EXHIBIT 10.28
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of January 1, 1997 by and among PROPHECY TRANSCRIPTION SERVICES, INC., a
New Jersey corporation ("Purchaser"); and PROPHECY HEALTH INFORMATION
MANAGEMENT, INC., a New Jersey corporation ("Seller"); and XXXXXX X. XXXXXXX, a
resident of the State of New Jersey (the "Shareholder").
W I T N E S S E T H:
WHEREAS, Seller owns and operates a medical transcription business at
00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 (the "Business");
WHEREAS, the Shareholder and his spouse own a substantial amount of
the outstanding stock of Seller;
WHEREAS, it is Seller's intention to cause the sale of Seller's assets
in order to liquidate Seller's investment in said assets;
WHEREAS, Purchaser desires to buy, and Seller desires to sell,
substantially all of the assets owned by Seller and used in the operation of the
Business, upon the terms and conditions hereinafter set forth; and
WHEREAS, to induce Purchaser to perform under this Agreement and as a
condition thereto, Seller and Shareholder have agreed to execute a
noncompetition agreement in favor of Purchaser ("Noncompetition Agreement").
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound, do hereby agree as follows:
Section 1. Sale of Assets; Assumption of Specified Liabilities.
----------------------------------------------------------------
1.1 Sale of Assets. On the terms, subject to the conditions, and
--------------
for the consideration hereinafter stated, Seller hereby agrees to sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser agrees to buy and
acquire as hereinafter provided, at the "Closing" (as hereinafter defined),
substantially all assets of Seller, tangible or intangible, real or personal,
including, without limitation, the following described assets owned and used by
Seller:
(a) all equipment, business machines, computers, furniture,
furnishings, and other tangible personal property of Seller
including, without limitation, that listed in Exhibit 1.1(a)
hereto;
(b) DELETED
(c) all claims and rights under the contracts of Seller listed in
Exhibit 1.1(c) (the "Assigned Contracts");
(d) all patient transcribed reports as dictated by physicians (to the
extent permitted by law), and all personnel lists (whether past
or present, whether stored in computer memory or on hard copy);
(e) all sales literature, promotional material and other general
files and printed forms used by Seller;
(f) all goodwill, trademarks, services marks and trade names used by
Seller (including, without limitation, the name "Prophecy" when
used in connection with the Business).
(g) DELETED
(h) all telephone numbers and telephone and yellow pages directory
listings;
(i) all prepaid expenses and deposits of Seller, including any lease
deposits; Security Deposit on Lease will be adjusted at closing;
(j) all inventory and supplies of Seller;
(k) all rights to leasehold improvements and fixtures;
(l) all software and passwords to LAN networks used by Seller;
(m) all payroll records for all employees of Seller;
(n) all information and documentation relating to the names,
addresses, customer computer access codes, and telephone numbers
of Seller's referral sources;
2
(o) all records and lists of third party payor and case manager
contacts including names, addresses and telephone numbers; and
(p) all records relating to vendors dealing with Seller, business
leads, and prospective customers and employees.
The foregoing assets may be referred to herein collectively as the
"Assets". The "Assets" shall not include any "Excluded Assets", as defined in
Section 1.2 below.
The "Assets" shall include, without limitation, all properties and
assets of Seller and the Business as reflected in the 1996 Financial Statement
referred to in Section 4.3 hereof and all properties and assets acquired by
Seller after November 30, 1996, except those properties and assets disposed of
thereafter in the ordinary course of business and except for the "Excluded
Assets" as defined below.
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1
---------------
hereof, the following described assets of Seller shall not be acquired by
Purchaser, shall not constitute "Assets," and shall be defined herein as the
"Excluded Assets":
(a) the minute books and stock ledger books of Seller;
(b) all cash of Seller as of midnight the day before the Closing
Date;
(c) all accounts receivable and all unbilled amounts for services of
Seller as of midnight of the day before the Closing Date;
(d) any land or buildings owned by Seller;
(e) all pension plan assets of Seller; and
(f) the assets described in Exhibit 1.2(g) hereof.
1.3 No Assumption of Liabilities. It is expressly acknowledged and
----------------------------
agreed that, except in respect of the Assigned Contracts, Purchaser is assuming
no obligations, debts or liabilities of Seller or Shareholder (and Seller and
Shareholder shall jointly and severally indemnify Purchaser against any and all
such debts, obligations and liabilities) including, without limitation, the
following described debts, obligations or liabilities:
3
(a) any liability, indebtedness or obligation of Seller or
Shareholder for borrowed money, whether absolute or contingent,
direct or indirect;
(b) liabilities and obligations of Seller or Shareholder, the
existence of which constitute a breach of any of the
representations or warranties made by Seller or Shareholder in
this Agreement or in any document delivered by Seller or
Shareholder pursuant to this Agreement;
(c) any liabilities or obligations arising out of or in connection
with any litigation, claim, investigation or proceeding
(including, without limitation, losses, costs, expenses,
attorneys' fees, and damages incurred in connection therewith)
which relate to Seller or Shareholder or relate to services
performed or products delivered prior to the Closing or which
arise out of actions taken by, or omissions of, Seller or
Shareholder prior to the Closing (whether or not scheduled on
Exhibit 4.8);
(d) any federal, state, local or other income taxes payable by Seller
or Shareholder or any interest or penalties with respect thereto;
(e) any liability under any employee benefit or welfare plan or
regarding any compensation or withholding taxes owed to or with
respect to any employee or independent contractor of Seller or
Shareholder;
(f) liabilities and obligations of Seller or Shareholder for payroll,
wages, salaries, bonuses, vacation, sick pay and severance pay
and other like amounts due as of the Closing Date to officers,
directors, employees, contractors and agents of Seller or
Shareholder, all of which amounts are listed in Exhibit 1.3(f)
attached hereto;
(g) liabilities and obligations of Seller or Shareholder based upon
tortious or illegal conduct;
(h) liabilities and obligations of Seller or Shareholder for any
breach or violation, as of the Closing, of any contracts of
Seller or Shareholder including, without limitation, the Assigned
Contracts;
4
(i) liabilities and obligations of Seller or Shareholder for
environmental or ecological matters, including those relating to
the use, transport, disposal, handling or storage of hazardous or
toxic materials, pollutants, contaminants, petroleum products, or
waste;
(j) any liability or obligation to Medicare, Medicaid, Blue
Cross/Blue Shield (or any other third party payor) as a result of
recapture of amounts paid by any such payor to Seller or
Shareholder or any overpayments made by such payor to Seller or
Shareholder or any disallowance of any claim of Seller or
Shareholder;
(k) liabilities and obligations of Seller or Shareholder incurred in
connection with the preparation of this Agreement and the
consummation of transaction contemplated hereby, including,
without limitation, legal and accounting fees; and
(l) trade payables and operating expenses of Seller incurred prior to
the Closing Date.
All of the foregoing items described in clauses (a) through (l) above are
referred to herein collectively as the "Excluded Liabilities".
Notwithstanding the foregoing, Purchaser will assume the obligations
of Seller under the "Assigned Contracts", but only to the extent that they
represent obligations which are by their stated terms to be performed, in the
ordinary course, subsequent to the Closing Date.
1.4 Freedom from Encumbrances. The conveyance of the Assets to
-------------------------
Purchaser hereunder shall be free and clear of all claims, security interests,
pledges, options, rights of first refusal, liens, financing statements, deeds of
trust, mortgages, charges, assessments, restrictions, leases, and encumbrances
(all such claims, security interests, pledges, options, rights of first refusal,
liens, financing statements, deeds of trust, mortgages, charges, assessments,
restrictions, leases and encumbrances being referred to individually as an
"Encumbrance" and collectively as "Encumbrances"), except solely for the
Assigned Contracts.
Section 2. Amount, Payment and Allocation of Consideration.
---------- ------------------------------------------------
2.1 Amount and Payment. At the "Closing" (as defined in Section 3.1
------------------
hereof), Purchaser shall deliver the following
5
"Consideration" for the Assets and for the execution, delivery and performance
by Seller and Shareholder of the "Noncompetition Agreement" (as defined in
Section 3.4(i) hereof):
(i) $425,000.00 in cash or in bank or certified funds shall be
delivered to Seller at closing in consideration of the sale of the Assets to
Purchaser;
(ii) $50,000.00 in cash or in bank or certified funds shall be
delivered on or before March 1, 1997 in consideration of the sale of the Assets
to Purchaser. Said $50,000.00 will be secured by a Promissory Note signed by
Purchaser and guaranteed by EquiMed, Inc.; and
(iii) $25,000.00 in cash or in bank or certified funds shall be
delivered to Seller and Shareholder at closing in consideration of the
execution, delivery and performance by Seller and Shareholder of the
Noncompetition Agreement.
2.2 Allocation. The Consideration shall be allocated for tax
----------
purposes as provided in Exhibit 2.2 hereof and as otherwise required by Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"). Each party
will timely file IRS Form 8594 as required under the Code, which shall be
completed in conformity with the allocations set forth in this Agreement.
Section 3. Closing.
-------------------
3.1 Closing and Closing Date. The closing (the "Closing") of the
------------------------
sale and purchase of the Assets and the execution and delivery of the other
agreements and documents contemplated herein shall take place on or before
January 3, 1997 (the "Closing Date") at 10:00 a.m., Somerville, New Jersey time
at 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, or at such other place
and time as may be deemed appropriate by the parties hereto, at which time the
cash consideration as stated in Section 2.1(I) and 2.1(iii) shall be delivered
in bank certified funds pursuant to Seller's further direction. For purposes of
this Agreement and for accounting purposes, the "Closing Date" shall be January
1, 1997. If the parties agree, the Closing may be consummated by exchange of
signature pages by facsimile transmission, with the originals thereof to be
delivered by mail as soon thereafter as practicable. At the Closing, all charges
for rent, utilities, payroll, payments under Assigned Contracts, and other
current operating expenses of the Business shall be prorated based on actual
days elapsed for the appropriate period, with Seller being responsible for its
share of such prorations through midnight of the day preceding the Closing Date.
6
3.2 Action by Purchaser. Upon the terms and subject to the
-------------------
conditions herein contained, at the Closing on the Closing Date, Purchaser will
deliver to Seller and Shareholder the following:
(i) The certificate referred to in Section 6.1 hereof;
(ii) The opinion of counsel for Purchaser referred to in Section 6.3
hereof;
(iii) Resolutions of Purchaser, certified by an appropriate officer,
authorizing the execution, delivery and performance of this
Agreement and the other agreements to be delivered by Purchaser
in connection with the Closing hereunder; and
(iv) The Consideration in the manner specified in Section 2.1 hereof
and in the form specified in Section 3.1 hereof.
3.3 Action by Seller. Upon the terms and subject to the conditions
----------------
herein contained, at the Closing on the Closing Date, Seller and Shareholder
will deliver to Purchaser the following:
(i) A duly executed Xxxx of Sale and Assignment in substantially
the form of Exhibit 3.3(i) hereto;
(ii) The certificate referred to in Section 7.1 hereof;
(iii) The opinion of counsel for Seller and Shareholder referred to
in Section 7.3 hereof; and
(iv) Resolutions of Seller, certified by an appropriate officer,
authorizing the execution, delivery and performance of this
Agreement and the other agreements to be delivered by Seller in
connection with the Closing hereunder.
3.4 Action by All Parties. Upon the terms and subject to the
---------------------
conditions herein contained, at the Closing on the Closing Date, the parties
will, as appropriate, execute and deliver to each other the "Noncompetition
Agreement" in substantially the form attached hereto as Exhibit 3.4.
3.5 Further Acts and Assurances. From time to time and at any
---------------------------
time, at Purchaser's request, whether on or after the Closing Date, and without
further consideration, Seller shall, at its expense, execute and deliver such
further documents and instruments of conveyance and transfer and shall take such
further actions (i) as may be reasonably necessary to transfer
7
and convey to Purchaser all of the right, title and interest in and to the
Assets, free and clear of any Encumbrance whatsoever, or (ii) as may be
reasonably necessary to carry out the intent of this Agreement and the
transactions contemplated hereby, or (iii) as may be reasonably necessary in
connection with any audit which Purchaser may conduct of Seller's financial
statements, which audit (if any) shall be at Purchaser's sole expense and
consistent with this Agreement.
3.6 Seller's Records. Following the Closing, Purchaser shall
----------------
cooperate reasonably in making available to Seller for its review the records of
the Business created prior to Closing and in the possession of Purchaser.
3.7 Collection of Seller's Accounts Receivable. From and after the
------------------------------------------
Closing, Purchaser will promptly forward to Seller all payments received by
Purchaser with respect to Seller's accounts receivable.
Section 4. Representations and Warranties of Seller and Shareholder.
--------------------------------------------------------------------
Seller and Shareholder hereby jointly and severally represent,
warrant, covenant and agree to and with Purchaser as follows:
4.1 Seller's Existence and Power. Seller is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
New Jersey. Seller has the corporate power to own its property and to carry on
the Business as now being conducted.
4.2 DELETED
4.3 Accuracy of Financial Statements. Seller has delivered to
--------------------------------
Purchaser as Exhibit 4.3 a copy of the financial statements of Seller for the
years ended December 31, 1994 and 1995 and a balance sheet and an income
statement for the eleven-month period ending November 30, 1996 (the "Financial
Statements"). The balance sheet and income statement for the eleven-month period
ending November 30, 1996 are referred to hereinafter as the "1996 Financial
Statement". The Financial Statements are complete and accurate and fairly
present, in all material respects, the financial condition of Seller and the
income and expenses of Seller as of the respective dates thereof. Except as
noted in Exhibit 4.3, the Financial Statements have been prepared on a cash
basis and are accurate. Seller has no material liabilities or obligations
(including, without limitation, any liability for federal, state or local taxes
of Seller), for any period ended on or prior to the 1996 Financial Statement or
any liability or obligation in connection with any
8
transaction or state of affairs entered into or existing on or before the date
thereof, which is not fully reflected on the 1996 Financial Statement or
otherwise disclosed to Purchaser in the Exhibit 4.10 hereto.
4.4 Properties of Seller.
--------------------
(i) The 1996 Financial Statement reflects all of the properties
presently owned by Seller and used in the Business.
(ii) Exhibit 4.4(ii) attached hereto is an accurate and complete
list of all real or personal property which is used by Seller in the Business
and which either is not owned by Seller or is leased or rented by Seller.
4.5 Taxes and Tax Returns. Seller has filed all federal, state and
---------------------
local tax returns and reports of Seller which have become due to be filed
(including, without limitation, those due in respect of its properties, income,
franchises, licenses, sales and payrolls), and such returns are complete and
accurate in all material respects. A copy of Seller's most recent federal income
tax return is attached as Exhibit 4.5 hereto. Seller has paid all taxes,
assessments, fees, interest, penalties (if any) and other governmental charges
due with respect to the periods covered by such tax returns and reports and as
reflected on said returns and reports. Seller is not delinquent in the payment
of any taxes, assessments or governmental charges, and there are no assessments
of additional taxes threatened against Seller or any of Seller's properties. No
waiver of any statute of limitations or agreement for extension of time for
assessment in respect of any tax liability of Seller has been given by
Shareholder or Seller which is presently in effect. Without limiting the
foregoing, (a) Seller has timely filed all FICA, FUTA and similar state and
local tax returns and withholding of employee tax returns and reports of Seller
which have become due to be filed and has paid all amounts required to be paid
thereunder, and (b) Seller has paid over to the appropriate taxing authorities
all amounts required to have been withheld by Seller from employee compensation,
except such withheld amounts not yet due to have been paid over, all of which
amounts not yet paid over are being held by Seller for the account of the
appropriate taxing authority. The income tax returns of Seller have never been
audited by any taxing authority. Neither Seller nor Shareholder knows of any
questions which have been raised by any federal, state or local taxing authority
relating to taxes or assessments of Seller which, if determined adversely to
Seller, would result in the assertion of any tax deficiency.
4.6 Contracts. Exhibit 1.1(c) is a list of the Assigned Contracts.
---------
Exhibit 4.6 is a list of all agreements of Seller other than the Assigned
-----------
Contracts. Except as set forth in
9
Exhibit 1.1(c) or in Exhibit 4.6 hereto, Seller is not a party to any material
contract, agreement, lease, or power of attorney of any kind whatsoever. As to
Seller, all Assigned Contracts are valid and are in full force and effect
according to their material terms, and no material default by Seller exists
under any such contract, lease or agreement and no condition or state of facts
exists which, with notice or the passage of time, or both, would constitute a
default under any such contract, lease or agreement. To Seller's knowledge, all
Assigned Contracts are valid as to the other contracting parties thereto and
there is no material default by any such party existing under the Assigned
Contracts and no condition or state of facts exists which, with notice or the
passage of time, or both would constitute a default by any such party
thereunder. All Assigned Contracts are enforceable in accordance with their
terms by Seller against all other parties thereto in all material respects.
Neither the execution, the delivery nor the performance of this Agreement by
Seller will cause any default in or breach of any provision of Seller's Articles
of Incorporation, as amended, bylaws or any agreement or commitment to which
Seller is a party or by which Seller is bound, and none of such actions will
result in either acceleration, or any similar right of any other party, under
any Assigned Contract, or constitute a default under any Assigned Contract, or
result in the creation or imposition of any Encumbrance against the Assets.
4.7 Compliance with Laws. To the best of Shareholder's knowledge,
--------------------
Seller is in compliance in all material respects with the laws, regulations,
rules and decrees of all governmental authorities whatsoever relating to the
conduct of its business, including, without limitation, the Fair Labor Standards
Act.
4.8 Litigation. Except as scheduled in Exhibit 4.8, there is no
----------
litigation, action, suit, proceeding or governmental investigation pending or
(to the best of Seller's or Shareholder's knowledge) threatened against Seller
or Shareholder or affecting Seller or its business or any of its assets, at law
or in equity or before any federal, state, municipal, local or other
governmental authority, or before any arbitrator, nor does Seller or Shareholder
know of any reasonable basis for any such litigation, action, suit, proceeding
or investigation. Neither Seller nor Shareholder is subject to any order, writ
or decree of any court or other governmental authority.
4.9 Employee Plans and Agreements. Seller is not a party to any
-----------------------------
collective bargaining or labor agreement or to any written employment agreement,
profit sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, welfare, or incentive plan or policy
or increases in the rate of remuneration entered into with
10
or for the benefit of present or former employees, whether or not unionized, of
Seller or any other like agreement, plan or policy, other than as set forth in
Exhibit 4.9.
4.10 Liabilities. All liabilities and obligations of Seller, direct,
-----------
indirect or contingent, are either listed on the 1996 Financial Statement or on
Exhibit 4.10 attached hereto.
4.11 Insurance. All insurance maintained by Seller is listed and
---------
described on Exhibit 4.11 attached hereto.
4.12 Absence of Certain Changes. From November 30, 1996 until the
--------------------------
Closing, (a) the operations of Seller shall have been conducted in the ordinary
course of business, (b) no event shall have occurred or have been threatened
which has or would have a material and adverse affect upon Seller, and (c)
Seller shall not have sustained any loss or damage to its assets or property,
whether or not insured, or union activity that affects materially and adversely
its ability to conduct its business. Except as described in Exhibit 4.12, since
November 30, 1996, Seller has not:
(i) incurred or suffered any obligations or liabilities (absolute or
contingent) except current liabilities incurred in the ordinary
course of business;
(ii) issued any stock or other corporate securities or granted any
option or right with respect to the acquisition of any of its
corporate securities;
(iii) declared or made (or became obligated for) any payment or
distribution or dividend (other than cash or cash equivalents) to
shareholders or purchased or redeemed (or became obligated to
purchase or redeem) any shares of its capital stock;
(iv) mortgaged, pledged or subjected (whether or not voluntarily) to
any Encumbrance, any of its assets, other than Encumbrances
incidental to the conduct of its business or the ownership of its
property and assets which were not incurred in connection with
the borrowing of money, or the obtaining of advances or credit,
and which do not in the aggregate impair the use or value thereof
in the operation of the business of Seller;
(v) sold, assigned or transferred or agreed to sell, assign or
transfer any of its tangible assets or
11
cancelled any debts or claims, except in each case in the
ordinary course of business;
(vi) sold, assigned, or transferred or agreed to sell, assign or
transfer any trade names, or other intangible assets, or
permitted existing rights with respect thereto to lapse;
(vii) suffered any extraordinary loss or knowingly waived or
permitted to lapse any right of substantial value;
(viii) made any capital expenditures, or otherwise entered into any
executory transactions or commitments to make any capital
expenditures, in excess of $5,000 per item or $25,000 in the
aggregate;
(ix) failed to comply in any material respect with any applicable
local, state or federal law, rule or regulation; or
(x) suffered any event or condition of any character, materially and
adversely affecting the business, properties or prospects of
Seller or the Business.
4.13 Employees. A listing of all employees (including their rates of
---------
pay and their accrued but unpaid vacation and sick days ) of Seller is attached
as Exhibit 4.13.
4.14 Authority. Seller has the corporate power to execute and deliver
---------
this Agreement and consummate the transactions contemplated hereby and has taken
(or by the Closing Date will have taken) all action required by law, its
Articles of Incorporation, bylaws or otherwise to authorize such execution and
delivery and the consummation of the transactions contemplated hereby,
including, without limitation, execution and delivery of the Xxxx of Sale and
Assignment.
4.15 Licenses. To the best knowledge of Seller and Shareholder, there
--------
are no licenses or permits required for Seller to operate the Business, and the
Seller has no notice of violation of any such licenses or permits.
4.16 No Finders or Brokers. Neither Shareholder, nor Seller, nor any
---------------------
officer or director thereof has engaged any finder or broker in connection with
the transactions contemplated hereunder. Seller and Shareholder will indemnify
and hold Purchaser harmless against claims (and attorneys' fees and expenses in
the defense thereof) of any person, firm or corporation for finder's fees,
broker's fees, brokerage
12
commissions, sales commissions or the like alleged in connection with the
transactions contemplated hereunder due to acts of Seller or Shareholder.
4.17 Disclosure. No representation or warranty by Seller or Shareholder
----------
in this Agreement and no statement pertaining to Seller or Shareholder in this
Agreement or any document, exhibit or certificate furnished or to be furnished
to Purchaser pursuant hereto will contain any untrue statement which, if
corrected, would have a material adverse effect on the fair market value of the
property being transferred hereunder. There are no facts known to Seller or
Shareholder not described herein which would adversely affect the future
operations of the Business or the use of the Assets in the conduct of a similar
business at the same location.
4.18 Validity of Agreements. Upon execution and delivery by all
----------------------
parties, the obligations of Seller and Shareholder under this Agreement and all
other agreements to be executed by Seller or Shareholder in connection herewith,
will constitute the valid and binding obligation of Seller or Shareholder, as
the case may be, and be binding against them and enforceable in accordance with
their respective terms (except as enforceability may be restricted, limited, or
delayed by bankruptcy, insolvency, moratorium or similar laws affecting or
relating to the enforcement of creditors' rights in general and except as the
enforceability is subject to general principles of equity, regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.19 DELETED
4.20 Title to Assets. Except as described in the 1996 Financial
---------------
Statement referred to in Section 4.3 or in Exhibits 4.10 and 4.12 hereof, Seller
holds good and marketable title to the Assets, free and clear of restrictions on
or conditions to transfer or assignment, and free and clear of Encumbrances.
4.21 Transfer Not Subject to Encumbrances or Third-Party Approval.
------------------------------------------------------------
Except as disclosed in Exhibit 4.21 hereto, the execution and delivery of this
Agreement by Seller and Shareholder, and the consummation of the contemplated
transactions, will not result in the creation or imposition of any Encumbrance
on any of the Assets, and will not require the authorization, consent, or
approval of any third party, including any governmental subdivision or
regulatory agency.
4.22 Condition of Personal Property. Except as set forth in Exhibit
------------------------------
4.22 attached hereto, all tangible personal property, equipment, fixtures and
inventories included within the Assets or required to be used in the ordinary
course of Seller's
13
business are in good condition and are suitable for the purposes for which they
are being used. No value in excess of applicable reserves has been given to any
inventory with respect to obsolete or discontinued products.
Section 5. Representations and Warranties of Purchaser.
-------------------------------------------------------
Purchaser represents, warrants, covenants and agrees to and with Seller
as follows:
5.1 Organization and Standing of Purchaser. Purchaser is a corporation
--------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has full corporate power and authority to conduct its
business as now being conducted; and is duly qualified to do business in each
jurisdiction in which the nature of the property owned or leased or the nature
of the businesses conducted would require such qualification, specifically
including the State of New Jersey.
5.2 Authority. Purchaser has corporate power to execute and deliver
---------
this Agreement and consummate the transactions contemplated hereby and has taken
(or by the Closing Date will have taken) all action required by law, its
Articles of Incorporation, bylaws or otherwise to authorize such execution and
delivery and the consummation of the transactions contemplated hereby.
5.3 No Finders or Brokers. Neither Purchaser nor any officer or
---------------------
director thereof has engaged any finder or broker in connection with the
transactions contemplated hereunder. Purchaser will indemnify and hold Seller
harmless against claims (and attorneys' fees and expenses in the defense
thereof) of any person, firm or corporation for finder's fees, broker's fees,
brokerage commissions, sales commissions or the like alleged in connection with
the transactions contemplated hereunder due to acts of Purchaser.
5.4 Validity of Agreements. Upon execution and delivery by all parties
----------------------
hereto, this Agreement and all other agreements to be executed by Purchaser in
connection herewith will constitute the valid and binding obligation of
Purchaser and be binding against Purchaser and enforceable in accordance with
their respective terms (except as enforceability may be restricted, limited, or
delayed by bankruptcy, insolvency, moratorium or similar laws affecting or
relating to the enforcement of creditors' rights in general and except as the
enforceability is subject to general principles of equity, regardless of whether
enforceability is considered in a proceeding at law or in equity).
14
Section 6. Conditions Precedent to the Obligations of Seller.
-------------------------------------------------------------
All obligations of Seller which are to be discharged under this
Agreement at the Closing are subject to the performance, at or prior to the
Closing, of all covenants and agreements contained herein which are to be
performed by Purchaser at or prior to the Closing and to the fulfillment at, or
prior to, the Closing, of each of the following conditions (unless expressly
waived in writing by Seller at any time at or prior to the Closing):
6.1 Representations and Warranties True. All of the representations and
-----------------------------------
warranties made by Purchaser contained in Section 5 of this Agreement shall be
true as of the date of this Agreement, shall be deemed to have been made again
at and as of the date of Closing, and shall be true at and as of the date of
Closing in all material respects; Purchaser shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by Purchaser prior to or at the Closing; and Seller shall have
been furnished with a certificate of the President or any Vice President of
Purchaser dated the Closing, certifying to the truth of such representations and
warranties as of the Closing and to the fulfillment of such covenants and
conditions.
6.2 Authority. All action required to be taken by or on the part of
---------
Purchaser to authorize the execution, delivery and performance of this Agreement
by Purchaser and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Purchaser.
6.3 Opinion of Counsel. Seller shall have been furnished with an
------------------
opinion, dated as of the Closing Date, of Xxxxx Xxxxxxx, Esq., general counsel
to Purchaser, to the effect set forth in Exhibit 6.3 attached hereto.
6.4 No Obstructive Proceeding. No action or proceedings shall have been
-------------------------
instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against Seller which
seeks to, or would, render it unlawful as of the Closing to effect the
transactions contemplated hereby, and no such action shall seek damages in a
material amount by reason of the transactions contemplated hereby. Also, no
substantive legal objection to the transactions contemplated by this Agreement
shall have been received from or threatened by any governmental department or
agency.
15
Section 7. Conditions Precedent to the Obligations of Purchaser.
----------------------------------------------------------------
All obligations of Purchaser which are to be discharged under this
Agreement at the Closing are subject to the performance, at or prior to the
Closing, of all covenants and agreements contained herein which are to be
performed by Seller and Shareholder at or prior to the Closing and to the
fulfillment at or prior to the Closing of each of the following conditions
(unless expressly waived in writing by Purchaser at any time at or prior to the
Closing):
7.1 Representations and Warranties True. All of the representations and
-----------------------------------
warranties of Seller and Shareholder contained in Section 4 of this Agreement
shall be true as of the date of this Agreement, shall be deemed to have been
made again at and as of the Closing, and shall be true at and as of the date of
Closing in all material respects; Seller and Shareholder shall have performed or
complied with all covenants and conditions required by this Agreement to be
performed or complied with by Seller or Shareholder prior to or at the Closing;
and Purchaser shall be furnished with a certificate of an officer of Seller and
of Shareholder, dated the Closing, certifying to the truth of such
representations and warranties as of the time of the Closing and to the
fulfillment of such covenants and conditions.
7.2 Authority. All action required to be taken by or on the part of
---------
Seller to authorize the execution, delivery and performance of this Agreement by
Seller and the consummation of the transactions contemplated hereby shall have
been duly and validly taken by the Board of Directors of Seller.
7.3 Opinion of Counsel. Seller and Shareholder shall have delivered to
------------------
Purchaser an opinion, dated as of the Closing Date, of Xxxxxx X. Xxxxxxxx, Esq.,
of Xxxxxxxx, Pomaco & Xxxx, counsel to Seller and Shareholder, in form and
substance to the effect set forth in Exhibit 7.3 attached hereto or as otherwise
acceptable to Purchaser.
7.4 No Obstructive Proceeding. No action or proceedings shall have been
-------------------------
instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against Purchaser or
its affiliates which seeks to, or would, render it unlawful as of the Closing to
effect the asset sale in accordance with the terms hereof, and no such action
shall seek damages in a material amount by reason of the transactions
contemplated hereby. Also, no substantive legal objection to the transactions
contemplated by this Agreement shall have been received from or threatened by
any governmental department or agency.
16
7.5 Consents and Approvals. Each of the parties to any of the Assigned
----------------------
Contracts under which the asset sale contemplated hereby would constitute or
result in a default or acceleration of obligations shall have given such consent
as may be necessary to permit the consummation of the transactions contemplated
hereby without constituting or resulting in a default or acceleration under such
agreement, and any consents required from any public or regulatory agency or
organization having jurisdiction shall have been given.
7.6 Release of Encumbrances. All Encumbrances shall have been released
-----------------------
at or prior to the closing.
7.7 Employment Contract with Xxxxxxx Xxxxxxx. Purchaser shall enter
----------------------------------------
into an employment agreement with Xxxxxxx Xxxxxxx for a term of two months, with
a compensation rate equal to $27,500 per annum.
Section 8. Indemnification.
---------------------------
8.1 Indemnity by Shareholder and Seller. Shareholder and Seller jointly
-----------------------------------
and severally shall indemnify, defend and hold harmless Purchaser and each
affiliate of Purchaser from and against:
(a) all Excluded Liabilities;
(b) any and all losses, damages; costs or deficiencies resulting from
any and all misrepresentations or breaches of warranty or
failures to perform agreements or undertakings by Seller or
Shareholder contained in or made pursuant to this Agreement or in
other agreements executed by Seller or Shareholder in connection
with this Agreement; and
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including, without
limitation, attorneys' fees, interest, penalties and amounts paid
in settlement of any such claim) relating to any of the
foregoing.
Seller and Shareholder shall jointly and severally pay to Purchaser or any
affiliate of Purchaser, as the case may be, all amounts owed to Purchaser
pursuant to subparagraphs (a), (b) and (c) above of this Section 8.1 which, in
the aggregate, exceed $10,000.00, within thirty (30) days after written demand
therefor. In the event that any third person, including, without limitation,
any governmental taxing authority, shall assert any claim or action in excess of
$1,000 against Purchaser or an
17
affiliate of Purchaser which, if successful, might result in a claim for
indemnity hereunder (collectively, an "indemnifiable loss"), Purchaser shall
notify Seller, in writing, of such claim or action; and at Shareholder's and
Seller's option, Shareholder and Seller may, at their sole expense, assume
control over the defense of such claim or action, but in any event Purchaser
(and its affiliate, as the case may be) shall have the right to participate in
the defense of any such claim or action. If, after notice thereof, Shareholder
and Seller shall not assume the defense of, or if after so assuming such defense
they shall fail to continue to defend, any such claim or action, Purchaser (and
its affiliate, as the case may be) may defend any such claim or action and
Purchaser (and its affiliate as the case may be) may then settle or compromise
such claim or action on terms it deems reasonable. Shareholder and Seller shall
promptly satisfy and pay any final judgment rendered with respect to any such
claim or action or any compromise or settlement thereof and shall pay the
reasonable expenses, legal or otherwise of Purchaser (and its affiliate, as the
case may be) in the defense of any such claim or action. If Seller and
Shareholder do not pay any such indemnifiable loss pursuant to any such
judgment, settlement or compromise within thirty (30) days after written demand,
Purchaser may pay the same and set off the amount paid against payments
otherwise due to Shareholder or Seller. If Purchaser (or an affiliate of
Purchaser) suffers an indemnifiable loss directly (not as a result of a third
party claim or action), Purchaser may set off the amount of the same against
payments otherwise due to Shareholder or Seller or demand payment therefor from
Shareholder or Seller.
8.2 Remedies Cumulative. The remedies provided herein shall be
-------------------
cumulative and shall not preclude any party from asserting any other rights or
seeking any other remedies to which such party is entitled by law.
Section 9. Miscellaneous.
-------------------------
9.1 Expenses. All expenses incurred by the parties in connection with
--------
the preparation of this Agreement and the other agreements contemplated hereby
and in connection with the closing of the transactions contemplated hereby,
including, without limitation, attorneys' fees, accounting fees, investment
advisor's fees and disbursements, shall be borne by the respective parties
incurring such expense.
9.2 Notices. All notices, demands and other communications hereunder
-------
shall be written and shall be deemed to have been duly given if delivered in
person or mailed by certified mail, postage prepaid, to the address set forth
below:
18
To Purchaser: Purchaser, Inc.
0000 XxXxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx, President
with a copy to: Xxxxx Xxxxxxx, Esq.
Purchaser General Counsel
0000 Xxxxx Xxxxx
Xxxxx Xxxxxxx, XX 00000
To Seller: Prophecy Health Information
Management, Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
with a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx, Pomaco & Xxxx
000 Xxxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
To Shareholder: Xxxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
with a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx, Pomaco & Xxxx
000 Xxxxx Xxxxxx
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
or to such other address as Purchaser or Seller may designate by written notice
to the other. Notices delivered in person shall be deemed delivered on the date
of delivery and notices mailed, as aforesaid, shall be deemed delivered forty-
eight (48) hours after the date mailed. Rejection or other refusal to accept or
inability to deliver because of a changed address of which no notice was given
shall be deemed to be a receipt of the notice, request or other communication.
Any notice, request or other communication required or permitted to be given by
any party may be given by such party's legal counsel.
9.3 Form of Transaction. If after the execution hereof, Purchaser
-------------------
determines that the sale of the Assets can be better achieved through a
different form of transaction without economic injury to Seller or Shareholder,
or delay or the consummation of the transaction, Seller and Shareholder shall
cooperate in revising the structure of the transaction to a stock sale or merger
or similar transaction and shall negotiate in good faith to so amend this
Agreement; provided, that Purchaser shall
19
reimburse Seller and Shareholder at Closing for all reasonable additional
expenses, including attorneys' fees, incurred by Seller and Shareholder as a
result of such change in form.
9.4 Entire Agreement. This Agreement and the Exhibits, and the other
----------------
agreements, schedules and documents delivered pursuant hereto, constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior and contemporaneous agreements, understandings,
letters of intent negotiations and discussions, whether written or oral, of the
parties, and there are no representations, warranties or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the parties to be bound
thereby.
9.5 Governing Law: Arbitration. This Agreement shall be construed and
--------------------------
interpreted under the laws of the State of New Jersey, exclusive of the
principles of conflicts of laws. The parties agree that all disputes concerning
this Agreement shall be submitted to binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association and the
provisions contained herein. The arbitration shall be conducted in Trenton, New
Jersey, by one arbitrator. The party initiating arbitration shall give the
other notice of the matter in dispute. If the parties fail to agree upon an
arbitrator within ten days after notice of initiation of the arbitration is
given, the American Arbitration Association shall select the arbitrator. All
determinations and the final decision of the arbitrator shall be made in
writing. The fees and expenses of the arbitrator shall be awarded by the
arbitrator in his discretion as part of the award. The arbitrator's award shall
be binding on the parties hereto and may be entered in any court of competent
jurisdiction. The parties reserve the right to seek a judicial temporary
restraining order, preliminary injunction, or other similar short term equitable
relief prior to the appointment of the arbitrator. The arbitrator will have the
right to make a final determination of the parties' rights including, without
limitation, whether to make permanent, modify or dissolve the judicial order.
9.6 Section and Exhibit Headings. The Section and Exhibit headings are
----------------------------
for reference only and shall not limit or control the meaning of any provisions
of this Agreement.
9.7 Waiver. No delay or omission on the part of any party hereto in
------
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement.
20
9.8 Nature and Survival of Representations. All statements contained in
--------------------------------------
any certificate delivered by or on behalf of a party to this Agreement pursuant
hereto in connection with the transactions contemplated hereby shall be deemed
to be representations and warranties made by such party hereunder. The
covenants, representations and warranties made by the parties each to the other
in this Agreement or pursuant hereto shall survive for two (2) years following
the Closing.
9.9 Exhibits. All Exhibits, schedules and documents referred to in or
--------
attached to this Agreement are integral parts of this Agreement as if fully set
forth herein and all statements appearing therein shall be deemed to be
representations. All items disclosed hereunder shall be deemed disclosed only
in connection with the specific representation to which they are explicitly
referenced.
9.10 DELETED
9.11 Binding on Successors and Assigns. Subject to Section 9.10, this
---------------------------------
Agreement shall inure to the benefit of and bind the respective heirs,
administrators, successors and assigns of the parties hereto. Nothing expressed
or referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or permitted assigns any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein, it being the
intention of the parties to this Agreement that this Agreement shall be for the
sole and exclusive benefit of such parties or such successors and assigns and
not for the benefit of any other person.
9.12 Amendments. This Agreement may be amended, but only in writing,
----------
signed by the parties hereto.
9.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall comprise one and the same instrument.
9.14 Nonarbitral Attorneys' Fees. In the event that a suit, action, or
---------------------------
other proceeding of any nature whatsoever (other than arbitration), including,
without limitation, any proceeding under the U.S. Bankruptcy Code and involving
issues peculiar to federal bankruptcy law, any action seeking a declaration of
rights or any action for rescission, is instituted to interpret or enforce this
Agreement or any provision of this Agreement, the prevailing party shall be
entitled to recover from the losing party the prevailing party's reasonable
attorneys', paralegals', accountants', and other experts' professional fees and
all other fees, costs, and expenses actually incurred and reasonably
21
necessary in connection therewith, as determined by the judge or arbitrator at
trial or other proceeding, or on any appeal or review, in addition to all other
amounts provided by law.
9.15 Rules of Construction. All references herein to the singular shall
---------------------
include the plural, and vice versa, and all references herein to the neuter
shall include the masculine or feminine, as the case may be, and vice versa.
When general words or terms are used herein followed by the word "including" (or
another form of the word "include") and words of particular and specific
meaning, the general words shall be construed in their widest extent, and shall
not be limited to persons or things of the same general kind or class as those
specifically mentioned in the words of particular and specific meaning. All
parties have participated in the drafting of this Agreement. No provision of
this Agreement shall be construed against or interpreted to the disadvantage of
a party by reason of such party having or being deemed to have drafted,
structured or dictated such provisions. Time is of the essence of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PROPHECY TRANSCRIPTION
SERVICES, INC., a New Jersey
corporation ("Purchaser")
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Title: President
--------------------
/s/ Xxxxxx X. Xxxxxxx (SEAL)
----------------------------
XXXXXX X. XXXXXXX (" Shareholder")
PROPHECY HEALTH INFORMATION
MANAGEMENT, INC., a New
Jersey corporation ("Seller")
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Title: President
---------------------------
22
