Exhibit 10.2
MEDICAL BILLING BUSINESS ASSET PURCHASE AGREEMENT
THIS MEDICAL BILLING BUSINESS ASSET PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of January 1, 1998 by and among
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION, a Nevada corporation
("NMFS"); XXXXXX XXXXXXXX, a resident of the State of New York
("Shareholder"); and SHORELINE MEDICAL BILLING SYSTEMS, INC., a New York
corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns and operates a medical billing services business
with its principal business office located at 000 Xxxxx 00, Xxxxxxx, Xxx Xxxx
00000 (the "Medical Billing Business");
WHEREAS, Shareholder owns and operates an accounting and billing
business with its principal business office located at 000 Xxxxx 00, Xxxxxxx,
Xxx Xxxx 00000 (the "Accounting Business"), which together with the Medical
Billing Business are sometimes referred to herein as the "Businesses";
WHEREAS, Shareholder is the sole shareholder of Seller;
WHEREAS, it is Shareholder's intention to cause the sale of Seller's
assets in order to liquidate Shareholder's investment in said assets;
WHEREAS, NMFS desires to buy, and Seller desires to sell, substantially
all of the assets owned by Seller and used in the operation of the Medical
Billing Business, upon the terms and conditions hereinafter set forth;
WHEREAS, to induce NMFS to perform under this Agreement and as a
condition thereto, Shareholder has agreed to execute a noncompetition
agreement dated as of the even date hereof in favor of NMFS ("Noncompetition
Agreement");
WHEREAS, to induce NMFS and Seller to perform under this Agreement,
Shareholder and NMFS have agreed to execute an employment agreement dated as
of the even date hereof ("Employment Agreement"); and
WHEREAS, in conjunction with the purchase of the assets of Seller
pursuant to this Agreement and as a condition hereto, NMFS desires to acquire
the assets of the accounting business owned and operated by Shareholder under
the tradename "Maybruch & Co., CPA's", the successor of Shareholder's
interest in the partnership "Maybruch & Xxxxxxxxx", pursuant to that certain
Accounting Business Asset Purchase Agreement (the "Accounting Business Asset
Purchase Agreement") dated as of the even date hereof;
WHEREAS, to induce Seller to enter into this Agreement, NMFS and
Shareholder have agreed under certain circumstances Shareholder may reacquire
the assets of Seller conveyed under this Agreement and Shareholder may
reacquire the assets of Shareholder conveyed under the Accounting Business
Asset Purchase Agreement, and in furtherance of that agreement Shareholder,
Seller and NMFS have executed a Buy-Back Agreement dated as of the even date
hereof (the "Buy-Back 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 NMFS, and NMFS agrees to buy and acquire as
hereinafter provided, at the "Closing" (as hereinafter defined), all assets
of Seller used in the Medical Billing Business, tangible or intangible, real
or personal, including, without limitation, the following described assets
owned and used in the Medical Billing Business to the extent that they exist:
(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) all accounts receivable and all unbilled amounts for services of
Seller as of midnight of the day before the Closing Date, which shall
be consistent with the aged accounts receivable listing as of October
31, 1997 set forth at Exhibit 1.1(b) attached hereto except for
additions and collections in the ordinary course of business;
(c) all claims and rights accruing on and after January 1, 1998 under the
contracts of Seller listed in Exhibit 1.1(c) (the "Assigned
Contracts");
(d) all business records, all customer lists, and all personnel lists
(whether past or present, whether stored in computer memory or on hard
copy);
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(e) all sales literature, promotional material and other general files and
printed forms used in the Medical Billing Business;
(f) all goodwill, trademarks, services marks and trade names used in the
Medical Billing Business;
(g) all rights of Seller under licenses and other governmental approvals
or permits (to the extent transferable) used in the Medical Billing
Business;
(h) all telephone numbers and telephone and yellow pages directory
listings;
(i) all prepaid expenses and deposits of Seller;
(j) all inventory and supplies of Seller;
(k) all rights to leasehold improvements and fixtures under the existing
sublease of Seller;
(l) all software used in the Medical Billing Business;
(m) all payroll records for all employees of Seller;
(n) all information and documentation relating to the names, addresses and
telephone numbers of Seller's referral sources;
(o) all records and lists of third party payor and case manager contacts
including names, addresses and telephone numbers;
(p) all records relating to vendors dealing with Seller; and
(q) all financial records of Seller.
Nothing herein shall be construed as prohibiting Seller from retaining copies
of any documents or computer software or records to be conveyed hereunder.
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 Medical Billing Business as reflected in the 1997
Financial Statement referred to in Section 4.3 hereof and all properties and
assets acquired by Seller after October 31, 1997, except those properties and
assets
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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
NMFS, shall not constitute "Assets," and shall be defined herein as the
"Excluded Assets":
(a) the minutebooks and stock ledger books of Seller;
(b) all cash of Seller as of midnight the day before the Closing Date;
(c) all claims and rights accruing prior to January 1, 1998 under the
Assigned Contracts;
(c) motor vehicles;
(d) any land or buildings owned by Seller;
(e) all pension plan assets of Seller;
(f) professional licenses; and
(g) 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 and as otherwise set
forth herein, NMFS is assuming no obligations, debts or liabilities of Seller
or Shareholder incurred prior to the Closing Date, including, without
limitation, the following described debts, obligations or liabilities to the
extent they may exist:
(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 material breach of any of the representations or
warranties made by Seller or Shareholder in Section 4 of 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,
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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 incurred
prior to the Closing Date;
(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 prior to Closing;
(h) liabilities and obligations of Seller or Shareholder for any breach or
violation, as of the Closing, of any contracts of Seller with third
parties, including, without limitation, the Assigned Contracts;
(i) DELETED
(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 or any overpayments made by such payor
in connection with any claims processed by Seller;
(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 or accrued
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".
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In addition, NMFS will pay any sales or similar tax (or any interest or
penalties with respect thereto) which NMFS may be required to pay or become
liable for as a result of the consummation of the transactions and the sale
of the Assets contemplated hereby, including without limitation sales tax on
all equipment, business machines, computers, furniture, furnishings and other
tangible personal property.
Notwithstanding the foregoing, NMFS 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 NMFS
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, and encumbrances being referred to
individually as an "Encumbrance" and collectively as "Encumbrances").
Section 2. Amount, Payment and Allocation of Consideration.
2.1 Amount and Payment. NMFS shall deliver to the Seller ONE HUNDRED
THOUSAND U.S. DOLLARS ($100,000.00) at the Closing (as defined below) in
consideration for the Assets.
2.2 Allocation. The Consideration shall be allocated for tax purposes
as provided in Exhibit 2.2 hereof. Each party will timely file IRS Form 8594
as required under Section 1060 of the Internal Revenue Code of 1986, as
amended, 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 6, 1998 (the "Closing Date") at 10:00 a.m., Suffern, New York time at
000 Xxxxx 00, Xxxxxxx, Xxx Xxxx 00000, or at such other place and time as may
be deemed appropriate by the parties hereto, at which time in addition to the
NMFS stock to be delivered pursuant to Section 2.1(iii) hereof, the cash
consideration as stated in Section 2.1(i) and 2.1(ii) shall be delivered in
immediately available funds pursuant to Seller's further direction. For
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purposes of this Agreement and for accounting purposes, the "Closing Date"
shall be effective as of January 1, 1998. 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 Medical Billing 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.
3.2 Action by NMFS. Upon the terms and subject to the conditions
herein contained, at the Closing on the Closing Date, NMFS will deliver to
Seller and Shareholder the following:
(i) The certificate referred to in Section 6.1 hereof;
(ii) The opinion of counsel for NMFS referred to in Section 6.3 hereof;
(iii) Resolutions of NMFS, certified by an appropriate officer,
authorizing the execution, delivery and performance of this
Agreement and the other agreements to be delivered by NMFS 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 NMFS 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 and to be
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effective on the Closing Date, the parties will, as appropriate, execute and
deliver to each other the following:
(i) The "Noncompetition Agreement";
(ii) The "Employment Agreement";
(iii) The "Buy-Back Agreement"; and
(iv) The "Accounting Business Asset Purchase Agreement".
3.5 Further Acts and Assurances. From time to time and at any time, at
NMFS'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 and convey to
NMFS 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 NMFS may conduct of Seller's financial statements, which audit (if any)
shall be at NMFS's sole expense.
3.6 Audit. NMFS shall have the right to cause its accounting firm to
audit the financial statements of Seller limited to the current year and the
two years prior to the current year at NMFS's expense solely for the purpose
of complying with SEC financial reporting regulations. Seller shall
cooperate reasonably in connection with any such audit or audits and will
execute management letters and other documents reasonably requested in
connection with any such audit or audits or any equity offering by NMFS.
Section 4. Representations and Warranties of Seller and Shareholder.
Seller and Shareholder hereby jointly and severally represent, warrant,
covenant and agree to and with NMFS 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 York. The nature of Seller's business as now conducted and the
character or location of its
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properties do not require qualification by it to do business in any other
jurisdiction. Seller has the corporate authority to own its property and to
carry on the Medical Billing Business as now being conducted.
4.2 Insider Transactions. Except as disclosed in Exhibit 4.2 hereto,
Seller is not, directly or indirectly, a party to any contract, lease or
commitment with any officer or director of Seller or any affiliate of any
such director or officer. As used in this Section 4.2, the term "affiliate"
shall mean any member of the immediate family of such officer or director or
any corporation, partnership, trust or other entity in which such officer or
director has a substantial interest or is a director, officer, partner or
trustee.
4.3 Accuracy of Financial Statements. Seller has delivered to NMFS as
Exhibit 4.3 a copy of the financial statements of Seller for the years ended
December 31, 1995 and 1996 and a balance sheet and an income statement for
the ten-month period ending October 31, 1997 (the "Financial Statements").
The balance sheet and income statement for the ten-month period ending
October 31, 1997 are referred to hereinafter as the "1997 Financial
Statement". The Financial Statements are complete and accurate and fairly
present 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 1997 Financial Statement or any liability
or obligation in connection with any transaction or state of affairs entered
into or existing on or before the date thereof, which is not fully reflected
on the 1997 Financial Statement or otherwise disclosed to NMFS in the Exhibit
4.10 hereto.
4.4 Properties of Seller.
(i) The 1997 Financial Statement reflects all of the properties
presently owned by Seller and used in the Medical Billing Business.
(ii) Exhibit 4.4(ii) attached hereto are true and accurate copies
of all real or personal property which is currently used by Seller in the
Medical Billing Business and which either is not owned by Seller or is leased
or rented by Seller.
4.5 Taxes and Tax Returns. To the best of Shareholder's knowledge,
Seller has filed all federal, state and local tax returns and reports of
Seller which have become due to be filed
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(including, without limitation, those due in respect of its properties,
income, licenses, sales and payrolls), and such returns are complete and
accurate in all material respects. A copy of Seller's most recent federal
information 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, to the best of
Shareholder's knowledge, (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 the 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 with third parties, other
than the Assigned Contracts. Except as set forth in 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.
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 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
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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 not the 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 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 1997 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 October 31, 1997 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 material 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 October 31, 1997, to the best of
Shareholder's knowledge, Seller has not:
(i) incurred or suffered any obligations or liabilities (absolute or
contingent) except current liabilities incurred in the ordinary
course of business none of which exceed $5,000 to any entity and
all of which together do not exceed $25,000;
(ii) declared or made (or became obligated for) any payment or
distribution (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;
(iii) 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
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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 Medical Billing Business of Seller;
(iv) sold, assigned or transferred or agreed to sell, assign or transfer
any of its tangible assets or cancelled any debts or claims, except
in each case in the ordinary course of business;
(v) 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;
(vi) suffered any extraordinary loss or knowingly waived or permitted to
lapse any right of substantial value;
(vii) 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, except in the ordinary course of business;
(viii) failed to comply in any material respect with any applicable
local, state or federal law, rule or regulation to the material
detriment of Seller; or
(ix) suffered any event or condition of any character, materially and
adversely affecting the Medical Billing Business, properties or
prospects of Seller or the Medical Billing 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 authority 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 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. Exhibit 4.15 consists of true and accurate copies of
all governmental or other licenses and permits held by (i) Seller relating to
the operation of the Medical Billing Business (including, as to each such
license or permit, the name of the owner of the license or permit, the
issuing authority, a description of the subject matter of the license or
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permit, and the termination date, if any, or notice requirement with respect
to termination and renewal options) and (ii) Shareholder and all other
personnel in connection with their services for the Medical Billing Business.
Except for the licenses and permits held by Seller and Shareholder and
described on Exhibit 4.15, there are no other licenses or permits required
for Seller and Shareholder to operate the Medical Billing Business. To the
best of Shareholder's knowledge, all such licenses and permits are in full
force and effect. To Shareholder's knowledge, the validity, continuation and
effectiveness of all of the licenses and permits is in no way affected by the
transfer of such licenses under this Agreement, or, if any would be affected,
Seller has delivered to NMFS, to the transferee or to the Medical Billing
Business an appropriate consent to such transfer. Seller is not aware of any
proceeding or investigation by any governmental agency relating to the
Medical Billing Business.
4.16 No Finders or Brokers. Neither Shareolder, 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 NMFS 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 Seller's engaging any finder or broker in connection with the transactions
contemplated herewith.
4.17 Disclosure. To the best of Shareholder's knowledge, no material
representation or warranty by Seller or Shareholder in this Agreement and no
material statement pertaining to Seller in this Agreement or any document,
exhibit or certificate furnished or to be furnished to NMFS pursuant hereto
will contain any materially 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 not described herein that Seller
or Shareholder knows (and which are not known to NMFS) which would materially
adversely affect the future operations of the Medical Billing Business or the
use of the Assets in the conduct of a similar business at the same location
by NMFS.
4.18 Validity of Agreements. To the best of Shareholder's knowledge,
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 and Shareholder in connection herewith, will constitute the valid and
binding obligation of Seller or Shareholder, as the case may be, and be
binding against it and enforceable in accordance with their respective terms
(except as enforceability may be restricted,
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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 1997 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.
4.22 Condition of Personal Property. All tangible personal property,
equipment, fixtures and inventories included within the Assets or required to
be used in the ordinary course of Seller's business are sold in "as is"
condition. 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 NMFS.
NMFS represents, warrants, covenants and agrees to and with Seller as
follows:
5.1 Organization and Standing of NMFS. NMFS is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada 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 York.
5.2 Authority. NMFS 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
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contemplated hereby, including, without limitation, execution and delivery of
the Promissory Note.
5.3 No Finders or Brokers. Neither NMFS nor any officer or director
thereof has engaged any finder or broker in connection with the transactions
contemplated hereunder. NMFS will indemnify and hold Seller and Shareholder
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 NMFS.
5.4 Validity of Agreements. Upon execution and delivery by all parties
hereto, this Agreement and all other agreements to be executed by NMFS in
connection herewith will constitute the valid and binding obligation of NMFS
and be binding against NMFS 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).
5.5 DELETED
5.6 Bulk Sales. NMFS hereby waives compliance by Seller with any bulk
sales acts and other laws having a similar effect, which may apply to the
transactions comtemplated by this Agreement.
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 NMFS 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 NMFS 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
15
the date of Closing in all material respects; NMFS shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by NMFS prior to or at the Closing; and Seller
shall have been furnished with a certificate of the President or any Vice
President of NMFS 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
NMFS to authorize the execution, delivery and performance of this Agreement
by NMFS and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of NMFS.
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 NMFS, 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.
Section 7. Conditions Precedent to the Obligations of NMFS.
All obligations of NMFS 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 NMFS 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
16
required by this Agreement to be performed or complied with by Seller and
Shareholder prior to or at the Closing; and NMFS 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
NMFS an opinion, dated as of the Closing Date, of Xxxxxxxx & Xxxxxxxxxxx,
LLP, 000 Xxxxx Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, counsel to Seller and
Shareholder, in form and substance to the effect set forth in Exhibit 7.3
attached hereto.
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 NMFS
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.
7.5 Consents and Approvals. 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 Licenses. All applications for the transfer of all licenses,
permits and provider numbers and agreements required in order to continue to
operate the Medical Billing Business shall have been properly filed and NMFS
shall be satisfied that all such licenses, permits and provider numbers and
agreements shall in due course be properly transferred to NMFS or the
designee thereof, effective as of the Closing.
Section 8. Indemnification.
8.1 Indemnity by Shareholder and Seller Shareholder and Seller jointly
and severally shall indemnify, defend and hold harmless NMFS from and against:
17
(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.
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 NMFS which, if successful, might result in a claim for
indemnity hereunder (collectively, an "indemnifiable loss"), NMFS shall
notify Seller, in writing, of such claim or action, and at Shareholder's and
Seller's option, Seller may, at their sole expense, assume control over the
defense of such claim or action, but in any event NMFS, at its sole cost,
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, NMFS may defend any such claim
or action and NMFS may then settle or compromise such claim or action on
terms that are 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, in the event Seller did not assume
control of the defense of such claim or action or failed to continue to
defend such claim or action, shall pay the reasonable legal expenses of NMFS
in the defense of any such claim or action. Seller and Shareholder shall
jointly and severally pay to NMFS all amounts owed to NMFS pursuant to this
Section 8.1 within thirty (30) days after written demand therefor. If Seller
and Shareholder do not pay any such indemnifiable loss pursuant to Section
8.1(a) hereof within thirty (30) days after written demand, NMFS may pay the
same and set off the amount paid against payments otherwise due to
Shareholder or to Seller under this Agreement or under the Employment
Agreement.
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.
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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 (i) sent by
fascimile transmission and mailed by regular mail, (ii) delivered in person,
or (iii) sent by nationally recognized overnight carrier prepaid, to the
address set forth below:
To NMFS: National Medical Financial
Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, M.D.
Fax: (000) 000-0000
with a copy to: Xxxxx X. Xxxxxxx & Associates, P.C.
X.X. Xxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
To Seller: Shoreline Medical Billing
Systems, Inc.
000 Xxxxx 00
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
To Shareholder: Xxxxxx Xxxxxxxx
000 Xxxxx 00
Xxxxxxx, XX 00000
Fax: (000) 000-0000
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with a copy to: Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
or to such other address as NMFS, Seller or Shareholder may designate by
written notice to the other. Notices delivered in person or by fascimile
transmission shall be deemed delivered on the date of delivery or
transmission respectively. Notices sent by nationally recognized overnight
carrier shall be deemed delivered forty-eight (48) hours after the date sent.
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 DELETED
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 York. 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 Westchester County, New York, 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,
20
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.
9.8 Nature and Survival of Representations. All statements contained
in the certificates delivered pursuant to Sections 6.1 and 7.1 hereof by or
on behalf of each party to this Agreement shall be deemed to be
representations and warranties made by such party hereunder. The covenants,
representations and warranties made by the parties in Sections 4 and 5 hereof
(and in the Exhibits incorporated by reference in Sections 4 and 5 hereto)
and the certificates delivered pursuant to Sections 6.1 and 7.1 hereof shall
survive the Closing for two (2) years.
9.9 Exhibits. All Exhibits, schedules and documents referred to in or
attached to this Agreement are integral parts of this Agreement to the extent
they are referenced to in the representations of Section 4 and 5 hereof as if
fully set forth herein and all statements appearing therein shall be deemed
to be representations. All items disclosed in the Exhibits, schedules and
documents incorporated hereto shall be deemed disclosed only for purposes of
the specific section which incorporates them by reference.
9.10 Assignment. Except as provided below, neither party shall assign
this Agreement without first obtaining the written consent of the other
party. Notwithstanding the foregoing to the contrary, NMFS shall have the
right, without any other party's consent, to assign all or any portion of
this Agreement to any entity controlled by, controlling or under common
control with, NMFS, and/or to any lender providing financing or refinancing
funds or credit facilities to NMFS or its affiliates, and/or to any
transferee of any of the stock, assets or business of NMFS; provided no such
assignment shall release NMFS from any liability hereunder.
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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 or entity 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 necessary in connection therewith, as
determined by the judge 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
22
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.
9.16 No Other Party. Seller and Shareholder acknowledge and agree that
the only other party to this Agreement is NMFS and that Xxxxxxx X. Xxxxxxx,
M.D. individually is not a party, in any capacity, to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION, a
Nevada corporation ("NMFS")
By:
------------------------------------
Title:
------------------------------
SHORELINE MEDICAL BILLING SYSTEMS, INC., a New
York corporation ("Seller")
By:
------------------------------------
Xxxxxx Xxxxxxxx, President
--------------------------------- (SEAL)
XXXXXX XXXXXXXX ("Shareholder")
23