EXECUTION COPY
December 31, 1997
Exhibit 2.1
ASSET PURCHASE AGREEMENT
DATED DECEMBER 31, 1997,
BUT EFFECTIVE AS XX XXXXXXXX 0, 0000
XXXXX
XXXXX SERVICES, INC. ("SELLER"),
ORTHODONTIC PRACTICE MANAGEMENT SYSTEM, INC. ("BUYER"),
INFOCURE CORPORATION ("INFOCURE")
AND
HALIS, INC. ("SHAREHOLDER")
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 31st day of December, 1997, but effective as of December 1, 1997, by
and among HALIS Services, Inc., a Georgia corporation (the "Seller"),
Orthodontic Practice Management System, Inc., a Georgia corporation (the
"Buyer"), InfoCure Corporation, a Delaware corporation ("InfoCure") and HALIS,
Inc., a Georgia corporation ("Shareholder"). Seller, Buyer, InfoCure and
Shareholder are referred to collectively herein as the "Parties."
RECITALS:
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A. Shareholder owns one hundred percent (100%) of the issued and
outstanding capital stock of Seller consisting of one thousand (1,000) shares of
Seller's voting common stock.
B. Seller is engaged in, among other things, the orthodontic practice
management software business which includes, without limitation, the
development, marketing, selling and servicing of computer hardware and software
to orthodontic healthcare providers and which business was previously engaged in
by Software Manufacturing Group, Inc., a Georgia corporation (the "Orthodontic
Business").
C. Seller is the surviving corporation of the merger of Software
Manufacturing Group, Inc. with and into Seller on June 30, 1997.
D. InfoCure owns one hundred percent (100%) of the issued and
outstanding capital stock of Buyer consisting of one hundred (100) shares of
voting common stock.
E. On the terms and subject to the conditions set forth herein, the
Parties desire to enter into this Agreement, pursuant to which Buyer will
purchase from Seller and Seller will sell to Buyer, substantially all of
Seller's assets and properties relating to the Orthodontic Business.
COVENANTS:
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In consideration of the mutual representations, warranties and
covenants and subject to the conditions herein contained, the parties hereto
agree as follows:
1. Purchase and Sale of the Assets.
1.1. Purchased Assets. On the terms and subject to the conditions
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contained in this Agreement, on the Closing Date (as hereinafter defined), Buyer
shall purchase from Seller, and Seller shall sell, assign and deliver to Buyer,
the Purchased Assets (as hereinafter defined), free and clear of all liens,
security interests, options, charges and other restrictions whatsoever
(hereinafter referred to as "Encumbrances") except for the Permitted
Encumbrances referenced in Section 4.7. below; provided however, the transfer of
the Purchased Assets shall be deemed effective as of December 1, 1997. The term
"Purchased Assets" shall mean all the following assets, properties, rights,
titles and interests of every kind and nature, whether tangible or
intangible, and wherever located and by whomever possessed, related to the
Orthodontic Business of Seller on the date hereof, with such changes therein
after the date hereof as shall be permitted pursuant to the terms hereof (the
"Purchased Assets") including, without limitation, all of the following assets
related to the Orthodontic Business (but excluding all "Excluded Assets" as
defined in Section 1.2.):
1.1.1. [Intentionally Left Blank];
1.1.2. All prepayments and prepaid expenses (including,
without limitation, any and all prepaid insurance, lease payments and deposits
and customer deposits) (the "Prepayments");
1.1.3. All inventories, work in process and supplies;
1.1.4. All rights existing under all supply and distribution
agreements and arrangements, sales and purchase agreements and orders, leases,
license agreements, consulting agreements, confidentiality and non-disclosure
agreements, including, without limitation, such agreements with current or prior
customers and current or prior employees, agents, officers and directors
("Confidentiality Agreements"), and under all other contracts, agreements and
arrangements, but only to the extent the foregoing are assignable or
transferable to Buyer; provided, however, Seller hereby covenants that all of
the foregoing will be assigned or transferred to Buyer at Closing (to be
effective as of December 1, 1997), except for those agreements, arrangements,
orders and leases set forth on Schedule 1.1.4 attached hereto;
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1.1.5. All lists and records pertaining to customer accounts
(whether past or current), suppliers, distributors, personnel and agents and all
other books, ledgers, files, documents correspondence and business records;
provided that Seller shall be given copies of these records upon request, as
such records exist as of the Closing Date;
1.1.6. All claims, deposits, warranties, guarantees, refunds,
causes of action, rights of recovery, rights of set-off and rights of recoupment
of every kind and nature, other than those relating exclusively to Excluded
Assets or Excluded Liabilities (each as defined below);
1.1.7. All Owned Software, all of Seller's interest in
Customer Software, all of Seller's interest in Other Software, all Intangibles
owned by Seller, and all of Seller's interest in all Intangibles not owned by
Seller, as those terms are defined in Section 4.9. hereof, together with all
copies and tangible embodiments of the foregoing (in whatever form or medium and
including, without limitation, all copies of all or any part thereof, in object
code, source code or other format, and in all magnetic or optical media);
1.1.8. All, to the extent transferable, permits, licenses,
franchises, orders, registrations, certificates, variances, approvals and
similar rights obtained from governments and governmental agencies and all data
and records pertaining thereto;
1.1.9. All insurance, warranty and condemnation proceeds
received after the Closing Date with respect to damage, non-conformances of or
loss to the Purchased Assets;
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1.1.10. All rights to receive mail and other communications
addressed to Seller and relating to the Purchased Assets including, without
limitation, accounts receivable payments;
1.1.11. All fixed assets, furniture, equipment and other
tangible personal property, whether owned, leased or otherwise (including,
without limitation, items which, have been fully depreciated or expensed),
including, without limitation, the assets which are set forth on Schedule 1.1.11
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attached hereto;
1.1.12. All books, records, ledgers, files, documents,
correspondence, lists, studies and reports and other printed or written
materials;
1.1.13. All accounts, notes and other receivables, including,
without limitation, all receivables from any current or former employee of
Seller (collectively, the "Receivables"); and
1.1.14. All goodwill as a going concern and associated with
the items listed above (including, without limitation, the goodwill associated
with (i) the items referred to in subsections 1.1.7. and 1.1.8. above and (ii)
all telephone numbers, facsimile numbers and web pages owned and used by Seller
in its business).
1.2. Excluded Assets. Notwithstanding the foregoing, the following
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assets are expressly excluded from the purchase and sale contemplated hereby
(the "Excluded Assets") and, as such, are not included in the Purchased Assets:
1.2.1. Seller's rights under or pursuant to this Agreement
(including, without limitation, Seller's rights to the Purchase Price);
1.2.2. Seller's general ledger, accounting records, minute
books and corporate seal; provided that Buyer shall be given copies upon request
of the general ledger and accounting records for any calendar year beginning on
or after January 1, 1994, as such documents exist as of the Closing Date;
1.2.3. Any right to receive mail and other communications
addressed to Seller relating exclusively to the Excluded Assets or to all
liabilities other than the Assumed Liabilities (as defined in Section 2.2.
below);
1.2.4. Those assets of Seller which are not utilized in the
Orthodontic Business and are not included in the assets referenced in the
November 30 Balance Sheet (as defined in Section 2.1.1. below); and
1.2.5. Shares of the capital stock of Seller.
2. Purchase Price; Assumption of Liabilities.
2.1. Amount of Purchase Price. In consideration for the purchase of
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the Purchased Assets, Buyer agrees to assume the Assumed Liabilities and to pay
Seller an amount equal to $2,000,000.00 (the "Base Consideration Amount"),
subject to the Net Worth Adjustment and the EBITDA Adjustment as set forth in
Sections 2.1.1.A. and 2.1.1.B. below, respectively.
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The "Purchase Price" shall be equal to the sum of the Assumed
Liabilities and the Base Consideration Amount, as adjusted as provided in
Section 2.1.1. below.
2.1.1. Adjustments to the Base Consideration Amount. The Base
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Consideration Amount shall be adjusted as follows:
A. Net Worth Adjustment. For purposes hereof, the term
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"Actual Adjusted Net Worth" shall mean the book value of only the following
assets: the Customer Receivables (net of allowance for doubtful accounts),
Inventories, Employee receivables, Fixed Assets (net of accumulated
depreciation), Prepaids and Deposits less that portion of the Assumed
Liabilities referenced in Section 2.2.(i) as said assets and liabilities are
reflected on the audited balance sheet of Seller, dated November 30, 1997, and
prepared by the accounting firm of BDO Xxxxxxx, L.L.P. (the "Accountants") in
accordance with this Agreement and with generally accepted accounting principles
("GAAP") consistently applied (the "November 30 Balance Sheet"). For purposes
hereof, the term "Target Adjusted Net Worth" shall mean $152,515.00. If the
Actual Adjusted Net Worth is greater than the Target Adjusted Net Worth (the
amount of said excess hereinafter referred to as the "Net Worth Excess"), then
the Base Consideration Amount shall be increased One and No/100 Dollar ($1.00)
for every dollar of Net Worth Excess. On the other hand, if the Actual Adjusted
Net Worth is less than the Target Adjusted Net Worth (said amount hereinafter
referred to as the "Net Worth Shortfall"), then the Base Consideration Amount
shall be reduced One and No/100 Dollar ($1.00) for every dollar of the Net Worth
Shortfall. The foregoing adjustment is referred to herein as the "Net Worth
Adjustment."
B. EBITDA Adjustment. After making the Net Worth
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Adjustment as provided in Section 2.1.1.A. above, the Base Consideration Amount
shall be further adjusted as provided in this Section 2.1.1.B. For purposes
hereof, the term "Actual Annualized EBITDA" shall mean the Seller's earnings
before interest, taxes, depreciation and amortization arising from the
Orthodontic Business as reflected on an audited income statement (the "November
30 Income Statement") prepared by the Accountants in accordance with this
Agreement and with GAAP consistently applied for the eleven (11) month period
ending November 30, 1997, but which amount shall be annualized to reflect a full
twelve (12) month accounting period. Thus, by way of example only, if the EBITDA
for the foregoing eleven (11) month period is $600,000.00, then the Actual
Annualized EBITDA would be $654,545.00. For purposes hereof, the term "Target
Annualized EBITDA" shall mean $541,850.00. If the Actual Annualized EBITDA is
greater than the Target Annualized EBITDA (said amount hereinafter referred to
as the "EBITDA Excess"), then the Base Consideration Amount shall be increased
Three and 20/100 Dollars ($3.20) for every dollar of EBITDA Excess. On the other
hand, if the Actual Annualized EBITDA is less than the Target Annualized EBITDA
(said amount hereinafter referred to as the "EBITDA Shortfall"), then the Base
Consideration Amount shall be reduced Three and 20/100 Dollars ($3.20) for every
dollar of the EBITDA Shortfall. The foregoing adjustment is referred to herein
as the "EBITDA Adjustment."
C. Estimate and Reconciliation Procedure. An estimate
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of the amount of the Net Worth Adjustment and the EBITDA Adjustment shall be
prepared by the Accountants on or prior to the Closing Date (which estimates
shall be attached hereto as Exhibit A) and the
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Base Consideration Amount calculated and paid as of the Closing Date will
reflect such estimated adjustment which will be subject to further adjustment as
set forth below in this Section 2.1.1.C. The cost of preparing the November 30
Balance Sheet and the November 30 Income Statement shall be borne by Buyer (the
November 30 Balance Sheet and the November 30 Income Statement shall be referred
to collectively as the "November 30 Financial Statements"). The November 30
Financial Statements shall be prepared and completed within thirty (30) days
following the Closing Date. As soon as the November 30 Financial Statements are
available to Buyer, Buyer shall deliver to Seller and Shareholder said financial
statements. Seller and Shareholder shall then have fifteen (15) days to review
and object to the November 30 Financial Statements. Any disagreements as to the
amounts of any adjustment to be made to the November 30 Financial Statements, if
not mutually resolved, shall be resolved as provided in Section 2.1.1.D. Upon
the final resolution of any dispute with respect to the November 30 Financial
Statements, the final Net Worth Adjustment and the EBITDA Adjustment shall be
made. The Net Worth Adjustment and the EBITDA Adjustment, if any, shall be paid
in immediately available funds (after taking into consideration the amount of
the estimated adjustments referenced on Exhibit A).
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D. Dispute Resolution. Each party shall have the right
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to examine during normal business hours such books and records of the other
party as may be reasonably necessary in order to verify any determination of the
Accountants with respect to the Net Worth Adjustment and EBITDA Adjustment. If
any party disagrees with any such determination by delivering formal written
notice of such disagreement to the other party on or before the expiration of
the fifteen (15) day period provided in Section 2.1.1.C. above, then the parties
agree to submit the dispute to Deloitte & Touche, L.L.P., who shall determine
the accuracy and correctness of the Accountant's original determination within
thirty (30) days following such submission. Said determination of Deloitte &
Touche, L.L.P. shall be final and binding on the parties hereto. The parties
shall each bear one-half (1/2) of the expenses of Deloitte & Touche, L.L.P. Any
additional amounts payable by a party as a result of the determination of
Deloitte & Touche, L.L.P. shall be made within fifteen (15) days following the
resolution of such dispute.
2.2. Assumed Liabilities. Buyer agrees to and shall at the Closing
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assume and agree to pay, discharge and perform when lawfully due only the
following liabilities (the "Assumed Liabilities"): (i) deferred revenue and the
liabilities (both current and long-term portions) related to those certain
capitalized leases of Seller as said liabilities are recorded on the November 30
Balance Sheet; (ii) the liabilities related to those operating leases identified
on Schedule 4.11 and (iii) those certain liabilities and obligations relating to
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Seller's operation of the Orthodontic Business which fall within the categories
set forth on Schedule 2.2 and which arose in the ordinary course of business
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from December 1, 1997, through the Closing Date (the "December Liabilities").
Seller shall remain responsible for all other liabilities relating to the
operation of the Orthodontic Business prior to Closing.
2.3. Procedure For Discharging Liabilities Not Assumed. Seller agrees
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to and shall on or before the twentieth (20th) day following the Closing, pay,
discharge or otherwise satisfy in full all liabilities related to, arising out
of or concerning the Purchased Assets and Seller shall
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present evidence acceptable to Buyer that said liabilities have been discharged
and that the Purchased Assets are free and clear of all Encumbrances.
2.4. Allocation of the Purchase Price Among the Purchased Assets. The
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Purchase Price shall be allocated among each item or class of the Purchased
Assets in accordance with Schedule 2.4 hereto. Seller and Buyer agree that they
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will prepare and file their federal and any state or local income tax returns
based on such allocation of the Purchase Price. Seller and Buyer agree that they
will prepare and file any notices or other filings required pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended, and that any such notices
or filings will be prepared based on such allocation of the Purchase Price.
3. Closing.
3.1. Time and Place of the Closing. The closing of the purchase and
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sale of the Purchased Assets shall take place at Xxxxxx, Xxxxxxx & Xxxxxx,
L.L.P., Atlanta, Georgia, at 10:00 A.M., local time, on the second (2nd)
business day following the date on which all conditions to Closing contained in
Sections 9. and 10. have been satisfied or complied with or, if not all
conditions have been satisfied or complied with, all such conditions which have
not been so satisfied or complied with have been waived by the party entitled to
the benefit of such condition. Throughout this Agreement, such event is referred
to as the "Closing" and such date and time are referred to as the "Closing
Date."
The parties agree to use their best efforts to cause all conditions to
Closing to occur on or before December 31, 1997 and, if that is done, then the
Purchased Assets will be deemed to have been transferred, and the Assumed
Liabilities will be deemed to have been assumed, as of the beginning of business
on December 1, 1997, but all documents shall be dated the actual date the
Closing occurs and all representations, warranties and covenants shall extend to
that date.
3.2. Procedure at the Closing. At the Closing, the parties agree to
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take the following steps in the order listed below (provided, however, that upon
their completion all such steps shall be deemed to have occurred
simultaneously):
3.2.1. Seller and Shareholder shall deliver to Buyer a Certificate
in the form of Exhibit B hereto, certifying that each of the conditions to the
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obligation of Buyer to purchase the Purchased Assets from Seller which is set
forth in Sections 9.1. through 9.8. of this Agreement has been satisfied.
3.2.2. Buyer and InfoCure shall each deliver to Seller a
Certificate in the form of Exhibit C hereto, certifying that each of the
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conditions to the obligations of Seller to sell the Purchased Assets to Buyer
which is set forth in Section 10. in this Agreement has been satisfied.
3.2.3. Seller shall deliver to Buyer such deeds, bills of sale,
endorsements assignments, lease assignments and estoppel agreements (duly
executed by the lessor under the leases) and other instruments, including a Xxxx
of Sale in the form of Exhibit D hereto and a Lease Assignment in the form of
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Exhibit E hereto, as shall be sufficient to vest in Buyer good
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and marketable title to the Purchased Assets, free and clear of all Encumbrances
other than Permitted Encumbrances.
3.2.4. Buyer shall pay to Seller the Purchase Price (after the
application of the estimate of the amount of the EBITDA Adjustment and Net Worth
Adjustment as provided in Section 2.1.1.C. above) by wire transfer in accordance
with the Wire Transfer Instructions attached hereto as Exhibit F.
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3.2.5. Buyer shall deliver to Seller instruments, in the form of
Exhibit G hereto, as shall be sufficient to effect the assumption by Buyer of
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the Assumed Liabilities.
4. Representations and Warranties of Seller and Shareholder.
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereunder, Seller and Shareholder, jointly and
severally, make the following representations and warranties as of the date
hereof and as of the Closing Date:
4.1. Organization, Power and Authority of Seller. Seller is a
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corporation duly organized and legally existing in good standing under the laws
of Georgia and has full corporate power and authority to own or lease its
properties and operate its Orthodontic Business as presently conducted, to enter
into this Agreement and to carry out the transactions and agreements
contemplated hereby.
The amount and character of Seller's Orthodontic Business do not
require Seller to qualify to do business in any foreign jurisdiction.
All of Seller's issued and outstanding stock is owned by Shareholder,
and no other person has any right, claim or beneficial interest in such shares
or other interest in Seller which would adversely affect or interfere in any
manner with this Agreement or the consummation of the transactions contemplated
hereby or affect or interfere with the ownership and operation of the Purchased
Assets and the Orthodontic Business by Buyer after the Closing.
4.2. No Subsidiaries and Affiliates. Except as set forth on Schedule
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4.2, Seller has within the two (2) year period ending on the Closing Date never
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owned or controlled, and does not own or control, directly or indirectly, any
stock, partnership interest, joint venture interest or other security, equity
participation or interest in any corporation, partnership, trust or other
business organization.
4.3. Financial Statements of Seller. Seller has delivered to Buyer the
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following financial statements of Seller:
4.3.1. Audited balance sheets at December 31 of each of the years
1995 and 1996;
4.3.2. Audited statements of income and retained earnings and
changes in stockholder's equity for the years ended December 31, 1995 and
December 31, 1996; and
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4.3.3. The November 30 Financial Statements referenced in Section
2.1.1.C. above.
Such financial statements present fairly the financial
position of Seller or the Orthodontic Business, as the case may be, at each of
such balance sheet dates and the results of its operations for each of the
periods covered, and have been prepared in conformity and consistent with past
practices except as may be disclosed in the notes thereto.
4.4. Liabilities of Seller. Except as set forth in Schedule 4.4, Seller
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has no liabilities or obligations (whether individually or in the aggregate),
either accrued, absolute, contingent or otherwise, except:
A. The Assumed Liabilities;
B. To the extent specifically set forth in or incorporated by
express reference in any of the schedules attached hereto; and
C. Liabilities incurred in the ordinary course of business,
consistent with Seller's past practices, since the date of execution of this
Agreement.
4.5. Tax Matters.
4.5.1. Except as set forth on Schedule 4.5, Seller has timely
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filed all tax returns and reports required to be filed by it, including, without
limitation, all federal, state and local tax returns, and has paid in full or
made adequate provision by the establishment of reserves for all taxes and other
charges which have become due or which are attributable to the conduct of
Seller's business or ownership of the Purchased Assets prior to Closing. Seller
will continue to make adequate provision for all such taxes and other charges
for all periods through November 30, 1997.
Except as set forth on Schedule 4.5, Seller and Shareholder have
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no knowledge of any tax deficiency proposed or threatened against Seller. There
are no tax liens upon any property or assets of Seller.
Except as set forth on Schedule 4.5, Seller has made all payments
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of estimated taxes when due in amounts sufficient to avoid the imposition of any
penalty.
4.5.2. Except as set forth on Schedule 4.5, all taxes and other
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assessments and levies which Seller was required by law to withhold or to
collect have been duly withheld and collected, and have been paid over to the
proper governmental entity.
4.5.3. Except as set forth in Schedule 4.5, the federal and state
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income tax returns and local returns, if any, of Seller have never been audited
by the income tax authorities, nor are any such audits in process. Except as set
forth in Schedule 4.5, there are no outstanding agreements or waivers extending
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the statute of limitations applicable to any federal or state income tax returns
of Seller for any period.
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4.5.4. Under its contracts with its customers for sales or
licenses of Seller Software, to the knowledge of Seller and Shareholder, such
customers are liable for any and all sales or use taxes imposed by virtue of or
with respect to such sales or licenses.
4.6. Real Estate of Seller.
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4.6.1. Seller does not own any real property.
4.6.2. The leases described in Schedule 4.6 cover all of the real
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estate leased, used or occupied by Seller in connection with its Orthodontic
Business (collectively, the "Real Property"). Except as set forth in Schedule
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4.6, to the knowledge of Seller and Shareholder, the leases described in
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Schedule 4.6 are in full force and effect and Seller holds a valid and existing
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leasehold interest under each of such leases. Seller has delivered to Buyer
complete and accurate copies of such of the leases described in Schedule 4.6 and
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none of such leases has been modified, except to the extent that such
modifications are disclosed by the Schedule 4.6.
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Seller is not in default and, to the knowledge of Seller and
Shareholder, no circumstances exist which would result in a default, under any
of such leases, and to the knowledge of Seller and Shareholder, no other party
to such leases has the right to terminate, accelerate performance under or
otherwise modify (including upon the giving of notice or the passage of time)
any of such leases. To the knowledge of Seller and Shareholder, no lessor under
any such lease is in default under any of such leases.
4.6.3. Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, granted a security deed, subleased or encumbered any interest
in any of the leaseholds or subleaseholds described in Schedule 4.6.
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4.7. Good Title to and Condition of Seller's Assets.
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4.7.1. Seller has good and marketable title to all of the
Purchased Assets (other than its interest in its leasehold premises), free and
clear of all Encumbrances, except for (i) Encumbrances for current taxes,
assessments or government changes or levies on property not yet due or
delinquent or (ii) Encumbrances related to the Assumed Liabilities (Encumbrances
of the type described in clauses (i) and (ii) above are sometimes referred to as
"Permitted Encumbrances") which are set forth in Schedule 4.7.
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4.7.2. The inventory and supplies of Seller consist of items
of a quality and quantity usable and saleable in the normal course of Seller's
business at values as shown on the November 30 Financial Statements. The values
of obsolete or slow-moving inventory and inventory of below standard quality, if
any, have been written down to the lower of cost or realizable market values or
have been written off.
The value at which such inventories are carried on the November 30
Balance Sheet reflects the normal inventory valuation policies of Seller,
stating inventories at the lower of cost or market on a first-in first-out
basis, all determined in accordance with generally accepted accounting
principles.
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4.8. Receivables of Seller. Seller has previously delivered to Buyer a
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complete list of all receivables of Seller relating to the Orthodontic Business
as of November 30, 1997, including accounts receivable, notes receivable and
insurance proceeds receivable. To the knowledge of Seller and Shareholder, all
of the receivables listed thereon or set forth or reflected in the November 30
Balance Sheet, were, as of the dates as of which the information is given
therein, and as of the Closing Date will be valid accounts receivable which are
or will be current and collectible.
4.9. Intellectual Property Rights of Seller.
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4.9.1. Schedule 4.9.1 (i) contains a complete list of each
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registration of patents, copyrights, trademarks, service marks, trade names,
maskworks, other Intangibles and Software (collectively "Registrations") which
have been issued to Seller and are related to the Orthodontic Business; (ii)
identifies each pending Registration of Seller with respect to the Intangibles
and Software (defined in Section 4.9.2.M.) which are related to the Orthodontic
Business and (iii) identifies all of Seller's applications for or Registrations
regarding the Intangibles and Software which have been withdrawn, abandoned, or
have lapsed or been denied.
Schedule 4.9.1 also identifies (i) each license agreement or other
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written or oral agreement or permission which is related to the Orthodontic
Business ("License Agreement") and which Seller has granted to any third party
with respect to any of the Intangibles or Software; (ii) each item of the
Intangibles and Software used or possessed by Seller that any third party owns
and the license, sublicense, agreement or other permission in connection
therewith which are related to the Orthodontic Business (the "Third Party
License Agreement"), together with the term thereof, and all royalties or other
amounts due thereon and (iii) each source code escrow agreement entered into by
Seller and relating to such Intangibles and Software.
Seller has supplied Buyer with correct and complete copies of all
License Agreements and Third Party License Agreements, and except as specified
in Schedule 4.9.1, all License Agreements and Third Party License Agreements may
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be assigned to Buyer free of cost or expense without obtaining the consent or
approval of any other person.
Seller has complied with all License Agreements and Third Party
License Agreements, and to the knowledge of Seller and Shareholder, no default
or event of default exists under any of the License Agreements or Third Party
License Agreements.
4.9.2.
A. Schedule 4.9.2 is an accurate and complete list and
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description (including a name, product description, the language in which it is
written and the type of hardware platform(s) on which it runs) of all of the
following:
(i) All Software owned by Seller or under development
by Seller related to the Orthodontic Business ("Owned Software").
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(ii) All Software, other than the Owned Software,
related to the Orthodontic Business and that is either (x) offered or provided
to customers of Seller when the Owned Software is licensed to such customers or
(y) used by Seller to provide services to customers of Seller which services
utilize the Owned Software (collectively, "Customer Software"; the Owned
Software and the Customer Software are collectively referred to as the "Seller
Software").
(iii) All Software, other than Seller Software, related
to the Orthodontic Business that is licensed or marketed to or from third
parties or otherwise used by Seller in the Orthodontic Business for any purpose
whatsoever (collectively, "Other Software").
B. To the extent not set forth in Schedule 4.9.1, Schedule
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4.9.2 separately sets forth an accurate and complete list and description of
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each copyright, trademark, trademark application or registration, service xxxx,
service xxxx application or registration, patent application or registration,
and name and logo included in the Intangibles (as defined below in this Section)
owned, marketed or licensed by Seller related to the Orthodontic Business to or
from third parties, used or under development by Seller related to the
Orthodontic Business. Schedule 4.9.2 indicates Seller's ownership of such items
--------------
or the source of Seller's right to use such items.
C. No Software other than the Owned Software, Customer
Software and Other Software is required to operate the Orthodontic Business as
currently conducted.
D. Except as explained on Schedule 4.9.2, Seller has
--------------
good and marketable title to the Owned Software and Intangibles attributable to
the Owned Software, and has the full right to use all of the Customer Software
and Other Software, and Intangibles attributable thereto, as used or required to
operate the Orthodontic Business as currently conducted, free and clear of any
liens, claims, charges or encumbrances which would affect the use of such
Software in connection with the operation of the Orthodontic Business as
currently conducted.
E. Other than as disclosed on Schedule 4.9.1, no rights of
--------------
any third party not previously obtained are necessary to market, license, sell,
modify, update, and/or create derivative works for any Software as to which
Seller takes any such action in its Orthodontic Business as currently conducted.
F. With respect to Software which is licensed by Seller to
third parties or used in connection with the providing of services to third
parties in the Orthodontic Business:
(i) Seller maintains machine-readable master-
reproducible copies, reasonably complete technical documentation and/or user
manuals for the most current releases or versions thereof and for all earlier
releases or versions thereof currently being supported by Seller;
(ii) In each case, the machine-readable copy
substantially conforms to the corresponding source code listing;
-11-
(iii) Such Software is written in the language
set forth on Schedule 4.9.2, for use on the hardware set forth on Schedule 4.9.2
-------------- --------------
with standard operating systems;
(iv) Such Software can be maintained and
modified by reasonable competent Seller programmers familiar with such language,
hardware and operating systems; and
(v) In each case the Software operates in
accordance with the user manual thereof without operating defects of any
material nature.
G. None of the Software or Intangibles listed on
Schedule 4.9.1 or Schedule 4.9.2, or their respective past or current uses
-------------- --------------
by or through Seller has violated or infringed upon, or is violating or
infringing upon, any Software, patent, copyright, trade secret or other
Intangible of any person. Seller has adequately maintained all trade secrets and
copyrights with respect to the Software. Seller has performed all obligations
imposed upon it in all material respects with regard to the Customer Software
and Other Software which are required to be performed by it on or prior to the
date hereof, and neither Seller nor, to the knowledge of Seller and Shareholder,
any other party, is in breach of or default thereunder in any respect, nor to
Seller's or Shareholder's knowledge, is there any event which with notice or
lapse of time or both would constitute a default thereunder.
H. To the knowledge of Seller and Shareholder, no
person is violating or infringing upon, or has violated or infringed upon at any
time, any of Seller's proprietary rights to any of the Software or Intangibles
listed on either Schedule 4.9.1 or Schedule 4.9.2.
-------------- ---------------
I. None of the Software or Intangibles listed on
Schedule 4.9.1 and Schedule 4.9.2 are owned by or registered in the name of
-------------- --------------
Shareholder, any current or former owner, or shareholder, other shareholder,
partner, director, executive, officer, employee, salesman, agent, customer,
contractor of Shareholder or representative nor does any such person have any
interest therein or right thereto, including, but not limited to, the right to
royalty payments. Except as listed on Schedule 4.9.1, Seller has granted no
--------------
third party any exclusive rights related to any Owned Software.
J. No litigation is pending and no claim has been
made against Seller or, to the knowledge of Seller or Shareholder, is
threatened, which contests the right of Seller to sell or license to any person
or use any of the Owned Software, Customer Software or Other Software. No former
employer of any employee or consultant of Seller has made a claim against Seller
or, to the knowledge of Seller and Shareholder, against any other person, that
Seller or such employee or consultant is misappropriating or violating the
Intangibles of such former employer.
K. Seller is not a party to or bound by any license
or other agreement requiring the payment by Seller or its assigns of any royalty
or license payment, excluding such agreements relating to the Customer Software
to the extent such royalty or license payment is expressly set forth on
Schedule 4.9.1.
--------------
-12-
L. Except as set forth in Schedule 4.9.1 or Schedule
-------------- --------
4.9.2, the Owned Software, Customer Software, and Other Software and the
-----
information used by Seller, and the Intangibles thereunder, are fully
transferable to Buyer in the manner contemplated in this Agreement (in, object
code, and if applicable, source code forms, including all related documentation,
to the extent that such documentation has been created).
M. For purposes of this Agreement, "Software" means
any computer program, operating system, applications system, firmware or
software of any nature, whether operational, under development or inactive,
including all object code, source code, technical manuals, user manuals and
other documentation thereof, whether in machine-readable form, programming
language or any other language or symbols and whether stored, encoded, recorded
or written on disk, tape, film, memory device, paper or other media of any
nature.
"Intangible" means:
(i) Patents, patent applications, patent
disclosures, all re-issues, divisions, continuations, renewals, extensions and
continuation-in-parts thereof and improvements thereto;
(ii) Trademarks, service marks, trade dress,
logos, trade names, and corporate names and registrations and applications for
registration thereof and all goodwill associated therewith;
(iii) Copyrights and registrations and
applications for registration thereof;
(iv) Maskworks and registrations and
applications for registration thereof;
(v) All right, title and interest in all
computer software, data and documentation (including, without limitation,
modifications, enhancements, revisions or versions of or to any of the foregoing
and prior releases of any of the foregoing applicable to any operating
environment);
(vi) Trade secrets and confidential business
information (including ideas, formulas, compositions, inventions, whether
patentable or unpatentable and whether or not reduced to practice, know-how
(excluding know-how unrelated to the Owned Software, Customer Software, Other
Software, or the Orthodontic Business or products), manufacturing and production
processes and techniques, research and development information, drawings, flow
charts, processes ideas, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer and supplier lists
and information);
(vii) Other proprietary rights;
-13-
(viii) All income, royalties, damages and
payments due at Closing or thereafter with respect to the Owned Software,
Customer Software, Other Software, or other Intangibles and all other rights
thereunder including, without limitation, damages and payments for past, present
or future infringements or misappropriations thereof, the right to xxx and
recover for past, present or future infringements or misappropriations thereof;
(ix) All rights to use all of the foregoing
forever; and
(x) All other rights in, to, and under the
foregoing in all countries.
4.9.3. The Owned Software and to the best knowledge of Seller
and Shareholder, the Customer Software and Other Software, are substantially
"Millennium Compliant." For the purposes of this Agreement "Millennium
Compliant" means:
A. The functions, calculations, and other computing
processes of the Owned Software, Other Software and Customer Software
(collectively, "Processes") perform in an accurate manner regardless of the date
in time on which the Processes are actually performed and regardless of the date
input to the Owned Software, Other Software, and Customer Software, whether
before, on, or after January 1, 2000, and whether or not the dates are affected
by leap years;
B. The Owned Software, Other Software, and Customer
Software accept, store, sort, extract, sequence, and otherwise manipulate date
inputs and date values, and return and display date values, in an accurate
manner regardless of the dates used, whether before, on, or after January 1,
2000;
C. The Owned Software, Other Software, and Customer
Software will function without interruptions caused by the date in time on which
the Processes are actually performed or by the date input to the Owned Software,
Other Software, and Customer Software, whether before, on, or after January 1,
2000;
D. The Owned Software, Other Software, and Customer
Software accept and respond to two (2) digit year and four (4) digit year date
input in a manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner; and
E. The Owned Software, Other Software, and Customer
Software display, print, and provide electronic output of date information in
ways that are unambiguous as to the determination of the century.
F. For purposes of this Section 4.9.3., "date input"
does not include data received by a system using the Owned Software, Other
Software and Customer Software from a third party whose computer system is
networked or connected by Internet, except for date input for which the Owned
Software, Other Software and Customer Software are designed to accept according
to parameters established by such software.
-14-
4.9.4. Without limiting any of the foregoing, to the knowledge
of Seller and Shareholder, none of Seller's officers, directors, employees or
independent contractors have disclosed to (without proper obligation of
confidentiality) or otherwise used or utilized on behalf of any person other
than Seller, any trade secrets or proprietary information, including, without
limitation, the source codes for Seller Software.
Schedule 4.9.4 identifies all individuals compensated at an
--------------
annual rate in excess of $30,000.00 who have contributed to the development of
the Owned Software.
4.9.5. Seller Software:
A. Performs substantially in accordance with all
published specifications for such Programs;
B. Complies in all material respects with all other
published documentation, descriptions and literature with respect to such
Programs; and
C. Complies in all material respects with all
representations, warranties and other requirements specified in all of Seller's
License Agreements.
4.9.6. Except as set forth on Schedule 4.9.6, Shareholder does
--------------
not have an ownership right or other interest in any Software or Intangibles
related to the Orthodontic Business.
4.9.7. All Seller's contracts with customers in the
Orthodontic Business (collectively "Customer Contracts") for specific customers,
whether completed or outstanding, were or are evidenced by written agreements
containing provisions reasonably equivalent to those contained in Schedule 4.9.7
--------------
hereto, with only such changes as would not affect the rights of Buyer as
assignee thereof and would not impose on Buyer, as assignee thereof, any
additional obligations.
No Customer Contract provided for the transfer to the customer
therein of any Intangibles relating to Seller Software as to which Seller
thereafter shall have no further rights. No current Customer Contract provides
that the customer therein shall be entitled to sublicense or otherwise transfer
to a third party any of the Intangibles relating to Seller Software unless such
third party agrees to be bound by the confidentiality provisions thereof and
agrees to pay Seller royalties and other amounts comparable to those under such
Customer Contract.
Except as set forth on Schedule 4.9.7, each past or present
--------------
customer of Seller and each past or present customer of Seller to whom Seller
disclosed any of the Intangibles relating to Seller Software is bound by a
confidentiality provision which requires such past or present customer to take
reasonable steps to protect the rights of Seller in the Intangibles relating to
Seller Software.
-15-
4.10. Adequacy of Seller's Assets. The Purchased Assets constitute, in
---------------------------
the aggregate, all of the property necessary for the conduct of Seller's
Orthodontic Business in the manner in which and to the extent to which it is
currently being conducted.
4.11. Documents of and Information With Respect to Seller.
---------------------------------------------------
4.11.1. Schedule 4.11 accurately and completely sets forth a true
-------------
and complete list of all of the contracts of Seller which are material to the
Purchased Assets or Seller's Orthodontic Business (the "Material Contracts"),
including, without limitation, the following:
A. Each policy of insurance in force with respect to the
assets and properties of Seller and each of the performance or other surety
bonds maintained by Seller in the conduct of its business;
B. Each promissory note, loan, credit agreement,
guarantee, security agreement or similar document or instrument to which Seller
is a party or by which it is bound;
C. Each lease of personal property to which Seller is a
party or by which it is bound which involves rental payments which, if
annualized, would exceed $5,000.00;
D. Any other agreement, contract or commitment to which
Seller is a party or by which it is bound which involves a future commitment by
Seller in excess of $5,000.00 and which cannot be terminated without liability
on ninety (90) days or less notice; and
E. The name of each bank in which Seller has an account
or safe-deposit box, the name in which the account or box is held and the names
of all persons authorized to draw thereon or to have access thereto.
The contracts listed on Schedule 4.11 together with the License
-------------
Agreements and Third Party License Agreements listed on Schedule 4.9.1 are
--------------
referred to herein as the "Material Contracts."
Seller has previously furnished Buyer with a true and complete
copy of each such agreement, contract or commitment listed in Schedule 4.11.
-------------
There has not been any material default in any obligation to be performed by
Seller, nor to the best knowledge of Seller and Shareholder, any other party,
under any such instrument. Except as set forth on Schedule 4.9.1 and Schedule
-------------- --------
4.11, Seller is not a party to or bound by any other Material Contracts.
----
All Material Contracts have been entered into in the ordinary
course of business, are on normal and reasonable commercial terms and are not
unduly favorable to the parties thereto other than Seller. To the knowledge of
Seller and Shareholder, no Material Contract will likely result in a loss to
Seller upon completion of performance or which cannot readily be fulfilled or
performed by Seller in accordance with its terms without undue or unusual
expenditures of money or effort.
-16-
4.11.2. Seller carries insurance as set forth in Schedule 4.11.2.
---------------
All premiums and other payments which have become due under the
policies of insurance listed in Schedule 4.11.2 have been paid in full and, to
---------------
the extent relating to periods prior to the Closing Date, will be paid in full
on or prior to the Closing Date. All of such policies are now in full force and
effect and Seller has received no notice from any insurer, agent or broker of
the cancellation of, or any increase in premium with respect to, any of such
policies or bonds. No insurer has the right to make retrospective premium
adjustments with respect to any of such policies.
Except as set forth in Schedule 4.11.2, Seller has received no
---------------
notification from any insurer, agent or broker denying or disputing any claim
made by Seller or denying or disputing any coverage for any such claim or the
amount of any claim. Except as set forth in Schedule 4.11.2, Seller has no claim
---------------
against any of its insurers under any of such policies pending or anticipated
and there has been no occurrence of any kind which would give rise to any such
claim.
4.11.3. Schedule 4.11.3 sets forth a complete list of all of
---------------
Seller's current Orthodontic Business customers (defined as having received
products or services from Seller within the last three (3) years).
4.12. Litigation Involving Seller and Shareholder. Except as set forth
-------------------------------------------
on Schedule 4.12, there are no actions, suits, claims, governmental
-------------
investigations or arbitration proceedings pending or, to the knowledge of Seller
and Shareholder, threatened against or affecting Seller or any of its assets or
properties or Shareholder with respect to or relating to Seller and, to the
knowledge of Seller and Shareholder, there is no basis for any of the foregoing.
There are no outstanding orders, decrees or stipulations issued by any federal,
state, local or foreign judicial or administrative authority in any proceeding
to which Seller is or was a party.
4.13. No Adverse Change. Since the date of the November 30 Balance
-----------------
Sheet, all changes in the Orthodontic Business or Orthodontic Business
properties of Seller, or in the financial condition of its Orthodontic Business,
including changes occurring in the ordinary course of business, have not had or
will not have an adverse effect on the business, properties, financial
condition, business prospects or operating results of the Orthodontic Business
of Seller. There is not, to the knowledge of Seller and Shareholder, any
threatened or prospective event or condition of any character whatsoever which
could adversely affect the assets, properties, business, financial condition or
results of operations of the Orthodontic Business Seller.
4.14. Absence of Certain Acts or Events. Since the date of the November
---------------------------------
30 Balance Sheet, with respect to the Orthodontic Business, Seller has not:
A. Sold or transferred any of its assets other than in the
ordinary course of business;
B. Made or obligated itself to make capital expenditures
aggregating more than $10,000.00;
-17-
C. Incurred any material obligations or liabilities (including
any indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby;
D. Suffered any theft, damage, destruction or casualty loss in
excess of $5,000.00; or
E. Declared or paid any dividends or made any other distributions
with respect to its shares or redeemed or purchased any of its shares.
4.15. Compliance With Laws by Seller.
------------------------------
4.15.1. To the knowledge of Seller and Shareholder, Seller is in
compliance in all material respects with all laws, regulations and orders
applicable to the Orthodontic Business of Seller, and its assets and properties
used in the Orthodontic Business. Seller has not received notification of any
asserted past or present failure to comply with any laws, and to the knowledge
of Seller and Shareholder, no proceeding with respect to any such violation is
contemplated.
4.15.2. To the knowledge of Seller and Shareholder, Seller has
not made any payment of funds prohibited by law in connection with the
Orthodontic Business of Seller, and no funds have been set aside to be used in
connection with the Orthodontic Business of Seller for any payment prohibited by
law.
4.16. Employment and Labor Matters.
----------------------------
4.16.1. Schedule 4.16 lists all employees and agents who on the
-------------
date hereof perform services on a regular basis in the Orthodontic Business
operations of or for Seller. No such employee or agent has terminated or given
notice of termination of his employment as of the date hereof, nor, to the
knowledge of Shareholder or Seller, plans to refuse employment with Buyer after
the Closing Date.
4.16.2. To the knowledge of Seller and Shareholder, Seller has
complied in all material respects with all applicable federal, state and local
laws, rules and regulations and ordinances respecting health, safety and working
conditions of its employees, including, without limitation, the Occupational
Safety and Health Act of 1970, Pub. L. 91-596, as amended, and all similar
applicable federal, state and local laws, rules, regulations and ordinances, and
has provided Buyer with copies of all reports filed and notices provided under
any such laws, rules, regulations and ordinances during the last five (5) years.
4.16.3. Seller is not a party to any agreement, contract or
arrangement, written or oral, providing for any payments to any person resulting
from the consummation of the transactions contemplated hereby, except for
payments to holders of shares of Seller's capital stock. Seller's obligation to
make any such payments shall constitute Excluded Liabilities.
-18-
4.17. Employee Benefits Matters.
-------------------------
4.17.1. Schedule 4.17.1 lists all plans, programs, and similar
---------------
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of Seller or any other party that provide benefits or compensation
to, or for the benefit of, current or former employees of Seller ("Plan" or
"Plans"). Except as set forth on Schedule 4.17.1 only current and former
---------------
employees of Seller participate in the Plans. Buyer does not adopt or assume,
and Seller shall not assign or transfer to Buyer, any Plan. If requested by
Buyer, copies of all Plans and, to the extent applicable, all related trust
agreements, actuarial reports, and valuations for the most recent three (3)
years, all summary plan descriptions, prospectuses, Annual Report Form 5500s or
similar forms (and attachments thereto) for the most recent three (3) years, all
Internal Revenue Service determination letters, and any related documents
requested by Buyer, including all amendments, modifications and supplements
thereto, will be delivered to Buyer, and all of the same are or will be true,
correct and complete.
4.17.2. With respect to each Plan to the extent applicable:
A. No litigation or administrative or other proceeding is
pending or, to the knowledge of Seller and Shareholder, threatened involving
such Plan;
B. To the best knowledge of Seller and Shareholder, such
Plan has been administered and operated in substantial compliance with, and has
been amended to comply with all applicable laws, rules, and regulations,
including, without limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Internal Revenue Code, and the regulations
issued under ERISA and the Internal Revenue Code;
C. Seller and its predecessors, if any, have made and as
of the Closing Date will have made or accrued, all payments and contributions
required, or reasonably expected to be required, to be made under the provisions
of such Plan or required to be made under applicable laws, rules and
regulations, with respect to any period prior to the Closing Date, such amounts
to be determined using the ongoing actuarial and funding assumptions of the
Plan;
D. Such Plan is fully funded in an amount sufficient to
pay all liabilities accrued (including liabilities and obligations for health
care, life insurance and other benefits after termination of employment) and
claims incurred to the date hereof, or the November 30 Balance Sheet contains
adequate reserves or paid-up insurance has been provided, therefor; and
E. To the knowledge of Seller and Shareholder, such Plan
has been administrated and operated only in the ordinary and usual course and in
accordance with its terms, and there has not been in the four (4) years prior
hereto any increase in the liabilities of such Plan beyond increases typically
experienced by employers similar to Seller.
4.18. Due Authorization; Binding Obligation. The execution, delivery and
-------------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by necessary corporate action of
Seller. This Agreement has been duly executed and
-19-
delivered by Seller and Shareholder and is a valid and binding obligation of
each of them, enforceable in accordance with its terms, subject to bankruptcy,
reorganization, moratorium or other similar laws of general application
affecting the enforcement of creditors' rights, and to general principles of
equity.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will:
A. Conflict with or violate any provision of the articles of
incorporation or bylaws of Seller, or of any law, ordinance or regulation or any
decree or order of any court or administrative or other governmental body which
is either applicable to, binding upon or enforceable against Seller or
Shareholder; or
B. Result in any breach of or default under any mortgage,
contract, agreement, indenture, will, trust or other instrument which is either
binding upon or enforceable against Seller or Shareholder or the assets and
properties of the Orthodontic Business of Seller or Shareholder, which breach or
default would have a material adverse effect on the business, properties or
financial condition of the Orthodontic Business of Seller.
Without limiting the generality of the foregoing, neither Seller or
Shareholder is a party to any continuing agreement or understanding, made by it
or on its behalf, which limits in any way the ability of:
A. Seller and Shareholder to enter into this Agreement and
perform their respective obligations hereunder;
B. Seller to sell the Purchased Assets to Buyer and Buyer to
purchase the Purchased Assets, all on the terms and subject to the conditions
set forth herein; or
C. The parties hereto to consummate the transactions contemplated
hereby, nor has Seller or Shareholder breached any such agreement, or any prior
agreement, which breach would entitle the other party thereto to any equitable
or monetary remedies.
4.19. Consents and Approvals. Except as set forth in Schedule 4.19 and
---------------------- -------------
Schedule 4.9.1., no consent, authorization or approval of, or exemption by, or
---------------
filing with, any governmental, public or self-regulatory body or authority (a
"Governmental Agency") or any other third party, including, without limitation,
the licensors of any Software, is required in connection with the execution,
delivery and performance by Seller or Shareholder of this Agreement or the
consummation of the transactions contemplated hereby or thereby or for the
continuation by Buyer of the business of Seller after the Closing in the same
manner as presently conducted or proposed to be conducted.
4.20. Related Party Transactions. Except as set forth in Schedule 4.20,
-------------------------- -------------
Seller is not directly or indirectly a party to any contract, agreement, or
lease with, or any other commitment to:
-20-
A. Shareholder or any other party owning, or formerly owning,
beneficially or of record, directly or indirectly, any of the shares of capital
stock of Seller;
B. Any person related by blood, adoption or marriage to any such
party;
C. Any director or officer of Seller;
D. Any corporation or other entity in which any of the foregoing
parties has, directly or indirectly, at least a five percent (5%) beneficial
interest in the share capital or other type of equity interest in such entity;
or
E. Any partnership in which any such party is a general partner
(any or all of the foregoing being herein referred to as "Related Parties").
Without limiting the generality of the foregoing, except as disclosed in
Schedule 4.20,
-------------
A. No Related Party, directly or indirectly, owns or controls any
assets or properties which are or have been used in the business of Seller; and
B. No Related Party, directly or indirectly, engages in or has
any significant interest in or connection with any business (x) which is or
which within the last three (3) years has been a competitor, customer or
supplier of Seller or has done business with Seller or (y) which as of the date
hereof sells or distributes products or services which are similar or related to
Seller's products or services.
4.21. Accuracy of Information Furnished by Seller and Shareholder. No
-----------------------------------------------------------
representation contained in this Agreement and no information or statements
contained in the various schedules attached hereto, contains or shall contain
any untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained therein in light of circumstances in
which they were made, not misleading.
4.22. Customer Prepayments. Set forth on Schedule 4.22 is a description of
-------------------- -------------
arrangements with existing customers pursuant to which Seller is obligated to
perform services relating to its Orthodontic Business software products,
including the amount of prepayments received by Seller as of November 30, 1997,
under such contracts.
4.23. Books and Records. The books of account and other financial records
-----------------
to be transferred to Buyer pursuant hereto are complete and correct, and are
accurately reflected in the Financial Statements. Seller has provided to Buyer
and its representatives true and complete copies of or access to all minute
books, stock register and other corporate records of Seller existing on the date
hereof.
5. Representations and Warranties of Buyer and InfoCure.
In order to induce Seller to enter into this Agreement and consummate the
transactions contemplated hereunder, Buyer and InfoCure, jointly and severally,
make the following representations and warranties:
-21-
5.1. Organization, Power and Authority of Buyer. Buyer is a corporation
------------------------------------------
duly organized and validly existing under the laws of the State of Georgia, with
full corporate power and authority to enter into this Agreement and to carry out
the transactions and agreements contemplated hereby.
5.2. Due Authorization; Binding Obligation. The execution, delivery and
-------------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate actions
of Buyer. This Agreement has been duly executed and delivered by Buyer and is a
valid and binding obligation of Buyer, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will:
A. Conflict with or violate any provision of the articles of
incorporation or bylaws of Buyer or of any decree or order of any court or
administration or other governmental body which is either applicable to, binding
upon or enforceable against Buyer; or
B. Result in any breach of or default under any mortgage,
contract, agreement, indenture, will, trust or other instrument which is either
binding upon or enforceable against Buyer.
5.3. Accuracy of Information Furnished by Buyer. No representation,
------------------------------------------
statement or information made or furnished by Buyer to Seller in writing
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein, in light of the circumstances
in which they were made, not misleading.
5.4. Accuracy of Information Furnished by Buyer and InfoCure. No
-------------------------------------------------------
representation, statement or information in writing made or furnished by Buyer
or InfoCure or by both of them to Seller and Shareholder, including, without
limitation, those contained in this Agreement and the various schedules attached
hereto and the other information and statements previously furnished by Buyer to
Seller in writing, contains or shall contain any untrue statement of a material
fact or omits or shall omit any material fact necessary to make the information
contained therein in light of circumstances in which they were made, not
misleading.
5.5. No Adverse Change. Since November 30, 1997, all changes in the
-----------------
business or properties of Buyer or InfoCure, or in their consolidated financial
condition, including changes occurring in the ordinary course of business, have
not had or will not have an adverse effect on the business, properties,
financial condition, business prospects or operating results of Buyer or
InfoCure. There is not, to the best knowledge of Buyer and InfoCure, any
threatened or prospective event or condition of any character whatsoever which
could adversely affect the assets, properties, business, financial condition or
results of operations of Buyer or InfoCure.
-22-
6. Additional Covenants of Seller and Shareholder.
6.1. Best Efforts. Seller and Shareholder will each use its respective
------------
best efforts to cause to be satisfied as soon as practicable and prior to the
Closing Date all of the conditions set forth in Section 9. to the obligation of
Buyer to purchase the Purchased Assets.
6.2. Conduct of Business Pending the Closing. From and after the
---------------------------------------
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided by the prior written consent of Buyer, with respect to the
Orthodontic Business of Seller:
6.2.1. Seller will: (i) conduct its business and operations in the
manner in which the same have heretofore been conducted; (ii) preserve its
business organization intact; (iii) keep available the services of its officers,
employees, agents and distributors and (iv) preserve its relationships with
customers, suppliers and others having dealings with Seller;
6.2.2. Seller will maintain all of its properties in customary
repair, order and condition, reasonable wear and use and damage by unavoidable
casualty excepted, and maintain insurance of such types and in such amounts upon
all of its properties and with respect to the conduct of its business as are in
effect on the date of this Agreement;
6.2.3. Seller will: (i) not sell or transfer any of its assets other
than in the ordinary course of business consistent with past practices or (ii)
not incur any material obligations or liabilities or enter into any material
transaction, contract, arrangement or agreement without the prior written
consent of Buyer; and
6.2.4. Seller will not increase the compensation payable or to
become payable to any director, officer, employee or agent of Seller, make any
profit-share payment or other arrangement (whether current or deferred) to or
with any director, officer, employee or agent, hire any employee, officer or
director, consultant, or agent without the prior written approval of Buyer.
6.3. Access to Seller's Plants, Properties and Records. From and after
-------------------------------------------------
the execution and delivery of this Agreement, Seller will afford to the
representatives of Buyer access, during normal business hours and upon
reasonable notice, to Seller's premises sufficient to enable Buyer to inspect
the assets and properties of Seller, and Seller will furnish to such
representatives during such period all such information relating to the
foregoing investigation as Buyer may reasonably request; provided, however, that
any furnishing of such information to Buyer and any investigation by Buyer shall
not affect the right of Buyer to rely on the representations and warranties made
by Shareholder or Seller in or pursuant to this Agreement, and, provided further
that Buyer will hold in confidence all documents and information concerning
Seller so furnished.
6.4. No Other Discussions. Commencing on the date hereof and extending
--------------------
through and including the earlier of the Closing Date or termination of this
Agreement pursuant to Section 13.3., Seller will, and Shareholder will use
Shareholder's best efforts to cause Seller to, discontinue negotiations with
others and will not continue or enter into discussions or negotiate with or
entertain or accept the unsolicited offer of any other party concerning the
potential sale of
-23-
all or any part of the assets of the Orthodontic Business or shares of Seller or
the merger, consolidation or other business combination of Seller with respect
to its Orthodontic Business with any person other than Buyer. Seller will, and
Shareholder will use Shareholder's best efforts to cause Seller to, notify Buyer
of any offers or inquiries with respect thereto and provide copies of any
written offers or proposals.
6.5. Employee Benefit Plans and Termination of Employment of Certain of
------------------------------------------------------------------
Seller's Employees. Seller, Buyer, and Shareholder hereby covenant and agree as
------------------
follows with regard to all employee benefit Plans (as defined in Section 4.17.1.
hereof) maintained by Seller and with respect to the termination of employment
of Seller employees by Buyer following the Closing:
A. Benefit Plans. Shareholder and Seller covenant and agree to
-------------
hold Buyer harmless from and indemnify Buyer against all liabilities for any
benefits payable under any Benefit Plan as of the Closing Date.
B. Health Insurance. Seller and Shareholder hereby covenant and
----------------
agree that Seller will promptly pay (or properly accrue on the November 30
Balance Sheet) all obligations that are payable under any health insurance plan
maintained by Seller or Seller as of the Closing Date.
C. Disability Insurance. Seller will promptly pay (or properly
--------------------
accrue on the November 30 Balance Sheet) all obligations that are payable under
any disability plan maintained by Seller as of the Closing Date with respect to
any of Seller's employees.
D. Bonuses. Seller and Shareholder hereby covenant and agree that
-------
Seller will pay all bonuses earned by employees or former employees of Seller as
of the Closing Date. Except as otherwise agreed pursuant to Section 11.6. below,
Buyer shall have no liability for bonuses earned or expected as of the Closing
Date.
E. Seller's Employees to Enter Buyer's Health Plan. Buyer hereby
-----------------------------------------------
covenants and agrees that it will cover each employee of Seller whom Buyer
employs in Buyer's group health plan, without requiring a waiting period and
without imposing any limitation for a pre-existing health condition, subject to
general enrollment requirements mandated by such plan. Each of Seller and
Shareholder agrees to cooperate with Buyer in ensuring the transition of health
benefits from Seller's plan to Buyer's plan so as to avoid any lapse in
coverage.
F. COBRA and HIPAA. Seller hereby covenants and agrees that it
---------------
will promptly deliver to all employees of Seller, and such employees'
dependents, appropriate notices and documentation under applicable provisions of
the Consolidated Budget Reconciliation Act of 1985 and the Health Insurance
Portability and Accountability Act of 1996.
G. Prior Service Credit for 401(k), Employee Stock Option and
----------------------------------------------------------
Employee Stock Purchase Plans. In determining whether an employee of Buyer has
-----------------------------
met the waiting period requirement for participation in Buyer's 401(k), Employee
Stock Option and Employee Stock Purchase Plans, Buyer hereby covenants and
agrees to provide such employee with credit for time employed by Seller.
-24-
H. Reimbursement by Buyer. Buyer hereby covenants and agrees promptly
----------------------
to reimburse Seller for payments made by Seller on behalf of each employee of
Seller whom Buyer employs between December 1, 1997, through the Closing Date
with respect to any medical, dental, life and short-term disability benefits
provided by Seller, which expenses shall be reconciled as provided in Section
11.G. below.
I. Termination of Employment of Certain Employees. The parties
----------------------------------------------
acknowledge that upon the Closing Date, Buyer intends to terminate the
employment of certain of Seller's employees, whose employment Seller and
Shareholder have represented and warranted to be "at will."
7. Other Covenants of Shareholder.
------------------------------
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereunder, Shareholder agrees with Buyer as
follows:
7.1. No Other Discussions. Commencing on the date hereof and extending
--------------------
through and including the earlier of the Closing Date or termination of this
Agreement pursuant to Section 13.3., Shareholder will discontinue negotiations
with others and will not enter into discussions or negotiate with or entertain
or accept the unsolicited offer of any other party concerning the potential sale
of all or any part of the assets of the Orthodontic Business or shares of Seller
or the merger or consolidation or other business combination of Seller with
respect to its Orthodontic Business with any person other than Buyer.
Shareholder will notify Buyer of any offers or inquiries with respect thereto
and provide copies of any written offers or proposals.
7.2. Best Efforts; Cooperation With Accountants. Shareholder will use
------------------------------------------
its best efforts to cause to be satisfied as soon as practicable and prior to
the Closing Date all of the conditions set forth in Section 9. to the obligation
of Buyer to purchase the Purchased Assets and will cooperate with the
Accountants in the preparation of the November 30 Balance Sheet.
8. Additional Covenants of Buyer and InfoCure.
8.1. Best Efforts. Each of Buyer and InfoCure will use its best efforts
------------
to cause to be satisfied as soon as practicable and prior to the Closing Date
all of the conditions set forth in Section 10. to the obligation of Seller to
sell the Purchased Assets pursuant to this Agreement.
9. Conditions to the Obligation of Buyer and InfoCure.
The obligation of Buyer and InfoCure to purchase the Purchased Assets
shall be subject to the fulfillment at or prior to the Closing Date of each of
the following conditions, each of which is for the benefit of Buyer and InfoCure
and any one (1) or more of which may be waived by either Buyer or InfoCure:
-25-
9.1. Accuracy of Representations and Warranties and Compliance With
--------------------------------------------------------------
Obligations. The representations and warranties of Shareholder and Seller
-----------
contained in this Agreement shall have been true and correct at and as of the
date hereof, and they shall be true and correct at and as of the Closing Date
with the same force and effect as though made at and as of that time.
Shareholder and Seller shall have performed and complied with all of
their obligations required by this Agreement to be performed or complied with at
or prior to the Closing Date.
Shareholder and the President or Vice President of Seller shall have
delivered to Buyer a certificate, dated as of the Closing Date and signed by
Shareholder and the President or Vice-President of Seller, certifying that such
representations and warranties are thus true and correct and that all such
obligations have been thus performed and complied with.
9.2. Opinion of Counsel. Buyer shall have received an opinion dated the
------------------
Closing Date from Xxxxx, Xxxxxxxx & Xxxxxxx, L.L.P., counsel for Seller and
Shareholder, substantially in form and substance as set forth on Exhibit H
---------
attached hereto.
9.3. Receipt of Necessary Consents. Except as described on Schedule
----------------------------- --------
4.19, all necessary consents or approvals of third parties to any of the
----
transactions contemplated hereby, the absence of which would affect Buyer's
rights hereunder, shall have been obtained and shown by written evidence
reasonably satisfactory to Buyer.
9.4. No Adverse Litigation. There shall not be pending or threatened
---------------------
any action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the sale of the Purchased Assets
to Buyer or any other transaction contemplated hereby, or which might affect the
right of Buyer to own the Purchased Assets or to operate the Orthodontic
Business formerly operated by Seller and which, in the judgment of Buyer, makes
it inadvisable to proceed with the purchase of the Purchased Assets.
9.5. Restrictive Covenant Agreements. Seller and HALIS shall have each
-------------------------------
entered into a restrictive covenant agreement (the "Restrictive Covenant
Agreement") with Buyer and InfoCure, substantially in the form of Exhibit I
---------
hereto.
9.6. Employment Agreements. Xxxx Xxxx and Xxxxxxxx Xxxxxxx shall have
---------------------
each entered into an employment agreement with Buyer, substantially in the forms
of Exhibit J and Exhibit K hereto, respectively.
--------- ---------
9.7. Directors and Shareholder Resolutions; Good Standing. Seller shall
----------------------------------------------------
have delivered to Buyer a certificate evidencing the good standing of Seller as
of a recent practicable date, and a certified copy of the resolutions of the
Directors and shareholders of Seller approving the execution, delivery and
performance by Seller of this Agreement and all the other transactions to be
taken by Seller contemplated herein.
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9.8. Employee Covenants Agreements. Each employee or agent of Seller
-----------------------------
listed on Schedule 9.8 shall have executed and delivered to Buyer a Covenants
------------
Agreement in favor of Buyer in the form of Exhibit L.
---------
9.9. Assignment of Intellectual Property. At or prior to Closing,
-----------------------------------
Shareholder shall assign to Buyer any rights they may have in or to the Software
and Intangibles.
9.10. Buyer's Lender's Approval. On or before December 31, 1997, Buyer
-------------------------
shall have obtained the commitment of Finova Capital Corporation ("Finova") to
make a term loan or loans to Buyer sufficient to fund fully all of Buyer's
obligations under this Agreement to pay the cash portion of the Purchase Price
(the "Finova Commitment"). The term of the loan shall be sufficient so that such
loan can be amortized over a period of no less than five (5) years.
9.11. Lender's Loan. On or before the Closing, Finova shall have made
-------------
to Buyer a term loan equal to or in excess of the cash portion of the purchase
price, on the same terms and conditions as set out in the Finova Commitment.
9.12. Assumption of Portion of Xx. Xxxx'x Salary. Shareholder shall
------------------------------------------
have entered into an agreement with Xxxx Xxxx, Buyer and InfoCure in the form of
Exhibit M attached hereto.
---------
10. Conditions to Obligation of Seller.
The obligation of Seller to sell the Purchased Assets shall be subject
to the fulfillment at or prior to the Closing Date of each of the following
conditions, each of which is for the benefit of Seller and any one (1) or more
of which may be waived by it:
10.1. Accuracy of Representations and Warranties and Compliance With
--------------------------------------------------------------
Obligations.
-----------
The representations and warranties of Buyer and InfoCure contained in
this Agreement shall have been true and correct at and as of the date hereof,
and they shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time.
Buyer and InfoCure shall have performed and complied with all of their
respective obligations required by this Agreement to be performed or complied
with at or prior to the Closing Date.
Each of Buyer and InfoCure shall have delivered to Seller a
certificate, dated as of the Closing Date and signed by each of their respective
Presidents, certifying that such representations and warranties are thus true
and correct and that all such obligations have been thus performed and complied
with.
10.2. Opinion of Counsel. Seller shall have received an opinion, dated
------------------
the Closing Date, from Xxxxxx, Xxxxxxx & Xxxxxx L.L.P., counsel to Buyer and
InfoCure, substantially in form and substance as set forth in Exhibit N attached
---------
hereto.
10.3. No Adverse Litigation. There shall not be pending or threatened
---------------------
any action or proceeding by or before any court or other governmental body which
shall seek to restrain,
-27-
prohibit or invalidate the sale of the Purchased Assets by Seller or any other
transaction contemplated hereby or which, in the judgment of Seller, makes it
inadvisable to proceed with the sale of the Purchased Assets.
11. Additional Agreements.
11.1. Execution of Further Documents. From and after the Closing, upon
------------------------------
the reasonable request of Buyer, Seller and Shareholder shall, and Shareholder
shall cause Seller to, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required to convey and transfer to and vest in Buyer and protect its
rights, title and interest in the Purchased Assets and as may be appropriate
otherwise to carry out the transactions contemplated by this Agreement.
11.2. Use of Name. After the Closing, Seller shall not conduct any
-----------
business under the name "Software Manufacturing Group", "Software Manufacturing
Group, Inc.", "Orthodontic Practice Management System, Inc." or "OPMS" or under
any name deceptively or confusingly similar thereto, and shall only use such
name as necessary to wind down Seller's Orthodontic Business.
11.3. Nonassignable Contracts. To the extent that the assignment
-----------------------
hereunder by Seller to Buyer of any contract, commitment, license, lease or
other agreement of Seller (the "Contracts") is prohibited or is not permitted
without the consent of any other party to the Contract, this Agreement shall not
be deemed to constitute an assignment of any such Contract if such consent is
not given or if such assignment otherwise would constitute a breach of, or cause
a loss of contractual benefits under, any such Contract, and Buyer shall assume
no obligations or liabilities thereunder.
Prior to the Closing, Seller shall advise Buyer promptly in writing
with respect to any Contract as to which it knows it will not receive any
required consent. Without in any way limiting Seller's obligation pursuant to
Section 9.3. to obtain all consents and waivers necessary for the sale,
transfer, assignment and delivery of the Contracts and the Purchased Assets to
Buyer hereunder, if any such consent is not obtained or if such assignment is
not permitted irrespective of consent and the Closing hereunder is consummated,
Seller shall, if requested by Buyer, cooperate with Buyer in any reasonable
arrangement designed to provide Buyer with the rights and benefits (subject to
the obligations) under the Contract, including, if reasonably requested by
Buyer, by enforcing for the benefit of Buyer any and all rights of Seller
against any other person arising out of breach or cancellation by such other
person, acting as an agent on behalf of Buyer, subcontracting to Buyer the right
to perform under the Contract on the same economic terms as applied to Seller
prior to the Closing and acting as Buyer shall otherwise reasonably require, in
each case at Buyer's expense.
Acceptance of any such arrangement shall constitute a waiver by Buyer
of any claim or alleged breach under this Agreement with respect to such
Contracts.
-28-
11.4. Enforcement of Confidentiality Agreements. From and after the
-----------------------------------------
Closing Date, Seller and Shareholder shall enforce, on behalf of Buyer, any
confidentiality agreements which cannot be assigned to Buyer pursuant to this
Agreement.
11.5. Announcements. Seller and Buyer shall work together after the
-------------
Closing to coordinate the preparation and mailing by each of any announcements
each of them desires to make to customers relating to this transaction.
11.6. Post-Closing Reconciliation of Operation of the Orthodontic
-----------------------------------------------------------
Business Between December 1, 1997 and the Closing Date. Seller and Shareholder
------------------------------------------------------
agree following Closing to prepare, no later than January 15, 1998, complete and
accurate schedules of the December Liabilities (as defined in Section 2.2. and
------------
in accordance with Schedule 2.2), together with complete and detailed schedules
of all disbursements, receipts and receivables incurred or realized by Seller
during the period between December 1, 1997, and the actual date of Closing. The
parties shall then promptly and no later than January 20, 1998, reconcile such
schedules so as to give effect to Buyer's ownership of the Orthodontic Business
during this period, and any net sums due Buyer or Seller, as the case may be,
shall be promptly remitted to such party.
12. Indemnification.
12.1. Agreement by Seller and Shareholder to Indemnify. Seller and
------------------------------------------------
Shareholder, jointly and severally (Seller and Shareholder, the "Seller
Indemnifying Parties"), agree that they will indemnify and hold Buyer harmless
in respect of the aggregate of all indemnifiable damages of Buyer.
For this purpose, "indemnifiable damages" of Buyer means the aggregate
of all expenses, losses, costs, deficiencies, liabilities and damages (including
related counsel fees and expenses) incurred or suffered by Buyer resulting from:
A. Any inaccurate representation or warranty made by Seller or
Shareholder in or pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Seller or by Shareholder in this Agreement;
C. The failure of any of Seller and Shareholder to pay,
discharge or perform any liability or obligation of Seller and Shareholder which
is not expressly assumed by Buyer pursuant to Section 2.2. of this Agreement or
resulting from any dispute concerning any such liability or obligation; or
D. Any liability (other than an Assumed Liability) arising out
of Seller's use of the Purchased Assets or operation of the Orthodontic Business
prior to Closing.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable damages", Buyer shall have the right to be put in
the same financial position as it
-29-
would have been had each of the representations and warranties of Seller and
Shareholder been true and correct and had each of the covenants of Seller and
Shareholder been performed in full.
The amount of any indemnifiable damages otherwise payable to Buyer
hereunder shall be reduced if the indemnifiable damages incurred by Buyer will
provide Buyer with income tax deductions or credits. The amount of the reduction
shall be the amount of the actual cash tax savings realized by Buyer as a result
of such deductions or credits, discounted to its present value as of the date of
the payment of the indemnifiable damages from the date such indemnifiable
damages were incurred by Buyer at the rate of interest charged on such date by
the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Seller Indemnifying Parties to indemnify
Buyer shall be subject to each of the following principles or qualifications:
12.1.1. Each of the representations and warranties made by
Seller and Shareholder in this Agreement or pursuant hereto, shall survive for a
period of two (2) years after the Closing Date, notwithstanding any
investigation at any time made by or on behalf of Buyer, and thereafter all such
representations and warranties shall be extinguished; provided, however, that
the representations and warranties made by Seller and Shareholder to the extent
they relate to Seller's title to the Purchased Assets shall survive forever and
that the representations and warranties made by Seller and Shareholder in
Section 4.5. hereof ("Tax Matters") shall in each case survive until the first
(1st) anniversary of the later of:
A. The date on which applicable period of limitation
on assessment or refund of tax has expired; or
B. The date on which the applicable taxable year (or
portion thereof) has been closed.
No claim for the recovery of indemnifiable damages may be asserted by
Buyer against Seller Indemnifying Parties or their successors in interest after
such representations and warranties shall be thus extinguished; provided,
however, that claims first asserted in writing within the applicable period
shall not thereafter be barred. In addition, the Seller Indemnifying Parties
shall have no liability with respect to indemnifiable damages until the total of
all such damages exceeds $10,000.00 in which event the Seller Indemnifying
Parties shall be obligated to indemnify Buyer as provided herein for all such
damages. Notwithstanding the foregoing, in no event shall the aggregate
liability of the Seller Indemnifying Parties under this Section 12. exceed the
Purchase Price.
12.2. Agreements by Buyer and InfoCure to Indemnify. Buyer and InfoCure
---------------------------------------------
(the "Buyer Indemnifying Parties"), jointly and severally, agree to indemnify
and hold Seller and Shareholder (the "Seller Indemnified Parties") harmless in
respect of the aggregate of all indemnifiable damages of any of Seller
Indemnified Parties.
For this purpose, "indemnifiable damages" of any of Seller Indemnified
Parties means the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including related
-30-
counsel fees and expenses) incurred or suffered by any of Seller Indemnified
Parties resulting from:
A. Any inaccurate representation or warranty made by Buyer
or InfoCure or pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Buyer or InfoCure in this Agreement;
C. The failure of Buyer to pay, discharge or perform the
Assumed Liabilities or resulting from any dispute concerning any Assumed
Liabilities; or
D. Any liability arising out of Buyer's use of the Purchased
Assets or operation of the Orthodontic Business after the Closing.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable damages", each of Seller Indemnified Parties shall
have the right to be put in the same financial position as they would have been
had each of the representations and warranties of Buyer Indemnifying Parties
been true and correct and had each of the covenants of Buyer Indemnifying
Parties been performed in full.
The amount of any indemnifiable damages otherwise payable to any Seller
Indemnified Party hereunder shall be reduced if the indemnifiable damages
incurred by Seller Indemnified Party will provide such Party with income tax
deductions or credits. The amount of the reduction shall be the amount of the
actual cash tax savings realized by Seller Indemnified Party as a result of such
deductions or credits discounted to its present value as of the date of the
payment of the indemnifiable damages from the date such indemnifiable damages
were incurred by Seller Indemnified Party at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Buyer Indemnifying Parties to indemnify
Seller Indemnified Parties shall be subject to each of the following principles
or qualifications:
12.2.1. Each of the representations and warranties made by Buyer
and InfoCure in Article V. of this Agreement shall survive for a period of three
(3) years after the Closing Date, and thereafter all such representations and
warranties shall be extinguished.
No claim for the recovery of indemnifiable damages pursuant to clause
(i) of Section 12.2. may be asserted by Seller Indemnified Parties against Buyer
Indemnifying Parties or its successors in interest after such representations
and warranties shall be thus extinguished; provided, however, that claims first
asserted in writing within the applicable period shall not thereafter be barred.
12.3. Matters Involving Third Parties. If any third party shall notify
-------------------------------
Buyer or Seller (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 12. then
-31-
the Indemnified Party shall notify each Indemnifying Party thereof promptly;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the extent that)
the Indemnifying Party thereby is damaged.
If any Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party
against the matter with counsel of its choice satisfactory to the Indemnified
Party;
B. The Indemnified Party may retain separate co-counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes that the counsel the Indemnifying Party has
selected has a conflict of interest);
C. The Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably); and
D. The Indemnifying Party will not consent to the entry of
any judgment with respect to the matter, or enter into any settlement which does
not include a provision whereby the plaintiff or claimant in the matter releases
the Indemnified Party from all liability with respect thereto, without the
written consent of the Indemnified Party (not to be withheld or delayed
unreasonably).
If no Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it may deem appropriate.
12.4. Exclusivity. Following the Closing, in the absence of actual
-----------
fraud on the part of Seller (in which case Buyer may avail itself of all
statutory and common law remedies for such fraud) the right to receive
indemnification pursuant to this Section 12. shall be the sole and exclusive
remedy of Buyer, Seller, InfoCure and HALIS or their respective officers,
directors, employees, agents, affiliates, successors and assigns for monetary
damages of any kind with respect to any breach of this Agreement or conduct
otherwise relating to the negotiation and completion of the transactions
contemplated herein.
13. Miscellaneous.
13.1. Brokers' Commission. Buyer will indemnify and hold harmless
-------------------
Seller and Shareholder from the commission, fee or claim of any person, firm or
corporation employed or retained or claiming to be employed or retained by Buyer
to bring about, or to represent it in, the transactions contemplated hereby.
Seller and Shareholder will indemnify and hold harmless
-32-
Buyer from the commission, fee or claim of any person, firm or corporation
employed or retained or claiming to be employed or retained by Seller or
Shareholder to bring about, or to represent them in the transactions
contemplated hereby.
13.2. Amendment and Modification. The parties hereto may amend, modify
--------------------------
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
13.3. Termination.
-----------
13.3.1. Anything to the contrary herein notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:
13.3.1.1. By the mutual written consent of all of the
Parties hereto at any time prior to the Closing Date;
13.3.1.2. Unless terminated pursuant to Section 13.3.1.1.
by any Party in the event of the breach by any other Party of any provision of
this Agreement, which breach is not remedied by the breaching Party within ten
(10) days after receipt or notice thereof from the terminating party; or
13.3.1.3. Unless terminated pursuant to Section
13.3.1.1., by any Party hereto if the Closing has not taken place by January 15,
1998.
If this Agreement is terminated pursuant to clause
13.3.1.1. of this Section 13.3.1., no Party shall have any liability for any
costs, expenses, loss of anticipated profit or any further obligation for breach
of warranty or otherwise to any other Party to this Agreement. Any termination
of this Agreement pursuant to clauses 13.3.1.2. or 13.3.1.3. of this Section
13.3.1. shall be without prejudice to any other rights or remedies of the
respective parties.
13.3.2. The risk of any loss to the properties to be sold by
Seller hereunder and all liability with respect to injury and damage occurring
in connection therewith shall be the sole responsibility of Seller until the
completion of the Closing. If, in the opinion of Buyer, any material part of
said properties shall be damaged by fire or other casualty prior to the
completion of the Closing hereunder, then Buyer shall have the right and option:
13.3.2.1. To terminate this Agreement, without liability
to any party thereto; or
13.3.2.2. To proceed with the Closing hereunder, in which
event such casualty shall not constitute a breach by Seller of any
representation, warranty or covenant in this Agreement, and Buyer shall be
entitled to receive and retain the insurance proceeds arising from such
casualty.
13.4. Binding Effect. This Agreement shall be binding upon and inure to
--------------
the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives. This Agreement may not be assigned by Buyer and
InfoCure, jointly and severally, except to another
-33-
corporation controlled by or under common control with Buyer. In any such event,
Buyer and InfoCure, jointly and severally, shall remain directly liable for all
undertakings and obligations hereunder. This Agreement, including any rights to
receive payments hereunder, may not be assigned by Seller except to its
shareholders upon a dissolution or liquidation of Seller.
13.5. Entire Agreement. This Agreement and the exhibits and schedules
----------------
attached hereto contain the entire agreement of the parties hereto with respect
to the purchase of the Purchased Assets and the other transactions contemplated
herein, and supersede all prior understandings and agreements of the parties
with respect to the subject matter hereof. Any reference herein to this
Agreement shall be deemed to include the schedules and exhibits attached hereto.
13.6. Headings. The descriptive headings in this Agreement are inserted
--------
for convenience only and do not constitute a part of this Agreement.
13.7. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be deemed an original, and all of
which together will constitute one and the same instrument.
13.8. Notices. Any notice, request, information or other document to
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be given hereunder to any of the Parties by any other Party shall be in writing
and delivered personally or sent by certified or registered mail, postage
prepaid, as follows:
If to Seller or Shareholder, addressed to:
HALIS, Inc.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
With a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx
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If to Buyer, addressed to:
InfoCure Corporation
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
With copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx., Esq.
Any party may change the address to which notices hereunder are to be
sent to it by giving written notice of such change of address in the manner
herein provided for giving notice. Any notice delivered personally shall be
deemed to have been given on the date it is so delivered, and any notice
delivered by registered or certified mail shall be deemed to have been given on
the date it is received or refused, if delivery is refused.
13.9. Schedules. To the extent any disclosure in a schedule puts Buyer
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on actual notice of the facts reflected therein, such disclosure shall be deemed
to be a disclosure in all other schedules under this Agreement as to such facts.
13.10. Limitation of the Representations, Warranties and Covenants of
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Seller and Shareholder. The representations and warranties of Seller and
----------------------
Shareholder as set forth in Sections 4.3., 4.4., 4.5., 4.6., 4.7., 4.8., 4.9.,
4.10., 4.11., 4.12., 4.13., 4.14., 4.15., 4.16.1., 4.19., 4.22. and 4.23. of
this Agreement, the Additional Covenants of Seller and Shareholder as set forth
in Sections 6.2., 6.3. and 6.4. of this Agreement and the Other Covenants of
Shareholder as set forth in Section 7.1. of this Agreement shall be limited to
the Orthodontic Business, to the extent not otherwise limited in said
provisions.
13.11. Governing Law/Consent to Jurisdiction. This Agreement shall be
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governed by and construed in accordance with the laws of the State of Georgia
applicable to contracts made and to be performed herein. The parties agree that
any claim or dispute relating to or arising out of this Agreement or the
transactions contemplated hereby shall be addressed solely by the Superior Court
of DeKalb County or United States District Court for the Northern District of
Georgia (provided said court has subject matter jurisdiction), which shall be
the exclusive venue and jurisdiction for such adjudication, and the parties
hereby agree to subject themselves to the jurisdiction and venue of such court
for all such purposes and agree to waive any objections thereto.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BUYER:
Orthodontic Practice Management System, Inc.
By: /s/ Xxxxxxxxx X. Fine
------------------------------------------
Xxxxxxxxx X. Fine, President
INFOCURE:
InfoCure Corporation
By: /s/ Xxxxxxxxx X. Fine
------------------------------------------
Xxxxxxxxx X. Fine, President
SELLER:
HALIS Services, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxx, Vice President and
Chief Financial Officer
SHAREHOLDER:
HALIS, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxx, Senior Vice President
and Chief Financial Officer
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EXHIBITS
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Exhibit A Estimate of Net Worth Adjustment and
EBITDA Adjustment
Exhibit B Certificates of Seller and Shareholder
Exhibit C Certificates of Buyer and InfoCure
Exhibit D Xxxx of Sale
Exhibit E Lease Assignment
Exhibit F Wire Transfer Instructions
Exhibit G Assignment and Assumption Agreement
Exhibit H Opinion of Seller's Counsel
Exhibit I Restrictive Covenant Agreement
Exhibit J Employment Agreement - Xxxx Xxxx
Exhibit K Employment Agreement - Xxxxxxxx Xxxxxxx
Exhibit L Covenants Agreements
Exhibit M HALIS, Inc. Salary Commitment Agreement
Exhibit N Opinion of Buyer's Counsel
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SCHEDULES
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Schedule 1.1.4 Agreements not to be Assigned or
Transferred
Schedule 1.1.11 Fixed Assets
Schedule 1.2.4 Excluded Assets
Schedule 2.2 December Liabilities
Schedule 2.4 Allocation of Purchase Price
Schedule 4.2 Subsidiaries
Schedule 4.4 Liabilities of Seller
Schedule 4.5 Tax Matters
Schedule 4.6 Real Estate
Schedule 4.7 Liens and Encumbrances
Schedule 4.9.1 Registration; License Agreements
Schedule 4.9.2 Software and Intangibles
Schedule 4.9.4 Key Software Development Employees
Schedule 4.9.6 Interest in Software or Intangibles
Schedule 4.9.7 Standard Form Contracts
Schedule 4.11 Documents of and Information with Respect
to Seller
Schedule 4.11.2 Insurance Matters
Schedule 4.11.3 Customer List
Schedule 4.12 Litigation
Schedule 4.16 Employment and Labor Matters
Schedule 4.17.1 Benefit Plans
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Schedule 4.19 Consents and Approvals
Schedule 4.20 Related Party Transactions
Schedule 4.22 Customer Prepayments
Schedule 9.8 Persons Signing Covenants Agreements
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