Exhibit 10.4
BUY-BACK AGREEMENT
THIS BUY-BACK AGREEMENT (this "Agreement") is made and entered into as of
January 1, 1998 by and among XXXXXX XXXXXXXX, a resident of the State of New
York ("Repurchaser"); SHORELINE MEDICAL BILLING SYSTEMS, INC., a New York
corporation ("Shoreline"); and NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION,
a Nevada corporation ("NMFS").
W I T N E S S E T H:
WHEREAS, as of the date hereof, NMFS has acquired substantially all of the
assets of Shoreline pursuant to that certain Medical Billing Business Asset
Purchase Agreement with Shoreline dated as of the even date hereof (the
"Shoreline Asset Purchase Agreement");
WHEREAS, as of the date hereof, NMFS has acquired substantially all of the
assets of an accounting business owned and operated by Repurchaser, the
successor of Repurchaser's interest in the partnership "Maybruch & Xxxxxxxxx"
(the "Accounting Business"), pursuant to that certain Accounting Business Asset
Purchase Agreement with Repurchaser dated as of the even date hereof (the
"Accounting Business Asset Purchase Agreement") (the Shoreline Asset Purchase
Agreement and the Accounting Business Asset Purchase Agreement being hereinafter
referred to collectively as the "Asset Purchase Agreements");
WHEREAS, Repurchaser owns all of the stock of Shoreline and all of the
assets of the Accounting Business, and Repurchaser is therefore a beneficiary of
the Asset Purchase Agreements;
WHEREAS, in conjunction with said asset purchases pursuant to the Asset
Purchase Agreements, NMFS and Repurchaser have made and entered into that
certain Employment Agreement (the "Employment Agreement") and that certain
Noncompetition Agreement (the "Noncompetition Agreement"), each dated as of the
even date hereof;
WHEREAS, the Employment Agreement provides inter alia for the payment of
certain bonuses to Repurchaser as set forth in Sections 3.8 and 3.9 of the
Employment Agreement;
WHEREAS, to induce Repurchaser and Shoreline to enter into said Asset
Purchase Agreements, NMFS and Repurchaser hereby agree that Repurchaser should
have the right under certain circumstances as set forth herein to reacquire the
assets of Shoreline and of the Accounting Business;
WHEREAS, if NMFS defaults in the performance of certain obligations under
the Employment Agreement, the parties wish to protect the interests of
Repurchaser and Shoreline by, among other things, affording Repurchaser the
right to repurchase assets from NMFS;
NOW, THEREFORE, IN CONSIDERATION OF the premises and the covenants and
agreements contained herein, the parties hereto do hereby agree as follows:
Section 1. Buy-Back Right. In the event of any failure of NMFS to make
any payment due to Repurchaser in accordance with Section 3.8 or Section 3.9 of
the Employment Agreement and the failure by NMFS to cure such nonpayment within
thirty (30) days after receipt of written notice thereof (the "Event of
Default"), then Repurchaser shall have the right repurchase from NMFS all of the
assets of Shoreline and of the Accounting Business acquired by NMFS pursuant to
the Asset Purchase Agreements, subject to the procedures set forth in Section 3
hereof.
Section 2. Remedies for Default.
2.1 Upon the occurrence of the Event of Default set forth in Section 1
hereof, Repurchaser shall have the right to purchase from NMFS (the "Buy-back")
for the consideration of One U.S. Dollar ($1.00) all of the assets purchased by
NMFS under the Asset Purchase Agreements, together with (i) any replacements or
proceeds of the disposition thereof; (ii) contracts to perform medical billing
or accounting services managed or serviced or obtained as a result of efforts by
Repurchaser ("Client Contracts") or other contracts ("Assigned Contracts")
between NMFS, its successors or assigns, and any third parties located within a
fifty (50) mile radius of 000 Xxxxx 00, Xxxxxxx, Xxx Xxxx (the "Territory") (all
the above referred to hereinafter as the "Assets").
2.1.1 The Assets shall include, without limitation, the lease
assigned by assignment dated as of the even date hereof from Shoreline to
NMFS under the Shoreline Asset Purchase Agreement (the "Lease") and any
other lease for replacement or additional offices, including any extensions
or modifications thereof, for premises located within the Territory.
2.1.2 Upon conveyance to Repurchaser, the Assets 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 of 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
2
individually as an "Encumbrance" and collectively as "Encumbrances").
2.2 Upon the occurrence of any Event of Default and exercise of the
buy-back right:
2.2.1 Repurchaser shall be released from all obligations,
restrictions and liabilities under the Noncompetition Agreement and the
Employment Agreement.
2.2.2 Repurchaser and Shoreline shall have the right, without any
liability to NMFS, to negotiate and enter into contracts for medical
billing and accounting services with NMFS clients in the Territory, even
though the terms of the Client Contracts have not expired. Upon notice
to NMFS that any of its clients intend to enter into a medical billing
or accounting contract with Repurchaser or Shoreline, the client's
contract with NMFS shall be terminated and such NMFS clients shall be
free of any further liability to NMFS incurred after the date of said
notice.
2.2.3 Each and every representation and warranty of Repurchaser and
Shoreline which survived the closing under the Asset Purchase Agreements
shall terminate.
Section 3. Buy-back Procedure.
3.1 Repurchaser may initiate the Buy-back by giving NMFS written notice of
same (the "Buy-back Notice"). Repurchaser may give the Buy-back Notice at any
time after an Event of Default except that such Buy-back Notice shall be given
within ten (10) days of an Event of Default under Section 1 hereof. The
Buy-back Notice shall set forth a closing date (the "Buy-back Closing Date")
which shall be no less than fifteen (15) days nor more than sixty (60) days
after the giving of the Buy-back Notice and designate the location of closing
within the Territory. The closing of the Buy-back (the "Buy-back Closing")
shall occur at the location and on the Buy-back Closing Date designated in the
Buy-back Notice.
3.2 At the Buy-back Closing, all charges for rent, utilities, payroll,
payments under any Assigned Contracts assigned to Repurchaser in the Buy-back,
and other current operating expenses of NMFS in the Territory shall be prorated
based on actual days elapsed for the appropriate period, with NMFS being
responsible for its share of such prorations through midnight of the day
preceding the Buy-back Closing Date.
3.3 Upon the terms and subject to the conditions herein contained, at the
Buy-back Closing NMFS will deliver to Repurchaser, the following:
3
3.3.1 one or more duly executed Bills of Sale and Assignments in
substantially the forms delivered in accordance with the Asset Purchase
Agreements for the Assets to be transferred to Repurchaser hereunder, or in
such other form reasonably requested by Repurchaser.
3.4 From time to time and at any time, at Repurchaser's request, whether
on or after the Buy-back Closing Date, and without further consideration, NMFS
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 Repurchaser, all of the
right, title and interest in and to the Assets to be transferred to Repurchaser
hereunder, free and clear of any Encumbrances whatsoever, or (ii) as may be
reasonably necessary to carry out the intent of this Agreement and the
transactions contemplated hereby.
3.5 Upon consummation of the Buy-back Closing, the Employment Agreement
and the Noncompetition Agreement shall be terminated, except that any amounts
due Repurchaser under the terms of the Employment Agreement and the
Noncompetition Agreement as of the Buy-back Closing Date, shall be paid to
Repurchaser at the Buy-back Closing.
Section 4. Conditions of Buy-back.
4.1 In the event of a Buy-back, Repurchaser shall not assume any
obligation, debt or liability of NMFS incurred or arising out of events
occurring after the date of the Asset Purchase Agreements and prior to the
Buy-back Closing Date, including without limitation the following (the "Excluded
Liabilities"):
4.1.1 any liability, indebtedness or obligation of NMFS for
borrowed money, whether absolute or contingent, direct or indirect;
4.1.2 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 NMFS or relate to
services performed or products delivered prior to the Buy-back Closing or
which arise out of actions taken by, or omissions of, NMFS prior to the
Buy-back Closing;
4.1.3 any federal, state, local or other income taxes payable by
NMFS or any interest or penalties with respect thereto;
4
4.1.4 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 NMFS incurred prior to the
Buy-back Closing Date;
4.1.5 liabilities and obligations of NMFS for payroll, wages,
bonuses, vacation, sick pay and severance pay and other like amounts due as
of the Buy-back Closing Date to officers, directors, employees, contractors
and agents of NMFS;
4.1.6 liabilities and obligations of NMFS based upon tortious or
illegal conduct prior to the Buy-back Closing Date;
4.1.7 liabilities and obligations of NMFS for any breach or
violation, as of the Buy-back Closing, of any contracts of NMFS with third
parties, including without limitation the Assigned Contracts and Client
Contracts;
4.1.8 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 NMFS;
4.1.9 liabilities and obligations of NMFS incurred in connection
with the preparation of this Agreement and the consummation of transactions
contemplated hereby, including without limitation legal and accounting
fees; and
4.1.10 trade payables and operating expenses of NMFS incurred or
accrued prior to the Buy-back Closing Date.
4.2 Notwithstanding the foregoing, Repurchaser will assume the obligations
of NMFS under the Assigned Contracts and Client Contracts to be transferred to
Repurchaser hereunder, but only to the extent that they represent obligations
which are by their stated terms to be performed, in the ordinary course of
business, subsequent to the Buy-back Closing Date.
Section 5. Indemnification.
5.1 Indemnity by NMFS NMFS shall indemnify, defend and hold harmless
Repurchaser and Shoreline from and against:
(a) all Excluded Liabilities;
(b) any and all losses, damages, costs or deficiencies resulting from any
and all misrepresentations or breaches
5
of warranty or failures to perform agreements or undertakings by NMFS
contained in or made pursuant to 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 Repurchaser or Shoreline which, if successful, might result in a
claim for indemnity hereunder (collectively, an "indemnifiable loss"),
Repurchaser or Shoreline, as the case may be, shall notify NMFS, in writing, of
such claim or action, and at NMFS's option, NMFS may, at its sole expense,
assume control over the defense of such claim or action, but in any event
Repurchaser or Shoreline, as the case may be, at its sole cost, shall have the
right to participate in the defense of any such claim or action. If, after
notice thereof, NMFS 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,
Repurchaser or Shoreline, as the case may be, may defend any such claim or
action and may then settle or compromise such claim or action on terms that are
reasonable. NMFS 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 NMFS 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 Repurchaser or Shoreline, as the case may be, in
the defense of any such claim or action. NMFS shall pay to Repurchaser or to
Shoreline, as the caser may be, all amounts owed pursuant to this Section 5.1
within thirty (30) days after written demand therefor.
5.2 Remedies Cumulative. The remedies provided herein shall be cumulative
and shall not preclude any party from asserting any other rights or seeking any
other remedies to which such party is entitled by law.
Section 6. Miscellaneous.
6.1 Expenses. All expenses of the preparation of this Agreement and of
the other agreements and transactions contemplated hereby, including, without
limitation, counsel fees, accounting fees, investment advisor's fees and
disbursements, shall be borne by the respective parties incurring such expense.
6.2 Notices. All notices, demands and other communications hereunder
shall be written and shall be deemed to have been duly
6
given if (i) sent by facsimile 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 Repurchaser: Xxxxxx Xxxxxxxx
000 Xxxxx 00
Xxxxxxx, XX 00000
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 Shoreline: Shoreline Medical Billing
Systems, Inc.
000 Xxxxx 00
Xxxxxxx, XX 00000
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
or to such other address as NMFS, Shoreline or Repurchaser may designate by
written notice to the other. Notices delivered in person or by facsimile
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
7
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.
6.3 Entire Agreement. This Agreement and the Exhibits, and the other
agreements and 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.
6.4 Governing Law; Arbitration. The validity and construction of this
Agreement shall be governed by the laws of the State of New York. The parties
(meaning Repurchaser on one hand and NMFS on the other hand) agree that all
disputes concerning this Agreement or any of the other agreements executed and
delivered in connection with the Closing 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 party 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, then the American Arbitration
Association shall select the arbitrator. All determinations and the final
decision of the arbitrator shall be made in writing. The fees and expenses of
the arbitrator shall be awarded by the arbitrator in his discretion as part of
the award. The arbitrator's award shall be binding on the parties hereto and
may be entered in any court of competent jurisdiction. The parties reserve the
right to seek a judicial temporary restraining order, preliminary injunction, or
other similar short term equitable relief prior to the appointment of the
arbitrator. The arbitrator will have the right to make a final determination of
the parties' rights including, without limitation, whether to make permanent,
modify or dissolve the judicial order.
6.5 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.
6.6 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.
8
6.7 Amendments. This Agreement may be amended, but only in writing,
signed by the parties hereto.
6.8 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.
6.9 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.
6.10 No Other Parties. Repurchaser acknowledges and agrees 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.
6.11 Rules of Construction. All references herein to the singular shall
include the plural, and vice versa, and all references herein to the neuter
shall include the masculine or feminine, as the case may be, and vice versa.
When general words or terms are used herein followed by the word "including" (or
another form of the word "include") and words of particular and specific
meaning, the general words shall be construed in their widest extent, and shall
not be limited to persons or things of the same general kind or class as those
specifically mentioned in the words of particular and specific meaning. All
parties have participated in the drafting of this Agreement. No provision of
this Agreement shall be construed against or interpreted to the disadvantage of
a party by reason of such party having or being deemed to have drafted,
structured or dictated such provisions. Time is of the essence of this
Agreement.
6.12 Assignment; Binding on Successors and Assigns. Repurchaser may assign
all or any portion of his rights under this Agreement to any assignee of the
payments due pursuant to Section
9
3.8 or Section 3.9 of the Employment Agreement or to any corporation or entity
in which Repurchaser is a principal. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, successors,
assigns, beneficiaries and representatives.
6.13 Prevailing Terms. In the event the terms of this Agreement conflict
with the terms of the Asset Purchase Agreements, Employment Agreement or
Noncompetition Agreement, the terms of this Agreement shall prevail.
10
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
------------------------------- (SEAL)
XXXXXX XXXXXXXX ("Repurchaser")
SHORELINE MEDICAL BILLING SYSTEMS, INC.,
a New York corporation ("Shoreline")
By:
------------------------------------
Xxxxxx Xxxxxxxx, President
NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION, a Nevada corporation
("NMFS")
By:
------------------------------------
Title:
------------------------------
11
