UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________________ to ____________________
Commission file number: 0-22052
PROXYMED, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0202059
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2501 DAVIE ROAD, SUITE 230, FT. LAUDERDALE, FLORIDA 33317
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 473-1001
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. [X] Yes [ ]
No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
COMMON STOCK, $.001 PAR VALUE
10,376,611 SHARES AS OF MAY 6, 1997
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 3,122,783
Investment in U.S. Treasury Notes 4,502,140
Trade receivables, net 485,158
Notes and other receivables 460,392
Inventory 183,610
Other current assets 187,522
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Total current assets 8,941,605
Property and equipment, net 1,100,724
Capitalized software costs, net 1,165,680
Goodwill, net 1,593,419
Other assets 27,599
-------------
Total assets $12,829,027
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $683,167
Accounts payable and accrued expenses 862,061
Deferred revenue 568,863
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Total current liabilities 2,114,091
Long-term debt 974,309
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Total liabilities 3,088,400
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Stockholders' equity:
Common stock, $.001 par value. Authorized 20,000,000
shares; issued and outstanding 9,673,396 shares 9,673
Additional paid-in capital 26,726,128
Accumulated deficit (16,995,174)
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Total stockholders' equity 9,740,627
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Total liabilities and stockholders' equity $12,829,027
=============
See accompanying notes.
2
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1997 1996
----------- ----------
Net sales $ 430,166 1,543,426
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Costs and expenses:
Cost of sales 218,208 265,057
Selling, general and administrative expenses 2,004,757 1,067,542
----------- ----------
2,222,965 1,332,599
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Operating income (loss) (1,792,799) 210,827
Other income (expense):
In-process research and
development technology (Note 5) (4,300,000) -
Gain on sale of pharmacy assets - 820,482
Interest, net 135,919 (2,789)
----------- ----------
Net income (loss) (5,956,880) 1,028,520
Dividends on cumulative preferred stock - (46,688)
----------- ----------
Net income (loss) applicable to
common shareholders $(5,956,880) 981,832
=========== ==========
Net income (loss) per share of common stock:
Primary ($.62) .18
=========== ==========
Fully diluted ($.62) .15
=========== ==========
See accompanying notes.
3
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<TABLE>
<CAPTION>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,956,880) 1,028,520
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 100,263 68,935
Acquired in-process research
and development technology 4,300,000 -
Amortization of covenant not-to-compete (20,000) (20,000)
Gain on sale of pharmacy assets - (820,482)
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Accounts receivable 464,543 123,188
Inventory 12,354 36,241
Accounts payable and accrued expenses (143,244) 95,804
Deferred revenue (18,358) -
Other (17,252) (73,443)
------------ ----------
Net cash provided by
(used in) operating activities (1,278,574) 438,763
------------ ----------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (2,745,644) -
Maturities of U.S. Treasury Notes 1,500,000 -
Capitalized software (275,360) -
Capital expenditures (110,373) (145,851)
------------ ----------
Net cash used in investing activities (1,631,377) (145,851)
------------ ----------
Cash flows from financing activities:
Exercise of stock options 21,751 -
Payment of note payable (9,375) -
Collection of notes receivable - 92,754
Payment of capital lease obligations - (54,405)
------------ ----------
Net cash provided by financing activities 12,376 38,349
------------ ----------
Net increase (decrease) in cash and cash equivalents (2,897,575) 331,261
Cash and cash equivalents at beginning of period 6,020,358 463,980
------------ ----------
Cash and cash equivalents at end of period $ 3,122,783 795,241
============ ==========
</TABLE>
See accompanying notes.
4
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION - The accompanying unaudited financial statements of
ProxyMed, Inc. and subsidiaries (the "Company") have been prepared in accordance
with the instructions to Form 10-QSB and do not include all of the information
and disclosures required by generally accepted accounting principles. However,
such information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results to be expected for the full year.
Reference is made to the Company's annual report on Form 10-KSB for the year
ended December 31, 1996.
(2) REVENUE RECOGNITION - Revenues from sales of software or software licenses
are recognized upon delivery of the software, or ratably upon the completion of
any significant Company obligations. Revenues from software rentals are
recognized over the rental period. Revenues from sales of computer hardware are
recognized upon shipment of the hardware. Revenues from the Company's
prescription drug dispensing activities are reported at net realizable amounts
from insurance providers and patients at the time the individual prescriptions
are delivered to the patients.
(3) INVENTORY - Inventory, which consists primarily of prescription drugs, is
stated at the lower of cost (first-in, first-out method) or market.
(4) NET INCOME (LOSS) PER SHARE - Net income (loss) per share is computed by
dividing net income (loss) applicable to common shareholders by the weighted
average shares of common stock outstanding during the applicable period
(9,568,972 shares and 5,409,939 shares for the three months ended March 31, 1997
and 1996, respectively). Common stock equivalents have been included in the
computation using the modified treasury stock method for those periods in which
the Company reported net income; however, they have been excluded from the
computation in those periods in which the Company reported losses as their
effect would be anti-dilutive. In addition, in calculating fully diluted
earnings per share for the three months ended March 31, 1996, convertible
preferred stock and other potentially issuable securities have been included in
the computation of the weighted average shares of common stock outstanding
(6,368,064 shares).
(5) ACQUISITION OF CLINICAL MICROSYSTEMS - On March 14, 1997, the Company
acquired substantially all the assets and certain liabilities of Clinical
MicroSystems, Inc. ("CMS"). CMS is the developer of ClinScan, a physician
desktop lab ordering and results posting software used by over 100 labs and
approximately 3,000 physicians throughout the United States. The purchase price
consisted of the following: $3,000,000 in cash and
5
<PAGE>
125,786 shares of unregistered common stock paid at closing, plus $2,000,000 in
cash and common stock payable over a three year period as follows: $750,000,
$500,000 and $750,000 in 12, 24 and 36 months following the closing date,
respectively. Each of the future payments will be at least 50% in cash, with the
remainder, if any, paid in shares of unregistered common stock. The acquisition
has been accounted for as a purchase and accordingly, the acquired assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. A significant portion of the purchase price was allocated to
in-process research and development technology, resulting in a $4,300,000 charge
to the Company's operations in the first quarter of 1997. This charge was valued
using a risk adjusted cash flow model, under which projected income and expenses
attributable to the purchased technology were identified, and potential income
streams were discounted for certain risks and uncertainties, including the stage
of development of the technology, viability of target markets, rapidly changing
nature of the industry, and other factors. The income tax benefit resulting from
this charge is estimated to be approximately $1,613,000; however, based on the
weight of available evidence, a valuation allowance in the amount of $1,613,000
has been recorded concurrently. The excess of the consideration paid over the
estimated fair value of net assets acquired (including the in-process research
and development) in the amount of approximately $1,002,000 has been recorded as
goodwill, and is being amortized on the straight-line basis over 20 years.
The following unaudited pro forma summary presents the consolidated
results of operations of the Company and CMS as if the acquisition had occurred
at the beginning of 1996, including amortization of goodwill and additional
interest expense but excluding the one-time charge for acquired in-process
research and development technology. These pro forma results do not necessarily
represent results which would have occurred if the acquisition had taken place
at that date, or of results which may occur in the future.
THREE MONTHS ENDED MARCH 31,
-------------------------------
1997 1996
-------------------------------
Net sales $ 685,290 $1,927,744
Net income (loss) ($1,745,054) $981,645
Net income (loss) per share of common stock ($.18) $.18
(6) SUBSEQUENT EVENTS
(a) ACQUISITION OF HAYES COMPUTER SYSTEMS - On April 30, 1997,
the Company acquired substantially all the assets and assumed certain
specific, but limited liabilities of Hayes Computer Systems, Inc.
("Hayes"), a company that provides information technology solutions
and services to public and private sector organizations including
systems integration services, Internet access services, and client
server software development. The purchase price consisted of
$3,200,000 in cash and 388,215 shares of unregistered common stock
paid at closing. In addition, the Company will pay up to $1,000,000
in cash and common stock in each of the two subsequent 12 month
periods if certain
6
<PAGE>
defined operating criteria are achieved. The acquisition will be
accounted for as a purchase. Hayes reported net sales of $7,111,225
and pre-tax loss of ($235,865) for the 10 month period ended January
31, 1997.
(b) OTHER CAPITAL TRANSACTIONS - In April 1997, the Company
repurchased 110,000 shares of its common stock on the open market for
approximately $5.05 per share. In addition, in April 1997, the
Company consummated a private placement sale of 425,000 shares of
common stock for $2,231,250 ($5.25 per share) to an investor. The
Company is obligated to file a registration statement for these
newly-issued shares by June 30, 1997.
(7) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash paid for interest $ - 16,971
============ ============
Common stock issued for business acquired $ 760,452 -
Debt issued for business acquired 1,649,555
Other acquisition costs accrued 225,000
Details of business acquired:
Working capital (232,807) -
In-process research and
development technology (4,300,000)
Property and equipment (1,432) -
Goodwill (1,001,872) -
Note payable 9,375 -
Other assets (108,271) -
------------ ------------
Cash paid for acquisition (3,000,000) -
Less cash acquired 254,356 -
------------ ------------
Net cash paid for acquisition $ (2,745,644) -
============ ============
</TABLE>
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company is a healthcare information technology company providing
online transaction processing services to physicians and other healthcare
providers by offering one-stop shopping through ProxyNet, its national
healthcare information network. In addition, the Company provides such services
through its free-standing software products.
The Company also owns and operates ProxyCare, Inc. ("ProxyCare"), its
institutional pharmacy subsidiary which dispenses prescription drugs to patients
in long-term care facilities; however, the Company is considering whether
ProxyCare fits within its long-term business plan. There are no understandings,
commitments or agreements at the date of this Form 10-QSB for the sale of
ProxyCare.
This report contains "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements include, among
others, statements relating to the Company's growth strategy, which is based
upon the Company's interpretation and analysis of healthcare industry trends and
management's abilities to successfully develop, implement, market and sell its
online transaction processing services to physicians and other healthcare
providers. This strategy assumes that physicians will prefer "one-stop shopping"
for online services and that the Company will be able to successfully acquire or
develop all of the necessary clinical and financial transaction sets and
implement them into the Company's existing products and services. This strategy
also assumes that the Company will be able to successfully develop and execute
its strategic relationships, especially with the providers of information
systems to physicians under the Company's Electronic Commerce Partner ("ECP")
program, and with pharmacy chains, independent pharmacy owners and pharmacy
information vendors. Many known and unknown risks, uncertainties and other
factors may cause these assumptions to prove incorrect and may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED
MARCH 31, 1996
NET SALES. Net sales for the three months ended March 31, 1997
decreased by $1,113,260, or 72%, to $430,166 from net sales of $1,543,426 for
the three months ended March 31, 1996. This decrease was primarily due to the
net effect of two factors. First,
8
<PAGE>
the Company recognized income totaling $1,189,000 from two one-time license
fees in the 1996 period from Bergen Brunswig Drug Corporation ("Bergen") and
Blue Cross/Blue Shield of Massachusetts, Inc. ("BCBSM"), whereas no license
fee income was received in the 1997 period. Second, sales of the recently
acquired CMS products were $63,547 in the 1997 period, whereas there were no
such sales in the 1996 period.
GROSS PROFIT MARGIN. Gross profit margin for the three months ended
March 31, 1997 was 49% compared to a gross profit margin of 83% for the three
months ended March 31, 1996. This decrease is primarily due to the favorable
impact of the one-time license fee revenues received in the first quarter of
1996 from Bergen and BCBSM. Additionally, gross profit margin at ProxyCare, the
Company's drug dispensing operations, was 34% for the three months ended March
31, 1997 compared to 26% for the three months ended March 31, 1996, due to a
change in ProxyCare's customer mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended March 31, 1997 increased by
$937,215, or 88%, to $2,004,757 from selling, general and administrative
expenses of $1,067,542 for the three months ended March 31, 1996. This increase
is primarily due to the Company's efforts to develop and market its healthcare
information technology products and services. Specifically, this increase
resulted from the following additional costs: (i) payroll and related costs for
sales, product development, customer service, clinical pharmacy service and
management personnel related to the Company's technology products and services
($675,000); (ii) marketing expenses related to these products and services,
marketing materials, attendance at national and local trade shows, expenses for
potential customers and travel costs ($118,000); (iii) depreciation,
amortization and computer costs related to network equipment and capitalized
software costs ($28,000); (iv) consulting fees to various software and business
consultants ($116,000); (v) stockholders' expenses related to relations with
institutional and other investors ($23,000), (vi) telecommunication costs
related to the Company's development of its ProxyNet network ($30,000), (vii)
expenses at ProxyCare incurred to develop increased sales ($23,000) and (viii)
net decreases in various other selling, general and administrative expenses
($76,000).
INTEREST, NET. The Company earned net interest income for the three
months ended March 31, 1997 of $135,919, whereas the Company incurred net
interest expense for the three month period ended March 31, 1996 of $2,789. This
reflects the use of proceeds from the sale of equity securities in 1996 to
retire all indebtedness, resulting in the elimination of interest expense. All
available cash has been invested in interest-bearing money market accounts,
certificates of deposit and U.S. Treasury Notes.
OTHER. As a result of the acquisition of CMS, the Company recorded a
charge of $4,300,000 in the three months ended March 31, 1997 related to the
expensing of in-process research and development technology (see Note 5 to the
financial statements). In the period ended March 31, 1996, the Company earned
$820,482 from the sale of certain assets of its drug dispensing operations to
Eckerd Corporation in 1995.
9
<PAGE>
NET INCOME (LOSS). As a result of the foregoing, the Company recorded a
net loss of ($5,956,880) for the three months ended March 31, 1997, as compared
to net income of $1,028,520 for the three months ended March 31, 1996. The
Company believes it is making progress in its acquisition strategy, strategic
relationships and other plans to increase the usage of its healthcare
information technology products and services. However, the Company anticipates
that it will continue to incur operating losses until it generates a substantial
flow of recurring revenues from these products and services. There can be no
assurance that the Company will realize a significant level of recurring
revenues from the sale of these products and services, or that revenues from
these operations or those of its newly-acquired businesses or ProxyCare will
ultimately result in significant reductions in losses or achievement of
profitability.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the three month period ended March 31, 1997, cash used in operating
activities totaled $1,278,574 and net cash of $2,745,644 was used to acquire
CMS. After these expenditures, the Company had cash, cash equivalents and
investments in U.S. Treasury Notes totaling $7,624,923 as of March 31, 1997.
These available funds continue to be used for operations, the further
development and marketing of the Company's new products and services, equipment
and other general corporate purposes. In addition, the Company is continuously
evaluating acquisition opportunities that add synergies to the product
offerings.
Subsequent to March 31, 1997, the Company paid approximately $3,200,000
in cash and issued 388,215 shares in restricted common stock to acquire Hayes.
Additionally, subsequent to March 31, 1997, the Company repurchased 110,000
shares of its common stock in the open market for approximately $5.05 per share.
These activities were financed through available cash resources and through a
private placement sale of 425,000 shares of common stock to an investor for
$2,231,250 ($5.25 per share).
The Company has a revolving bank line of credit of up to $5,000,000.
Borrowings, if any, are due on demand, collateralized by U.S. Treasury Notes,
and bear interest at the prime rate less 3/4%.
Accounts receivable turnover for ProxyCare was 11.1 times in 1997
compared to 4.0 times in 1996. Inventory turnover for ProxyCare was 4.4 times in
1997 compared to 4.6 times in 1996. The improvement in accounts receivable
turnover reflects the change in customer mix.
As mentioned above, the Company expects to continue to incur negative
net cash flow from operations until it begins receiving substantial recurring
revenues from the sale of its healthcare information technology products and
services or from sales of its newly-acquired businesses. Furthermore, while the
Company presently has no material commitments for capital expenditures,
management is committed to the strategy of investing funds in further marketing
and development of its products and services, is considering whether to invest
further in technologies recently acquired from CMS and Hayes, and may pursue
additional acquisitions which are deemed to be in accordance with its business
strategy. In such event, the Company may seek additional equity financing,
although there can be no assurances that such financing will be available under
terms and conditions acceptable to the Company.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGE IN SECURITIES
(c) On April 29, 1997, the Company sold 425,000 shares of
unregistered common stock for $5.25 per share to Bellingham
Industries, Inc. Such issuance is exempt from the registration
provisions of Section 5 of the Securities Act of 1933, as amended
(the "Act"), by virtue of Section 4(2) of the Act. However, the
Company agreed to file a registration statement for such shares under
the Act by June 30, 1997, and must use its best efforts to have such
registration statement declared effective by August 31, 1997. No
underwriting discounts or commissions were paid in connection with
this sale.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
1 - $5 million Revolving Line of Credit Agreement with First
Union National Bank of Florida
2 - Employment Agreement dated April 30, 1997 between Danny
Hayes and ProxyMed, Inc.
27 - Financial Data Schedule
(b) During the quarter ended March 31, 1997, the following report on
Form 8-K was filed:
- March 14, 1997 - Report on the acquisition of substantially
all of the assets and certain liabilities of Clinical
MicroSystems, Inc. ("CMS"), including audited financial
statements of CMS for the years ended December 31, 1996 and
1995, and pro forma financial information as of December 31,
1996
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PROXYMED, INC.
(Registrant)
Date May 14, 1997 /s/ BENNETT MARKS
--------------------------------------
Bennett Marks
Executive Vice President - Finance,
Chief Financial Officer and Principal
Accounting Officer
13
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1 $5 million Revolving Line of Credit Agreement with First Union
National Bank of Florida.
2 Employment Agreement dated April 30, 1997 between Danny Hayes and
ProxyMed, Inc.
27 Financial Data Schedule
14
FIRST UNION NATIONAL BANK OF FLORIDA
REVOLVING LOAN AGREEMENT
This Revolving Loan Agreement (hereinafter the "Agreement") is made
this the 21st day of October, 1996, by and between First Union National Bank of
Florida, a national banking association organized and existing under the laws of
the United States of America, with an address at First Union Financial Center,
200 S. Biscayne Boulevard, 15th Floor, Miami, Florida 33131 (hereinafter
referred to as "Bank"), and ProxyMed, Inc., a corporation organized under the
laws of the State of Florida and having as its principal address 2501 Davie
Road, Suite 230, Fort Lauderdale, Florida 33317 (hereinafter referred to as
"Borrower").
The Borrower has applied to the Bank for a loan in the principal amount
of Five Million Dollars ($5,000,000.00) (hereinafter referred to as the "Loan"),
the terms and conditions of which are more fully described hereinafter and in
the Demand Revolving Promissory Note executed of even date herewith by Borrower
in favor of the Bank in the stated principal amount of $5,000,000.00 (the
"Note"). Provided that no default has occurred in the payment and/or performance
obligations of Borrower under the Note or this Agreement and that no Bankruptcy
Event (as hereinafter defined) has occurred and that the conditions precedent
set forth in Section 6 hereof have been fulfilled, the Borrower may borrow,
repay, and reborrow all sums advanced under the Loan, from time to time, so long
as the total indebtedness outstanding at any one time does not exceed the lesser
of (i) $5,000,000.00, of (ii) ninety-five percent (95%) of the then-current
value (based upon the quoted value in the WALL STREET JOURNAL for U.S. Treasury
Bills and the face amount of certificates of deposits with Bank) of the
Collateral (as such term is defined in Section 7(a) hereof. The proceeds of this
Loan are to be used by Borrower solely for general corporate purposes.
Relying upon the representations and warranties and the agreements and
covenants herein contained, the Bank is willing to make the Loan to the Borrower
upon the terms and subject to the conditions hereinbefore and hereinafter set
forth:
A. THE REVOLVING LOAN: The Borrower and the Bank hereby agree, with
respect to the Loan, as follows:
a. NOTE. Borrower shall, concurrently with the execution and
delivery of this Agreement, execute and deliver the Note to the Bank. The Loan
and each Loan advance made to the Borrower hereunder shall be evidenced by and
shall be repayable with interest in accordance with the terms of the Note.
b. METHOD OF BORROWING AND FUNDING UNDER THE LOAN. For each
borrowing and reborrowing under the Loan, Borrower shall submit a drawing
request (a "Request for Advance") to the Bank at
<PAGE>
the Bank's address set forth in the preamble to this Agreement by 2:00 p.m.
Eastern Standard Time not later than one (1) business day prior to each
borrowing. The Request for Advance shall be submitted to the Bank on forms
customarily used by the Bank for such purposes and shall specify the amount of
the requested Loan Advance and the date of funding of such Loan Advance. The
Bank shall fund each Loan advance in immediately available funds by crediting
the amount thereof to the account with the Bank that Borrower designates in the
Request for Advance. Monies shall be considered advanced at the time of the
transfer to such account and interest on each Loan advance shall commence to
accrue as of the date of such transfer, notwithstanding whether the Borrower
shall have received the benefit of such monies as of such date.
c. MANDATORY PREPAYMENTS. If, at any time or from time to
time, (i) the total outstanding Loan advances exceeds ninety-five percent (95%)
of the then-current value (based upon the quoted value in the WALL STREET
JOURNAL for U.S. Treasury Bills and the face amount of certificates of deposits
with Bank) of the Collateral, or (ii) due to an accounting error the Bank has
funded a Loan Advance in an amount greater than the amount which should have
been funded in accordance with the terms of this Agreement, then Borrower shall,
within five (5) business days' after demand by the Bank, pay the Bank an amount
sufficient to cause the outstanding Loan amount to (a) be less than 95% of the
then-current value (based upon the quoted value in the WALL STREET JOURNAL for
U.S. Treasury Bills and the face amount of certificates of deposits with Bank)
of he Collateral, and (b) not exceed $5,000,000.00. All such mandatory
prepayments shall permanently reduce the amount of credit available to Borrower
under the Loan and no reborrowing of such mandatory prepayments shall be
permitted.
Additionally, in the event that the total outstanding Loan
advances exceeds ninety-nine percent (99%) of the then-current value (based upon
the quoted value in the WALL STREET JOURNAL for U.S. Treasury Bills and the face
amount of certificates of deposits with Bank) of the Collateral, then the Bank
may immediately liquidate the Collateral and apply the proceeds thereof in
reduction of the Loan. Upon any such liquidation, no further Loan advances shall
be made hereunder.
2. REPRESENTATIONS AND WARRANTIES: The Borrower represents and
warrants that:
a. FINANCIAL CONDITION: All balance sheets, financial
statements, profit and loss statements, and all other information heretofore
furnished to the Bank are true and correct and fairly reflect the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof,
including all material contingent liabilities of every type and that the
financial condition as stated in the financial statements provided
2
<PAGE>
to Bank has not changed materially and adversely since the dates of such
documents.
b. CAPACITY AND STANDING: The execution of this Agreement, the
Note, and any related documents executed pursuant to this Agreement when
executed, shall constitute valid and binding obligations of Borrower. The
Borrower warrants and represents that it is duly organized and existing under
the laws of the State of Florida, it and its subsidiaries, if any, are duly
qualified and good standing in every other state in which the nature of their
business shall require such qualification, and are duly authorized to make and
perform the obligations under the Note and this Agreement.
c. VIOLATION OF OTHER AGREEMENTS: The execution of this
Agreement and the Note specified herein, and the performance of the undersigned
pursuant to this Agreement and the Note will not violate any provision of law,
or any agreement, indenture, note or other instrument binding upon the Borrower
or give cause for the acceleration of any obligations of Borrower.
d. AUTHORITY: All authority from and approval by any
governmental body, commission or agency, State or Federal, necessary to the
making or validity of this Agreement or the Note has been obtained.
e. ASSET OWNERSHIP: The Borrower has good and marketable title
to all of the properties and assets reflected on the balance sheets and
financial statements supplied Bank by Borrower, and that all such properties and
assets are free and clear of mortgages, security deeds, pledges, liens, charges,
and all other encumbrances, except as otherwise disclosed by the financial
statements submitted to the Bank, and except for encumbrances on the fee simple
interests of properties and assets leased to Borrower pursuant to capitalized
leases.
f. DISCHARGE OF LIENS AND TAXES: The Borrower has, and where
pertinent has caused each subsidiary, to duly file, pay and/or discharge all
taxes or other claims which may become a lien on any of its property or assets,
excepting to the extent that such items are being appropriately contested in
good faith and an adequate reserve for the payment thereof is being maintained.
g. REGULATION U: None of the proceeds of the Loan made
pursuant to this Agreement shall be used directly or indirectly for the purpose
of purchasing or carrying any stock in violation of any of the provisions of
Regulation U of the Board of Governors of the Federal Reserve System.
h. ERISA: Each employee benefit plan, as defined in the
Employee Retirement Income Security Act of 1974 ("ERISA") maintained by the
Borrower or by any subsidiary of the Borrower
3
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meets, as of the date hereof, the minimum funding standards of Section 302 of
ERISA, all applicable requirements of ERISA and of the Internal Revenue Code of
1954, as amended, and no "Reportable Event" (as defined by ERISA) has occurred
with respect to any such plan.
3. AFFIRMATIVE COVENANTS: The Borrower covenants and agrees that from
the date hereof and until payment in full of the principal of and interest on
the Note, its satisfaction of its obligations hereunder, unless the Bank shall
otherwise consent in writing, the Borrower will:
a. BUSINESS CONTINUITY: Conduct its business in substantially
the same manner and in substantially the same areas as such business is now and
has heretofore been carried on and conducted. Notwithstanding the foregoing,
Borrower has advised the Bank that it contemplates the sale of substantially all
of the assets of ProxyCare, Inc. (a subsidiary of Borrower) in a single
transaction.
b. CORPORATE EXISTENCE AND PROPERTIES: Comply in all material
respects with all applicable statutes, laws and regulations, and if a
corporation, maintain the corporate existence of itself and its operating and
active subsidiaries, if any, and shall maintain, preserve and keep its property
and assets in good repair, working order and condition, making all needed
replacements, additions, improvements and renewals thereto, to the extent
allowed by this Agreement.
c. ACCESS TO BOOKS AND RECORDS: Allow the Bank, or its agents,
during normal business hours to have access to the books, records and such other
documents of the Borrower and its Subsidiaries, if any, as the Bank shall
reasonably require, and allow Bank to make copies thereof at Bank's expense. The
Bank agrees to provide all information obtained pursuant to this Section the
same degree of confidentiality that it normally gives to its customers'
financial information.
d. INSURANCE: Maintain adequate insurance coverage, including
but not limited to, insurance against loss by fire, and other hazards included
in the term "extended coverage," workmen's compensation insurance, and business
interruption insurance in such amounts and in such companies as the Bank may
from time to time reasonably require, and shall promptly pay all premiums
therefor when due.
e. DEPOSITORY AND CASH MANAGEMENT ACCOUNTS. Unless prohibited
by applicable law, maintain its primary depository account and cash management
account with the Bank and each such account shall be maintained in a manner
satisfactory to the Bank.
f. COMPLIANCE WITH OTHER AGREEMENTS: Comply with all
4
<PAGE>
covenants, terms and conditions contained in this Agreement, and any other
agreements or instruments entered into pursuant to this Agreement.
4. NEGATIVE COVENANTS: The Borrower covenants and agrees that from the
date hereof and until payment in full of the principal and interest on the Note,
its satisfaction of its obligations hereunder, unless the Bank shall otherwise
consent in writing, the Borrower will not:
a. GUARANTEES: Unless it gives the Bank fifteen (15) days
advance written notice of its intention to do so, guarantee or otherwise become
responsible for obligations of any other person, corporation, or entity
excepting for the endorsement of negotiable instruments by the Borrower or any
subsidiary, if any, in the ordinary course of business for collection.
b. ENCUMBRANCES: Unless it gives the Bank fifteen (15) days
advance written notice of its intention to do so, create, assume or permit to
exist any mortgage, security deeds, pledge, lien, charge or other encumbrance on
any of its assets, whether now owned or hereafter acquired, other than: (i)
security interests required by this Agreement; (ii) liens for taxes contested in
good faith; (iii) liens accruing by law for employee benefits; (iv) existing
liens as disclosed by Borrower to Bank in the financial statements submitted to
the Bank.
c. PREPAYMENT OF OTHER DEBT: Retire any long-term or funded
debt entered into prior to the date of this Agreement at a date in advance of
its legal obligation to do so.
d. CAPITAL STRUCTURE: Retire or otherwise acquire any of its
capital stock nor alter or amend its capital structure or that of its
subsidiaries.
e. TRANSFER OF INTERESTS: Sell, convey, assign, lease, pledge
or otherwise transfer any of Borrower's interest in or to the Collateral or this
Agreement.
5. FINANCIAL STATEMENTS: For so long as any balance remain unpaid on
the Note the Borrower shall at all times comply with the following unless the
Bank shall otherwise consent in writing:
a. ANNUAL STATEMENTS: Deliver to the Bank within one hundred
five (105) days after the end of each fiscal year of the Borrower, a
consolidated and consolidating balance sheet and a consolidated and
consolidating statement of income (loss) and surplus (deficit), together with
supporting schedules; all in reasonable detail and prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
that of the preceding year; all examined by an independent
5
<PAGE>
certified public accountant acceptable to the Bank, showing the financial
condition of the Borrower and its subsidiaries, if any, at the close of such
year and the results of operations of the Borrower and its subsidiaries, if any,
during the year. The opinion of such independent certified public accountant
shall not be acceptable to the Bank if qualified due to any limitations in scope
imposed by the Borrower or its subsidiaries, if any. Any other qualification of
the opinion by the accountant shall render the acceptability of the financial
statements subject to Bank approval.
b. UNAUDITED QUARTERLY STATEMENTS: Deliver to the Bank within
fifty (50) days after the end of each of the first three fiscal quarters in each
fiscal year, similar financial statements (which may include a copy of the 10Q
or 10QSB that Borrower submits to the Securities and Exchange Commission) to
those referred to in subparagraph 4.a unaudited but certified as to their
correctness by a principal financial officer of the Borrower, all in reasonable
detail, prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the period involved and prior periods,
such balance sheets to be as of the end of such period and such statements of
income and surplus to be for the period from beginning of the fiscal year to the
end of such period, and in each case subject to audit and year-end adjustments.
c. NON-DEFAULT CERTIFICATE: Borrower shall deliver with the
statements required by subparagraphs 4.a and 4.b above, a certificate signed by
a principal financial officer of the Borrower to the effect that the Borrower is
not in default of any of its payment and/or performance obligations contained in
this Agreement or in the Note.
d. REPORTS AND PROXIES: Borrower shall deliver to Bank,
promptly, a copy of all financial statements, reports, notices, and proxy
statements, sent by the Borrower or any of its subsidiaries, if any, to
stockholders, and all regular or periodic reports (including without limitation,
its 10-Q reports) required to be filed by Borrower by any governmental agency or
authority.
e. OTHER FINANCIAL INFORMATION: Borrower shall deliver,
promptly, such other information regarding the operation, business affairs, and
financial condition of the Borrower or any of its subsidiaries, if any, which
the Bank may reasonably request. Notwithstanding the foregoing, the Borrower
shall not be required to disclose its proprietary software and related manuals
which are subject to state trade secret law and federal copyright protection.
f. BANK'S USE OF FINANCIAL INFORMATION: The Bank agrees to
provide all information obtained pursuant to this Section 5 the same degree of
confidentiality that it normally
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<PAGE>
gives to its customers' financial information.
6. CONDITIONS PRECEDENT: The obligations of the Bank to make the Loan
and advances pursuant to this Agreement are subject to the following conditions
precedent.
a. COMMITMENT LETTER: Borrower's full compliance with all
conditions set forth in the commitment letter from Bank to Borrower.
b. RESOLUTIONS: On or prior to the date of any borrowings
hereunder, the Bank shall have received:
(1) Certified copies of resolutions of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Agreement, the Note, and all documentation executed pursuant to this
Agreement.
(2) A copy of the By-laws of the Borrower, certified
as to completeness and accuracy by an appropriate officer of the Borrower.
c. CERTIFICATE OF INCUMBENCY: Receipt by the Bank of a
certificate of an appropriate officer of the Borrower as to the incumbency and
signatures of the officers of the Borrower executing this Agreement, the Note
and all other documents executed pursuant to this Agreement.
d. CHARTER DOCUMENTS: Receipt by the Bank of a copy of the
Articles of Incorporation and all other charter documents of the Borrower, all
certified by the Secretary of State of the State of Borrower's Incorporation.
e. CERTIFICATE OF GOOD STANDING: Receipt by the Bank of a
certificate of the Secretary of State of the State of Borrower's Incorporation
as to the good standing of the Borrower and its charter documents on file.
f. ADDITIONAL DOCUMENTS: Receipt by the Bank of such
additional supporting documents as the Bank or its counsel may reasonably
request.
g. OPINION OF COUNSEL: On or prior to the date of any
borrowings hereunder, the Bank shall have received a favorable written opinion
of the chief legal officer of the Borrower acceptable to the Bank as to the
following:
(1) Confirming the accuracy of the representations
and warranties set forth in this Agreement.
(2) To the effect that this Agreement, the Note and
other documents executed pursuant to the Agreement have been duly
7
<PAGE>
executed and delivered by the Borrower and constitutes the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their terms.
(3) That no registration with, consent of, approval
of, or other action by, any Federal, State or other governmental authority or
regulatory body to the execution and delivery of this Agreement, the borrowings
hereunder, the Note, or other documents executed pursuant to this Agreement is
required by law, or, if so required, such registration has been made, and
consent or approval given or such other appropriate action taken.
(4) That, to the best of his knowledge, the loan
transactions entered into pursuant to this Agreement are not usurious.
h. NON-DEFAULT: At the time of any borrowings hereunder, the
Borrower shall be in compliance with all of the terms and conditions set forth
herein, the Note, and all other documentation executed pursuant to this
Agreement, on the Borrower's part to be observed or performed and all
representations and warranties shall be true and correct as of such date.
7. SECURITY: The obligations of Borrower to Bank pursuant to this
Agreement and the Note executed pursuant thereto, are secured wholly or
partially as hereinafter described and are subject to the following terms and
conditions:
a. PERSONALTY: The Loan shall be secured by a first lien
Security Interest in certain United States Treasury Bills and/or certificates of
deposits that Borrower will maintain with the Bank, and any and all other
accounts, certificates and instruments pledged by Borrower to the Bank as
security for the Loan (collectively the "Collateral").
b. PERFECTION: The Bank's security interest as above described
must be properly perfected, and the Borrower agrees to execute all documents
necessary to effectuate such perfection including but not limited to financing
statements and to reimburse Bank for all reasonable expenses incurred in the
perfection of such security interest.
8. BANKRUPTCY EVENTS: Each of the following shall be a "Bankruptcy
Event":
a. Should a custodian, as that term is defined in the
Bankruptcy Code, be appointed for or take possession of any or all of the assets
of the Borrower or guarantor or should the Borrower or guarantor either
voluntarily or involuntarily become subject to any insolvency proceeding,
proceeding to dissolve the Borrower or guarantor, proceeding to have a receiver
appointed or should the
8
<PAGE>
Borrower or guarantor make an assignment for the benefit of creditors, or should
there be an attachment, execution, or other judicial seizure of all or any
portion of the Borrower's or guarantor's assets, and such seizure is not
discharged within 10 days; or
b. The Borrower shall be a debtor, either voluntarily or
involuntarily, under (and as the term debtor is defined in) the Bankruptcy Code.
9. MISCELLANEOUS PROVISIONS:
a. COMMITMENT LETTER: The terms and conditions of the
commitment letter from the Bank to the Borrower are incorporated herein as
reference as if fully set forth herein.
b. INDIRECT MEANS: Any act which the Borrower is prohibited
from doing shall not be done indirectly through a subsidiary or by any other
indirect means.
c. NON-IMPAIRMENT: If any one or more provisions contained in
this Agreement or any other document executed pursuant to this Agreement shall
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained in this Agreement and
the documentation executed pursuant hereto, shall not in any way be affected or
impaired thereby and this Agreement shall otherwise remain in full force and
effect.
d. APPLICABLE LAW: This Agreement, the Note, and all other
documentation executed pursuant to this Agreement shall be construed in
accordance with and governed by the laws of the State of Florida.
e. WAIVER: Neither the failure nor any delay on the part of
the Bank in exercising any right, power, or privilege granted pursuant to this
Agreement, the Note, or any other documents executed pursuant to this Agreement,
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise or the exercise of any other
right, power or privilege.
f. MODIFICATION: No modification, amendment, or waiver of any
provision of this Agreement, the Note or any other document executed pursuant to
this Agreement shall be effective unless in writing and signed by the Bank, it
being acknowledged by the parties hereto that all terms, conditions and
covenants therein and herein contained are deemed to be material and relied upon
by the Bank.
g. STAMPS AND FEES: The Borrower shall pay all Federal or
State stamps or taxes, or other fees and charges, if
9
<PAGE>
any, payable or determined to be payable by reason of the execution, delivery or
issuance of this Agreement, the Note, and the Mortgage/Deed of Trust issued
pursuant hereto or any security granted to the Bank; whether they be payable
upon execution or recurring from time to time, and the Borrower agrees to
indemnify and hold harmless the Bank against any and all liability in respect
therefor.
h. ATTORNEY'S FEES: In the event that Borrower shall default
in any of its obligations under this Agreement, the Note, or any other document
executed pursuant to this Agreement, and the Bank believes it reasonably
necessary or proper to employ an attorney to assist in the enforcement or
collection of the indebtedness of Borrower to Bank or to enforce any other term
or condition of this Agreement, the Note, or any other document executed
pursuant to this Agreement, or in the event the Bank voluntarily or otherwise
shall become a party to any suit or legal proceeding (including a proceeding
conducted under the Bankruptcy Code), Borrower agrees to pay (promptly upon the
receipt of an invoice for same) the reasonable attorney's fees of Bank and all
costs that may reasonably be incurred by Bank. Borrower shall be liable for such
attorney's fees and costs whether or not any suit or proceeding is commenced
(including costs for appellate proceedings, if any.)
i. INTEREST: Anything contained herein, the Note, or any other
document executed pursuant to this Agreement, notwithstanding, if for any reason
the effective rate of interest on any advances shall exceed the maximum lawful
rate of interest, the effective rate of interest shall be deemed reduced to and
shall be such maximum lawful rate, and any sums of interest which have been
collected in excess of such maximum lawful rate shall be applied by the Bank as
a credit against the unpaid principal amount due thereunder.
j. ASSIGNMENT: This Agreement shall be binding upon the
parties and their respective successors and assigns. Bank's interest in the
Note, the Loan, and Collateral, and its rights hereunder are freely assignable,
in whole or in part. Borrower may assign its rights and interests hereunder only
with the prior written consent of the Bank, and said assignment shall not
release Borrower from responsibility hereunder.
WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, BORROWER AND BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREE, THAT:
(A) NEITHER THE BORROWER, BANK NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR
LEGAL REPRESENTATIVE OF ANY OF THE SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE ARISING FROM OR
BASED UPON THIS PROMISSORY NOTE, ANY OTHER LOAN DOCUMENT EVIDENCING, SECURING OR
RELATING TO THE OBLIGATIONS OR TO THE DEALINGS OR RELATIONSHIP BETWEEN OR
10
<PAGE>
AMONG THE PARTIES HERETO;
(B) NEITHER THE BORROWER NOR BANK WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS;
(D) NEITHER THE BORROWER NOR BANK HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK TO ENTER INTO
THIS TRANSACTION.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Loan
Agreement to be duly executed all as of the day and year first above written.
WITNESS/ATTEST: BORROWER:
ProxyMed, Inc.,
____________________________ a Florida corporation
____________________________ By:
------------------------------
Bennett Marks, Executive Vice
President - Finance and Chief
Financial Officer
BANK:
First Union National Bank of
____________________________ Florida
____________________________ By:
------------------------------
Jorge Gonzalez, Vice President
11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
30th day of April, 1997, by and between PROXYMED, INC. ("Company") and DANNY
HAYES residing at 1101 Savannah Trace, Tallahassee, Florida 32312 ("Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on April 30, 1997
(the "Effective Date") and shall continue thereafter for three (3) years
(hereafter the "Term).
2. POSITION; DUTIES; LOYALTY.
(a) POSITION. Employee will be employed by the Company as a Senior Vice
President reporting to either the Chief Executive Officer or the President so
long as the Company remains an independent public company, and shall render
service to the Company as an employee pursuant to the terms, provisions and
conditions hereinafter set forth.
(b) DUTIES. Employee shall be employed by the Company on a full-time,
exclusive basis. Employee shall perform such duties and have such authority and
responsibilities customarily accompanying such position and as directed by his
supervisor.
(c) LOYALTY. Employee shall devote the full time required for his
position and shall give his best efforts to the business of the Company and to
the performance of the duties and obligations described in this Agreement.
Employee shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations without the prior written consent of the Company, which consent may
not be unreasonably withheld, except for (a) passive investments, and (b)
minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries.
3. COMPENSATION AND EXPENSES.
(a) SALARY. In consideration for the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a monthly base salary
of $10,416.67 ("Base Salary") in accordance with the Company's customary payroll
practices, plus a $500 per month car allowance, subject to federal and state
taxes, if any.
(b) EXPENSES. Company shall promptly pay or reimburse the Employee for
all reasonable business expenses actually incurred or paid by the Employee in
the performance of his services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses, provided
that Employee properly accounts therefor in accordance with the Company's
policy.
(c) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from the compensation due Employee hereunder any and all sums required
for Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
<PAGE>
4. BENEFITS.
(a) VACATION. Employee shall be entitled to two weeks of vacation with
pay in the first year of his employment, and thereafter. Vacation not taken
during a calendar year does not accrue unless approved in writing by the
Company. Employee shall not be entitled to receive any additional compensation
from the Company on account of his failure to take a vacation.
(b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. Employee shall be entitled to family health insurance coverage
beginning 90 days from the commencement of employment from the Company's
insurance carrier (currently Humana HMO). If Employee elects the Humana PPO
option, any additional premium will be payable by Employee. The Company agrees
to reimburse Employee for actual expenses of COBRA coverage from Employee's
prior employer for the first ninety (90) days of employment, but not to exceed
the cost of the Company's HMO coverage. The Company shall not be obligated to
maintain any special or additional plans for Employee's benefit. Employee shall
also be entitled to participate in benefit plans extended to other senior
executives of the Company.
5. TERMINATION.
(a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of
Employee's Disability (as defined herein), this Agreement may be terminated at
the election of the Company. Upon termination for death or Disability, Employee
or his/her beneficiary or estate or legal representative shall be entitled to
receive the amounts payable under Section 5 (c). For purposes of this Agreement,
"Disability" is defined to mean inability of Employee due to illness or physical
or mental infirmity (as determined by a physician selected by Employee and
acceptable to the Company) to perform his duties hereunder on a full-time basis
for six consecutive months with reasonable accommodation by the Company.
Employee shall, upon request of the Company, furnish information and assistance
to the Company, and, in addition, upon reasonable request of the Company's Board
of Directors or its designees, shall make himself available to undertake
reasonable assignments consistent with the dignity, importance and scope of his
position and his physical and mental health.
(b) TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause", effective immediately upon giving written
notice thereof. For purposes of this Agreement, the term "cause" shall be
limited to (i) conviction of a felony or of any crime involving fraud or
misrepresentation; (ii) proven dishonesty affecting the Company; (iii) excessive
use of alcohol or illegal drugs interfering with the performance of Employee's
duties and the continuance thereof after written warning; (iv) any material
breach by Employee of the covenants contained in Section 6 of this Agreement
regarding confidentiality. For purposes of this paragraph, no act or failure to
act on Employee's part shall be considered "willful" unless done, or omitted to
be done, by Employee not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company. If at any time the
Company shall determine that Employee has engaged in one or more activities
constituting "cause" for termination hereunder, Employee's employment shall be
terminated for cause. Company shall pay Employee his full Base Salary through
the date of termination at the then current rate (including any applicable bonus
and accrued vacation pay). Company shall then have no further obligations to
Employee. Employee may give a written request to the Company within thirty (30)
days after such termination requesting an opportunity to be heard by the Board
of Directors of the Company. If Employee timely so requests such an opportunity
to be heard, such opportunity shall be made available to Employee within 30 days
after such written request. If the Board, with the advice of counsel, determines
that there was cause for termination, its determination shall be deemed to be
conclusive and final. If it determines in its reasonable judgment that there was
not sufficient basis to terminate Employee for cause, Employee shall be
reinstated with all back pay and benefits restored.
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<PAGE>
(c) PAYMENT UPON TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the
event of termination by the Company without cause, Employee shall execute a full
and complete release of any and all claims against the Company in a form
satisfactory to the Company (such release being conditioned upon Employee's
receipt of the payments provided herein), in which event Employee (or his
estate) shall be entitled to severance pay of an amount equal to Employee's Base
Salary on the date of termination for one (1) month commencing on the date of
termination payable in accordance with the Company's customary payroll
practices, plus payment when due of all the contingency payments (all
contingencies then being waived by the Company) due to be paid under Section
2(c) of the Asset Purchase Agreement dated April 11, 1997, between Hayes
Computer Systems, Inc., Employee, and the Company.
(d) RETURN OF COMPANY PROPERTY. Upon notice of termination by the
Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation and benefits owed to Employee hereunder
until all such property is returned.
6. COVENANTS OF EMPLOYEE.
(a) Employee agrees that during the Term and for three (3) years
following a termination of employment for any reason, he will not, directly or
indirectly, engage, assist or participate in, whether as a director, officer,
executive, agent, manager, consultant, partner, owner or independent contractor
or other participant, in any line of business which is the same as the Company
or any of its subsidiaries are engaged in as of the termination of this
Agreement without the written consent of the Company. Employee and Company agree
that this clause is to protect the interests of the Company while at the same
time allowing the Employee to pursue gainful employment with any other company
Employee so chooses, so long as such Employee does not, within the relevant time
period herein, engage in any line of business that directly competes with any
line of business engaged in by the Company or any of its subsidiaries as of the
date Employee terminates his employment with Company. Nothing contained herein
shall prevent Employee from acquiring less than 1% of any class of securities of
any company that competes with the Company that has any of its securities listed
on a national securities exchange or traded in the over-the-counter market,
provided Employee remains a passive investor.
(b) Employee agrees that during the Term and for three (3) years after
the termination of employment for any reason, he will not, directly or
indirectly, without the prior written consent of the Company, induce or solicit
any person employed or hereafter employed by the Company or any of its
subsidiaries to leave the employ of the Company or any of its subsidiaries or
solicit, recruit, hire or attempt to solicit, recruit or hire any person
employed by the Company. Further, Employee agrees that for a period of three (3)
years after the termination of this Agreement, he will not, directly or
indirectly, without the prior written consent of the Company, solicit, divert
away, take away, or attempt to take away any customer of the Company who was a
customer which Employee had, alone or in conjunction with others, served during
his employment with the Company.
(c) Employee agrees and acknowledges that he will disclose promptly to
the Company every discovery, improvement and invention made, conceived or
developed by Employee during the entire period of employment (whether or not
during working hours) which discoveries, improvements or inventions are capable
of use in any line of business which is the same as the Company or any of its
subsidiaries are engaged in as of the termination of this Agreement. To the
fullest extent permitted by law, all such discoveries, inventions and
improvements will be deemed works made for hire. Employee grants and agrees to
convey to Company or its nominee the entire right, title and interest, domestic
and foreign, which he may have in such discoveries, improvements or inventions,
or a lesser interest therein, at the option of Company. Employee further agrees
to promptly, upon request, sign all applications for patents, copyrights,
assignments and other appropriate documents, and to perform all acts and to do
all things necessary and appropriate to carry out the intent of this section,
whether or not Employee is still an employee of
<PAGE>
the Company at the time of such requests. Should Employee wish to work
on personal projects during his own time, he may do so to the extent that such
projects do not conflict with the preceding sentence and Employee obtains the
prior written consent of the Company, which consent shall not be unreasonably
withheld.
(d) Employee agrees and acknowledges that the Confidential Information
of the Company and its subsidiaries (as hereinafter defined) is valuable,
special and unique to its business, that such business depends on such
Confidential Information, and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Employee agrees to undertake the following
obligations with respect to such Confidential Information:
(i) Employee agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) Employee agrees that, except as required by Employee's
duties or authorized in writing by the Company and its subsidiaries, he will not
at any time during and for a period of 10 years after the termination of his
employment with the Company and its subsidiaries, disclose, directly or
indirectly, any Confidential Information of the Company or any of its
subsidiaries. except as maybe required by applicable law or court order, in
which case Employee shall promptly notify Company so as to allow it to seek a
protective order if it so elects;
(iii) Employee agrees to take all reasonable steps necessary,
or reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
(iv) Employee agrees that, upon termination of his employment
by the Company or any of its subsidiaries or at any other time the Company may
in writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 6 (d), Confidential
Information means any and all information developed by or for the Company or any
of its subsidiaries of which Employee gained knowledge by reason of his
employment by the Company or any of its subsidiaries prior to the date hereof or
during his employment that is not generally known in any industry in which the
Company or its subsidiaries is or may become engaged, but does not apply to
information which is generally known to the public or the trade, unless such
knowledge results from an unauthorized disclosure by Employee. Confidential
Information includes, but is not limited to, any and all information developed
by or for the Company concerning plans, marketing and sales methods, materials,
processes, business forms, procedures, devices used by the Company, its
subsidiaries, suppliers and customers with which the Company had dealt with
prior to Employee's termination of employment with the Company and its
subsidiaries, plans for development of new products, services and expansion into
new areas or markets, internal operations, and any trade secrets, proprietary
information of any type owned by the Company and its subsidiaries, together with
all written, graphic and other materials relating to all or any part of the
same. The Company will receive all materials, including, software programs,
source code, object code, specifications, documents, abstracts, and summaries
developed in connection with Employee's employment. Employee acknowledges that
the programs and documentation developed in connection with Employee's
employment with the Company shall be the exclusive property of the Company, and
that the Company shall retain all right, title and interest in such materials,
including without limitation patent and copyright interests. Nothing herein
shall be construed as a license from the Company to make, use, sell or copy any
inventions, ideas, trade secrets, trademarks, copyrightable works, or other
intellectual property of the Company during the term of this Agreement or
subsequent to its termination.
4
<PAGE>
Employee acknowledges that there is no general geographical
restriction contained in this Section 6 because the Company's business is not
confined to one geographical area and is national and international in scope.
Notwithstanding the foregoing, if a court of competent jurisdiction were to
determine that the foregoing covenants would be held to be unreasonable in time
or distance or scope, the time or distance may be reduced by appropriate order
of the court to that deemed reasonable.
(e) INJUNCTIVE RELIEF.
(i) Employee acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
will cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Employee agrees that the Company shall be entitled
(without having to post a bond or other surety) to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from committing any violation of the covenants and
obligations set forth in this Section 6.
(ii) The Company's rights and remedies under this Section are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.
7. MISCELLANEOUS.
(a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the prevailing party shall be entitled to recover all
reasonable and actual expenses incurred, including reasonable attorney fees.
(b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Employee without the written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Company and
the Employee and the Employee's heirs and legal representatives, and the
Company's successors and assigns.
(c) GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Florida, without regard to the
application of principles of conflict of laws.
(d) NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company at its then principal office, as notified to Employee, or to the
Employee at his address specified on page 1 of this Agreement, or to either
party hereto at such other address or addresses as he or it may from time to
time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
(e) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
5
<PAGE>
(f) COMPLETE UNDERSTANDING. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
(h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
(j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(k) ARBITRATION. Except for disputes relating to Section 6 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the FEDERAL ARBITRATION ACT takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward or Leon County, Florida,
and the parties hereby agree to accept service of process at the address above
written and in the personal jurisdiction and venue as set out herein. Both
parties expressly covenant and agree to be bound by the decision of the
arbitrators as the final determination of the matter in dispute. Judgment upon
the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. The prevailing party shall be entitled to recover all
reasonable and actual expenses incurred in such arbitration, including
reasonable attorney fees.
(l) INDEMNIFICATION. In accordance with the Company's Articles and
Bylaws, the Company agrees to defend, indemnify and hold harmless the Employee
("Indemnified Party") for acts in his capacity as Employee to the fullest extent
permitted by Florida corporate law at the present time (or as such right of
indemnity may be increased in the future) including in particular and without
limitation with respect to the execution and delivery of this Agreement or
Employee's accepting employment with the Company. The Company agrees to
reimburse the Indemnified Party in advance for any costs of defending any action
or investigation (including reasonable attorneys' fees and expenses) regarding
Employee's performance of his duties under this Agreement, subject to an
undertaking from the Indemnified Party to repay the Company if the Indemnified
Party is determined not to be entitled to such indemnity by a court of competent
jurisdiction; provided that, the Company shall first have the opportunity to
defend Employee so long as counsel hired by the Company does not have a conflict
with representation of both the Company and the Employee and Employee approves
of such counsel. Notwithstanding the
6
<PAGE>
foregoing, the Company shall not be required to advance expenses for the
defense of Employee for any causes of action that relate to activities of
Employee that the Company in good faith determines are outside of the scope of
the duties required of Employee under this Agreement and not related to the
execution and delivery of this Agreement or Employee's accepting employment
with the Company, including without limitation, for causes of action such as
sexual harassment, torts, etc.
(m) Sections 5(a), 5(b), and 5(c), 6 and 7 shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
COMPANY: EMPLOYEE:
PROXYMED, INC., DANNY HAYES
a Florida corporation
By:
--------------------------------- ------------------------------
Harold Blue, Chairman and C.E.O.
7
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