ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 18, 1997,
BUT EFFECTIVE AS OF OCTOBER 1, 1997
AMONG
PROFESSIONAL ON-LINE COMPUTER, INC. ("SELLER"),
POLCI ACQUISITION, INC. ("BUYER"),
INFOCURE CORPORATION ("INFOCURE"),
XXXXX X. XXXXXX REVOCABLE LIVING TRUST,
XXXXXXX X. XXXXXX REVOCABLE LIVING TRUST,
XXXXXXX XXXXXXX, AS PERSONAL REPRESENTATIVE OF
THE ESTATE OF XXXXXX XXXXXXX ("SHAREHOLDERS")
AND
XXXXX X. XXXXXX
-6-
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement (the "Agreement") is made and entered into
this 18th day of November, 1997, but effective as of October 1, 1997, by and
among PROFESSIONAL ON-LINE COMPUTER, INC., a Michigan corporation (the
"Seller"), POLCI ACQUISITION, INC., a Michigan corporation (the "Buyer"),
INFOCURE CORPORATION, a Delaware corporation ("InfoCure"), XXXXX X. XXXXXX
REVOCABLE LIVING TRUST u/a/d June 15, 1990 (the "X. Xxxxxx Trust"), XXXXXXX X.
XXXXXX REVOCABLE LIVING TRUST u/a/d June 15, 1990 (the "X. Xxxxxx Trust"),
XXXXXXX XXXXXXX, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF XXXXXX XXXXXXX
("Representative") (X. Xxxxxx Trust, X. Xxxxxx Trust and Representative
sometimes referred to collectively as the "Shareholders") and XXXXX X. XXXXXX
("Xxxxxx"). Seller, Buyer, InfoCure, Shareholders and Xxxxxx are referred to
collectively herein as the "Parties."
RECITALS:
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All of the equity interest in Seller consisting of five hundred (500)
shares of Seller's common voting stock with a par value of One and No/100
Dollars ($1.00) per share is owned thirty-seven and six-tenths percent (37.6%)
by the X. Xxxxxx Trust, thirty-seven and four-tenths percent (37.4%) by the X.
Xxxxxx Trust and twenty-five percent (25%) by the Representative.
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 business,
assets and properties.
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, 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. 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, 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 (but excluding all
"Excluded Assets" as defined in Section 1.2.):
1.1.1. All cash and cash equivalents on hand and in banks,
certificates of deposit, commercial paper, stocks, bonds and other liquid
investments of Seller, which amount shall not exceed $250,000.00 as provided in
Section 2.3. below;
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, except for
those agreements, arrangements, orders and leases set forth on SCHEDULE 1.1.4
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attached hereto;
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;
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 attached
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hereto;
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1.1.12. All books, records, ledgers, files, documents,
correspondence, lists, studies and reports and other printed or written
materials;
1.1.13. Except for certain loans made by Seller to the Shareholders
totaling $30,000.00 which will be accrued on the books of Seller as of September
30, 1997 (the "Shareholder Advances"), all accounts, notes and other
receivables, including, without limitation, all receivables from any current or
former employee of Seller (collectively, the "Receivables");
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; (ii) the
Seller's AS400 software related and customer base; (iii) all telephone numbers,
facsimile numbers and web pages owned and used by Seller in its business) and
(iv) residual research and development value relating to AS400 software; and
1.1.15 All right, title and interest of Xxxxxx and Seller in all
assets of Netmed, Inc. ("Netmed") which will be transferred (and Xxxxxx shall
cause Netmed to transfer) to Seller on or before Closing.
1.2. Excluded Assets. Notwithstanding the foregoing, the following assets
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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 liabilities that are
not Assumed Liabilities;
1.2.4. The personal property described on SCHEDULE 1.2.4; and
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1.2.5. The Shareholder Advances.
2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES.
2.1. Amount of Purchase Price. In consideration for the purchase of the
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Purchased Assets, Buyer agrees to assume the Assumed Liabilities and to pay
Seller:
A. An amount (the "Base Consideration Amount") equal to
$3,520,868.00, but subject to increase based on the Xxxxxxx Hospital contract
(as discussed in Section 2.1.1. below); and
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B. A contingent amount based upon the performance of Seller's
business in the twenty-four (24) month period beginning on November 1, 1997,
also as determined as provided herein and under GAAP (the "Earnout Amount").
The "Purchase Price" shall be equal to the sum of the Assumed Liabilities,
the Base Consideration Amount, and the Earnout Amount.
2.1.1. The Base Consideration Amount. The Base Consideration Amount
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has been established by the parties as an amount equal to one hundred eighteen
and 89/1000ths percent (118.089%) of $441,082.00, which is the "Total
Stockholders' Equity" of Seller (i.e., total assets other than Excluded Assets
less liabilities assumed by Buyer hereunder) as shown on an audited balance
sheet of Seller, dated September 30, 1997, and prepared by the accounting firm
of BDO Xxxxxxx (the "Accountants") in accordance with this Agreement and with
generally accepted accounting principles ("GAAP") consistently applied (the
"Closing Date Balance Sheet") (such percentage of the September 30, 1997 Total
Shareholder Equity hereinafter referred to as the "Target Adjusted Net Worth
Amount").
Buyer shall, in addition to assuming the Assumed Liabilities, pay
Seller the sum of $3,017,888.00 in cash by wire transfer at Closing and deliver
to Seller share certificates representing that number of shares of InfoCure's
$.001 par value voting common stock (the "Stock") which, when multiplied by the
Determined Value per share, equals $502,980.00. The "Determined Value" per share
shall be the average of the closing bid price per share of such common stock for
the five (5) trading days on which such stock was traded immediately preceding
the Closing Date.
In addition, if Seller executes a binding agreement with Xxxxxxx
Hospital of Binghamton, New York ("Xxxxxxx Hospital") on or before Closing or
within the ninety (90) day period following Closing, and if that agreement is
assignable and is assigned to Buyer with the consent of Xxxxxxx Hospital, so
that Buyer will recognize all of the income from that agreement from and after
the Closing, then, for the purpose of computing Seller's net worth at Closing,
the existence of that contract shall result in a deemed $100,000.00 increase in
the Target Adjusted Net Worth Amount of Seller reflected on the Closing Date
Balance Sheet, and Buyer shall pay such additional $100,000.00 amount to Seller
within thirty (30) days following execution of such contract. In making payments
of cash and stock to Seller for the Xxxxxxx Hospital contract, such payments
shall be made 14.28% in stock, to the nearest whole number of shares, and the
balance in cash. Any payments of stock made will value the stock at the same
Determined Value that was used at the Closing in order to calculate the total
number of shares to be delivered at Closing.
The cost of preparing the Closing Date Balance Sheet shall be borne by
Buyer.
2.1.2. The Earnout Amount. The Earnout Amount is the amount of
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additional consideration to be paid to Seller, not to exceed in the aggregate
$750,000.00, and comprised of two (2) portions: (i) the First Earnout Period
Amount (as defined below) and (ii) the Cumulative Earnout Period Amount (as
defined below). No Earnout Amount shall be due to Seller if Xxxxxx fails to
remain employed with the Buyer or an affiliate of the Buyer for the full twenty-
four (24)
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month period beginning November 1, 1997 (the "Start Date") following Closing,
unless such failure is due to the termination of Xxxxxx'x employment without
cause (as defined in his employment agreement with Buyer) or by reason of
Xxxxxx'x death or Total and Permanent Disability (as defined in his employment
agreement with Buyer).
For the purposes of computing the Earnout Amount, Buyer has assumed
that during the first twelve (12) consecutive full calendar months beginning on
the Start Date, Seller's business will produce gross profit of $3,200,000.00 and
that during the thirteenth (13th) through twenty-fourth (24th) full consecutive
calendar months following the Start Date, Seller's business will produce a like
amount of gross profit. As used in Sections 2.1.1. and 2.1.2., "gross profit"
shall mean "total revenue" (i.e., revenues from system and software sales and
maintenance and services and other income) less "cost of goods sold" (i.e., cost
of hardware and software sales) as those terms are defined under GAAP and set
forth in Seller's 09/30/97 audited statements of Income and Retained Earnings;
provided, however, that for purposes of this Section 2.1.2., gross profit shall
not include the first $250,000.00 of gross profit realized from Xxxxxxx Hospital
that is included in the computation of an increase in Seller's net worth
pursuant to Section 2.1.1. above. The parties agree that if Buyer is combined or
merged with one (1) or more affiliates of InfoCure, then InfoCure shall endeavor
to track and determine in a fair and equitable manner that portion of such new
entity's gross profit which should fairly and reasonably be allocated as arising
out of the historical customer base and products and services of Buyer and
Seller as previously conducted. Similarly, the parties agree that a reasonable
allocation shall be made for any gross profit derived through the joint efforts
of Buyer, on the one side, and InfoCure or other affiliates of InfoCure, on the
other.
If the amount of gross profit at the end of the first twelve (12)
month period (the "First Earnout Period") is in excess of $3,200,000.00, then
the First Earnout Period Amount for the First Earnout Period shall be the amount
of such excess times fifty percent (50%), but in no event more than $375,000.00.
The Earnout Amount shall not be paid until ninety (90) days following the last
day of the First Earnout Period and must be repaid in full if Xxxxxx has not
remained employed with Buyer or an affiliate of Buyer pursuant to the terms of
this Section 2.1.2., which repayment shall be made within ninety (90) days
following termination of Xxxxxx'x employment. If the cumulative amount of gross
profit at the end of the twenty-four (24) month period is in excess of
$6,400,000.00, then the Cumulative Earnout Period Amount shall be the (i) amount
of such excess times (ii) fifty percent (50%), but in no event more than
$750,000.00 less the First Earnout Period Amount previously paid for the First
Earnout Period. Should the Earnout Amount be negative at the end of either the
First Earnout Period or the Cumulative Earnout Period, then no amounts shall be
due Buyer by Seller with respect to each such period.
For example, if during the twelve (12) month period ending October 31,
1998, Buyer has a gross profit of $6,000,000.00, then the First Earnout Period
Amount paid to Seller shall be $375,000.00. If the gross profit in the twelve
(12) month period ending October 31, 1999 is $3,000,000.00, then the Cumulative
Earnout Period Amount shall be $375,000,00. Alternately, if the facts are the
same as above, except that the gross profit earned in the first twelve (12)
month period is only $4,000,000.00 then the First Earnout Period Amount shall be
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$375,000.00 and the Cumulative Earnout Period Amount shall be $0.00. The
foregoing examples assume that Xxxxxx remains employed with Buyer through
October 31, 1999.
The First Earnout Period Amount or the Cumulative Earnout Period
Amount, as the case may be, shall not be paid in cash but in shares of
InfoCure's Stock valued at the average of the closing bid price per share of the
Stock for the five (5) trading days on which such stock is traded immediately
preceding the last day of the First Earnout Period or the Cumulative Earnout
Period, as the case may be. Buyer agrees to keep adequate books of account with
respect to Seller's business so that the gross profit of such business can be
readily determined.
In order to insure the parties hereto that both the Earnout and the
Net Worth portions of the Purchase Price are computed by the Accountants in
accordance with this Agreement and with GAAP in a fair and disinterested manner,
the parties agree as follows:
Each party shall have the right 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 under this Agreement. If
any party disagrees with any such determination, then that party may submit, at
its sole expense, within thirty (30) days an alternate determination prepared by
a certified public accountant, which the other party may accept or reject in its
reasonable discretion. If the other party rejects the alternate determination,
then the contesting party shall be entitled to submit such dispute to a
certified public accountant acceptable to both parties who shall determine the
accuracy and correctness of the Accountant's original determination. Both
parties shall each bear one-half (1/2) of the expenses of such certified public
accountant. Any additional amounts payable by a party as a result of the other
party's alternate determination shall be made within fifteen (15) days following
the acceptance of such alternate determination or the resolution of such
dispute, as the case may be.
2.1.3. Escrow Agreement. As security for the indemnities provided
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herein by Seller and Shareholders and to facilitate adjustments in the Purchase
Price, Seller shall deposit in escrow with the escrow agent named in the Escrow
Agreement attached hereto as EXHIBIT A (i) the sum of $262,353.00 in cash.
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2.1.4. Marketability of Stock; Registration Rights Agreement. In
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order to provide Seller with a market for the shares of Stock issued to it as
part of the Purchase Price, Buyer agrees, for a period of thirty-six (36)
months, to file with the Securities and Exchange Commission (the "SEC") in a
timely manner the reports required under SEC rules necessary to permit Seller to
sell its shares of Stock (and to permit each of Seller's shareholders to sell
his or its shares of Stock) under SEC Securities Act Rule 144.
In addition, Buyer agrees to enter into, with Seller, a registration
rights agreement in the form attached hereto as EXHIBIT B (the "Registration
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Rights Agreement"). The Registration Rights Agreement will grant to Seller and
to each of Shareholders who acquires Stock from Seller the right to "piggyback"
a registration of the Stock held by them on any primary or secondary offering of
the Stock by the Company registered with the SEC to the extent permitted by SEC
rules. This right will extend for a period of thirty-six (36) months from the
Closing Date and be subject to the "market-out" provisions usually contained in
such
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agreements. Because there may be other persons to whom Buyer has issued stock
and with whom Buyer has a registration rights agreement, Seller's Stock will be
registered and subject to sale, pro rata, with all other holders of Buyer's
shares outstanding at the xxxx Xxxxxx must elect to avail itself of its
registration rights.
2.2. Assumed Liabilities. Buyer agrees to and will at the Closing
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assume and agree to pay, discharge and perform when lawfully due only those
liabilities, contracts, commitments and other obligations of Seller that are
listed on SCHEDULE 2.2 hereto (the "Assumed Liabilities").
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2.3. Xxxxxx Loans. As a part of the Purchase Price, Buyer and
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InfoCure, jointly and severally, will assume and agree to pay the Xxxxxx loans
which are currently due Xxxxx X. Xxxxxx. As of September 30, 1997, these loans
are $395,103.00 in principal amount and bear interest at the rate of twelve
percent (12%) per annum, and Seller and Shareholders agree that such loans will
be that amount or less on the Closing Date (the "Xxxxxx Debt"). The Xxxxxx Debt
will be repaid as follows:
A. An amount in cash of $305,370.00 will be paid to Xxxxxx on
the Closing Date, which amount reflects the amount by which the value of
Seller's cash in banks and money market shares is in excess of $250,000.00 as of
September 30, 1997.
B. The balance of the Xxxxxx Debt (i.e., $89,733.00) will be
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paid by the issuance by Buyer and InfoCure, jointly and severally, of its note,
partially subordinate to Buyer's and InfoCure's obligations to its institutional
lenders for borrowed money (the "Bank Debt"), dated October 1, 1997, and payable
in sixty (60) equal consecutive monthly installments of principal and simple
interest at ten percent (10%) per annum of $1,906.56, beginning on the first
(1st) day of the calendar month immediately following the Closing (the "Xxxxxx
Note"). The Xxxxxx Note will contain a provision allowing Buyer to offset
against Buyer's obligation to the holder thereof any liability Xxxxxx may have
to Buyer or its affiliates under this Agreement, Shareholders' Nonsolicitation
and Noncompete Agreements and Xxxxxx'x Employment Agreement.
In computing the amount of cash in banks and in money market shares
available under this Section to pay the Xxxxxx Debt, such amounts will be
reduced by all properly accrued current liabilities which remain unpaid for a
period of thirty (30) days or more from the date such current liabilities were
incurred under GAAP.
Either party may request the Accountants, as a part of this preparation of
the Closing Date Balance Sheet to determine if there has been an initial
overpayment or underpayment on the Xxxxxx Debt, and, if so, then such excess or
deficiency shall be made up by adjusting the amount of the next installment or
installments due on the Xxxxxx Note.
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
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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 the offices of either Katten,
Muchin & Zavis, Chicago, Illinois, or 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 November 30, 1997 and, if that is done, then the
assets will be deemed to have been transferred as of the beginning of business
on October 1, 1997, and the twenty-four (24) month periods referred to in the
earnout shall be deemed to have begun on November 1, 1997, and the Closing Date
Balance Sheet shall be dated September 30, 1997, but all documents shall be
dated the 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, Xxxxxx and Shareholders shall deliver to Buyer a
Certificate in the form of EXHIBIT C hereto, certifying that each of the
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conditions to the obligation of Buyer to purchase the Purchased Assets from
Seller which is set forth in Section 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 D 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 E hereto and a Lease Assignment in the form of
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EXHIBIT F hereto, as shall be sufficient to vest in Buyer good and marketable
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title to the Purchased Assets, free and clear of all Encumbrances other than
Permitted Encumbrances.
3.2.4. Buyer shall pay to Seller the cash portion of the
Purchase Price (less amounts to be escrowed hereunder) by wire transfer or
certified or bank cashier's check.
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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.
3.2.6. Buyer and Seller shall execute and deliver a cross receipt
acknowledging receipt from the other, respectively, of the Purchased Assets and
the Purchase Price.
4. REPRESENTATIONS AND WARRANTIES OF SELLER, XXXXXX AND SHAREHOLDERS.
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereunder, Seller, Xxxxxx and Shareholders,
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 corporation
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duly organized and legally existing in good standing under the laws of Michigan
and has full corporate power and authority to own or lease its properties and
operate its business, to enter into this Agreement and to carry out the
transactions and agreements contemplated hereby.
The amount and character of Seller's business does not require Seller to
qualify to do business in any foreign jurisdiction.
All of Seller's issued and outstanding stock is owned by Shareholders, 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 business by Buyer after the Closing.
4.2. No Subsidiaries and Affiliates. Except as set forth on SCHEDULE 4.2,
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Seller or Xxxxxx has within the two (2) year period ending on the Closing Date
never 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. Unaudited balance sheets at December 31 of each of the years
1994 and 1995;
4.3.2. An audited balance sheet at December 31, 1996 (the cost of
which shall be borne by Buyer);
4.3.3. Unaudited statements of income for each year in the two (2)
year period ended December 31, 1995;
4.3.4. An audited statement of income and retained earnings and
changes in stockholder's equity for the year ended December 31, 1996 (the cost
of which shall be borne by Buyer); and
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4.3.5. An audited balance sheet, statement of income and retained
earnings, changes in stockholder's equity, and cash flow for the nine (9) month
period ended September 30, 1997 (the cost of which shall be borne by Buyer).
Such financial statements present fairly the financial
position of Seller 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.
The audited balance sheet of Seller at September 30, 1997
(including the notes pertaining thereto), is referred to herein as the "Current
Balance Sheet."
4.4. Liabilities of Seller. Except as set forth in SCHEDULE 4.4, Seller has
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no liabilities or obligations (whether individually or in the aggregate), either
accrued, absolute, contingent or otherwise, except:
A. To the extent reflected or taken into account in determining
shareholders' equity in the Current Balance Sheet and not heretofore paid or
discharged;
B. To the extent specifically set forth in or incorporated by
express reference in any of the schedules attached hereto; and
C. Normal liabilities incurred in the ordinary course of
business, consistent with Seller's past practices, since the date of the Current
Balance Sheet.
4.5. Tax Matters.
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4.5.1. Except as set forth on SCHEDULE 4.5, Seller has timely filed
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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 the Closing Date.
Except as set forth on SCHEDULE 4.5, Seller, Xxxxxx and Shareholders
------------
have 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 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
------------
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, and all such withholdings
16
and collection and all other payments due in connection therewith as of the date
of the Current Balance Sheet are duly reflected on the Current Balance Sheet.
4.5.3. Except as set forth in SCHEDULE 4.5, the federal and state
------------
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
------------
the statute of limitations applicable to any federal or state income tax returns
of Seller for any period.
4.5.4. Under its contracts with its customers for sales or licenses
of Seller Software, to the knowledge of Seller, Xxxxxx and Shareholders, such
customers are liable for any and all sales or use taxes imposed by virtue of or
with respect to such sales or licenses.
4.5.5. During the time of Shareholders' ownership of Seller until
the date hereof, Seller was and is an "electing small business corporation" (the
"Election") within the meaning of Section 1371, et. seq. of the Internal Revenue
-- ---
Code. Until the Closing Date, neither Shareholders or Seller will take any
action whatsoever which will terminate, or cause to be terminated, the Election.
4.6. Real Estate of Seller.
---------------------
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
------------
estate leased, used or occupied by Seller in connection with its business
(collectively, the "Real Property"). Except as set forth in SCHEDULE 4.6, the
------------
leases described in SCHEDULE 4.6 are in full force and effect and Seller holds a
------------
valid and existing 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 none of such leases has been modified, except to the extent
------------
that such modifications are disclosed by the SCHEDULE 4.6.
-------------
Seller is not in default and no circumstances exist which would
result in a default, under any of such leases, and to the best knowledge of
Seller, Xxxxxx and Shareholders, 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 best
knowledge of Seller, Xxxxxx and Shareholders, 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.
------------
4.7. Good Title to and Condition of Seller's Assets.
----------------------------------------------
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)
17
Encumbrances for current taxes, assessments or government changes or levies on
property not yet due or delinquent or (ii) Encumbrances related to 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.
------------
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 in the aggregate at least equal to the values at which such
items are carried on its books. 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 Current
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.
4.8. Receivables of Seller. Seller has previously delivered to Buyer a
---------------------
complete list of all receivables of Seller as of September 30, 1997, including
accounts receivable, notes receivable and insurance proceeds receivable. To the
best knowledge of Seller, Xxxxxx and Shareholders, all of the receivables listed
thereon or set forth or reflected in the Current 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.
--------------------------------------
4.9.1. SCHEDULE 4.9.1 (i) contains a complete list of each
--------------
registration of patents, copyrights, trademarks, service marks, trade names,
maskworks, other Intangibles and Software (collectively "Registrations") which
have been issued to Seller; (ii) identifies each pending Registration of Seller
with respect to the Intangibles and Software (defined in Section 4.9.2.(M));
(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 and (iv) specifies any advice to Seller with respect to the
Registration or protectability of the Intangibles and Software, summarizing such
advice.
SCHEDULE 4.9.1 also identifies (i) each license agreement or other
--------------
written or oral agreement or permission ("License Agreement") 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 (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
--------------
be assigned to Buyer free of cost or expense without obtaining the consent or
approval of any other person.
18
Seller has complied with all License Agreements and Third Party
License Agreements, and to the best of Seller's, Xxxxxx'x and Shareholders'
knowledge all other parties to such agreements have complied with all provisions
thereof; and 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
--------------
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 ("Owned Software").
(ii) All Software, other than the Owned Software, 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, that is
licensed or marketed to or from third parties or otherwise used by Seller for
any purpose whatsoever (collectively, "Other Software").
B. To the extent not set forth in SCHEDULE 4.9.1, SCHEDULE
-------------- --------
4.9.2 separately sets forth an accurate and complete list and description of
-----
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 to or from third parties, used or under
development by Seller. 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 Seller's business as
currently conducted and as contemplated by existing Seller Software product and
service plans.
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
Seller's 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 Seller's business as currently conducted.
E. 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 business
as currently conducted.
19
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:
(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;
(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 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, Xxxxxx and Shareholders, any other party, is in breach of
or default thereunder in any respect, nor to Seller's, Xxxxxx'x or Shareholders'
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, Xxxxxx and Shareholders, 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 Shareholders,
----- --------------
any current or former owner, or shareholder, other shareholder, partner,
director, executive, officer, employee, salesman, agent, customer, contractor of
Shareholders 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 4.9.2, Seller has granted no third party
--------------
any exclusive rights related to any Owned Software.
20
J. No litigation is pending and no claim has been made
against Seller or, to the knowledge of Seller, Xxxxxx or Shareholders, 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, Xxxxxx and Shareholders, 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 and, upon the
consummation of the transactions contemplated by this Agreement, Buyer will not
be a party to or bound by (as a result of any acts or agreements of Seller), 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 4.9.2.
--------------
L. Except as set forth in 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
21
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
Seller's 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;
(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. Except as noted in SCHEDULE 4.9.3, the Owned Software and to
--------------
the knowledge of Seller, Xxxxxx and Shareholders, the Customer Software and
Other Software, are "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;
22
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.
4.9.4. Without limiting any of the foregoing, to the best knowledge
of Seller, Xxxxxx and Shareholders, 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 in accordance with all published specifications
for such Programs;
B. Complies with all other published documentation,
descriptions and literature with respect to such Programs; and
C. Complies 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, neither Shareholder
--------------
nor Xxxxxx has an ownership right or other interest in any Software or
Intangibles.
4.9.7. All Seller's contracts with customers (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
23
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.
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 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 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 default in any obligation to be performed by Seller, nor to the
best knowledge of Seller, Xxxxxx and Shareholders, 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 best knowledge of
Seller, Xxxxxx and Shareholders, no Material
24
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.
4.11.2. Seller carries insurance, which is adequate in character and
amount, with reputable insurers, covering all of its assets, properties and
business, and it has provided all required performance or other surety bonds.
All premiums and other payments which 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 customers (defined as having received products or services from Seller
within the last three (3) years) by category and the month of September, 1997,
and year-to-date (through September 30, 1997) revenue of Seller by category for
certain periods set forth therein.
4.12. Litigation Involving Seller, Xxxxxx and Shareholders. Except as set
----------------------------------------------------
forth on SCHEDULE 4.12, there are no actions, suits, claims, governmental
-------------
investigations or arbitration proceedings pending or, to the best knowledge of
Seller, Xxxxxx and Shareholders, threatened against or affecting Seller or any
of its assets or properties or Shareholders with respect to or relating to
Seller and, to the best of the knowledge of Seller, Xxxxxx and Shareholders,
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 Current Balance Sheet, all
-----------------
changes in the business or properties of Seller, or in its 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
Seller. There is not, to the best knowledge of Seller, Xxxxxx and Shareholders,
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 Seller.
25
4.14. Absence of Certain Acts or Events. Except as disclosed in SCHEDULE
--------------------------------- --------
4.14, since the date of the Current Balance Sheet, 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;
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. Except as disclosed on SCHEDULE 4.14, 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, Xxxxxx and Shareholders, Seller
is in compliance with all laws, regulations and orders applicable to Seller, its
assets, properties and business. Seller has not received notification of any
asserted past or present failure to comply with any laws, and to the best of the
knowledge of Seller, Xxxxxx and Shareholders, no proceeding with respect to any
such violation is contemplated.
4.15.2. To the knowledge of Seller, Xxxxxx and Shareholders, Seller
has not made any payment of funds prohibited by law in connection with the
business of Seller, and no funds have been set aside to be used in connection
with the 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 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 Shareholders,
Xxxxxx or Seller, plans to refuse employment with Buyer after the Closing Date.
4.16.2. To the knowledge of Seller, Xxxxxx and Shareholders, Seller
has complied 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
26
Buyer with copies of all reports filed and notices provided under any such laws,
rules, regulations and ordinances during the last five (5) years.
To the knowledge of Seller, Xxxxxx and Shareholders, Seller's
operations do not involve any unusual risk to the health or safety of its
employees (including, without limitation, any risk associated with hazardous
airborne contaminants or hazardous chemicals or waste materials).
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.
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. 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, have been 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 threatened involving such Plan;
B. To the knowledge of Seller, Xxxxxx and Shareholders,
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
27
benefits after termination of employment) and claims incurred to the date
hereof, or the Current Balance Sheet contains adequate reserves or paid-up
insurance has been provided, therefor;
E. On the Closing Date such Plan will be fully funded in
an amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the Closing Date, or adequate reserves
will be set up on Seller's books and records, or paid-up insurance will be
provided, therefor; and
F. 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 delivered by Seller, Xxxxxx
and Shareholders and is a valid and binding obligation of each of them,
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 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, Xxxxxx or
Shareholders; 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, Xxxxxx or Shareholders or the assets and
properties of Seller, Xxxxxx or Shareholders.
Without limiting the generality of the foregoing, neither Seller, Xxxxxx
or Shareholders is a party to any continuing agreement or understanding, made by
him or it or on his or its behalf, which limits in any way the ability of:
A. Seller, Xxxxxx and Shareholders 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, Xxxxxx or Shareholders breached any such agreement, or
any prior agreement, which breach would entitle the other party thereto to any
equitable or monetary remedies.
28
4.19. Consents and Approvals. Except as set forth in SCHEDULE 4.19, 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, Xxxxxx or Shareholders 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:
A. Shareholders, Xxxxxx 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, Xxxxxx and
-------------------------------------------------------
Shareholders.
------------
No representation, statement or information in writing made or furnished by
Seller, Xxxxxx or Shareholders or by any of them to Buyer, including, without
limitation, those contained in this Agreement and the various schedules attached
hereto and the other information and statements previously furnished by Seller
to Buyer 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.
29
4.22. Customer Prepayments. Set forth on SCHEDULE 4.22 is a list of all
-------------------- -------------
existing contracts pursuant to which Seller is obligated to perform services
relating to its software products, including the amount of prepayments received
by Seller as of September 30, 1997, under such contracts, a description of the
services yet to be performed for which payment has been received, and the number
of employee hours Seller reasonably estimates must be expended by its employees
to complete such services. Such contracts are based on a good faith estimate
basis rather than a fixed bid basis. Also set forth on SCHEDULE 4.22 is a list
-------------
of all products and services prepaid and not yet delivered or provided.
4.23. Books and Records. The books of account and other financial records
-----------------
to be transferred to Buyer pursuant hereto are complete and correct, are
maintained in accordance with all applicable laws, 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,
makes the following representations and warranties:
5.1. Organization, Power and Authority of Buyer. Buyer is a corporation
------------------------------------------
duly organized and validly existing under the laws of the State of Michigan,
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
30
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, Xxxxxx and Shareholders, 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. Litigation Involving Buyer and InfoCure. Except as set forth on
---------------------------------------
SCHEDULE 5.5, there are no actions, suits, claims, governmental investigations
-------------
or arbitration proceedings pending or, to the best knowledge of Buyer and
InfoCure, threatened against or affecting Buyer or any of its assets or
properties or InfoCure or any of its assets or properties and, to the best of
the knowledge of Buyer and InfoCure, 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 Buyer or InfoCure is or was a party.
5.6. No Adverse Change. Since October 31, 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.
6. ADDITIONAL COVENANTS OF SELLER AND SHAREHOLDERS.
6.1. Best Efforts. Seller and Shareholders will each use its or his 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:
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 to 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;
31
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 Shareholders 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, and, if the sale of the Purchased Assets
pursuant hereto shall not be consummated, such confidence shall be maintained in
accordance with the nondisclosure agreement between Buyer and Seller dated
September 4, 1997.
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 Shareholders will use
Shareholders' 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 all or any part of the assets or shares of Seller or the
merger, consolidation or other business combination of Seller with any person
other than Buyer. Seller will, and Shareholders will use Shareholders' 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 Shareholders hereby covenant and agree as
------------------
follows with regard to all ERISA Plans (as defined in Section 4.17.3. hereof)
maintained by Seller and with respect to the termination of employment of Seller
employees by Buyer following the closing:
A. Benefit Plans. Shareholders 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 Shareholders hereby covenant and
----------------
agree that Seller will promptly pay (or properly accrue on the Closing Date
Balance Sheet) all obligations
32
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 Closing Date Balance Sheet) all obligations that are payable under
any disability plan maintained by Seller as of the Closing Date with respect to
any Seller employee.
D. Bonuses. Seller and Shareholders hereby covenant and agree that
-------
Seller will pay all bonuses earned by employees or former employees of Seller as
of the Closing Date. Buyer shall have no liability for bonuses earned or
expected as of the Closing Date.
E. 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.
F. 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.
G. 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
Shareholders have represented and warranted to be "at will."
7. OTHER COVENANTS OF SHAREHOLDERS AND XXXXXX.
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereunder, Shareholders and Xxxxxx agree 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., Shareholders and Xxxxxx 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 or shares of Seller or the
merger or consolidation or other business combination of Seller with any person
other than Buyer. Shareholders and Xxxxxx 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. Shareholders and Xxxxxx
------------------------------------------
will use their 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 Closing Date Balance Sheet.
33
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:
9.1. Accuracy of Representations and Warranties and Compliance With
--------------------------------------------------------------
Obligations. The representations and warranties of Shareholders, Xxxxxx 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.
Shareholders, Xxxxxx 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.
Shareholders, Xxxxxx and Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date and signed by Shareholders, Xxxxxx and
the 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 Xxxxxxxx & Xxxx, P.C., counsel for Seller, Xxxxxx, the X.
Xxxxxx Trust and the X. Xxxxxx Trust and from Smith, Bovill, Xxxxxx, Xxxxx &
Xxxxxxxx, P.C., counsel for Representative, 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 business formerly
operated by Seller and which, in the judgment of Buyer, makes it inadvisable to
proceed with the purchase of the Purchased Assets.
34
9.5. Agreements Concurrently With the Closing. Xxxxxx shall have entered
----------------------------------------
into a restrictive covenant agreement (the "Restrictive Covenant Agreement") and
an employment agreement (the "Employment Agreement") with Buyer, substantially
in the forms of EXHIBIT I and EXHIBIT J hereto, respectively, and as of the
--------- ---------
Closing Date each of the Restrictive Covenant Agreement and the Employment
Agreement will be in full force and effect. In addition, Seller and Shareholders
shall enter into a Subscription Agreement in the form of EXHIBIT K.
---------
9.6. Directors and Shareholder Resolutions; Good Standing. Seller shall
----------------------------------------------------
have delivered to Buyer a certificate from the Michigan Department of Consumer
and Industry Services, Corporation, Security and Land Development Bureau
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.
9.7. Assignment of Intellectual Property. At or prior to Closing,
-----------------------------------
Shareholders shall assign to Buyer any rights they may have in or to the
Software and Intangibles.
9.8. Employee Covenants Agreements. Each employee, agent, officer and
-----------------------------
director of Seller listed on SCHEDULE 9.8 shall have executed and delivered to
------------
Buyer a restrictive covenants agreement in favor of Buyer in the form of EXHIBIT
-------
M.
-
9.9. Buyer's Lender's Approval. On or before November 20, 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.
9.10. 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, but in no event less than $3,000,000.00, on the same terms and conditions
as set out in the Finova Commitment.
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.
35
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 L 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, 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, Xxxxxx and Shareholders shall, and
Shareholders 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. Non-Solicitation of Employees and Independent Contractors. During
---------------------------------------------------------
the period from the Closing Date through the third (3rd) anniversary of the
Closing Date, neither Seller, Xxxxxx or Shareholders will without the prior
written consent of Buyer directly or indirectly offer employment to or hire (in
any capacity) any former employee or independent contractor of Seller who is
hired or offered employment or other engagement by Buyer, except for employees
whose employment or engagement is terminated by Buyer or except for those five
(5) employees noted on SCHEDULE 4.16 who perform or will perform certain
-------------
collection services on behalf of Professional Investigation & Collection, Inc.,
an affiliate of Xxxxxx which performs collection-related services.
11.3. Use of Name. After the Closing, Seller shall not conduct any
-----------
business under its current name or the names POLCI or Advantage or under any
name deceptively or confusingly similar thereto, and shall only use such name as
necessary to wind down Seller's business. Within five (5) business days
following the Closing, Seller shall amend its Articles of Incorporation to
change its corporate name from its current name to a name that is not
deceptively or confusingly similar thereto.
11.4. 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
36
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.
11.5. Enforcement of Confidentiality Agreements. From and after the
-----------------------------------------
Closing Date, Seller and Shareholders shall enforce, on behalf of Buyer, any
Confidentiality Agreements which cannot be assigned to Buyer pursuant to this
Agreement.
11.6. Tax Clearance and Unemployment Tax History Certificates; Good
-------------------------------------------------------------
Standing. Seller shall use its reasonable efforts to assist Buyer in filing all
--------
necessary documents and obtaining all clearances from the Michigan Department of
Treasury and Michigan Employment Security Agency for Seller's sale of the
Purchased Assets as provided in this Agreement. Buyer acknowledges that it has
received from Seller a completed MESA Form 1027 within the period required by
law.
11.7. 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.
12. INDEMNIFICATION.
12.1. Agreement by Seller, Xxxxxx and Shareholders to Indemnify. Seller,
---------------------------------------------------------
Xxxxxx and Shareholders, jointly and severally (Seller, Xxxxxx and Shareholders,
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:
37
A. Any inaccurate representation or warranty made by Seller,
Xxxxxx or Shareholders in or pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Seller, Xxxxxx or by Shareholders in this Agreement; or
C. The failure of any of Seller, Xxxxxx and Shareholders to pay,
discharge or perform any liability or obligation of Seller, Xxxxxx and
Shareholders 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.
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 would have been had each of the
representations and warranties of Seller, Xxxxxx and Shareholders been true and
correct and had each of the covenants of Seller, Xxxxxx and Shareholders 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,
Xxxxxx and Shareholders in this Agreement or pursuant hereto, shall survive for
a period of eighteen (18) months 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, Xxxxxx and Shareholders to
the extent they relate to Seller's title to the Assets shall survive for a
period of sixty (60) months and that the representations and warranties made by
Seller, Xxxxxx and Shareholders 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
38
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
$42,500.00 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, Xxxxxx and Shareholders (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 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; or
B. Any default in the performance of any of the covenants or
agreements made by Buyer or InfoCure in this Agreement.
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 5. of this Agreement shall survive for a period of eighteen
(18) months after the Closing Date, and thereafter all such representations and
warranties shall be extinguished.
39
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 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. Other Agreements. The representations, warranties and covenants made
----------------
by Seller are also being made, severally, by Xxxxxx and Representative. The
provisions of this Agreement limit the liability of each of them to seventy-five
percent (75%) and twenty-five percent (25%) of the Purchase Price, respectively.
40
Any indemnity obligations which Seller may have to Buyer can be discharged
by the Escrow Agent delivering to Buyer an amount in cash and an amount in
Stock. The percentage of cash and stock used to discharge Seller's indemnity
obligations shall be determined by the respective percentages that the cash and
stock are of the aggregate value of cash and stock paid as a part of the
Purchase Price. Each share of Stock so delivered shall be valued at the per
share closing market price of such Stock on the date delivered.
The liability of the Representative on account of representations,
warranties and covenants made by the Representative shall not be personal to the
Representative, but shall be limited to the assets in the Estate of Xxxxxx
Xxxxxxx and, if that is not sufficient, and if assets of the Estate are
transferred after the date hereof, to the assets of the transferee of such
Estate assets, but not in an amount in excess of the fair market value of the
assets (determined as of the Closing Date) transferred.
13. MISCELLANEOUS.
13.1. Brokers' Commission. Buyer will indemnify and hold harmless Seller
-------------------
and Shareholders 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 Shareholders will indemnify and hold harmless 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 Shareholders to bring about,
or to represent them in the transactions contemplated hereby, including, without
limitation, the commission due Jefferies & Company, Inc. which is representing
Seller and Shareholders in these transactions.
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 November 30, 1997.
41
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 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 and the nondisclosure agreement between Buyer and Seller dated
September 4, 1997, 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 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:
42
If to Seller or Shareholders, addressed to:
Professional On-Line Computer, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
With a copy to:
Xxxxxxxx & Xxxx, P.C.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
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 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.
13.12. Governing Law/Consent to Jurisdiction. This Agreement shall be
-------------------------------------
governed by and construed in accordance with the laws of the State of Michigan
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
43
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]
44
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:
POLCI Acquisition, Inc.
Attest: /s/ X. X. Xxxxx, Xx. By: /s/ Xxxxxxxxx X. Fine
--------------------------- --------------------------------
Asst. ,Secretary Xxxxxxxxx X. Fine, President
----------------
(CORPORATE SEAL)
INFOCURE:
InfoCure Corporation
Attest: /s/ X. X. Xxxxx, Xx. By: /s/ Xxxxxxxxx X. Fine
--------------------------- --------------------------------
Asst. ,Secretary Xxxxxxxxx X. Fine, President
----------------
(CORPORATE SEAL)
SELLER:
Professional On-Line Computer, Inc.
Attest: [SIGNATURE ILLEGIBLE] By: /s/ Xxxxx X. Xxxxxx
--------------------------- --------------------------------
Asst. , Secretary Xxxxx X. Xxxxxx, President
----------------
(CORPORATE SEAL)
SHAREHOLDERS:
Xxxxx X. Xxxxxx Revocable Living Trust
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx, as Trustee
Xxxxxxx X. Xxxxxx Revocable Living Trust
By: /s/ Xxxxxxx X. Xxxxxx, by Xxxxx X.
-----------------------------------
Xxxxxx under POA dated Nov. 12, 1997
--------------------------------------
Xxxxxxx X. Xxxxxx, as Trustee
/s/ Xxxxxx Xxxxxxx, by Xxxxx X.
--------------------------------------
Xxxxxx under Power of Attorney dated
--------------------------------------
11-17-97
--------
Xxxxxxx Xxxxxxx, as Personal
Representative of the Estate of Xxxxxx
Xxxxxxx
XXXXXX:
/s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx, Individually
46
EXHIBITS
--------
Exhibit A Escrow Agreement
Exhibit B Registration Rights Agreements
Exhibit C Certificates of Seller Shareholders
and Xxxxxx
Exhibit D Certificates of Buyer and InfoCure
Exhibit E Xxxx of Sale
Exhibit F Lease Assignment
Exhibit G Assignment and Assumption Agreement
Exhibit H Opinion of Seller's Counsel
Exhibit I Restrictive Covenant Agreement
Exhibit J Employment Agreement
Exhibit K Subscription Agreement
Exhibit L Opinion of Buyer's Counsel
Exhibit M Covenants Agreements
47
SCHEDULES
---------
Schedule 1.1.4 Agreements not to be Assigned or
Transferred
Schedule 1.1.11 Fixed Assets
Schedule 1.2.4 Excluded Personal Property
Schedule 2.2 Assumed 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 4.9.3 Millennium Compliant Matters
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 4.14 Absence of Certain Acts or Events
Schedule 4.16 Employment and Labor Matters
Schedule 4.17.1 Benefit Plans
Schedule 4.19 Consents and Approvals
Schedule 4.20 Related Party Transactions
48
Schedule 4.22 Customer Prepayments
Schedule 5.5 Litigation
Schedule 9.8 Persons Signing Covenants Agreements
49
