SECURITIES PURCHASE
AGREEMENT
by and among
PSHS PARTNERSHIP VENTURES,
INC.,
GARY J. LUSTGARTEN PROFIT SHARING AND
TRUST ,
RONALD DeMEO, M.D.,
GAETANO SCUDERI, M.D.,
ARTURO CORCES, M.D.,
PAINCARE HOLDINGS,
INC.,
a nd
PAINCARE SURGERY CENTERS II,
INC.
Dated as of Ju ly 22 ,
2005
ARTICLE I
PURCHASE AND SALE OF PARTNERSHIP
INTERESTS; CLOSING
2
Section 1.1
Interpretation; Definitions
2
Section 1.2
Purchase and Sale of the PSHS Partnership
Interests
8
Section 1.3
Purchase and Sale of the Lustgarten
Partnership Interests
8
Section 1.4
Purchase and Sale of the DeMeo
Partnership Interests.
8
Section 1.5
Purchase and Sale of the Scuderi
Partnership Interests
8
Section 1.6
Purchase and Sale of Corces Partnership
Interests
8
Section 1. 7
Closing Date
9
Section 1. 8
Transactions To Be Effected at the
Closing
9
Section 1. 9
Post-Closing Working Capital
Adjustment
11
ARTICLE II
REPRESENTATIONS AND WARRANTIES RELATING
TO
SELLERS AND THE PARTNERSHIP
INTERESTS
13
Section 2.1
Organization
13
Section 2.2
Authority; Execution and Delivery;
Enforceability
13
Section 2.3
No Conflicts; Consents
13
Section 2.4
Partnership Interests
14
Section 2.5
Investor Representations
14
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING
TO THE
PARTNERSHIP
16
Section 3.1
Organization and Standing; Books and
Records
16
Section 3.2
The Partnership Interests
17
Section 3.3
Authority; Execution and Delivery;
Enforceability
18
Section 3.4
No Conflicts; Consents
18
Section 3.5
Financial Statements
18
Section 3.6
Assets Other than Real Property
Interests
19
Section 3.7
Real Property
20
Section 3.8
Intellectual Property
20
Section 3.9
Contracts
21
Section 3.10
Banking and Insurance
23
Section 3.11
Taxes
23
Section 3.12
Proceedings
25
Section 3.13
Benefit Plans
25
Section 3.14
Employees and Labor Matters
26
Section 3.15
Absence of Changes or Events
27
Section 3.16
Compliance With Laws and
Orders
27
Section 3.17
Environmental Matters
29
Section 3.18
Transactions with Affiliates
30
Section 3.19
Suppliers/Payors
30
Section 3.20
Private Offering
30
Section 3.21
No Undisclosed Liabilities
30
Section 3.22
Standard Warranties
31
Section 3.23
Questionable Payments
31
Section 3.24
Accounts Receivable
31
Section 3.25
Indemnification Claims
31
2
TABLE OF CONTENTS
(Continued)
Section 3.26
Purchase Orders
31
Section 3.27
Malpractice
31
Section 3.28
Health Care Compliance
32
Section 3.29
Fraud and Abuse
32
Section 3.30
Legal Compliance
33
Section 3.31
Rates and Reimbursement
Policies
33
Section 3.32
Medical Staff
33
Section 3.33
Medical Providers
33
Section 3.34
Third-party Payors
35
Section 3.35
Corporate Practice or Fee
Splitting
35
Section 3.36
HIPAA
35
Section 3.37
Improper and Other Payments
35
Section 3.38
Medical Waste
36
Section 3.39
Certain Representations with respect to
the Ambulatory
Surgical Center
36
Section 3.40
Competing Facilities
37
Section 3.41
Disclosure
37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
37
Section 4.1
Organization, Standing and
Power
37
Section 4.2
Authority; Execution and Delivery;
Enforceability
37
Section 4.3
No Conflicts; Consents
38
Section 4.4
Securities Act
38
Section 4.5
Purchaser Stock
38
ARTICLE V
COVENANTS
39
Section 5.1
Covenants Relating to Conduct of
Business
39
Section 5.2
Access to Information
42
Section 5.3
Termination of Agreements with Sellers
and any Affiliates of Sellers
42
Section 5.4
Prepayment of Indebtedness
42
Section 5.5
Reasonable Best Efforts
43
Section 5.6
Expenses; Transfer Taxes
43
Section 5.7
Brokers or Finders
44
Section 5.8
Publicity
44
Section 5.9
Further Assurances
44
Section 5.10
No Negotiation
44
Section 5.11
Notification; Updates to Disclosure
Schedules
45
Section 5.12
Tax Matters
45
ARTICLE VI
CONDITIONS PRECEDENT
47
Section 6.1
Conditions to Each Party’s
Obligation
47
Section 6.2
Conditions to Obligation of
Purchaser
47
3
Section 6.3
Conditions to Obligation of
Sellers
50
Section 6.4
Frustration of Closing
Conditions
50
ARTICLE VII
TERMINATION, AMENDMENT AND
WAIVER
50
Section 7.1
Termination
50
Section 7.2
Effect of Termination
51
Section 7.3
Amendments and Waivers
51
ARTICLE VIII
INDEMNIFICATION
51
Section 8.1
Survival of Representations and
Warranties
51
Section 8.2
Indemnification Provisions for the
Benefit of Purchaser
51
Section 8.3
Indemnification Provisions for the
Benefit of Sellers
52
Section 8.4
Matters Involving Third
Parties
52
Section 8.5
Limitation
53
Section 8.6
Mitigation
54
ARTICLE IX
GENERAL PROVISIONS
54
Section 9.1
Disclosure Schedule
54
Section 9.2
Assignment
54
Section 9.3
No Third-Party Beneficiaries
54
Section 9.4
Notices
54
Section 9.5
Counterparts
55
Section 9.6
Entire Agreement
55
Section 9.7
Severability
56
Section 9.8
Consent to Jurisdiction
56
Section 9.9
Governing Law
56
Section 9.10
Waiver of Jury Trial
56
Section 9.11
Attorney’s Fees
56
Section 9.12
Time of Essence
57
Section 9.13
Waiver
57
Section 9.14
Specific Performance
57
SECURITIES PURCHASE
AGREEMENT
THIS SECURITIES PURCHASE
AGREEMENT is entered into this
22nd day of July , 2005, (this “Agreement “) by and
among PSHS PARTNERSHIP VENTURES, Inc. a Florida corporation (the
“PSHS Seller”); Gary J. Lustgarten Profit Sharing and
Trust (the “ Lustgarten Seller”); Ronald DeMeo , M . D
. (the “ DeMeo Seller”); Gaetano Scuderi, M.D. (the
“ Scuderi Seller”); Arturo Corces, MD (the
“Corces Seller”); (the foregoing are collectively, at
times, referred to as the “Sellers”); PSHS BETA
PARTNERS, LTD., a Florida limited partnership (the
“Partnership”); and PAINCARE HOLDINGS, INC., a Florida
corporation (“PainCare”) and its wholly owned
subsidiary, PAINCARE SURGERY CENTERS II, INC., a Florida
corporation (the “Subsidiary”) (collectively, PainCare
and the Subsidiary shall hereinafter sometimes be called the
“Purchaser”).
RECITALS
WHEREAS, the PSHS Seller has a 48 %
partnership interest in the Partnership as the general partner; the
Lustgarten Seller has an 10 % partnership interest in the
Partnership as a limited partner; the DeMeo Seller has an 20 %
partnership interest in the Partnership as a limited partner; the
Scuderi Seller has a 4% partnership interest in the Partnership as
a limited partner; and the Corces Seller has a 10% partnership
interest in the Partnership as a limited partner;
WHEREAS, the PSHS Seller desires to sell
to Purchaser its entire 48 % partnership interest in the
Partnership (the “PSHS Partnership Interest”), the
Lustgarten Seller desires to sell to Purchaser its entire 10 %
partnership interest in the Partnership (the “ Lustgarten
Partnership Interest”), the DeMeo Seller desires to sell to
Purchaser a 10 % partnership interest in the Partnership (the
“ DeMeo Partnership Interest”), the Scuderi Seller
desires to sell to Purchaser a 2% partnership interest in the
Partnership (the “ Scuderi Partnership Interest”), and
the Corces Seller desires to sell to Purchaser a 3% partnership
interest in the Partnership (the “Corces Partnership
Interest”) (collectively the “Partnership
Interests”); and Purchaser desires to purchase such
respective Partnership Interests in the Partnership from the
respective Sellers, all pursuant to the terms and conditions set
forth in this Agreement;
WHEREAS, after the sale of the
Partnership Interests in the Partnership provided for, and subject
to the terms and conditions, in this Agreement, Purchaser will own
a 73 % partnership interest in the Partnership, the DeMeo Seller
will own a 10 % partnership interest in the Partnership as a
limited partner, the Scuderi Seller will own a 2 % partnership
interest in the Partnership as a limited partner, the Corces Seller
will own a 7 % partnership interest in the Partnership as a limited
partner , Gustavo Torres, M.D. (the “ Torres Limited Partner
” ) will own a 1% partnership interest in the Partnership as
a limited partner, Dennis Zaslow, D.O. (the “ Zaslow Limited
Partner ” ) will own a 3% partnership interest in the
Partnership as a limited partner, Jose Jaen, M.D. (the “ Jaen
Limited Partner ” ) will own a 2% partnership interest in the
Partnership as a limited partner, and Carlos Azar, M.D. (the
“ Azar Limited Partner ” ) will own a 2% partnership
interest in the Partnership as a limited partner .
NOW THEREFORE, in consideration of the
promises contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE
I
PURCHASE AND SALE OF PARTNERSHIP INTERESTS; CLOSING
Section
1.1 Interpretation; Definitions.
(a)
The headings contained in this Agreement,
any Exhibit (as defined below) hereto, the Sellers Disclosure
Schedule, the Partnership Disclosure Schedule or the Purchaser
Disclosure Schedule and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Exhibits and
schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth
in full herein. Any capitalized terms used in any Exhibit, the
Sellers Disclosure Schedule, the Partnership Disclosure Schedule or
the Purchaser Disclosure Schedule but not otherwise defined
therein, shall have the meaning as defined in this Agreement. The
words “include” or “including” and
variations thereof shall be deemed to be followed by the words
“without limitation.” Any references to names in the
singular shall be deemed to include the plural and vice versa. When
a reference is made in this Agreement to a Section or an Exhibit,
such reference shall be to a Section of, or an Exhibit to, this
Agreement unless otherwise indicated.
(b)
For all purposes hereof:
(1)
“Acquisition” means the
purchase and sale of the Partnership Interests pursuant to this
Agreement.
(2)
“Affiliate” of any Person
means another Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, such first Person. An “affiliate” of a
natural person shall additionally mean any other natural person who
is related to the individual, the individuals spouse and any person
related to such persons within the second degree.
(3)
“Ambulatory Surgical Center”
means the licensed ambulatory surgical center located at 401
LeJeune Road, Suite 201, Miami, Florida 33134 .
(4)
“Applicable Law” means any
statute, law, ordinance, rule or regulation.
(5)
“Cash Purchase Price for the PSHS
Seller” means $ 1,351,458 .00, in cash
minus the sum of, (i) Seventy-five percent (75%) of
the outstanding principal and accrued but unpaid interest, fees and
other amounts payable by the Partnership (including any prepayment
penalties) as of the Closing Date with respect to the Long Term
Capital Debt, and (ii) the PSHS Seller’s pro rata share as
compared to the other Sellers (i.e., 65 %) of the amount of the
Transaction Expenses. (Additionally, the PSHS Seller shall
pay Purchaser the PSHS Seller’s pro rata share as compared to
the other Sellers (i.e., 65 %) of the Working Capital Adjustment
Amount (as defined in Section 1.9 hereinbelow), post Closing
pursuant to the terms described in Section 1.9 hereinbelow, if
applicable.)
(6)
“Cash Purchase Price for the
Lustgarten Seller” means $281,554.00, in cash
minus the sum of (i) any indebtedness pursuant to
which a lien has been placed on the Lustgarten Partnership
Interest, (ii) Ten percent ( 10%) of the outstanding principal and
accrued but unpaid interest, fees and other amounts payable by the
Partnership (including any prepayment penalties) as of the Closing
Date with respect to the Long Term Capital Debt, and (iii) the
Lustgarten Seller’s pro rata share as compared to the other
Sellers (i.e., 1 4.1 %) of the amount of the Transaction Expenses.
(Additionally, the Lustgarten Seller shall pay Purchaser the
Lustgarten Seller’s pro rata share as compared to the other
Sellers (i.e., 14.1 %) of the Working Capital Adjustment Amount (as
defined in Section 1.9 hereinbelow), post Closing pursuant to the
terms described in Section 1.9 hereinbelow, if
applicable.)
(7)
“Cash Purchase Price for the DeMeo
Seller” means $1,126,215.00, in cash
minus the sum of (i) any indebtedness pursuant to which a
lien has been placed on the DeMeo Partnership Interest, (ii) Ten
percent ( 10%) of the outstanding principal and accrued but unpaid
interest, fees and other amounts payable by the Partnership
(including any prepayment penalties) as of the Closing Date with
respect to the Long Term Capital Debt, and (iii) the DeMeo
Seller’s pro rata share as compared to the other Sellers
(i.e., 14.1 %) of the amount of the Transaction Expenses.
(Additionally, the DeMeo Seller shall pay Purchaser the DeMeo
Seller’s pro rata share as compared to the other Sellers
(i.e., 14.1 %) of the Working Capital Adjustment Amount (as defined
in Section 1.9 hereinbelow), post Closing pursuant to the terms
described in Section 1.9 hereinbelow, if applicable.)
(8)
“Cash Purchase Price for the Corces
Seller” means $ 337,865 .00, in cash
minus the sum of (i) any indebtedness pursuant to which a
lien has been placed on the Corces Partnership Interest, (ii) Three
percent ( 3%) of the outstanding principal and accrued but unpaid
interest, fees and other amounts payable by the Partnership
(including any prepayment penalties) as of the Closing Date with
respect to the Long Term Capital Debt, and (iii) the Corces
Seller’s pro rata share as compared to the other Sellers
(i.e., 4.08 %) of the amount of the Transaction Expenses.
(Additionally, the Corces Seller shall pay Purchaser the
Corces Seller’s pro rata share as compared to the other
Sellers (i.e., 4.08 %) of the Working Capital Adjustment Amount (as
defined in Section 1.9 hereinbelow), post Closing pursuant to the
terms described in Section 1.9 hereinbelow, if
applicable.)
(9)
“Cash Purchase Price for the
Scuderi Seller” means $225,243 .43 , in cash
minus the sum of (i) any indebtedness pursuant to
which a lien has been placed on the Scuderi Partnership Interest,
(ii) Two percent ( 2 %) of the outstanding principal and accrued
but unpaid interest, fees and other amounts payable by the
Partnership (including any prepayment penalties) as of the Closing
Date with respect to the Long Term Capital Debt, and (iii) the
Scuderi Seller’s pro rata share as compared to the other
Sellers (i.e., 2 .72%) of the amount of the Transaction Expenses.
(Additionally, the Scuderi Seller shall pay Purchaser the
Scuderi Seller’s pro rata share as compared to the other
Sellers (i.e., 2 .72%) of the Working Capital Adjustment Amount (as
defined in Section 1.9 hereinbelow), post Closing pursuant to the
terms described in Section 1.9 hereinbelow, if
applicable.)
(10)
“Code” shall mean the U.S.
Internal Revenue Code of 1986, as amended.
hereby.
(11)
“Consent” means any consent,
approval, license, permit, order or authorization.
(12)
“Contract” means any
contract, lease, license, indenture, agreement, commitment or other
legally binding arrangement.
(13)
“Damages” includes any loss,
damage, injury, decline in value, Liability, charge, cost, demand,
settlement, judgment, award, fine, penalty, Tax, fee or expense
(including any reasonable expenses of investigation and reasonable
legal fees and disbursements).
(14)
“Environmental Laws” means
any and all Applicable Laws, Judgments and Permits issued,
promulgated or entered into by or with any Governmental Entity as
of the Closing Date, relating to the environment, the protection,
preservation or reclamation of natural resources, or to the
management, treatment, emission, discharge, use, handling, storage,
removal, cleanup, decontamination, discharge, disposal or release
of Hazardous Materials.
(15)
“Fair Market Value of PainCare
Stock” shall be defined as a price per share equal to ninety
percent (90%) multiplied by the average thirty (30) day closing
price of PainCare Holdings Inc.’s stock as reported on the
American Stock Exchange or such other established stock exchange on
which PainCare Holding Inc.’s stock is trading for the thirty
(30) day period ending on the day immediately preceding the
complete execution of this Agreement by all parties to this
Agreement; provided, however, if the Closing does not occur within
the seventy-five (75) day period which immediately follows the
complete execution of this Agreement by all parties to this
Agreement, then “Fair Market Value of PainCare Stock”
shall be defined as a price per share equal to ninety percent (90%)
multiplied by the average thirty (30) day closing price of PainCare
Holdings Inc.’s stock as reported on the American Stock
Exchange or such other established stock exchange on which PainCare
Holding Inc.’s stock is trading for the thirty (30) day
period ending on the day immediately preceding the Closing
Date.
(16)
“GAAP” means United States
generally accepted accounting principles in effect as of the
Closing Date, consistently applied.
(17)
“Governmental Entity” means
any Federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or
foreign.
(18)
“Hazardous Materials” means
(1) petroleum products and byproducts, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, radon gas and
chlorofluorocarbons; and (2) any other material, substance or waste
that is prohibited or regulated pursuant to any Environmental
Law.
(19)
“Intellectual Property” means
any patent (including all reissues, divisions, continuations and
extensions thereof), patent application, trademark, trademark
registration, trademark application, service mark, trade name,
business name, brand name, copyright, copyright registration,
design, design registration, or any right to any of the
foregoing.
(20)
“Judgment” means any
judgment, order or decree.
(21)
“Knowledge of the
Partnership” means (i) the actual current knowledge of
Sellers or (ii) the knowledge such persons would reasonably be
expected to have as a result of discharging their official duties
in a reasonable manner.
(22)
“Liability” means, with
respect to any Person, any liability or obligation of such Person
of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint
or several, whether or not the same is required to be accrued on
the financial statements of such Person.
(23)
“Limited Partnership Interest
Pledge Agreements” means collectively the Limited Partnership
Interest Pledge Agreement for the PSHS Seller and the Limited
Partnership Interest Pledge Agreement for the Lustgarten
Seller.
(24)
“Limited Partnership Interest
Pledge Agreement for the Lustgarten Seller” means an
agreement pursuant to which Subsidiary pledges to the Lustgarten
Seller 10 % partnership interest in the Partnership as security for
the obligations of the Subsidiary to the Lustgarten Seller under
the terms of the Promissory Note for the Lustgarten
Seller.
(25)
“Limited Partnership Interest
Pledge Agreement for the PSHS Seller” means an agreement
pursuant to which Subsidiary pledges to the PSHS Seller 48 %
partnership interest in the Partnership as security for the
obligations of Subsidiary to the PSHS Seller under the terms of the
Promissory Note for the PSHS Seller.
(26)
“Long Term Capital Debt”
means the long term portion of the capital debt set forth on
Schedule 1.1(b)(26).
(27)
“Noncompetition and Confidentiality
Agreement” means that certain Noncompetition and
Confidentiality Agreement in the form of Exhibit A-1 to be entered
into by and between Sellers, on the one hand, and the Purchaser, on
the other hand, and delivered at Closing.
(28)
“Nonselling Partners” means
the Torres Limited Partner, the Zaslow Limited Partner, the Jaen
Limited Partner, and the Azar Limited Partner.
(29)
“On-Site Services Agreement”
means that certain On-Site Services Agreement in the form of
Exhibit A-2 to be entered into by and between Spectrum Personnel,
Inc. and the Purchaser and delivered at Closing.
(30)
“Ordinary Course of
Business”: An action taken by a Person will be deemed to have
been taken in the Ordinary Course of Business only if that
action:
(i)
is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in
the ordinary course of the normal, day-to-day operations of such
Person;
(ii)
does not require authorization by the
board of directors, general partner, stockholders or partners of
such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or
special authorization of any nature; and
(iii)
is similar in nature, scope and magnitude
to actions customarily taken, without any separate or special
authorization, in the ordinary course of the normal, day-to-day
operations of other Persons that are in the same line of business
as such Person.
(31)
“Other Indebtedness” of any
Person means, without duplication of Long Term Capital Debt, (i)
all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than trade
payables incurred in the Ordinary Course of Business of such Person
which are not more than 30 days past due), (ii) all indebtedness of
such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the principal amount of all obligations under or
in respect of capitalized leases, (iv) the then drawable stated
amount of all letters of credit issued for the account of such
Person and, without duplication, all unreimbursed amounts drawn
thereunder and (v) all payment obligations of such Person under any
interest rate protection agreements and similar agreements to the
extent constituting a liability under GAAP.
(32)
“Partnership Agreement” means
that certain Agreement of Limited Partnership for PSHS Beta
Partners , Ltd., dated January 14, 1998, that was entered into by
the general partner and limited partners as of such date to create
PSHS Beta Partners , Ltd., as amended by that certain:
(i) Amendment to Partnership Agreement dated
November 12, 1998 by and among the Partnership, the general partner
and limited partners as of such date; (ii) Second Amendment to
Partnership Agreement dated June 10, 2002 by and among the
Partnership, the general partner and limited partners as of such
date; and (iii) Third Amendment to Partnership Agreement dated June
11, 2002 by and among the Partnership, the general partner and
limited partners as of such date and (iv) Fourth Amendment to
Partnership Agreement dated January 8, 2003 by and among the
Partnership, the general partner and limited partners as of such
date. and (v) Fifth Amendment to Partnership Agreement dated
January 22,..2004 and among the Partnership, the general partner
and limited partners as of such date; and (vi) Sixth Amendment to
Partnership Agreement dated June 8,2004 by and among the
Partnership, the general partner and limited partners as of such
date; and (vii) Seventh Amendment to Partnership Agreement dated
January 31, 2005 by and among the Partnership, the general partner
and limited partners as of such date. and (viii) Eighth Amendment
to Partnership Agreement dated July 15, 2004 by and among the
Partnership, the general partner and limited partners as of such
date; and
and (iii) Ninth Amendment to
Partnership Agreement dated July 15, 2004 by and among the
Partnership, the general partner and limited partners as of such
date.
(33)
“Partnership Material Adverse
Effect” shall mean a material adverse effect (i) on the
business, assets or results of operations of the Partnership or
(ii) on the ability of the Partnership to consummate the
Acquisition and the other transactions contemplated
hereby.
(34)
“Permit” means all
certificates, licenses, permits, authorizations or approvals issued
or granted to the Partnership.
(35)
“Person” means any
individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Entity or other
entity.
(36)
“Promissory Notes” means
collectively the Promissory Note for the PSHS Seller and the
Promissory Note for the Lustgarten Seller.
(37)
“Promissory Note for the Lustgarten
Seller” means a promissory note to be issued by PainCare to
the Lustgarten Seller at Closing, in the principal amount of
$281,554 .00 , with interest at the rate of 0 % per year, due and
payable in one lump sum of principal and interest on the date that
is one year from the date of Closing.
(38)
“Promissory Note for the PSHS
Seller” means a promissory note to be issued by PainCare to
the PSHS Seller at Closing, in the principal amount of $
1,351,458.00 , with interest at the rate of 0 % per year, due and
payable in one lump sum of principal and interest on the date that
is one year from the date of Closing.
(39)
“Purchaser Stock” means
collectively the Purchaser Stock for the PSHS Seller and the
Purchaser Stock for the Lustgarten Seller.
(40)
“Purchaser Stock for the PSHS
Seller” means shares of PainCare’s common stock,
$0.0001 par value, subject to adjustment for any stock splits,
stock dividends or comparable events prior to the Closing which
collectively has a value equal to $ 2,702,916 .00 on the Closing
Date using the Fair Market Value of PainCare Stock (as defined
herein).
(41)
“Purchaser Stock for the Lustgarten
Seller” shares of PainCare’s common stock, $0.0001 par
value, subject to adjustment for any stock splits, stock dividends
or comparable events prior to the Closing which collectively has a
value equal to $ 563,108 .00 on the Closing Date using the Fair
Market Value of PainCare Stock (as defined herein).
(42)
“Registration Rights
Agreement” means the Registration Rights Agreement dated the
date hereof, substantially in the form of Exhibit A-3.
(43)
“Seller Material Adverse
Effect” means, with respect to Sellers, a material adverse
effect on the ability of Sellers to consummate the transactions
contemplated hereby.
(44)
“ S ubsidiary” of any Person
means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors
or other governing body, or, if there are no such voting interests,
50% or more of the equity interests of which is owned directly or
indirectly by such first Person or by another subsidiary of such
first Person.
(45)
“Support and Services
Agreement” means that certain Support and Services Agreement
in the form of Exhibit A-4 to be entered into by and between
Spectrum Personnel, Inc. and the Purchaser and delivered at
Closing.
(46)
“Tax” shall mean all forms of
taxation or duties imposed, or required to be collected or
withheld, including charges, together with any related interest,
penalties or other additional amounts.
(47)
“Tax Return” shall mean any
return, filing, report, questionnaire, information statement or
other document required to be filed, including any amendments that
may be filed, for any taxable period with any Taxing Authority
(whether or not a payment is required to be made with respect to
such filing).
(48)
“Taxing Authority” shall mean
any Governmental Entity exercising any authority to impose,
regulate or administer the imposition of Taxes.
(49)
“Total Consideration” means
the sum of (i) $ 3,322,334 cash , (ii) the Purchaser Stock
delivered to the Sellers at the Closing which collectively has a
value equal to $ 3,266,024 on the Closing Date using the Fair
Market Value of PainCare Stock (as defined herein) , and (iii) the
Promissory Notes delivered at Closing in the collective principal
amount of $1,633,012 .
(50)
“Transaction Documents” means
this Agreement, the Promissory Notes, the Limited Partnership
Interest Pledge Agreements, the Support and
Services Agreement, the On-Site Services Agreement, the
Non-competition and Confidentiality Agreement, the Registration
Rights Agreement, the Amended and Restated Limited Partnership
Agreement, together with such other agreements, certificates
and documents delivered at Closing.
(51)
“Transaction Expenses” means
all of the fees and expenses of the Partnership and the Sellers
incurred prior to or as of the Closing relating to the transactions
contemplated hereby for which the Sellers shall be
responsible.
Section
1.2 Purchase and Sale of the PSHS Partnership Interests.
(a)
On the terms and subject to the
conditions of this Agreement, at the Closing,
(i)
the PSHS Seller shall sell, transfer,
assign, convey and deliver to the Purchaser, and Purchaser shall
purchase from PSHS Seller, the PSHS Partnership
Interest (which is a 48 % partnership
interest in the Partnership) owned by the PSHS Seller, free and
clear of all Liens (as defined in Section 3.6 hereinbelow);
and
(ii)
Purchaser shall deliver to the PSHS
Seller: (a) the Cash Purchase Price for the PSHS Seller, (b)
certificates representing the Purchaser Stock for the PSHS Seller ,
(c) the Promissory Note for the PSHS Seller, and (d) the Limited
Partnership Interest Pledge Agreement for the PSHS
Seller.
Section
1.3 Purchase and Sale of the Lustgarten Partnership
Interests.
(a)
On the terms and subject to the
conditions of this Agreement, at the Closing,
(i)
the Lustgarten Seller shall sell,
transfer, assign, convey and deliver to the Purchaser, and
Purchaser shall purchase from the Lustgarten Seller, the Lustgarten
Partnership Interest (which is a 10 % partnership interest in the
Partnership) owned by the Lustgarten Seller, free and clear of all
Liens (as defined in Section 3.6 hereinbelow); and
(ii)
Purchaser shall deliver to the Lustgarten
Seller : (a) the Cash Purchase Price for the Lustgarten
Seller , (b) certificates representing the Purchaser Stock for the
Lustgarten Seller, (c) the Promissory Note for the Lustgarten
Seller, and (d) the Limited Partnership Interest Pledge Agreement
for the Lustgarten Seller.
Section
1.4 Purchase and Sale of the DeMeo Partnership
Interests.
(a)
On the terms and subject to the
conditions of this Agreement, at the Closing,
(i)
the DeMeo Seller shall sell, transfer,
assign, convey and deliver to the Purchaser, and Purchaser shall
purchase from the DeMeo Seller, the DeMeo Partnership Interest
(which is a 10 % partnership interest in the Partnership) owned by
the DeMeo Seller, free and clear of all Liens (as defined in
Section 3.6 hereinbelow); and
(ii)
Purchaser shall deliver to the DeMeo
Seller the Cash Purchase Price for the DeMeo Seller .
Section
1.5 Purchase and Sale of the Scuderi Partnership
Interests. On the terms
and subject to the conditions of this Agreement, at the
Closing,
(i)
the Scuderi Seller shall sell, transfer,
assign, convey and deliver to the Purchaser, and Purchaser shall
purchase from the Scuderi Seller, the Scuderi Partnership Interest
(which is a 2% partnership interest in the Partnership) owned by
the Scuderi Seller, free and clear of all Liens (as defined in
Section 3.6 hereinbelow); and
(ii)
Purchaser shall deliver to the Scuderi
Seller the Cash Purchase Price for the Scuderi Seller.
Section 1.6 Purchase and Sale of the
Corces Partnership Interests. On the terms and subject to the conditions of
this Agreement, at the Closing,
(i)
the Corces Seller shall sell, transfer,
assign, convey and deliver to the Purchaser, and Purchaser shall
purchase from the Corces Seller, the Corces Partnership Interest
(which is a 3% partnership interest in the Partnership) owned by
the Corces Seller, free and clear of all Liens (as defined in
Section 3.6 hereinbelow); and
(ii)
Purchaser shall deliver to the Corces
Seller the Cash Purchase Price for the Corces Seller.
Section
1.7 Closing Date. The
closing of the Acquisition (the “Closing”) shall take
place at the offices of PainCare or such other mutually agreed to
location or if mutually acceptable, remotely: (i) seventy-five (75)
days after the execution of this Agreement by all parties to this
Agreement subject to the satisfaction of the conditions set forth
in Article VI (or, to the extent permitted, waived by the parties
entitled to the benefits thereof); or (ii) less than seventy-five
(75) days after the execution of this Agreement by all parties to
this Agreement at a date mutually agreed upon by the parties to
this Agreement if all of the conditions set forth in Article VI
have been satisfied (or, to the extent permitted, waived by the
parties entitled to the benefits thereof). The date on which the
Closing occurs is referred to in this Agreement as the
“Closing Date.”
Section
1.8 Transactions To Be Effected at the Closing.
At the Closing:
(a)
the PSHS Seller shall deliver to
Purchaser: (i) certificates representing the PSHS Partnership
Interest, duly endorsed to Purchaser or accompanied by partnership
interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any,
affixed, which, together with the certificates delivered to
Purchaser by the PSHS Seller, shall represent 48 % of the
partnership interests of the Partnership outstanding as of the
Closing Date; (ii) Noncompetition and Confidentiality
Agreement executed by the PSHS Seller, (iii) a certificate
dated as of the Closing Date stating the PSHS Seller’s name,
tax identifying number and address, stating that the PSHS Seller is
not a “foreign person,” sworn to under penalties of
perjury and otherwise in form and substance sufficient to satisfy
the requirement of Treasury Regulation Section 1.1445-2(b)(2) (the
“FIRPTA Certificate”) , and (iv) the Limited
Partnership Interest Pledge Agreement for the PSHS Seller
.
(b)
the Lustgarten Seller shall deliver to
Purchaser: (i) certificates representing the Lustgarten Partnership
Interest, duly endorsed to Purchaser or accompanied by partnership
interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any,
affixed, which, together with the certificates delivered to
Purchaser by the Lustgarten Seller, shall represent 10% of the
partnership interests of the Partnership outstanding as of the
Closing Date; (ii) Noncompetition and
Confidentiality Agreement executed by the Lustgarten Seller,
(iii) a certificate dated as of the Closing Date stating the
Lustgarten Seller’s name, tax identifying number and address,
stating that the Lustgarten Seller is not a “foreign
person,” sworn to under penalties of perjury and otherwise
in
form and substance sufficient to satisfy
the requirement of Treasury Regulation Section 1.1445-2(b)(2) (the
“FIRPTA Certificate”) , and (iv) the Limited
Partnership Interest Pledge Agreement for the Lustgarten Seller
.
(c)
the DeMeo Seller shall deliver to
Purchaser: (i) certificates representing the DeMeo Partnership
Interest, duly endorsed to Purchaser or accompanied by partnership
interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any,
affixed, which, together with the certificates delivered to
Purchaser by the DeMeo Seller, shall represent 10 % of the
partnership interests of the Partnership outstanding as of the
Closing Date; (ii) Noncompetition and Confidentiality
Agreement executed by the DeMeo Seller, and (iii) a
certificate dated as of the Closing Date stating the DeMeo
Seller’s name, tax identifying number and address, stating
that the DeMeo Seller is not a “foreign person,” sworn
to under penalties of perjury and otherwise in form and substance
sufficient to satisfy the requirement of Treasury Regulation
Section 1.1445-2(b)(2) (the “FIRPTA
Certificate”).
(d)
the Scuderi Seller shall deliver to
Purchaser: (i) certificates representing the Scuderi Partnership
Interest, duly endorsed to Purchaser or accompanied by partnership
interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any,
affixed, which, together with the certificates delivered to
Purchaser by the Scuderi Seller, shall represent 2% of the
partnership interests of the Partnership outstanding as of the
Closing Date; (ii) Noncompetition and Confidentiality
Agreement executed by the Scuderi Seller, and (iii) a
certificate dated as of the Closing Date stating the Scuderi
Seller’s name, tax identifying number and address, stating
that the Scuderi Seller is not a “foreign person,”
sworn to under penalties of perjury and otherwise in form and
substance sufficient to satisfy the requirement of Treasury
Regulation Section 1.1445-2(b)(2) (the “FIRPTA
Certificate”).
(e)
the Corces Seller shall deliver to
Purchaser: (i) certificates representing the Corces Partnership
Interest, duly endorsed to Purchaser or accompanied by partnership
interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any,
affixed, which, together with the certificates delivered to
Purchaser by the Corces Seller, shall represent 3% of the
partnership interests of the Partnership outstanding as of the
Closing Date; (ii) Noncompetition and
Confidentiality Agreement executed by the Corces Seller, and
(iii) a certificate dated as of the Closing Date stating the
Corces Seller’s name, tax identifying number and address,
stating that the Corces Seller is not a “foreign
person,” sworn to under penalties of perjury and otherwise in
form and substance sufficient to satisfy the requirement of
Treasury Regulation Section 1.1445-2(b)(2) (the “FIRPTA
Certificate”).
(f)
Purchaser shall deliver to the PSHS
Seller: (i) the Cash Purchase Price for the PSHS Seller, (ii) a
certificate representing the Purchaser Stock for the PSHS Seller
issued to the PSHS Seller , (iii) the Promissory Note for the PSHS
Seller, and (iv) the Limited Partnership Interest Pledge Agreement
for the PSHS Seller .
(g)
Purchaser shall deliver to the Lustgarten
Seller : (i) the Cash Purchase Price for the Lustgarten
Seller , (ii) Stock for the Lustgarten Seller, (iii) the Promissory
Note for
the Lustgarten Seller, and (iv) the
Limited Partnership Interest Pledge Agreement for the Lustgarten
Seller .
(h)
Purchaser shall deliver to the DeMeo
Seller: the Cash Purchase Price for the DeMeo Seller .
(i)
Purchaser shall deliver to the Scuderi
Seller the Cash Purchase Price for the Scuderi Seller.
(j)
Purchaser shall deliver to the Corces
Seller the Cash Purchase Price for the Corces Seller.
Purchaser shall: (i) deliver by wire transfer
to the applicable bank account(s) designated in writing by the
Partnership any other Indebtedness of the Partnership, if any, if
such amounts are not paid off prior to the Closing Date, if
applicable and (ii) deliver payment to the applicable accounts
designated therefore of all Transaction Expenses.
(l)
If there are any other liens encumbering
the partnership interests being purchased from any of the Sellers,
then the attendant indebtedness needs to be identified and paid off
prior to Closing, or alternatively, Purchaser will pay off such
attendant indebtedness at the Closing and reduce the respective
cash portions of the purchase price payable to the applicable
Seller(s).
Post-Closing Working Capital Adjustment.
(a)
Net Working Capital
Statement . Not more
than 60 days after the Closing Date, the Purchaser shall deliver to
the Sellers a net working capital statement of the Partnership as
of the Closing Date (the “Net Working Capital
Statement”) prepared in accordance with generally accepted
accounting principles (“GAAP”). The Net Working
Capital, as defined in Section 1.9(b), of the Partnership reflected
on the Net Working Capital Statement is referred to herein as the
“Final Closing Date Working Capital Position.”
The cash component of the Final Closing Date Working Capital
Position shall be at least $100,000. Except as provided in
Section 1.9(d) hereof, fifteen (15) business days after delivery of
the Net Working Capital Statement (the “Adjustment Payment
Date”), the Sellers shall each pay the Purchaser their
respective pro rata share the amount by which the Agreed Closing
Date Working Capital Position, as defined in Section 1.9(c) exceeds
the Final Closing Date Working Capital Position, if any, within
thirty (30) days of receiving notice of the same, or the Purchaser
shall pay the Sellers their pro rata share in the amount by which
the Final Closing Date Working Capital Position exceeds the Agreed
Closing Date Working Capital Position, as defined in Section
1.9(c), if any, within thirty (30) days of receiving notice of the
same. In determining whether Sellers owe Purchaser money or
Purchaser owes Sellers money pursuant to the terms of the preceding
sentence: (i) the entire working capital position of the
Partnership shall be considered (meaning, for example, if the Final
Closing Date Working Capital Position is less than the Agreed
Closing Date Working Capital Position and the cash component of the
Final Closing Date Working Capital Position is greater than
$100,000, then on these hypothetical facts, if true, Sellers would
owe Purchaser the difference between the Final Closing Date Working
Capital Position and the Agreed Closing Date Working Capital
Position, notwithstanding that the cash component of the Final
Closing
12
Date Working Capital Position is greater
than $100,000); and (ii) to the extent that the absolute value of
the difference between the Final Closing Date Working Capital
Position and the Agreed Closing Date Working Capital Position is
$5,000 or less, then neither Sellers nor Purchaser will owe the
other money pursuant to the preceding sentence. All payments
under this Section 1.9(a), as applicable, shall be by wire transfer
in immediately available funds to a bank account designated by
Purchaser or Sellers.
(b)
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.
(c)
Agreed Closing Date Working Capital
Position . For purposes
of this Agreement, the “Agreed Closing Date Working Capital
Position” means the “Net Working Capital” of the
Partnership, as defined in Section 1.9(b) on the Closing Date,
which is $ 1,789,082 (with $100,000 of such $1 ,789,082 being
cash).
(d)
Manner of Payment
.
(i)
Objection Period and Discussion
Period . Within ten (10)
business days (the “Objection Period”) after the
Purchaser’s delivery of the Net Working Capital Statement,
the Sellers, collectively, shall, in a written notice to the
Purchaser, either accept or describe in reasonable detail any
proposed adjustment to the Net Working Capital Statement and the
reasons therefor, and shall include pertinent calculations.
If the Sellers collectively fail 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.
(ii)
Accounting Firm Review
. If the Purchaser and the Sellers
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 Sellers (the
“Discussion Period”), the Purchaser and the Sellers,
collectively, shall each have the right to require that such
disputed determinations be submitted to a certified public
accounting firm as the Sellers, collectively, and the Purchaser may
then mutually agree upon in writing, for computation or
verification in accordance with the provisions of this Agreement,
provided the Purchaser or Sellers shall pay, as applicable, on the
Adjustment Payment Date, their respective share of the net of the
undisputed portion(s) of the Working Capital Adjustment
contemplated by this Section 1.5. If the Sellers 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 Sellers, on the one hand, and the
Purchaser, on the other hand, 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
years, services to any of Sellers, Partnership 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.
(iii)
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 Purchaser or
each of the Sellers, as the case may be, shall make their
respective share of the required payment, if applicable. Any
payments due under this Section 1.5 shall bear interest at LIBOR,
as published in the Wall Street Journal, from the Adjustment
Payment Date.
(e)
Ordinary Course of Business
. Following the Closing, Purchaser
shall not take any action with respect to the accounting books and
records of the Partnership, or the items reflected thereon, on
which the Final Closing Date Working Capital Position is to be
based that are not in the Ordinary Course of Business.
ARTICLE
II
REPRESENTATIONS AND WARRANTIES
RELATING TO SELLERS AND THE PARTNERSHIP INTERESTS
Except as set forth in the schedule dated
the date of this Agreement from the Sellers to Purchaser (the
“Sellers Disclosure Schedule”), PSHS
the Sellers, jointly and severally (with the
exception of the representations and warranties made in Section 2.5
of this Agreement which are made severally), hereby represent and
warrant to Purchaser, as of the date of this Agreement and as of
the Closing Date, as follows:
Section
2.1 Organization. The
PSHS Seller is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
organized.
Section
2.2 Authority; Execution and Delivery; Enforceability.
Each of the Sellers has full power
and authority to execute this Agreement and to consummate the
Acquisition and the other transactions contemplated hereby. The
execution and delivery by each of the Sellers of this Agreement
have been duly authorized by all necessary action. Each of the
Sellers has duly executed and delivered this Agreement, and this
Agreement constitutes a legal, valid and binding obligation of each
of the Sellers, enforceable against each of the Sellers in
accordance with its terms.
Section
2.3 No Conflicts; Consents. The execution and delivery by each of the
Sellers of this Agreement does not, and the consummation of the
Acquisition and the other transactions
contemplated hereby and compliance by
each of the Sellers with the terms hereof will not conflict with,
or result in any violation of or default (with or without notice or
lapse of time, or both) under, any provision of (i) the governing
instruments of any of the Sellers which are not a natural person,
(ii) any Contract to which any of the Sellers is a party or by
which any of its properties or assets is bound or (iii) any
Judgment or Applicable Law applicable to any of the Sellers or its,
his or their, as applicable, properties or assets, other than, in
the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, would not have a Seller Material
Adverse Effect. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or
made by or with respect to any of the Sellers in connection with
the execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions
contemplated hereby, other than (A) compliance with and filings
with the Agency for Health Care Administration and the Centers for
Medicare and Medicaid necessary with respect to the change in the
owner of the Partnership Interests as described in this Agreement,
and (B) any Consent, registration, declaration or filing the
failure of which to obtain or make would not have, individually or
in the aggregate, a Seller Material Adverse Effect.
Section
2.4 Partnership Interests. Each of the Sellers has good and valid title to
the respective Partnership Interests it, he or they, as applicable,
is/are selling pursuant to this Agreement, free and clear of all
Liens. Upon delivery to Purchaser at the Closing of certificates
representing such Partnership Interests, duly endorsed by the
respective Sellers for transfer to Purchaser, and upon each of the
Sellers’ respective receipt of the amount payable to the
respective Seller pursuant to Section 1.4, good and valid title to
such Partnership Interests will pass to Purchaser, free and clear
of any Liens, other than those arising from acts of Purchaser or
its Affiliates. Other than this Agreement, and the Partnership
Agreement, such Partnership Interests are not subject to any voting
trust agreement or other Contract, including any Contract
restricting or otherwise relating to the voting, dividend or
distribution rights or disposition of such Partnership Interests.
None of the Sellers has other equity interests or rights to acquire
equity interests in the Partnership.
Section
2.5 Investor Representations. In connection with the issuance by the
Purchaser of the Purchaser Stock for PSHS and the Purchaser Stock
for Lustgarten as partial payment of the Total Consideration, each
of the PSHS Seller and the Lustgarten Seller hereby represents and
warrants to, and covenants with, the Purchaser as
follows:
(a)
By executing this Agreement, each of the
Sellers acknowledges that:
(i)
There are continuing substantial risks
incident to the acquisition of the Purchaser’s Securities and
each of the Sellers may at any time suffer a complete loss of value
of their respective ownership of the Purchaser Stock for PSHS and
the Purchaser Stock for Lustgarten , as applicable;
(ii)
No federal or state agency has passed
upon the Purchaser Stock issued in connection with this Agreement
or made any finding or determination as to the fairness of the
transactions contemplated hereby; and
(iii)
The PSHS Seller and the Lustgarten
Seller, as applicable, must bear the risk of acquiring the
Purchaser Stock for PSHS and the Purchaser Stock for Lustgarten ,
as applicable, for an indefinite period of time because the
Purchaser Stock has not been registered under the Securities Act or
any state securities laws, and, therefore, cannot be sold or
transferred unless the sale or transfer is subsequently registered
under said laws or the Purchaser receives a legal opinion of
counsel reasonably satisfactory to the Purchaser that an exemption
from such registration is available.
(b)
Each of the PSHS Seller and the
Lustgarten Seller further represents and warrants to the Purchaser
that:
(i)
Each of the PSHS Seller and the
Lustgarten Seller has had the opportunity to examine all aspects of
the Purchaser, and its proposed operations and financial condition
that each of the Sellers has deemed relevant, including the
Purchaser’s public filings available on line at
http://www.sec.gov/, and has had the opportunity to ask such
questions of directors, officers, employees and representatives of
the Purchaser as each of the Sellers deems necessary for an
evaluation of the Purchaser Stock;
(ii)
Purchaser has not granted, offered or
sold the Purchaser Stock to the PSHS Seller and the Lustgarten
Seller by means of any form of general solicitation or general
advertising or by means of publicly disseminated advertisements or
sales literature;
(iii)
Each of the PSHS Seller and the
Lustgarten Seller has adequate means of providing for his, its or
their, as applicable, current needs and possible future
contingencies, and each of the PSHS Seller and the Lustgarten
Seller has no need, and anticipates no need in the foreseeable
future, to sell the Purchaser Stock;
(iv)
Each of the PSHS Seller and the
Lustgarten Seller possesses such expertise, knowledge and
sophistication in financial and business matters generally that it
is capable of evaluating the merits and economic risks of acquiring
the Purchaser Stock. Each of the PSHS Seller and the Lustgarten
Seller is able to bear the economic risks of this investment and,
consequently, without limiting the generality of the foregoing,
each of the PSHS Seller and the Lustgarten Seller is able to hold
the Purchaser Stock for an indefinite period of time and has
sufficient net worth to sustain a loss of its, their or his, as
applicable, entire investment in the event such loss should occur.
Each of the PSHS Seller and the Lustgarten Seller is acquiring the
Purchaser Stock solely for investment for the respective
Seller’s own account (and not for the account of any other
person) and has no agreement, understanding or arrangement to
subdivide, sell, assign, transfer or otherwise dispose of all or
any part of any of the Purchaser Stock to any other Person;
and
(v)
All of the representations and
information provided in this Section 2.5 is accurate and complete
as of the date of this Agreement. If there should be any material
change in any such representations, Sellers will immediately
furnish accurate and complete information concerning any material
change to the Purchaser.
(c)
Each of the PSHS Seller and the
Lustgarten Seller acknowledges, represents and warrants that the
PSHS Seller and the Lustgarten Seller, as applicable,
satisfies/satisfy one of the following:
(i)
The respective Seller is an accredited
investor for purposes of Rule 501 under the Securities
Act;
(ii)
The respective Seller is a corporation,
partnership or similar entity not formed for the specific purpose
of acquiring the securities offered, with total assets in excess of
$5,000,000;
(iii)
The respective Seller is a natural person
whose individual net worth, or joint net worth with the respective
Seller’s spouse, at the time of the acquisition of the
Purchaser Stock exceeds $1,000,000;
(iv)
The respective Seller is a natural person
who had an individual income in excess of $200,000 in each of the
two most recent years or joint income with the respective
Seller’s spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level
in the current year;
(v)
The respective Seller is a trust, with
total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Purchaser Stock, whose purchase is
directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D promulgated under the Securities
Act;
(vi)
The respective Seller is an entity in
which all of the equity owners are accredited investors;
or
(vii)
The respective Seller, if not an
accredited investor, possesses such expertise, knowledge and
sophistication in financial and business matters generally, and
familiarity with this investment, that together with its investment
advisers it is capable of evaluating the merits and economic risks
of acquiring the Purchaser Stock.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES
RELATING TO THE PARTNERSHIP
Except as set forth in the schedule dated
the date of this Agreement from the Partnership to Purchaser (the
“Partnership Disclosure Schedule”), each of the
physician owners of the PSHS Seller and the Sellers, jointly and
severally, hereby represent and warrant to Purchaser, as of the
date of this Agreement and as of the Closing Date (or, to the
extent that a representation or warranty expressly relates to an
earlier date, as of such earlier date), as follows:
Section
3.1 Organization and Standing; Books and Records.
(a)
Except as set forth in Section 3.1(a) of
the Partnership Disclosure Schedule, the Partnership is a limited
partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of formation, which jurisdiction
is set forth in Section 3.1 of the Partnership Disclosure Schedule.
The Partnership has full power and authority and possesses
all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold
its properties and assets and to carry on its business as presently
conducted (the “Business”) at the locations for which
such Business is presently being conducted (the “Business
Locations”). Except as set forth in Section 3.1(a) of the
Partnership Disclosure Schedule, the Partnership is duly qualified
and in good standing to do business as a foreign limited
partnership in each jurisdiction in which the conduct or nature of
its business or the ownership, leasing or holding of its properties
makes such qualification necessary.
(b)
Except as set forth in Section 3.1(b) of
the Partnership Disclosure Schedule, the Partnership has made
available to Purchaser true and complete copies of the certificate
of limited partnership, as amended to date, and the Partnership
Agreement of the Partnership. All actions taken by the Partnership,
including those taken by its general partner, limited partners, and
employees, of the type required to be reflected in its minute books
will be reflected in the Partnership’s minute books which are
to be made available to Purchaser at least 5 days prior to Closing.
No material action of a type which would normally appear in a
partnership’s minute books has been taken by the Partnership
that has not been otherwise disclosed to Purchaser. As of the
Closing Date, the minute books of the Partnership will have been
made available for inspection by Purchaser and will be true and
complete.
Section
3.2 The Partnership Interests.
(a)
The PSHS Seller has a 48 % partnership
interest in the Partnership as the general partner; the Lustgarten
Seller has a 10 % partnership interest in the Partnership as a
limited partner; the DeMeo Seller has a 20 % partnership interest
in the Partnership as a limited partner; the Scuderi Seller has a
4% partnership interest in the Partnership as a limited partner;
the Corces Seller has a 10 % partnership interest in the
Partnership as a limited partner ; the Torres Limited Partner has a
1% partnership interest in the Partnership as a limited partner;
the Zaslow Limited Partner has a 3% partnership interest in the
Partnership as a limited partner; the Jaen Limited Partner has a 2%
partnership interest in the Partnership as a limited partner; and
the Azar Limited Partner has a 2% partnership interest in the
Partnership as a limited partner (collectively, the “Issued
and Outstanding Partnership Interests”) . Except for
the Issued and Outstanding Partnership Interests, there are no
units, partner interests or other equity securities of the
Partnership issued, reserved for issuance or outstanding. The
Issued and Outstanding Partnership Interests are duly authorized,
validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar
right under the Florida Revised Uniform Limited Partnership Act,
the certificate of limited partnership or limited partnership
agreement of the Partnership or any Contract to which the
Partnership is a party or otherwise bound. There are not any bonds,
debentures, notes or other Indebtedness of the Partnership having
the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
holders of
partnership interests in the Partnership
may vote (“Voting Partnership Debt”). Except as set
forth in Section 3.2 of the Partnership Disclosure Schedule, there
are no options, warrants, rights, convertible or exchangeable
securities, “phantom” unit or other equity rights, unit
or other equity appreciation rights, equity-based performance
units, commitments, Contracts, arrangements or undertakings of any
kind to which the Partnership is a party or by which any of them is
bound (i) obligating the Partnership to issue, deliver or sell, or
cause to be issued, delivered or sold, additional partnership
interests in the Partnership or other equity interests in, or any
security convertible or exercisable for or exchangeable into any
partnership interests in the Partnership of or other equity
interest in, the Partnership or any Voting Partnership Debt or (ii)
obligating the Partnership to issue, grant, extend or enter into
any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking. There are no outstanding
contractual obligations of the Partnership to repurchase, redeem or
otherwise acquire any partnership interests of the
Partnership.
(b)
Except for the ownership interests set
forth in Section 3.2(b) of the Partnership Disclosure Schedule, the
Partnership does not own, directly or indirectly, any capital
stock, membership interest, partnership interest, joint venture
interest or other equity interest in any Person.
Section
3.3 Authority; Execution and Delivery; Enforceability.
The Partnership has full power and
authority to execute this Agreement and to consummate the
Acquisition and the other transactions contemplated hereby. The
execution and delivery by the Partnership of this Agreement and the
consummation by the Partnership of the Acquisition and the other
transactions contemplated hereby and thereby have been duly
authorized by all necessary action. The Partnership has duly
executed and delivered this Agreement and this Agreement
constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
Section
3.4 No Conflicts; Consents. Except as set forth in Section 3.4 of the
Partnership Disclosure Schedule, the execution and delivery by the
Partnership of this Agreement does not, and the consummation of the
Acquisition and the other transactions contemplated hereby and
compliance by the Partnership with the terms hereof will not,
conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or result in the
creation of any Lien upon any of the properties or assets of the
Partnership under, any provision of (i) the certificate of limited
partnership or the Partnership Agreement of the Partnership, (ii)
any Contract to which the Partnership is a party or by which any of
its respective properties or assets is bound or (iii) any Judgment
or Applicable Law applicable to the Partnership or its properties
or assets, other than, in the case of clauses (ii) and (iii) above,
any such items that do not exceed $2,000 individually or $5,000 in
the aggregate. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or
made by or with respect to the Partnership in connection with the
execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions
contemplated hereby, other than (A) compliance with and filings
with the Agency for Health Care Administration and the Centers for
Medicare and Medicaid regarding the sale of the Partnership
Interests as provided for, and subject to the terms and conditions,
in this Agreement with respect to the Partnership’s ownership
and operation of the Ambulatory Surgical Center; and (B) compliance
with and filings under the Florida Revised Uniform Limited
Partnership Act.
Section
3.5 Financial Statements.
(a)
Section 3.5 of the Partnership Disclosure
Schedule sets forth (i) the audited balance sheet of the
Partnership as of October 31, 2004 , (ii) the unaudited balance
sheet of the Partnership as of April 30, 2005 (the “Balance
Sheet”), (iii) the audited statement of income and cash flows
of the Partnership for the fiscal year ended October 31, 2004 , and
(iv) the unaudited statement of income and cash flows of the
Partnership for the three months ended April 30, 200 5 (the
financial statements described in this sentence, collectively, the
“Financial Statements”). Except (i) as set forth in
Section 3.5 of the Partnership Disclosure Schedule, (ii) as
described in the notes to the Financial Statements, (iii) that the
unaudited interim statements do not include footnote disclosure as
required by GAAP and (iv) in the case of the unaudited statements,
for normal, year-end adjustments (including recognizing taxes
payable and bonus accruals), the Financial Statements have been
prepared in accordance with GAAP and fairly present the financial
condition and results of operations of the Partnership as of the
respective dates thereof and for the respective periods indicated
therein.
(b)
Audited financial statements for the
Partnership for the stub period commencing on November 1, 2004 and
ending on and as of April 30, 2005 , do not exist.
(c)
Except as set forth in Section 3.5(c) of
the Partnership Disclosure Schedule, the Partnership has accurately
accrued in the Financial Statements for all employee and management
bonuses. Section 3.5(c) of the Partnership Disclosure Schedule sets
forth a complete and accurate accrual of all bonuses owed to
current and former employees and management as of the date of this
Agreement and as of the Closing Date.
(d)
Except as set forth in Section 3.5(d) of
the Partnership Disclosure Schedule, since April 30, 2005 , (i) the
Partnership has paid its accounts payable in a consistent and
timely manner and has not altered any of its practices, policies or
procedures in paying its accounts payable and (ii) no instance has
occurred where the Partnership took any action with regard to any
account payable outside of the Ordinary Course of
Business.
(e)
Section 3.5(e) of the Partnership
Disclosure Schedule identifies all individuals who help in the
production of the Financial Statements and the provision of
information for the preparation of the same and lists the
responsibilities of each such individuals.
Section
3.6 Assets Other than Real Property Interests.
(a)
The Partnership has good and valid title
to all assets reflected on the Balance Sheet or thereafter
acquired, other than those set forth in Section 3.6 of the
Partnership Disclosure Schedule or otherwise disposed of since the
date of the Balance Sheet in the Ordinary Course of Business, in
each case free and clear of all mortgages, liens, security
interests, charges, easements, leases, subleases, covenants, rights
of way, options, claims, restrictions or encumbrances of any kind
(collectively, “Liens”), except (i) such Liens as are
set forth in Section 3.6 of the Partnership Disclosure Schedule,
(ii) mechanics’, carriers’, workmen’s,
repairmen’s or other like Liens arising or incurred in the
Ordinary Course of Business, Liens arising under original purchase
price conditional sales contracts and equipment leases with third
parties
entered into in the Ordinary Course of
Business and Liens for Taxes that are not due and payable or that
may thereafter be paid without penalty, which in the case of this
clause (ii) do not exceed $5,000 in the aggregate, (iii) Liens that
secure obligations that are reflected as liabilities on the Balance
Sheet or Liens the existence of which is referred to in the notes
to the Balance Sheet and set forth in Section 3.6 of the
Partnership Disclosure Schedule and (iv) other imperfections of
title or encumbrances, if any, that, individually or in the
aggregate, do not impair the continued use and operation of the
assets to which they relate in the conduct of the Business of the
Partnership as presently conducted (the Liens described in clauses
(ii) through (iv) above, together with the Liens referred to in
clauses (ii) through (v) of Section 3.7(a), are referred to
collectively as “Permitted Liens”).
(b)
This Section 3.6 does not relate to real
property or interests in real property, such items being the
subject of Section 3.7, or to Intellectual Property, such items
being the subject of Section 3.8.
Section
3.7 Real Property.
(a)
Section 3.7 of the Partnership Disclosure
Schedule sets forth a complete list of all real property and
interests in real property owned in fee by the Partnership
(individually, an “Owned Property”). Section 3.7 of the
Partnership Disclosure Schedule also sets forth a complete list of
all real property and interests in real property leased by the
Partnership or used by the Partnership and material to its Business
and not otherwise owned in fee (individually, a “Leased
Property”). The Partnership has good and marketable fee title
to all Owned Property and good and valid title to the leasehold
estates in all Leased Property (an Owned Property or Leased
Property being sometimes referred to herein, individually, as a
“Partnership Property”), in each case free and clear of
all Liens, except (i) the Liens described in clauses (ii) through
(iv) of Section 3.6 above, (ii) such Liens as are set forth in
Section 3.7 of the Partnership Disclosure Schedule, (iii) leases,
subleases and similar agreements set forth in Section 3.7 of the
Partnership Disclosure Schedule, (iv) easements, covenants,
rights-of-way and other similar restrictions of record, (v) (A)
zoning, building and other similar restrictions, (B) Liens that
have been placed by any developer, landlord or other third party on
property over which the Partnership has easement rights or on any
Leased Property and subordination or similar agreements relating
thereto and (C) unrecorded easements, covenants, rights-of-way and
other similar restrictions. None of the items set forth in clause
(v) above, individually or in the aggregate, impairs the continued
use and operation of the Partnership Property to which they relate
in the conduct of the Business of the Partnership as presently
conducted.
(b)
True and complete copies of (A) all
deeds, existing title insurance policies and surveys of or
pertaining to the Partnership Property and (B) all instruments,
agreements and other documents evidencing, creating or constituting
any Real Estate Encumbrance on Partnership Property have been
delivered to Purchaser.
Section
3.8 Intellectual Property. Section 3.8 of the Partnership Disclosure
Schedule sets forth a true and complete list of all material
Intellectual Property, owned, used, filed by or licensed to the
Partnership. The Intellectual Property set forth in Section 3.8 of
the Partnership Disclosure Schedule is referred to in this
Agreement as the “Partnership Intellectual Property.”
With respect to all Partnership Intellectual Property that is
registered or subject to an application
for registration, Section 3.8 of the
Partnership Disclosure Schedule sets forth a list of all
jurisdictions in which such Partnership Intellectual Property is
registered or registrations were applied for and all registration
and application numbers. Except as set forth in Section 3.8 of the
Partnership Disclosure Schedule, (i) all the Partnership
Intellectual Property has been duly registered in, filed in or
issued by the appropriate Governmental Entity where such
registration, filing or issuance is necessary or appropriate for
the conduct of the Business of the Partnership as presently
conducted, (ii) the Partnership is the sole and exclusive owner of,
and the Partnership has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative
works of and sublicense, without payment to any other Person, all
the Partnership Intellectual Property, and the consummation of the
Acquisition and the other transactions contemplated hereby does not
and will not conflict with, alter or impair any such rights and
(iii) during the past two years, the Partnership has not received
any written communication from any Person asserting any ownership
interest in or claiming any infringement by any Partnership
Intellectual Property.
Section
3.9 Contracts.
(a)
A true and complete copy of all Contracts
set forth in Section 3.9 of the Partnership Disclosure Schedule has
heretofore been made available to the Purchaser by the Partnership.
Except as set forth in Section 3.9 of the Partnership Disclosure
Schedule, the Partnership is not a party to or bound by
any:
(i)
covenant not to compete (other than
pursuant to any radius restriction contained in any lease,
reciprocal easement or development, construction, operating or
similar agreement) that limits the conduct of the Business of the
Partnership as presently conducted;
(ii)
Contract (other than this Agreement) with
(A) any of Sellers , Nonselling Partners, or any Affiliate of any
of said parties (other than the Partnership) or (B) any officer,
director or employee of the Partnership, any of Sellers ,
Nonselling Partners, or any Affiliate of any of said parties
;
(iii)
lease, sublease or similar Contract with
any Person (other than the Partnership) under which the Partnership
is a lessor or sublessor of, or makes available for use to any
Person (other than the Partnership), (A) any Partnership Property
or (B) any portion of any premises otherwise occupied by the
Partnership;
(iv)
license, sublicense, option or other
agreement relating in whole or in part to the Partnership
Intellectual Property (including any license or other agreement
under which the Partnership is licensee or licensor of any
Intellectual Property);
(v)
Contract under which the Partnership has
borrowed any money from, or issued any note, bond, debenture or
under which the Partnership has incurred Indebtedness to, any
Person (other than the Partnership) or any other note, bond,
debenture or other Indebtedness of the Partnership (other than in
favor of the Partnership) in any such case which, individually, is
in excess of $2,000;
(vi)
Contract (including any so-called
take-or-pay or keepwell agreements) under which (A) any Person
other than the Partnership, has directly or indirectly guaranteed
Indebtedness or Liabilities of the Partnership; (B) the Partnership
has directly or indirectly guaranteed Indebtedness or Liabilities
of any Person, other than the Partnership (in each case other than
endorsements for the purpose of collection in the Ordinary Course
of Business), in any such case which, individually, is in excess of
$2,000; or (C) the Partnership has agreed to indemnify any third
party;
(vii)
Contract under which the Partnership has,
directly or indirectly, made any advance, loan, extension of credit
or capital contribution to, or other investment in, a Person (other
than the Partnership and other than extensions of trade credit in
the Ordinary Course of Business), in any such case which,
individually, is in excess of $2,000;
(viii)
material Contract granting a Lien (other
than Permitted Liens) upon any Partnership Property or any other
asset owned by the Partnership;
(ix)
Contract for the sale of any asset of the
Partnership with a book value of $2,000 individually or $5,000 in
the aggregate (other than inventory sales in the Ordinary Course of
Business) or the grant of any preferential rights to purchase any
such asset or requiring the consent of any party to the transfer
thereof, other than any such Contract entered into in the Ordinary
Course of Business after the date of this Agreement and not in
violation of this Agreement;
(x)
Contract with or license or Permit by or
from any Governmental Entity;
(xi)
Contract for any joint venture,
partnership or similar arrangement;
(xii)
Contract providing for the services of
any dealer, distributor, sales representative, franchisee or
similar representative involving the payment or receipt over the
life of such Contract in excess of $5,000 by the
Partnership;
(xiii)
Contract that has an aggregate future
Liability to any Person (including the Partnership) in excess of
$5,000 and is not terminable by the Partnership by notice of not
more than 90 days for a cost of less than $1,000 (including
purchase orders and sales orders except purchase orders and sales
orders entered into in the Ordinary Course of Business after the
date of this Agreement and not in violation of this Agreement);
or
(xiv)
Contract other than as set forth
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