NOTE 8
Commitments and Contingencies
The Company leases office space and equipment under noncancelable operating
and capital leases, respectively, with various expiration dates through 2009.
Capital lease obligations are collateralized by the equipment subject to the
leases. The Company is responsible for maintenance costs and property taxes on
certain of the operating leases. Rent expense for the years ended December 31,
2000, 1999 and 1998 was $4.0 million, $1.2 million and $192,000 respectively.
These amounts are net of sublease income of $78,000, $25,000 and $48,000,
respectively.
Future minimum lease payments under noncancelable operating and capital
leases at December 31, 2000 are as follows:
FOR THE PERIODS ENDING DECEMBER 31, CAPITAL LEASES OPERATING LEASES
----------------------------------- -------------- ----------------
(IN THOUSANDS)
2001................................................... $ 2,523 $ 7,240
2002................................................... 1,840 6,973
2003................................................... 1,146 6,483
2004................................................... 450 4,808
2005................................................... 159 3,967
Thereafter............................................. -- 6,967
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Total minimum lease payments................................ 6,118 $36,438
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Less: Interest.............................................. (692)
Less: Current portion....................................... (2,123)
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$ 3,303
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In May 2000, Finserv Health Care Systems, Inc. ("Finserv"), a wholly owned
subsidiary of the Company, initiated litigation against U.S. Imaging, Inc.
("USI") for breach of contract. Finserv claims that USI failed to pay fees and
expenses in the amount of approximately $194,000 and that USI wrongfully and
unilaterally terminated the contracts in February 2000, before the end of the
term and therefore is liable for a termination fee of $250,000. Also, Finserv
alleges that USI has continued to use Finserv's proprietary software after the
wrongful termination of the contracts and that USI is liable for the economic
damages suffered by Finserv as a result of this unauthorized use. The amount of
damages, if any, remains unknown. USI has filed a counterclaim against Finserv
for breach of contract, alleging that USI sustained damages in excess of
$450,000 as Finserv failed to provide a variety of services within the
contracts' scope. In addition, USI has claimed additional damages of
approximately $2.0 million as a result of Finserv's breach of an obligation to
file certain claims on USI's behalf in the bankruptcy of Dow Corning
Corporation. The litigation is set for trial on April 23, 2001, but the parties
have requested a continuance until after October 15, 2001. No accrual for any
loss related to this matter has been made in the consolidated financial
statements.
In December 2000, the Company received notice from a third party through
its legal counsel, that the Company is allegedly infringing on the third party's
trademark. No damages have been specified. No accrual for any loss related to
this matter has been made in the consolidated financial statements.
In the opinion of management, the results of the above matters,
individually or in the aggregate, are not expected to have a material effect on
the Company's results of operations, financial condition or cash flows.
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