Exhibit 1
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ASSET PURCHASE AGREEMENT
between
MDNY HEALTHCARE, INC.,
a New York corporation,
and
TOPHAAT HOLDINGS GROUP, INC.,
a Delaware corporation
Dated as of March 21, 2008
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ASSET PURCHASE AGREEMENT
Asset
Purchase Agreement
dated as of March 21, 2008 (this "Agreement") by
and between MDNY Healthcare, Inc., a New York corporation (the "Seller"),
and
TopHaat Holdings Group, Inc., a Delaware corporation (the
"Buyer").
RECITALS
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WHEREAS,
Seller is a healthcare
insurance company based in Melville, New
York;
WHEREAS,
the Seller desires to
sell to the Buyer, and the Buyer wishes to
purchase from the Seller, certain assets relating to the
business of the Seller
(the "Business"), upon the terms and conditions set forth herein;
and
WHEREAS,
the Seller
desires to transfer
to the Buyer,
and the Buyer is
willing to assume
from the Seller, certain liabilities, upon the terms and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the foregoing premises, the
respective
covenants,
representations and warranties and agreements hereinafter
contained,
and other good and valuable consideration, the receipt and sufficiency of
which
are hereby
acknowledged, the
parties hereto,
intending to be legally bound
hereby, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section
1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" of
any party means any person or entity controlling,
controlled by or under common control with such party.
"Business
Day" shall refer to a day, other than a Saturday or a Sunday,
on
which commercial banks are not required or authorized to close in
New York City.
"Buyer
Regulatory Approvals"
means (i) Atlantic American Health Insurance
Company, an affiliate of Buyer ("Atlantic American"), being granted
a license as
an accident
and health
insurer in the State
of New York by NYSID
pursuant to
Article 42 of the New York Insurance Law; (ii) the grant to the
Service Company
(as defined below) of such Consents from applicable Governmental
Entities as are
required to permit the
Service Company to
perform its
obligations
under the
Claims Processing
Services Agreement; (iii) the approval of NYSID of a
subscriber contract that may be issued by Buyer to its members.
"Claims"
means claims for benefits provided to members of Seller
incurred
prior to the Closing Date under subscriber contracts issued by Seller. Claims
include, but are not
limited to, Claims
that are incurred but
not reported to
Seller prior to the
Closing Date but that are thereafter reported to Seller
within 120 days after the date incurred.
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"Consent"
means any permit,
consent, approval,
authorization or
similar
type of action.
"Contracts" means all agreements, contracts, leases, subleases,
purchase
orders, commitments, contractual licenses and instruments to which
the Seller is
a party or by which
the Seller is bound
and which relate to the Purchased
Assets.
"Governmental Entity" means any Federal, state or local court of
competent
jurisdiction, or
any governmental agency, authority, instrumentality or
regulatory body, including, but not limited to the NYSID and
NYSDOH.
"HIPAA"
means the Health Insurance Portability and Accountability Act of
1996.
"Material
Adverse Effect" means, taken as a whole, a material
diminishment
of the prospective
value to Buyer of the
Purchased Assets or of the value to
Buyer of Seller's
obligations under this
Agreement (other than
such as may be
caused by or
attributable
to a deterioration in the overall business and
financial condition of
the Seller between the
date of this Agreement
and the
Closing Date),
or a material
increase in the
prospective
obligations of and
costs to Buyer under the Assumed Liabilities.
"NYSDOH"
means the New York State Department of Health.
"NYSID"
means the New York State Insurance Department.
"Owners"
means, respectively,
Catholic Healthcare Network of Long Island,
Inc., a New York corporation, and Long Island Physicians Holding
Corporation a
New York corporation ("LIPH").
"Person"
means any individual,
firm, corporation,
partnership,
limited
liability company, trust, joint venture, Governmental Entity or
other entity.
"Seller
Regulatory
Approvals"
means any approvals required by any
Governmental Entity
having jurisdiction over the Seller and/or either of
the
Owners and the transactions contemplated hereunder,
including, but not
limited
to, the NYSID and NYSDOH.
"Subsidiary" of any person means another person, an amount of the voting
securities, other
voting ownership or voting partnership interests of which is
sufficient to elect at
least a majority
of its Board of Directors or other
governing body (or,
if there are no such
voting interests
50% or more of the
equity interests of
which is owned
directly or indirectly by such first person
or by another subsidiary of such first person).
"Tax
Return" means any
report, return,
document, declaration or other
information or filing
required to be supplied to any Taxing Authority with
respect to Taxes, including any amendment made with respect
thereto.
"Tax" or
"Taxes" means all forms of taxation imposed by any Federal,
state, local or other Taxing Authority, including income, franchise,
property,
sales, use,
excise, employment, unemployment, payroll, social security,
estimated, value added, ad valorem, transfer, recapture,
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withholding, health
and other taxes of any kind, including any interest,
penalties and additions thereto.
"Taxing
Authority"
means any Federal, state or local government, any
subdivision,
agency,
commission or
authority thereof or any domestic
quasi-governmental body exercising tax regulatory authority.
"Transferred
Contracts" means all Contracts selected by Buyer pursuant to
Section 2.5 hereof.
ARTICLE
II
PURCHASE AND SALE OF ASSETS
Section
2.1 Purchased Assets.
(a) Transfer of
Purchased Assets.
At the Closing the
Seller shall
sell, transfer,
assign and deliver to
the Buyer, and the Buyer shall purchase,
acquire and accept from the Seller, all of the right, title and
interest of the
Seller in, to and
under the following
assets (collectively, the "Purchased
Assets"):
(i) All furniture,
fixtures, machinery and equipment owned by
Seller and used in the
day-to-day operation
of the Business by Seller at its
facility located
at One Huntington Quadrangle, Melville, New York (the
"Facility"); and
(ii) Transferred
Contracts (including
any leases or licenses
relating to equipment
or other assets leased
or licensed by Seller and used in
the day-to-day operation of the Business by Seller at the
Facility).
(b) Excluded Assets.
Notwithstanding anything in this Agreement (or
any agreement,
document or instrument
delivered in connection herewith) to the
contrary, the
Purchased Assets shall not include the equipment, agreements and
other assets identified on Schedule 2.1(b), which shall remain owned, leased
or
licensed by Seller (the "Retained Assets").
Section
2.2 Assumption of
Liabilities.
At the Closing,
the Buyer shall
assume the obligations of the Seller under the Transferred
Contracts,
but only
to the extent that such obligations relate to the period after the
Closing Date
(collectively, the "Assumed Liabilities").
Section
2.3 Excluded Liabilities. Notwithstanding anything to the
contrary
contained in this Agreement, except for the Assumed Liabilities,
Buyer shall not
assume, or
become responsible in any way for, any other liabilities or
obligations of the Seller or any other liabilities or obligations
that relate in
any way to the
Purchased Assets (each, an "Excluded Liability"). Without
limiting the
generality of the
foregoing,
Buyer shall not
assume, or become
responsible in any way
for, and the Excluded
Liabilities shall
include, the
following:
(a) Any and all
liabilities or obligations that arise or relate to
Seller's breach of, or
default under,
any Transferred Contract prior to the
Closing Date;
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(b) Any and all liabilities or obligations of Seller with respect
to
the Transferred Contracts that arise or relate to the performance
of services or
the purchase or delivery of goods prior to the Closing Date;
(c) Any and all
liabilities arising
out of any lawsuit or legal or
regulatory proceeding
of any type, kind or nature involving Seller or the
Business (except for
any such liabilities
as may arise out of any such lawsuit
or proceeding arising
out of or in connection with a dispute between Seller and
Buyer relating to this Agreement or any of the Ancillary
Agreements);
(d) Except as
expressly provided
in Section
6.3(b), any and all
liabilities relating to an individual in connection with their
current, past or
future employment with Seller; and
(e) Any regulatory, corporate or tax obligation of Seller.
The Seller
shall remain solely responsible for the Excluded Liabilities.
Section
2.4 Purchase Price.
(a) In addition to the Buyer's assumption of the Assumed
Liabilities, the
aggregate purchase price (the "Purchase Price") for the
Purchased Assets shall
be the payment of
$3,200,000 as follows:
(i) $500,000
(the "Initial
Deposit") shall be paid by the Buyer concurrently with the
execution and delivery
of this Agreement by
all parties hereto
(the "Deposit
Date") or the Closing.
If the Initial Deposit is paid on the Deposit Date, such
amount shall be paid
by wire transfer
of immediately available funds to an
account designated
by the Seller,
in which case Seller
shall use such
amount
solely for purposes of satisfying Claims. If the Initial Deposit is paid upon
the Closing, such amount shall be paid by wire transfer of
immediately available
funds to an account
(the "Trust
Account") designated by Seller, as for the
benefit of the Seller pursuant to a Trust Agreement substantially
in the form of
Exhibit A hereto among Seller and the Trustee Thereunder (the "Trust
Agreement"), for use
in accordance with the terms of Section 2.4(a)(ii) hereof,
and (ii) $2,700,000 (the "Proceeds"), pursuant to the following
terms: (x) Buyer
shall deposit the Proceeds in the Trust Account; provided that such
Proceeds and
the Initial Deposit
shall be used solely for purposes of satisfying Claims and
(y) the Seller shall
retain $200,000 of the Proceeds to satisfy expenses
incurred in the final dissolution of the Seller subsequent to the
Closing of the
transactions
contemplated hereunder. If, after satisfying the expenses
incurred
in the windup of the Seller, any portion of the $200,000 reserved for final
dissolution expenses
is not used, such remaining amount shall be disbursed from
escrow and made
available for purposes
of satisfying
Claims pursuant to the
terms hereof.
(b) The Buyer and the Seller hereby agree upon an allocation of
the
Purchase Price (and all other capitalized costs) and the amount of the
Assumed
Liabilities among the
Purchased Assets consistent with Section 1060 of the
Internal Revenue
Code of 1986,
as amended (the "Code"), and the Treasury
Regulations
promulgated thereunder
prior to Closing as
set forth in
Schedule
2.4(a). Each of the
Buyer and the Seller agree to file Internal Revenue Service
Form 8594,
and all Federal, state and local Tax Returns (as hereinafter
defined), in
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accordance with any
such agreed allocation
as adjusted as provided herein.
Except as required by
applicable law,
the Buyer and the
Seller shall not take
any position in any Tax Return, Tax proceeding or audit that is inconsistent
with such allocation.
Section
2.5 Transferred
Contracts.
Within three (3)
Business Days after
the date hereof,
Seller will deliver to the Buyer a copy of each
Contract,
including any amendments thereto, which shall be true, correct and
complete in
all material
respects. The Buyer shall determine, in its sole and absolute
discretion, which
Contracts will be
assumed by Buyer, and
will provide Seller
with a schedule
("Schedule 2.5") specifically identifying such Contracts to
be
included as Transferred Contracts within thirty (30) days
after receipt of such
Contracts from Seller.
Schedule 2.5 shall
identify all
Transferred
Contracts
that require consent to assignment or otherwise prohibit
assignment.
Section
2.6 Third Party Consents for Transferred Contracts.
(a) Seller shall use commercially reasonable efforts to obtain all
Consents from third parties reasonably requested by the Buyer and
required for
the transfer of the
Transferred Contracts
to Buyer. Buyer shall
provide such
information and assurances as any such third parties may reasonably
request as a
condition to or in connection with the grant of such
Consent. Notwithstanding
anything to the contrary in this Agreement, this Agreement shall not
constitute
an agreement
to assign any
Transferred
Contract or any claim, right or any
benefit arising
under or resulting from such Transferred Contract if an
attempted assignment
thereof, without the Consent of a third party, would
constitute a breach,
default or violation of such Transferred Contract. If any
transfer or assignment
by the Seller,
or any assumption by the Buyer of,
any
interest in, or
obligation, liability
or commitment
under, any Transferred
Contract requires the Consent of a third party, then such transfer, assignment
or assumption shall be made subject to such Consent being
obtained.
(b) If any Consent with respect to a Contract identified on
Schedule
2.5 as a Transferred
Contract is not obtained prior to the Closing Date, the
Closing shall
nonetheless
take place on the
terms set forth
herein. In such
event, the Buyer may elect, with respect to each Transferred
Contract for which
a Consent has not been so obtained, (i) to cause the Seller to provide
or cause
to be provided
all commercially reasonable assistance to the Buyer (not
including the payment of any consideration) reasonably requested by
the Buyer to
secure such
Consent after the Closing and cooperate with the Buyer (at the
Buyer's expense)
in any lawful and commercially reasonable arrangement
reasonably proposed by the Buyer under which (x) the Buyer shall
obtain (without
infringing upon the legal rights of such third party or violating
any applicable
law) the economic
claims, rights and benefits under the subject Transferred
Contract(s), and (y)
the Buyer shall assume any related economic burden
(including the amount
of any related Tax costs imposed on the Seller or any
of
its Affiliates) with respect to the subject Transferred Contract
and the claims,
rights or benefits
arising under or
resulting from the subject Transferred
Contract(s) agreement, or (ii) to have the Seller retain the
subject Transferred
Contract(s) and all liabilities and obligations associated therewith (in which
event such
Transferred
Contract(s)
shall not be
considered
as Transferred
Contract(s) and all
such liabilities and obligations thereunder shall be
Excluded Liabilities).
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ARTICLE III
CLOSING
Section
3.1 Closing.
Unless the Seller and
Buyer otherwise
agree, the
closing ("Closing")
of the sale and
purchase of the
Purchased Assets and
the
assumption of the Assumed Liabilities contemplated hereby (collectively, the
"Acquisition") shall take place at the offices of Herrick,
Feinstein LLP, 2 Park
Avenue, New York, New York within fifteen (15) days following the
receipt of the
Buyer Regulatory
Approvals and any Seller Regulatory Approvals, and the
satisfaction of the
conditions to Closing
set forth herein. The
date on which
the Closing occurs is hereinafter referred to in this Agreement as
the "Closing
Date." The Closing
shall be deemed to be
effective as of 12:01
a.m., Eastern
time, on the Closing Date (the "Effective Time").
Section
3.2 Deliveries at Closing.
(a) Deliveries by the Seller. At the Closing, the Seller shall
cause
to be delivered to the Buyer the following:
(i) a bill of sale and such other assignments, instruments and
documents (if any) as may be reasonably requested by the Buyer, and in
form and
substance reasonably satisfactory to the Seller, as may be
necessary to evidence
the sale of the Purchased Assets to the Buyer; it being understood that such
instruments and
documents shall not
require the Seller to make any additional
representations,
warranties or
covenants,
express or implied,
not expressly
contained in this Agreement;
(ii) a certificate
of recent date as to
the good standing of
Seller in the State of New York;
(iii) a certified copy of resolutions adopted by the board of
directors of the
Seller approving
the transactions contemplated herein and
authorizing the Seller to enter into this Agreement and the
Ancillary Agreements
and to perform its obligations hereunder and thereunder;
(iv) a certificate
dated as of the Closing Date reconfirming
that Seller's
representations
and warranties are true and correct in all
material respects;
(v) the Trust
Agreement duly
executed by the Seller
and the
Trustee;
(vi) a Claims
Processing Expense
Payment Agreement
between
Seller and the Service Company (as defined in Section 6.9)
substantially in
the
form of Exhibit B hereto (the "Claims Processing Expense Payment Agreement"),
duly executed by the Seller;
(vii) a Restrictive
Covenant Agreement(s)
between Buyer and
each of the
Owners, substantially in the form of Exhibit C hereto (the
"Restrictive Covenant Agreement"), executed by each of the
Owners;
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(viii) a Transition
Services Agreement between Buyer and
Seller, substantially
in the form of Exhibit D hereto (the "Transition Services
Agreement"), executed by the Seller; and
(ix) such other
documents as may be
reasonably
required for
the purpose of consummating the Acquisition.
(b) Deliveries by the Buyer. At the Closing, the Buyer shall cause
to be delivered to the Seller the following:
(i) funds in an amount equal to the Proceeds, delivered via
wire transfer of immediately available funds to the escrow account
designated by
the Escrow Agent;
(ii) if the Initial
Deposit shall not have been previously
released to the Seller on the Deposit Date pursuant to Section
2.4(a)(i), funds
in an amount equal to
the Initial
Deposit, delivered via wire transfer of
immediately available funds to an escrow account designated by the
Escrow Agent;
(iii) the Assumption Agreement in the form of Exhibit E
annexed hereto (the
"Assumption
Agreement"),
dated the Closing
Date, and all
other instruments of assumption and other documents reasonably requested by the
Seller to confirm the Buyer's obligation to duly assume and
timely pay, perform
and discharge the Assumed Liabilities;
(iv) a certified copy of the minutes of a meeting of the board
of directors of the Buyer approving the transactions contemplated herein and
resolving to enter
into this Agreement
and the Ancillary Agreements and to
perform its obligations hereunder and thereunder;
(v) the Claims
Processing
Expense Payment Agreement duly
executed by the Service Company;
(vi) the Restrictive
Covenant Agreement(s)
duly executed by
the Buyer;
(vii) the Transition
Services Agreement
duly executed by the
Buyer; and
(viii) such other
documents as Seller may reasonably request
for the purpose of facilitating the consummation of the
Acquisition.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller
makes the following representations and warranties to the Buyer
as of the date hereof,
subject to and qualified by any fact or facts disclosed
in the Schedules
hereto that are provided to the Buyer as required in this
Agreement.
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Section
4.1 Organization. The
Seller has been duly organized, is validly
existing and in good standing under the laws of the state of its
incorporation.
Section
4.2 Authority; Execution and Delivery; Enforceability. The Seller
has full corporate
power and corporate
authority to execute this Agreement and
the other agreements and instruments, if applicable, to be executed and
delivered in connection with this Agreement (the "Ancillary Agreements") to
which it is a party
and to consummate the transactions contemplated to be
consummated by it by this Agreement and such Ancillary Agreements. The Seller
has taken all corporate action required by its relevant
organizational documents
to authorize the
execution and delivery of this Agreement and the Ancillary
Agreements to which it
is a party and to
authorize the consummation of the
Acquisition and the other transactions contemplated hereby and thereby
(subject
to the fact
that Seller's Board of Directors had no incumbent "Enrollee
Representatives" (as
defined in Seller's By-laws) when the Board took such
action). The Seller
has duly executed and delivered this Agreement and on the
Closing will have duly executed and delivered each Ancillary
Agreement to which
it is a party, and this Agreement constitutes, and each Ancillary Agreement
to
which Seller is a party will after the Closing constitute,
its legal, valid
and
binding obligation, enforceable against it in accordance with its
terms subject,
as to enforcement, to applicable bankruptcy, insolvency, moratorium,
reorganization or
similar laws affecting
creditors'
rights generally and to
general equitable
principles
(whether considered in an action at law or in
equity).
Section
4.3 No Consents
or Approvals Required. To its knowledge, no
consent, approval,
authorization or
similar type of action
("Consent") of, or
registration,
declaration or filing with, any Federal, state or local court of
competent
jurisdiction,
governmental agency,
authority,
instrumentality
or
regulatory body,
including,
but not limited to, the NYSID and NYSDOH
("Governmental
Entity"), is required
to be obtained or made by or with respect
to the Seller in connection with the execution, delivery and
performance of this
Agreement, the
Ancillary Agreements
to which it is a party or the consummation
of the Acquisition,
other than the Buyer
Regulatory
Approvals and the
Seller
Regulatory Approvals.
Section
4.4 No Conflicts. The execution and delivery by the Seller of
this
Agreement does not,
and each Ancillary Agreement to which it is a party
will
not, and the consummation of the transactions contemplated to be consummated
by
the Seller in this Agreement and such Ancillary Agreements will not, conflict
with, or result in any
breach of or constitute a default under any provision of
(x) the Seller's organizational documents; (y) any Transferred Contract or
(z)
any judgment, order or decree applicable to any of the Purchased
Assets.
Section 4.5 Proceedings. There is not any suit,
action or proceeding
pending, or to the
knowledge of the Seller, threatened against the Seller
that
would reasonably
be expected to have a material adverse effect on Seller's
ability to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements.
Section
4.6 Contracts.
(a) The Seller is not in material breach of, or default under,
any
Transferred Contract
and, to the knowledge of the Seller, no event has occurred
that, with notice or lapse of
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time would constitute
such a breach or
default or permit
termination
by the
other party under such Transferred Contract.
(b) To the knowledge of the Seller, no other party to any
Transferred Contract is in material breach thereof or default
thereunder and, to
the knowledge of the Seller, no event has occurred that, with
notice or lapse of
time would
constitute
such a breach or default or permit termination,
modification or acceleration by Seller under such Transferred
Contract.
Section
4.7 Employees.
The Seller has
provided Buyer with
Schedule 4.6,
setting forth the name, title and total compensation of each person
employed by
the Seller (the "Employees"), including all accrued (whether vested
or unvested)
vacation, personal
time, time off,
holiday or sick leave
for such
Employees;
date of hire; wage
rate; and benefits
received by such Employees or pension or
benefit plans in which such Employees participate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer
hereby represents and warrants to the Seller as follows:
Section
5.1 Organization
of the Buyer.
The Buyer is a
corporation duly
organized, validly
existing and in good standing under the laws of the State of
Delaware.
Section
5.2 Authority; Execution and Delivery; Enforceability. The Buyer
has full corporate
power and authority to execute this Agreement and the
Ancillary Agreements
to which it is a party and to consummate the transactions
contemplated by this Agreement and the other transactions contemplated hereby
and thereby.
The Buyer has taken all corporate action required by its
organizational
documents to
authorize the execution and delivery of this
Agreement and the
Ancillary Agreements
to which it is a party and to authorize
the consummation
of the transactions contemplated by this Agreement and the
other transactions
contemplated hereby and thereby. The Buyer has duly executed
and delivered
this Agreement and prior to the Closing
will have duly executed
and delivered
each Ancillary Agreement to which it is a party, and this
Agreement constitutes,
and each Ancillary Agreement to which it is a party will
after the Closing constitute, its legal, valid and binding obligation,
enforceable against it
in accordance with its terms subject, as to enforcement,
to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws
affecting creditors'
rights generally and to general equitable principles
(whether considered in an action at law or in equity).
Section
5.3 No Conflict or Violations, No Consents or Approvals
Required.
No Consent of, or
registration,
declaration or filing
with any Governmental
Entity is required to
be obtained
or made by or with
respect to the Buyer
in
connection with the execution, delivery and performance of this
Agreement, the
Ancillary Agreements
to which it is a party or the consummation of the
transactions
contemplated by this
Agreement, other than
the Buyer
Regulatory
Approvals. The execution and delivery by the Buyer of this
Agreement do not, and
of each Ancillary Agreement to which it is a party will not, and the
consummation of the
transactions
contemplated
by this Agreement and such
Ancillary Agreements
will not, conflict
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with, or result in any breach of or constitute a default under, or
result in the
creation of any lien upon any of the properties or assets of the
Buyer under, or
require Consent under any provision of (x) the Buyer's
organizational documents,
as amended to date;
(y) any contract to
which the Buyer is a party or by which
any of its properties or assets is bound; or (z) any judgment,
order or decree,
or statute, law, ordinance, rule or regulation applicable to the
Buyer or any of
its properties or assets, other than, in the case of clauses
(y) and (z) above,
any such items that would not reasonably be expected to have a
material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
by this Agreement
and the Ancillary Agreements (a "Buyer Material Adverse
Effect").
Section
5.4 Proceedings. There
is not any (i) outstanding judgment, order
or decree against the
Buyer or any of its
subsidiaries; (ii)
suit, action or
proceeding pending,
or to the knowledge of
the Buyer, threatened
against the
Buyer or any of its
subsidiaries; or (iii)
investigations by any
Governmental
Entity that
are pending or threatened against the Buyer or any of its
subsidiaries that,
in any such case,
would reasonably be expected to have a
Buyer Material Adverse Effect.
ARTICLE VI
C
