EXHIBIT 10.02
ASSET PURCHASE
AGREEMENT
BY AND AMONG
PAINCARE HOLDINGS, INC., PAINCARE
SURGERY CENTERS III, INC.,
CENTER FOR PAIN MANAGEMENT ASC, LLC,
AND ITS
MEMBERS
Dated as of
September 26, 2005
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TABLE OF CONTENTS
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Page
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1.
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PURCHASE AND SALE OF ASSETS
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1
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1.1
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Assets to be Transferred
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1
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1.2
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Excluded Assets
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4
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2.
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ASSUMPTION OF LIABILITIES
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4
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2.1
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Liabilities to be Assumed
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4
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2.2
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Liabilities Not to be Assumed
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5
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2.3
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Taxes Arising from Transaction
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5
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2.4
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Income and Franchise Taxes
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5
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2.5
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Product, Medical Malpractice and Service
Liability
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5
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2.6
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Litigation Matters
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5
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2.7
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Infringements
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5
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2.8
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Transaction Expenses
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5
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2.9
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Liability For Breach
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5
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2.10
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Liabilities to Affiliates
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6
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2.11
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Violation of Laws or Orders
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6
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3.
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PURCHASE PRICE - PAYMENT
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6
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3.1
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Purchase Price Consideration
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6
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3.2
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Closing Consideration
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6
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3.3
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Payment of Closing Consideration
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6
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3.4
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Closing Time Adjustments
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7
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3.5
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Promissory Note and Guaranty
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9
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3.6
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Allocation of Purchase Price
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9
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3.7
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Escrow Agreement and Transition Management
Services
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9
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4.
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REPRESENTATIONS AND WARRANTIES OF
SELLERS
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10
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4.1
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Organization; Authority
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10
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4.2
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No Violation
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10
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4.3
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Appraisal Reports
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11
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4.4
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Compliance With Laws and Orders
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11
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4.5
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Title to and Condition of Properties
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12
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4.6
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Insurance
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13
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4.7
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Contracts and Commitments
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14
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4.8
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Employee Benefit Plans
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16
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4.9
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Intellectual Property
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16
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4.10
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Product Warranty and Product
Liability
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16
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4.11
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Assets Necessary to Business
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17
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4.12
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No Brokers or Finders
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17
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4.13
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Financial Statements
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17
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4.14
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Conduct Since Date of Recent Balance
Sheet
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17
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4.15
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Company and Affiliates
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18
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MIA
300140-7.064049.0030
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TABLE OF CONTENTS
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(continued)
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Page
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4.16
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Liabilities
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18
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4.17
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Accounts Receivable
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19
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4.18
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Environmental Matters
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19
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4.19
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Personnel
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20
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4.20
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Bank Accounts
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21
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4.21
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Tax Matters
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21
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4.22
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Litigation
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22
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4.23
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Health Care Compliance
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22
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4.24
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Fraud and Abuse
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22
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4.25
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Rates and Reimbursement Policies
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23
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4.26
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Medical Staff
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23
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4.27
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Medical Providers
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24
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4.28
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Third-party Payors
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25
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4.29
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Disclosure
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25
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4.30
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Corporate Practice or Fee Splitting
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25
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4.31
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Staff Privileges
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25
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4.32
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Securities Representation
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25
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4.33
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HIPAA
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27
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4.34
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Improper and Other Payments
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27
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4.35
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Medical Waste
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27
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4.36
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Transfer of Custody of Patient Medical
Records
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28
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4.37
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Certain Representations with respect to the
Centers
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28
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5.
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REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER
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28
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5.1
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Organization of PainCare and
Subsidiary
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29
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5.2
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Authorization of Transaction
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29
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5.3
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PainCare Shares
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29
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5.4
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No Conflicts; Consents
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29
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5.5
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Consents
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30
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5.6
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Brokers
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30
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5.7
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Full Disclosure
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30
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6.
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RESTRICTIVE COVENANTS
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30
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6.1
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Restricted Period
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30
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6.2
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Confidentiality, Press Releases, and Public
Announcements
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32
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6.3
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Bulk Sales Compliance
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33
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7.
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FURTHER COVENANTS OF SELLERS
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33
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7.1
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Access to Information and Records
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33
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7.2
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Maintain Organization
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33
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7.3
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No Breach
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33
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7.4
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Maintenance of Insurance
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33
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TABLE OF CONTENTS
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(continued)
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Page
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7.5
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Consents
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33
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7.6
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Other Action
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33
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7.7
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Disclosure
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34
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8.
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CONDITIONS PRECEDENT TO PURCHASER’S
OBLIGATIONS
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34
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8.1
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Representations and Warranties True on the
Closing Time
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34
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8.2
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Compliance With Agreement
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34
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8.3
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Absence of Litigation
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34
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9.
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CONDITIONS PRECEDENT TO SELLERS’
OBLIGATIONS
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35
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9.1
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Representations and Warranties True on the
Closing Time
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35
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9.2
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Compliance With Agreement
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35
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10.
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CLOSING
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35
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10.1
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Closing
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35
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10.2
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Documents to be Delivered by the
Sellers
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36
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10.3
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Documents to be Delivered by the
Purchaser
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37
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11.
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POST-CLOSING COVENANTS
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37
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11.1
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General
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37
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11.2
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Option Agreement
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38
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11.3
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Tax Returns
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38
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11.4
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Transition
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38
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11.5
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Litigation Support
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38
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12.
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REGISTRATION
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38
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13.
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SURVIVAL AND INDEMNIFICATION
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38
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13.1
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Survival of Representations and
Warranties
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38
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13.2
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Indemnification Provisions for the Benefit of
PainCare and the
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Subsidiary
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39
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13.3
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Indemnification Provisions for the Benefit of
the Sellers
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39
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13.4
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Matters Involving Third Parties
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39
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13.5
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Limitation
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40
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14.
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MISCELLANEOUS
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41
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14.1
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Disclosure Schedules
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41
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14.2
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Assignment; Parties in Interest
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41
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14.3
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Notice
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41
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14.4
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Entire Agreement
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42
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14.5
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Counterparts
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42
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TABLE OF CONTENTS
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(continued)
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Page
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14.6
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Headings
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43
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14.7
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Governing Law; Jurisdiction
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43
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14.8
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Attorneys’ Fees
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43
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14.9
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Amendments and Waivers
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43
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14.10
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Severability
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43
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14.11
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Expenses
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43
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14.12
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Further Assurances
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43
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14.13
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Construction
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44
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14.14
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Survival
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44
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14.15
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Incorporation of Exhibits and
Schedules
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44
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15.
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DEFINITIONS
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44
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the
“Agreement”) is entered into effective the 26th day of
September, 2005 (the “Execution Date”), by and among
MARK H. COLEMAN, M.D. (“Dr. Coleman”), PRABAAL DEY,
M.D. (“Dr. Dey”), MARC A. LOEV, M.D. (“Dr.
Loev”), LESTER A. ZUCKERMAN, M.D. (“Dr.
Zuckerman”), CENTER FOR PAIN MANAGEMENT ASC, LLC, a Maryland
limited liability company (the “Company”), PAINCARE
HOLDINGS, INC., a Florida corporation (“PainCare”) and
its wholly owned subsidiary, PAINCARE SURGERY CENTERS III, INC., a
Florida corporation (the “Subsidiary”). Dr. Dey, Dr.
Loev, Dr. Coleman and Dr. Zuckerman are sometimes referred to
herein as the “Members.” The Company and the Members
are sometimes referred to herein as the “Sellers” and
PainCare and the Subsidiary are sometimes referred to herein as the
“Purchaser.” The Purchaser and the Sellers are
sometimes referred to herein individually as a “Party”
and collectively as the “Parties.”
W I T N E S S E T
H:
A. The Company owns and operates
four (4) Medicare certified and state licensed ambulatory surgical
centers that are located at the following locations: (i) 11921
Rockville Pike, Suite 505, Rockville, Maryland 20852; (ii) 3901
Greenspring Avenue, Suite 304, Baltimore, Maryland 21211; (iii)
1150 Professional Court, Suite L, Hagerstown, Maryland 21740; and
(iv) 305 Hospital Drive, Suite 304, Glen Burnie, Maryland 21061
(collectively, the “Centers”).
B. The Company desires to sell and
the Purchaser desires to buy substantially all of the assets,
properties, rights, and claims of the Company and the Centers,
which assets, properties, rights and claims shall collectively be
referred to herein as the “Business.”
C. The Members own one hundred
percent (100%) of the total issued and outstanding membership
interests of the Company, free and clear of any and all Liens (as
defined in Section 4.5(a) below).
NOW THEREFORE, in consideration of
the mutual promises and covenants herein contained and the sum of
ten dollars ($10.00) and other good and valuable consideration paid
by the Purchaser to the Company, the receipt and sufficiency of
which are hereby acknowledged by the Company, it is mutually
covenanted and agreed by the parties hereto as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Transferred . Subject to the terms and
conditions of this Agreement, on the Closing Time (as defined in
Section 10.1 below), and except as otherwise stated, the Subsidiary
shall purchase, and the Company shall sell, transfer,
convey, assign, and deliver to Subsidiary,
all of the Company’s Business rights, claims and assets (of
every kind, nature, character and description, whether real,
personal or mixed, tangible or intangible, accrued, contingent or
otherwise, and wherever situated other than the Excluded Assets
specified in Section 1.2 below) which are used, held for use or
acquired or developed for use by the Company in the Business, or
developed in the course of conducting the Business or by Persons
employed by the Company in the Business (collectively the
“Purchased Assets”), free and clear of any and all
Liens other than those Liens set forth on Disclosure Schedule
4.5(a) . The Purchased Assets shall include, without limitation,
all the following assets or rights of the Company, to the extent so
used, held, acquired or developed in the Business:
(a) Cash and Cash Equivalents
and Accounts Receivable . All cash, cash equivalents, and the
Accounts Receivable of the Company as of the Closing Time,
including without limitation those described in Disclosure Schedule
1.1(a);
(b) Personal Property . All
of the Company’s rights in, to and under all, instruments,
equipment, furniture, machinery and other items of tangible
personal property including, without limitation, the personal
property leases described in the Disclosure Schedule 1.1(b);
(c) Inventory . All
inventories including, without limitation, supplies, merchandise
and durable medical equipment, together with related packaging and
delivery materials (collectively the “Inventory”);
(d) Books and Records . All
books and records of the Company, including without limitation, all
credit records, payroll records, computer records, computer
programs, contracts, agreements, operating manuals, schedules of
assets, correspondence, books of account, files, papers, books and
all other public and confidential business records but excluding
the Company’s corporate minute books and tax records
(together the “Business Records”), whether such
Business Records are in hard copy form or are electronically or
magnetically stored;
(e) Intellectual Property .
The Company’s interest in all of its Intellectual Property.
As used herein, the term “Intellectual Property” shall
mean and include: (i) all trademark rights, business identifiers,
trade dress, logos, service marks, trade names and brand names, all
registrations thereof and applications therefore and all goodwill
associated with the foregoing; (ii) all copyrights, copyright
registrations and copyright applications, and all other rights
associated with the foregoing and the underlying works of
authorship; (iii) all patents and patent applications, and all
international proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or
privilege under the intellectual property rights of any third
party; (v) all inventions, mask works and mask work registrations,
know-how, discoveries, improvements, designs, trade secrets, shop
and royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of
intellectual property; (vi) all computer software (including all
data and related documentation); (vii) all other proprietary
rights; (viii) all copies and tangible
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embodiments of the foregoing (in whatever
form or medium); and (ix) all claims for infringement or breach of
any of the foregoing;
(f) Contracts . All of the
Company’s rights in, to and under all contracts, agreements,
license agreements, purchase orders and sales orders (hereinafter
“Contracts”) of the Company as it relates to the
Business (third party payors, licenses, etc.). To the extent that
any Contract for which assignment to Subsidiary is provided herein
is not assignable without the consent of another party, this
Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would
constitute a breach thereof. The Sellers and the Purchaser agree to
use their reasonable best efforts (without any requirement on the
part of the Purchaser to pay any money or agree to any change in
the terms of any such Contract) to obtain the consent of such other
Party to the assignment of any such Contract to the Subsidiary in
all cases in which such consent is or may be required for such
assignment. If any such consent shall not be obtained prior to the
Closing Time, the Sellers agree to cooperate with the Purchaser in
any reasonable arrangement designed to provide for the Purchaser
the benefits intended to be assigned to Subsidiary under the
relevant Contract, including enforcement at the cost and for the
account of the Purchaser of any and all rights of the Sellers
against the other Party thereto arising out of the breach or
cancellation thereof by such other Party or otherwise. If and to
the extent that such arrangement cannot be made, the Purchaser,
upon notice to the Sellers, shall have no obligation pursuant to
Section 2.1 or otherwise with respect to any such Contract and any
such Contract shall not be deemed to be a Purchased Asset
hereunder;
(g) Computer Software . To
the extent transferable by the Company, all computer programs and
other software, documentation and related property and information
of the Company;
(h) Licenses; Permits . To
the extent transferable by the Company, all franchises, licenses,
permits, certificates, approvals and other governmental
authorizations necessary to own and operate any of the Purchased
Assets, a complete and correct list of which is set forth in the
Disclosure Schedule 1.1(h) (the “Licenses”);
(i) General Intangibles .
All causes of action arising out of occurrences before or after the
Closing Time, and other intangible rights and assets;
(j) Telephone Numbers . All
of the Company’s right, title and interest in, to and under
all telephone numbers used in connection with its Business,
including all extensions thereto;
(k) Warranties . All rights
in, to and under all representations, warranties, covenants and
guaranties made or provided by third parties to or for the benefit
of the Company with respect to any of the Purchased Assets;
(l) Prepaids . All of the
Company’s prepaid expenses, prepaid insurance, deposits and
other similar items (“Prepaid Items”);
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(m)
Leasehold Improvements . All rights, titles and interests
in, to and under all structures, fixtures, landings, constructions
in progress, improvements, betterments, installations, and
additions constructed or located on or attached or affixed to the
leasehold estates conferred on the Company under or by virtue of,
all real property lease and sublease agreements (such real property
lease and sublease agreements are hereinafter referred to as
“Real Property Leases” which are described on the
Disclosure Schedule 1.1(m));
(n) Patient Information .
All of the patient lists, ledgers and information (“Patient
Information”) relating to past and current patients of Seller
(a “Patient” or the “Patients”);
(o) Other Assets . All
other tangible and intangible assets, properties, rights, and
claims in, to or arising from the business of the Business; and
(p) Facility Agreements .
All of the Company’s and Business’ contracts,
agreements and understandings (collectively, the “Facility
Agreements”) with any party regarding the provision of
ambulatory surgical services to patients, including without
limitation, all the Facility Agreements with health maintenance
organizations, preferred provider organizations, third-party
payors, independent practice associations, physician hospital
organizations, management services organizations, employers, labor
unions, hospitals, clinics, ambulatory surgery centers, and
Medicare and Medicaid intermediaries, (a copy of each of the
Facility Agreements has been provided to Purchaser and is described
on the Disclosure Schedule 1.1(p)) .
1.2 Excluded Assets .
“Excluded Assets” shall mean those assets listed on the
Disclosure Schedule 1.2.
2. ASSUMPTION OF LIABILITIES
2.1 Liabilities to be
Assumed . As used in this Agreement, the term
“Liability” shall mean and include any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, absolute or contingent, accrued or
unaccrued, due or to become due, asserted or unasserted, liquidated
or unliquidated, secured or unsecured, including, but not in any
way limited to, any liability for Taxes. Subject to the terms and
conditions of this Agreement, on the Closing Time, Subsidiary shall
assume or take subject to, as the case may be, and agrees to
perform and discharge the following, and only the following
, Liabilities of the Company:
(a) Certain Liabilities .
Those certain accounts payable and accrued Liabilities listed in
Disclosure Schedule 2.1(a) .
(b) Contractual Liabilities
. Liabilities that relate to periods, events or circumstances
occurring on or after the Closing Time under and pursuant to the
Contracts described in Section 1.1(f), but not as a result of an
event that arose prior to the Closing Time.
The
Liabilities described in subsections 2.1(a), and 2.1(b) above are
hereinafter collectively described as the “Assumed
Liabilities.”
2.2 Liabilities Not to be
Assumed . Except as and to the extent specifically set forth in
Section 2.1 above, the Purchaser is not assuming nor buying
the Purchased Assets subject to any Liabilities of the Sellers and
all such Liabilities shall be and remain the responsibility of the
Sellers.
2.3 Taxes Arising from
Transaction . The Purchaser is not assuming nor shall they be
responsible for any Taxes applicable to, imposed upon or arising
out of the sale or transfer of the Purchased Assets to the
Purchaser and the other transactions contemplated by this
Agreement, including but not limited to any income, transfer,
sales, use, gross receipts or documentary stamp taxes.
2.4 Income and Franchise
Taxes . The Purchaser is not assuming nor shall they be
responsible for any Liability of the Sellers for federal income
Taxes and any state or local income, profit or franchise Taxes (and
any penalties or interest due on account thereof).
2.5 Product, Medical
Malpractice and Service Liability . The Purchaser is not
assuming nor shall they be responsible for any Liability of the
Sellers arising out of or in any way relating to or resulting from,
either directly or indirectly, any medical negligence, malpractice
or professional or personal liability or pharmaceutical, medication
or product manufactured, formulated, mixed, compounded, assembled
or sold or any service performed by the Sellers, its physicians,
contractors or any of its employees whether prior to, on, or after
the Closing Time (including any Liability of the Sellers or any of
its physicians, employees, contractors or agents for claims made
for injury to Person, damage to property or other damage, whether
made in product liability, tort, negligence, breach of warranty or
otherwise).
2.6 Litigation Matters .
The Purchaser is not assuming nor shall they be responsible for any
Liability of the Sellers with respect to any action, claim, suit,
proceeding, arbitration, investigation or inquiry, whether civil,
criminal or administrative whether same shall occur or arise from
matters prior to, on, or after the Closing Time
(“Litigation”).
2.7 Infringements . The
Purchaser is not assuming nor shall they be responsible for any
Liability of the Sellers with respect to a third party for
infringement of such third party’s Intellectual Property
whether same shall occur or arise from matters prior to, on, or
after the Closing Time.
2.8 Transaction Expenses .
The Purchaser is not assuming nor shall they be responsible for any
Liabilities incurred by the Sellers in connection with this
Agreement and the transactions contemplated herein.
2.9 Liability For Breach .
The Purchaser is not assuming nor shall they be responsible for any
Liabilities of the Sellers for any breach or failure to perform any
of the Sellers’ covenants and agreements contained in, or
made pursuant to, this Agreement,
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or, prior to the Closing, any other
contract or agreement, whether or not assumed hereunder, including
breach arising from assignment of contracts hereunder without
consent of third parties.
2.10 Liabilities to
Affiliates . The Purchaser is not assuming nor shall they be
responsible for any Liabilities of the Sellers to its present or
former Affiliates.
2.11 Violation of Laws or
Orders . The Purchaser is not assuming nor shall they be
responsible for any Liabilities of the Sellers for any violation of
or failure to comply with any statute, law, ordinance, rule or
regulation (collectively, “Laws”) or any order, writ,
injunction, judgment, plan or decree (collectively,
“Orders”) of any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or
other body, whether federal, state, municipal, foreign or other
(collectively, “Government Entities”) whether same
shall occur or arise from matters prior to, on, or after the
Closing Time.
3. PURCHASE PRICE - PAYMENT
3.1 Purchase Price
Consideration . The aggregate purchase price consideration (the
“Purchase Price Consideration”) shall equal Fifteen
Million and No/100 Dollars ($15,000,000), comprised of: (i) the
Closing Consideration as hereafter defined, and (ii) the Promissory
Note as hereinafter defined, subject to the adjustment as provided
in Section 3.4 below. Subject to the provisions set forth in
Section 3.3 below, the adjustment as provided in Section 3.4 below,
the provisions set forth in Sections 8, 9 and 10 below, PainCare
shall deliver (or cause the Escrow Agent (as defined in Section
3.7) to deliver the Closing Consideration and the Promissory Note
to the Company.
3.2 Closing Consideration .
The “Closing Consideration” shall equal: (i) Three
Million Seven Hundred Fifty Thousand and No/100 Dollars
($3,750,000) (the “Closing Cash”), plus (ii) One
Million Twenty One Thousand Nine Hundred Forty Two (1,021,942)
PainCare Shares totaling Three Million Seven Hundred Fifty Thousand
and No/100 Dollars ($3,750,000), each share being valued at $3.672
for purposes of PainCare’s obligation hereunder (the
“Closing Shares”).
3.3 Payment of Closing
Consideration . The Closing Consideration shall be payable as
follows:
(a) Subject to adjustment as
provided in Section 3.4 below and the provisions set forth in
Sections 8, 9 and 10 below, PainCare shall deliver (or cause the
Escrow Agent to deliver) the Closing Cash to the Company via wire
transfer on the Closing Time to a bank account(s) designated by the
Company. At least five (5) days prior to the Closing Time, the
Company shall notify PainCare in writing of the bank account(s) to
which the Closing Cash shall be wired.
(b) Subject to adjustment as
provided in Section 3.4 below and the provisions set forth in
Sections 8, 9 and 10 below, PainCare shall deliver the Closing
Shares to the Company or alternatively, to the Members as indicated
in an instruction letter from the Company delivered to
PainCare.
3.4
Closing Time Adjustments . The Closing Consideration shall
be subject to adjustment as follows:
(a) Transaction Related
Adjustments . The Closing Cash shall be reduced by the amount
of any cash payments made by the Purchaser with respect to any
expenses which the Sellers request in writing to be paid and the
Purchaser agrees to pay on behalf of the Sellers, all of which are
set forth on Disclosure Schedule 3.4(a) .
(b) Post Closing Working Capital
Adjustment .
(i) Not more than sixty (60) days
after the Closing Time, the Purchaser shall deliver to Prabaal Dey,
M.D. (the “Company Representative”) a net working
capital statement of the Company as of the Closing Time (the
“Net Working Capital Statement”) prepared in accordance
with generally accepted accounting principles (“GAAP”).
The Net Working Capital, as defined in Section 3.4(b)(ii), of the
Company reflected on the Net Working Capital Statement is referred
to herein as the “Final Closing Time Working Capital
Position.” The cash component of the Final Closing Time
Working Capital Position shall be at least One Hundred Thousand and
No/100 Dollars ($100,000). Subject to Sections 3.4(b)(iv) and (v)
hereof, within ten (10) business days after the delivery of the Net
Working Capital Statement, the Company or the Purchaser as the case
may be, shall pay the Purchaser or the Company as the case may be,
the amount by which the Agreed Closing Time Working Capital
Position, as defined in Section 3.4(b)(iii) differs from the Final
Closing Time Working Capital Position by more than Twenty Thousand
and No/100 Dollars ($20,000) (the “Band Amount”). For
the avoidance of doubt, if the Final Closing Time Working Capital
Position exceeds the Agreed Closing Time Working Capital Position
by more than Twenty Thousand and No/100 Dollars ($20,000), then the
Purchaser shall pay the difference, less the Band Amount, to the
Company. If the Final Closing Time Working Capital is less than the
Agreed Closing Time Working Capital Position by more than Twenty
Thousand and No/100 Dollars ($20,000), then the Company shall pay
the difference, less the Band Amount, to the Purchaser. All
payments under this Section 3.4(b)(i), as applicable, shall be by
wire transfer in immediately available funds to a bank account
designated by the Purchaser or the Company, as the case may be.
(ii) Net Working Capital .
For purposes of this Agreement, “Net Working Capital”
shall mean, as of the date of determination, an amount equal to:
(a) the sum of the current assets, including, without limitation,
the following items: (i) cash, (ii) accounts receivable, (iii)
inventories and supplies, and (iii) prepaid expenses; minus
(b) the sum of the current liabilities, including, without
limitation, the following items: (i) accounts payable, (ii)
employee liabilities, and (iii) accrued expenses, but excluding the
current portion of long-term debt and capital leases.
(iii) Agreed Closing Time
Working Capital Position . For purposes of this Agreement, the
“Agreed Closing Time Working Capital Position” means
the “Net Working Capital” of the Company, as defined in
Section 3.4(b)(ii) at the Closing Time, which is Eight Hundred
Eighty Three Thousand Three Hundred Eight Seven and No/100 Dollars
($883,387) (with One Hundred Thousand and No/100 Dollars
($100,000) of such Eight Hundred Eighty
Three Thousand Three Hundred Eight Seven and No/100 Dollars
($883,387) being cash).
(iv) Manner of Payment .
Within ten (10) business days (the “Objection Period”)
after the Purchaser’s delivery of the Net Working Capital
Statement to the Company Representative, the Company and Members
collectively, shall, in a written notice to the Purchaser from the
Company Representative, either accept or describe in reasonable
detail any proposed adjustment to the Net Working Capital Statement
and the reasons therefore, and shall include pertinent
calculations. If the Company Representative fails to deliver notice
of acceptance or objection to the Net Working Capital Statement
before the expiration of the Objection Period, then the Sellers
shall be deemed to have accepted the Net Working Capital
Statement.
(v) Accounting Firm Review
. If, after the Purchaser receives a timely objection from the
Company Representative in accordance with Section 3.4(b)(iv) above,
the Purchaser and the Company Representative are not able to agree
on the Net Working Capital Statement within thirty (30) business
days from and after the receipt by the Purchaser of any timely
objections raised by the Company Representative (the
“Discussion Period”), the Purchaser and the Company
shall each have the right to require that such disputed
determinations be submitted to a certified public accounting firm
as the Company Representative and the Purchaser may then mutually
agree upon in writing, for computation or verification in
accordance with the provisions of this Agreement, provided the
Company shall pay, as applicable, on the Adjustment Payment Date,
the net of the undisputed portion(s) of the Working Capital
Adjustment contemplated by this Section 3.4(b) . If the Company
Representative and the Purchaser cannot mutually agree on the
identity of the accounting firm within ten (10) business days after
the expiration of the Discussion Period, then the Company
Representative and the Purchaser shall each pick a certified public
accounting firm within three (3) business days after the expiration
of the ten (10) business day period, and such two (2) firms shall
select the identity of the third accounting firm within seven (7)
business days after the expiration of such three (3) business day
period, which third accounting firm shall be an independent
accounting firm which does not currently provide, and has not
provided within the last two (2) years, services to any of the
Sellers or Purchaser. All materials for the third accounting firm
to make a decision shall be provided by the Parties to this
Agreement within five (5) business days after notice of a decision
to use such accounting firm shall have been given. The accounting
firm shall deliver its decision to the Parties to this Agreement
within thirty (30) business days after receipt of the
materials.
(vi) Binding Decision;
Expenses . The foregoing provisions for certified public
accounting firm review shall be specifically enforceable by the
Parties; the decision of such accounting firm shall be final and
binding upon the Parties, there shall be no right of appeal from
such decision; and such accounting firm’s fees and expenses
for each such disputed determination shall be borne by the Party
whose determination has been modified by such accounting
firm’s report or by all Parties in proportion to the relative
amount each Party’s determination has been modified. Within
five (5) business days after delivery of the Accounting
Firm’s decision, the Company shall make the required payment.
Any payments due under this Section 3.4(b) shall bear
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interest at LIBOR, as published in the
Wall Street Journal, from the Adjustment Payment Date.
3.5 Promissory Note and
Guaranty . In addition to the Closing Consideration, the
Purchaser shall pay to the Company Seven Million Five Hundred
Thousand and No/100 Dollars ($7,500,000) in the form of a one (1)
year promissory note (the form of which is attached hereto as
Exhibit 3.5(a) ) delivered to the Company at the Closing
Time (the “Promissory Note”), which shall bear interest
at a rate of three and forty-five hundredths percent (3.45%) per
annum. PainCare shall enter into that certain guaranty (the form of
which is attached hereto as Exhibit 3.5(b) ), pursuant to
which it shall guaranty the payment obligations of the Purchaser
under the Promissory Note (the “ Guaranty
”).
3.6 Allocation of Purchase
Price . The aggregate Purchase Price Consideration (including
the assumption by the Purchaser of the Assumed Liabilities) shall
be allocated among the Purchased Assets for tax purposes in
accordance with Disclosure Schedule 3.6. The Members and the
Purchaser will follow and use such allocation in all tax returns,
filings or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are
required to be made by the Parties to the Internal Revenue Service
(“IRS”) under the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the “Code”)
or any regulations thereunder, the Members and the Purchaser will
disclose such reports to the other prior to filing with the
IRS.
3.7 Escrow Agreement and
Transition Management Services . The parties acknowledge and
agree that as of the Execution Date, the parties have entered into
that certain Escrow Agreement, dated of even date herewith, a copy
of which is attached hereto as Exhibit 3.7 , and have agreed
to Adorno & Yoss, LLP serving as the escrow agent (the
“Escrow Agent”). In connection with the contemplated
closing, commencing on the Execution Date and continuing through
the Closing (the “Transition Period”), Subsidiary shall
provide the Company with transitional management assistance. In
consideration therefore and subject to the Closing, the Subsidiary
shall be entitled to a management fee (the “Transition
Management Fee”) during the Transitional Period equal to all
of the financial and economic benefits of the Purchased Assets that
accrue during the Transition Period, including, but in no way
limited to, the recognition of the profits and losses attributable
to the Purchased Assets and the right to receive the revenues and
cash flows associated with the Purchased Assets; provided ,
however , in the event the Closing is not consummated, the
Transition Management Fee shall be paid by the Subsidiary to the
Company and the parties shall return to the status quo as of the
time immediately preceding the Execution Date, as further
contemplated in Section 10.1 below. Notwithstanding anything herein
to the contrary, the transitional management assistance to be
provided by Subsidiary shall not provide Subsidiary with operating
or management control of the Company. Furthermore, during the
Transition Period, the Sellers shall not make any distributions of
Company profits or otherwise take any actions outside the Ordinary
Course of Business.
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4. REPRESENTATIONS AND WARRANTIES OF
SELLERS
The Sellers hereby jointly and
severally make the following representations and warranties to the
Purchaser, each of which is true and correct on the Execution Date
and shall remain true and correct to and including the Closing
Time, shall be unaffected by any investigation heretofore or
hereafter made by the Purchaser, or any Knowledge of the Purchaser
other than as specifically disclosed and accepted by the Purchaser
in the Disclosure Schedules attached hereto and shall survive the
Closing of the transactions provided for herein.
4.1 Organization; Authority
. The Company is a limited liability company duly organized and
validly existing under the laws of the State of Maryland. The
Members own one hundred percent (100%) of the total issued and
outstanding membership interests of the Company free and clear of
any and all Liens. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by
the Sellers pursuant hereto and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized. No other or further act or proceeding on the part of
the Sellers or any lienholder or other party is necessary to
authorize this Agreement or the other documents and instruments to
be executed and delivered by the Sellers pursuant hereto or the
consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by the
Sellers pursuant hereto will constitute, valid binding agreements
of the Sellers, enforceable in accordance with their respective
terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights
generally, and by general equitable principles. The Company has
filed a certificate of authorization with and been approved by
Maryland Department of Health and Mental Hygiene for the use of the
corporate name, “Center For Pain Management ASC, LLC”,
pursuant to Maryland Annotated Code, Corporation and Association
Article, §§5-101–134.
4.2 No Violation . Neither
the execution and delivery of this Agreement or the other documents
and instruments to be executed and delivered by the Sellers
pursuant hereto, nor the consummation by the Sellers of the
transactions contemplated hereby and thereby (a) will violate any
applicable Law or Order, (b) will require any authorization,
consent, approval, exemption or other action by or notice to any
Government Entity or (c) will conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which the Sellers are a
party or by which the Sellers are bound or to which any of the
Purchased Assets are subject, or will result in the termination of,
or accelerate the performance required by, or result in the
creation of any Lien (as defined in Section 4.5), upon any of the
Purchased Assets under, any term or provision of any contract,
commitment, understanding, arrangement, agreement or restriction of
any kind or character to which the Sellers are a party or by which
the Sellers or any of its assets or properties may be bound or
affected.
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4.3
Appraisal Reports . Within the three (3) year period prior
to the Closing, there have been no appraisal reports, surveys or
other documents which evaluate or describe the Business or any of
the Purchased Assets which have not been delivered to the
Purchaser.
4.4 Compliance With Laws and Orders
.
(a) Compliance . The
Company, the Business and the Centers (including each and all of
its operations, practices, properties and assets) are in compliance
with all applicable laws and orders, including, without limitation,
those applicable to discrimination in employment, Medicare,
insurance billings, providing of medical services, sales of
medication and durable medical equipment, occupational safety and
health, trade practices, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement
and labor relations, and product advertising. Except as set forth
in Disclosure Schedule 4.4(a), the Sellers have not received notice
of any violation or alleged violation of, and are subject to no
Liability for past or continuing violation of, any laws or orders
with respect to the Company and the operation of the Business. The
Sellers and their Affiliates have complied with all applicable Laws
(including rules, regulations, codes, injunctions, judgments,
orders, decrees, and rulings of federal, state, local, and foreign
governments (and all agencies thereof)), and no action, suit,
proceeding, hearing, complaint, claim, demand, notice or
investigation has been filed or commenced, or to the Knowledge of
the Sellers, threatened against the Sellers or the Business
alleging any failure so to comply. There are no outstanding notices
of deficiencies relating to the Company or the Business issued by
any governmental authority or third-party payor requiring
conformity or compliance with any applicable law or condition for
participation with such governmental authority or third-party
condition for participation with such governmental authority or
third-party payor. The Sellers have not received notice and the
Sellers have no Knowledge or reason to believe that any necessary
governmental authorizations may be revoked or not renewed in the
Ordinary Course of Business.
(b) The operation of the Business
as it is now conducted does not, nor does any condition existing at
the Centers, in any manner constitute a nuisance or other tortuous
interference with the rights of any Person or Persons in such a
manner as to give rise to or constitute the grounds for a suit,
action, claim or demand by any such Person or Persons seeking
compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any aspect of the conduct of the Business or the manner in
which it is now conducted.
(c) The Sellers have made all
required payments to its unemployment compensation reserve accounts
with the appropriate governmental departments where it is required
to maintain such accounts with respect to the operations of the
Business, and each of such accounts has a positive balance.
(d) The Sellers have timely filed,
in a complete, accurate and correct manner, all requisite claims
and other reports required to be filed in connection with all state
and federal Medicare and Medicaid programs due on or before the
date
hereof. There are no claims, actions,
payment reviews, or appeals pending or threatened before any
commission, board or agency, including, without limitation, any
intermediary or carrier, the Centers for Medicare and Medicaid
Services, the Maryland Department of Health and Rehabilitative
Services, the Maryland Board of Medicine or any other state or
federal agency with respect to any Medicare or Medicaid claims
filed by the Sellers on or before the Closing Time or program
compliance matters, which would adversely affect the Company, the
Business, the Centers, the Purchased Assets or the consummation of
the transactions contemplated hereby. No validation review or
program integrity review related to the Sellers (other than normal,
routine reviews) has been conducted by any commission, board or
agency in connection with the practice of medicine or any Medicare
or Medicaid program, and no such reviews are scheduled, pending or,
threatened against or affecting the Sellers or the consummation of
the transactions contemplated hereby.
(e) The Sellers have filed when
due any and all material cost reports and other documentation and
reports, if any, required to be filed by third-party payors and
governmental agencies in compliance with applicable contractual
provisions and/or laws, regulations and rules.
(f) Licenses and Permits .
The Sellers have all licenses, permits, approvals, authorizations
and consents of all Government Entities and insurance companies
including Medicare and all certificates, licenses and permits
required for the conduct of the Business, all of which are set
forth on Disclosure Schedule 4.4(f) . The Company and the Business
(including its operations, properties and assets) are and have been
in compliance with all such permits and licenses, approvals,
authorizations and consents.
4.5 Title to and Condition of Properties .
(a) Marketable Title . The
Company has good and marketable title to all the Purchased Assets,
free and clear of all mortgages, liens (statutory or otherwise),
Security Interests, claims, pledges, licenses, equities, options,
conditional sales contracts, assessments, levies, covenants,
reservations, restrictions, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively,
“Liens”) except those described in Disclosure Schedule
4.5(a) . None of the Purchased Assets are subject to any
restrictions with respect to the transferability thereof. The
Company has complete and unrestricted power and right to sell,
assign, convey and deliver the Purchased Assets to Subsidiary as
contemplated hereby. At Closing, the Subsidiary will receive good
and marketable title to all the Purchased Assets, free and clear of
all Liens of any nature whatsoever except those described in the
appropriate Disclosure Schedule.
(b) Condition . All
tangible assets constituting Purchased Assets hereunder are located
at the Centers and are in good operating condition and repair, free
from any defects (except such minor defects as do not interfere
with the use thereof in the conduct of the normal operations), have
been maintained consistent with the standards generally followed in
the industry and are sufficient to carry on the business of the
Company as conducted during the preceding Fifty (50) months and
as
contemplated for the next three (3)
years. To the Knowledge of the Sellers, all buildings and other
structures owned or otherwise leased or utilized by the Company in
operating its Business or the Centers are in good condition and
repair and have no structural defects or defects affecting the
plumbing, electrical, sewerage, or heating, ventilating or air
conditioning systems.
(c) No Condemnation or
Expropriation . Neither the whole nor any portion of the
Purchased Assets is subject to any order to be sold or is being
condemned, expropriated or otherwise taken by any Government
Entities with or without payment of compensation therefore, nor to
Sellers’ Knowledge has any such condemnation, expropriation
or taking been proposed.
4.6 Insurance . Set forth
in Disclosure Schedule 4.6 is a complete and accurate list and
description of all policies of errors and omissions, fire,
liability, product liability, workers compensation, health and
other forms of insurance presently in effect with respect to the
Company, the Business and the Purchased Assets, true and correct
copies of which have heretofore been delivered to the Purchaser.
Disclosure Schedule 4.6 contains a description of all current
malpractice liability insurance policies of the Members, the
Company, and the Company’s professional employees and all
predecessor policies in effect. Except as set forth on Disclosure
Schedule 4.6: (a) neither the Company, its professional employees,
nor the Members have, during the five (5) years immediately
preceding the Closing Time, filed a written application for any
insurance coverage relating to the Company’s business or
property which has been denied by an insurance agency or carrier;
and (b) the Company, its professional employees and the Members
have been continuously insured for professional malpractice claims
during the same period. Disclosure Schedule 4.6 includes, without
limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual
premiums, date of expiration and the date through which premiums
have been paid with respect to each such policy, and any pending
claims in excess of Five Thousand and No/100 Dollars ($5,000). All
such policies are valid, outstanding and enforceable policies and
provide insurance coverage for the Company, the Business, the
Centers and the Purchased Assets, of the kinds, in the amounts and
against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for
or is subject to any currently enforceable retroactive rate or
premium adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events
arising prior to the date hereof. Disclosure Schedule 4.6 indicates
each policy as to which (a) the coverage limit has been reached or
(b) the total incurred losses from the beginning of the most recent
fiscal year to date equal twenty-five percent (25%) or more of the
coverage limit. No notice of cancellation or termination has been
received with respect to any such policy, and the Sellers have no
information or Knowledge of any act or omission of the Sellers
which could result in cancellation of any such policy prior to its
scheduled expiration date. The Company has not been refused any
insurance with respect to any aspect of the operations of the
Business nor has its coverage been limited by any insurance carrier
to which it has applied for insurance or with which it has carried
insurance during the last three (3) years. The Sellers have duly
and timely made all claims it has been entitled to make under each
policy of insurance. There is no claim by the Sellers pending under
any such policies as to which coverage
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has been questioned, denied or disputed
by the underwriters of such policies, and the Sellers do not know
of any basis for denial of any claim under any such policy. The
Sellers have not received any written notice from or on behalf of
any insurance carrier issuing any such policy that insurance rates
therefore will hereafter be substantially increased (except to the
extent that insurance rates may be increased for all similarly
situated risks) or that there will hereafter be a cancellation or
an increase in a deductible (or an increase in premiums in order to
maintain an existing deductible) or non-renewal of any such policy.
Such policies are sufficient in all material respects for
compliance by the Sellers with all requirements of law and with the
requirements of all material contracts to which the Sellers are a
party.
4.7 Contracts and Commitments .
(a) Real Property Lease .
Except as set forth in Disclosure Schedule 4.7(a), the Sellers have
no leases of real property used or held for use in connection with
the Business or the Purchased Assets.
(b) Personal Property
Leases . Except as set forth in Disclosure Schedule 4.7(b), the
Sellers have no leases of personal property used or held for use in
connection with the Business or the Purchased Assets.
(c) Purchase Commitments .
The Sellers have no purchase commitments in connection with the
Business in excess of Seven Thousand Five Hundred and No/100
Dollars ($7,500) which can not be cancelled by providing at least
thirty (30) days written notice.
(d) Sales Commitments . The
Sellers have no sales contracts or commitments to customers or
distributors in connection with or affecting the Business or the
Purchased Assets. The Sellers have no sales contracts or
commitments in connection with or affecting the Business or the
Purchased Assets except those made in the Ordinary Course of
Business, at arm’s length, and no such contracts or
commitments are for a sales price which would result in a loss to
the Company.
(e) Contracts With Affiliates
and Certain Others . Except as set forth on Disclosure Schedule
4.7(e), the Company has no agreement, understanding, contract or
commitment (written or oral) in connection with or affecting the
Company, the Business, the Centers or the Purchased Assets with any
Affiliate or any other officer, employee, agent, consultant,
distributor, dealer or franchisee.
(f) Powers of Attorney .
The Sellers have not given a power of attorney, which is currently
in effect, to any Person, firm or corporation for any purpose
whatsoever in connection with or affecting the Company, the
Business or the Purchased Assets.
(g) Loan Agreements .
Except as otherwise disclosed in the Disclosure Schedules, the
Company is not obligated under any loan agreement, promissory note,
letter of credit, or other evidence of indebtedness as a signatory,
guarantor or otherwise, which obligation constitutes or gives rise
or could by its terms,
through the giving of notice or any other
events short of judgment by a court, give rise to a Lien against
the Company or any Purchased Asset.
(h) Guarantees . Except as
otherwise disclosed in the Disclosure Schedules, the Company has
not guaranteed the payment or performance of any Person, firm or
corporation, agreed to indemnify any Person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any Person, in connection with the Business or in
any other way which affects the Business, the Centers or the
Purchased Assets.
(i) Government Contracts .
Except as otherwise disclosed in the Disclosure Schedules, the
Sellers are not a party to any contract with any governmental
body.
(j) Burdensome or Restrictive
Agreements . The Company is not a party to, nor is it bound by,
any agreement, deed, lease or other instrument in connection with
or affecting the Business or the Purchased Assets which is so
burdensome as to materially affect or impair the Company or the
operation of the Business. Without limiting the generality of the
foregoing, the Sellers are not a party to, nor are they bound by,
any such agreement requiring the Sellers to assign any interest in
any trade secret or proprietary information constituting Purchased
Assets hereunder, or prohibiting or restricting the Sellers in
their operation of the Business from competing in any business or
geographical area or soliciting customers or otherwise restricting
them from carrying on the Business anywhere in the world.
(k) Indemnification Claims
. Disclosure Schedule 4.7(k) sets forth all claims made by the
Sellers relating to any Contract or agreement to purchase assets by
the Sellers for the benefit of the Company.
(l) Suppliers and Payors .
Except as set forth in Disclosure Schedule 4.7(l), the Company does
not have any supplier from whom it purchased more than ten percent
(10%) of the total amount of goods and services which it purchased
during its most recent fiscal year. Except as set forth in
Disclosure Schedule 4.7(l), the Company does not have any payor
from whom it received more than ten percent (10%) of the total
amount of revenues from services it rendered during its most recent
fiscal year.
(m) No Default . The
Company is not in default under any lease, license, contract or
commitment in its operation of the Business, nor has any event or
omission occurred which through the passage of time or the giving
of notice, or both, would constitute a default thereunder or cause
the acceleration of any of the Company’s obligations or
result in the creation of any Lien on any Purchased Asset. No third
party is in default under any such lease, contract or commitment to
which the Company is a party, nor has any event or omission
occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder, or give
rise to an automatic termination, or the right of discretionary
termination thereof.
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4.8
Employee Benefit Plans . Except as described in Disclosure
Schedule 4.8, there are no pension, thrift, savings, profit
sharing, retirement, incentive bonus or other bonus, medical,
dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, stock purchase, stock option, stock
appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting
contracts, “golden parachutes,” collective bargaining
agreements, severance agreements or plans, vacation and sick leave
plans, programs, arrangements and policies, including, without
limitation, all “employee benefit plans” (as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)), all employee manuals, and
all written or binding oral statements of policies, practices or
understandings relating to employment, which are provided to, for
the benefit of, or relate to, any Persons employed or leased by the
Company in its operation of the Business.
4.9 Intellectual Property .
Disclosure Schedule 4.9 lists all Intellectual Property of the type
described in Section 1.1(f) which are or were used, held for use,
or acquired or developed for the Company for use in the Business,
or developed in the course of conducting the Business or by Persons
employed or leased by the Company in the Business, specifying
whether such Intellectual Property are owned, controlled, used or
held (under license or otherwise) by the Company, and also
indicating which of such Intellectual Property are registered. The
Company is not infringing and has not infringed any Intellectual
Property of another, nor is any other Person infringing the
Intellectual Property of the Company. The Company has not granted
any license or made any assignment of any trade right listed on
Disclosure Schedule 4.9, and no other Person has any right to use
any such trade right. The Company does not pay any royalties or
other consideration for the right to use any Intellectual Property
of others. There is no Litigation pending or threatened to
challenge the Company’s right, title and interest with
respect to its continued use and right to preclude others from
using any Intellectual Property of the Company. All Intellectual
Property of the Company is valid, enforceable and in good standing,
and there are no equitable defenses to enforcement based on any act
or omission of the Sellers.
4.10 Product Warranty and
Product Liability . Except as set forth on Disclosure Schedule
4.10 and to the actual knowledge of the Sellers, (i) there are no
warranties, commitments or obligations with respect to the return,
repair or replacement of Products; (ii) there are no defects in
design, construction or manufacture of Products which would
adversely affect performance or create an unusual risk of injury to
Persons or property; (iii) none of the Products has been the
subject of any replacement, field fix, retrofit, modification or
recall campaign and, no facts or conditions exist which could
reasonably be expected to result in such a recall campaign. As used
in this Section 4.9, the term “Products” means any and
all medication and other products currently or at any time
previously manufactured, compounded, mixed, formulated, distributed
or sold by the Company, or by any predecessor or affiliate of the
Company under any brand name or mark under which products are or
have been manufactured, distributed or sold by the Company.
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4.11
Assets Necessary to Business . The Purchased Assets include
all property and assets (except for the Excluded Assets), tangible
and intangible, and all leases, licenses and other agreements,
which are necessary to permit Subsidiary to carry on, as currently
used or held for use in, the Business as presently conducted.
4.12 No Brokers or Finders
. The Sellers have not retained, employed or used any broker or
finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
4.13 Financial Statements .
Included as Disclosure Schedule 4.13 are true and complete copies
of the financial statements of the Company consisting of (i) a
balance sheet of the Company for the year ended December 31, 2004
and the related statement of operations as of and for the year
ended December 31, 2004 (including the notes contained therein or
annexed thereto), which financial statements are unaudited, and
(ii) an unaudited balance sheet of the Company for the eight (8)
months ending August 31, 2005 (the “Recent Balance
Sheet”), and the related unaudited statements of operations
for the eight (8) months ending August 31, 2005 (the “Recent
Statement of Operations”) and for the corresponding period of
the prior year (including the notes and schedules contained therein
or annexed thereto). All of such financial statements (including
the notes and schedules contained therein or annexed thereto)
present fairly the financial condition of the Company as of such
dates and the results of the operations of the Company for such
periods, are correct and complete, and are consistent with the
books and records of the Company (which books and records are
correct and complete). Except as provided in the Recent Balance
Sheet, or as fully disclosed in Disclosures Schedule 4.13 and 4.16,
the Company does not have any Liabilities or obligations (whether
accrued, absolute, contingent, whether due or to become due or
otherwise i.e., accounts payable, accrued expenses) which might be
or become a charge against the Company since the date of the Recent
Balance Sheet.
4.14 Conduct Since Date of
Recent Balance Sheet . Except as set forth in this Agreement or
as disclosed in Disclosure Schedule 4.14 hereto, none of the
following has occurred since the date of the Recent Balance
Sheet:
(a) No Adverse Change . Any
material adverse change in the financial condition, Purchased
Assets, Assumed Liabilities, Business, prospects or operations of
the Company;
(b) No Damage . Any
material loss, damage or destruction, whether covered by insurance
or not, affecting the Company, its Business or the Purchased
Assets;
(c) No Increase in
Compensation . Any increase in the compensation, salaries or
wages payable or to become payable to any employee, contractor or
agent of the Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other
employee benefit granted, made or accrued, that exceeds in the
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aggregate a five percent (5%) increase in
the total compensation or benefits payable to any single employee,
contractor or agent of the Company;
(d) No Labor Disputes . Any
labor dispute or disturbance, other than routine individual
grievances which are not material to the Company, the Business or
the Purchased Assets;
(e) No Commitments . Any
commitment or transaction by the Company (including, without
limitation, any borrowing or capital expenditure) other than in the
Ordinary Course of Business;
(f) No Disposition of
Property . Any sale, lease or other transfer or disposition of
any properties or assets of the Company, except in the Ordinary
Course of Business;
(g) No Indebtedness . Any
indebtedness for borrowed money incurred, assumed or guaranteed by
the Company;
(h) No Liens . Any
mortgage, pledge, lien or encumbrance made on any of the Purchased
Assets;
(i) No Amendment of
Contracts . Any entering into, amendment or termination by the
Company of any Assumed Liability, or any waiver of material rights
thereunder, other than in the Ordinary Course of Business;
(j) Credit . Any grant of
credit to any customer or distributor on terms or in amounts more
favorable than those which have been extended to such customer or
distributor in the past, any other change in the terms of any
credit heretofore extended, or any other change of the
Company’s policies or practices with respect to the granting
of credit; or
(k) No Unusual Events . Any
other event or condition not in the Ordinary Course of Business of
the Company.
4.15 Company and Affiliates
. Except as set forth in Disclosure Schedule 4.15, the Company has
no interest in any entity nor does the Company own or control,
directly or indirectly, any capital stock of any corporation or
interest in any limited liability company, partnership, trust or
unincorporated association, or any interest or investment in any
other corporation, association or other business entity which
operates any part of the Business or otherwise has a contract with
the Sellers with respect to providing any service or product to the
Business.
4.16 Liabilities . Except
as and to the extent specifically disclosed in the Recent Balance
Sheet, or in Disclosure Schedules 4.16 and 4.13, the Company does
not have any material liabilities, commitments or obligations
(secured or unsecured, and whether accrued, absolute, contingent,
direct, indirect or otherwise) other than commercial liabilities
and obligations incurred since the date of the Recent Balance Sheet
in the Ordinary Course of Business and consistent with past
practice and none of which has or
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will have a Material Adverse Effect on
the Company, the Business or the Purchased Assets. Except as and to
the extent described in the Recent Balance Sheet or in Disclosure
Schedule 4.16, the Sellers do not have any information, Knowledge
or belief of any basis for the assertion against the Company,
Business and/or Purchased Assets of any material liability and
there are no circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may give rise to such
material liabilities, except commercial liabilities and obligations
incurred in the Ordinary Course of the Business.
As of the Closing, other than the
current trade accounts payable or otherwise described in the
Disclosure Schedules, the Company shall not have any unpaid
liabilities, including, but not limited to, any bank debt, capital
leases or any general or professional liability claims, or be
obliged in any other way to provide funds in respect of, or to
guarantee or assume, any debt, obligation or dividend of any
Person, except endorsements in the Ordinary Course of Business in
connection with the deposit, in banks or other financial
institutions, of items for collection. Except as disclosed in
detail in Disclosure Schedule 4.16, the Company does not have any
Liabilities or obligations which might be or become a charge
against the Subsidiary or the Company.
4.17 Accounts Receivable .
All Accounts Receivable of the Company represent arm’s length
services actually provided in the Ordinary Course of Business; are
collectible (net of the reserve shown on the Recent Balance Sheet
for d