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EXHIBIT 10.1
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT dated as of March 5, 2001, by and between
InfoCure Corporation, a Delaware corporation ("InfoCure"), and PracticeWorks,
Inc., a Delaware corporation ("PracticeWorks").
RECITALS
A. InfoCure is the common parent of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), which currently files consolidated federal
income tax returns.
B. Pursuant to the Agreement and Plan of Distribution dated
February 21, 2001 by and between InfoCure and PracticeWorks (the "Distribution
Agreement"), the following transactions will occur: (i) InfoCure Systems, Inc.,
a Georgia corporation ("ISI"), will merge with and into InfoCure (the "ISI
Merger"); (ii) InfoCure will contribute certain assets and liabilities to
PracticeWorks (directly or through a disregarded single member limited liability
company wholly owned by PracticeWorks) in exchange for shares of PracticeWorks
common stock (the "Contribution Transaction"), and then (iii) InfoCure will
distribute all of the outstanding shares of the common stock of PracticeWorks
pro rata to the holders of InfoCure common stock (the "Distribution").
C. InfoCure and PracticeWorks intend that the ISI Merger will
qualify for nonrecognition treatment under the Code, that the Contribution
Transaction and the Distribution will qualify as a reorganization described in
Section 368(a)(1)(D) of the Code, that the Distribution will qualify as a
distribution described in Section 355 of the Code and that none of such
transactions will result in the recognition of any taxable gain or income to
InfoCure, ISI, PracticeWorks or any shareholder of InfoCure or PracticeWorks
(except to the extent of cash received for any fractional share interest in
PracticeWorks stock and any deferred intercompany gain).
D. From and after Date of the Distribution, PracticeWorks will
cease to be a member of the InfoCure affiliated group for federal income tax
purposes.
E. InfoCure and PracticeWorks desire on behalf of themselves,
their subsidiaries and their successors to set forth their rights and
obligations with respect to taxes due for periods before and after the
Distribution.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
1.01 "Affiliate" shall mean any Person that directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with a specified Person.
1.02 "Agreement" shall mean this Tax Disaffiliation Agreement dated
March 5, 2001 between InfoCure and PracticeWorks as the same may be amended from
time to time.
1.03 "Applicable Federal Rate" shall have the meaning set forth in
Section 1274(d) of the Code, compounded quarterly.
1.04 "Claim" shall have the meaning set forth in Section 5.03(a).
1.05 "Code" shall have the meaning set forth in the recitals.
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1.06 "Control" or "Controlled" shall mean, with respect to any
Person, the presence of one of the following: (i) the legal, beneficial or
equitable ownership, directly or indirectly, of more than 50% (by vote or value)
of the capital or voting stock (or other ownership or voting interest, if not a
corporation) of such Person or (ii) the ability, directly or indirectly, to
direct the voting of a majority of the directors of such Person's board of
directors or, if the Person does not have a board of directors, a majority of
the positions on any similar body, whether through appointment, voting agreement
or otherwise.
1.07 "Controlling Party" shall have the meaning set forth in
Section 5.01.
1.08 "Contribution Transaction" shall have the meaning set forth in
the recitals.
1.09 "Corporate Restructuring Transactions" shall mean the
transactions undertaken by InfoCure, PracticeWorks, and their respective
Subsidiaries in order to effect the Distribution, which transactions are
described in the Distribution Agreement.
1.10 "Date of Distribution" shall mean the Distribution Date
specified in the Distribution Agreement.
1.11 "Distribution" shall have the meaning set forth in the
recitals.
1.12 "Distribution Agreement" shall have the meaning set forth in
the recitals.
1.13 "Final Determination" shall mean with respect to any issue (a)
a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (b) a closing agreement whether or not
entered into under Section 7121 of the Code or any other binding settlement
agreement (whether or not with the Internal Revenue Service) entered into in
connection with or in contemplation of an administrative or judicial proceeding,
or (c) the completion of the highest level of administrative proceedings if a
judicial contest is not or is no longer available.
1.14 "Fiscal Year 2000" shall mean the period beginning January 1,
2000 and ending on December 31, 2000.
1.15 "Fiscal Year 2001 Stub Period" shall mean the period beginning
January 1, 2001 and ending on or after the Date of Distribution.
1.16 "Form S-1" shall mean the registration statement on Form S-1
(including the related prospectus) relating to the Distribution, as declared
effective by the Securities and Exchange Commission.
1.17 "InfoCure" shall have the meaning set forth in the preamble to
this Agreement.
1.18 "InfoCure Group" shall mean InfoCure and all entities that are
Subsidiaries of InfoCure at any time following the Distribution.
1.19 "InfoCure Tainting Act" shall mean (a) any breach of any
written representation or covenant relating to the qualification of the ISI
Merger as a transaction qualifying for nonrecognition treatment under the Code,
the qualification of the Contribution Transaction as a reorganization described
in Section 368(a)(1)(D) of the Code or relating to the qualification of the
Distribution as a transaction described in Section 355 of the Code, which
representation or covenant is made by InfoCure in connection with the tax
opinion of King & Spalding described in the Form S-1, or (b) any action or
actions of or involving any Person (other than PracticeWorks or any Person that
is an Affiliate of PracticeWorks immediately before or immediately after such
action or actions), or any omission or omissions of any Person (other than
PracticeWorks or any Person that is an Affiliate of PracticeWorks immediately
before or immediately after such omission or omissions), of an action or actions
available to it, after the Date of the Distribution, if such breach, action or
omission described in (a) or (b) contributes to a Final Determination that the
Distribution results in the recognition of gain to the InfoCure Group by virtue
of (i) the ISI Merger failing to qualify
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for nonrecognition treatment under the Code, (ii) the Contribution Transaction
failing to qualify as a reorganization under Section 368(a)(1)(D) of the Code,
(iii) the Distribution failing to qualify as a transaction described in Section
355 of the Code, or (iv) any stock or securities of PracticeWorks failing to
qualify as "qualified property" within the meaning of Sections 355(c)(2) and
361(c)(2) of the Code, including by reason of the application of Section 355(e)
of the Code to the Distribution.
1.20 "Indemnitor" shall have the meaning set forth in Section 5.02.
1.21 "IRS" shall have the meaning set forth in Section 5.03(a). ---
1.22 "ISI" shall have the meaning set forth in the recitals to this
Agreement.
1.23 "ISI Merger" shall have the meaning set forth in the recitals
to this Agreement.
1.24 "Period After Distribution" shall mean any taxable year or
other taxable period beginning on or after the Date of Distribution and, in the
case of any taxable year or other taxable period that begins before and ends
after the Date of Distribution, that part of the taxable year or other taxable
period that begins after the close of the Date of Distribution.
1.25 "Period Before Distribution" shall mean any taxable year or
other taxable period that ends on or before the Date of Distribution and, in the
case of any taxable year or other taxable period that begins before and ends
after the Date of Distribution, that part of the taxable year or other taxable
period through the close of the Date of Distribution.
1.26 "Person" shall mean any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
1.27 "PracticeWorks" shall have the meaning set forth in the
preamble to this Agreement.
1.28 "PracticeWorks Business" shall mean the business of providing
practice management applications and related services to dental, orthodontic,
and oral and maxillofacial surgery practices.
1.29 "PracticeWorks Group" shall mean PracticeWorks and all
entities that are Subsidiaries of PracticeWorks at any time following the
Distribution.
1.30 "PracticeWorks Tainting Act" shall mean (a) any breach of any
written representation or covenant relating to the qualification of the ISI
Merger as a transaction qualifying for nonrecognition treatment under the Code,
the qualification of the Contribution Transaction as a reorganization described
in Section 368(a)(1)(D) of the Code or relating to the qualification of the
Distribution as a transaction described in Section 355 of the Code, which
representation or covenant is made by PracticeWorks in connection with the tax
opinion of King & Spalding described in the Form S-1, or (b) any action or
actions of or involving any Person (other than InfoCure or any Person that is an
Affiliate of InfoCure immediately before or immediately after such action or
actions), or any omission or omissions of any Person (other than InfoCure or any
Person that is an Affiliate of InfoCure immediately before or immediately after
such omission or omissions), of an action or actions available to it, after the
Date of the Distribution, if such breach, action or omission described in (a) or
(b) contributes to a Final Determination that the Distribution results in the
recognition of gain to the InfoCure Group by virtue of (i) the ISI Merger
failing to qualify for nonrecognition treatment under the Code, (ii) the
Contribution Transaction failing to qualify as a reorganization under Section
368(a)(1)(D) of the Code, (iii) the Distribution failing to qualify as a
transaction described in Section 355 of the Code or (iv) any stock or securities
of PracticeWorks failing to qualify as "qualified property" within the meaning
of Sections 355(c)(2) and 361(c)(2) of the Code, including by reason of the
application of Section 355(e) of the Code to the Distribution.
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1.31 "Restructuring Taxes" means any Taxes resulting from the
Corporate Restructuring Transactions, including, but not limited to, any Taxes
imposed pursuant to or as a result of Section 311 of the Code or Section
1.1502-13 of the Treasury Regulations (and any applicable similar federal,
state, local or foreign Taxes, together with related interest, penalties and
additions to Tax), but excluding any Taxes imposed as a result of a Final
Determination that the ISI Merger failed to qualify for nonrecognition treatment
under the Code, that the Contribution Transaction failed to qualify as a
reorganization under Section 368(a)(1)(D) or that the Distribution otherwise
failed to meet the requirements of Section 355 or 361 of the Code for
nonrecognition of gain by the InfoCure Group.
1.32 "Subsidiary" shall mean a corporation, limited liability
company, partnership, joint venture or other business entity if 50% or more of
the outstanding equity or voting power of such entity is owned directly or
indirectly by the corporation with respect to which such term is used.
1.33 "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean all forms of taxation, whenever created or imposed,
including, but not limited to, taxes on or measured by income, franchise, gross
receipts, sales, use, excise, payroll, personal property (tangible or
intangible), real property, ad-valorem, value-added, leasing, leasing use or
other taxes, levies, imposts, duties, charges or withholdings of any nature
whether imposed by a nation, locality, municipality, government, state,
federation, or other governmental body (a "Taxing Authority"). Whenever the term
"tax" or "taxes" is used (including, without limitation, in the context of any
duty to reimburse another party or indemnify for taxes or refunds or credits of
taxes) it shall include penalties, fines, additions to tax and interest thereon.
1.34 "Taxing Authority" shall have the meaning set forth in the
foregoing definition of the term "Tax."
1.35 "Tax Returns" shall mean all reports, returns, information
statements, questionnaires or other documents required to be filed or that may
be filed for any period with any Taxing Authority (whether domestic or foreign)
in connection with any Tax or Taxes (whether domestic or foreign).
ARTICLE II.
TAX RETURNS, TAX PAYMENTS AND TAX SHARING OBLIGATION
2.01 OBLIGATIONS TO FILE TAX RETURNS. InfoCure shall timely file or
cause to be filed all Tax Returns with respect to the PracticeWorks Group that
(a) are required to be filed and are due before the Date of Distribution or (b)
are for either Fiscal Year 2000 or the Fiscal Year 2001 Stub Period, and are
filed on a consolidated, combined or unitary basis and include any member of the
PracticeWorks Group with InfoCure or any of its Subsidiaries. PracticeWorks
shall timely file or cause to be timely filed any other Tax Return with respect
to the PracticeWorks Group.
2.02 OBLIGATION TO REMIT TAXES. InfoCure and PracticeWorks shall
each remit or cause to be remitted any Taxes due in respect of any Tax for which
it is required to file a Tax Return and shall be entitled to reimbursement for
such payments only to the extent provided in Section 2.03.
2.03 TAX SHARING OBLIGATIONS AND PRIOR AGREEMENTS.
(a) Other than liabilities dealt with elsewhere in this
Agreement, PracticeWorks shall be liable for and shall indemnify and hold the
InfoCure Group harmless against (i) any Tax liability of any member of the
PracticeWorks Group, and of any member of the InfoCure Group to the extent that
such liability is attributable, as determined in good faith by InfoCure, to the
PracticeWorks Business, for (A) any Period After Distribution and (B) the Fiscal
Year 2000 and (C) any taxable year or period that begins before and ends on or
after the Date of Distribution in respect of the Period Before Distribution,
(ii) any Tax liability resulting from a Final Determination with respect to an
adjustment attributable to any member of the PracticeWorks Group, or any member
of the InfoCure Group to the extent that such liability is attributable, as
determined in good faith by InfoCure, to the PracticeWorks Business, and (iii)
any amount determined to be PracticeWorks' liability under Section 2.04.
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PracticeWorks shall be entitled to any refund of or credit for Taxes of the
PracticeWorks Group or amounts owed by PracticeWorks or for which PracticeWorks
is responsible under this Section 2.03(a). Any liability for Taxes under this
Section 2.03(a) shall be measured by the InfoCure Group's actual liability for
Taxes after applying Tax benefits otherwise available to the InfoCure Group
other than Tax benefits that the InfoCure Group in good faith determines would
actually offset Tax liabilities of the InfoCure Group in other taxable years or
periods. Any right to refund under this Section 2.03(a) shall be measured by the
actual refund or credit of the InfoCure Group attributable to the adjustment
without regard to offsetting Tax attributes or liabilities of the InfoCure
Group.
(b) Other than liabilities dealt with elsewhere in this
Agreement, InfoCure shall be liable for and shall hold the PracticeWorks Group
harmless against (i) any liability attributable to any member of the InfoCure
Group for Taxes that are not attributable, as determined in good faith by
InfoCure, to the PracticeWorks Business, including any liability asserted
against any member of the PracticeWorks Group under the provisions of Treas.
Reg. ss. 1.1502-6(a) that impose several liability on members of an affiliated
group of corporations that files consolidated returns, or similar provisions of
any foreign, state or local law, in respect of Taxes of any member of the
InfoCure Group that are not attributable to the PracticeWorks Business, and (ii)
any amount determined to be InfoCure's liability under Section 2.04. InfoCure
shall be entitled to any refund of or credit for Taxes for any periods that are
attributable to the InfoCure Group or amounts owed by InfoCure or for which
InfoCure is responsible under this Section 2.03(b).
(c) Except as set forth in this Section 2.03 and in
consideration of the mutual indemnities and other obligations of this Agreement,
any and all prior Tax sharing agreements or practices between any member of the
InfoCure Group and any member of the PracticeWorks Group shall be terminated
with respect to the PracticeWorks Group as of the Date of Distribution.
2.04 RESTRUCTURING TAXES; OTHER TAXES RELATING TO THE DISTRIBUTION.
(a) GENERALLY. Notwithstanding any other provision of
this Agreement to the contrary, PracticeWorks shall pay, and shall indemnify and
hold harmless InfoCure and any member of the InfoCure Group from and against any
and all Restructuring Taxes and any reasonable expenses (including, but not
limited to, attorney's fees) incurred in defending any audit or examination with
respect to Restructuring Taxes. In the event of a Final Determination that the
ISI Merger failed to qualify for nonrecognition treatment or that the
Distribution failed to meet the requirements of Sections 355 or 361 of the Code
for nonrecognition of gain by the InfoCure Group, including, without limitation,
by reason of (x) any stock or securities of PracticeWorks failing to qualify as
"qualified property" within the meaning of Sections 355(c)(2) or 361(c)(2) of
the Code or (y) the application of Section 355(e) of the Code to the
Distribution, (other than a Final Determination that the Distribution failed to
qualify for nonrecognition which determination would not have been made but for
an InfoCure Tainting Act or a PracticeWorks Tainting Act), the liability of
InfoCure and PracticeWorks for any Taxes arising from such Final Determination
and any liability to shareholders arising from such Final Determination
(together with any reasonable expense (including, but not limited to, attorney's
fees) incurred in defending against any liability) shall be borne 50 percent by
InfoCure and 50 percent by PracticeWorks. If an InfoCure Tainting Act and a
PracticeWorks Tainting Act both contribute to such a Final Determination, any
such Taxes or liability (together with any reasonable expense (including, but
not limited to, attorney's fees) incurred in defending against any liability)
shall be borne 50 percent by InfoCure and 50 percent by PracticeWorks.
(b) INDEMNIFICATION FOR PRACTICEWORKS TAINTING ACTS.
PracticeWorks covenants that neither PracticeWorks nor any member of the
PracticeWorks Group shall commit or be party to or the subject of any
PracticeWorks Tainting Act which would result in any Tax or liability described
in the following sentence and payable by InfoCure. To the extent that any member
of the InfoCure Group would not have been liable for the following amounts but
for a PracticeWorks Tainting Act, PracticeWorks shall pay, and shall indemnify
and hold harmless the InfoCure Group from and against, (i) any liability of any
member of the InfoCure Group to any Taxing Authority, InfoCure shareholders or
PracticeWorks shareholders (together with any reasonable expenses (including,
but not limited to, attorney's fees) incurred in defending against any such
liability) resulting from a Final Determination that the ISI Merger failed to
qualify for nonrecognition treatment or that the Distribution failed to meet the
requirements of Sections 355 or 361 of the Code for nonrecognition of gain by
the InfoCure Group, including, without limitation, by reason of (x) any stock or
securities of PracticeWorks failing to qualify as
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"qualified property" within the meaning of Sections 355(c)(2) or 361(c)(2) of
the Code or (y) the application of Section 355(e) of the Code to the
Distribution, and (ii) any Taxes and related expenses payable by any member of
the InfoCure Group by reason of the receipt of such payment.
(c) INDEMNIFICATION FOR INFOCURE TAINTING ACTS. InfoCure
covenants that neither InfoCure nor any member of the InfoCure Group shall
commit or be party to or the subject of any InfoCure Tainting Act which would
result in any Tax or liability described in the following sentence and payable
by PracticeWorks. To the extent that PracticeWorks would not have been liable
for the following amounts but for an InfoCure Tainting Act, InfoCure shall pay,
and shall indemnify and hold harmless PracticeWorks from and against, (i) any
liability of PracticeWorks to any Taxing Authority, InfoCure shareholders or
PracticeWorks shareholders (together with any reasonable expenses (including,
but not limited to, attorney's fees) incurred in defending against any such
liability) resulting from a Final Determination that the ISI Merger failed to
qualify for nonrecognition treatment or that the Distribution failed to meet the
requirements of Sections 355 or 361 of the Code for nonrecognition of gain by
the InfoCure Group, including, without limitation, by reason of (x) any stock or
securities of PracticeWorks failing to qualify as "qualified property" within
the meaning of Sections 355(c)(2) or 361(c)(2) of the Code or (y) the
application of Section 355(e) of the Code to the Distribution, and (ii) any
Taxes and related expenses payable by PracticeWorks by reason of the receipt of
such payment.
2.05 PERIOD THAT INCLUDES THE DATE OF DISTRIBUTION.
(a) To the extent permitted by law or administrative
practice, the taxable year of the PracticeWorks Group shall be treated as
closing at the close of the Date of Distribution.
(b) If it is necessary for purposes of this Agreement to
determine the Tax liability of any member of the PracticeWorks Group for a
taxable year or period that begins on or before and ends after the Date of the
Distribution and is not treated under Section 2.05(a) as closing at the close of
the Date of Distribution, the determination shall be made, in the case of Taxes
that are based upon income or receipts, by assuming that the relevant taxable
period ended at the close of the Date of Distribution, except that any
exemptions, allowances or deductions that are calculated on an annual basis
shall be apportioned on a time basis. In the case of Taxes that are imposed on a
periodic basis, are payable for a taxable period that includes (but does not end
on) the Date of Distribution, and are not based upon or related to income or
receipts, the portion of such Tax that relates to the Period Before Distribution
shall be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Date of Distribution and the denominator of which
is the number of days in the entire taxable period.
ARTICLE III.
CARRYBACKS, DISTRIBUTIONS AND ELECTIONS
3.01 CARRYBACKS. Any member of the PracticeWorks Group shall be
entitled to carry back any net operating loss or other item from a Period After
Distribution to a Period Before Distribution, except to the extent that InfoCure
determines in good faith that such action will cause an actual increase in the
Taxes for which the InfoCure Group is responsible or will cause an actual
reduction in the amount of any refund of Taxes payable to the InfoCure Group.
Any refund of Taxes resulting from any such carryback by a member of the
PracticeWorks Group shall be payable to PracticeWorks as provided in Section
2.03(a).
3.02 DISTRIBUTIONS AND ELECTIONS.
(a) No member of the PracticeWorks Group shall make any
election with respect to Taxes, pay or cause to be paid any distribution from an
Affiliate or take any other action that shall cause an actual increase in the
Taxes for which the InfoCure Group is responsible or will cause an actual
reduction in the amount of any refund of Taxes payable to the InfoCure Group.
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(b) No member of the InfoCure Group shall make any
election with respect to Taxes, pay or cause to be paid any distribution from an
Affiliate or take any other action that shall cause an actual increase in the
Taxes for which the PracticeWorks Group is responsible or will cause an actual
reduction in the amount of any refund of Taxes payable to the PracticeWorks
Group.
ARTICLE IV.
PAYMENTS
4.01 FISCAL YEAR 2001 STUB PERIOD AND FISCAL YEAR 2000.
(a) PracticeWorks shall determine and pay the final
amount owed, if any, under clause (i)(C) of Section 2.03(a) for the Fiscal Year
2001 Stub Period as follows: (i) within sixty (60) days from the Date of
Distribution, PracticeWorks shall provide InfoCure with a copy of its Federal
and State tax package (except that standard items such as Internal Revenue
Service Form 5471s, boycott information, FTC receipts and Section 861
information may be provided within one hundred twenty (120) days from the Date
of Distribution) of its Fiscal Year 2001 Stub Period operating and nonoperating
tax and financial results; (ii) PracticeWorks will calculate in accordance with
the principles established in Section 2.03 and submit to InfoCure an estimate of
its Fiscal Year 2001 Stub Period Tax liability, offsetting such liability by the
amount, if any, determined to be owed to PracticeWorks for Fiscal Year 2000
pursuant to Section 4.01(b), to the extent payment has not already been received
by PracticeWorks for such overpayment pursuant to Section 4.01(b); (iii)
InfoCure shall have the right to object in writing to such calculation on or
before sixty (60) days after the date on which such calculation is provided to
InfoCure, on the grounds that there is substantial authority that such
calculation is incorrect; PROVIDED that if InfoCure so objects, InfoCure and
PracticeWorks shall promptly submit the dispute to an independent accounting or
law firm acceptable to both InfoCure and PracticeWorks for prompt resolution,
whose decision shall be final and binding on InfoCure and PracticeWorks, and (x)
the party that such accounting or law firm determines has lost the dispute shall
pay all of the fees and expenses incurred in connection with submitting such
dispute; (y) PracticeWorks shall pay to InfoCure an amount equal to 80% of the
amount determined in clause (ii) of this Section 4.01(a) within ten (10) days
after InfoCure lodges an objection pursuant to clause (iii) of this Section
4.01(a); (z) a determination of the final amount owed, if any, under clause (ii)
of this Section 4.01(a) shall be made when the InfoCure Group's Fiscal Year 2001
Tax Returns are filed and shall be paid within thirty (30) days from the date
InfoCure notifies PracticeWorks of any additional amounts due together with
interest at a rate equal to the Applicable Federal Rate from the date on which
such Tax Return is filed. Similarly, any refund owed PracticeWorks over the
amount previously determined and paid under clause (ii) of this Section 4.01(a)
shall be refunded by InfoCure within the same thirty (30) day period together
with interest at a rate equal to the Applicable Federal Rate from the date on
which InfoCure receives such refund, and any claims resulting from carrybacks,
tax audits or a Final Determination shall be handled in the same manner as
provided in Articles V, VI, VII, and VIII.
(b) PracticeWorks shall determine and pay the final
amount owed, if any, under clause (i)(B) of Section 2.03(a) for Fiscal Year 2000
as follows: (i) PracticeWorks shall provide InfoCure with a copy of its Federal
and State tax package, together with standard items such as Internal Revenue
Service Form 5471s, boycott information, FTC receipts and Section 861
information, in the normal InfoCure format and according to the normal InfoCure
schedule, of its Fiscal Year 2000 operating and nonoperating tax and financial
results; (ii) InfoCure shall prepare and file those Tax Returns in respect of
Fiscal Year 2000 that it is obligated to file pursuant to Section 2.01; (iii)
PracticeWorks shall prepare a reconciliation of the amounts PracticeWorks has
paid either directly or indirectly through inter-company charges in respect of
the InfoCure Fiscal Year 2000 consolidated federal Tax Return or any other Tax
Return in respect of Fiscal Year 2000 that InfoCure is required to file pursuant
to Section 2.01 to the calculation of the PracticeWorks Group's final liability
for Fiscal Year 2000 to be determined from such Tax Returns in accordance with
the principles established in Section 2.03(a), and shall provide such
reconciliation to InfoCure within thirty (30) days before the due date for
filing the relevant Tax Return; (iv) InfoCure shall have the right to object in
writing to such reconciliation in accordance with the principles established in
Section 4.01(a)(iii) within fifteen (15) days of delivery of the reconciliation;
(v) if the reconciliation described in clause (iii) of this Section 4.01(b)
indicates that PracticeWorks owes InfoCure money, PracticeWorks shall pay the
balance to InfoCure within thirty (30) days of the delivery of such
reconciliation together with interest at a rate equal to the Applicable Federal
Rate from the date on which such Tax Return was filed. If the reconciliation
shows that
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InfoCure owes PracticeWorks money and PracticeWorks' overpayment cannot be
applied to PracticeWorks' Fiscal Year 2001 Stub Period Tax liabilities pursuant
to Section 4.01(a)(ii), InfoCure shall pay such balance to PracticeWorks within
five (5) days of InfoCure's receipt of such balance from the relevant Taxing
Authority to the extent that a refund is due from the relevant Taxing Authority
(with no interest) and concurrently with delivery of the reconciliation to the
extent that no refund is due from the relevant Taxing Authority (together with
interest at a rate equal to the Applicable Federal Rate from the due date of the
Tax Return); and (vi) any claims resulting from carrybacks, tax audits or Final
Determination shall be handled in the same manner as provided in Articles V, VI,
VII and VIII.
4.02 OTHER PAYMENTS. Other payments due to a party under Section
2.03 shall be due not later than twenty (20) days after the receipt or crediting
of a refund or the receipt of notice of a Final Determination that the
indemnified party is liable for an indemnified cost, together with interest at a
rate equal to the Applicable Federal Rate from the date on which the
indemnifying party receives such receipt, credit or notice.
4.03 NOTICE. InfoCure and PracticeWorks shall give each other
prompt written notice of any payment that may be due under this Agreement.
ARTICLE V.
TAX AUDITS
5.01 GENERAL. Except as provided in Sections 5.02 and 6.02, each of
PracticeWorks and InfoCure shall have sole responsibility for all audits or
other proceedings with respect to Tax Returns that it is required to file under
Section 2.01 (the "Controlling Party"). Except as provided in Section 5.03, the
Controlling Party shall have the sole right to contest the audit or proceeding
and to employ advisors of its choice.
5.02 INDEMNIFIED CLAIMS IN GENERAL. InfoCure or PracticeWorks shall
promptly notify the other in writing prior to the issuance of an actual notice
of assessment by the relevant Taxing Authority (for example, if by the Internal
Revenue Service, prior to the issuance of a Form 5701 Notice of Proposed
Adjustment) of any proposed adjustment to a Tax Return that may result in
liability of the other party (the "Indemnitor") under this Agreement. If the
Indemnitor is not also the Controlling Party, the Controlling Party shall
provide the Indemnitor with information about the nature and amounts of the
proposed adjustments and shall permit the other party to participate in the
proceeding at its own expense, PROVIDED, HOWEVER, that the Controlling Party
shall not be required to indemnify the Indemnitor if the Controlling Party fails
to notify or provide such information to the Indemnitor, unless the Indemnitor
is materially prejudiced thereby. The Indemnitor shall pay all reasonable
expenses (including, but not limited to, legal and accounting fees) incurred by
the Controlling Party in connection with the assessment or adjustment within
seven (7) days after a written request by the Controlling Party.
5.03 CERTAIN FEDERAL INCOME TAX CLAIMS.
(a) Any issues raised by the Internal Revenue Service
("IRS") in any tax inquiry, audit, examination, investigation, dispute,
litigation or other proceeding which would result in federal income tax
liability to the Indemnitor which in the aggregate would equal or exceed
$100,000 in any taxable year are defined as a Claim (a "Claim"). Except as
provided in Section 5.03(d) and notwithstanding any other provision of this
Agreement that may be construed to the contrary, the Controlling Party agrees to
contest any Claim and not to settle any Claim without prior written consent of
the Indemnitor, PROVIDED that (i) the Controlling Party shall provide notice to
Indemnitor pursuant to Section 5.02 of any Claim, (ii) within thirty (30) days
after notice by the Controlling Party to the Indemnitor of a Claim is received
by the Indemnitor, the Indemnitor shall request in writing that such Claim be
contested, (iii) within thirty (30) days after notice by the Controlling Party
to the Indemnitor of such Claim is received by the Indemnitor, the Indemnitor
shall have provided an opinion of independent tax counsel, selected by the
Indemnitor and reasonably acceptable to the Controlling Party, to the effect
that it is more likely than not that a Final Determination will be substantially
consistent with the Indemnitor's position relating to such Claim, (iv) the
Indemnitor agrees to pay on demand and pays all out-of-pocket costs, losses and
expenses (including, but not limited to, legal and accounting fees) paid or
incurred by the Controlling Party in connection with contesting such Claim,
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except for a Claim where the expenses are shared pursuant to Section 2.04(a),
and (v) the Controlling Party, after reasonable consultation with the
Indemnitor, shall determine in its sole discretion the nature of all actions to
be taken to contest such Claim, including (1) whether any action to contest such
Claim shall initially be by way of judicial or administrative proceeding, or
both, (2) whether any such Claim shall be contested by resisting payment thereof
or by paying the same and seeking a refund thereof, and (3) the court or other
judicial body before which judicial action, if any, shall be commenced. To the
extent the Indemnitor is not participating, the Controlling Party shall keep the
Indemnitor and, upon request by the Indemnitor, its counsel informed as to the
progress of the contest.
(b) If the Indemnitor requests that the Controlling Party
accept a settlement of a Claim offered by the IRS and if such Claim may, in the
reasonable discretion of the Controlling Party, be settled without prejudicing
any claims the IRS may have with respect to matters other than the transactions
contemplated by the Distribution Agreement, the Controlling Party shall either
accept such settlement offer or agree with the Indemnitor that the Indemnitor's
liability with respect to such Claim shall be limited to the lesser of (i) an
amount calculated on the basis of such settlement offer plus interest owed to
the IRS on the date of eventual payment or (ii) the amount calculated on the
basis of a Final Determination.
(c) If the Controlling Party shall elect to pay the Tax
claimed and seek a refund, the Indemnitor shall lend sufficient funds on an
interest-free basis to the Controlling Party, and with no net after-tax cost to
the Controlling Party, to cover any applicable indemnity obligations of the
Indemnitor. To the extent such refund claim is ultimately disallowed, the loan
or portion thereof equal to the amount of the refund claim so disallowed shall
be applied against the Indemnitor's obligation to make indemnity payments
pursuant to this Agreement. To the extent such refund claim is allowed, the
Controlling Party shall pay to the Indemnitor all amounts advanced to the
Controlling Party with respect to the indemnity obligation within ten (10) days
of the receipt of such refund (or if the Controlling Party would have received
such refund but for the existence of a counterclaim or other claim not
indemnified by the Indemnitor under this Agreement, within ten (10) days of the
final resolution of the contest), plus an amount equal to any interest received
(or that would have been received) from the IRS that is properly attributable to
such amount.
(d) Except as provided below, the Controlling Party shall
not settle a Claim that Indemnitor is entitled to require the Controlling Party
to contest under Section 5.03(a) without the prior written consent of the
Indemnitor. At any time, whether before or after commencing to take any action
pursuant to this Section 5.03 with respect to any Claim, the Controlling Party
may decline to take action with respect to such Claim and may settle such Claim
without the prior written consent of the Indemnitor by notifying the Indemnitor
in writing that the Indemnitor is released from its obligations to indemnify the
Controlling Party with respect to such Claim (which notification shall release
the Indemnitor from such obligations except to the extent the Indemnitor has
agreed in writing that it would be willing to have its liability calculated on
the basis of a settlement offer, as provided in Section 5.03(b), at that point
in the contest) and with respect to any Claim related to such Claim or based on
the outcome of such Claim. If the Controlling Party settles any Claim or
otherwise takes or declines to take any action pursuant to this paragraph, the
Controlling Party shall pay to the Indemnitor any amounts paid or advanced by
the Indemnitor with respect to such Claim (other than amounts payable by the
Indemnitor in connection with a settlement offer pursuant to Section 5.03(b)),
plus interest attributable to such amounts.
ARTICLE VI.
COOPERATION
6.01 GENERAL. InfoCure and PracticeWorks shall cooperate with each
other in the filing of any Tax Returns and the conduct of any audit or other
proceeding and each shall execute and deliver such powers of attorney and make
available such other documents as are reasonably necessary to carry out the
intent of this Agreement. Each party agrees to notify the other party in writing
of any audit adjustments which do not result in Tax liability but can be
reasonably expected to affect Tax Returns of the other party, or any of its
Subsidiaries, for a Period After Distribution. Each party agrees to treat the
Distribution for all income tax purposes as not causing the recognition of any
gain or loss.
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6.02 COOPERATION WITH RESPECT TO TAX RETURN FILINGS, EXAMINATIONS
AND TAX RELATED CONTROVERSIES.
(a) INFOCURE'S OBLIGATIONS. In addition to any
obligations imposed pursuant to the Distribution Agreement, InfoCure and each
other member of the InfoCure Group shall fully cooperate with PracticeWorks and
its representatives, in a prompt and timely manner, in connection with (i) the
preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the PracticeWorks Group for any
taxable period beginning on or before the Distribution Date. Such cooperation
shall include, but not be limited to, (x) the execution and delivery to
PracticeWorks by the appropriate InfoCure Group member of any power of attorney
required to allow PracticeWorks and its counsel to represent InfoCure or such
other InfoCure Group member in any controversy which PracticeWorks shall have
the right to control pursuant to the terms of Section 5.01 of this Agreement,
(y) making available to PracticeWorks, during normal business hours, and within
sixty (60) days of any written request therefor, all books, records and
information, and the assistance of all officers and employees, necessary or
useful in connection with any tax inquiry, audit, examination, investigation,
dispute, litigation or any other matter, and (z) use of its best efforts in
defending PracticeWorks' interests in any tax inquiry, audit, examination,
investigation, dispute, litigation or any other matter for which InfoCure is the
Controlling Party.
(b) PRACTICEWORKS' OBLIGATIONS. Except as otherwise
provided in this Article VI, PracticeWorks shall fully cooperate with InfoCure
and its representatives, in a prompt and timely manner, in connection with (i)
the preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the InfoCure Group which includes
PracticeWorks or any other member of the PracticeWorks Group. Such cooperation
shall include, but not be limited to, (x) the execution and delivery to InfoCure
by PracticeWorks of any power of attorney required to allow InfoCure and its
counsel to participate on behalf of InfoCure or other InfoCure Group members in
any inquiry, audit or other administrative proceeding and to assume the defense
or prosecution, as the case may be, of any suit, action or proceeding pursuant
to the terms of and subject to the conditions set forth in Section 5.01 of this
Agreement, (y) making available to InfoCure, during normal business hours, and
within sixty (60) days of any written request therefor, all books, records and
information, and the assistance of all officers and employees, necessary or
useful in connection with any tax inquiry, audit, examination, investigation,
dispute, litigation or any other matter, and (z) the use of its best efforts in
defending InfoCure's interests in any tax inquiry, audit, examination,
investigation, dispute, litigation or other matter for which PracticeWorks is
the Controlling Party.
(c) REMEDY FOR FAILURE TO COMPLY. If PracticeWorks
reasonably determines that InfoCure is not for any reason fulfilling its
obligations under Section 6.02(a), or if InfoCure reasonably determines that
PracticeWorks is not for any reason fulfilling its obligations under Section
6.02(b), then InfoCure or PracticeWorks, as the case may be, shall have the
right to appoint, at the expense of the other, an independent entity such as a
nationally-recognized public accounting or law firm to assist the other in
meeting its obligations under this Section 6.02. Such entity shall have complete
access, during normal business hours to all books, records and information, and
the complete cooperation of all officers and employees, of InfoCure or
PracticeWorks, as the case may be. The remedy provided in this Section 6.02(c)
shall not be deemed exclusive.
ARTICLE VII.
RETENTION OF RECORDS; ACCESS
The InfoCure Group and the PracticeWorks Group shall (a) in accordance
with their then current record retention policy, retain records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns in respect of Taxes of the
InfoCure Group or the PracticeWorks Group for any Period Before Distribution or
for the audit of such Tax Returns; and (b) give to the other reasonable access
to such records, documents, accounting data and other information (including
computer data) and to its personnel (insuring their cooperation) and premises,
for the purpose of the review or audit of such Tax Returns to the extent
relevant to an obligation or liability of a party under this Agreement. At any
time after the Date of Distribution that the PracticeWorks Group proposes to
destroy such material or information, they shall first
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notify the InfoCure Group in writing and the InfoCure Group shall be entitled to
receive such materials or information proposed to be destroyed.
ARTICLE VIII.
DISPUTES
If InfoCure and PracticeWorks cannot agree on any calculation of any
liabilities under this Agreement, such calculation shall be made by any
independent public accounting firm acceptable to both InfoCure and
PracticeWorks. The decision of such firm shall be final and binding. The fees
and expenses incurred in connection with such calculation shall be borne by the
party that such independent public accounting firm determines has lost the
dispute.
ARTICLE IX.
TERMINATION OF LIABILITIES
Notwithstanding any other provision in this Agreement, any liabilities
determined under this Agreement shall not terminate any earlier than the
expiration of the applicable statute of limitation for such liability. All other
covenants under this Agreement shall survive indefinitely.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Sections 9.4, 9.7, 9.9, 9.10, 9.11, 9.14, 9.15, 9.16, 9.17, 9.18, 9.19,
9.20, 9.21 and 9.22 of the Distribution Agreement shall apply in relevant part
to this Agreement.
Notwithstanding Sections 9.8 and 9.9 of the Distribution Agreement (i)
in connection with the closing of the transactions contemplated by the Loan
Agreement dated as of March 5, 2001 (as amended, modified, supplemented or
restated from time to time, the "PW Loan Agreement") by and between
PracticeWorks and FINOVA Capital Corporation (together with its successors and
assigns, "FINOVA"), PracticeWorks agrees that it shall assign this Agreement and
its rights, interests and benefits hereunder to FINOVA pursuant to, among other
things, the Collateral Assignment of Distribution Transaction Documents dated
the date of the PW Loan Agreement executed by PracticeWorks in favor of FINOVA,
whereupon FINOVA shall be permitted to exercise any remedy, claim of action or
other right afforded to PracticeWorks hereunder and (ii) in connection with the
closing of the transactions contemplated by the Second Amendment to Loan
Agreement and Other Loan Documents dated as of March 5, 2001 (as amended,
modified, supplemented or restated from time to time, the "InfoCure Loan
Agreement") by and between InfoCure and FINOVA, InfoCure agrees that it shall
assign this Agreement and its rights, interests and benefits hereunder to FINOVA
pursuant to, among other things, the Collateral Assignment of Distribution
Transaction Documents dated the date of the InfoCure Loan Agreement executed by
InfoCure in favor of FINOVA, whereupon FINOVA shall be permitted to exercise any
remedy, claim of action or other right afforded to InfoCure hereunder.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
INFOCURE CORPORATION
By: /s/ Xxxxxxxxx X. Fine
---------------------------------------------
Xxxxxxxxx X. Fine
Chief Executive Officer
PRACTICEWORKS, INC.
By: /s/ Xxxxx X. Xxxxx
----------------------------------------------
Xxxxx X. Xxxxx
Chief Executive Officer
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