EXHIBIT 99.3
FOURTH EXTENSION AND MODIFICATION AGREEMENT
By this FOURTH EXTENSION AND MODIFICATION AGREEMENT (this "Agreement"),
dated as of June 6, 2002 (the "Effective Date"), XXXXX DENTAL OF KENTUCKY, INC.
("Lender"), PRACTICEWARES, INC. ("Borrower"), PRACTICEWORKS, INC.
("PracticeWorks") and XXXXXXX X. XXXXX ("Xxxxx", and collectively with
PracticeWorks, "Pledgors") confirm and agree as follows:
SECTION 1 - RECITALS
1.1 Borrower and Lender, among others, are parties to that Amended and
Restated Asset Purchase Agreement, dated as of December 4, 2002 (as previously
and hereafter amended, the "Asset Purchase Agreement"). Capitalized terms used,
but not defined, in this Agreement shall have the meanings given to those terms
in the Asset Purchase Agreement; provided that all documents referenced by
capitalized terms shall refer to those documents as modified by the Prior
Extensions (defined below) and as hereafter modified. All documents entered into
in connection with or relating to the transactions contemplated by the Asset
Purchase Agreement or the Loans (defined below) evidenced by the Notes (defined
below) are referred to herein as the "Transaction Documents".
1.2 At the Closing, in payment of the Purchase Price, Borrower executed
and delivered to Lender the following promissory notes (collectively, the
"Notes"): (i) Senior Note A in the principal amount of $6,194,200.00; (ii)
Senior Note B in the principal amount of $1,200,000.00; and (iii) the Junior
Note in the principal amount of $1,147,800.00.
1.3 Borrower failed to pay Senior Note A on its original maturity date,
and the parties entered into the following agreements, which, among other
things, extended the due date of Senior Note A (collectively, the "Prior
Extensions"): (i) Extension and Modification Agreement, dated as of January 11,
2002; (ii) Second Extension and Modification Agreement, dated as of February 1,
2002; and (iii) Third Extension and Modification Agreement, dated as of February
15, 2002.
1.4 The final maturity date for Senior Note A (after giving effect to
the Prior Extensions) was March 1, 2002, and Borrower failed to pay Senior Note
A in accordance with its terms by that date.
1.5 Borrower acknowledges that it is in default under the Notes and
other Transaction Documents by virtue of, among other things, its payment
default under Senior Note A.
1.6 Borrower desires to adjust the Purchase Price and as a result, pay
Lender cash and issue Lender shares of its capital stock, with such payment
constituting a payment in full of the Purchase Price and of the principal and
interest amounts due and owing under the Notes.
1.7 Lender is willing to accept this payment for the loans evidenced by
the Notes (the "Loans"), as proposed by Borrower, all on the terms, and subject
to the limitations, set forth herein.
I-1
SECTION 2 - MODIFICATIONS AND AGREEMENTS
2.1 Purchase Price Adjustment. Effective as of the Modification Closing
Date, and subject to all of the conditions set forth herein, the Purchase Price
shall be adjusted to an amount equal to the total of the following items, which
Borrower shall provide to Lender on or before the Payment Deadline, defined
below (collectively, the "Payoff"): (a) the sum of $3,800,000.00, payable in the
form of a wire transfer of immediately available funds; (b) the sum of
$130,672.00, payable in the form of a wire transfer of immediately available
funds (which represents the agreed amount of unpaid interest under the Notes as
of the date hereof); (c) 2,498,437 shares of common stock, $.001 par value per
share, of Borrower (the "Stock"), which shall constitute 19.04% of the issued
and outstanding shares of capital stock of Borrower as of the Modification
Closing Date, defined below, on a fully diluted basis; and (d) subject to the
terms and conditions set forth in an Escrow Agreement substantially in the form
attached hereto as EXHIBIT A (the "Escrow Agreement"), deliver to an escrow
agent to be agreed upon by the parties, the sum of $200,000.00 in the form of a
wire transfer of immediately available funds, for the benefit of Lender, which
shall be held for a period of sixty (60) days from the Modification Closing Date
and such funds shall be used to offset certain obligations of Lender as set
forth in (i) Section 2(e) of the Modification of Asset Purchase Agreement (as
defined in Section 2.6); (ii) Section 11.1.H of the Asset Purchase Agreement;
and (iii) the Sublease Agreement; provided that such amounts shall be offset
against certain obligations of Lender only to the extent that such offset rights
and amounts are definitively established pursuant to the Escrow Agreement within
said sixty (60) day period. If, for whatever reason, the Payoff is not made to
Lender on or before the Payoff Deadline, then the Purchase Price adjustment
contemplated herein shall not be made.
2.2 Payoff Conditions. Borrower's right to make the Payoff shall be
conditioned upon the following requirements, all of which Borrower must comply
with: (a) Borrower shall make the Payoff on or before the earlier of the
following dates (the "Payment Deadline"): (i) June 18, 2002; or (ii) the fourth
(4th) business day following the date of completion of, and receipt of proceeds
from, the pending offering of 3,750,000 shares of common stock of PracticeWorks,
pursuant to a registration statement filed by PracticeWorks with the SEC on or
about May 6, 2002 (the "Registered Offering"), or such later date as agreed to
by the parties in writing; (b) Borrower shall execute and deliver to Lender all
of the items and documents set forth in this Section 2 to be provided by
Borrower on or before the date upon which Borrower actually provides the Payoff
to Lender (the "Modification Closing Date"); and (c) Borrower shall not be in
breach or default under the Transaction Documents, other than continuing
defaults due to the failure to pay scheduled payments of principal and/or
interest under the Notes. Borrower's obligation to make the Payoff shall be
conditioned upon the following requirements, all of which Lender must comply
with: (a) Lender shall execute and deliver to Borrower all of the items and
documents set forth in this Section 2 to be provided by Lender on or before the
Modification Closing Date; and (b) Lender shall not be in breach or default
under the Transaction Documents.
2.3 Application of Payoff to Notes. Lender hereby acknowledges and
agrees that the Payoff, provided it is made on or before the Payoff Deadline,
shall be applied to the principal balance and accrued interest owing on the
Notes in full satisfaction thereof.
2.4 [Intentionally Omitted].
2.5 Subscription Agreement (With Call Rights); Issuance of Stock. On or
before the Modification Closing Date, Borrower and Lender shall enter into a
Subscription Agreement (with Call Rights) for the transfer of the Stock, with
such agreement in substantially the form attached hereto as EXHIBIT B. Further,
on the Modification Closing Date, Borrower shall issue and deliver to Lender, at
no cost to Lender related to the issuance or transfer of the Stock, certificates
representing the Stock.
2.6 Modification of Asset Purchase Agreement. On or before the
Modification Closing Date, Borrower and Lender shall enter into a Modification
of Asset Purchase Agreement, with such agreement in substantially the form
attached hereto as EXHIBIT C.
2.7 Releases of Collateral. On or before the Modification Closing Date,
Lender agrees to terminate and release all liens and security interests held by
Lender in any of the assets of Borrower securing repayment of the Notes and
hereby authorizes Borrower to file all necessary UCC termination statements to
effect such release upon the full satisfaction of all conditions set forth
herein. Further, Lender agrees to release the shares of capital stock of
Borrower that were pledged by the Pledgors pursuant to the Pledge Agreement on
or before the Modification Closing Date.
2.8 Stockholders Agreement. On or before the Modification Closing Date,
Borrower, Lender and Pledgors hereby agree to execute and deliver a Stockholders
Agreement in substantially the form attached hereto as EXHIBIT D. On or before
the Modification Closing Date, all current officers and directors of Borrower
shall resign, and Lender and Pledgors hereby agree to take all necessary steps
to appoint new directors of Borrower pursuant to the procedures set forth in the
Stockholders Agreement.
2.9 Forbearance by Lender. Provided that Borrower commits no breaches
or defaults under the Transaction Documents other than continuing defaults due
to the failure to pay scheduled payments of principal and/or interest under the
Notes, Lender shall forbear from foreclosing upon any of its collateral securing
repayment of the Notes until after the Payment Deadline.
2.10 Release of Lender and Its Affiliates. Except for all obligations
under the Asset Purchase Agreement that do not relate to the Loans or the Notes,
Borrower waives, releases and absolutely and forever discharges Lender and its
affiliates, and their present and former shareholders, directors, officers,
employees and agents, and their separate and respective heirs, personal
representatives, successors and assigns, from any and all liabilities, claims,
demands, damages, actions and causes of action, whether known or unknown and
whether contingent or matured, that Borrower may now or hereafter have, that
relate to the Notes or the Loans and arise from acts, omissions or events
occurring prior to the date hereof. Borrower further acknowledges and represents
that no event has occurred and no condition exists that presently constitutes
or, after notice or lapse of time, or both, would constitute a default by Lender
under the Notes or any other Transaction Documents.
2.11 Release of Borrower and Its Affiliates. Except for all obligations
under the Asset Purchase Agreement that do not relate to the Loans or the Notes,
Lender waives, releases and absolutely and forever discharges Borrower and its
affiliates, and their present and former
stockholders, directors, officers, employees and agents, and their separate and
respective heirs, personal representatives, successors and assigns, from any and
all liabilities, claims, demands, damages, actions and causes of action, whether
known or unknown and whether contingent or matured, that Lender may now or
hereafter have, that relate to the Notes or the Loans and arise from acts,
omissions or events occurring prior to the date hereof.
2.12 Additional Capital Contribution and Loan. On or before the
Modification Closing Date, PracticeWorks hereby agrees, subject only to (a) the
conditions set forth herein; and (b) the completion of the Registered Offering
and receipt of the proceeds related thereto, to (i) make a capital contribution
to Borrower in the amount of $1,000,000.00; and (ii) loan Borrower $3,000,000.00
in exchange for the execution and delivery by Borrower of the promissory note in
substantially the form attached hereto as EXHIBIT E and the security instruments
contemplated therein.
2.13 Stock Transfer Agreement; Stock Redemption Agreement. On or before
the Modification Closing Date, Xxxxx hereby agrees to execute and deliver (a) a
Stock Transfer Agreement; and (b) a Stock Redemption Agreement, each in
substantially the forms attached hereto as EXHIBIT F and EXHIBIT G,
respectively.
2.14 E-Commerce Agreement. On or before the Modification Closing Date,
PracticeWorks and Borrower hereby agree to execute and deliver the E-Commerce
Agreement in substantially the form attached hereto as EXHIBIT H.
2.15 Xxxxxx & Xxxxxxx Fees. PracticeWorks and PracticeWares both agree
to indemnify, defend and hold harmless Lender and all of its affiliates for,
from and against any claim, loss, damage, liability, action or cause of action
arising with respect to any fees owing to Xxxxxx, Xxxxxxx & Xxxxxx, LLP.
2.16 Stock Incentive Plan. On or before the Modification Closing Date,
the Lender and the Pledgors hereby agree to take all necessary steps to
authorize and approve the PracticeWares, Inc. 2002 Stock Incentive Plan in
substantially the form attached hereto as EXHIBIT I.
2.17 Xxxxx Xxxxxx Receivables. Lender will use its best efforts to
resolve all disputes with Xxxxx Xxxxxx Inc. that relate to or impact certain
obligations of Xxxxx Xxxxxx to Borrower in the amount of approximately $59,000
on or before the Modification Closing Date.
2.18 Credit Facility. Xxxxx hereby covenants and agrees that he will
use his best efforts to negotiate, execute and deliver a credit facility on
behalf of the Company on commercially reasonable terms within sixty (60) days
after the Modification Closing Date.
SECTION 3 - REPRESENTATIONS OF BORROWER. Borrower represents and warrants to
Lender, as of the date hereof and as of the date of Closing, that:
3.1 Organization and Authority. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has all requisite power and authority to own or hold under lease
the property it purports to own or hold under lease and to transact the business
it transacts and proposes to transact. Borrower has all requisite corporate
power and authority to execute and deliver this Agreement and the Loan
Documents, and to perform the obligations and consummate the transactions
contemplated hereunder and thereunder. Borrower will endeavor to obtain prior to
the Modification Closing Date authorization and approval from its Board of
Directors to the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby. Subject to obtaining such
approval and authorization, this Agreement has been duly authorized, executed
and delivered by, and is the valid and binding obligation of, Borrower
enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws or by
legal or equitable principles relating to or limited creditors' rights
generally.
3.2 Litigation, Etc. To the knowledge of Borrower, there is no action,
suit, proceeding or investigation pending or threatened against Borrower, which
challenges the validity of this Agreement or the right of Borrower to enter into
it, or to consummate the transactions contemplated hereby.
3.3 Taxes. Borrower has filed all tax returns which are required to
have been filed by Borrower and has paid all taxes shown to be due and payable
on such returns.
3.4 Compliance With Other Instruments. The consummation of the
transactions contemplated by this Agreement and the execution, delivery and
performance of this Agreement will not contravene, result in any breach of,
constitute a default or require a consent under, or result in the creation of
any lien in respect of any property of Borrower under, any material indenture,
mortgage, deed of trust, bank loan or credit agreement, corporate charter,
bylaws or other agreement or instrument to which Borrower is a party or by which
Borrower or any of its properties may be bound or affected.
3.5 Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
body is required for the validity of the execution and delivery, or for the
performance by Borrower of this Agreement.
3.6 Proprietary Information. To the best of its knowledge, Borrower
owns or possesses sufficient legal rights to all trade or service marks,
copyright, patents, processes, operation manuals, techniques, trade secrets and
similar proprietary property and rights necessary for its business as now
conducted and as proposed to be conducted, without any known conflict or
infringement of the rights of others.
3.7 No Defaults. Except for breaches or defaults under the Transaction
Documents caused solely by the failure to pay scheduled payments of principal
and/or interest under the Notes, (i) there are no defaults or breaches by
Borrower under or with respect to any of the Transaction Documents; and (ii) all
representations and warranties of Borrower under the Transaction Documents are
true and correct as of the date hereof (except with respect to the Asset
Purchase Agreement, which such representations and warranties therein were true
and correct as of the Closing Date as defined therein).
3.8 Disclosure. Neither this Agreement nor any other document
referenced herein or in any other Transaction Document and furnished to Lender
contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein, in light of the circumstances under
which they were made, not misleading.
SECTION 4 - REPRESENTATIONS OF LENDER. Lender represents and warrants to
Borrower, as of the date hereof and as of the Modification Closing Date, that:
4.1 Organization and Authority. Lender is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and has all requisite power and authority to own or hold under lease the
property it purports to own or hold under lease and to transact the business it
transacts and proposes to transact. Lender has all requisite corporate power and
authority to execute and deliver this Agreement and the Loan Documents, and to
perform the obligations and consummate the transactions contemplated hereunder
and thereunder. Lender will endeavor to obtain, prior to the Modification
Closing Date, authorization and approval from its Board of Directors of the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby. Subject to obtaining such approval and
authorization, this Agreement has been duly authorized, executed and delivered
by, and is the valid and binding obligation of, Lender enforceable in accordance
with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limited creditors' rights generally.
4.2 Litigation, Etc. To the knowledge of Lender, there is no action,
suit, proceeding or investigation pending or threatened against Lender, which
challenges the validity of this Agreement or the right of Lender to enter into
it, or to consummate the transactions contemplated hereby.
4.3 Compliance With Other Instruments. The consummation of the
transactions contemplated by this Agreement and the execution, delivery and
performance of this Agreement will not contravene, result in any breach of,
constitute a default or require a consent under, or result in the creation of
any lien in respect of any property of Lender under, any material indenture,
mortgage, deed of trust, bank loan or credit agreement, corporate charter,
bylaws or other agreement or instrument to which Lender is a party or by which
Lender or any of its properties may be bound or affected.
4.4 Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
body is required for the validity of the execution and delivery, or for the
performance by Lender of this Agreement.
4.5 No Defaults. There are no defaults or breaches by Lender under or
with respect to any of the Transaction Documents, and all representations and
warranties of Lender under the Transaction Documents are true and correct as of
the date hereof (except with respect to the Asset Purchase Agreement, which such
representations and warranties were true and correct as of the Closing Date as
defined therein).
4.6 Disclosure. Neither this Agreement nor any other document
referenced herein or in any other Transaction Document and furnished to Borrower
contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein, in light of the circumstances under
which they were made, not misleading.
SECTION 5 - GENERAL
5.1 All terms, conditions and provisions of the Transaction Documents
are continued in full force and effect and shall remain unaffected and
unchanged, except as specifically amended hereby.
5.2 This Agreement in no way acts as a waiver, release or
relinquishment of any of Lender or Borrower's rights under the Transaction
Documents, and Borrower and Lender hereby reaffirms all such rights.
5.3 This Agreement and the documents referenced herein contain the
entire agreement of the parties with respect to the matters discussed herein and
therein. No express or implied consent to any further modifications shall be
inferred by Lender or Borrower's execution of this Agreement. Any further
modification of any Transaction Document shall require the express written
approval of Lender and Borrower.
5.4 This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of which, taken together, shall
constitute one and the same Agreement.
5.5 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
5.6 Notwithstanding this or any prior forbearance, if any, actual or
implied, of any nature by Lender, time is hereby declared to be of the essence
hereof and of all Transaction Documents, as modified hereby.
5.7 This Agreement shall be governed by and construed according to the
laws of the State of Arizona. Exclusive venue for any action hereunder shall be
in the federal and state courts located in Maricopa County, Arizona.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
18th day of June, 2002.
BORROWER: PRACTICEWARES, INC.
By: s/s Xxxxxxx Xxxxx
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Its: President
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LENDER: XXXXX DENTAL OF KENTUCKY, INC.
By: s/s Xxxxxxx Xxxxxxxx
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Its: Treasurer
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PLEDGORS: PRACTICEWORKS, INC.
By: s/s Xxxxx X. Xxxxx
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Its: Executive Vice-President
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s/s Xxxxxxx X. Xxxxx
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XXXXXXX X. XXXXX
