EXHIBIT 10.1
ACCOUNTING BUSINESS ASSET PURCHASE AGREEMENT
THIS ACCOUNTING BUSINESS ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of January 1, 1998 by and between NATIONAL MEDICAL
FINANCIAL SERVICES CORPORATION, a Nevada corporation ("NMFS"); and XXXXXX
XXXXXXXX D/B/A XXXXXXXX & CO., CPA'S, a resident of the State of New York
("Seller").
W I T N E S S E T H:
WHEREAS, Seller has been principal and partner of a partnership "Maybruch &
Xxxxxxxxx" (the "Partnership"), operating an accounting and billing services
business with its principal business office located at 000 Xxxxx 00, Xxxxxxx,
Xxx Xxxx 00000 (the "Accounting Business");
WHEREAS, in December 1997 Seller retained certain assets and clients of the
Partnership as a sole proprietor (the "Accounting Business"), upon the
dissolution of the Partnership;
WHEREAS, Shoreline Medical Billing Systems, Inc. ("Shoreline") operates a
medical billing business with its principal business office located at 000 Xxxxx
00, Xxxxxxx, Xxx Xxxx 00000 (the "Medical Billing Business"), which together
with the Accounting Business are sometimes referred to herein as the
"Businesses";
WHEREAS, Seller is the sole shareholder of Shoreline;
WHEREAS, it is Seller's intention to cause the sale of Seller's assets
relating to the Accounting Business in order to liquidate Seller's investment in
said assets;
WHEREAS, NMFS desires to buy, and Seller desires to sell, substantially all
of the assets owned by Seller and used in the operation of the Accounting
Business, upon the terms and conditions hereinafter set forth;
WHEREAS, to induce NMFS to perform under this Agreement and as a condition
thereto, Seller has agreed to execute a noncompetition agreement dated as of the
even date hereof in favor of NMFS ("Noncompetition Agreement");
WHEREAS, in conjunction with the purchase of the assets of the Accounting
Business, Seller and NMFS have agreed to execute an employment agreement dated
as of the even date hereof ("Employment Agreement"); and
WHEREAS, in conjunction with the purchase of the assets of Accounting
Business pursuant to this Agreement and as a condition
hereto, NMFS desires to acquire the assets and business of Shoreline Medical
Billing Systems, Inc., a New York corporation, pursuant to that certain Medical
Billing Business Asset Purchase Agreement (the "Shoreline Asset Purchase
Agreement") dated as of the even date hereof;
WHEREAS, to induce Seller to enter into this Agreement, NMFS and Seller
have agreed under certain circumstances Seller may reacquire the assets of
Seller conveyed under this Agreement and Shoreline may reacquire the assets of
Shoreline conveyed under the Shoreline Asset Purchase Agreement, and in
furtherance of that agreement Seller, Shoreline and NMFS have executed a
Buy-Back Agreement dated as of the even date hereof (the "Buy-Back Agreement");
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, the sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound, do hereby agree as follows:
Section 1. Sale of Assets; Assumption of Specified Liabilities.
1.1 Sale of Assets. On the terms, subject to the conditions, and for the
consideration hereinafter stated, Seller hereby agrees to sell, convey,
transfer, assign and deliver to NMFS, and NMFS agrees to buy and acquire as
hereinafter provided, at the "Closing" (as hereinafter defined), all assets of
the Accounting Business, tangible or intangible, real or personal, including,
without limitation, the following described assets owned and used in the
Accounting Business to the extent that they exist:
(a) all equipment, business machines, computers, furniture, furnishings,
and other tangible personal property of Accounting Business including,
without limitation, that listed in Exhibit 1.1(a) hereto;
(b) all accounts receivable and all unbilled amounts for services of
Seller as of midnight of the day before the Closing Date, which shall
be consistent with the aged accounts receivable listing as of October
31, 1997 set forth at Exhibit 1.1(b) attached hereto except for
additions and collections in the ordinary course of business;
(c) all claims and rights accruing on and after January 1, 1998 under the
contracts of Seller listed in Exhibit 1.1(c) (the "Assigned
Contracts");
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(d) all business records, all customer lists, and all personnel lists
(whether past or present, whether stored in computer memory or on hard
copy);
(e) all sales literature, promotional material and other general files and
printed forms used in the Accounting Business;
(f) all goodwill, trademarks, services marks and trade names used in the
Accounting Business;
(g) all rights of the Seller under licenses and other governmental
approvals or permits (to the extent transferable) used in the
Accounting Business;
(h) all telephone numbers and telephone and yellow pages directory
listings of the Accounting Business;
(i) all prepaid expenses and deposits of the Accounting Business;
(j) all inventory and supplies of the Accounting Business;
(k) all rights to leasehold improvements and fixtures under the existing
sublease of the Accounting Business;
(l) all software used in the Accounting Business;
(m) all payroll records for all employees of the Accounting Business;
(n) all information and documentation relating to the names, addresses and
telephone numbers of the Accounting Business's referral sources;
(o) all records and lists of third party payor and case manager contacts
including names, addresses and telephone numbers;
(p) all records relating to vendors dealing with the Accounting Business;
and
(q) all financial records of the Accounting Business.
Nothing herein shall be construed as prohibiting Seller from retaining copies of
any documents or computer software or records to be conveyed hereunder.
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The foregoing assets may be referred to herein collectively as the
"Assets". The "Assets" shall not include any "Excluded Assets", as defined in
Section 1.2 below.
The "Assets" shall include, without limitation, all properties and assets
of the Accounting Business as reflected in the 1997 Financial Statement of the
Partnership referred to in Section 4.3 hereof and all properties and assets
acquired by the Partnership or the Seller relating to the Accounting Business
after October 31, 1997, except those properties and assets disposed of
thereafter in the ordinary course of business and except for the "Excluded
Assets" as defined below.
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1
hereof, the following described assets of the Accounting Business shall not be
acquired by NMFS, shall not constitute "Assets," and shall be defined herein as
the "Excluded Assets":
(a) DELETED
(b) all cash of the Accounting Business as of midnight the day before the
Closing Date;
(c) all claims and rights accruing prior to January 1, 1998 under the
Assigned Contracts;
(c) motor vehicles;
(d) any ownership interest in land or buildings;
(e) all pension plan assets;
(f) professional licenses; and
(g) the assets described in Exhibit 1.2(g) hereof.
1.3 No Assumption of Liabilities. It is expressly acknowledged and agreed
that, except in respect of the Assigned Contracts and as otherwise set forth
herein, NMFS is assuming no obligations, debts or liabilities of the Accounting
Business or of Seller incurred prior to the Closing Date, including, without
limitation, the following described debts, obligations or liabilities to the
extent they may exist:
(a) any liability, indebtedness or obligation of the Accounting Business
or of Seller for borrowed money, whether absolute or contingent,
direct or indirect;
(b) liabilities and obligations of the Accounting Business or of Seller,
the existence of which
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constitute a material breach of any of the representations or
warranties made by Seller in Section 4 of this Agreement;
(c) any liabilities or obligations arising out of or in connection with
any litigation, claim, investigation or proceeding (including, without
limitation, losses, costs, expenses, attorneys' fees, and damages
incurred in connection therewith) which relate to the Accounting
Business or to Seller or relate to services performed or products
delivered prior to the Closing or which arise out of actions taken by,
or omissions of, the Accounting Business or Seller prior to the
Closing (whether or not scheduled on Exhibit 4.8);
(d) any federal, state, local or other income taxes payable by the
Accounting Business or by Seller or any interest or penalties with
respect thereto;
(e) any liability under any employee benefit or welfare plan or regarding
any compensation or withholding taxes owed to or with respect to any
employee or independent contractor of the Accounting Business or of
Seller incurred prior to the Closing Date;
(f) liabilities and obligations of the Accounting Business or of Seller
for payroll, wages, salaries, bonuses, vacation, sick pay and
severance pay and other like amounts due as of the Closing Date to
officers, directors, employees, contractors and agents of Seller, all
of which amounts are listed in Exhibit 1.3(f) attached hereto;
(g) liabilities and obligations of the Accounting Business or of Seller
based upon tortious or illegal conduct prior to Closing;
(h) liabilities and obligations of the Accounting Business or of Seller
for any breach or violation, as of the Closing, of any contracts of
the Accounting Business or of Seller with third parties, including,
without limitation, the Assigned Contracts;
(i) DELETED
(j) any liability or obligation to Medicare, Medicaid, Blue Cross/Blue
Shield (or any other third party payor) as a result of recapture of
amounts paid by any such payor or any overpayments made by such payor
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in connection with any claims processed by the Accounting Business;
(k) liabilities and obligations of the Accounting Business or of Seller
incurred in connection with the preparation of this Agreement and the
consummation of transaction contemplated hereby, including, without
limitation, legal and accounting fees; and
(l) trade payables and operating expenses of the Accounting Business
incurred or accrued prior to the Closing Date.
All of the foregoing items described in clauses (a) through (l) above are
referred to herein collectively as the "Excluded Liabilities".
In addition, NMFS will pay any sales or similar tax (or any interest or
penalties with respect thereto) which NMFS may be required to pay or become
liable for as a result of the consummation of the transactions and the sale of
the Assets contemplated hereby, including without limitation sales tax on all
equipment, business machines, computers, furniture, furnishings and other
tangible personal property.
Notwithstanding the foregoing, NMFS will assume the obligations of the
Seller under the "Assigned Contracts", but only to the extent that they
represent obligations which are by their stated terms to be performed, in the
ordinary course, subsequent to the Closing Date.
1.4 Freedom from Encumbrances. The conveyance of the Assets to NMFS
hereunder shall be free and clear of all claims, security interests, pledges,
options, rights of first refusal, liens, financing statements, deeds of trust,
mortgages, charges, assessments, restrictions, leases, and encumbrances (all
such claims, security interests, pledges, options, rights of first refusal,
liens, financing statements, deeds of trust, mortgages, charges, assessments,
restrictions, and encumbrances being referred to individually as an
"Encumbrance" and collectively as "Encumbrances").
Section 2. Amount, Payment and Allocation of Consideration.
2.1 Amount and Payment. NMFS shall deliver the following "Consideration"
for the Assets and for the execution, delivery and performance by Seller of the
"Noncompetition Agreement" (as defined in Section 3.4(i) hereof):
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(i) $763,702 in cash shall be paid at the Closing (as defined below) to
Seller in consideration of the sale of the Assets to NMFS;
(ii) $50,000.00 in cash shall be paid to Seller at the Closing in
consideration of the execution, delivery and performance by Seller of the
Noncompetition Agreement;
(iii) shares of unregistered common stock of NMFS ("NMFS Stock") shall
be delivered to Seller at Closing, in consideration of the sale of the
Assets to NMFS, the number of which shares shall be calculated by dividing
$400,000.00 by the average closing price (as quoted by the NASDAQ quotation
system) of NMFS Stock for the ten-day trading period immediately preceding
and including January 1, 1998 (the "Acquisition Date Price"); and
(iv) if (1) the average closing price (as quoted by the NASDAQ quotation
system or other quotation system on which NMFS Stock is then regularly
quoted) of NMFS Stock for the ten-day trading period immediately preceding
and including January 1, 1999 (the "Average Closing Price") is less than
the Acquisition Date Price, and if (2) the Net Income (as defined below)
during the preceding twelve (12) months is at least $800,000.00, then
additional shares of NMFS Stock shall be delivered to Seller on or before
January 15, 1999 in consideration of the sale of the Assets to NMFS, the
number of which shares shall be equal to the difference between (a) the
number derived by dividing $400,000.00 by the Average Closing Price, and
(b) the number of shares issued pursuant to Section 2.1(iii) above. An
example of the computation of the number of shares to be delivered is
attached hereto as Exhibit 2.1(iv) hereof.
If the other conditions set forth in Section 2.1(iv)(2) above are
applicable, except that on January 1, 1999 NMFS Stock is no longer listed
on the NASDAQ quotation system, is listed at a zero price, or there is no
market for the NMFS stock, then (A) the amount payable to Seller pursuant
to Section 3.8 of the Employment Agreement shall be increased retroactively
to January 1, 1998 from $21,765.00 to $28,765.00 per quarterly payment and
all unpaid amounts due to Seller pursuant to Section 3.8 of the Employment
Agreement shall be immediately due and payable, (B) the amount of the
performance bonus payable to Seller pursuant to Section 3.9(B)(i) of the
Employment Agreement shall be increased from $1,243,716.00 to
$1,643,716.00, (C) the limitation on the March 1 annual payments pursuant
to Section 3.9(A)(iii) of the Employment Agreement shall be increased from
$248,743.00 to $328,743.00, and (D) the NMFS
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Stock issued pursuant to Section 2.1(iii) above shall be immediately
surrendered to NMFS and cancelled.
In the case of any reclassification, capital reorganization or other change
of outstanding shares of NMFS Stock, or in the case of any consolidation or
merger of NMFS with or into another corporation which results in any
reclassification, capital reorganization or other change of outstanding
shares of NMFS Stock, NMFS shall take any and all necessary action so that
Seller shall have the right thereafter, pursuant to this Agreement, to
acquire the kind and number of shares of NMFS Stock upon such
reclassification, capital reorganization or other change, consolidation or
merger that might have been acquired pursuant to this Agreement immediately
prior to such reclassification, capital reorganization, or other change,
consolidation or merger.
For purposes of Section 2.1(iv) above, the term "Net Income" shall mean net
income before taxes computed in accordance with generally accepted principles
using the accrual method of accounting and shall be equal to net revenues of
NMFS for the period in question, initially commencing on the Closing Date and
attributable to: (1) the assets or existing customers of the Businesses,
(2) customers obtained as a result of the efforts of Seller, or (3) customers
managed or serviced within the Territory (as that term is defined in the
Noncompetition Agreement), such customers described in the foregoing (1), (2),
and (3) of this subparagraph being referred to hereinafter as "Contract
Customers", less: (a) all direct operating expenses of NMFS servicing the
Contract Customers for the period in question, including but not limited to, all
employees' salaries, compensation, payroll taxes, health insurance, expense
reimbursement, sign-up bonuses, performance bonuses and other benefits (other
than to Seller), rent, office and supplies, general liability insurance,
telephones, computers, repairs and maintenance, equipment rental and leases;
(b) a management overhead allowance of $72,731 during the first twelve (12)
months following the date of this Agreement and thereafter five percent (5%)
of the net revenues of NMFS attributable to the Businesses; (c) amortization
over an 18-year period of the consideration paid by NMFS in connection with
the acquisition of the Businesses and incentives payable to Seller (i.e.,
$140,489 per year); (d) depreciation and amortization over a 5-year period of
leasehold improvements, equipment, other fixed assets and intangibles
purchased after the Closing Date; and (e) interest costs associated with the
acquisition of fixed assets and intangibles for the Accounting Business after
the Closing Date (i.e., any financing costs for capital equipment acquired
for the Businesses after the Closing Date). For purposes of this section,
the term "net revenues" shall mean gross revenues, minus contractual
adjustments and uncollectible accounts, computed on an accrual
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basis in accordance with generally accepted accounting principles consistently
applied. No expenditure of NMFS for servicing the Contract Customers may be
considered an expense or in any way taken into account in the computation of Net
Income if the expenditure is outside the operating budget approved by Seller in
accordance with Seller's employment pursuant to the Employment Agreement and
Seller has not approved the expenditure in advance in writing, which approval
shall not be unreasonably withheld.
2.2 Allocation. The Consideration shall be allocated for tax purposes as
provided in Exhibit 2.2 hereof. Each party will timely file IRS Form 8594 as
required under Section 1060 of the Internal Revenue Code of 1986, as amended,
which shall be completed in conformity with the allocations set forth in this
Agreement.
Section 3. Closing.
3.1 Closing and Closing Date. The closing (the "Closing") of the sale and
purchase of the Assets and the execution and delivery of the other agreements
and documents contemplated herein shall take place on or before January 6, 1998
(the "Closing Date") at 10:00 a.m., Suffern, New York time at 000 Xxxxx 00,
Xxxxxxx, Xxx Xxxx 00000, or at such other place and time as may be deemed
appropriate by the parties hereto, at which time in addition to the NMFS stock
to be delivered pursuant to Section 2.1(iii) hereof, the cash consideration as
stated in Section 2.1(i) and 2.1(ii) shall be delivered in immediately available
funds pursuant to Seller's further direction. For purposes of this Agreement
and for accounting purposes, the "Closing Date" shall be effective as of
January 1, 1998. If the parties agree, the Closing may be consummated by
exchange of signature pages by facsimile transmission, with the originals
thereof to be delivered by mail as soon thereafter as practicable. At the
Closing, all charges for rent, utilities, payroll, payments under Assigned
Contracts, and other current operating expenses of the Accounting Business
shall be prorated based on actual days elapsed for the appropriate period,
with Seller being responsible for its share of such prorations through
midnight of the day preceding the Closing Date.
3.2 Action by NMFS. Upon the terms and subject to the conditions herein
contained, at the Closing on the Closing Date, NMFS will deliver to Seller the
following:
(i) The certificate referred to in Section 6.1 hereof;
(ii) The opinion of counsel for NMFS referred to in Section 6.3
hereof;
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(iii) Resolutions of NMFS, certified by an appropriate officer,
authorizing the execution, delivery and performance of this
Agreement and the other agreements to be delivered by NMFS in
connection with the Closing hereunder; and
(iv) The Consideration in the manner specified in Section 2.1 hereof
and in the form specified in Section 3.1 hereof.
3.3 Action by Seller. Upon the terms and subject to the conditions herein
contained, at the Closing on the Closing Date, Seller will deliver to NMFS the
following:
(i) A duly executed Xxxx of Sale and Assignment in substantially the
form of Exhibit 3.3(i) hereto;
(ii) The certificate referred to in Section 7.1 hereof; and
(iii) The opinion of counsel for Seller referred to in Section 7.3
hereof.
3.4 Action by All Parties. Upon the terms and subject to the conditions
herein contained, at the Closing and to be effective on the Closing Date, the
parties will, as appropriate, execute and deliver to each other the following:
(i) The "Noncompetition Agreement" in substantially the form attached
hereto as Exhibit 3.4(i);
(ii) The "Employment Agreement" in substantially the form attached
hereto as Exhibit 3.4(ii);
(iii) The "Subscription Agreement" and "Confidential Purchaser
Questionnaire", each in substantially the form attached hereto as
Exhibit 3.4(iii); and
(iv) The "Buy-Back Agreement" in substantially the form attached
hereto as Exhibit 3.4(iv); and
(v) The "Shoreline Asset Purchase Agreement".
3.5 Further Acts and Assurances. From time to time and at any time, at
NMFS's request, whether on or after the Closing Date, and without further
consideration, Seller shall, at its expense, execute and deliver such further
documents and instruments of conveyance and transfer and shall take such further
actions (i) as may be reasonably necessary to transfer and convey to NMFS all of
the right, title and interest in and to the Assets, free and clear of any
Encumbrance whatsoever, or (ii)
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as may be reasonably necessary to carry out the intent of this Agreement and the
transactions contemplated hereby, or (iii) as may be reasonably necessary in
connection with any audit which NMFS may conduct of the Accounting Business's
financial statements, which audit (if any) shall be at NMFS's sole expense.
3.6 Audit. NMFS shall have the right to cause its accounting firm to
audit the financial statements of the Partnership and of the Accounting Business
limited to the current year and the two years prior to the current year at
NMFS's expense solely for the purpose of complying with SEC financial reporting
regulations. Seller shall cooperate reasonably in connection with any such
audit or audits and will execute management letters and other documents
reasonably requested in connection with any such audit or audits or any equity
offering by NMFS.
Section 4. Representations and Warranties of Seller.
Seller hereby represents, warrants, covenants and agrees to and with NMFS
as follows:
4.1 DELETED
4.2 DELETED
4.3 Accuracy of Financial Statements. Seller has delivered to NMFS as
Exhibit 4.3 a copy of the financial statements of the Accounting Business for
the years ended December 31, 1995 and 1996 and a balance sheet and an income
statement for the ten-month period ending October 31, 1997 (the "Financial
Statements"). The balance sheet and income statement for the ten-month period
ending October 31, 1997 are referred to hereinafter as the "1997 Financial
Statement". The Financial Statements are complete and accurate and fairly
present the financial condition of the Accounting Business and the income and
expenses of the Accounting Business as of the respective dates thereof. Except
as noted in Exhibit 4.3, the Financial Statements have been prepared on a cash
basis and are accurate. The Accounting Business has no material liabilities or
obligations (including, without limitation, any liability for federal, state or
local taxes of the Accounting Business), for any period ended on or prior to the
1997 Financial Statement or any liability or obligation in connection with any
transaction or state of affairs entered into or existing on or before the date
thereof, which is not fully reflected on the 1997 Financial Statement or
otherwise disclosed to NMFS in the Exhibit 4.10 hereto.
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4.4 Properties of the Accounting Business.
(i) The 1997 Financial Statement reflects all of the properties
presently owned by Seller and used in the Accounting Business.
(ii) Exhibit 4.4(ii) attached hereto are true and accurate copies of
all real or personal property which is currently used by Seller in the
Accounting Business and which either is not owned by Seller or is leased or
rented by Seller.
4.5 Taxes and Tax Returns. To the best of Seller's knowledge, Seller has
filed all federal, state and local tax returns and reports of the Accounting
Business which have become due to be filed (including, without limitation, those
due in respect of its properties, income, licenses, sales and payrolls), and
such returns are complete and accurate in all material respects. A copy of the
Partnership's most recent federal information return is attached as Exhibit 4.5
hereto. Without limiting the foregoing, to the best of Seller's knowledge,
(a) Seller has timely filed all FICA, FUTA and similar state and local tax
returns and withholding of employee tax returns and reports of the Accounting
Business which have become due to be filed and has paid all amounts required
to be paid thereunder, and (b) Seller has paid over to the appropriate taxing
authorities all amounts required to have been withheld by the Accounting
Business from employee compensation, except such withheld amounts not yet due
to have been paid over, all of which amounts not yet paid over are being held
by the Accounting Business for the account of the appropriate taxing
authority. Seller does not know of any questions which have been raised by
any federal, state or local taxing authority relating to taxes or assessments
of the Accounting Business which, if determined adversely to the Accounting
Business, would result in the assertion of any tax deficiency.
4.6 Contracts. Exhibit 1.1(c) is a list of the Assigned Contracts.
Exhibit 4.6 is a list of all agreements of the Accounting Business with third
parties, other than the Assigned Contracts. Except as set forth in Exhibit
1.1(c) or in Exhibit 4.6 hereto, Seller is not a party to any material contract,
agreement, lease, or power of attorney of any kind whatsoever.
4.7 Compliance with Laws. To the best of Seller's knowledge, the
Accounting Business is in compliance in all material respects with the laws,
regulations, rules and decrees of all governmental authorities whatsoever
relating to the conduct of its business, including, without limitation, the Fair
Labor Standards Act.
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4.8 Litigation. Except as scheduled in Exhibit 4.8, there is no
litigation, action, suit, proceeding or governmental investigation pending or
(to the best of Seller's knowledge) threatened against the Accounting Business
or Seller or affecting the Accounting Business or any of its assets, at law or
in equity or before any federal, state, municipal, local or other governmental
authority, or before any arbitrator, nor does Seller know of any reasonable
basis for any such litigation, action, suit, proceeding or investigation.
Neither the Accounting Business nor Seller is the subject to any order, writ or
decree of any court or other governmental authority.
4.9 Employee Plans and Agreements. The Accounting Business is not a party
to any collective bargaining or labor agreement or to any written employment
agreement, profit sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, welfare, or incentive plan
or policy or increases in the rate of remuneration entered into with or for the
benefit of present or former employees, whether or not unionized, of the
Accounting Business or any other like agreement, plan or policy, other than as
set forth in Exhibit 4.9.
4.10 Liabilities. All liabilities and obligations of the Accounting
Business, direct, indirect or contingent, are either listed on the 1997
Financial Statement or on Exhibit 4.10 attached hereto.
4.11 Insurance. All insurance maintained for the Accounting Business is
listed and described on Exhibit 4.11 attached hereto.
4.12 Absence of Certain Changes. From October 31, 1997 until the Closing,
(a) the operations of the Accounting Business shall have been conducted in the
ordinary course of business, (b) no event shall have occurred or have been
threatened which has or would have a material and adverse affect upon the
Accounting Business, and (c) the Accounting Business shall not have sustained
any material loss or damage to its assets or property, whether or not insured,
or union activity that affects materially and adversely its ability to conduct
the Accounting Business. Except as described in Exhibit 4.12, since October 31,
1997, to the best of Seller's knowledge, the Accounting Business has not:
(i) incurred or suffered any obligations or liabilities (absolute or
contingent) except current liabilities incurred in the ordinary
course of business none of which exceed $5,000 to any entity and
all of which together do not exceed $25,000;
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(ii) declared or made (or became obligated for) any payment or
distribution (other than cash or cash equivalents) to partners or
purchased or redeemed (or became obligated to purchase or redeem)
any partnership interests;
(iii) mortgaged, pledged or subjected (whether or not voluntarily) to
any Encumbrance, any of its assets, other than Encumbrances
incidental to the conduct of its business or the ownership of its
property and assets which were not incurred in connection with
the borrowing of money, or the obtaining of advances or credit,
and which do not in the aggregate impair the use or value thereof
in the operation of the Accounting Business of the Seller;
(iv) sold, assigned or transferred or agreed to sell, assign or
transfer any of its tangible assets or cancelled any debts or
claims, except in each case in the ordinary course of business;
(v) sold, assigned, or transferred or agreed to sell, assign or
transfer any trade names, or other intangible assets, or
permitted existing rights with respect thereto to lapse;
(vi) suffered any extraordinary loss or knowingly waived or permitted
to lapse any right of substantial value;
(vii) made any capital expenditures, or otherwise entered into any
executory transactions or commitments to make any capital
expenditures, in excess of $5,000 per item or $25,000 in the
aggregate, except in the ordinary course of business;
(viii) failed to comply in any material respect with any applicable
local, state or federal law, rule or regulation to the material
detriment of Seller; or
(ix) suffered any event or condition of any character, materially and
adversely affecting the Accounting Business, properties or
prospects of the Accounting Business.
4.13 Employees. A listing of all employees (including their rates of pay
and their accrued but unpaid vacation and sick days ) of the Accounting Business
is attached as Exhibit 4.13.
4.14 DELETED
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4.15 Licenses. Exhibit 4.15 consists of true and accurate copies of all
governmental or other licenses and permits held by (i) Seller relating to the
operation of the Accounting Business (including, as to each such license or
permit, the name of the owner of the license or permit, the issuing authority, a
description of the subject matter of the license or permit, and the termination
date, if any, or notice requirement with respect to termination and renewal
options) and (ii) personnel in connection with their services for the Accounting
Business. Except for the licenses and permits held by the Accounting Business
and by Seller and described on Exhibit 4.15, there are no other licenses or
permits required to operate the Accounting Business. To the best of Seller's
knowledge, all such licenses and permits are in full force and effect. To
Seller's knowledge, the validity, continuation and effectiveness of all of the
Accounting Business's licenses and permits is in no way affected by the transfer
of such licenses under this Agreement, or, if any would be affected, Seller has
delivered to NMFS, to the transferee or to the Accounting Business an
appropriate consent to such transfer. Seller is not aware of any proceeding or
investigation by any governmental agency relating to the Accounting Business.
4.16 No Finders or Brokers. Neither Seller nor any officer or director
thereof has engaged any finder or broker in connection with the transactions
contemplated hereunder. Seller will indemnify and hold NMFS harmless against
claims (and attorneys' fees and expenses in the defense thereof) of any person,
firm or corporation for finder's fees, broker's fees, brokerage commissions,
sales commissions or the like alleged in connection with the transactions
contemplated hereunder due to Seller's engaging any finder or broker in
connection with the transactions contemplated herewith.
4.17 Disclosure. To the best of Seller's knowledge, no material
representation or warranty by Seller in this Agreement and no material statement
pertaining to the Accounting Business in this Agreement or any document, exhibit
or certificate furnished or to be furnished to NMFS pursuant hereto will contain
any materially untrue statement which, if corrected, would have a material
adverse effect on the fair market value of the property being transferred
hereunder. There are no facts not described herein that Seller knows (and which
are not known to NMFS) which would materially adversely affect the future
operations of the Accounting Business or the use of the Assets in the conduct of
a similar business at the same location by NMFS.
4.18 Validity of Agreements. To the best of Seller's knowledge, upon
execution and delivery by all parties, the obligations of Seller under this
Agreement and all other agreements to be executed by Seller in connection
herewith, will
15
constitute the valid and binding obligation of Seller and be binding against it
and enforceable in accordance with their respective terms (except as
enforceability may be restricted, limited, or delayed by bankruptcy, insolvency,
moratorium or similar laws affecting or relating to the enforcement of
creditors' rights in general and except as the enforceability is subject to
general principles of equity, regardless of whether enforceability is considered
in a proceeding at law or in equity).
4.19 DELETED
4.20 Title to Assets. Except as described in the 1997 Financial Statement
referred to in Section 4.3 or in Exhibits 4.10 and 4.12 hereof, Seller holds
good and marketable title to the Assets, free and clear of restrictions on or
conditions to transfer or assignment, and free and clear of Encumbrances.
4.21 Transfer Not Subject to Encumbrances or Third-Party Approval.
Except as disclosed in Exhibit 4.21 hereto, the execution and delivery of this
Agreement by Seller, and the consummation of the contemplated transactions, will
not result in the creation or imposition of any Encumbrance on any of the
Assets, and will not require the authorization, consent, or approval of any
third party.
4.22 Condition of Personal Property. All tangible personal property,
equipment, fixtures and inventories included within the Assets or required to be
used in the ordinary course of business by the Accounting Business are sold in
"as is" condition. No value in excess of applicable reserves has been given to
any inventory with respect to obsolete or discontinued products.
4.23 Investment Representation (Stock). Seller is acquiring NMFS Stock
pursuant to this Agreement for investment and without a view to, or for the
resale in connection with, any distribution thereof. Seller is an "accredited
investor" within the meaning Regulation D promulgated under Securities Act of
1933, as amended. Seller acknowledges NMFS's representation that the NMFS Stock
has not been registered under the Securities Act of 1933, as amended, or under
any state securities laws and cannot be resold unless so registered or unless an
exemption from registration is available. Seller has had sufficient opportunity
to ask questions of the executive officers of NMFS and to obtain information
from NMFS. Seller acknowledges NMFS's representation that the NMFS Stock is
restricted stock subject to Rule 144 of the Securities and Exchange Commission.
16
Section 5. Representations and Warranties of NMFS.
NMFS represents, warrants, covenants and agrees to and with Seller as
follows:
5.1 Organization and Standing of NMFS. NMFS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to conduct its business as now
being conducted; and is duly qualified to do business in each jurisdiction in
which the nature of the property owned or leased or the nature of the businesses
conducted would require such qualification, specifically including the State of
New York.
5.2 Authority. NMFS has corporate power to execute and deliver this
Agreement and consummate the transactions contemplated hereby and has taken (or
by the Closing Date will have taken) all action required by law, its Articles of
Incorporation, bylaws or otherwise to authorize such execution and delivery and
the consummation of the transactions contemplated hereby, including, without
limitation, execution and delivery of the Promissory Note.
5.3 No Finders or Brokers. Neither NMFS nor any officer or director
thereof has engaged any finder or broker in connection with the transactions
contemplated hereunder. NMFS will indemnify and hold Seller harmless against
claims (and attorneys' fees and expenses in the defense thereof) of any person,
firm or corporation for finder's fees, broker's fees, brokerage commissions,
sales commissions or the like alleged in connection with the transactions
contemplated hereunder due to acts of NMFS.
5.4 Validity of Agreements. Upon execution and delivery by all parties
hereto, this Agreement and all other agreements to be executed by NMFS in
connection herewith will constitute the valid and binding obligation of NMFS and
be binding against NMFS and enforceable in accordance with their respective
terms (except as enforceability may be restricted, limited, or delayed by
bankruptcy, insolvency, moratorium or similar laws affecting or relating to the
enforcement of creditors' rights in general and except as the enforceability is
subject to general principles of equity, regardless of whether enforceability is
considered in a proceeding at law or in equity).
5.5 Authorization of NMFS Stock. The NMFS Stock to be delivered to Seller
hereunder shall be duly authorized and validly issued and, upon consummation of
the Closing, shall be fully paid and nonassessable. The NMFS Stock is
restricted stock subject to Rule 144 of the Securities and Exchange Commission.
17
5.6 Bulk Sales. NMFS hereby waives compliance by Seller with any bulk
sales acts and other laws having a similar effect, which may apply to the
transactions comtemplated by this Agreement.
Section 6. Conditions Precedent to the Obligations of Seller.
All obligations of Seller which are to be discharged under this Agreement
at the Closing are subject to the performance, at or prior to the Closing, of
all covenants and agreements contained herein which are to be performed by NMFS
at or prior to the Closing and to the fulfillment at, or prior to, the Closing,
of each of the following conditions (unless expressly waived in writing by
Seller at any time at or prior to the Closing):
6.1 Representations and Warranties True. All of the representations and
warranties made by NMFS contained in Section 5 of this Agreement shall be true
as of the date of this Agreement, shall be deemed to have been made again at and
as of the date of Closing, and shall be true at and as of the date of Closing in
all material respects; NMFS shall have performed and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
NMFS prior to or at the Closing; and Seller shall have been furnished with a
certificate of the President or any Vice President of NMFS dated the Closing,
certifying to the truth of such representations and warranties as of the Closing
and to the fulfillment of such covenants and conditions.
6.2 Authority. All action required to be taken by or on the part of NMFS
to authorize the execution, delivery and performance of this Agreement by NMFS
and the consummation of the transactions contemplated hereby shall have been
duly and validly taken by the Board of Directors of NMFS.
6.3 Opinion of Counsel. Seller shall have been furnished with an opinion,
dated as of the Closing Date, of Xxxxx Xxxxxxx, Esq., general counsel to NMFS,
to the effect set forth in Exhibit 6.3 attached hereto.
6.4 No Obstructive Proceeding. No action or proceedings shall have been
instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against Seller which
seeks to, or would, render it unlawful as of the Closing to effect the
transactions contemplated hereby, and no such action shall seek damages in a
material amount by reason of the transactions contemplated hereby. Also, no
substantive legal objection to the transactions contemplated by this Agreement
shall have been received from or threatened by any governmental department or
agency.
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Section 7. Conditions Precedent to the Obligations of NMFS.
All obligations of NMFS which are to be discharged under this Agreement at
the Closing are subject to the performance, at or prior to the Closing, of all
covenants and agreements contained herein which are to be performed by Seller at
or prior to the Closing and to the fulfillment at or prior to the Closing of
each of the following conditions (unless expressly waived in writing by NMFS at
any time at or prior to the Closing):
7.1 Representations and Warranties True. All of the representations and
warranties of Seller contained in Section 4 of this Agreement shall be true as
of the date of this Agreement, shall be deemed to have been made again at and as
of the Closing, and shall be true at and as of the date of Closing in all
material respects; Seller shall have performed or complied with all covenants
and conditions required by this Agreement to be performed or complied with by
Seller prior to or at the Closing; and NMFS shall be furnished with a
certificate of an officer of Seller, dated the Closing, certifying to the truth
of such representations and warranties as of the time of the Closing and to the
fulfillment of such covenants and conditions.
7.2 DELETED
7.3 Opinion of Counsel. Seller shall have delivered to NMFS an opinion,
dated as of the Closing Date, of Xxxxxxxx & Xxxxxxxxxxx, LLP, 000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, counsel to Seller, in form and substance to
the effect set forth in Exhibit 7.3 attached hereto.
7.4 No Obstructive Proceeding. No action or proceedings shall have been
instituted against, and no order, decree or judgment of any court, agency,
commission or governmental authority shall be subsisting against NMFS or its
affiliates which seeks to, or would, render it unlawful as of the Closing to
effect the asset sale in accordance with the terms hereof, and no such action
shall seek damages in a material amount by reason of the transactions
contemplated hereby. Also, no substantive legal objection to the transactions
contemplated by this Agreement shall have been received from or threatened by
any governmental department or agency.
7.5 Consents and Approvals. Any consents required from any public or
regulatory agency or organization having jurisdiction shall have been given.
7.6 Release of Encumbrances. All Encumbrances shall have been released at
or prior to the closing.
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7.7 Licenses. All applications for the transfer of all licenses, permits
and provider numbers and agreements required in order to continue to operate the
Accounting Business shall have been properly filed and NMFS shall be satisfied
that all such licenses, permits and provider numbers and agreements shall in due
course be properly transferred to NMFS or the designee thereof, effective as of
the Closing.
7.8 Closing of the Shoreline Acquisition. Contemporaneously with the
Closing hereunder, the parties shall have closed the acquisition of the Medical
Billing Business, in accordance with the Shoreline Asset Purchase Agreement
between NMFS and Shoreline dates as of the even date hereof.
Section 8. Indemnification.
8.1 Indemnity by Seller Seller shall indemnify, defend and hold harmless
NMFS from and against:
(a) all Excluded Liabilities;
(b) any claim by or liability to any partner of the Partnership;
(c) any and all losses, damages, costs or deficiencies resulting from any
and all misrepresentations or breaches of warranty or failures to
perform agreements or undertakings by Seller contained in or made
pursuant to this Agreement or in other agreements executed by Seller
in connection with this Agreement; and
(d) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses (including, without limitation,
attorneys' fees, interest, penalties and amounts paid in settlement of
any such claim) relating to any of the foregoing.
In the event that any third person, including, without limitation, any
governmental taxing authority, shall assert any claim or action in excess of
$1,000 against NMFS which, if successful, might result in a claim for indemnity
hereunder (collectively, an "indemnifiable loss"), NMFS shall notify Seller, in
writing, of such claim or action, and at Seller's option, Seller may, at its
sole expense, assume control over the defense of such claim or action, but in
any event NMFS, at its sole cost, shall have the right to participate in the
defense of any such claim or action. If, after notice thereof, Seller shall not
assume the defense of, or if after so assuming such defense they shall fail to
continue to defend, any such claim or action, NMFS may defend any such claim or
action and NMFS may then settle
20
or compromise such claim or action on terms that are reasonable. Seller shall
promptly satisfy and pay any final judgment rendered with respect to any such
claim or action or any compromise or settlement thereof and, in the event Seller
did not assume control of the defense of such claim or action or failed to
continue to defend such claim or action, shall pay the reasonable legal expenses
of NMFS in the defense of any such claim or action. Seller shall pay to NMFS
all amounts owed to NMFS pursuant to this Section 8.1 within thirty (30) days
after written demand therefor. If Seller does not pay any such indemnifiable
loss pursuant to Section 8.1(a) hereof within thirty (30) days after written
demand, NMFS may pay the same and set off the amount paid against payments
otherwise due to Seller under this Agreement or under the Employment Agreement.
8.2 Remedies Cumulative. The remedies provided herein shall be cumulative
and shall not preclude any party from asserting any other rights or seeking any
other remedies to which such party is entitled by law.
Section 9. Miscellaneous.
9.1 Expenses. All expenses incurred by the parties in connection with the
preparation of this Agreement and the other agreements contemplated hereby and
in connection with the closing of the transactions contemplated hereby,
including, without limitation, attorneys' fees, accounting fees, investment
advisor's fees and disbursements, shall be borne by the respective parties
incurring such expense.
9.2 Notices. All notices, demands and other communications hereunder
shall be written and shall be deemed to have been duly given if (i) sent by
fascimile transmission and mailed by regular mail, (ii) delivered in person, or
(iii) sent by nationally recognized overnight carrier prepaid, to the address
set forth below:
To NMFS: National Medical Financial
Services Corporation
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, M.D.
Fax: (000) 000-0000
with a copy to: Xxxxx X. Xxxxxxx & Associates P.C.
X.X. Xxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
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To Seller: 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
or to such other address as NMFS or Seller may designate by written notice to
the other. Notices delivered in person or by fascimile transmission shall be
deemed delivered on the date of delivery or transmission respectively. Notices
sent by nationally recognized overnight carrier shall be deemed delivered
forty-eight (48) hours after the date sent. Rejection or other refusal to accept
or inability to deliver because of a changed address of which no notice was
given shall be deemed to be a receipt of the notice, request or other
communication. Any notice, request or other communication required or permitted
to be given by any party may be given by such party's legal counsel.
9.3 DELETED
9.4 Entire Agreement. This Agreement and the Exhibits, and the other
agreements, schedules and documents delivered pursuant hereto, constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior and contemporaneous agreements, understandings,
letters of intent negotiations and discussions, whether written or oral, of the
parties, and there are no representations, warranties or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the parties to be bound
thereby.
9.5 Governing Law; Arbitration. This Agreement shall be construed and
interpreted under the laws of the State of New York. The parties agree that all
disputes concerning this Agreement shall be submitted to binding arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association and the provisions contained herein. The arbitration shall be
conducted in Westchester County, New York, by one arbitrator. The party
initiating arbitration shall give the other notice of the matter in dispute. If
the parties fail to agree upon an arbitrator within ten days after notice of
initiation of the arbitration is given, the American Arbitration Association
shall select the arbitrator. All determinations and the final decision of the
arbitrator shall be made in writing.
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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.
9.6 Section and Exhibit Headings. The Section and Exhibit headings are
for reference only and shall not limit or control the meaning of any
provisions of this Agreement.
9.7 Waiver. No delay or omission on the part of any party hereto in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Agreement.
9.8 Nature and Survival of Representations. All statements contained
in the certificates delivered pursuant to Sections 6.1 and 7.1 hereof by or
on behalf of each party to this Agreement shall be deemed to be
representations and warranties made by such party hereunder. The covenants,
representations and warranties made by the parties in Sections 4 and 5 hereof
(and in the Exhibits incorporated by reference in Sections 4 and 5 hereto)
and the certificates delivered pursuant to Sections 6.1 and 7.1 hereof shall
survive the Closing for two (2) years.
9.9 Exhibits. All Exhibits, schedules and documents referred to in or
attached to this Agreement are integral parts of this Agreement to the extent
they are referenced to in the representations of Section 4 and 5 hereof as if
fully set forth herein and all statements appearing therein shall be deemed
to be representations. All items disclosed in the Exhibits, schedules and
documents incorporated hereto shall be deemed disclosed only for purposes of
the specific section which incorporates them by reference.
9.10 Assignment. Except as provided below, neither party shall assign
this Agreement without first obtaining the written consent of the other
party. Notwithstanding the foregoing to the contrary, NMFS shall have the
right, without any other party's consent, to assign all or any portion of
this Agreement to any entity controlled by, controlling or under common
control with,
23
NMFS, and/or to any lender providing financing or refinancing funds or credit
facilities to NMFS or its affiliates, and/or to any transferee of any of the
stock, assets or business of NMFS; provided no such assignment shall release
NMFS from any liability hereunder.
9.11 Binding on Successors and Assigns. Subject to Section 9.10, this
Agreement shall inure to the benefit of and bind the respective heirs,
administrators, successors and assigns of the parties hereto. Nothing
expressed or referred to in this Agreement is intended or shall be construed
to give any person or entity other than the parties to this Agreement or
their respective successors or permitted assigns any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein, it being the intention of the parties to this Agreement
that this Agreement shall be for the sole and exclusive benefit of such
parties or such successors and assigns and not for the benefit of any other
person.
9.12 Amendments. This Agreement may be amended, but only in writing,
signed by the parties hereto.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall comprise one and the same instrument.
9.14 Nonarbitral Attorneys' Fees. In the event that a suit, action, or
other proceeding of any nature whatsoever (other than arbitration),
including, without limitation, any proceeding under the U.S. Bankruptcy Code
and involving issues peculiar to federal bankruptcy law, any action seeking a
declaration of rights or any action for rescission, is instituted to
interpret or enforce this Agreement or any provision of this Agreement, the
prevailing party shall be entitled to recover from the losing party the
prevailing party's reasonable attorneys', paralegals', accountants', and
other experts' professional fees and all other fees, costs, and expenses
actually incurred and reasonably necessary in connection therewith, as
determined by the judge at trial or other proceeding, or on any appeal or
review, in addition to all other amounts provided by law.
9.15 Rules of Construction. All references herein to the singular
shall include the plural, and vice versa, and all references herein to the
neuter shall include the masculine or feminine, as the case may be, and vice
versa. When general words
24
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.
9.16 No Other Party. Seller 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION, a
Nevada corporation ("NMFS")
By:
---------------------------------------
Title:
---------------------------------
------------------------------------------ (SEAL)
XXXXXX XXXXXXXX ("Seller")
25
