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EXHIBIT 10.36
RESCISSION AGREEMENT
BY AND AMONG
NATIONAL HEALTHCARE RECOVERY SERVICES, LLC
IM COMET, LLC
EPS SOLUTIONS CORPORATION
AND
ENTERPRISE PROFIT SOLUTIONS CORPORATION
NOVEMBER 24, 1999
EXECUTION COPY
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RESCISSION AGREEMENT
THIS RESCISSION AGREEMENT (this "AGREEMENT") is entered into as of
November 24, 1999 by and among EPS Solutions Corporation, a Delaware corporation
("EPS"), Enterprise Profit Solutions Corporation, a Delaware corporation
("EPSC"), National HealthCare Recovery Services, LLC, a Delaware limited
liability company ("NHRS"), and IM Comet, LLC, a Nevada limited liability
company ("IM COMET"). Xxxxxx Xxxxxxx, an individual ("XXXXXXX"), Xxxxx Law, an
individual ("LAW") and IM Comet are each hereinafter referred to as a "MEMBER,"
and collectively, the "MEMBERS."
A. Pursuant to that certain Securities Purchase Agreement, dated March
1, 1999, by and among EPS, NHRS and the Members (the "SECURITIES PURCHASE
AGREEMENT"), EPS purchased from the Members 100% of the outstanding membership
units of NHRS (the "MEMBERSHIP INTERESTS").
B. Pursuant to the Securities Purchase Agreement, EPS paid an aggregate
purchase price of $9,350,000 (the "PURCHASE PRICE") for the Membership Interests
as follows: $1,000,000 cash to Xxxxxxx, $67,427.26 cash to Law and the
cancellation of indebtedness of Law in favor of EPS of $532,572.74, the issuance
by EPS of a promissory note in the amount of $6,400,000 to IM Comet (the "EPS
NOTE"), and the payment of $1,350,000 pre-acquisition indebtedness of NHRS.
C. EPS purchased the membership units of NHRS from the Members based
upon anticipated profitable performance of the NHRS business (the "BUSINESS")
and the Business has not performed as anticipated. EPS desires to discontinue
funding the operating losses of NHRS.
D. To settle all matters between the parties hereto with respect to the
sale and purchase of the Membership Interests acquired by EPS from IM Comet the
parties agree that the appropriate remedy is to rescind the purchase by EPS of
Membership Interests from IM Comet contemplated by the Securities Purchase
Agreement upon the terms and conditions set forth herein.
E. The parties hereto desire to rescind the purchase by EPS of
Membership Interests from IM Comet in its entirety such that such purchase is
void ab initio, and return the parties to the same legal and economic positions
that they would have occupied had the purchase by EPS of Membership Interests
from IM Comet never been effected.
F. Concurrent herewith, EPSC, EPS, Xxxxxxxxxxx Xxxxxx, Xxxx Xxxxx, 1758
Primary Properties, Limited Partnership, 1910 Properties, Ltd., and IM Comet are
entering into a Settlement Agreement (the "SETTLEMENT AGREEMENT").
G. It is a condition to the Settlement Agreement that the parties enter
into this Agreement.
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NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties and agreements set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. RESCISSION.
1.1 RESCISSION OF SECURITIES PURCHASE AGREEMENT.
(a) Subject to the terms and conditions set forth in this Agreement, on
or as soon as practicable after the date on which EPSC obtains the Bank Release
(as defined in Section 4.4) and with at least two business day's prior written
notice to IM Comet, EPS and EPSC shall execute and deliver to IM Comet the
Assignment Agreement in the form of Exhibit A (the "ASSIGNMENT AGREEMENT"),
which is being executed and delivered by IM Comet to EPS and EPSC concurrently
herewith. The date EPS and EPSC deliver the Assignment Agreement will be the
"ASSIGNMENT DATE." The effect of the execution and delivery by EPS and EPSC of
the Assignment Agreement will be to return to IM Comet the Membership Interests
in NHRS that it sold to EPS pursuant to the Securities Purchase Agreement and to
rescind the purchase by EPS of NHRS Membership Interests from IM Comet pursuant
to the Securities Purchase Agreement in its entirety such that the purchase is
void ab initio, and each of the rights, interests, obligations or liabilities of
the parties set forth in or arising pursuant to the Securities Purchase
Agreement shall be deemed to be of no force and effect.
(b) IM Comet will be entitled to revoke its execution and delivery of
the Assignment Agreement only before the Assignment Date and only (i) if IM
Comet is not in material breach of this Agreement or the Settlement Agreement or
any Separation Documents referred to therein and EPS or EPSC breaches this
Agreement or the Settlement Agreement or any Separation Documents referred to
therein in any material respect and fails to cure the breach within 15 days of
receipt of notice from IM Comet demanding cure, or (ii) pursuant to Section 4.4
hereof. In the event of the revocation of the Assignment Agreement or the
termination of this Agreement as provided in Section 4.4 hereof, (A) subject to
obtaining any necessary bank consents (which EPS agrees to use commercially
reasonable efforts to obtain), EPS and EPSC shall promptly take all action
necessary to cause NHRS to cease the conduct of Business and EPS and EPSC shall
refrain from conducting the Business in the future, either directly or
indirectly through Affiliates or otherwise; (B) all obligations of the parties
hereunder, including, without limitation, the obligations set forth in Sections
1.2, 1.3, 4.4 and 4.5 hereof, shall cease and be of no further force and effect;
(C) the subordinated promissory note payable to IM Comet in the principal amount
of $6.4 million issued in connection with the purchase of NHRS by EPS (and
accrued interest thereon) will be canceled; (D) the repurchase pursuant to the
Settlement Agreement by EPS from IM Comet of 290,000 of the Repurchased Shares
(as defined in the Settlement Agreement) will be rescinded and IM Comet will pay
to EPS $5,800, representing return to EPS of $.02 per share for such 290,000
shares from the amount paid by EPS pursuant to Section 2.1 of the Settlement
Agreement (which shares shall be certificated in the same manner as other shares
of EPS common stock held by IM Comet as of November 1, 1999); and (E) IM Comet
will, as maker, issue to EPS promissory notes in the form, on the terms and in
the amounts of the First NHRS Note (as defined in Section 1.2), the Second NHRS
Note (as defined in Section 1.3) and, if Xxxxxxx and Law have not entered into
an Additional
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Rescission (as defined in Section 4.7), the Third NHRS Note (as defined in
Section 4.7).
1.2 REPAYMENT OF PURCHASE PRICE; LOAN TO NHRS. Concurrently with receipt
from EPS and EPSC of the Assignment Agreement as described in Section 1.1: (i)
IM Comet shall deliver to EPS the EPS Note, marked "canceled" and all
obligations on the EPS Note shall be canceled and terminated as of such date and
any interest paid on the EPS Note shall be returned to EPS; and (ii) IM Comet
shall pay EPS by wire transfer $1,350,000 to reimburse EPS for its payment of
the pre-acquisition indebtedness obligation of NHRS to Comet Capital Corporation
NV and IM Investments, Inc., paid by EPS at the closing of the transactions
contemplated by the Securities Purchase Agreement. Concurrently with the
delivery of EPS and EPSC of the Assignment Agreement as provided in Section 1.1
and upon receipt of the amounts to be paid pursuant to the preceding sentence,
EPS, either directly or through EPSC, shall make a cash advance to NHRS in the
principal amount of $1,350,000 and NHRS shall execute and deliver to EPS a
promissory note (the "FIRST NHRS NOTE") in the principal amount of $1,350,000 in
the form of Exhibit B to evidence the obligation of NHRS to repay the advance to
EPS. All cash transactions described in this Section 1.2 shall be effected by
wire transfer through appropriate accounts established by the respective
parties.
1.3 REPAYMENT OF THE NHRS OBLIGATIONS. From March 1, 1999 through
November 15, 1999, NHRS had a negative cash flow from operations, and in
operating the business of NHRS, EPS, through EPSC has made cash advances to or
paid expenses on behalf of NHRS in the aggregate amount of approximately
$7,054,166.45. These amounts, together with any other advances made by EPS or
EPSC to fund the operations of NHRS from November 16, 1999 until the Assignment
Date pursuant to Section 4.4 or Section 4.5 or termination of this Agreement
pursuant to Section 4.4, will be evidenced by a note payable by NHRS to EPSC in
the form of Exhibit C that will be executed and delivered by NHRS to EPSC on the
Assignment Date (the "SECOND NHRS NOTE"). On the Assignment Date or the date on
which this Agreement is terminated pursuant to Section 4.4 hereof, IM Comet
shall deliver to EPS a guaranty in the form of Exhibit D hereto guaranteeing the
obligations of NHRS under the First NHRS Note, the Second NHRS Note and (if
applicable) the Third NHRS Note and a Stock Pledge Agreement in the form of
Exhibit E attached hereto, securing the payment and performance of the First
NHRS Note, the Second NHRS Note and (if applicable) the Third NHRS Note.
2. REPRESENTATIONS AND WARRANTIES OF EPS AND EPSC.
The business of NHRS has been managed primarily by Xxxxxxx and Law under
the supervision of the Employees (as such term is defined in the Settlement
Agreement) acting in their capacities as employees of EPS or NHRS. Accordingly,
although EPS has participated in the business of NHRS, IM Comet (which is
controlled by the Employees) and the other Employee Parties (as such term is
defined in the Settlement Agreement) have more knowledge regarding the matters
addressed in the representations and warranties of EPS set forth in Section 2.1
than EPS itself. The representations and warranties set forth in Section 2.1
shall be deemed to be qualified in all respects by such facts as IM Comet and
the Employee Parties know or should know as a result of their participation in
the business of NHRS prior to the date hereof. All such facts known to IM Comet
and the Employee Parties shall be deemed to be known by IM Comet and the
Employee Parties prior to the date hereof and to have been disclosed by EPS
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to NHRS as if set forth in this Agreement. Notwithstanding any provision of this
Agreement to the contrary (and except for any claim or action for breach of any
representation and warranty of EPSC or EPS set forth in this Article 2, neither
EPSC nor EPS will be liable on the basis of any claim or action that disclosure
provided by EPSC and EPS in connection with the transactions contemplated hereby
was incomplete. Subject to the foregoing, EPS and EPSC represent and warrant to
IM Comet that:
2.1 NO ENCUMBRANCES. Neither EPS nor EPSC has encumbered the Membership
Interests or the assets of NHRS or conveyed any interest in the Membership
Interests or assets of NHRS to any party except any of the following: (i)
actions that may have been taken by or with the knowledge of IM Comet or the
Employee Parties or taken by EPS or EPSC at the direction of the Employee
Parties or in performance of and consistent with duties known by one or more of
the Employee Parties to be performed by EPS or EPSC on behalf of the Business,
as to which EPS and EPSC make no representation or warranty; (ii) purchase money
security interests in specific items of equipment used in the Business and
interests of lessors and licensors of equipment acquired by EPS or EPSC or their
Affiliates pursuant to leases or licenses, which interests, leases and licenses
will remain in place and be handled pursuant to Section 4.5; (iii) liens for
taxes not yet payable; (iv) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (v) liens incurred in connection
with the extension, renewal or refinancing of the indebtedness secured by liens
of the type described above; and (vi) the Bank Liens defined in, and being
handled pursuant to Section 4.4 of this Agreement.
2.2 AUTHORITY. EPS and EPSC have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and to perform their respective obligations hereunder. This
Agreement and all other agreements and instruments to be executed by the parties
hereto in connection herewith (together with all other documents to be delivered
in connection herewith or therewith, collectively, the "TRANSACTION DOCUMENTS")
have (except for Transaction Documents to be executed and delivered solely by
parties other than EPS or EPSC) been duly and validly approved by the Board of
Directors of EPS and EPSC (the "BOARD OF DIRECTORS") and no other proceedings on
the part of EPS or EPSC are necessary to approve this Agreement, consummate the
transactions contemplated hereby, or perform hereunder. This Agreement and the
other Transaction Documents executed or to be executed by EPS or EPSC have been
duly executed and delivered by EPS and EPSC or will, when executed and delivered
by or on behalf of EPS or EPSC, as the case may be, be duly executed and
delivered on behalf of EPS or EPSC, as the case may be, and constitute and will
constitute legal, valid and binding obligations of EPS and EPSC, except as such
enforceability may be limited by general principles of equity and bankruptcy,
insolvency, reorganization and moratorium and other similar laws relating to
creditors' rights (the "BANKRUPTCY EXCEPTION").
3. REPRESENTATIONS AND WARRANTIES OF IM COMET.
IM Comet represents and warrants to EPS and EPSC that:
3.1 ORGANIZATION AND AUTHORITY. IM Comet has all requisite limited
liability company authority to enter into this Agreement and the Transaction
Documents and to consummate the transactions contemplated hereby and to perform
their obligations hereunder.
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No other proceedings on the part of IM Comet are necessary to approve this
Agreement, consummate the transactions contemplated hereby, or perform
hereunder. This Agreement has been duly executed and delivered by IM Comet and
constitutes legal, valid and binding obligations of IM Comet, except as such
enforceability may be limited by the Bankruptcy Exception.
3.2 OPERATION OF BUSINESS. Since March 1, 1999, no Member or Employee
Party has made any material commitments or entered into any material
obligations, as such commitments or obligations relate to NHRS, which are
binding upon EPS or any of its Affiliates other than NHRS and which (a) have not
been fulfilled or satisfied in full or (b) are not being assumed by the Members
or any of their Affiliates. The Business has been conducted at all times by the
Members and the Employees in accordance with applicable laws and regulations,
and there are no pending, or to the knowledge of IM Comet and the Employee
Parties, threatened, claims, actions or proceedings relating to the operation of
the Business other than (x) the litigation with Anthem pending as of the date
hereof and (y) certain unwritten claims made by EPS stockholders towards the
Employee Parties and their Affiliates.
4. CERTAIN AGREEMENTS OF THE PARTIES.
4.1 EFFECT OF RESCISSION. It is the intent of the parties to the
Securities Purchase Agreement that this Agreement return them as nearly as
possible to the same legal and economic position that they would have occupied
had the transactions contemplated by the Securities Purchase Agreement never
been effected.
4.2 OPERATION OF THE BUSINESS.
(a) The parties acknowledge that since March 1, 1999, through the date
hereof, while NHRS was managed on behalf and in the name of EPS or its
Affiliates, the business and operations of NHRS have changed. The parties
further acknowledge that during such period the business of NHRS has been
managed and operated primarily by Xxxxxxx and Law under the supervision of the
Employee Parties (who control IM Comet) in their capacities as employees of EPS
or NHRS, together with persons acting under such persons' direction, control or
supervision. IM Comet and NHRS agree that all actions taken or obligations or
liabilities assumed by EPS or its Affiliates in managing and operating NHRS
shall be deemed to have been taken on behalf and in the name of NHRS and the
Members, and NHRS and the Members shall have no claim against EPS, or its
Affiliates for such actions, obligations or liabilities, and NHRS and IM Comet
(as the managing member of NHRS), on behalf of itself, its members and their
respective successors and assigns, hereby forever releases, discharges and
acquits EPS, its Affiliates, and their respective members, principals,
stockholders, directors, officers, agents, employees, attorneys and
representatives, and the successors and assigns of each of them, from any and
all Losses (as hereinafter defined), of every type, kind, nature, description or
character, whether known or unknown, suspected or unsuspected, liquidated or
unliquidated arising from, under or related to the management and operations of
NHRS in the name of and on behalf of EPS and its Affiliates.
(b) From March 1, 1999 through the date hereof, certain aspects of the
business of NHRS have been operated in conjunction with other business
operations of EPS and its Affiliates. Subject to the provisions of Sections 4.4
and 4.5 hereof, from and after the date
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hereof the business and operations of NHRS shall be separated in all respects
from those of EPS and its Affiliates and except as set forth herein will not be
subsidized or supported in any way by EPS and its Affiliates. The parties shall
in good faith take any and all actions reasonably necessary or advisable to give
effect to the separation of the business and operations of NHRS from the
operations of EPS and its Affiliates or otherwise give effect to this Section
4.2. Without limiting the generality of the foregoing, the parties agree that:
(i) To the extent employees of NHRS or employees of EPSC involved
primarily in the business of NHRS (collectively, "EMPLOYEES") were active
participants or accrued benefits under any "employee benefit plans", as such
term is defined in Section 3(3) of the Employee Retirement Income Savings Act of
1974, as amended or other benefits programs or arrangements, which were
maintained, contributed to or sponsored on behalf of the employees of EPS or its
Affiliates ("BENEFIT PLANS"), such participation shall cease and be terminated
as of the Assignment Date.
(ii) Promptly following the execution and delivery of this
Agreement, EPSC and IM Comet shall cooperate and attempt in good faith to agree
upon a list of contracts, leases or other agreements of EPS or its Affiliates or
of both NHRS and EPS and/or its Affiliates under which NHRS has, prior to the
date hereof, received benefits and under which benefits are to be extended to
NHRS after the date hereof (the "CONTINUING CONTRACTS"). The Continuing
Contracts shall be retained by EPS or its Affiliates, and NHRS and IM Comet
shall use commercially reasonable efforts to enter into a separate agreement,
contract, lease or other arrangement with the provider or an alternative
provider of the services or assets provided under the Continuing Contracts, for
the provision of such services or assets directly to NHRS. Until such time as a
new contract, lease, agreement or arrangement is obtained from the provider or
an alternative provider of such services or assets, NHRS shall make payments to
EPS, and not directly to the provider, for its pro rata share of such assets or
services, whether received prior to or after the date hereof, no later than five
(5) business days prior to the due date of any payment for such services and
assets, so that EPS can process the payment in a timely manner. EPS shall apply
the payment so received from NHRS to the timely payment of amounts due to the
provider under the Continuing Contract for the services or assets so provided
for the benefit of NHRS. Notwithstanding anything contained herein to the
contrary, from and after the date hereof, NHRS shall be solely responsible for
all insurance of the assets, business and operations of NHRS, and any claims
arising or made with respect to such activities shall be the sole responsibility
of NHRS.
(iii) Notwithstanding the foregoing provisions, the parties have
agreed that EPSC, as an administrative convenience to NHRS, will pay, on behalf
of NHRS, the salaries and other benefits to which the Employees shall be
entitled for the period from the Assignment Date through December 31, 1999, but
only if and only to the extent that NHRS advances the funds to EPSC to make such
payments at least one business day prior to the day on which such payment is
due. To facilitate this arrangement, NHRS shall provide EPSC a schedule setting
forth all amounts to be paid in writing at least four business days before any
such payment is due with the amount of the payment in such detail as EPSC and
NHRS may reasonably agree. NHRS will indemnify, defend, and hold harmless EPSC
from and against any claims, liabilities and costs incurred by EPSC as a result
of or in connection with EPSC's actions pursuant to this subsection (b)(iii),
including without limitation arising as a result of any assertion that EPSC is
the employer
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of or has any duties to any of the Employees on account of EPSC's actions
pursuant to this subsection (b)(iii).
(c) Notwithstanding anything contained herein to the contrary, NHRS
shall retain and/or assume all payment obligations arising pursuant to
contracts, commitments, agreements, or other arrangements, whether in the name
of EPS, its Affiliates or NHRS, which provide for the payment of referral fees,
commissions and other amounts to parties other than EPS, EPSC, and their
Affiliates and employees in respect of revenues, income or other earnings
arising from the operation of the Business. In addition, NHRS shall retain
and/or assume all payment obligations to EPS, EPSC, and their Affiliates and
employees pursuant to the contracts listed on the schedule attached hereto as
Schedule 4(c). For purposes of this Agreement, "AFFILIATE" shall have the
meaning ascribed to such term in Rule 405 of the Securities Act of 1933, as
amended.
4.3 DISCLAIMER.
(a) THE NHRS MEMBERSHIP INTEREST BEING TRANSFERRED PURSUANT HERETO,
TOGETHER WITH BUSINESS OF NHRS (INCLUDING ITS ASSETS AND LIABILITIES), ARE BEING
TRANSFERRED TO IM COMET "AS IS" AND "WHERE IS" AND ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR USE OR A PARTICULAR PURPOSE, ARE EXCLUDED AND DISCLAIMED (EXCEPT AS
EXPRESSLY SET FORTH IN ARTICLE 2). IM COMET, FOR ITSELF AND FOR NHRS (AS ITS
MANAGING MEMBER), HEREBY WAIVES ALL RIGHTS IT MAY HAVE TO ASSERT ON ITS OWN
BEHALF OR ON BEHALF OF NHRS ACTING UNDER ITS CONTROL THAT EPS, EPSC, OR ANY OF
THEIR AFFILIATES OR ANY PARTY ACTING ON BEHALF OF EPS, EPSC, OR ANY OF THEIR
AFFILIATES HAS MADE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO NHRS (EXCEPT
AS EXPRESSLY SET FORTH IN ARTICLE 2 OF THIS AGREEMENT), INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY CONCERNING THE FINANCIAL CONDITION,
SALES, PROFITABILITY, INCOME OR FUTURE VALUE OR PROSPECTS OF NHRS AND HEREBY
FURTHER WAIVE ALL RIGHTS THEY MAY HAVE TO SEEK DAMAGES, RIGHTS OF OFFSET OR ANY
OTHER RELIEF BASED UPON AN ALLEGED BREACH OR INACCURACY OF ANY REPRESENTATION OR
WARRANTY CONCERNING NHRS (EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS
AGREEMENT FOR A BREACH OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN
ARTICLE 2 OF THIS AGREEMENT).
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(b) Except as expressly set forth in this Agreement, each party hereto
hereby confirms that no other party hereto (or any third person acting on behalf
of another party hereto) has made any representation or warranty concerning NHRS
or the Business, including, without limitation, the financial condition, sales,
profitability, income or future value or prospects of NHRS or the Business. Each
party hereto represents and warrants that it has had ample opportunity to
conduct a full investigation and evaluation of NHRS and the Business and its
present and future prospects and value and that it has completed the
investigation and evaluation to its satisfaction and it has made an independent
determination of the desirability of entering into this Agreement and
consummating the transactions provided for herein for the consideration and upon
the terms set forth in this Agreement without relying in any manner upon any
representation or warranty of any other party hereto (or any third person acting
on behalf of another party hereto).
(c) EPS AND EPSC HEREBY WAIVE ALL RIGHTS THEY MAY HAVE TO ASSERT THAT
NHRS OR IM COMET OR ANY PARTY ACTING ON BEHALF OF NHRS OR IM COMET HAS MADE ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO NHRS (EXCEPT AS EXPRESSLY SET FORTH
IN ARTICLE 3 OF THIS AGREEMENT), INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY CONCERNING THE FINANCIAL CONDITION, SALES,
PROFITABILITY, INCOME OR FUTURE VALUE OR PROSPECTS OF NHRS AND HEREBY FURTHER
WAIVE ALL RIGHTS THEY MAY HAVE TO SEEK DAMAGES, RIGHTS OF OFFSET OR ANY OTHER
RELIEF BASED UPON AN ALLEGED BREACH OR INACCURACY OF ANY REPRESENTATION OR
WARRANTY CONCERNING NHRS (EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS
AGREEMENT FOR A BREACH OF THE REPRESENTATION AND WARRANTY SET FORTH IN ARTICLE 3
OF THIS AGREEMENT).
4.4 LIEN RELEASE; INTERIM OPERATIONS. The Membership Interests are
subject to liens in favor of EPSC's lenders (the "BANK LIENS"). EPSC shall use
commercially reasonable efforts to obtain the following in writing
(collectively, the "BANK RELEASE") by December 20, 1999: (a) the termination of
the Bank Liens and associated financing statements, (b) the termination of the
guaranties made by NHRS in favor of the holders of the Bank Liens (the
"GUARANTIES"), (c) the consent from EPSC's lenders to the payment of any portion
or all of any amount payable by NHRS or IM Comet to EPS or EPSC pursuant to the
First NHRS Note, the Second NHRS Note, the Third NHRS Note (if applicable) and
the "Note" (as that term is defined in the Asset Purchase Agreement (as defined
below)) by the cancellation of a comparable amount of the $18.276 million
subordinated note of EPS held by IM Comet (the "SUBORDINATED NOTE") and (d) the
consent to the asset transfers contemplated by that certain Asset Purchase
Agreement, dated as of the date hereof, between IM Comet, EPS and EPSC (the
"ASSET PURCHASE AGREEMENT") and termination of the related liens on the assets
transferred. The date on which the Bank Release is obtained is referred to in
this Agreement as the "LIEN RELEASE DATE". If the Bank Release is not obtained
by December 23, 1999, either EPS (if neither EPS nor EPSC is in material breach
of this Agreement or the Settlement Agreement or any Separation Document
referred to therein), or IM Comet (if IM Comet is not in material breach of this
Agreement or the Settlement Agreement or any Separation Document referred to
therein), may terminate this Agreement. Until the Assignment Date, the Business
shall be operated under the
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management and direction and for the account of IM Comet, and IM Comet and EPS
and EPSC will cause the Business to be operated in all respects in the ordinary
course consistent with past practices and in the best interests of the owners of
the Business, provided, however, that neither EPS nor EPSC shall make any
advances to NHRS or take any action to incur any obligations on behalf of NHRS
or cause NHRS to incur any obligations or make any payments to subsidize or
finance the operation of the Business, in each case without obtaining the prior
written consent of IM Comet. Any amounts paid by EPS or EPSC pursuant to Section
4.4 to subsidize or finance the operation of the Business from and after
November 16, 1999 until the Assignment Date or the termination of this Agreement
will be repaid to EPS or EPSC by NHRS through an increase in the amount of the
Second NHRS Note as described in Section 1.3. The parties will use commercially
reasonable efforts to obtain the Bank Release.
4.5 LEASES AND LICENSES. EPSC and EPS will continue to make all payments
due to third parties under leases, licenses, installment sale contracts, or
other forms of financing (and renewals or refinancing thereof) pursuant to which
assets used solely in the Business were acquired by EPSC or EPS before the
Assignment Date (including without limitation amounts payable to Wareforce or
LaSalle National Leasing in respect of computer equipment used solely in the
Business) (collectively, the "FINANCED ASSETS"). All amounts paid by EPS or EPSC
from and after November 16, 1999 under this Section 4.5 will (provided the Bank
Release is obtained and the Assignment Agreement is delivered) be repaid to EPS
or EPSC by NHRS through an increase in the amount of the Second NHRS Note as
described in Section 1.3 for amounts paid before the Assignment Date, or, after
the Assignment Date, by offset reduction of any amounts otherwise payable by EPS
or EPSC or any of their Affiliates to IM Comet or any of its successors or
permitted assignees or any holder of the Subordinated Note (provided that no
offset may be made against the Subordinated Note prior to January 5, 2000). NHRS
will hold and operate the Financed Assets according to the terms of the leases,
licenses or other financing arrangements pursuant to which the Financed Assets
were acquired by EPSC or EPS. Without limiting the foregoing, NHRS will not
transfer or relocate any Financed Assets and will keep them free of any liens
and encumbrances other than those created by EPS or EPSC.
4.6 FURTHER ASSURANCES. IM Comet shall not take any action that would
cause NHRS to be unable to fulfill its obligations under this Agreement and the
agreements entered into by NHRS in connection with this Agreement. EPS and EPSC
acknowledge that the agreement in the foregoing sentence is not a guarantee or
any obligation on IM Comet to provide additional funds to NHRS. Upon the
reasonable request of a party or parties hereto at any time after the date
hereof, the other party or parties shall forthwith execute and deliver such
further instruments of assignment, transfer, conveyance, endorsement, direction
or authorization and other documents as the requesting party or parties or its
or their counsel may reasonably request in order to effectuate the purposes of
this Agreement.
4.7 PURCHASE OF MEMBERSHIP INTERESTS. IM Comet may cause Xxxxxxx and Law
to enter into a Rescission Agreement in substantially the form of this Agreement
(or to enter into an amendment and joinder to this Agreement) prior to the
Assignment Date (an "ADDITIONAL RESCISSION") pursuant to which the acquisition
by EPS from them of NHRS Membership Interests pursuant to the Securities
Purchase Agreement would be rescinded and the aggregate payment to them of $1.6
million would be repaid to EPS and loaned back to NHRS pursuant to a promissory
note guaranteed by IM Comet and secured by the IM Comet pledge agreement
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referenced in Section 1.3. In the event that Xxxxxxx and Law do not enter into
an Additional Rescission by the Assignment Date (or the date of any termination
pursuant to Section 4.4), IM Comet will issue to EPS or EPSC on the Assignment
Date (or the date of any termination pursuant to Section 4.4) a promissory note
(the "THIRD NHRS NOTE") in the principal amount of $1,600,000 in substantially
the form of Exhibit B in exchange for transfer by EPS or EPSC (as the case may
be) to IM Comet of the membership interests of NHRS not owned by IM Comet as a
result of the rescission described in Article 1.
4.8 TRANSFER OF LOCKBOX. EPS and EPSC shall transfer to the control of
NHRS as of the Assignment Date any lockbox used exclusively for the Business
that is currently held in the name of EPS or EPSC or their respective
Affiliates.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION BY NHRS AND IM COMET. If the Bank Release shall have
been obtained and the Assignment Date shall have occurred, NHRS and IM Comet
shall and shall cause their successors and assigns to, jointly and severally
indemnify, defend, reimburse and hold harmless EPS and its Affiliates and their
successors and assigns, and the officers, directors, employees and agents of any
of them, from and against any and all claims, losses, damages, liabilities,
obligations, assessments, penalties and interest, demands, actions and expenses,
whether direct or indirect, known or unknown, absolute or contingent (including,
without limitation, settlement costs and any legal, accounting and other
expenses for investigating or defending any actions or threatened actions)
("LOSSES") reasonably incurred by any such indemnitee, arising out of or in
connection with any of the following:
(a) the operation of NHRS at any time or the holding of the Membership
Interests by EPS or EPSC, including without limitation, for all net income,
gross receipts, sales, use, withholding, payroll, employment, social security,
unemployment, excise and property taxes, plus applicable penalties and interest
thereon arising relating to NHRS; Employee severance obligations, including WARN
Act liabilities; claims by Employees to equity of EPS, other than as
specifically provided to the Members or Employees by EPS or EPSC pursuant to
written agreement; and leasehold obligations of NHRS;
(b) any untruth or inaccuracy of any representation or warranty made by
NHRS or IM Comet in this Agreement; or
(c) the breach of any covenant, agreement or obligation of NHRS or IM
Comet contained in this Agreement.
5.2 INDEMNIFICATION BY EPS AND EPSC. If the Bank Release shall have been
obtained and the Assignment Date shall have occurred, EPS and EPSC shall jointly
and severally indemnify, defend, reimburse and hold harmless NHRS, its
Affiliates and IM Comet and its successors and assigns and their respective
officers, directors, employees and agents from and against any and all Losses
reasonably incurred by any such indemnitee arising out of or in connection with
any of the following:
(a) the operation of the EPS businesses other than NHRS (subject to the
obligations of IM Comet under the Asset Purchase Agreement);
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(b) any untruth or inaccuracy of any representation, warranty or
certification made by EPS or EPSC in this Agreement; or
(c) the breach of any covenant, agreement or obligation of EPS or EPSC
contained in this Agreement.
5.3 INDEMNIFICATION PROCEDURE.
(a) Whenever any claim shall arise for indemnification hereunder (a
"CLAIM"), the party entitled to indemnification (the "INDEMNITEE") shall
promptly give written notice to the party obligated to provide indemnity (the
"INDEMNITOR") with respect to the Claim after the receipt by the Indemnitee of
reliable information of the facts constituting the basis for the Claim; but the
failure to timely give such notice shall not relieve the Indemnitor from any
obligation under this Agreement, except to the extent, if any, that the
Indemnitor is materially prejudiced thereby.
(b) Upon receipt of written notice from the Indemnitee of a Claim, the
Indemnitor shall provide counsel (such counsel subject to the reasonable
approval of the Indemnitee) to defend the Indemnitee against the matter from
which the Claim arose, at the Indemnitor's sole cost, risk and expense. The
Indemnitee shall cooperate in all reasonable respects, at the Indemnitor's sole
cost, risk and expense, with the Indemnitor in the investigation, trial, defense
and any appeal arising from the matter from which the Claim arose; provided,
however, that the Indemnitee may (but shall not be obligated to) participate (at
its sole expense) in any such investigation, trial, defense and any appeal
arising in connection with the Claim. Notwithstanding the foregoing, if both the
Indemnitor and the Indemnitee are named parties in any action or proceeding and
the Indemnitee shall have concluded in its reasonable judgment, based upon an
opinion of counsel, that there may be one or more legal defenses available to it
that are materially different from or in addition to those available to the
Indemnitor, and if the Indemnitee reasonably believes based upon an opinion of
counsel that the Indemnitee's interests will be adversely and materially
affected if such legal position or defense is not pursued in such action or
proceeding, the Indemnitor shall bear the expense of the Indemnitee's separate
participation, including the reasonable fees, costs and expenses of one separate
counsel for the Indemnitee (or multiple Indemnitees). It is understood that the
Indemnitor shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnitees. If the Indemnitee elects to so participate, the Indemnitor shall
cooperate with the Indemnitee, and the Indemnitor shall deliver to the
Indemnitee or its counsel copies of all pleadings and other information within
the Indemnitor's knowledge or possession reasonably requested by the Indemnitee
or its counsel that is relevant to the defense of such Claim and that will not
prejudice the Indemnitor's position, claims or defenses. The Indemnitee and its
counsel shall maintain confidentiality with respect to all such information
consistent with the conduct of a defense hereunder. The Indemnitor shall have
the right to elect to settle any claim for monetary damages only without the
Indemnitee's consent, if the settlement includes a complete release of the
Indemnitee. If the settlement does not include such a release, it will be
subject to the consent of the Indemnitee, which will not be unreasonably
withheld. The Indemnitor may not admit any liability of the Indemnitee or waive
any of the Indemnitee's rights without the Indemnitee's prior
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written consent, which will not be unreasonably withheld. If the subject of any
Claim results in a judgment or settlement, the Indemnitor shall promptly pay
such judgment or settlement.
(c) If the Indemnitor fails to assume the defense of the subject of any
Claim in accordance with the terms of Section 4.5(b), or if the Indemnitor fails
diligently to prosecute such defense, the Indemnitee may defend against the
subject of the Claim, at the Indemnitor's sole cost, risk and expense, in such
manner and on such terms as the Indemnitee deems appropriate, provided, however,
that the Indemnitee shall not be entitled to settle the Claim without the
Indemnitor's consent, which consent shall not be unreasonably withheld. If the
Indemnitee defends the subject of a Claim in accordance with this Section, the
Indemnitor shall cooperate with the Indemnitee and its counsel, at the
Indemnitor's sole cost, risk and expense, in all reasonable respects, and shall
deliver to the Indemnitee or its counsel copies of all pleadings and other
information within the Indemnitor's knowledge or possession reasonably requested
by the Indemnitee or its counsel that are relevant to the defense of the subject
of any such Claim and that will not prejudice the Indemnitor's position, claims
or defenses. The Indemnitee shall maintain confidentiality with respect to all
such information consistent with the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee against
Losses arising under this Agreement shall be in addition to any other
obligations the Indemnitor might otherwise have and any other rights the
Indemnitee might otherwise have.
5.4 PAYMENT. All payments owing under Section 5.3 will be made promptly
as indemnifiable Losses are incurred. If the Indemnitee defends the subject
matter of any Claim in accordance with Section 5.3(c) or proceeds with separate
counsel in accordance with Section 5.3(b), the expenses (including attorneys'
fees) incurred by the Indemnitee shall be paid by the Indemnitor in advance of
the final disposition of such matter as incurred by the Indemnitee, if the
Indemnitee undertakes in writing to repay any such advances in the event that it
is ultimately determined that the Indemnitee is not entitled to indemnification
under the terms of this Agreement or applicable law. In addition to any rights
of offset or other rights that an Indemnitee may have at common law, by statute
or otherwise, each Indemnitee shall have the right to offset any payment
obligations of such Indemnitee to any Indemnitor.
6. MISCELLANEOUS.
6.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given upon personal delivery
or three (3) days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, or one (1) business day after being sent via
a nationally recognized overnight courier service if overnight courier service
is requested from such service or upon receipt of electronic or other
confirmation of transmission if sent via facsimile to the parties, their
successors in interest or their assignees at the following addresses and
telephone numbers, or at such other addresses or telephone numbers as the
parties may designate by written notice in accordance with this Section 6.1:
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If to NHRS:
IM Comet
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxx
With a copy to: Xxxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
If to EPS or EPSC: EPS Solutions Corporation
000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: General Counsel
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
0 Xxxx Xxxxx, Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
6.2 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement shall inure to
the benefit of and be binding upon EPS, EPSC, IM Comet and NHRS and their
respective permitted successors and assigns. Except as specifically set forth in
Sections 5.1 and 5.2, nothing in this Agreement will confer upon any person or
entity not a party to this Agreement, or the legal representatives of such
person or entity, any rights or remedies of any nature or kind whatsoever under
or by reason of this Agreement.
6.3 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, without
regard to its conflicts-of-law principles.
6.4 COUNTERPARTS. Facsimile transmission of any signed original document
and/or retransmission of any signed facsimile transmission will be deemed the
same as delivery of an original. At the request of any party, the parties will
confirm facsimile transmission by signing a duplicate original document. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute but one and the same instrument.
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6.5 COMPLETE AGREEMENT. This Agreement and the exhibits hereto contain
the entire agreement between the parties hereto with respect to the transactions
contemplated herein and therein and shall supersede all previous oral and
written and all contemporaneous oral representations, negotiations, commitments,
and understandings.
6.6 MODIFICATIONS, AMENDMENTS AND WAIVERS. No amendment of this
Agreement will be effective unless in writing signed by the parties hereto. The
parties hereto shall not be deemed to have waived any of their respective rights
hereunder unless such waiver be in writing and signed by the party so waiving
its right. No delay or omission on the part of either party in exercising its
rights hereunder shall operate as a waiver of such right or any other right. A
waiver on one occasion shall not be construed as a bar to, or waiver of, that
right or any other right or remedy on a future occasion.
6.7 HEADINGS; REFERENCES. The headings contained in this Agreement are
for reference purposes only and do not affect he meaning hereof.
6.8 SEVERABILITY. If any provision of this Agreement is found, held,
declared, determined, or deemed by any court of competent jurisdiction to be
void, illegal, invalid or unenforceable in that jurisdiction under any
applicable statute or controlling law, the illegal, invalid, or unenforceable
provision will be deemed not to be a part of the Agreement in that jurisdiction
unless without such provision, the purposes and intent of this Agreement cannot
fairly be carried out, and the legality, validity, and enforceability in that
jurisdiction of the remaining provisions and the legality, validity and
enforceability of this entire Agreement in other jurisdictions will not be
affected.
6.9 EXPENSES OF TRANSACTIONS. All fees, costs and expenses incurred by
NHRS or IM Comet in connection with the transactions contemplated by this
Agreement shall be borne by NHRS and IM Comet, and all fees, costs, and expenses
incurred by EPS or EPSC in connection with the transactions contemplated by this
Agreement shall be borne by EPS.
6.10 DISPUTES.
(a) Reference. Subject to the provisions of Section 6.11 hereof,
any controversy or dispute between either EPS or EPSC and NHRS or IM Comet
involving the construction, interpretation, application or performance of the
terms, covenants or conditions of this Agreement or in any way arising under or
relating to this Agreement shall, on demand of any of the parties by written
notice hereto served on the others in the manner prescribed in Section 6.1
hereof, be determined pursuant to the general reference provisions of California
Code of Civil Procedure ("CCP") Section 638(1), et seq., by a retired or former
judge of the Superior Court for the County of Orange, State of California. The
parties intend this general reference provision to be specifically enforceable
in accordance with said Section 638(1).
(b) Commencement. The reference may be commenced by any party
hereto by the filing in the Superior Court of the State of California for the
County of Orange of a petition or a motion for a general reference. The petition
and any opposition or response thereto shall recite in a clear and meaningful
manner the factual basis of the controversy between the parties and identify the
issues to be submitted to the referee for decision.
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(c) Referee. The petition or motion shall designate as a sole
referee a retired judge from the Orange County, California, Judicial Arbitration
& Mediation Services ("JAMS") panel acceptable to that party (the "Referee"). If
the parties to the reference proceeding are unable to agree upon a Referee, the
Presiding Judge or any judge of the Orange County Superior Court to whom the
matter is assigned shall appoint a retired or former Orange County Superior
Court Judge from the JAMS panel as the Referee.
(d) Specific Enforcement. The parties acknowledge that the terms
of this Section 6.10 are specifically enforceable and that the decision by the
Referee is tantamount to a judgment by a trial court (CCP Section 644) and is
subject to review in accordance with CCP Section 645, and that any judgment
rendered in the trial court is appealable in the same manner as any other trial
court judgment.
6.11 REMEDIES. Each of the parties acknowledges and agrees that the
legal remedies available to each party in the event any party violates or
breaches any of the provisions of Article 1 or Section 4.2, 4.4, 4.5, 4.6 or 4.7
of this Agreement would be inadequate and that EPS and EPSC (if the breach is by
IM Comet or NHRS acting under the control of IM Comet), or IM Comet or NHRS
acting under the control of IM Comet (if the breach is by EPS or EPSC), shall be
entitled to institute and prosecute proceedings in accordance with Section 6.10,
to enjoin such breaching party from violating any of such provisions and to
enforce the specific performance by such breaching party of any of such
provisions, but nothing herein contained shall be construed to prevent such
remedy or combination of remedies as the non-breaching party may elect to
invoke. All applicable actions may be taken by such non-breaching party without
bond and without prejudice to any other rights and remedies available for a
breach of this Agreement. The failure of any party to promptly institute legal
action upon any breach of this Agreement shall not constitute a waiver of that
or any other breach hereof.
6.12 SUBMISSION TO JURISDICTION. All actions or proceedings arising in
connection with this Agreement for injunctive relief or matters (if any) not
subject to general reference, shall be tried and litigated exclusively in the
state or federal courts located in the County of Orange, State of California.
The aforementioned choice of venue is intended by the parties to be mandatory
and not permissive in nature, thereby precluding the possibility of litigation
between the parties with respect to or arising out of his Agreement in any
jurisdiction other than that specified in this paragraph. Each party hereby
waives any right it may have to assert the doctrine of forum non conveniens or
similar doctrine or to object to venue with respect to any proceeding brought in
accordance with this paragraph , and stipulates that the state and federal
courts located in the County of Orange, State of California shall have in
personam jurisdiction over each of them for the purpose of litigating any such
dispute, controversy, or proceeding. Each party hereby authorizes and accepts
service of process sufficient for personal jurisdiction in any action against it
as contemplated by this Section by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices as set
forth in Section 6.1. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law.
6.13 ATTORNEYS' FEES. If NHRS or IM Comet, or any of their Affiliates,
successors or assigns brings any action, suit, counterclaim, cross-claim,
appeal, arbitration, or mediation for any relief against EPS or any of its
Affiliates, successors or assigns, or if EPS or any of its Affiliates,
successors or assigns brings any action, suit, counterclaim, cross-claim,
appeal,
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arbitration, or mediation for any relief against NHRS or IM Comet or any of
their Affiliates, successors or assigns, declaratory or otherwise, to enforce
the terms hereof or to declare rights hereunder (collectively, an "ACTION"), in
addition to any damages and costs which the prevailing party otherwise would be
entitled, the non-prevailing party shall pay to the prevailing party a
reasonable sum for attorneys' fees and costs (at the prevailing party's
attorneys' then-prevailing rates) incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award (collectively, a
"DECISION") granted therein, all of which shall be deemed to have accrued on the
commencement of such Action and shall be paid whether or not such action is
prosecuted to a Decision. Any Decision entered in such Action shall contain a
specific provision providing for the recovery of attorneys' fees and costs
incurred in enforcing such Decision.
For the purposes of this Section, attorneys' fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
For purposes of this paragraph, "PREVAILING PARTY" includes, without
limitation, a party who agrees to dismiss an action on the other party's payment
of the sum allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it. If there are multiple claims,
the prevailing party shall be determined with respect to each claim separately.
The prevailing party shall be the party who has obtained the greater relief in
connection with any particular claim, although, with respect to any claim, it
may be determined that there is no prevailing party. Any dispute with respect to
the existence or identity of the prevailing party shall be resolved by the
Referee.
6.14 INTENDED THIRD PARTY BENEFICIARIES. All Indemnitees under Article 5
are intended third party beneficiaries of Article 5 of this Agreement and shall
be entitled to enforce the provisions of Article 5 as if they were parties to
this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
EPS SOLUTIONS CORPORATION
By: _____________________________________
Name:____________________________________
Title:___________________________________
ENTERPRISE PROFIT SOLUTIONS CORPORATION
By: _____________________________________
Name:____________________________________
Title:___________________________________
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NATIONAL HEALTHCARE RECOVERY SERVICES, LLC
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------------
Title: CEO
-------------------------------------
IM COMET LLC, a Nevada limited liability company
By: Comet Capital Corp. NV
Its: Manager
By: /s/ XXXX XXXXX
-------------------------------
Name: Xxxx Xxxxx
Title: Manager
----------------------------
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