Exhibit 10.14
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of August 1, 1997 by
and among Medical Billing Services of Arizona, Inc., a corporation organized
under the laws of the State of Delaware ("MBS-NV"), National Medical
Financial Services Corporation, a Nevada corporation ("NMFSC"), and Vacovec,
Mayotte & Singer (the "Escrow Agent").
Whereas, MBS-NV and NMFSC are entering into a Contract Rights
Purchase Agreement of even date herewith (the "Agreement")
simultaneously with the execution and delivery of this Escrow
Agreement;
Whereas, the Agreement provides that NMFSC may issue and deliver
to MBS-NV on or before August 15, 1997 a stock certificate representing
384,000 shares of NMFSC Common Stock, par value $.01 per share, subject
to equitable adjustment for any stock split, stock dividend, reverse
stock split or other capital reorganization with respect to such Common
Stock between the date of the Agreement and the date on which such
shares are issued (the "Shares "); and
Whereas, the Agreement provides that MBS-NV will deliver
immediately all stock certificates representing the Shares to the
Escrow Agent to be held by the Escrow Agent in accordance with the
terms of this Escrow Agreement.
Now, therefore, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Deposit of the Shares. Upon delivery by NMFSC to MBS-NV of a
stock certificate or certificates representing the Shares, MBS-NV will
immediately deliver to the Escrow Agent all stock certificates
representing the Shares, duly indorsed in blank or with duly signed
blank stock transfer powers attached, in either case with such
assurance that MBS-NV's indorsement is genuine and effective as NMFSC
may require pursuant to Section 2.2 of the Agreement. The Escrow Agent
shall promptly thereafter give notice to NMFSC confirming the deposit
hereunder of such stock certificate or certificates, specifying the
certificate number(s) and the aggregate number of Shares represented by
such certificate or certificates. If MBS-NV does not deposit any stock
certificates with the Escrow Agent hereunder on or before September 15,
1997, this Escrow Agreement shall automatically terminate.
2. Acceptance of the Stock Certificates. The Escrow Agent shall
hold the stock certificates (and any accompanying stock transfer
powers) in escrow hereunder subject to the terms and conditions of this
Escrow Agreement. The Escrow Agent shall not transfer or dispose of
the Shares except in accordance with the provisions of this Escrow
Agreement.
3. Delivery and Deposit of Additional Shares. MBS-NV hereby
irrevocably authorizes NMFSC to deliver to the Escrow Agent, and MBS-NV
covenants that it will promptly deliver to the Escrow Agent if MBS-NV
shall first receive the same, any certificate or certificates
representing additional or other shares of capital stock distributed
on, in respect of or in substitution for the Shares in the event of any
stock dividend, stock split, reverse stock split or other capital
reorganization with respect to Shares held in escrow hereunder. Such
additional or other stock certificates shall be held in escrow under
the terms and conditions set forth in this Escrow Agreement as if they
were originally deposited with the Escrow Agent by MBS-NV at the time
that MBS-NV delivered the stock certificate or certificates
representing the Shares.
4. Voting. The right to vote the Shares shall remain in MBS-NV
unless and until such Shares are transferred to NMFSC in accordance
with the terms of this Escrow Agreement.
5. Dividends and Distributions. MBS-NV hereby irrevocably
authorizes NMFSC to deliver to the Escrow Agent, and MBS-NV covenants
that it will promptly deliver to the Escrow Agent if MBS-NV shall first
receive the same, to be held hereunder all dividends and other
distributions on or with respect to Shares held in escrow hereunder.
6. Disposition of the Shares.
(a) On or before October 31, 1998, NMFSC will determine, and
will give notice to MBS-NV and the Escrow Agent of its determination
of, the amount of fees (net of refunds and net of a reasonable reserve
for future refunds as determined by NMFSC in good faith) collected by
or for the account of NMFSC from October 1, 1997 through
September 30, 1998 pursuant to MBS-NV's assignment of the Contract
Rights (as defined in the Agreement) to NMFSC (the "Annual Revenues").
If NMFSC notifies the Escrow Agent that the Annual Revenues were
US$1,800,000 or more, the Escrow Agent shall promptly deliver to MBS-NV
all of the Shares and all other property then held by the Escrow Agent
hereunder (and if the Escrow Agent shall have caused any such other
property to be registered in its name, the Escrow Agent shall promptly
transfer record ownership to MBS-NV). If NMFSC notifies the Escrow
Agent that the Annual Revenues were US$850,000 or less, the Escrow
Agent shall, subject to the provisions of Section 6(b), promptly
deliver to NMFSC all of the Shares, with a stock transfer power or
other indorsement assigning the Shares to NMFSC duly completed by the
Escrow Agent as attorney-in-fact for MBS-NV pursuant to Section 7, and
all other property then held by the Escrow Agent hereunder (and if the
Escrow Agent shall have caused any such other property to be registered
in its name, the Escrow Agent shall promptly transfer record ownership
to NMFSC). If NMFSC notifies the Escrow Agent that the Annual Revenues
were less than US$1,800,000 but more than US$850,000, NMFSC shall
include in its notice to the Escrow Agent (and MBS-NV) a statement of
the number of Earned Shares (as defined below). The Escrow Agent shall
promptly thereafter deliver to MBS-NV (i) stock
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certificates representing a number of Shares equal to the number of Earned
Shares and (ii) all dividends or other distributions distributed on, in
respect of or in substitution for the Earned Shares (and all earnings on such
distributions) held by the Escrow Agent hereunder; and the Escrow Agent
shall, subject to the provisions of Section 6(b), promptly deliver to NMFSC
stock certificates representing all Shares other than the Earned Shares (the
"Unearned Shares") and all dividends or other distributions distributed on,
in respect of or in substitution for the Unearned Shares (and all earnings on
such distributions) held by the Escrow Agent hereunder; in each case with
appropriate transfers of record ownership as provided in the second and third
preceding sentences. The number of Earned Shares shall be the number of
whole Shares determined by dividing the remainder equal to (a) the remainder
of (i) the Annual Revenues as determined by NMFSC minus (ii) US$850,000 minus
(b) the remainder of (i) US$350,000 minus (ii) the amount of the Foregone
Principal (as defined in the Agreement), if any, by the stipulated
representative closing price of NMFSC Common Stock, which is hereby
stipulated to be US$1.5625 (the "Closing Price"); provided that the Closing
Price shall be equitably adjusted in the event of any stock split, stock
dividend, reverse stock split or other capital reorganization with respect to
NMFSC Common Stock between the date of the Agreement and the date on which
the Escrow Agent delivers the Earned Shares to MBS-NV. For purposes of this
Section 6(a), earnings on property held by the Escrow Agent hereunder shall
be attributed to distributions on Earned Shares and Unearned Shares,
respectively, in the same ratio as Earned Shares bear to Unearned Shares.
(b) Notwithstanding any other provision of this Escrow
Agreement, if MBS-NV gives notice to the Escrow Agent within thirty
(30) days of the date on which NMFSC gives to the Escrow Agent notice
of its determination of the amount of the Annual Revenues and/or the
number of Earned Shares to the effect that MBS-NV disputes NMFSC's
determination thereof, the Escrow Agent shall promptly send a copy of
such notice to NMFSC and the Escrow Agent shall not deliver any
property held by it hereunder to NMFSC until directed in writing to do
so by MBS-NV or until ordered to do so by final judgment not subject to
further appeal of a court of competent jurisdiction. The Escrow Agent
shall have no duty to determine the accuracy of any determination or
notice furnished to it pursuant to this Agreement.
(c) For purposes of Section 6(a) all compensation collected
by NMFSC or any subsidiary or other affiliate of NMFSC for (i)
providing any billing, collection or accounts receivable management
service to any party to any of the Contracts (as defined in the
Agreement) or any affiliate of any such party or (ii) conveying any
interest in any of the Contract Rights shall be deemed fees collected
by or for the account of NMFSC pursuant to MBS-NV's assignment of the
Contract Rights.
7. Power of Attorney. MBS-NV does hereby revocably constitute
and appoint the Escrow Agent as its attorney-in-fact to execute all
stock transfer powers, assignments and other documents necessary or
appropriate to effect any transfer or delivery of the
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Shares, or portion thereof, or any other property held by the Escrow
Agent hereunder, in accordance with this Agreement.
8. Termination. Unless earlier terminated as provided in
Section 1 of this Agreement or as hereinafter provided, this Escrow
Agreement shall expire on the first date after September 15, 1997 on
which no Shares or other property are held by the Escrow Agent
hereunder. This Escrow Agreement may be terminated prior to such
expiration date (a) by joint written notice by MBS-NV and NMFSC to the
Escrow Agent, in which case the Escrow Agent shall deliver all property
held by it hereunder in accordance with the joint written instructions
of MBS-NV and NMFSC, or (b) by the Escrow Agent, upon thirty (30) days
prior written notice to MBS-NV and NMFSC, whereupon MBS-NV and NMFSC
will use their best efforts to agree upon a successor Escrow Agent
before the effective date of the termination, in which case the Escrow
Agent shall deliver all property held by it hereunder to the successor
Escrow Agent jointly designated by MBS-NV and NMFSC, or, if MBS-NV and
NMFSC fail to agree upon a successor Escrow Agent within thirty (30)
days after such notice, the Escrow Agent shall be entitled to appoint
its successor and deliver all property held by it hereunder to such
successor.
9. Fees and Expenses. As compensation for its services
hereunder, the Escrow Agent shall receive a fee (the "Escrow Fee") of
$300.00, payable by NMFSC, upon execution of this Escrow Agreement.
Thereafter the Escrow Agent shall be jointly and severally indemnified
by MBS-NV and NMFSC (i) against any out-of-pocket expenses incurred by
the Escrow Agent and (ii) for services provided by its partners and
employees at their usual rates in performing its duties hereunder, and
the party (i.e., MBS-NV or NMFSC) making any such indemnification
payment or any payment pursuant to Section 16 shall be entitled to
contribution of 50% of such payment from the other party.
10. Limitation of Liability. The Escrow Agent shall incur no
liability in respect of any action taken or suffered by it in reliance
upon any notice, direction, instruction, consent, statement or other
paper or document believed by it to be genuine and duly authorized nor
for anything except its own willful misconduct or gross negligence. In
all questions arising out of this Escrow Agreement, the Escrow Agent
may rely on the advice of counsel (including partners and employees of
the Escrow Agent), and for anything done, omitted or suffered in good
faith by the Escrow Agent based on such advice the Escrow Agent shall
not he liable to anyone. The Escrow Agent shall not be required to
take any action hereunder involving any expense unless the payment of
such expense shall be made or provided for in a manner satisfactory to
it. The duties and obligations of the Escrow Agent hereunder shall be
governed solely by the provisions of this Escrow Agreement, and the
Escrow Agent shall have no duties other than the duties expressly
imposed herein and shall not be required to take any action other then
in accordance with the terms hereof.
11. Notices. All notices, requests, demands, and other
communications hereunder ("Notices") shall be in writing and shall be
deemed to have been duly given if
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delivered, mailed in the country in which the addressee is located
(registered or certified mail, postage prepaid, return receipt requested),
sent via an internationally recognized courier service or sent by cable,
telex, facsimile transmission or other electronic means of written
communication and confirmed in a writing sent by the close of business on the
next following business day via an internationally recognized courier service
as follows:
If to the Escrow Agent:
Vacovec, Mayotte & Singer
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
If to MBS-NV:
Medical Billing Services of Arizona, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: President
Copy to:
Xxx X. Xxxxx, Esquire
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
If to NMFSC:
National Medical Financial Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxx 00000
Attention: President
or to such other address as any party may have furnished to the others
in writing in accordance herewith, except that Notices of change of
address shall only be effective upon receipt.
12. Governing Law. This Escrow Agreement shall be governed by
and construed in accordance with the law of The Commonwealth of
Massachusetts.
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13. Benefit. This Escrow Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors and
assigns of the parties hereto.
14. Scope of Agreement. This document constitutes the entire
agreement among the parties concerning its subject matter, and no
representation, condition, understanding or agreement of any kind shall
be binding upon the parties unless incorporated herein. This Escrow
Agreement may not be modified or amended except by an agreement in
writing signed by the party against whom the enforcement of any
modification or change is sought and the Escrow Agent.
15. Indemnification. MBS-NV and NMFSC jointly and severally
shall indemnify and hold harmless the Escrow Agent from and against any
loss, liability, cost or expense incurred by the Escrow Agent and
arising out of the performance or nonperformance of its duties
hereunder (including but not limited to any loss, liability, cost or
expense arising out of any claim or legal action brought against it
arising out of its services hereunder), except to the extent that there
is a final determination by a court of competent jurisdiction that such
loss, liability, cost or expense resulted solely from willful
misconduct or gross negligence of the Escrow Agent.
16. Investments. Any amount of cash held by the Escrow Agent at
any time in excess of US$1,000 shall, to the extent practicable, be
invested in United States government securities, money market mutual
funds or an interest paying savings account in a commercial bank in the
United States.
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In witness whereof, the parties have executed this Escrow
Agreement under seal as of the day, month and year first above written.
MEDICAL BILLING SERVICES OF ARIZONA, INC.
By:
--------------------------
President:
NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION
By:
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President:
VACOVEC, MAYOTTE & SINGER
By:
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Partner
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