment with the Company. The benefit shall be paid in
shares of the Company's common stock to Employee within thirty (30) days
following the date of such termination of employment.
4. Adjustments. If the number of outstanding shares of common
stock of the Company is increased or decreased by reason of a split-up, stock
split, reverse stock split, reclassification, distribution of a common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made in the benefit payable pursuant hereto, such that Employee's
proportionate interest shall be maintained as before the occurrence of such
event.
5. Governing Law. This Agreement shall be construed, administered
and enforced according to the laws of the State of Georgia.
<PAGE> 2
6. Entire Agreement. This Agreement, and the Restricted Stock
Agreement to the extent not inconsistent herewith, express the entire
understanding and agreement of the parties with respect to the subject matter
hereof.
7. Amendment. This Agreement may be amended or revoked at any
time in whole or in part by the mutual written agreement of the parties hereto.
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
-----------------------------------------
Title: Chairman
--------------------------------------
EMPLOYEE:
/s/ Frederick L. Fine
--------------------------------------------
Frederick L. Fine
2
<PAGE> 1
EXHIBIT 10.20
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into effective as of the ________
day of __________, 199___, by and between InfoCure Corporation, a Delaware
corporation (the "Company") and James K. Price ("Employee").
WHEREAS, the Company and Employee are parties to that certain
Restricted Stock Award Agreement dated June 1, 1998 (the "Restricted Stock
Agreement"), whereby Employee was awarded thirty thousand (30,000) shares of
the Company's common stock (the "Bonus Shares"), subject to certain vesting
requirements;
WHEREAS, none of the Bonus Shares have vested as of the date hereof;
and
WHEREAS, Employee and the Company desire to modify the Restricted
Stock Agreement so that in the event the Bonus Shares vest, the benefit is
credited under a deferred compensation arrangement.
FOR AND IN CONSIDERATION of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Bonus Shares. In the event the Bonus Shares vest,
Employee irrevocably elects to have a benefit equivalent to the thirty thousand
(30,000) Bonus Shares credited to a deferred compensation account maintained by
the Company for the benefit of Employee.
2. Unfunded Nature of Benefit. The benefit contemplated
hereby is an unfunded promise to pay a benefit equivalent to the value of
thirty thousand (30,000) (subject to adjustment as provided in Section 4.
hereof) shares of the Company's common stock as of the date of payment. Any
funds which may be segregated for payment of this obligation of the Company
shall continue for all purposes to be a part of the general funds of the
Company and no person other than the Company shall by virtue of the provisions
of this Agreement have any interest in such funds.
3. Payment. Employee shall be entitled to receive a benefit
equivalent to the thirty thousand (30,000) Bonus Shares only upon termination
of his employment with the Company. The benefit shall be paid in shares of the
Company's common stock to Employee within thirty (30) days following the date
of such termination of employment.
4. Adjustments. If the number of outstanding shares of common
stock of the Company is increased or decreased by reason of a split-up, stock
split, reverse stock split, reclassification, distribution of a common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made in the benefit payable pursuant hereto, such that Employee's
proportionate interest shall be maintained as before the occurrence of such
event.
5. Governing Law. This Agreement shall be construed,
administered and enforced according to the laws of the State of Georgia.
<PAGE> 2
6. Entire Agreement. This Agreement, and the Restricted
Stock Agreement to the extent not inconsistent herewith, express the entire
understanding and agreement of the parties with respect to the subject matter
hereof.
7. Amendment. This Agreement may be amended or revoked at
any time in whole or in part by the mutual written agreement of the parties
hereto.
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Richard E. Perlman
-------------------------------------
Title: Chairman
----------------------------------
EMPLOYEE:
/s/ James K. Price
----------------------------------------
James K. Price
2
<PAGE> 1
EXHIBIT 10.21
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into effective as of the ________
day of __________, 199___, by and between InfoCure Corporation, a Delaware
corporation (the "Company") and Richard E. Perlman ("Employee").
WHEREAS, the Company and Employee are parties to that certain
Restricted Stock Award Agreement dated June 1, 1998 (the "Restricted Stock
Agreement"), whereby Employee was awarded thirty thousand (30,000) shares of
the Company"s common stock (the "Bonus Shares"), subject to certain vesting
requirements;
WHEREAS, none of the Bonus Shares have vested as of the date hereof;
and
WHEREAS, Employee and the Company desire to modify the Restricted
Stock Agreement so that in the event the Bonus Shares vest, the benefit is
credited under a deferred compensation arrangement.
FOR AND IN CONSIDERATION of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Bonus Shares. In the event the Bonus Shares vest,
Employee irrevocably elects to have a benefit equivalent to the thirty thousand
(30,000) Bonus Shares credited to a deferred compensation account maintained by
the Company for the benefit of Employee.
2. Unfunded Nature of Benefit. The benefit contemplated
hereby is an unfunded promise to pay a benefit equivalent to the value of
thirty thousand (30,000) (subject to adjustment as provided in Section 4.
hereof) shares of the Company's common stock as of the date of payment. Any
funds which may be segregated for payment of this obligation of the Company
shall continue for all purposes to be a part of the general funds of the
Company and no person other than the Company shall by virtue of the provisions
of this Agreement have any interest in such funds.
3. Payment. Employee shall be entitled to receive a benefit
equivalent to the thirty thousand (30,000) Bonus Shares only upon termination
of his employment with the Company. The benefit shall be paid in shares of the
Company's common stock to Employee within thirty (30) days following the date
of such termination of employment.
4. Adjustments. If the number of outstanding shares of common
stock of the Company is increased or decreased by reason of a split-up, stock
split, reverse stock split, reclassification, distribution of a common stock
dividend, or other similar capital adjustment, an appropriate adjustment shall
be made in the benefit payable pursuant hereto, such that Employee's
proportionate interest shall be maintained as before the occurrence of such
event.
5. Governing Law. This Agreement shall be construed,
administered and enforced according to the laws of the State of Georgia.
<PAGE> 2
6. Entire Agreement. This Agreement, and the Restricted Stock
Agreement to the extent not inconsistent herewith, express the entire
understanding and agreement of the parties with respect to the subject matter
hereof.
7. Amendment. This Agreement may be amended or revoked at any
time in whole or in part by the mutual written agreement of the parties hereto.
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first set forth above.
COMPANY:
InfoCure Corporation
By: /s/ Frederick L. Fine
-----------------------------------
Title: President
--------------------------------
EMPLOYEE:
/s/ Richard E. Perlman
--------------------------------------
Richard E. Perlman
2
<PAGE> 1
Exhibit 10.22
Non-Plan Stock Options Grants
The table below sets forth options to acquire the common stock, par
value $.001 per share, of InfoCure Corporation granted to executive officers of
InfoCure pursuant to Non-Qualified Stock Option Grant Certificates in the form
set below and not otherwise pursuant to a stock option plan of InfoCure.
<TABLE>
<CAPTION>
Shares Subject to Exercise Price Per
Name Date Option* Share*
- ---- ---- ------- ------
<S> <C> <C> <C>
Frederick L. Fine June 9, 1999 440,000 $17.50
James K. Price June 9, 1999 440,000 $17.50
Richard E. Perlman June 9, 1999 440,000 $17.50
Frederick L. Fine October 23, 1998 280,000 $ 6.75
James K. Price October 23, 1998 260,000 $ 6.75
Richard E. Perlman October 23, 1998 260,000 $ 6.75
</TABLE>
* Reflects the effect of a two for one stock split of
InfoCure's common stock on August 19, 1999.
<PAGE> 2
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:
Type of Stock Option: Non-qualified
Shares Subject to Option:
Exercise Price Per Share:
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
- -----------------------------
Print Name of Optionee
<PAGE> 3
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. In the event
of a stock split, reverse stock split, stock dividend or a reclassification of
the Common Stock of the Company or similar action by the Company, the number of
Shares issuable upon exercise of this Option and/or the Exercise Price shall be
appropriately adjusted, as determined by the Board in its sole discretion.
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, in the event that the
average per share closing price for common stock of the Company over a period
of twenty (20) consecutive trading days reaches $50.00, this Option shall
immediately vest as to one hundred percent (100%) of the underlying Shares.
<PAGE> 1
Exhibit 10.23
Non-Plan Stock Option Grants
The table below sets forth options to acquire the common stock, par
value $.001 per share, of InfoCure Corporation granted to directors of InfoCure
pursuant to Non-Qualified Stock Option Grant Certificates in the form set below
and not otherwise pursuant to a stock option plan of InfoCure.
<TABLE>
<CAPTION>
Shares Subject Exercise Price
Name Date to Option* Per Share*
- ---- ---- -------------- --------------
<S> <C> <C> <C>
Raymond H. Welsh October 23, 1998 5,000 $6.75
James D. Elliott October 23, 1998 5,000 $6.75
</TABLE>
* Reflects the effect of a two for one stock split of InfoCure's common
stock on August 19, 1999.
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:
Type of Stock Option: Non-qualified
Shares Subject to Option:
Exercise Price Per Share:
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.
Two 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
- -----------------------------
Print Name of Optionee
- -----------------------------
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. 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.
4. 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.
5. 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.
6. 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. In the event of a stock split,
reverse stock split, stock dividend or a reclassification of the Common Stock of
the Company or similar action by the Company, the number of Shares issuable upon
exercise of this Option and/or the Exercise Price shall be appropriately
adjusted, as determined by the Board in its sole discretion.
7. 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.
8. 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.
THIS OPTION SHALL VEST AS TO FIFTY PERCENT (50%) OF THE UNDERLYING SHARES
UPON OPTIONEE'S COMPLETION OF ONE (1) YEAR OF SERVICES AS A MEMBER OF THE
COMPANY'S BOARD OF DIRECTORS FOLLOWING THE DATE OF GRANT, AND AS TO THE
REMAINING FIFTY PERCENT (50%) OF THE UNDERLYING SHARES UPON COMPLETION OF
OPTIONEE'S SECOND YEAR OF SERVICE AS A MEMBER OF THE BOARD OF DIRECTORS
FOLLOWING THE DATE OF GRANT.
<PAGE> 1
EXHIBIT 10.24
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: October 23, 1998
Type of Stock Option: Non-qualified
Shares Subject to Option: 2,500
Exercise Price Per Share: $13.50
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
Michael Warren
- -----------------------------------
Print Name of Optionee
<PAGE> 2
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 extend (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 (75%) of the Shares; and
(d) After forty-eight (48) months of Continuous Service, up to one
hundred percent (100%) of the Shares.
<PAGE> 1
EXHIBIT 10.25
AMERICAN MEDCARE CORPORATION
1994 STOCK OPTION PLAN
I. PURPOSE
The American Medcare Corporation 1994 Stock Option Plan is an incentive
to encourage stock ownership by officers and other key employees of the
Corporation, of its Subsidiaries and of its Affiliates in order to provide them
with a proprietary interest or to increase their proprietary interest in the
corporation's success and/or to encourage them to remain in the employ of the
Corporation or any of its Subsidiaries.
II. DEFINITIONS
Where the following words appear in this Plan, they shall have the
respective meanings set forth below, unless their context clearly indicates a
contrary meaning:
A. Affiliate - Any corporation or other business organization in which
the Parent owns, directly or indirectly, 25% or more of the voting stock or
capital at the time of the granting of the Option.
B. Board of Directors - The Board of Directors of the Corporation.
C. Code - The Internal Revenue Code of 1986, as amended, included
amendments hereafter adopted.
D. Committee - The Compensation Committee of the Board of Directors or
any successor Committee appointed by the Board of Directors and in the absence
of the appointment of such committee, the Board of Directors of the corporation
which shall exercise all of the powers of the Committee.
E. Corporation - American Medcare Corporation, a Delaware corporation,
that is the parent corporation as defined in Subsections 424(e) and (g) of the
code.
F. Employee - Employee shall mean any officer or other key employee
(including an officer or other key employee who is also a director) employed on
a full-time basis by the corporation or any present or future Parent of
Subsidiary or Affiliate.
G. ISO - An option granted under the Plan which constitutes an
incentive stock option within the meaning of Section 422 of the Code.
H. Non-Qualified Stock Option - An option granted under the Plan which
does not qualify as an ISO.
I. Option - An option granted under the Plan which may be either an ISO
or a Non-Qualified Stock Option.
J. Option Agreement - The document setting forth the terms and
conditions of each Option.
K. Optionee - The holder of an Option.
L. Parent - Parent shall mean any present or future corporation as
defined in Subsections 424(e) and (g) of the code.
M. Plan - American Medcare Corporation 1994 Stock Option Plan, as the
same may be amended from time to time in accordance with the terms hereof.
<PAGE> 2
N. Shares - The shares of common stock of the corporation, $0.001 par
value, subject to adjustment as provided in Paragraph V of the Plan.
O. Subsidiary - Any present or future subsidiary of the corporation as
defined in Subsections 424(f) and (g) of the code.
III. ADMINISTRATION
A. The committee shall have full and complete authority in its sole
discretion, but subject to the express provisions of the Plan, to grant Options,
to determine the option price of the shares covered by each Option, the
Employees of the Corporation, of its subsidiaries and of its affiliates to whom,
and the time or times at which, Options shall be granted and number of Shares to
be covered by each Option; to interpret the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan to determine the terms and
conditions of the respective option grant (which terms need not be identical);
to cancel and amend Options (with the consent of the holder of the option where
required); to impose such conditions on the grant of Options as it determines to
be appropriate, including the surrender of outstanding stock options issued
under Plan or any other stock options, regardless of the option price; and to
make all other determinations and rules and the such other action deemed
necessary or advisable for the administration of the Plan. In addition, the
Committee may extend the duration of any Option for a period not to exceed one
year subject to the provisions of Section VI B without changing the option price
upon such terms as the committee may deem advisable.
Each determination, interpretation, rule or other action made or taken
pursuant to the Plan by the Committee shall be final and conclusive for all
purposes and upon all persons, including but without limitation thereto, the
corporation, subsidiaries, affiliates, the Board of Directors, the Committee,
Optionees and Employees of the Corporation, its Subsidiaries and its affiliates
and Optionees and their respective successors in interest.
B. The committee shall consist of not less than (2) directors, Each
member of the Committee shall be a member of the Board of directors who is not
eligible to participate under the Plan and who has not been granted or awarded
equity securities of the Corporation for at least one year prior to the time the
director becomes a member of the committee or during such services on the
Committee pursuant to the Plan or any other plan within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (634 Act), except as
otherwise permitted under Rule 16b-3 (or any successor rule or regulation).
The Board of Directors may designate one (1) of the members of the
committee as its chairman and the Committee shall hold its meetings at such
times and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members present at a meeting at which a quorum was present. Any
decision or determination reduced to writing and signed by all the members of
the Committee shall be effective as if it had been made by a vote at a meeting
duly called and held. The committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.
C. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the administration of the Plan
and the granting of Options thereunder.
<PAGE> 3
IV. ELIGIBILITY AND LIMITATIONS
Options may be granted only to Employees of the corporation or of any
Subsidiary or Parent or Affiliate. Persons who are not Employees of the
corporation or of a Subsidiary or Parent will not be eligible to receive as ISO.
In determining the number of shares to be covered by each Option, subject to
Paragraph V. hereof, and persons whom Options shall be granted, the Committee
shall take into account such factors as it shall deem relevant in connection
with accomplishing the purpose of the Plan as set forth in Paragraph I hereof
Any person who has been granted an Option may be granted an additional Option or
Options if the Committee shall so determine. No ISO shall be granted to an
individual who, at the time an ISO is granted, owns (within the meaning of
Section 422(b)(6) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or of its
Parent or any Subsidiary, unless, at the times the ISO is granted, the option
price is at least 110 percent (110%) of the fair market value of the Shares
subject to the ISO and the ISO by its terms is not exercisable after the
expiration of five (5) years from the date the ISO is granted. The aggregate
fair market value (determined as of the time an ISO is granted) of the Shares
with respect to which ISOs are exercisable for the first time by the Optionee
during any calendar year (under all plans of the corporation and the Parent and
Subsidiaries, if any) shall not exceed $100,000. ISOs granted to an Optionee in
excess of such limitation of or any calendar year shall be deemed to be a
Non-Qualified Stock Option. Each Option must be granted within ten (10) days
from the date on which the Plan is adopted by the board of Directors.
V. AVAILABLE SHARES AND STOCK ADJUSTMENTS
A. The total number of Shares that may be issued pursuant to Options
granted under this Plan shall not exceed 5,000,000 Shares of Common Stock,
subject to adjustment as set forth hereinafter. Shares subject to the Plan may
be either authorized but unissued Shares or Shares that were once issued and
subsequently reacquired by the Corporation. If any Option is surrendered before
exercise of lapses without exercise or for any other reason ceases to be
exercisable, the Shares reserved therefore shall continue to be available under
the Plan. The Corporation will reserve and keep available a sufficient number of
authorized but unissued shares and/or treasury shares to be issued upon the
exercise of the options.
B. In the event of a stock split, reverse stock split, stock dividend,
combination of Shares or a reclassification of the shares or other similar
action by the Corporation, the total number of Shares which may be issued under
the Plan upon the exercise of Options and the total number of shares and/or the
option price contained in any outstanding Option pursuant to which options were
granted under this Plan, shall be appropriately adjusted as determined by the
Board of Directors in its sole discretion. Any such adjustment in the number of
Shares and/or option price of an ISO shall be made in such a manner as to not
constitute a modification as defined in Subsection 424(h)(3) of the code an only
to the extent permitted by Sections 422 and 425 of the Code.
C. In the event of any merger or consolidation or other reorganization
in which the Corporation shall be surviving corporation and its shareholders
have a right to receive (or retain), in whole or in part, equity securities for
the outstanding Shares held, each holder of an outstanding Option shall be
entitled to receive, upon the exercise of the Option, in lieu of the number of
Shares as to which such holder of the Option would otherwise have been entitled
to receive upon the exercise of the Option immediately prior to such merger or
consolidation or other reorganization, the number and class of shares or other
securities and consideration to which such holder of the Option would have been
entitled pursuant to the terms of the merger or consolidation or other
reorganization, such is then being so exercised. Comparable rights shall accrue
to each holder of an Option in the event of successive mergers or consolidations
or other reorganization.
<PAGE> 4
D. In the event of any merger or consolidation or other reorganization,
in which the shareholders of the corporation shall not receive (or retain) any
equity securities of the surviving corporation for their Shares, regardless of
whether the corporation is the surviving corporation, or upon the dissolution or
liquidation of the corporation, except as hereinafter set forth, all Options
(whether or not vested in whole or in part) which have not been exercised prior
to such event, shall terminate upon such event unless and to the extent the
Board of Directors shall have provided for the substitution of other options
for, or for the assumption by another corporation of, any unexercised options
then outstanding. Such action by the Board of directors may be taken with
respect to ISO only to the extent permitted by the Code, including Sections 422
and 424, unless the Options are or are to become Non-Qualified Stock Options.
Except to the extent the Board of Directors shall have provided for the
substitution of other options for, or for the assumption by another corporation
of, any unexercised Option then outstanding or shall have specifically otherwise
provided as permitted by this subparagraph D, the Options which have not vested
shall not become exercisable prior to such event and all outstanding Options
shall expire upon such event.
E. In the event of any merger or consolidation or other reorganization
in which the Corporation is not the surviving corporation and in which its
shareholders shall receive equity securities (regardless of whether they receive
other consideration for their Shares, each holder of an outstanding Option shall
be entitled to receive, upon the exercise of the Option, in lieu of the number
of shares as to which such holder of the Option would otherwise have been
entitled to receive upon the exercise of the Option immediately prior to such
merger or consolidation or other reorganization, the number and class of shares
and other securities and consideration to which such holder of the Option would
have been entitled pursuant to the terms of the merger or consolidation or other
reorganization if, at the time of such merge or consideration or other
reorganization, such holder of the Option had been the holder of record of a
number of Shares equal to the number of Shares to which such Option is then
being so exercised. Comparable rights shall accrue to each holder of an Option
in the event of successive mergers or consolidations or reorganizations.
F. Any adjustments pursuant to this Paragraph V may provide for the
elimination of any fractional interest which might otherwise become subject to
an option, with or without consideration, as determined by the Board of
Directors of the corporation.
VI. OPTION TERMS
The Options will be granted under terms and conditions set forth in a
written instrument as determined by the Committee from time to time, which will
include (but no by way of limitation) the following:
A. Price and Payment - the purchase price of each Share covered by each
Option shall be determined by the Committee. The purchase price of each share
covered by an ISO shall not be less than the fair market value of a Share at the
time of the granting of the Option. The fair market value of a Share shall be
determined without regard to any restriction other than restrictions which by
their terms will never lapse. The purchase price of the Shares for which an
Option shall be exercised shall be paid in full at the time of the exercise in
cash or by check, subject to collection. The Committee may also provide that the
purchase price may be paid in whole in in part by assigning to the corporation a
number of shares having a fair market value, determined as of the date the
Option is exercised, equal to the cash amount of the option price for the Shares
being acquired upon the exercise of the Option. In such event, the committee
may, in its sole discretion, require certain representations and other
conditions precedent to the acceptance of the Shares form the Optionee.
<PAGE> 5
B. Duration - The duration of the Options shall be determined by the
Committee but in no event shall an Option granted hereunder be exercisable after
the earliest of any of the following dates (i) the expiration of the (1O) years
from the date the Option is granted; (ii) one (1) year after the cessation of
employment, engagement or officership, as the case may be, of the holder of the
Option with the corporation, any subsidiary, or the Part or Affiliate, except in
the event of termination of such employment or engagement or election, as the
case may be, due to death, or disability (within in the meaning of Section
422(c)(6) of the code). The committee's determination as to whether such
employment, engagement or election of an Optionee has ceased and the effective
date thereof shall be final and conclusive on all persons affected thereby.
Whether military or other government or eleemosynary service or other leave of
absence will constitute termination of such employment, engagement or election
shall be determined in each case by the committee in its sole discretion.
C. Non-transferability - Options granted under the Plan shall not be
transferable otherwise than by will or the laws of descent and distribution or
as otherwise permitted pursuant to Section 424(c)(4) of the Code (or any
successor provision). Options may be exercised during the lifetime of the
Optionee only by the Optionee personally or by the Optionee's legal
representative.
D. Exercise of Option - Options granted hereunder shall be exercisable
in whole or in part as determined by the Committee.
E. Conditions to Exercise of Options - Shares shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Shares shall comply with (or be exempt from) all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, any applicable state securities
law, and the requirements of any stock exchange or nation market system on which
the Shares may then be listed. If the issuance or transfer of Shares to be
issued or issued pursuant to any Option granted under this Plan may in the
opinion of counsel to the corporation conflict or be inconsistent with any
applicable law or regulation of any governmental agency having jurisdiction,
including, without limitation, federal and state securities laws, the
Corporation reserves the right to delay the issuance of the Shares upon the
exercise of an Option and such delay shall be without liability to or other
obligation of the corporation, the Corporation shall have no obligation
hereunder to file registration statements or other reports or notices or obtain
any license or permit or exemption under any federal or state law with respect
to the grant of an Option or the issuance of Shares upon the exercise of an
Option or the transfer of such Shares at any time thereafter. The Board of
directors or Committee may require that the holder of an Option, as a condition
to each exercise of the Option in whole on in part, to represent to the
corporation in writing that the Shares to be acquired upon the exercise of the
Option are to be acquired by the holder of the Option for investment purposes
only, for such person's own account, and not with an view to distribution and
make such other representations as counsel to the corporation may reasonably
request to assure the availability of an exemption from or compliance wit the
registration, notice, reporting or licensing requirements of applicable federal
or state securities laws. The Option may also set forth such other terms and
conditions relating to the non-registration or qualification of the Shares or
the issuance or transfer of the Shares by the Corporation under the federal and
state securities laws, as the Board of Directors or Committee may prescribe.
Such representations and other terms and conditions shall continue in effect as
long as counsel to the corporation may reasonably request.
F. Disposition of Shares - In the event the disposition of Shares
acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act of 1933, as amended, and under
<PAGE> 6
state securities laws, the Shares so purchased shall be restricted against
transfer to the extent and for as long as required by such laws and regulations
promulgated thereunder or until, and as long as, the Shares are covered by
applicable registration statements filed by the Corporation in its sole
discretion.
G. Tax Withholding - The corporation may, in its sole discretion and on
terms it shall determine, withhold, or grant to an Optionee the right to elect
to have withhold, Shares having a fair market value not in excession of the
amount necessary to satisfy the withholding tax obligations of the Optionee, in
whole or in part, relating to the exercise of the Option. Any election granted
to an executive officer (as defined pursuant to rules promulgated under the 1934
Act) or director or the Parent shall only be made during the period set forth in
Rule 16b-3 promulgated under the 1934 Act (or any successor rule or regulation.
VII. EXERCISE
An Option granted hereunder shall be exercisable in whole or in part
only by written notice delivered in person or by mail to the President of the
Corporation at its principal executive office, specifying the number of Shares
to be purchased and accompanied by payment therefore and other consideration in
accordance with the Option. The holder of an Option shall not be deemed to be a
holder of any Shares subject to any Option and shall not be entitled to the
rights of a holder of any shares, including the right to receive dividends,
unless and until such Shares have been issued.
VIII. TERMINATION AND AMENDMENT
The Board of Directors may at any time terminate the Plan, or make such
amendments thereto or modifications thereof as it shall deem advisable,
including amendments deemed necessary or desirable to conform any ISO to any
change in the Code regulations thereto; provided, however, that the Board of
Directors may not, without further approval by the shareholders of the
Corporation, increase the maximum number of Shares for which options may be
granted under the Plan or change the designation of the class of employees and
other persons eligible to receive Options. No termination, modification or
amendment of the Plan shall, without the consent of the person to whom an Option
shall theretofore have been granted, adversely affect the rights of such person
under such Option without such person's consent.
IX. MISCELLANEOUS
Applicable Law. The Plan shall be governed and construed in accordance
with the laws of the State of Georgia.
Employee/Employer Rights. The granting of Options hereunder shall be
entirely discretionary and noting in the Plan shall be deemed to give any
Employee any right of continued employment, engagement or officership, as the
case may be, or give any person any fight to receive Options or additional
Options hereunder or interfere in any way with the right of the Corporation, its
Parent or Subsidiary to terminate the Optionee's employment, engagement or
election, as the case may be, for any reason or the right of the Employee to
terminate his/her employment, engagement, or officership, as the case may be,
for any reason.
ISO Grants. This Plan is intended to provide in part for the grant in
incentive stock options pursuant to Section 422 of the code, including
amendments thereto hereafter adopted, and the provisions of the Plan as they
relate to ISOs and the ISOs granted shall be construed to effectuate such
purpose. If for any reason it is subsequently determined that an Option
<PAGE> 7
intended to qualify as an ISO does not so qualify, the Corporation, Parent and
Subsidiary shall have no liability to the Optionee and such Options shall be
deemed to be Non-Qualified Stock Options.
X. EFFECTIVE DATE
The Plan shall become effective on the date of this adoption by the
Board of Directors subject to the approval of the Plan by the shareholders of
the Corporation within twelve (12) months after the date of its adoption. The
date of granting of an Option shall be the date on which the Committee makes the
determination of granting such Option or such later date as designed by the
Committee.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
1. InfoCure Systems, Inc.
2. SDM Acquisition, Inc.
3. Thoroughbred Acquisition, Inc.
4. CADI Acquisition Corp.
5. InfoCure Australia PTY Limited
6. DeVage PTL Limited
7. InfoCure Orthodontics PTY Ltd.
<PAGE> 1
Exhibit 23.1 Consent of BDO Seidman, LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
InfoCure Corporation
Atlanta, Georgia
We hereby consent to the incorporation by reference in the registration
statements (Nos. 333-88589, 333-87795 and 333-73097) on Form S-3 and (Nos.
333-74773 and 333-48829) on Form S-8 of our report dated February 21, 2000,
relating to the consolidated financial statements of InfoCure Corporation and
subsidiaries appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
BDO SEIDMAN, LLP
Atlanta, Georgia
March 30, 2000
<PAGE> 1
Exhibit 23.2 Consent of KPMG LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Datamedic Holding Corp.
We consent to the incorporation by reference in the registration statements
(Nos. 333-88589, 333-87795 and 333-73097) on Form S-3 and (Nos. 333-74773 and
333-48829) on Form S-8 of InfoCure Corporation of our report dated May 25,
1999, with respect to the consolidated balance sheets of Datamedic Holding
Corp. and subsidiaries as of March 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficiency), and
cash flows for each of the years in the three-year period ended March 31, 1999,
which report appears in the Form 10-K of InfoCure Corporation dated December
31, 1999.
KPMG LLP
Melville, New York
March 30, 2000
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