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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 6, 1998
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 0-25344 25-1741216
(State or other juris- (Commission file (I.R.S. Employer
diction of organization) number) Identification No.)
1315 Greg Street, Suite 103, Sparks, Nevada 89431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 356-2315
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 6, 1998, the Registrant entered into an Accounting Business
Asset Purchase Agreement with Morris Maybruch D/B/A Maybruch & Co., and a
Medical Billing Business Asset Purchase Agreement with Morris Maybruch and
Shoreline Billing Systems, Inc., a New York corporation (the "Agreements"). In
the transaction, the Registrant acquired the assets and business operations of
the accounting and medical billing businesses effective January 1, 1998. The
purchase price for the assets and business operations was $913,702 in cash and
1,634,043 shares of the Registrant's common stock valued at $0.24 per share.
Under the terms of the Agreements additional shares of the Registrant's common
stock may be issued if its closing price decreases over a defined period. The
Agreements contain customary representations and warranties, indemnifications
and covenants, including a five-year non-competition agreement; a five-year
buy-back agreement; and a five-year employment contract.
The description contained herein of the acquisition is qualified in its
entirety by reference to the Agreements, dated as of January 1, 1998, by and
among the Registrant, Morris Maybruch, Morris Maybruch D/B/A Maybruch & Co.,
and Shoreline Medical Billing Systems, Inc., which is attached hereto as
exhibits and are incorporated herein by reference.
Item 5. OTHER EVENTS.
As previously announced, the Registrant has determined, after a detailed
assessment by management, that it will restructure its operations for the
future. The Registrant has decided that it will strategically align and
affiliate itself, through acquisitions and partnerships, with currently
established companies that offer billing and collection and practice
management services to medical service providers. In connection with this
restructuring, the Registrant expects to write-off approximately $5.0 million
in receivables and approximately $7.5 million in intangible assets in the
fourth quarter of 1997, which write-offs are related to certain contracts
previously acquired by the Registrant. Due to the magmitude of these
write-offs, the Registrant anticipates that it will report net losses both
for the fourth quarter and the fiscal year ended December 31, 1997, although
the amount of such losses has not yet been determined.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
As of the date of the filing of this Current Report on Form 8-K,
it is impractical for the Registrant to provide the financial
statements required by this Item 7(a). In accordance with Item
7(a)(4) of Form 8-K, such financial statements will be filed by
amendment to this Form 8-K no later than 60 days after January
21, 1998.
(b) Pro Forma Financial Information.
As of the date of the filing of this Current Report on Form 8-K,
it is impractical for the Registrant to provide the pro forma
financial required by this Item 7(b). In accordance with Item
7(b) of Form 8-K, such financial statements will be filed by
amendment to this Form 8-K no later than 60 days after January
21, 1998.
(c) Exhibits
10.1 Form of Accounting Business Asset Purchase Agreement dated
as of January 1, 1998 by and between Morris Maybruch D/B/A
Maybruch & Co., CPA'S, and National Medical Financial
Services Corporation.
10.2 Form of Medical Billing Business Asset Purchase Agreement
dated as of January 1, 1998 by and between Morris Maybruch
and Shoreline Billing Systems, Inc. and National Medical
Financial Services Corporation.
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10.3 Form of Employment Agreement dated January 1, 1998 by and
between Morris Maybruch and National Medical Financial
Services Corporation.
10.4 Form of Buy-Back Agreement dated January 1, 1998 by and
between Morris Maybruch; Shoreline Medical Billing Systems,
Inc.; and National Medical Financial Services Corporation.
10.5 Form of Noncompetition Agreement dated January 1, 1998 by
and between Morris Maybruch and National Medical Financial
Services Corporation.
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
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(Registrant)
Date: February 19, 1998 By: /s/ Robert W. Horner, Jr.
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Robert W. Horner, Jr., Vice President,
Chief Financial Officer, Secretary
and Treasurer
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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 MORRIS
MAYBRUCH D/B/A MAYBRUCH & 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 &
Cygielman" (the "Partnership"), operating an accounting and billing services
business with its principal business office located at 222 Route 59, Suffern,
New York 10901 (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 222 Route
59, Suffern, New York 10901 (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
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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 222 Route 59,
Suffern, New York 10901, 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 Bill 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
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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.
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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.
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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 Marcy Colkitt, 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 Schwartz & Silverstein, LLP, 254 South Main
Street, New City, New York 10956, 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
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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
1315 Greg Street, Suite 103
Sparks, NV 89431
Attention: Douglas R. Colkitt, M.D.
Fax: (814) 238-8069
with a copy to: Marcy L. Colkitt & Associates P.C.
P.O. Box 607
Indiana, PA 15701
Fax: (412) 463-3569
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To Seller: Morris Maybruch
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
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,
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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
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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 Douglas R. Colkitt, 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)
MORRIS MAYBRUCH ("Seller")
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Exhibit 10.2
MEDICAL BILLING BUSINESS ASSET PURCHASE AGREEMENT
THIS MEDICAL BILLING BUSINESS ASSET PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of January 1, 1998 by and among
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION, a Nevada corporation
("NMFS"); MORRIS MAYBRUCH, a resident of the State of New York
("Shareholder"); and SHORELINE MEDICAL BILLING SYSTEMS, INC., a New York
corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns and operates a medical billing services business
with its principal business office located at 222 Route 59, Suffern, New York
10901 (the "Medical Billing Business");
WHEREAS, Shareholder owns and operates an accounting and billing
business with its principal business office located at 222 Route 59, Suffern,
New York 10901 (the "Accounting Business"), which together with the Medical
Billing Business are sometimes referred to herein as the "Businesses";
WHEREAS, Shareholder is the sole shareholder of Seller;
WHEREAS, it is Shareholder's intention to cause the sale of Seller's
assets in order to liquidate Shareholder'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 Medical
Billing Business, upon the terms and conditions hereinafter set forth;
WHEREAS, to induce NMFS to perform under this Agreement and as a
condition thereto, Shareholder has agreed to execute a noncompetition
agreement dated as of the even date hereof in favor of NMFS ("Noncompetition
Agreement");
WHEREAS, to induce NMFS and Seller to perform under this Agreement,
Shareholder 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 Seller
pursuant to this Agreement and as a condition hereto, NMFS desires to acquire
the assets of the accounting business owned and operated by Shareholder under
the tradename "Maybruch & Co., CPA's", the successor of Shareholder's
interest in the partnership "Maybruch & Cygielman", pursuant to that certain
<PAGE>
Accounting Business Asset Purchase Agreement (the "Accounting Business Asset
Purchase Agreement") dated as of the even date hereof;
WHEREAS, to induce Seller to enter into this Agreement, NMFS and
Shareholder have agreed under certain circumstances Shareholder may reacquire
the assets of Seller conveyed under this Agreement and Shareholder may
reacquire the assets of Shareholder conveyed under the Accounting Business
Asset Purchase Agreement, and in furtherance of that agreement Shareholder,
Seller 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 Seller used in the Medical Billing Business, tangible or intangible, real
or personal, including, without limitation, the following described assets
owned and used in the Medical Billing Business to the extent that they exist:
(a) all equipment, business machines, computers, furniture, furnishings,
and other tangible personal property of Seller 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");
(d) all business records, all customer lists, and all personnel lists
(whether past or present, whether stored in computer memory or on hard
copy);
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(e) all sales literature, promotional material and other general files and
printed forms used in the Medical Billing Business;
(f) all goodwill, trademarks, services marks and trade names used in the
Medical Billing Business;
(g) all rights of Seller under licenses and other governmental approvals
or permits (to the extent transferable) used in the Medical Billing
Business;
(h) all telephone numbers and telephone and yellow pages directory
listings;
(i) all prepaid expenses and deposits of Seller;
(j) all inventory and supplies of Seller;
(k) all rights to leasehold improvements and fixtures under the existing
sublease of Seller;
(l) all software used in the Medical Billing Business;
(m) all payroll records for all employees of Seller;
(n) all information and documentation relating to the names, addresses and
telephone numbers of Seller'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 Seller; and
(q) all financial records of Seller.
Nothing herein shall be construed as prohibiting Seller from retaining copies
of any documents or computer software or records to be conveyed hereunder.
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 Seller and the Medical Billing Business as reflected in the 1997
Financial Statement referred to in Section 4.3 hereof and all properties and
assets acquired by Seller after October 31, 1997, except those properties and
assets
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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 Seller shall not be acquired by
NMFS, shall not constitute "Assets," and shall be defined herein as the
"Excluded Assets":
(a) the minutebooks and stock ledger books of Seller;
(b) all cash of Seller 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 land or buildings owned by Seller;
(e) all pension plan assets of Seller;
(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 Seller
or Shareholder 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 Seller or Shareholder for
borrowed money, whether absolute or contingent, direct or indirect;
(b) liabilities and obligations of Seller or Shareholder, the existence of
which constitute a material breach of any of the representations or
warranties made by Seller or Shareholder 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 Seller or
Shareholder or relate to services performed or products delivered
prior to the Closing or which arise out of actions taken by, or
omissions of,
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Seller or Shareholder prior to the Closing (whether or not scheduled
on Exhibit 4.8);
(d) any federal, state, local or other income taxes payable by Seller or
Shareholder 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 Seller or Shareholder incurred
prior to the Closing Date;
(f) liabilities and obligations of Seller or Shareholder 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 or Shareholder, all of
which amounts are listed in Exhibit 1.3(f) attached hereto;
(g) liabilities and obligations of Seller or Shareholder based upon
tortious or illegal conduct prior to Closing;
(h) liabilities and obligations of Seller or Shareholder for any breach or
violation, as of the Closing, of any contracts 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
in connection with any claims processed by Seller;
(k) liabilities and obligations of Seller or Shareholder 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 Seller 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".
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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
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 to the Seller ONE HUNDRED
THOUSAND U.S. DOLLARS ($100,000.00) at the Closing (as defined below) in
consideration for the Assets.
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
222 Route 59, Suffern, New York 10901, 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
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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 Medical Billing 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 and Shareholder 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;
(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 and Shareholder
will deliver to NMFS the following:
(i) A duly executed Bill of Sale and Assignment in substantially the
form of Exhibit 3.3(i) hereto;
(ii) The certificate referred to in Section 7.1 hereof;
(iii) The opinion of counsel for Seller and Shareholder referred to in
Section 7.3 hereof; and
(iv) Resolutions of Seller, certified by an appropriate officer,
authorizing the execution, delivery and performance of this
Agreement and the other agreements to be delivered by Seller in
connection with the Closing hereunder.
3.4 Action by All Parties. Upon the terms and subject to the
conditions herein contained, at the Closing and to be
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effective on the Closing Date, the parties will, as appropriate, execute and
deliver to each other the following:
(i) The "Noncompetition Agreement";
(ii) The "Employment Agreement";
(iii) The "Buy-Back Agreement"; and
(iv) The "Accounting Business 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) 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 Seller'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 Seller 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 and Shareholder.
Seller and Shareholder hereby jointly and severally represent, warrant,
covenant and agree to and with NMFS as follows:
4.1 Seller's Existence and Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New York. The nature of Seller's business as now conducted and the
character or location of its
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properties do not require qualification by it to do business in any other
jurisdiction. Seller has the corporate authority to own its property and to
carry on the Medical Billing Business as now being conducted.
4.2 Insider Transactions. Except as disclosed in Exhibit 4.2 hereto,
Seller is not, directly or indirectly, a party to any contract, lease or
commitment with any officer or director of Seller or any affiliate of any
such director or officer. As used in this Section 4.2, the term "affiliate"
shall mean any member of the immediate family of such officer or director or
any corporation, partnership, trust or other entity in which such officer or
director has a substantial interest or is a director, officer, partner or
trustee.
4.3 Accuracy of Financial Statements. Seller has delivered to NMFS as
Exhibit 4.3 a copy of the financial statements of Seller 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 Seller and the income and expenses of
Seller 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.
Seller has no material liabilities or obligations (including, without
limitation, any liability for federal, state or local taxes of Seller), 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.
4.4 Properties of Seller.
(i) The 1997 Financial Statement reflects all of the properties
presently owned by Seller and used in the Medical Billing 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
Medical Billing 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 Shareholder's knowledge,
Seller has filed all federal, state and local tax returns and reports of
Seller which have become due to be filed
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(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 Seller's most recent federal
information return is attached as Exhibit 4.5 hereto. Seller has paid all
taxes, assessments, fees, interest, penalties (if any) and other governmental
charges due with respect to the periods covered by such tax returns and
reports and as reflected on said returns and reports. Seller is not
delinquent in the payment of any taxes, assessments or governmental charges,
and there are no assessments of additional taxes threatened against Seller or
any of Seller's properties. No waiver of any statute of limitations or
agreement for extension of time for assessment in respect of any tax
liability of Seller has been given by Shareholder or Seller which is
presently in effect. Without limiting the foregoing, to the best of
Shareholder'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 Seller 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
Seller 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 Seller for the account of the appropriate taxing authority. The income
tax returns of the Seller have never been audited by any taxing authority.
Neither Seller nor Shareholder knows of any questions which have been raised
by any federal, state or local taxing authority relating to taxes or
assessments of Seller which, if determined adversely to Seller, 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 Seller 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 Shareholder's knowledge,
Seller 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.
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 Shareholder's knowledge) threatened against Seller or
Shareholder or affecting Seller or its business or any of its assets, at law
or in equity or before any federal, state, municipal, local or other
governmental
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authority, or before any arbitrator, nor does Seller or Shareholder know of
any reasonable basis for any such litigation, action, suit, proceeding or
investigation. Neither Seller nor Shareholder is not the subject to any
order, writ or decree of any court or other governmental authority.
4.9 Employee Plans and Agreements. Seller 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
Seller 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 Seller, 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 by Seller 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 Seller 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 Seller,
and (c) Seller 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 its business. Except as
described in Exhibit 4.12, since October 31, 1997, to the best of
Shareholder's knowledge, Seller 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;
(ii) declared or made (or became obligated for) any payment or
distribution (other than cash or cash equivalents) to shareholders
or purchased or redeemed (or became obligated to purchase or redeem)
any shares of its capital stock;
(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
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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 Medical Billing Business of 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 Medical Billing Business, properties or
prospects of Seller or the Medical Billing Business.
4.13 Employees. A listing of all employees (including their rates of
pay and their accrued but unpaid vacation and sick days ) of Seller is
attached as Exhibit 4.13.
4.14 Authority. Seller has the authority 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 or
otherwise to authorize such execution and delivery and the consummation of
the transactions contemplated hereby, including, without limitation,
execution and delivery of the Bill of Sale and Assignment.
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 Medical Billing 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
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permit, and the termination date, if any, or notice requirement with respect
to termination and renewal options) and (ii) Shareholder and all other
personnel in connection with their services for the Medical Billing Business.
Except for the licenses and permits held by Seller and Shareholder and
described on Exhibit 4.15, there are no other licenses or permits required
for Seller and Shareholder to operate the Medical Billing Business. To the
best of Shareholder's knowledge, all such licenses and permits are in full
force and effect. To Shareholder's knowledge, the validity, continuation and
effectiveness of all of the 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 Medical Billing
Business an appropriate consent to such transfer. Seller is not aware of any
proceeding or investigation by any governmental agency relating to the
Medical Billing Business.
4.16 No Finders or Brokers. Neither Shareolder, nor Seller nor any
officer or director thereof has engaged any finder or broker in connection
with the transactions contemplated hereunder. Seller and Shareholder 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 Shareholder's knowledge, no material
representation or warranty by Seller or Shareholder in this Agreement and no
material statement pertaining to Seller 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
or Shareholder knows (and which are not known to NMFS) which would materially
adversely affect the future operations of the Medical Billing 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 Shareholder's knowledge,
upon execution and delivery by all parties, the obligations of Seller and
Shareholder under this Agreement and all other agreements to be executed by
Seller and Shareholder in connection herewith, will constitute the valid and
binding obligation of Seller or Shareholder, as the case may be, and be
binding against it and enforceable in accordance with their respective terms
(except as enforceability may be restricted,
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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 Shareholder, 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 Seller's 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.
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
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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 and Shareholder
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 DELETED
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
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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 Marcy Colkitt, 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.
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 and Shareholder 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 and Shareholder 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 and Shareholder shall
have performed or complied with all covenants and conditions
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required by this Agreement to be performed or complied with by Seller and
Shareholder prior to or at the Closing; and NMFS shall be furnished with a
certificate of an officer of Seller and of Shareholder, 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 Authority. All action required to be taken by or on the part of
Seller to authorize the execution, delivery and performance of this Agreement
by Seller and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of Seller.
7.3 Opinion of Counsel. Seller and Shareholder shall have delivered to
NMFS an opinion, dated as of the Closing Date, of Schwartz & Silverstein,
LLP, 254 South Main Street, New City, New York 10956, counsel to Seller and
Shareholder, 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.
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 Medical Billing 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.
Section 8. Indemnification.
8.1 Indemnity by Shareholder and Seller Shareholder and Seller jointly
and severally shall indemnify, defend and hold harmless NMFS from and against:
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(a) all Excluded Liabilities;
(b) 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 or Shareholder contained
in or made pursuant to this Agreement or in other agreements executed
by Seller or Shareholder in connection with 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 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 Shareholder's and
Seller's option, Seller may, at their 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, Shareholder and 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 or compromise such claim or action on
terms that are reasonable. Shareholder and 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 and Shareholder shall
jointly and severally pay to NMFS all amounts owed to NMFS pursuant to this
Section 8.1 within thirty (30) days after written demand therefor. If Seller
and Shareholder do 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
Shareholder or 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.
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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
1315 Greg Street, Suite 103
Sparks, NV 89431
Attention: Douglas R. Colkitt, M.D.
Fax: (814) 238-8069
with a copy to: Marcy L. Colkitt & Associates, P.C.
P.O. Box 607
Indiana, PA 15701
Fax: (412) 463-3569
To Seller: Shoreline Medical Billing
Systems, Inc.
222 Route 59
Suffern, NY 10901
Attention: Morris Maybruch
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
To Shareholder: Morris Maybruch
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
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with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
or to such other address as NMFS, Seller or Shareholder 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. 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,
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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, 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.
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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 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
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<PAGE>
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 and Shareholder acknowledge and agree that
the only other party to this Agreement is NMFS and that Douglas R. Colkitt,
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:
------------------------------
SHORELINE MEDICAL BILLING SYSTEMS, INC., a New
York corporation ("Seller")
By:
------------------------------------
Morris Maybruch, President
--------------------------------- (SEAL)
MORRIS MAYBRUCH ("Shareholder")
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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
January 1, 1998 by and between NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION, a Nevada corporation (NMFS"), and MORRIS MAYBRUCH, a resident of
the State of New York ("Maybruch").
W I T N E S S E T H:
WHEREAS, NMFS is engaged in the provision of medical billing and
accounting services to the public; and
WHEREAS, as of the date hereof, Maybruch sold the assets of his
accounting business to NMFS pursuant to the terms of an asset purchase
agreement dated as of the even date hereof ("Accounting Business Asset
Purchase Agreement");
WHEREAS, Maybruch is the sole shareholder of Shoreline Medical Billing
Systems, Inc. ("Shoreline"), which sold its assets to NMFS pursuant to the
terms of an asset purchase agreement dated as of the even date hereof
("Shoreline Asset Purchase Agreement");
WHEREAS, pursuant to the terms of the Accounting Business Asset Purchase
Agreement, NMFS and Maybruch entered into a noncompetition agreement dated as
of the even date hereof ("Noncompetition Agreement"), restricting Maybruch's
ability to engage in certain businesses within certain time periods and
within specified geographical areas and subject to certain conditions;
WHEREAS, to induce the respective parties to enter into the Accounting
Business Asset Purchase Agreement and the Shoreline Asset Purchase Agreement,
NMFS and Maybruch have agreed that Maybruch will continue to remain active in
the medical billing and accounting services business by rendering services to
NMFS on the terms and conditions set forth in this Agreement; and
WHEREAS, NMFS, Shoreline and Maybruch have agreed under certain
circumstances assets acquired by MNFS under the Accounting Business Asset
Purchase Agreement and the Shoreline Asset Purchase Agreement may be
reacquired by Seller and Shoreline, respectively, and in furtherance of that
agreement, Seller, Shoreline and NMFS have executed a Buy-Back Agreement
dated as of the even date hereof ("Buy-Back Agreement").
NOW, THEREFORE, in consideration of the mutual promises in this
Agreement and the payments to be made or received by each party, NMFS and
Maybruch agree as follows:
<PAGE>
ARTICLE I. DEFINITIONS
Capitalized terms used in the Agreement shall have their defined meaning
throughout the Agreement. The following terms shall have the meanings set
forth below, unless the context clearly requires otherwise.
1.1 Businesses means (1) the accounting services business owned and
operated by Maybruch under the tradename "Maybruch & Co., CPA's",
the successor of Maybruch's interest in the partnership "Maybruch &
Cygielman", and located at 222 Route 59, Suffern, NY 10901, the
assets of which were acquired by NMFS pursuant to that the
Accounting Business Asset Purchase Agreement dated as of the even
date hereof; and (2) the medical billing business owned and
operated by Shoreline located at 222 Route 59, Suffern, New York,
the assets of which were acquired by NMFS pursuant to the Shoreline
Asset Purchase Agreement dated as of the even date hereof.
1.2 Commencement Date means January 1, 1998.
1.3 Confidential Information means information that is proprietary to
NMFS or proprietary to others and entrusted to NMFS, whether or not
trade secrets. Confidential Information includes, but is not
limited to, information relating to business plans and to business
as conducted and to past or current products, services or
procedures. Confidential Information also includes, without
limitation, customer names, customer addresses, customer lists, fee
schedules, managed care contracts and rates, quality assurance
policies and procedures, staffing models, design maintenance and
operation of centers, and information concerning research,
development, purchasing, accounting, marketing, selling and
services. Confidential information does not include:
(i) information which is public information at the time such
information is disclosed by Maybruch, or thereafter becomes public
through no violation of this Agreement; (ii) information which was
in the possession of Maybruch or any entity with which he was
affiliated prior to its disclosure by NMFS to Maybruch; (iii) any
disclosure of information to the extent required by applicable law,
regulation, or judicial or regulatory process; or (iv) use by
Maybruch or Shoreline as evidence in or in connection with any
arbitration or litigation relating to this Agreement, the
Accounting Business Asset Purchase Agreement, the Shoreline Asset
Purchase Agreement, the Noncompetition Agreement or any other
agreement related to the above-mentioned agreements.
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1.4 Full-Time means 5 days per week for 46 weeks per year.
1.5 Territory means the geographical area within a fifty- (50-) mile
radius of 222 Route 59, Suffern, New York 10901.
ARTICLE II. EMPLOYMENT, DUTIES AND TERM
2.1 Employment. Upon the terms and conditions set forth in this
Agreement, NMFS hereby employs Maybruch, and Maybruch accepts such
employment by NMFS.
2.2 Services and Duties.
(a) During the term of this Agreement, and excluding any periods
of personal time to which Maybruch is entitled, Maybruch agrees to
devote his best efforts and attention during normal business hours
to the business and affairs of NMFS and, to the extent necessary to
discharge the responsibilities assigned to Maybruch hereunder, to
use Maybruch's best efforts to perform faithfully and efficiently
such responsibilities, to abide by the policies and procedures of
NMFS and to accept no other gainful employment without the consent
of NMFS. Maybruch will work Full-Time as a staff employee of NMFS.
(b) All monies paid to or received by Maybruch for teaching,
research, honoraria, writing and the like, as well as payments
received for professional services rendered as a certified public
accountant, shall be income to and the property of Maybruch;
(c) Maybruch shall perform the services required hereunder
principally at 222 Route 59, Suffern, New York 10901 and at such
other locations in the New York metropolitan area as NMFS shall
reasonably direct.
2.3 DELETED
2.4 Certain Proprietary Information. If Maybruch possesses any
proprietary information of another person or entity as a result of
prior employment or relationship, Maybruch shall honor any legal
obligation that Maybruch has with that person or entity with
respect to such proprietary information.
2.5 Term. The employment pursuant to this Agreement shall begin on the
Commencement Date and shall end on the day immediately prior to the
fifth anniversary of the
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Commencement Date year, unless sooner terminated as set forth in
Article IV hereof.
In the event that Maybruch should remain employed with NMFS beyond
the term of this Agreement and no new employment agreement has been
executed: (a) Maybruch shall be deemed an employee at will, and
his employment may then be terminated upon ninety (90) days written
notice by either party, and (b) all other terms and conditions of
this Agreement shall continue to apply.
ARTICLE III. COMPENSATION, BENEFITS AND EXPENSES
3.1 Base Compensation. During the term of Maybruch's employment by
NMFS, in addition to payment of the sign-up bonus pursuant to
Section 3.8 hereof and the performance bonus pursuant to Section
3.9 hereof, Maybruch shall receive base compensation in
consideration of his services hereunder equal to: THIRTY AND
33THS/100THS PERCENT (30.33%) of the "Net Income" (as hereinafter
defined), subject to the following terms hereof:
NMFS shall pay Maybruch an advance or draw, against anticipated
base compensation due hereunder, in the sum of $145,000.00 per
annum, payable semi-monthly in accordance with NMFS's customary
payroll practices. This advance or draw is not additional or
guaranteed compensation, and shall be reconciled against actual
compensation due on a quarterly basis as provided in Section 3.2
hereof.
Notwithstanding anything to the contrary herein, in the event that
the net revenues of NMFS for any calendar year exceeds $2,095,000,
NMFS shall pay Maybruch no less than the sum of $145,000.00 per
annum, which payment shall be guaranteed (but not additional)
compensation hereunder, irrespective of Net Income.
3.2 Net Income. For purposes of this Agreement, 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
Maybruch, 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
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<PAGE>
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 Maybruch),
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 Maybruch
(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
3.2, the term "net revenues" shall mean gross revenues, minus
contractual adjustments and uncollectible accounts, computed on an
accrual 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 Maybruch in accordance with Maybruch's
employment pursuant to the Employment Agreement and Maybruch has
not approved the expenditure in advance in writing, which approval
shall not be unreasonably withheld.
3.3 Personal Time. Maybruch shall be entitled during the term of this
Agreement to absent himself voluntarily or due to actual illness
from the performance of his employment under this Agreement, all
such voluntary absences to count as personal time, provided that:
(a) Such personal time shall not exceed six (6) work weeks (30
working days) during each calendar year (prorated for any
partial calendar year) during the period Maybruch is employed
Full-Time hereunder.
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<PAGE>
(b) The timing of personal time shall be scheduled in a reasonable
manner that is consistent with the best interest of NMFS.
(c) In addition to the aforesaid personal time, Maybruch shall be
entitled to the following holidays: Religious holidays, New
Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. In addition, Maybruch
shall be entitled to take as holidays any additional days that
NMFS is closed for a holiday.
(d) Maybruch shall not be entitled to receive any additional
compensation from NMFS (or to receive any additional
compensation upon termination or expiration of employment) on
account of his failure to take personal time. Unused personal
time during a calendar year may not be used in a subsequent
calendar year.
Vacation time, educational and sick leave shall be deemed personal
time, and shall be subject to the provision of this Section 3.3.
3.4 Employee Benefits. During the term of the Maybruch's employment
under this Agreement, Maybruch shall be entitled to participate in
all of the employee benefit programs which are available to NMFS
employees.
3.5 Office and Facilities. During the term of Maybruch's employment
under this Agreement, NMFS shall provide Maybruch the use of NMFS's
facilities and support services, which shall include, but not be
limited to computer hardware, computer software, computer support,
accounting and legal services, which services are provided as part
of the management overhead allowance.
3.6 Business Expenses. In addition to the base compensation due under
Section 3.1 hereof, NMFS shall pay to Maybruch a business expense
allowance of $36,000 per calendar year, payable in equal monthly
installments of $3,000 per month. In addition, NMFS shall bear any
other business expenses to the extent permitted by Internal Revenue
Service guidelines in effect from time to time for business expense
reimbursement. Maybruch is responsible to promptly account for all
expenses to NMFS in the manner prescribed from time to time by
NMFS, including such records as are required by the Internal
Revenue Service.
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3.7 DELETED
3.8 Sign-up Bonus. On March 1, 1998 and on the first day of each
succeeding June, September, December and March through and
including December 1, 2003, NMFS shall pay Maybruch the sum of
TWENTY-ONE THOUSAND SEVEN HUNDRED SIXTY-FIVE U.S. DOLLARS
($21,765.00) as a sign-up bonus, in further consideration of the
execution of this Agreement by Maybruch.
3.9 Performance Bonus. NMFS shall pay Maybruch a performance bonus as
set forth in this Section 3.9.
A. On March 1, 1999 and on March 1 of each succeeding year during
the initial five-year term of this Agreement, NMFS shall pay
to Maybruch the lesser of (i) an amount equal to the excess by
which the Net Income (as defined in Section 3.2 hereof) during
the preceding calendar year exceeds $595,609.00, (ii) zero, if
there is no such excess, or (iii) $248,743.00.
B. On the fifth anniversary date of this Agreement, NMFS shall
pay to Maybruch:
(i) ONE MILLION TWO HUNDRED FORTY-THREE THOUSAND SEVEN HUNDRED
SIXTEEN U.S. DOLLARS ($1,243,716.00), minus
(ii) any amounts paid pursuant to Section 3.9(A) hereof, plus
(iii) 50% of the Net Income for the five year period following
the Commencement Date ("Five-Year Net Income") in excess
of $2,978,045, minus
(iv) 2.0 times the amount, if any, that $2,978,045 exceeds the
Five-Year Net Income.
An example the computation of this performance bonus is set
forth in Exhibit "A" attached hereto.
C. Notwithstanding any terms to the contrary herein, Maybruch
shall not be obligated to repay any funds received by him as a
result of the adjustments pursuant to Section 3.9(B).
D. The amounts due to Maybruch under this Section 3.9 are subject
to the adjustments contained in Section 2.1 of the Accounting
Business Asset Purchase Agreement.
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ARTICLE IV. EARLY TERMINATION
4.1 Early Termination. Subject to the respective continuing
obligations of the parties elsewhere provided in this Agreement and
in the Buy-Back Agreement, this Article IV sets forth the terms for
early termination of Maybruch's employment under this Agreement.
In the event of early termination of Maybruch's employment due to
death or disability or for any other reason, NMFS shall continue to
pay the amounts set forth in Sections 3.8 and 3.9 of this
Agreement, except that Sections 3.9(B)(iii) and 3.9(B)(iv) shall be
null and void and therefore the amount due Maybruch pursuant to
Section 3.9(B) shall be $1,243,716 (or $1,643,716, if such amount
is increased pursuant to Section 2.1 of the Accounting Business
Asset Purchase Agreement) minus any amounts paid pursuant to
Section 3.9(A); such amounts shall be payable to Maybruch or, if
applicable, to the administrator or executor of Maybruch's estate
or the legal guardian of Maybruch.
4.2 No Termination Without Cause. This Agreement may not be terminated
without cause.
4.3 Termination by NMFS for Cause. NMFS may terminate Maybruch's
employment under this Agreement for cause effective upon written
notice to Maybruch. For purposes of this Agreement, "Cause" means
(a) an act or acts of personal dishonesty taken by Maybruch
resulting in personal enrichment of Maybruch at the expense of
NMFS, (b) any material breach by Maybruch of his duties and other
obligations under this Agreement, after written notice and thirty
(30) days in which to cure the same, (c) if Maybruch is convicted
of a felony involving moral turpitude, (d) if any material
representation of Maybruch to NMFS is untrue and Maybruch knew the
representation was untrue, (e) habitual absenteeism (in excess of
personal time permitted hereunder), alcoholism or any form of drug
abuse having a material adverse effect on Maybruch's performance of
his duties or an adverse effect on NMFS, and (f) intentional
conduct or activities (excluding conduct or activities engaged in
by Maybruch in good faith exercise of his business judgment on
behalf of NMFS) materially damaging to NMFS or to EquiMed.
4.4 Termination in the Event of Death or Disability. Maybruch's
employment under this Agreement shall terminate (a) upon Maybruch's
death or (b) in the event Maybruch is unable to perform his duties
for NMFS for four (4) consecutive months as a result of a physical
or
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<PAGE>
mental disability. Employee shall be deemed unable to perform his
duties to NMFS when he is deemed disabled for purposes of any
disability insurance policy maintained by NMFS or by Maybruch and
covering Maybruch's risk of disability.
4.5 Notice of Termination; Date of Termination. The provisions of this
Section 4.5 shall apply in connection with any early termination of
Maybruch's employment under this Agreement pursuant to this Article
IV.
(a) For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provisions in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances
claimed to provide the basis for such termination.
(b) For purposes of the Agreement, "Date of Termination" shall
mean: (1) if Maybruch's employment is terminated due to
death, the day Maybruch's death occurs; (2) if Maybruch's
employment is terminated by NMFS for Cause, the date specified
in the Notice of Termination; (3) if Maybruch's employment is
terminated by mutual agreement of the parties, the date
specified in such agreement; (4) if this Agreement is
terminated due to disability, the date specified in the Notice
of Termination, which in no event shall be a date earlier than
four (4) months after Maybruch has been continuously unable to
perform his duties to NMFS as a result of physical or mental
disability; or (5) in any other instance not referred to in
this Section 4.5(b)(1) thru (4) above, the last day of
Maybruch's employment with NMFS.
4.6 Compensation upon Termination of Employment. In addition to the
other amounts due Maybruch under the terms of this Agreement, upon
termination of Maybruch's employment under this Agreement, NMFS
shall, within thirty (30) days following the Date of Termination,
pay any Base Compensation earned by Maybruch and reimburse Maybruch
amounts due for reimbursable business expenses incurred by Maybruch
through the Date of Termination and any additional amounts due
Maybruch in accordance with the terms of any Plan. Upon termination
of employment for any reason whatsoever, Maybruch shall not be
entitled to be paid for any unused personal time under Section 3.2.
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<PAGE>
4.7 Termination by Maybruch. In the event any payment owed to Maybruch
under Article III hereof is not made when due and such default is
not cured within seven (7) days after Maybruch gives NMFS written
notice of such default, then Maybruch may, within ten (10) days
thereafter, give written Notice of Termination of this employment
relationship with NMFS and in such case Article VI (Noncompetition)
hereof shall cease to bind Maybruch and shall be null and void. In
the event Maybruch terminates his employment relationship with NMFS
under this Section 4.7, then Maybruch shall be entitled to base
compensation under Section 3.1 hereof and business expense
reimbursement under Section 3.6 hereof due through the Date of
Termination, and notwithstanding any terms to the contrary herein,
NMFS shall continue to pay all amounts due Maybruch under Sections
3.8 and 3.9 hereof, except that Sections 3.9(B)(iii) and 3.9(B)(iv)
shall be null and void and therefore the amount due Maybruch
pursuant to Section 3.9(B) hereof shall be $1,243,716 (or
$1,643,716, if such amount is increased pursuant to Section 2.1 of
the Accounting Business Asset Purchase Agreement) minus any amounts
paid pursuant to Section 3.9(A) hereof.
ARTICLE V. CONFIDENTIAL INFORMATION
Prohibitions Against Use. Maybruch will not during or subsequent
to the termination or expiration of Maybruch's employment under
this Agreement use or disclose, other than in connection with
Maybruch's employment with NMFS, any Confidential Information to
any person not employed by NMFS or not authorized by NMFS, without
the prior written consent of NMFS. Maybruch will use reasonable
and prudent care to safeguard and protect and prevent the
unauthorized use and disclosure of Confidential Information.
ARTICLE VI. NON-COMPETITION
6.1 Acknowledgements. Maybruch agrees and acknowledges that: (i) he
shall be in a position of confidence and trust with NMFS and he
shall have access to Confidential Information; (ii) the nature and
periods of restrictions imposed by the covenants set forth in this
Article VI are fair, reasonable and necessary to protect and
preserve for NMFS the benefits of this Agreement and that such
restrictions shall not prevent this Maybruch from earning a
livelihood; (iii) NMFS would sustain irreparable loss and damage if
Maybruch were to breach any of such covenants; (iv) the Territory
is reasonably sized inasmuch as the business of NMFS is conducted
over
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a wide geographical area and is based on serving customers in the
entire Territory to be successful; and (vi) the covenants herein
set forth are made as an inducement to and have been relied upon by
NMFS in entering this Agreement.
6.2 Non-Competition by Maybruch. Maybruch agrees that, during the term
of his employment by NMFS and for a period of two (2) years
following the termination or expiration of Maybruch's employment
with NMFS for any reason, Maybruch will not directly or indirectly,
alone or as a partner, officer, director, shareholder or employee
of any other firm, knowingly engage in medical billing or
accounting services in competition with NMFS within the Territory,
as conducted by NMFS during the term of the Agreement or as of the
date of such termination or expiration of employment.
Notwithstanding anything herein to the contrary, nothing shall
prohibit Maybruch from rendering professional services as a
certified public accountant.
6.3 Solicitation of Customers. Maybruch will not knowingly solicit any
person or entity who is or was a customer of NMFS, for a period of
two (2) years after the termination or expiration of Maybruch's
employment with NMFS for any reason.
6.4 Covenant Not to Recruit. Maybruch recognizes that NMFS workforce
represents a substantial financial and educational investment and
constitutes an important and vital aspect of its business.
Maybruch agrees that, during the term of his employment by NMFS and
for a period of two (2) years following the termination or
expiration of Maybruch's employment with NMFS for any reason
whatsoever, he shall not knowingly solicit, or assist anyone else
in the solicitation of, any of NMFS's then current employees,
except for Mary Maybruch, to terminate their employment with NMFS
and to become employed by any business enterprise with which
Maybruch may then be associated, affiliated or connected.
6.5 Severability. If any of the provisions of this Article VI should
in whole or part be held invalid in a final judgment by a court of
competent jurisdiction, such invalidity shall not affect the
validity of the rest of this Article VI, the parties intending that
such provision be severable.
6.6 Injunctive Relief. The parties hereto recognize and hereby
acknowledge that it is impossible to measure in money the damages
which would result to NMFS or its
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successors or assigns by reason of a failure by Maybruch to perform
any of the obligations imposed upon him under Article VI of this
Agreement. Therefore, NMFS or its successors or assigns shall be
entitled to injunctive and other equitable relief to enforce the
terms of Article VI of this Agreement, without the necessity of
showing irreparable harm and without the necessity of posting bond
or security. If NMFS or its successors or assigns should institute
an action or proceeding to enforce the provisions of Article VI
hereof, Maybruch hereby waives the claim or defense that any such
party has an adequate remedy at law, and Maybruch shall not urge in
any action or proceeding the claim or defense that such a remedy at
law exists. At the discretion of the court or arbitrator before
which an injunctive proceeding is brought, the running of the
covenants herein may be tolled and extended for a period of time
equal to the time period Maybruch shall be in violation of any such
covenant.
ARTICLE VII. GENERAL PROVISIONS
7.1 Completion of Documents. Maybruch agrees to cooperate with NMFS in
maintaining and providing customary financial, administrative and
other records as may be needed by NMFS or as required and/or
allowed by law.
7.2 DELETED
7.3 Physical and Mental Condition. Maybruch represents that he is in
good physical and mental health, has no chronic illness nor any
prior physical or mental problems, the recurrence of which would
impair his ability to function under all the terms and conditions
of this Agreement.
7.4 Assignment. The Agreement is not assignable by Maybruch. This
Agreement may be assigned by NMFS.
7.5 Offsets. Any amount payable to Maybruch pursuant to this Agreement
may be reduced for purposes of offsetting, either directly or
indirectly, any indebtedness or liability of Maybruch to NMFS.
Notwithstanding the foregoing, there shall not be any offsets for
indemnification under Sections 8.1(c) or 8.1(d) of the Accounting
Business Asset Purchase Agreement. In the event that any offset by
NMFS is challenged by Maybruch and not affirmed by a nonappealable
decision or order after such dispute is arbitrated or litigated, as
the case may be, NMFS shall, upon demand, pay Maybruch the amount
of the offset plus interest from the original due date of such
payment at
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<PAGE>
the rate of nine percent (9%) per annum, along with all reasonable
attorneys fees, costs, disbursements and expenses incurred by
Maybruch in connection with such arbitration or litigation.
7.6 Withholding.To the extent required by any applicable law, including
without limitation, any federal or state income tax or excise tax
law or laws, the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act or any comparable federal, state or local
laws, NMFS retains the right to withhold such portion of any amount
or amounts payable to Maybruch under this Agreement as is required
by law.
7.7 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. 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.
7.8 Rules of Construction. 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.
7.9 Waivers. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate
as a waiver thereof; nor
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<PAGE>
shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any
related document or by law.
7.10 Modification. This Agreement may not be modified or amended except
by written instrument signed by the parties hereto and, if on
behalf of NMFS, only by its President.
7.11 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
1315 Greg Street, Suite 103
Sparks, NV 89431
Attention: Douglas R. Colkitt, M.D.
Fax: (814) 238-8069
with a copy to: Marcy L. Colkitt & Associates, P.C.
P.O. Box 607
Indiana, PA 15701
Fax: (412) 463-3569
To Maybruch: Morris Maybruch
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
or to such other address as NMFS or Maybruch 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
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<PAGE>
other communication required or permitted to be given by any party
may be given by such party's legal counsel.
7.12 No Restrictive Covenants. Maybruch represents and warrants that he
is not subject to any restrictive covenant which would prohibit or
limit any of the services that Maybruch must perform as
contemplated by this Agreement.
7.13 Sole Employer; No Guarantor. NMFS shall be the sole employer of
Maybruch hereunder, and no officer, director, employee or
shareholder of NMFS shall be a guarantor of this Agreement.
7.14 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto in reference to the
subject matter hereof all the matters herein agreed upon. This
Agreement replaces in full all prior employment agreements or
understandings of the parties hereto, and any and all such prior
agreements or understandings are hereby rescinded by mutual
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
MAYBRUCH: NMFS:
- ------------------------- NATIONAL MEDICAL FINANCIAL
MORRIS MAYBRUCH SERVICES CORPORATION
By: --------------------------------
President
Address: Address:
- ---------------------- 1315 Greg Street, Suite 103
- ---------------------- Sparks, NV 89431
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<PAGE>
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 MORRIS MAYBRUCH, 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 & Cygielman"
(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;
<PAGE>
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 222 Route 59, Suffern, New York (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
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<PAGE>
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:
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<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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
1315 Greg Street, Suite 103
Sparks, NV 89431
Attention: Douglas R. Colkitt, M.D.
Fax: (814) 238-8069
with a copy to: Marcy L. Colkitt & Associates, P.C.
P.O. Box 607
Indiana, PA 15701
Fax: (412) 463-3569
To Repurchaser: Morris Maybruch
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
To Shoreline: Shoreline Medical Billing
Systems, Inc.
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
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
<PAGE>
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.
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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 Douglas R. Colkitt, 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
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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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
------------------------------- (SEAL)
MORRIS MAYBRUCH ("Repurchaser")
SHORELINE MEDICAL BILLING SYSTEMS, INC.,
a New York corporation ("Shoreline")
By:
------------------------------------
Morris Maybruch, President
NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION, a Nevada corporation
("NMFS")
By:
------------------------------------
Title:
------------------------------
11
<PAGE>
Exhibit 10.5
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is made and entered
into as of January 1, 1998, by and among NATIONAL MEDICAL FINANCIAL SERVICES
CORPORATION, a Nevada corporation ("NMFS"); and MORRIS MAYBRUCH, a resident
of the State of New York ("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Accounting Business Asset Purchase
Agreement dated as of the even date hereof (the "Accounting Business Asset
Purchase Agreement") among NMFS and Seller, NMFS has as of this date acquired
substantially all of the assets of the accounting business of Seller
operating under the tradename "Maybruch & Co., CPA's", the successor of
Seller's interest in the partnership "Maybruch & Cygielman";
WHEREAS, to induce NMFS to perform under the Accounting Business Asset
Purchase Agreement, Seller has agreed not to engage in certain businesses
within a certain time period and within certain specified geographic areas,
and subject to certain conditions, all as more particularly set forth herein;
WHEREAS, in conjunction with this Agreement and to induce NMFS and
Seller to perform under the Accounting Business Asset Purchase Agreement,
Seller and NMFS have agreed to execute an employment agreement of even date
herewith (the "Employment Agreement") by which Seller will be employed by
NMFS;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are acknowledged by the
parties hereto, the parties hereto hereby agree as follows:
Section 1. Noncompetition.
(a) Seller agrees that for a period ending on the later of (i) the
fifth anniversary of the date of this Agreement, or (ii) the second
anniversary of the date that Seller is no longer employed under the
Employment Agreement for any reason. Seller will not knowingly, directly or
indirectly (either alone or as a partner, officer, director, employee,
independent contractor, consultant, investor, partner, lender or stockholder
of any company or business organization):
(1) recruit, solicit, or otherwise seek to induce employees or
customers of NMFS, to terminate
<PAGE>
their employment or customer relationship with NMFS, to
terminate their employment relationship with NMFS, or to
violate any agreement with NMFS; or
(2) own, lease, manage or operate any medical billing or
accounting service business in the "Territory" (as
hereinafter defined); or
(3) provide any medical billing or accounting services in the
"Territory" in competition with NMFS;
provided, however, that:
(A) the record or beneficial ownership by Seller of 5% or less of the
outstanding publicly traded capital stock of any company
providing services described in Sections 1(a)(2) and (3) above
shall not be deemed to be a violation thereof so long as Seller
is not an officer, consultant, director, independent contractor
or employee of such company;
(B) services provided by Seller to NMFS under the Employment
Agreement shall not be deemed in violation of this Section 1;
(C) services rendered by Seller as a certified public accountant
shall be deemed not to be in competition with NMFS; and
(D) the restrictions under this Section 1 shall terminate in the
event of a default by NMFS under the Accounting Business Asset
Purchase Agreement, the Employment Agreement, or the Buy-Back
Agreement.
(b) Seller will not, without the prior written consent of NMFS,
disclose, other than in connection with the Employment Agreement, any
"Confidential Information" of Seller or NMFS to any person not authorized by
NMFS to receive such information. This covenant shall not apply to any
Confidential Information now or hereafter voluntarily disseminated by NMFS to
the public, or which otherwise has become part of the public domain through
lawful means. "Confidential Information", for purposes of this Agreement,
shall mean information that is proprietary to the Company or proprietary to
others and entrusted to the Company, whether or not trade secrets.
Confidential information includes, but is not limited to, information
relating to business plans and to business as conducted and to past and
current products,
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services or procedures. Confidential information also includes, without
limitation, customer names, customer addresses, customer lists, fee
scheduless, managed care contracts and rates, quality assurance policies and
procedures, staffing models, design maintenance and operation of centers, and
information concerning research, development, purchasing, marketing, selling
and services. Confidential Information does not include: (i) information
which is public information at the time such information is disclosed by
Seller, or thereafter becomes public through no violation of this Agreement;
(ii) information which was in the possession of Seller or any entity with
which he was affiliated prior to its disclosure by NMFS to Seller; (iii) any
disclosure of information to the extent required by applicable law, or
regulation, or judicial or regulatory process; or (iv) use by Seller as
evidence in or in connection with any arbritration or litigation relating to
this Agreement, the Accounting Business Asset Purchase Agreement, or the
Employment Agreement or any other agreement related to the above-mentioned
agreements.
(c) Seller acknowledges and agrees (i) that Seller has received
pursuant to the Accounting Business Asset Purchase Agreement adequate
consideration for the covenants and obligations of Seller contained in this
Agreement, and (ii) that the nature and the periods of restriction imposed in
this Section 1 are fair, reasonable and necessary to protect and preserve for
NMFS the benefits of this Agreement and that such restrictions shall not
prevent Seller from earning a livelihood.
(d) The term "Territory" as used herein shall mean the
geographical area within a fifty- (50-) mile radius of 222 Route 59, Suffern,
New York 10901.
Section 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
1315 Greg Street, Suite 103
Sparks, NV 89431
Attention: Douglas R. Colkitt, M.D.
Fax: (814) 238-8069
with a copy to: Marcy L. Colkitt & Associates, P.C.
P.O. Box 607
Indiana, PA 15701
3
<PAGE>
Fax: (412) 463-3569
To Seller: Morris Maybruch
222 Route 59
Suffern, NY 10901
Fax: (914) 357-0480
with a copy to: Larry Schwartz, Esq.
Schwartz & Silverstein LLP
254 South Main Street
New City, NY 10956
Fax: (914) 638-9090
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.
Section 3. 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, 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.
Section 4. Governing Law; Attorneys' Fees. This Agreement is executed
in and is governed by the laws of the State of New York, exclusive of the
principles of conflicts of laws. In the event that a suit, action,
arbitration, or other proceeding of any nature whatsoever, 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, prevailing party's reasonable
attorneys',
4
<PAGE>
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 or arbitrator at trial or
other proceeding, or on any appeal or review, in addition to all other
amounts provided by law.
Section 5. Severability; Reformation. If any of the provisions, or
portions thereof, of this Agreement are held to be unenforceable or invalid
by any arbitrator or court, the validity and enforceability of the remaining
provisions, or portions thereof, will not be affected and shall continue in
force. If any arbitrator or court determines that the scope, duration or
geographical limit of any of the restrictions contained in this Agreement is
unenforceable, it is the intention of the parties that the restrictions and
covenants shall not thereby be terminated but rather shall be amended and
revised to the extent required to render them valid and enforceable.
Section 6. Separate Agreement. Seller agrees that the covenants and
agreements contained herein shall be construed as agreements independent of
any other agreements with NMFS and are independently supported by good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and further agrees that this Agreement shall be interpreted,
construed and enforced separate and apart from any other agreements between
or among the parties hereto. Seller further agrees that any claim or cause
of action of Seller against NMFS and any other party hereto arising out of
any other agreement or arising out of any set of facts shall not constitute a
defense to the enforcement by NMFS or its successors or assigns of the
covenants and agreements of Seller contained herein; provided however, that
that if Article VI (Non-Competition) of the Employment Agreement is no longer
enforceable or binding upon Seller in accordance with the terms of the
Employment Agreement, then this Agreement shall terminate and no longer be
enforceable or binding upon Seller.
Section 7. Injunctive Relief. The parties hereto recognize and hereby
acknowledge that it is impossible to measure in money the damages which would
result to NMFS or its successors or assigns by reason of a failure by Seller
to perform any of the obligations imposed upon him under this Agreement.
Therefore, NMFS and its respective successors or assigns shall be entitled to
injunctive and other equitable relief to enforce the terms of this Agreement,
without the necessity of showing irreparable harm and without the necessity
of posting bond or security. If NMFS or its respective successors or assigns
should institute an action or proceeding to enforce the provisions hereof,
Seller hereby waives the claim or defense that any such party has an adequate
remedy at law, and Seller agrees he shall not urge in
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<PAGE>
any action or proceeding the claim or defense that such a remedy at law
exists. At the discretion of the court or arbitrator before which an
injunctive proceeding is brought, the running of the covenants in Section
1(a) hereof may be tolled and extended for a period of time equal to the time
period Seller shall be in violation of any such covenant.
Section 8. Arbitration. All disputes hereunder shall be resolved by
arbitration in the manner specified in the Accounting Business Asset Purchase
Agreement.
Section 9. No Other Parties. Seller acknowledges and agrees that the
only other party to this Agreement is NMFS and that Douglas R. Colkitt, M.D.
individually is not a party, in any capacity, to this Agreement.
IN WITNESS WHEREOF, this Agreement is entered into and effective as of
the day and year first written above.
NMFS:
NATIONAL MEDICAL FINANCIAL
SERVICES CORPORATION, a Nevada
corporation
By:
-------------------------------
Title:
-------------------------
SELLER:
----------------------------------
MORRIS MAYBRUCH
6
