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 JUNE 30, 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.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0202059
------- ----------
(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
--------------
(Issuer's telephone number)
-------------------------------------------------------------
(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
11,197,188 SHARES AS OF AUGUST 12, 1997
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 4,709,326
Investment in U.S. Treasury Notes 3,000,472
Trade receivables, net 2,119,810
Notes and other receivables 783,616
Inventory 665,058
Other current assets 286,050
-----------
Total current assets 11,564,332
Property and equipment, net 1,793,608
Purchased and capitalized software costs, net 4,367,011
Goodwill, net 1,572,826
Other assets 23,285
-----------
Total assets $19,321,062
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 700,643
Accounts payable and accrued expenses 2,880,928
Deferred revenue 688,101
Other current liabilities 52,711
-----------
Total current liabilities 4,322,383
Long-term debt 999,233
-----------
Total liabilities 5,321,616
-----------
Stockholders' equity:
Common stock, $.001 par value. Authorized 20,000,000
shares; 11,082,238 shares outstanding after deducting
110,000 shares in treasury 11,082
Additional paid-in capital 36,976,318
Accumulated deficit (22,987,954)
-----------
Total stockholders' equity 13,999,446
-----------
Total liabilities and stockholders' equity $19,321,062
===========
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
PROXYMED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- --------------------------
1997 1996 1997 1996
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 3,769,889 1,809,330 3,339,723 265,904
------------ ---------- ---------- ----------
Costs and expenses:
Cost of sales 2,447,270 441,753 2,229,062 176,696
Compensatory stock options
and warrants -- 247,834 -- 247,834
Selling, general and adminis-
trative expenses 4,811,987 2,089,691 2,807,230 1,022,149
------------ ---------- ---------- ----------
7,259,257 2,779,278 5,036,292 1,446,679
------------ ---------- ---------- ----------
Operating loss (3,489,368) (969,948) (1,696,569) (1,180,775)
Other income (expense):
In-process research and
development tech-
nology (Note 5) (8,632,654) -- (4,332,654) --
Gain on sale of assets -- 988,226 -- 167,744
Interest, net 172,362 78,043 36,443 80,832
------------ ---------- ---------- ----------
Net income (loss) (11,949,660) 96,321 (5,992,780) (932,199)
Dividends on cumulative
preferred stock -- 88,328 -- 41,640
------------ ---------- ---------- ----------
Net income (loss) appli-
cable to common
shareholders $(11,949,660) 7,993 (5,992,780) (973,839)
============ ========== ========== ==========
Net income (loss) per share of
common stock $ (1.21) 0 (.59) (.14)
============ ========== ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE,
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(11,949,660) 96,321
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 265,864 155,505
Acquired in-process research
and development technology 8,632,654 --
Common stock issued for services -- 56,000
Compensatory warrants issued -- 247,834
Amortization of covenant not-to-compete (40,000) (40,000)
Gain on sale of assets -- (988,226)
Changes in assets and liabilities, net of
effect of acquisitions and dispositions:
Accounts receivable (1,472,464) 331,527
Inventory (26,176) 26,011
Accounts payable and accrued expenses 1,081,010 (221,468)
Deferred revenue (102,446) --
Other (50,007) (121,987)
----------- -----------
Net cash used in operating activities (3,661,225) (458,483)
----------- -----------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (5,892,770) --
Maturities of U.S. Treasury Notes 3,000,000 --
Purchase of U.S. Treasury Notes -- (8,541,153)
Purchased and capitalized software (Note 6) (2,509,679) (199,499)
Capital expenditures (483,394) (371,650)
----------- -----------
Net cash used in investing activities (5,885,843) (9,112,302)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of common stock (Note 7) 8,259,250 13,041,309
Proceeds from exercise of stock options and warrants 541,119 942,656
Purchase of treasury stock (554,958) --
Draw on line of credit 2,500,000 --
Repayment of line of credit (2,500,000) --
Payment of note payable (9,375) --
Payment of preferred stock dividends -- (82,963)
Collection of notes receivable -- 92,753
Payment of capital lease obligations -- (417,884)
----------- -----------
Net cash provided by financing activities 8,236,036 13,575,871
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,311,032) 4,005,086
Cash and cash equivalents at beginning of period 6,020,358 463,980
----------- -----------
Cash and cash equivalents at end of period $ 4,709,326 4,469,066
=========== ===========
</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 and six months ended June 30,
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 - Transaction fee revenue is recorded in the period the
service is rendered. 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
when the related goods have been shipped and title has passed. 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, consisting of finished goods, is stated at the lower
of cost (first-in, first-out method) or market. At June 30, 1997, inventory
includes the following:
Computer hardware and software $478,241
Prescription drugs 186,817
--------
$665,058
========
(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
(9,886,040 shares and 5,872,757 shares for the six months ended June 30, 1997
and 1996, respectively; and 10,203,109 shares and 6,799,926 shares for the three
months ended June 30, 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. Conversions of preferred
stock, had they occurred at the beginning of the 1996 period, would have
resulted in a net loss per share of $(.13) for the three months ended June 30,
1996 and a net income per share of $.02 for the six months ended June 30, 1996.
5
<PAGE>
(5) ACQUISITION OF BUSINESSES -
(a) 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 125,786 shares of unregistered common stock
paid at closing (valued at $760,452), 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 remaining balance, if any, paid
in shares of unregistered common stock.
(b) 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. ("HCS"), 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 $3,147,126 in cash and 388,215 shares of unregistered common
stock paid at closing (valued at $1,296,600). 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 defined
operating criteria are achieved. Each of the future payments will
be at least 50% in cash, with the remaining balance, if any, paid
in shares of unregistered common stock. If such payments are made,
they will be allocated to the long-term assets acquired, a
substantial portion of which is in-process research and
development technology, which will be expensed
The acquisitions of both CMS and HCS have been accounted for as purchases
and accordingly, the acquired assets and liabilities have been recorded at their
estimated fair values at the dates of acquisition. A significant portion of the
purchase price for each acquisition 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 for the CMS acquisition and a $4,332,654
charge to the Company's operations in the second quarter of 1997 for the HCS
acquisition. These charges were each 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 benefits resulting from these
charges are estimated to be approximately $1,613,000 and $1,625,000 for the CMS
and HCS acquisitions, respectively; however, based on the weight of available
evidence, valuation allowances in the amounts of $1,613,000 and $1,625,000 has
been recorded concurrently. For the
6
<PAGE>
CMS acquisition, 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 $998,000 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, CMS and HCS as if the acquisitions of
these businesses had occurred at the beginning of 1996, including any
amortization of goodwill and additional interest expense but excluding one-time
charges for acquired in-process research and development technology. These pro
forma results do not necessarily represent results which would have occurred if
the acquisitions had taken place at that date, or of results which may occur in
the future.
SIX MONTHS ENDED JUNE 30,
--------------------------
1997 1996
----------- ---------
Net sales $ 6,745,402 5,398,666
Net income (loss) $(3,668,648) (202,034)
Net income (loss) per share of common stock $(.36) (.02)
(6) ACQUISITION OF SOFTWARE - On June 27, 1997, the Company acquired all rights,
title and interest in all copyrights and trademarks related to the technology
underlying the PRE-SCRIBE pharmacy-physician prescription network (the
"PRE-SCRIBE network") from Walgreens Co. Concurrently, Walgreens entered into a
network services agreement whereby Walgreens will pay fees to the Company for 12
years (the first three of which are on an exclusive basis) for transactions (as
defined) received over the PRE-SCRIBE network or ProxyMed's existing network,
ProxyNet. ProxyMed paid Walgreens $2,000,000 at closing, issued a 10-year
warrant for 200,000 shares of ProxyMed's common stock exercisable at the market
price ($9.96 per share) commencing on the fourth anniversary of the closing
date, and will pay $500,000 per year on the first, second and third
anniversaries of the agreement. The value of the warrant resulted in a $731,938
credit to additional paid-in capital and was computed using the Black-Scholes
model using the following assumptions: risk-free interest rate of 6.45%,
expected life of 10 years, expected volatility of 75% and no dividend yield.
Revenues generated from the PRE-SCRIBE network are not material.
At the time of the purchase, the PRE-SCRIBE network was being operated by
Integrated Systems Solutions Corp. ("ISSC"), a division of IBM. ISSC will
continue to operate the PRE-SCRIBE network for a reasonable period of time until
it is integrated into the Company's operations.
(7) CAPITAL TRANSACTIONS -
(a) SALES OF COMMON STOCK - On April 29, 1997, the Company sold
425,000 shares of unregistered common stock for $5.25 per share in
a private placement to Bellingham Industries, Inc. ("Bellingham").
Net proceeds from this sale, after deducting estimated costs and
expenses, were $2,181,250. On June 20, 1997, the Company sold an
additional 600,000 shares of unregistered common stock
7
<PAGE>
for $11.00 per share in a private placement to Bellingham. Net
proceeds from this sale were approximately $6,078,000 after
deducting estimated costs and expenses, including a 7% commission
to an underwriter. Subsequently, on July 31, 1997, Bellingham
purchased another 100,000 shares of unregistered common stock from
the Company for $11.00 per share, for which the Company received
net proceeds of $1,023,000 after commissions. Such issuances are
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 under the Act by August 31, 1997 for all
shares sold, and must use its best efforts to have such
registration statement declared effective by October 31, 1997.
Based on information provided by Bellingham, as of July 31, 1997
it beneficially owns 2,150,000 shares or 19.1% of the Company's
outstanding common stock.
(b) REPURCHASE OF COMMON STOCK - On April 14, 1997, the Company
repurchased 110,000 shares of its common stock on the open market
for $5.05 per share.
(8) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
------------ ---------
<S> <C> <C>
Cash paid for interest $ - 28,088
============ =========
Warrants issued for purchase
of software (Note 6) $ 731,938 -
============ =========
Common stock issued for businesses acquired $ 2,056,452 -
Debt issued for businesses acquired 1,649,555 -
Other acquisition costs accrued 1,055,000 -
Details of businesses acquired:
Working capital (473,334) -
In-process research and
development technology (8,632,654) -
Property and equipment (430,617) -
Goodwill (997,744) -
Note payable 9,375 -
Capitalized software (383,159) -
------------ ---------
Cash paid for acquisitions (6,147,126) -
Less cash acquired 254,356 -
------------ ---------
Net cash paid for acquisitions $ (5,892,770) -
============ =========
</TABLE>
8
<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. The Company also provides such services through
its free-standing software products. In addition, through its recent acquisition
of Hayes Computers Systems, Inc. ("HCS"), the Company provides information
technology solutions and systems integration services, Internet access services
and client/server development.
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 AND SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1996
NET SALES. Net sales for the three months ended June 30, 1997 increased
by $3,073,819, or 1,156%, to $3,339,723 from net sales of $265,904 for the three
months ended June 30, 1996. Net sales for the six months ended June 30, 1997
increased by $1,960,330, or 108%, to $3,769,889 from net sales of $1,809,330 for
the six months
9
<PAGE>
ended June 30, 1996. These increases were primarily due to the net effect of
three factors. First, the 1997 results include sales from Clinical MicroSystems,
Inc. ("CMS") and HCS which were acquired in March 1997 and April 1997,
respectively. Sales of the CMS products were $285,961 and $349,509 in the three
and six months ended June 30, 1997, and sales of the HCS products and services
were $2,645,295 in the 1997 period, whereas there were no such sales from either
of these two operations in the 1996 period. HCS's sales were positively impacted
in 1997 as the State of Florida, a major customer of HCS, ends its fiscal year
on June 30, 1997 and historically increases its purchases at the end of its
fiscal year. Second, the Company recognized income totaling $1,189,000 from two
one-time license fees in the first quarter of 1996 from Bergen Brunswig Drug
Corporation ("Bergen") and Blue Cross/Blue Shield of Massachusetts, Inc.
("BCBSM"), whereas no similar license fee income was received in the 1997
period. Finally, ProxyCare, the Company's drug dispensing operation, had
increased sales of $91,016 and $62,902 for the three and six months ended June
30, 1997 over the same periods in 1996.
GROSS PROFIT MARGIN. Gross profit margin for the three months ended June
30, 1997 was 33%, which is comparable to a gross profit margin of 34% for the
three months ended June 30, 1996. Gross profit margin for the six months ended
June 30, 1997 was 35% compared to a gross profit margin of 76% for the six
months ended June 30, 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended June 30, 1997 increased by
$1,785,081, or 175%, to $2,807,230 from selling, general and administrative
expenses of $1,022,149 for the three months ended June 30, 1996. Selling,
general and administrative expenses for the six months ended June 30, 1997
increased by $2,722,296, or 130%, to $4,811,987 from selling, general and
administrative expenses of $2,089,691 for the three months ended June 30, 1996.
These increases are primarily due to the Company's continued efforts to develop
and market its healthcare information technology products and services, and the
additional operating costs from CMS and HCS, which were acquired in 1997.
Specifically, these increases for the six months ended June 30, 1997 resulted
from the following additional costs: (i) payroll and related costs for sales,
product development, clinical pharmacy service and management personnel related
to the Company's technology products and services and personnel costs for the
employees of CMS and HCS ($1,818,000); (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 ($277,000); (iii)
depreciation, amortization and computer costs related to network equipment and
capitalized software costs ($105,000); (iv) consulting fees to various software
and business consultants ($177,000); (v) stockholders' expenses related to
relations with institutional and other investors ($92,000), (vi)
telecommunication costs related to the Company's development of its ProxyNet
network, and from CMS and HCS ($97,000), (vii) occupancy costs primarily
associated with CMS and HCS ($61,000), and (viii) net increases in various other
selling, general and administrative expenses ($95,000).
10
<PAGE>
INTEREST, NET. Net interest income for the three months ended June 30,
1997 decreased by $44,189, or 55% to $36,443, from $80,832 for the three months
ended June 30, 1996. Net interest income for the six months ended June 30, 1997
increased by $94,319, or 121% to $172,362, from $78,043 for the six months ended
June 30, 1996. The increase for the six month period reflects the use of
proceeds from the sale of common stock in 1996 to retire all indebtedness,
resulting in the elimination of interest expense. However, during the 1997
period, the Company has incurred interest expense of approximately $50,000 on
the debt issued for the acquisition of CMS. 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 acquisitions of CMS and HCS, the Company
recorded charges of $4,332,654 and $8,632,654 in the three and six months ended
June 30, 1997, respectively, related to the expensing of in-process research and
development technology (see Note 5 to the financial statements). In the six
months ended June 30, 1996, the Company earned $988,226 from the sale of certain
assets of its drug dispensing operations to Eckerd Corporation in 1995.
NET INCOME (LOSS). As a result of the foregoing, the Company recorded a
net loss of ($5,992,780) for the three months ended June 30, 1997, as compared
to a net loss of ($932,199) for the three months ended June 30, 1996 and a net
loss of ($11,949,660) for the six months ended June 30, 1997, as compared to net
income of $96,321 for the six months ended June 30, 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. In addition, the Company expects its
operations to be impacted, at least through the remainder of 1997, by charges
related to its June 1997 acquisition of the PRE-SCRIBE network from Walgreens
Co. Such charges are expected to include amortization of the acquisition costs,
and costs of operations, development, marketing and customer service related to
this network. There can be no assurance that the Company will realize a
significant level of recurring revenues from the sale of its 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.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the six month period ended June 30, 1997, cash used in operating
activities totaled $3,661,225, net cash of $5,892,770 was used to acquire CMS
and HCS, $2,000,000 was used to acquire the PRE-SCRIBE network, and $554,958 was
used to purchase 110,000 shares of its common stock in the open market. These
activities were financed through available cash resources, private placement
sales of 1,025,000 of the Company's common stock resulting in net proceeds of
$8,259,250, and $541,119 in proceeds from the exercise of stock options and
warrants. After these receipts and expenditures, the Company had cash, cash
equivalents and investments in U.S. Treasury Notes totaling $7,709,798 as of
June 30, 1997. In addition, subsequent to June 30, 1997, the Company received
$1,023,000 in net proceeds from a private placement sale of 100,000 shares of
its common stock. These available funds continue to be used for operations, the
further development and marketing of the Company's 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.
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%. The Company utilized $2,500,000
of this line of credit for the acquisition of HCS, which was repaid within 5
days.
Accounts receivable turnover for the Company was 5.2 in the six months
ended June 30, 1997 compared to 3.2 in the 1996 period, after eliminating the
effect of one-time license fee revenue in 1996. Inventory turnover was 11.4 for
the Company in the six months ended June 30, 1997 compared to 3.9 in the 1996
period. The increase in both ratios reflect the favorable impact of the CMS and
HCS acquisitions.
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 revenues generated by 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, the development
and marketing of the newly-acquired PRE-SCRIBE network, and may pursue
additional acquisitions which are deemed to be in accordance with its business
strategy. The Company believes it has sufficient funds available to support its
operations for the foreseeable future. However, if an acquisition is identified
that requires a cash investment, 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.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGE IN SECURITIES
(c) Information regarding the Company's sale of unregistered common
stock to Bellingham Industries, Inc. is discussed in Note 7 of
Notes to Consolidated Financial Statements contained in Part I of
this Form 10-QSB, and has been previously reported as follows:
-- Regarding the sale of 425,000 shares on April 29, 1997 - see
Part II, Item 2 of Form 10-QSB for the quarterly period ended
March 31, 1997.
-- Regarding the sales of 600,000 shares and 100,000 shares on
June 20 and July 31, 1997, respectively - see Item 5 of Form
8-K dated June 20, 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's annual meeting held on May 22, 1997, the shareholders
approved the following resolutions:
- The election of the following persons to serve on the Board of
Directors until the next annual meeting of the shareholders or until the
election and qualification of their respective successors: Harold S. Blue, Harry
A. Gampel, John Paul Guinan, Samuel X. Kaplan, Gary N. Mansfield, Bennett Marks,
Bertram J. Polan and Eugene R. Terry. The total number of votes cast for
directors was 7,488,331, and the directors received 7,464,845, 7,466,308,
7,461,808, 7,466,308, 7,464,808, 7,461,845, 7,464,008 and 7,467,008 votes,
respectively.
- The ratification of the Company's 1997 Stock Option Plan. The total
number of votes cast for this matter was 7,488,331. Of these votes, 6,772,572
were in favor, 91,844 were against, and 623,915 abstained (including broker
non-votes).
ITEM 5 - OTHER INFORMATION.
On May 22, 1997, the Board of Directors elected the following persons to
serve as executive officers of the Company: Harold S. Blue, Chairman of the
Board and Chief Executive Officer; John Paul Guinan, President and Chief
Operating Officer; Bennett Marks, Executive Vice President - Finance, Chief
Financial Officer and Treasurer; Gary N. Mansfield, Executive Vice President -
Business Development; Frank M. Puthoff, Executive Vice President - Chief Legal
Officer and Secretary; Carol A. Dragan, Executive Vice President - Operations;
Bruce S. Roberson, Executive Vice President - Sales and Marketing; and Donald R.
Sallot, Executive Vice President - Research and Development.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
2 - Employment Agreement dated May 22, 1997 between Donald R.
Sallot and ProxyMed, Inc.
27 - Financial Data Schedule
(b) During the quarter ended June 30, 1997, the following reports on Form
8-K were filed:
-- April 30, 1997 - Report on the acquisition of substantially
all of the assets and certain liabilities of Hayes Computer
Systems, Inc. ("HCS"), including audited financial statements
of HCS for the ten months ended January 31, 1997, and required
pro forma financial information.
-- June 20, 1997 - Report on (a) the sale of 600,000 and 100,000
shares of unregistered common stock on June 20 and July 31,
1997, respectively, to Bellingham Industries, Inc., and (b)
the purchase of all rights, title and interest in all
copyrights and trademarks underlying the PRE-SCRIBE
pharmacy-physician prescription network from Walgreen Co.
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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 AUGUST 13, 1997 /s/ BENNETT MARKS
--------------- -----------------
Bennett Marks
Executive Vice President - Finance,
Chief Financial Officer and Principal
Accounting Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2 Employment Agreement dated May 22, 1997 between Donald R. Sallot and
ProxyMed, Inc.
27 Financial Data Schedule
EXHIBIT 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
22nd day of May, 1997, by and between PROXYMED, INC. ("Company") and DONALD R.
SALLOT residing at 2029 N. Ocean Blvd., #210, Fort Lauderdale, FL 33305
("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 June 1, 1997 (the
"Effective Date"), and shall continue until May 31, 2000 (hereafter the "Term"),
and shall be automatically extended from year to year thereafter unless: (i)
terminated by the Company by delivery of not less than ninety (90) days written
notice to Executive prior to the end of the initial Term or any extension
thereof, in which case the employment of Executive shall terminate on the date
specified for termination in such notice; or (ii) terminated by Executive by
delivery of not less than thirty (30) days written notice to the Company, in
which case the employment of Executive shall terminate on the date which is
thirty (30) days following the date notice is received by the Company.
2. POSITION; DUTIES; LOYALTY.
a) POSITION. Employee will be employed as Executive Vice President of
the 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 the duties and have the authority and
responsibilities customarily accompanying responsibility for the Company's
executives.
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
shall not be unreasonably withheld, except for (i) passive investments; and (ii)
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 $8,750.00 (the "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. Employee performance reviews (with or without a wage
increase) will be conducted annually.
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b) ADDITIONAL COMPENSATION. Upon execution of this Agreement, Employee
shall receive a one-time performance bonus of Twenty Thousand and 00/100 Dollars
($20,000.00), subject to federal and state taxes, if any. As a further incentive
and inducement to the Executive to accept employment by the Company and to
devote his best efforts to the business and affairs of the Company, the Employee
shall be entitled to such bonuses that may be awarded from time to time by the
Compensation Committee or the Board of Directors of the Company, and to
participate in any stock option or bonus plans which the Company may now have or
in the future develop. The employee shall be entitled to receive on or about
each anniversary date of this Agreement a performance bonus not to exceed twenty
percent (20%) of Employee's base salary measured against performance criteria to
be mutually agreed upon by Employee and his supervisor, subject to approval by
the Compensation Committee of the Board of Directors of the Company. Further,
Employee shall be entitled to participate in any stock option or bonus plans
which the Company may now have or in the future develop.
c) OPTIONS. Employee will receive a stock option agreement for a ten
(10) year term to purchase up to Forty Thousand (40,000) shares of the Company's
common stock at its fair market value defined as mean price at which the common
stock is reported to have traded on the NASDAQ system at the close of business
on the Effective Date of this Agreement. The options will vest over a three (3)
year period as follows: 10,000 as of the date such grant is approved by the
Compensation Committee of the Board of Directors of the Company; 10,000 on the
first anniversary of this Agreement; 10,000 on the second anniversary of this
Agreement; and 10,000 on the day before the third anniversary of this Agreement.
The options will be granted as non-qualified options in accordance with the 1997
Stock Option Plan which the Company which contains a "change of control"
provision which provides that upon a "change of control", as defined therein,
any unvested options shall immediately vest as provided for in such Plan.
d) 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 for its
senior level executives, provided that the Employee properly accounts therefor
in accordance with the Company's policy.
e) 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.
4. BENEFITS.
a) VACATION. Employee shall be entitled to three (3) 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. The Company shall not be obligated to maintain any special or
additional plans for Employee's benefit. Employee shall
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also be entitled to participate in benefit plans extended to other executive
vice presidents 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 the 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) the continued failure by Employee to substantially
perform his duties to the Company after receipt of written notice from the
Company specifying any action or inaction by Employee which is deemed by the
Company to constitute a failure to perform his duties hereunder with
suggestions, where feasible, as to how Employee may remedy such failure, and
Employee has failed to correct the unsatisfactory performance within thirty (30)
days of such notice; (iii) Employee's gross negligence or willful misconduct
which is materially injurious to the Company, monetarily or otherwise; (iv)
proven dishonesty affecting the Company; (v) excessive use of alcohol or illegal
drugs interfering with the performance of Employee's duties and the continuance
thereof after written warning; or (vi) any material breach by Employee of the
Company's then current policies with written notice thereof and an appropriate
period to cure such breach where the breach is not one subject to immediate
termination under the Company's policies, or of the covenants contained in
Section 6 of this Agreement regarding confidentiality. For purposes of the
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), and all
stock options, if any, which have become vested and exercisable on or before the
date of termination, with such options remaining exercisable for such period of
time specified as in Employee's Option Agreement(s). 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. In the event Employee
is terminated for cause, Section 6(a) and 6(b) will be of no force or effect. 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. In the event of any
termination without cause, Employee shall be given ninety (90) days prior
written notice. Employee shall execute a full and complete release of any and
all claims against the Company in a form satisfactory to the Company, in which
event Employee (or his estate) shall be entitled to severance pay of (i) an
amount equal to Employee's Base Salary on the date of termination for six (6)
months commencing on the date of termination payable in accordance with the
Company's customary payroll practices; plus (ii) a pro rata portion of any bonus
compensation which would have been paid to Employee under any bonus plan which
is adopted by the Company's Compensation Committee or Board of Directors in such
year if the Company and Employee had met the targeted goals to the date of
termination; plus (iii) the continuation of all benefits including, without
limitation, all insurance plans) for six (6) months after termination; plus (iv)
any remaining unvested options shall vest. A termination pursuant to Section 1
above shall not be deemed to be a termination without cause under this Section
or a termination for Good Reason under Section 5(f) or subject to this Section
5(c).
d) ACCELERATION. If the Company defaults in the payment of any amounts
owed hereunder to Employee following written notice by Employee and fails to
cure such default within ten days from the date of such notice, Employee shall
be entitled to accelerate the entire amount due hereunder. The Company shall
have the opportunity to cure a monetary default one time after which time, if
another default occurs, Employee shall be entitled to accelerate the entire
amount due hereunder upon written notice by Employee without affording the
Company an opportunity to cure.
e) 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.
f) EMPLOYEE TERMINATION FOR GOOD REASON. Employee may terminate this
Agreement for Good Reason by giving Company ninety (90) days prior written
notice. "Good Reason" means: (i) the assignment of any duties inconsistent in
any respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities hereunder, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose as isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice from Employee;
(ii) any reduction of Employee's Base Salary or the failure by the Company to
provide Employee with an incentive compensation program and health and the
benefits hereunder no less favorable than the benefits Employee was entitled to
hereunder; and (iii) if Company's principal office is relocated in the future
more than fifty (50) miles from Fort Lauderdale, FL. In such event, Employee's
termination shall be treated as a termination without cause and he shall be
entitled to the payments enumerated in Section 5(c) above.
g) MITIGATION. If Employee becomes entitled to compensation pursuant to
Section 5(c) or 5(f) above, Executive shall use reasonable efforts to seek other
employment; provided, however, that he shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of termination or a position that could
require Executive to engage in activity in violation of the non-competition
provisions of Section 6 hereof nor shall he be required to accept a position
outside South Florida. The amount of any cash compensation paid or payable from
any such employment shall be
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<PAGE>
reported to the Company on a monthly basis and such amount shall be credited
against amounts otherwise payable by the Company to Executive under Sections
5(c) or 5(f) above. Other than as provided in this Section 5(g), Executive shall
have no duty to mitigate the amount of any payment provided for in this
Agreement.
6. COVENANTS OF EMPLOYEE.
a) Employee agrees that during the Term and for one (1) year 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 to vendors/sellers (but may consult to end
users/purchasers), 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 one (1) year 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 one (1) year 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, solicited or had
material contacts with during his employment with the Company. Regarding the
latter sentence, Company and Employee agree that Employee may contact and do
business with those customers, however during the relevant time period, he may
not solicit or sell them any product or service in the lines of business that
were the same as then being offered by the Company or any of its subsidiaries as
of the termination of employee's employment.
c) Employee agrees and acknowledges the 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 way in connection with the business of Company. 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 the Company at the time of such requests.
5
<PAGE>
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(c), 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
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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.
f) Employee confirms that he is not bound by the terms of any agreement
with any previous employer or other party which restricts in any way his use or
disclosure of information or his engagement in any business, except as Employee
may disclose in a separate schedule attached to this Agreement prior to the
Company's and Employee's execution of this Agreement. Further, Employee
represents that he has delivered to the Company prior to executing this
Agreement rue and complete copies of any agreements disclosed on such attached
schedule. Employee represents to the Company that his execution of this
Agreement, employment with the Company and the performance of his proposed
duties for the Company will not violate any obligations Employee may have to any
such previous employer or other party. In any work for the Company, Employee
will not disclose or make use of any information in violation of any agreements
with or rights of any such previous employer or other party, and will not bring
to the premises of the Company any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
g) 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 non- prevailing party shall pay the prevailing party's
fees and expenses, including reasonable attorney fees, unless the court or panel
of arbitrators determine otherwise.
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
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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.
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
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to the terms and conditions of this Agreement. Arbitration shall be held either
in Broward County or Dade 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 non-prevailing
party shall pay the prevailing party's fees and costs, 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 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, 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:
PROXYMED, INC., EMPLOYEE:
a Florida corporation
By: /s/ HAROLD S. BLUE /s/ DONALD R. SALLOT
-------------------------------------- ----------------
Harold S. Blue, Chairman and C.E.O. Donald R. Sallot
9
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