ASSET PURCHASE AGREEMENT

 

                     ASSET PURCHASE AGREEMENT

 

 

     THIS ASSET PURCHASE AGREEMENT ("Agreement") has been made this ____ day

of November, 2003, by and between McCoy Business Services, Inc. (hereafter

"Seller"), a Kentucky corporation in good standing, by and through Marlene

McCoy, its President, and Omni Medical Services, Inc. (hereafter "Buyer"), a

South Dakota corporation in good standing, by and through its Chief Executive

Officer, Arthur D. Lyons.

 

     Whereas, the purpose of this Agreement is to set forth the conditions

under which the Seller agrees to sell and the Buyer agrees to purchase the

Seller's tangible assets personal and mixed, related to medical transcription

services, and regardless of where located, including those located at the

business address of, 1230 Liberty Bank Lane, Suite 110, Louisville, KY 40222,

and to assume the Seller's lease for its office space, for the price and upon

the terms set forth in this agreement.

 

     NOW, THEREFORE, in consideration of the premises and the mutual promises

of the parties, and in consideration of the representations, warranties,

covenants and agreements contained herein, it is hereby agreed as follows:

    

ASSETS BEING SOLD AND PURCHASED:

 

     Subject to the provisions of this Agreement, Buyer hereby agrees to

purchase, and Seller hereby agrees to sell, transfer and assign to Buyer, all

of Seller's right, title and interest in and to the tangible assets of

Seller's business described hereinbelow (the "Purchased Assets"), including,

without limitation, those tangible assets related to and used in the operation

of the business related to medical transcription services, and all existing

contracts and proposals with all of Seller's medical transcription clients

(e.g. hospitals, clinics, etc.), and as shown on Seller's September 30, 2003

balance sheet, subject to changes occurring in the normal and ordinary course

of business between that date and the date of closing, and excepting the

Seller's cash, accounts receivable, and unbilled work-in-progress, excepting

any and all accrued, contingent and existing Company debts and liabilities

associated with the Purchased Assets or Seller's business prior to closing on

this agreement. The Purchased Assets shall, however, include a certain lease

agreement by and between Liberty Centre I and Seller dated November 8, 2000,

and the obligations under that lease agreement shall be assumed by Buyer.

 

     The personal property, tangible and intangible, are specifically listed

on Exhibit A and further generally described as follows:

 

          a)    All furniture, equipment, machinery, all computers and

               computer software, office supplies, phone systems, existing

               contracts and proposals with all clients of the Seller, and

               all other personal property being at and used in connection

               with carrying on the medical transcription business;

 

          b)    Signage (to the extent currently owned by Seller) wherever

               now located and relating to the medical transcription

               business;

 

          c)    The exclusive use of the business name "McCoy Business

               Services" as a fictitious name of Buyer for a period of five

               (5) years commencing at the Closing Date;

 

          d)    The transfer of any existing municipal, state or federal

               licenses of the business, and if any of the same requires

               the approval of an issuing authority, then this agreement is

               subject to the approval of the issuing authorities;

 

          e)    Any other contracts between the Seller and vendors or

               service providers that are in existence and which Buyer

               desires to obtain for the benefit of the ongoing

               transcription business, including a customer list of prior

               and current customers.

 

PURCHASE PRICE:     

 

     Consideration for Purchased Assets. In consideration for the Purchased

Assets and Seller's covenants herein, Buyer agrees to pay Seller three hundred

sixty thousand dollars ($360,000) subject to the following conditions and

schedule:

          1)    Cash at closing:                             $120,000.00

         

          2)    Eight quarterly payments of $30,000,

               each payment subject to earn out

               provision described below                    $240,000.00

          

      The quarterly payments referred to in 2) above ("Deferred Payments")

shall be allocated to Marlene McCoy's obligations under the Section below

entitled "Covenant Not to Compete/Confidentiality,"   and shall be payable

directly to Ms. McCoy.

 

     Earn-out Provision.

 

     Each of the Deferred Payments referred to in the preceding paragraph

shall be subject to adjustments as follows: Deferred Payments due at the end

of any one quarter shall be adjusted by an amount equal to one-sixth (1/6) of

the variance, if any, between (a) the sum of One Hundred Sixty-two Thousand

Five Hundred Dollars ($162,500) and (b) the revenues invoiced during that

quarter from the customers listed on Exhibit B to this Agreement, irrespective

of where the work resulting in the invoice was performed.   For the purposes of

this provision, revenues shall be determined on an accrual basis.   The base

amount of each of the Deferred Payments shall be $30,000, and the payments

shall be (i) reduced by one-sixth of the amount (if any) by which revenues

during the preceding quarter are less than $162,500, and (ii) increased by

one-sixth of the amount (if any) by which revenues during that quarter exceed

$162,500. Each Deferred Payment shall be made within 30 days after the

conclusion of the quarter to which it applies, and each payment shall be

accompanied by an accounting showing how the amount of the Deferred Payment

was determined.

 

     Throughout the period that Deferred Payments are calculated, Buyer shall

operate the business   in a manner that is calculated to maximize the revenues

of the business and retain the loyalty and business of the customers listed on

Exhibit B.

 

     All consideration identified herein is hereafter referred to as the

"Purchase Price".

 

EXCLUDED LIABILITIES:

 

     Except as expressly set forth herein, Buyer does not assume and shall

not be liable for any of the debts, obligations or liabilities of Seller or

Seller's business of any nature whatsoever. In particular, but without

limiting the foregoing, Buyer shall not assume, and shall not be deemed by

anything contained in this Agreement or any other related Agreement, to have

assumed, and shall not be liable for any debts, obligations or liabilities of

Seller or Seller's business, whether known or unknown, contingent, absolute or

otherwise, including without limitation debts, liabilities and obligations:

 

     1)      Under any contract or agreement to which Seller is bound

            excepting the real estate lease being assigned to Buyer herein,

 

     2)      For the payment of any wages, salary, accrued vacation pay,

            severance pay, or accrued sick pay accrued by   any employee of

            Seller and arising prior to the Closing by contract, by law, or

            otherwise, and whether or not related to this Agreement or to

            consummation of the transactions contemplated hereunder, or for

            any unemployment compensation benefits or premiums for the

            period ending as of the closing date,

 

     3)      For any other payment or compensation to employees of Seller

            including any severance pay liabilities under federal or state

            law or under any welfare, compensation, pension or benefit plan

            or agreement, or under the Consolidate Omnibus Budget

            Reconciliation Act of 1985 ("COBRA") or under the Employee

            Retirement Income Security Act of 1974, as amended ("ERISA"),

             for the period ending on the closing date,

 

     4)      For any foreign, federal, state or local income, franchise,

            excise, value added, sales, use, payroll, worker's

            compensation, property or other tax or taxes of any type,

             nature or description, which such tax liability is based on

            Seller's actions or operations prior to the closing date or as

            a result of this transaction, and for any liability for local

            or state taxes, use or transfer tax, which such tax liability

            is based on Seller's actions or operations prior to the closing

            date or as a result of this transaction or taxes that may be

            imposed upon the purchase and sale of the assets pursuant to

            the Agreement,

 

     5)      For any damages or injuries to persons or property or for any

            tort or strict liability arising from events, actions, or

            inactions or the operation of Seller's business on or prior to

             the closing date,

 

     6)      For any liability arising at any time from or relating to

            injuries arising from events occurring on or prior to the

            closing date, even if a claim for any such injury is first

            asserted after the closing date.

 

     7)      For any liability or obligation (contingent or otherwise) of

            Seller arising out of any litigation arising in any way on

            account of the period prior to the closing date, whether or not

             now threatened or pending,

 

     8)      Incurred by Seller or Seller's business for borrowed money,

 

     9)      Arising from any contract assigned to and assumed by Buyer

            hereunder provided, however, that such exclusion shall be

             limited to liabilities and obligations for all periods prior to

            and including the closing date, whether arising before or after

            the closing date, and

 

     10)     For any other liability or obligation of Seller that is not

             expressly assumed by Buyer whether or not such liability or

            obligation has been disclosed to or is known to Buyer.

 

     Seller further warrants to Buyer that any known accrued liabilities of

the Seller will be paid as and when they become due after closing. On or

before the date of closing, Seller will execute and provide to Buyer a

statement of all known liabilities of Seller's business.

     

ALLOCATION OF PURCHASE PRICE:

 

     The purchase price shall be allocated as follows:

 

     1)    Equipment, Furniture and

          other depreciable assets                         $60,000

 

     2)    Covenant Not to Compete:                        $240,000

 

     3)    Goodwill:                                        $60,000          

    

     Treasury Regulation 1.1060-1T Reporting Requirement. The parties hereby

agree that they shall each use the allocation made by them pursuant to Section

2.3 as an agreed allocation of the consideration paid for the Purchased Assets

in accordance with the provisions of Treasury Regulation Section 1.1060-1T,

etseq. The parties each covenant and agree to use such allocation to complete

and file Internal Revenue Service Form 8594, Asset Acquisition Statement Under

Section 1060, if applicable.

    

CLOSING DATE:

 

     Closing. The closing date for the transactions contemplated by this

Agreement shall be December 1, 2003 (the "Closing").

    

     Obligations of Seller at Closing. At the Closing, Seller shall:

 

     1)    Execute and deliver to Buyer a Bill of Sale and other documents

          necessary for transfer of title to all assets being purchased.

 

     2)    Execute and deliver to Buyer such other documents as may be

          necessary to vest Seller's right, title and interest in and to any

          location leased by Seller at the time of closing where it has done

          business, all at Buyer's option.

    

     Obligations of Buyer at Closing. At the Closing, Buyer shall deliver all

funds to be tendered at closing by a cashier's check, promissory note and

security agreement to the Seller.

 

     Post-Closing Acts, Deeds and Undertakings. Following the Closing, the

parties shall fully and faithfully undertake all such further acts, deeds and

undertakings as may be necessary or required to consummate the transactions

contemplated by this Agreement in accordance with the terms herein.

 

     Sales Taxes.   Buyer acknowledges that a Kentucky Sales Tax may be

payable on that portion of the Purchase Price allocated to Equipment,

Furniture, and other Depreciable Assets above.   In addition to the sum payable

in cash at the Closing, Buyer shall pay to Seller the applicable amount of

that tax, and Seller shall pay the tax when it becomes due.   In the event of

any subsequent adjustment in the sales tax payable in respect of this

transaction, due to a sales tax audit or for any other reason, the Buyer shall

promptly remit to Seller the amount of any additional tax payable as a result

of that adjustment.

    

CONDITIONS PRECEDENT:

 

     Contingencies.

 

          In the event that any of the following events occur, the parties

agree that this agreement shall be voidable at the election of either party

hereto:

 

     1)    In the event that the Seller does not obtain and provide to Buyer

          the written consent to assignment of any lease of Seller's

          existing business locations that Buyer desires to maintain, or, in

          the event that the remaining lease term is of such limited

          duration that Buyer wishes to enter into a new lease agreement

           with the Lessor of said location, and the Buyer is unable to

          obtain said new lease agreement at such terms and conditions that

          are substantially as the Seller's lease;

 

     2)    In the event that Buyer and Seller do not consummate an employment

          agreement between Buyer, as employer, and Marlene McCoy, as

          employee;

 

     3)    In the event the parties have not closed this transaction by

          December 15, 2003.

 

     4)    After execution of this agreement, and prior to closing, and after

          Buyer shall complete its due diligence, which shall include a

          review of the Seller's company books, records, tax returns, and

          financial statements prior to closing, and after Seller has

          provided Buyer with all documents necessary to complete a

          certified audit and receive an unqualified opinion as to the

          condition of the Seller's business, and if Buyer finds that such

          review and opinion do not support and verify all financial and

          other information previously provided by Seller to Buyer upon

          which Buyer has relied upon in offering the Purchase Price.

    

REPRESENTATIONS AND WARRANTIES:

 

     Representations and Warranties of Seller. Seller represents and warrants

to, and covenants with, Buyer that the following statements are true, correct

and complete as of the date of this Agreement, and that the same shall be

true, correct and complete on the Closing:

 

     1)    Seller is a duly organized and validly existing corporation formed

          under the laws of the State of Kentucky and is in good standing in

          such jurisdiction.

 

     2)    Seller has the right, power, and authority to enter into and

          perform its obligations under this Agreement.     

 

     3)    The execution of this Agreement by Seller and the transactions

          contemplated by this Agreement have been duly authorized by all

          necessary action required for such authorization by the Seller

          corporation.

 

     4)    Seller is not, nor at any time will be, a party to any contract or

          other arrangement of any nature that will materially interfere

          with its full, due, and complete performance of this Agreement,

          and neither Seller nor McCoy will solicit or entertain any offer

          from any other person and will not enter into any negotiations for

          the sale of the business or assets of Seller's business with any

          third party.

 

     5)    Seller is not, nor at any time will it be, in knowing violation of

          any existing law, statute or regulation, by entering into and

          undertaking the performance of this Agreement.

 

     6)    To the best knowledge and belief of Seller, there is no litigation

          or proceeding pending, nor is any litigation threatened or pending

          involving Seller which could, if adversely determined, materially

          and adversely affect the performance of its obligations under this

          Agreement.

     

     Representations and Warranties of Buyer. Buyer represents and warrants

to, and covenants with, Seller that the following statements are true, correct

and complete as of the date of this Agreement, and that the same shall be

true, correct and complete on the Closing:

 

     1)    Buyer has the right, power, and authority to enter into and

          perform its obligations under this Agreement.     

 

     2)    The execution of this Agreement by Buyer and the transactions

          contemplated by this Agreement have been duly authorized by all

          necessary action required for such authorization by the Buyer

          corporation.

 

     3)    Buyer is not, nor at any time will it be, a party to any contract

          or other arrangement of any nature that will materially interfere

          with its full, due, and complete performance of this Agreement.

 

     4)    Buyer is not, nor at any time will it be, in knowing violation of

          any existing law, statute or regulation, by entering into and

          undertaking the performance of this Agreement.

 

     5)    To Buyer's best knowledge and belief, there is no litigation or

          proceeding pending, nor is any litigation threatened or pending

          involving Buyer which could, if adversely determined, materially

          and adversely affect the performance of Buyer's obligations under

          this Agreement.

         

REPRESENTATIONS AND WARRANTIES CONCERNING PURCHASED ASSETS:

 

     Except as otherwise expressly provided herein, Seller makes no

representations or warranties, either express or implied, concerning the

Purchased Assets.

    

INDEMNIFICATION:

 

     1)    Seller shall indemnify, defend and hold Buyer harmless from and

          against, and reimburse Buyer with respect to, any and all losses,

          damages, liabilities, claims, judgments, costs and expenses

          (including attorneys' fees and costs) of any nature whatsoever

          that Buyer shall suffer as a result of a breach of any

          representation, warranty, covenant or agreement contained herein.    

 

 

     2)    Buyer shall indemnify, defend and hold Seller harmless from and

          against, and reimburse Seller with respect to, any and all losses,

          damages, liabilities, claims, judgments, costs and expenses

          (including attorneys' fees and costs) of any nature whatsoever

          that Seller shall suffer as a result of a breach of any

          representation, warranty, covenant or agreement contained herein.

    

COVENANT NOT TO COMPETE/CONFIDENTIALITY:

 

     As further compensation for Buyer's Purchase Price, Seller agrees and

covenants that for a period of two (2) years after the Closing ("Restricted

Period"), Seller, its principals, and their representatives, agents, officers

or stockholders (hereinafter collectively referred to as "Seller") will not

directly or indirectly engage in the the offering of medical transcription,

billing or related services business within a 200-mile geographical radius of

Louisville, Kentucky or of the location of any other business operated by

Buyer, nor will it or they use it or their influence or experience in the

interest of any other medical transcription services business in such areas,

nor will it or they act as an employee or subcontractor, shareholder, officer

or director of any transcription service company that directly or indirectly

competes with or for the accounts and prospective accounts being transferred

to Buyer or for so long as the Company continues to be in said business (or

for such maximum time allowed by Kentucky law, if less). The Seller agrees

that Seller will not, during the Restricted Period, engage, directly or

indirectly, in medical transcription services of any type within the

restricted area. Throughout the Restricted Period, Seller will not in such

locality, solicit customers for, or otherwise aid or assist, anyone engaged in

such business or businesses, or communicate to any such person or corporation

any customer lists or any other business data or secrets of the medical

transcription services business, as all non-public information will be treated

as confidential in accordance with that separate Confidential Information

Agreement previously executed by the parties. The parties agree that this

covenant not to compete does not extend to the Seller and its principals

regarding the writing, publishing, distributing and selling of textbooks or

similar written materials relating to medical transcription services.

 

AGREEMENT TO EMPLOY CERTAIN EMPLOYEES:

 

     The Buyer agrees, as consideration for Seller's agreements made herein,

to enter into a 24-month employment agreement with Marlene McCoy ("McCoy"),

renewable annually, as long as terms and conditions are met that are agreeable

to both parties. During this period of employment, McCoy will assist Buyer in

the transition of the business along with certain management and sales

responsibilities. In consideration for these services, McCoy will be

compensated with an annual base salary of $30,000.00, plus standard company

benefits and a commission based on sales, all as is more specifically defined

in the separate Employment Agreement to be entered into by McCoy and Buyer and

substantially in the form attached hereto as Exhibit C.

 

     The Buyer also agrees to make no personnel reductions from the present

staff level, throughout the term of Ms. McCoy's term of employment, providing

revenues continue to be billed at a minimum quarterly rate of $162,500

(annualized rate of $650,000).

    

DISPUTES:

 

     Resolution of Disputes.

 

      1)    Arbitration. All disputes between or among parties relating to

          this Agreement (a "Dispute"), which have not been otherwise

          resolved (such unresolved Dispute hereafter referred to as an

          "Arbitrable Matter"), shall be exclusively and finally resolved by

          arbitration by a single arbitrator agreed upon by the parties to

          the Arbitrable Matter (the "Arbitrator"). If the parties are

          unable to agree upon a single arbitrator, each of the parties to

           the Arbitrable Matter shall select an arbitrator, with a third

          (3rd) arbitrator selected by the arbitrators