EXHIBIT 2.1
April 18, 1997
Xx. Xxxxxx X. Xxxxxxx
President
HCX, Inc.
000 Xxx Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Dear Xx. Xxxxxxx:
The purpose of this letter agreement (the "Agreement") is to document the
parties' definitive agreement concerning HCX, Inc.'s ("HCX") acquisition of the
hospital xxxx audit business (the "HBA Business") of American Claims
Evaluation, Inc. ("ACE").
1. Accordingly, effective May 1, 1997, ACE hereby sells, assigns, transfers
and sets over to HCX, all of ACE's right, title and interest in the HBA
business, defined as hospital xxxx audits, nurse directed negotiations,
and provider discounts provided to Clients, including goodwill related
thereto, as currently conducted by ACE (the "Assignment"). To effectuate
the Assignment, ACE and HCX agree as follows: (i) all hospital bills
received through April 30, 1997, and completed by May 31, 1997, will be
completed and billed by ACE. HCX will not be entitled to any of the
revenues therefrom; (ii) effective May 1, 1997, all hospital bills
received from ACE clients and all cases not completed by ACE by May 31,
1997, will be processed by HCX and billed by HCX, subject to Client
approval and payment of costs by HCX to complete transferred in-process
cases. HCX will then be entitled to the revenues therefrom; (iii) ACE
will deliver to HCX concurrent with the execution of this Agreement a
list of the clients who have retained ACE to provide cost containment
services during the six months ended March 31, 1997 through the HBA
Business and provide reasonable access to HCX to the HBA Business client
files, account histories and related records. Both parties will undertake
to cooperate together with the intention of assigning the Provider
Discount Network contracts to HCX, i.e., Multi-Plan and Prime, subject to
the consent of the respective providers; and (iv) HCX and ACE will
jointly prepare and send a letter to clients of the HBA Business
announcing that HCX and ACE have entered into an agreement whereby HCX
will offer and provide HBA Business services on a going forward basis.
2. Liabilities Not Assumed. HCX shall not assume or be responsible for any
of the following liabilities or obligations expressly identified in this
section 2. (the "excluded Liabilities"):
a. Nonenumerated Liabilities. Any liability or obligation of ACE of
any kind, known or unknown, contingent or otherwise, or
resulting from any other covenant, agreement, or indemnity of
HCX in this Agreement. HCX does not assume any liability for
cases previously completed by ACE, nor is HCX responsible for
adjustments to any case completed by ACE prior to May 31, 1997,
which are excluded Liabilities.
b. Taxes. Any liability or obligation of ACE for federal, state, or
local income, franchise, property, sales or use, or recapture
taxes, assessments, and penalties, whether arising out of the
transactions contemplated by this Agreement or otherwise;
neither will HCX assume any portion of ACE's liabilities for any
state or local, tangible or intangible, property tax, or for any
other tax.
c. Trade Payables. None to be assumed.
d. Violations of Law. Any liability or obligation resulting from
violations of any applicable laws or regulations by ACE prior to
the execution of this Agreement or infringement of third-party
rights or interests.
e. Employee Liabilities. None to be assumed, including but not
limited to: any employee liabilities relating to present or
future employees of the ACE HBA Business with respect to plans,
programs, policies, commitments, and other benefit entitlement
established or existing on or prior to the execution of this
Agreement, and whether or not such liabilities are contingent in
nature, including by way of example, and not limitation:
(i). Any liability or obligation for workers' compensation.
(ii). Any current or future liabilities to employees retiring
on, before, or after the execution of this Agreement,
and their dependents.
(iii). Any current or future liabilities for benefits that may
have been accrued or earned by any employees associated
with the ACE HBA Business on or before the execution of
this Agreement under any pension plans relating to
service prior to the execution of this Agreement.
(iv). Any current or future liabilities for claims incurred
prior to the execution of this Agreement and related
expenses with respect to any employees associated with
the ACE HBA Business under any welfare or disability
plans established or existing at or prior to the
execution of this Agreement, regardless of when filed
with HCX, ACE, or the claims administrator for any such
plan.
(v). Any retrospective premium on pension, savings, thrift,
or profit-sharing plan contribution relating to
employees associated with the ACE HBA Business incurred
or accrued prior to the execution of this Agreement,
regardless of when invoiced or recorded.
(vi). Any monetary liability for severance payments that may
arise at any time in favor of any of ACE's employees
under any plan, program, policy, commitment, or other
benefit entitlement.
f. Incidents to Excluded Assets. Any liability or obligation
associated with any of the excluded assets.
g. Litigation. Any Litigation pending or threatened against ACE or
the assets.
3. In consideration of the foregoing, HCX agrees to pay ACE the following:
(i) twenty percent (20%) of all net revenues, as defined, generated from
hospital xxxx audits, nurse directed negotiations, and provider discounts
provided to Clients by HCX for a period commencing May 1, 1997 and ending
on October 31, 1998 and (ii) five percent (5%) of the net revenues, as
defined, for the period commencing on November 1, 1998 and ending on
April 30, 2000. For purposes of this Agreement, "Client" shall mean any
entity for whom ACE has performed cost containment services during the
six months ending March 31, 1997, excluding Humana, Blue Cross Blue
Shield of Idaho, EBPA, and State Farm, as these are also current clients
of HCX. Net revenues shall be defined as invoiced amounts (invoice less
credits and bad debt writeoff) less billed pass-through fees for
hospitals and travel and for the cost of provider discount network access
fees. HCX will remit the foregoing payments to ACE, along with a
calculation thereof, monthly 30 days from the end of each month based on
the net revenues generated in such month.
4. ACE shall make available copies of the case history for all cases
processed during the twelve months prior to the execution of this
Agreement to HCX for case processing informational purposes only. HCX
assumes no responsibility or liability for said cases. HCX shall maintain
records in sufficient detail and, upon reasonable notice from time to
time (but not more often than quarterly) and once after the final payment
has been made hereunder, allow a representative of ACE or an independent
public accounting firm, which firm shall be reasonably agreed to by both
parties, to examine its books and records pertaining to the HBA Business,
solely for the purpose of verifying the calculation of the payments due
under this Agreement. The fees and expenses of the accounting shall be
borne by ACE, except if such examination discovers an underpayment of ten
percent (10%) or more by HCX for any audit period, the reasonable fees of
such accounting firm shall be borne by HCX. ACE undertakes and agrees to
cause any independent accounting firm selected by ACE pursuant to this
paragraph not to disclose any information so obtained to any third party
except to the extent necessary to enforce this Agreement and such
accounting firm will otherwise keep such information strictly
confidential.
5. Nothing contained herein shall be construed as the transfer by ACE of (i)
any of its assets to HCX (other than the client list and the provider
contracts) and (ii) any rights to the use of the name "American Claims
Evaluation, Inc."
6. HCX agrees to use its best efforts to solicit business from the Clients
during the time period for which amounts are payable to ACE by HCX
hereunder.
7. As a material inducement to HCX to enter into this Agreement and to
perform its obligations hereunder and for other due and valid
consideration, the receipt and sufficiency of which is hereby
acknowledged, ACE, its Executive officers (Xxxx Xxxxxx and Xxxx Xxxxxx),
and its directors covenant and agree that they will not, after May 1,
1997 and through April 30, 2000, (i) own, lease, operate, extend credit
to, compete with, or otherwise engage in the Hospital Audit Business
(except for the completion of hospital bills received through April 30,
1997 and for any interest held in a publicly-held company of less than
ten percent of the voting stock) nor will it (ii) disclose or make use of
any confidential non-public information regarding ACE's HBA Business or
HCX's operations including, but not limited to, financial information and
know how, except as required by law or by the order of any court or
administrative or governmental agency, provided, however, that the
non-disclosure covenant contained herein shall not apply to information
which has become public or has been disclosed to the public without
violation of this covenant by ACE. HCX shall give ACE reasonable written
notice of any violation or alleged violation of the foregoing and an
opportunity to cure the same. If the provisions of this paragraph are
violated in whole or in part, HCX shall be entitled upon application to
any court of proper jurisdiction, to a temporary restraining order or
preliminary injunction to restrain and enjoin ACE from such violation.
8. ACE represents and warrants to HCX that (i) ACE is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York with full power and authority to own, lease and operate
its assets and to carry on its business as now and as heretofore
conducted. ACE has full power and authority to execute and deliver this
Agreement and all other documents and agreements necessary to give effect
to the provisions of this Agreement and to consummate the transactions
contemplated hereby and to perform the transactions contemplated hereby
and thereby; (ii) the execution and delivery by ACE of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action by ACE. This Agreement has
been duly executed and delivered by ACE, and is the legal, valid and
binding obligation of ACE, enforceable against ACE in accordance with its
terms; (iii) ACE is the sole legal and beneficial owner of the HBA
Business purported to be owned and has, and will transfer to, HCX, good
and marketable title to the HBA Business, free and clear of any and all
liens; (iv) there is no judicial, administrative or arbitral action,
suit, or proceeding at law or in equity pending against ACE involving the
HBA Business, in which ACE has received service or process; and (v) is
not aware of any threatened actions.
9. HCX represents and warrants to ACE that (i) HCX is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. HCX has full power and authority to execute and
deliver this Agreement and to perform the transactions contemplated
hereby; (ii) the execution and delivery by HCX of this Agreement and the
consummation by HCX of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action of HCX. This Agreement
is duly executed and delivered by HCX, and is the legal, valid and
binding obligation of HCX, enforceable against HCX in accordance with its
terms, and (iii) no consent, approval, waiver, order of
authorization of, or registration, declaration or filing with, any
governmental authority is required in connection with the execution and
delivery of this Agreement by HCX or the consummation by HCX of the
transactions contemplated hereby.
10. This Agreement contains the sole and entire agreement between the parties
with respect to the subject matter hereof. This Agreement may be modified
or waived only by a separate writing signed by the parties hereto. Any
such modification or waiver shall contain a specific reference to the
relevant provision of this Agreement that is to be modified or waived.
11. No failure or delay by a party in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
12. Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally (including by courier),
or sent by certified, registered mail, postage prepaid, or guaranteed
next day delivery. Any such notice shall be deemed given when so
delivered personally or delivered by guaranteed next day service, or if
mailed, forty-eight (48) hours after the date of deposit in the United
States mail, as follows:
(i) if to ACE to:
American Claims Evaluation, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, President
(ii) if to HCX to:
HCX, Inc.
000 Xxx Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxx, President
cc: HCX, Inc.
0000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: General Counsel
Any party may, by notice given in accordance with this paragraph to the
other party, designate another address or person for receipt of notices
hereunder.
13. The parties agree that no broker or finder was responsible for the
transaction that is the subject of this Agreement.
14. If any provision or any portion of any provision of this Agreement or the
application of any such provision or any portion thereof to any person or
circumstance, shall be held invalid or unenforceable, the remaining
portion of such provision and the remaining provisions of this Agreement,
or the application of such provision or portion of such provisions as is
held invalid or unenforceable to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby and such provision or portion of any provision as shall
have been held invalid or unenforceable shall be deemed limited or
modified to the extent necessary to make it valid and enforceable; in no
event shall this Agreement be rendered void or unenforceable.
15. This Agreement shall be construed in accordance with the laws in the
State of New York (without giving effect to the conflicts of law
principles thereof).
16. This Agreement shall be binding upon and inure to the benefit of the
successors of each of ACE and HCX. Neither party may assign its rights
hereunder.
If the foregoing correctly sets forth our understanding as to the transfer of
the HBA Business, please countersign below where indicated and return a signed
copy to ACE, whereupon it shall be binding upon us both.
Very truly yours,
AMERICAN CLAIMS EVALUATION, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
Chairman and CEO
Date: April 18, 1997
---------------------------------
ACCEPTED AND AGREED
TO AS OF THE DATE FIRST
SET FORTH ABOVE:
HCX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxx
President
Date: April 21, 1997
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