June 30,
2006
Zechariah 4, LLC
Attn: Mark and Xxxxx Xxxxxxxx
RE: Letter of Intent for total acquisition of the EMR
software
Dear Xxxx and
Xxxxx:
I would appreciate your joint consideration of this Letter of Intent,
between Zechariah 4, an Indiana LLC, of which you are co-owners
(hereinafter "Xxxx 4"), and TotalMed Systems, Inc., a Florida Corporation
(hereinafter 'TMS").
TMS proposes to acquire sole and complete ownership of the Electronic Medical
Record software program you have collectively developed (hereinafter "EMR
Software"). This Letter of Intent is intended to set forth the principal
business provisions between Xxxx 4 and TMS. It is not, however, intended to be
all inclusive. The parties to this Letter of Intent will be bound upon the
execution of an agreement in a form acceptable to both parties ("Final
Agreement"); however, the confidentiality and non-disclosure agreements made
in this Letter of Intent hereinafter set forth are fully binding on both
parties.
1) Purchasing sole and complete ownership. For the consideration stated herein
and fully set forth in the Final Agreement, Xxxx 4 will sell and TMS will
purchase sole and complete ownership of the EM R Software outright and free of
any existing liens or encumbrances. TMS will acquire legal title to the EMR
Software and after closing, TMS will have the sole and complete rights to
market, distribute and further license the use of the EMR Software through
its affiliates, direct sales representatives, master territory owners and
distributors in any geographic area TMS is marketing any of its other products.
2) Consideration for purchase. TMS agrees to pay a fee of $88,000 to
purchase sole and complete ownership of the EMR Software, $40,000 of which
will be payable upon execution of the Final Agreement. The remaining $48,000
will be paid out in monthly installments of $4,000 with the first payment due
in September, 2006. In addition, TMS agrees to issue a total of one million
shares of TMS stock in the name of Xxxx 4 for sole and complete ownership of
the EMR Software. Such shares of TMS stock will be restricted under the same
terms and conditions as the officers and directors of TMS restricted shares.
The shares will be issued at the formal closing of the Final Agreement which
is anticipated to occur within thirty (30) days of the signing of this Letter
Of Intent.
3) Appointment to medical advisory board. At closing, TMS will formally extend
to Dr. Xxxx Xxxxxxxx a membership position on its Medical Advisory Board. Dr.
Xxxx Xxxxxxxx will thereafter be entitled to all compensation and privileges
awarded to members of the Medical Advisory Board including participation in
stock issuances, if applicable. Such appointment shall be for the length of
time TMS remains a viable organization under current management. Such
appointment may be terminated at such time as TMS is sold to or acquired by
third party intent upon implementing its own management team and boards of
directors. If, for any reason, Dr. Xxxx Xxxxxxxx is unable to fulfill his
obligations as a board member, then his wife, Xxxxx Xxxxxxxx will fill the
allotted board position.
4) Distributorship. Xxxx 4 will be granted distributorship rights for all TMS
products for the state of Indiana. The costs of this distributorship, $75,000,
shall be waived. Xxxx 4 shall also receive a consultation fee of $6,000 per
month beginning in the month of September, 2006, and every month thereafter
for so long as the agreed upon services, primarily in the areas of EM R and
PM software functionality review. interface testing and evaluation are
rendered to TMS by Xxxx 4. Payment of the $6,000 per month consultation fee
will occur for a minimum of twelve (12) months, and will thereafter be renewed
annually if agreed to by both TMS and Zech4.
5) Conditions to TMS obligations. The obligation of TMS to consummate
this transaction will be subject to the resolution of each of the following
conditions to the satisfaction of TMS:
A) Due Diligence. A thorough analysis shall be performed to
conclude, beyond reasonable doubt, that Xxxx and Xxxxx Xxxxxxxx, the
developers of the EMR Software have complete, outright and unencumbered
ownership of all aspects of the EMR Software, free and clear of third party
claims. This analysis shall include, but is not limited to additional
information with respect to any licenses previously granted by Xxxx and Xxxxx
Xxxxxxxx either as individuals or as part of any business entity. TMS shall not
be obligated to assume any responsibility associated with either previous or
current versions of the EMR Software, in any form. This includes software
versions that may be in the possession of an outside software developer,
medical distribution organization. third party user of any kind, or customer
associated with past clinical or field testing. As a point of clarification,
TMS will provide improvements and updates to the EMR Software as weB
as ongoing technical support to the medical practice of Xx. Xxxxxxxx and his
primary beta site, Xx. Xxxxxxxx, for so long as these two practices choose to
utilize the EMR Software.
B) Agreement. The negotiation, execution and delivery of a Final
Agreement shall be based upon terms and conditions acceptable to
both parties.
2
6) Conditions to Xxxx 4 obligations. The obligation of Xxxx 4 to consummate the
transaction contemplated by this Letter of Intent will be subject to the
negotiation, execution and delivery of the Final Agreement with terms and
conditions acceptable to Xxxx 4.
7) Future Software Development Responsibilities. Xxxx 4 acknowledges that part
of the consideration for acquisition of sole and complete ownership of the EMR
Software will be its obligation to cooperate with TMS in the further
development of TMS products and services. The Final Agreement, the terms
of which will be agreed to by both parties, will set forth TMS and Xxxx 4
rights, responsibilities, obligations and penalties with respect to "Future
Software Development Responsibilities. II
8) Inspection and access to information. In order to permit TMS to exercise
its due diligence, after the date of execution of the Letter of Intent, Mark
and Xxxxx Xxxxxxxx will permit TMS and its authorized representatives full
access to and make available to them for inspection and review all pertinent
books, records, agreements and documents of or relating to Xxxx and Xxxxx
Xxxxxxxx, including the newly formed Xxxx 4, relative to the ownership,
development or marketing of the EMR Software which in the opinion of counsel
to TMS could impact their sale and unencumbered ownership of the EMR
Software. Any information reviewed by TMS pursuant to this paragraph will be
subject to the terms of the "Confidentiality Agreement" (as hereinafter
defined).
9) Expenses. Each of the parties agrees to pay its own expenses incident to the
performance of this Letter of Intent, the negotiation and execution of the
Final Agreement and closing of the transactions contemplated by this Letter of
Intent including all fees incurred by either party.
10) NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Xxxx and Xxxxx
Xxxxxxxx and TMS recognize and acknowledge that through the exercise of due
diligence under this Letter of Intent they will have access to confidential
information concerning the structure and conduct of the businesses of Mark
and Xxxxx Xxxxxxxx including the newly formed Xxxx 4, as well as TMS (including
but not limited to propitiatory information, list of customers, costs, and
financial information) which prior to and after the consummation of the
transaction will be valuable, special and unique property of Xxxx and Xxxxx
Xxxxxxxx and TMS respectively. Xxxx and Xxxxx Xxxxxxxx and TMS agree that they
will not disclose and that they will use their best efforts to prevent
disclosure by any other person of confidential information, except those
authorized by either Xxxx and Xxxxx Xxxxxxxx or TMS. This limitation applies
whether or not the transaction is closed both before and after the dates
specified for closing. Xxxx and Xxxxx Xxxxxxxx and TMS recognize and agree
that violation of any of the conditions contained in this paragraph will
cause irrefutable damage or injury to the other, the exact amount of which
may be impossible to ascertain, and the effected party will be entitled to an
injunction, without the necessity of posting a bond, to eliminate any further
violation.
The effective party's rights to an injunction will be in addition to, and not
in limitation of, any other rights or remedies that party may have against the
other.
11) Miscellaneous. This Letter of Intent has been prepared and is being
executed to serve as an aid to the negotiation, preparation and execution of
the Final Agreement. The terms described in this Letter of Intent have been
purposed without the benefit of a complete due diligence investigation
customary for transactions of this type, and each party understands that
certain terms hereof may be modified if either party believes that modification
is justified based upon its subsequent investigation.
12) Governing Law. The laws of the state of North Carolina will govern the
validity, interpretation. performance and enforcement of this Letter of Intent.
13) Terms of Agreement. Until executed by both parties this Letter of Intent
does not constitute an offer to purchase sole and complete ownership of the
EMR Software nor will it obligate Xxxx 4 to provide such sole and complete
ownership and will not bind either party until it is fully signed. If signed,
this Letter of Intent will become effective as of the date signed by both
parties and will remain in effect until the 1st of September of 2006, or this
Letter of Intent will terminate, unless extended by written agreement of the
parties. If you have any additional questions or comments, please feel free to
contact me.
Very truly yours,
/s/ Xxxxx X. Xxxxxxxx Chief Operating Officer
4
ACCEPTED:
TotalMed Systems, Inc.
/s/ Xxxxx X. Xxxxxxxx
Zechariah 4, LLC
/s/ Xxxx Xxxxxxxx /s/ Xxxxx Xxxxxxxx
Date: June 30, 2006
