ASSET PURCHASE AGREEMENT

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

 

TABLE OF CONTENTS
				Page
1.	PURCHASE AND SALE OF ASSETS			1
	1.1	Assets to be Transferred		1
	1.2	Excluded Assets		4
2.	ASSUMPTION OF LIABILITIES			4
	2.1	Liabilities to be Assumed		4
	2.2	Liabilities Not to be Assumed		5
	2.3	Taxes Arising from Transaction		5
	2.4	Income and Franchise Taxes		5
	2.5	Product, Medical Malpractice and Service Liability		5
	2.6	Litigation Matters		5
	2.7	Infringements		5
	2.8	Transaction Expenses		5
	2.9	Liability For Breach		5
	2.10	Liabilities to Affiliates		6
	2.11	Violation of Laws or Orders		6
3.	PURCHASE PRICE - PAYMENT			6
	3.1	Purchase Price Consideration		6
	3.2	Closing Consideration		6
	3.3	Payment of Closing Consideration		6
	3.4	Closing Time Adjustments		7
	3.5	Promissory Note and Guaranty		9
	3.6	Allocation of Purchase Price		9
	3.7	Escrow Agreement and Transition Management Services		9
4.	REPRESENTATIONS AND WARRANTIES OF SELLERS			10
	4.1	Organization; Authority		10
	4.2	No Violation		10
	4.3	Appraisal Reports		11
	4.4	Compliance With Laws and Orders		11
	4.5	Title to and Condition of Properties		12
	4.6	Insurance		13
	4.7	Contracts and Commitments		14
	4.8	Employee Benefit Plans		16
	4.9	Intellectual Property		16
	4.10	Product Warranty and Product Liability		16
	4.11	Assets Necessary to Business		17
	4.12	No Brokers or Finders		17
	4.13	Financial Statements		17
	4.14	Conduct Since Date of Recent Balance Sheet		17
	4.15	Company and Affiliates		18
MIA 300140-7.064049.0030			-i-

TABLE OF CONTENTS
(continued)
				Page
	4.16	Liabilities		18
	4.17	Accounts Receivable		19
	4.18	Environmental Matters		19
	4.19	Personnel		20
	4.20	Bank Accounts		21
	4.21	Tax Matters		21
	4.22	Litigation		22
	4.23	Health Care Compliance		22
	4.24	Fraud and Abuse		22
	4.25	Rates and Reimbursement Policies		23
	4.26	Medical Staff		23
	4.27	Medical Providers		24
	4.28	Third-party Payors		25
	4.29	Disclosure		25
	4.30	Corporate Practice or Fee Splitting		25
	4.31	Staff Privileges		25
	4.32	Securities Representation		25
	4.33	HIPAA		27
	4.34	Improper and Other Payments		27
	4.35	Medical Waste		27
	4.36	Transfer of Custody of Patient Medical Records		28
	4.37	Certain Representations with respect to the Centers		28
5.	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER			28
	5.1	Organization of PainCare and Subsidiary		29
	5.2	Authorization of Transaction		29
	5.3	PainCare Shares		29
	5.4	No Conflicts; Consents		29
	5.5	Consents		30
	5.6	Brokers		30
	5.7	Full Disclosure		30
6.	RESTRICTIVE COVENANTS			30
	6.1	Restricted Period		30
	6.2	Confidentiality, Press Releases, and Public Announcements		32
	6.3	Bulk Sales Compliance		33
7.	FURTHER COVENANTS OF SELLERS			33
	7.1	Access to Information and Records		33
	7.2	Maintain Organization		33
	7.3	No Breach		33
	7.4	Maintenance of Insurance		33
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TABLE OF CONTENTS
(continued)
				Page
	7.5	Consents		33
	7.6	Other Action		33
	7.7	Disclosure		34
8.	CONDITIONS PRECEDENT TO PURCHASER’S OBLIGATIONS			34
	8.1	Representations and Warranties True on the Closing Time		34
	8.2	Compliance With Agreement		34
	8.3	Absence of Litigation		34
9.	CONDITIONS PRECEDENT TO SELLERS’ OBLIGATIONS			35
	9.1	Representations and Warranties True on the Closing Time		35
	9.2	Compliance With Agreement		35
10.	CLOSING			35
	10.1	Closing		35
	10.2	Documents to be Delivered by the Sellers		36
	10.3	Documents to be Delivered by the Purchaser		37
11.	POST-CLOSING COVENANTS			37
	11.1	General		37
	11.2	Option Agreement		38
	11.3	Tax Returns		38
	11.4	Transition		38
	11.5	Litigation Support		38
12.	REGISTRATION			38
13.	SURVIVAL AND INDEMNIFICATION			38
	13.1	Survival of Representations and Warranties		38
	13.2	Indemnification Provisions for the Benefit of PainCare and the
		Subsidiary		39
	13.3	Indemnification Provisions for the Benefit of the Sellers		39
	13.4	Matters Involving Third Parties		39
	13.5	Limitation		40
14.	MISCELLANEOUS			41
	14.1	Disclosure Schedules		41
	14.2	Assignment; Parties in Interest		41
	14.3	Notice		41
	14.4	Entire Agreement		42
	14.5	Counterparts		42
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TABLE OF CONTENTS
(continued)
			Page
	14.6	Headings	43
	14.7	Governing Law; Jurisdiction	43
	14.8	Attorneys’ Fees	43
	14.9	Amendments and Waivers	43
	14.10	Severability	43
	14.11	Expenses	43
	14.12	Further Assurances	43
	14.13	Construction	44
	14.14	Survival	44
	14.15	Incorporation of Exhibits and Schedules	44
15.	DEFINITIONS		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