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Exhibit
10.1
MUTUAL SETTLEMENT
AGREEMENT AND GENERAL RELEASE
This Mutual Settlement
Agreement and General Release (“Settlement Agreement”)
is entered into as of February 1, 2008 (“Effective
Date”) by and between PainCare Holdings, Inc., a Florida
corporation (“ PainCare ”), and PainCare, Inc.,
a Nevada corporation and a wholly owned subsidiary of PainCare
(“ Subsidiary ”) (jointly referred to as the
“ Seller ”), and Benjamin Zolper, M.D., an
individual (the “ Buyer ”). The parties to this
Settlement Agreement are sometimes individually referred to herein
as a “Party” or collectively, as the
“Parties.”
RECITALS
| A. |
On or about July 1, 2004, the Parties effected a series of
purchase and sale related transactions (collectively the
“Acquisition”); |
| B. |
The Parties are mutually desirous to terminate, cancel, and
unwind the above Acquisition (the
“Termination”); |
| C. |
The Parties are mutually desirous that Buyer shall repurchase
from Seller the business and medical practice of Benjamin Zolper,
M.D., Inc., a Florida “C” corporation, doing business
as NorthEast Pain Management (“ NEPM
”); |
| D. |
The Parties are mutually desirous to settle and resolve all
potential claims, legal actions, judgments, disputes, claims,
causes of action, and appeals against each other, known or unknown,
by entering into this Settlement Agreement; and |
| E. |
The Parties are mutually desirous that this Settlement
Agreement shall lawfully: (i) sever the various business
relationships between the Parties created by the Acquisition;
(ii) terminate all agreements linking those Parties together;
(iii) provide for an orderly and amicable separation of the
Parties; (iv) compromise and settle all disputes between the
Parties; (v) transfer the Stock along with certain assets and
liabilities constituting NEPM from Seller to the Buyer; and
(vi) transfer certain Consideration from the Buyer to the
Seller. |
SETTLEMENT
AGREEMENT
NOW THEREFORE, in consideration of the
foregoing recitals and the mutual covenants and representations
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties to this Settlement Agreement agree as follows:
| 1. |
Termination of Acquisition. The Parties hereby
terminate and cancel all agreements constituting and comprising the
Acquisition entered into on or about July 1, 2004 between
PainCare and its related entities and Dr. Zolper and his
related entity. This termination includes but is not limited to the
following transactions and related documents: |
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1.1 |
The Merger Agreement and Plan of Reorganization (the
“Merger Agreement”) by and between PainCare
Holdings, Inc., a Florida corporation (“PainCare”),
PainCare Acquisition Company XIV, Inc., a Florida corporation
(“Subsidiary”), sometimes jointly referred to as the
“Acquiring Companies”; and Ben Zolper, M.D., L.L.C., a
Maine limited liability company (“Company”), and Ben
Zolper, M.D., an individual (“Dr. Zolper”), dated on or
about July 1, 2004, and all Addendums; |
Page 1 of 21
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1.2 |
The Physician Employment Agreement (“Employment
Agreement”) by and between NEPM (as the
“Employer”), and Ben Zolper, M.D., (as the
“Employee”), dated on or about July 1, 2004;
and |
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1.3 |
All Other Agreements, Documents, and Ancillary Schedules and
Exhibits by and between PainCare, Subsidiary, and Buyer entered
into on or about July 1, 2004, and thereafter. |
| 2. |
Medical Practice Location. This Settlement
Agreement involves the operation of that certain business and
medical practice located at 1365 Broadway, Bangor, Maine 04401 (the
“Business Location”); |
| 3. |
Transfer of All NEPM Stock to Buyer. As of the
Closing Date, Buyer shall purchase, and Seller shall sell,
transfer, convey, assign, and deliver to Buyer all right, title,
and interest to all of the issued and outstanding shares of stock
(“Stock”) in NEPM (See the “Stock Purchase
Agreement”, attached hereto as “ EXHIBIT A
”). As a result of this Stock Purchase Agreement, Buyer shall
own all issued and outstanding stock in NEPM at Closing. In order
to facilitate and memorialize the lawful transfer of NEPM Stock,
the Parties shall simultaneously enter into the assignment of Stock
Certificate and Stock Power, attached hereto as EXHIBIT
“B” . Seller further agrees that it shall execute
such further instruments as customary and reasonable to transfer
all of the stock ownership in NEPM aforementioned to Buyer, and to
take such other actions as may be reasonably required to effect the
stock ownership transfer contemplated herein; |
| 4. |
Termination of Related Agreements to Merger
Agreement. Simultaneous with the NEPM stock transfer to
Buyer, Seller and NEPM shall mutually terminate the following
agreements: |
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4.1 |
All agreements related to the Merger Agreement, written or
oral, among the Parties shall be terminated as of the Closing Date
pursuant to that certain Termination Agreement attached hereto as
EXHIBIT “C” ( the “Termination
Agreement”), and no Party thereto shall have any obligation
or responsibility to any other Party thereto under the terms of any
such agreements on or after the Closing Date; and |
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4.2 |
In connection with the termination of the foregoing agreements,
the Parties are hereby deemed to have waived any applicable
termination provisions contained in such agreements or any and all
other conditions (including, but not limited to, any conditions
precedent or conditions subsequent) to the termination
thereof. |
Page 2 of 21
| 5. |
Assets and Liabilities of NEPM. Except as stated
below, all Assets and all Liabilities of NEPM are held within the
corporate entity of NEPM, and therefore all such Assets and
Liabilities shall be transferred simultaneously with the transfer
of the NEPM Stock to Buyer and upon the Closing, Seller shall not
be responsible for nor shall it have any obligation to pay any such
Liabilities. The Assets and Liabilities of NEPM are more fully
described in COMPOSITE EXHIBIT “D” attached
hereto and by this reference incorporated herein. |
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5.1 |
Assets of NEPM Defined. For purposes of this Settlement
Agreement, the Parties hereby confirm that the assets of NEPM shall
generally mean all of NEPM’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, held, acquired, or
developed by NEPM, or otherwise. To be certain, this includes, but
is not limited to, all cash, cash equivalents, bank deposits, bank
accounts, accounts receivables (Medicare and Non-Medicare),
securities, short term investments, work in progress, and all other
assets which are used, held for use, acquired for use, or developed
for use, in connection with NEPM’s business. Furthermore, the
term “Asset”, of NEPM shall be interpreted to the
fullest extent permitted by law, as more fully described in
NEPM’s financial statements (the “Financial
Statements”) attached hereto as EXHIBIT
“K.” In addition, this includes all non-medical
assets of NEPM. Sellers shall immediately stop sweeping
NEPM’s Accounts Receivable and other deposits on
January 29, 2008 except such amounts as may be necessary to
pay NEPM’s payroll and related taxes due January 30,
2008. All monies swept prior to January 29, 2008 shall be the
sole and exclusive property of the Seller; |
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5.2 |
Excluded Assets . – Section 5.1
notwithstanding, the Seller is not selling, transferring,
assigning, conveying or delivering to the Buyer or NEPM, and the
Buyer and NEPM are not acquiring any of the following assets
(collectively, the “Excluded Assets”): |
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i. |
Tax Credits and Records . Federal, state and local
income and other tax credits and tax refund claims and associated
returns and records, provided the Buyer shall have reasonable
access to such records to the extent reasonably necessary for the
Buyer’s own tax planning or returns. |
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ii. |
Business Documents . General accounting records,
correspondence, policies, procedures, reports, data, the financial
statements and records of the Seller and NEPM and any other
documents not deemed part of the Assets. |
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iii. |
Equipment . That certain Equipment set forth in
EXHIBIT 5.2iii attached hereto and incorporated herein by
reference (the “Excluded Equipment”). The parties
hereby agree that Seller, at Seller’s expense, will arrange
with
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Page 3 of 21
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Buyer for the pick-up of
the Excluded Equipment at the Business Location within 120 days of
the Closing (the “Pick-up Time”). In addition, the
Buyer agrees to provide access to the Location at the Pick-up Time
for purposes of removing the Excluded Equipment and in connection
therewith, will cooperate in good faith and will provide all
reasonable assistance necessary to allow for the removal of the
Excluded Equipment. The Buyer hereby represents and warrants that,
to the best of his knowledge and belief, the Excluded Equipment has
not been damaged and will, at the Pick-up Time, be in good working
order, normal wear and tear excepted. Buyer shall not be liable or
responsible for Excluded Assets or the preservation or maintenance
of same after Closing, except for gross negligent, intentional or
willful acts or omissions to act.
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5.3 |
Liability of NEPM Defined . For purposes of this
Settlement Agreement, and except as provided below, the Parties
hereby confirm that the liability of NEPM shall generally mean all
indebtedness, guaranty, endorsement, claim, contract, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, secured or
unsecured, all of NEPM’s unpaid accounts payable,
indebtedness or other obligations to equipment lessors (whether
such leases are operating leases, capital leases, or other leases),
debts, salary, wages, employee benefit obligations, paid time off
obligations, and other obligations of NEPM set forth in
COMPOSITE EXHIBIT “D” and NEPM’s Financial
Statements aforementioned. Furthermore, the term
“Liability” shall specifically include the following
matters: (i) The real property lease of the Business Location
described in paragraph 2 above; (ii) All agreements for
employment for clinical and professional staff of NEPM;
(iii) All compensation and benefits for current staff not
under an employment agreement; (iv) the 401(k) payments for
December 2007 and thereafter, and (v) all bonuses due and
owing including the bonus due Dr. Thompson in the amount of
$28,000. |
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5.4 |
Excluded Liability . For purposes of this Settlement
Agreement, Seller shall be liable for paying (and Seller hereby
assumes the liability with respect to) NEPM’s payroll due on
January 30, 2008, equal to approximately $$54,276.80. In
addition, Seller shall be liable for paying (and Seller hereby
assumes the liability with respects to) the “Deferred Tax
Liability” of $34,361, under “Long Term
Liabilities” of NEPM’s Financial Statements (Balance
Statement) ending on December 31, 2007. In all other
instances, Seller shall cease paying all of NEPM’s Accounts
Payable as of January 25, 2008. |
| 6. |
Purchase Price . In exchange for the
Seller’s transfer of NEPM Stock to Buyer and the termination
of the Merger Agreement and other related documents between Seller
and NEPM, the Buyer shall pay Seller the Purchase Price equal to
the sum of the Cash Consideration stated below, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged. |
Page 4 of 21
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6.1 |
Cash Consideration. Unless otherwise notified in writing
by PainCare and HBK (as defined below), Buyer shall pay the sum
certain of Four Hundred Seventy-Five Thousand Dollars ($$475,000),
payable in four installments as follows: Buyer shall pay $300,000
at Closing (the “Cash Due at Closing”), by wire
transfer in accordance with the Closing Statement attached hereto
as EXHIBIT “E” ; and the balance of $$175,000
shall be paid by wire transfer in accordance with instructions to
be given by HBK Investments, LP, a Delaware limited partnership
(“HBK”) to HBK, on behalf of PainCare, to be credited
to PainCare’s loan obligation to HBK, as provided in that
certain Loan and Security Agreement, dated as of May 10, 2005,
and entered into by and between PainCare and HBK, among others
(hereinafter referred to sometimes as the “HBK Debt” or
“HBK Loan Agreement”) in three (3) consecutive
monthly installments of $59,308.24 (the “Installment
Payments”)(the Cash Due at Closing and the Installment
Payments shall collectively be referred to as the “Cash
Consideration”). The obligation to pay the Installment
Payments shall be evidenced by a Purchase Money Promissory Note
(“Note”) in favor of Seller and payment shall be
secured in the event of a default by all Assets of NEPM, including
all Accounts Receivable of NEPM. Buyer shall pay the Cash
Consideration in accordance with the terms of the Closing Statement
and wire transfer instructions given to Buyer by HBK on behalf of
PainCare, attached hereto as EXHIBIT “E.” In
addition, Buyer shall have deposited into the bank account of NEPM
$27,712.46 on Friday January 25, 2008, and $54,276.80 on or
before Tuesday, January 29, 2008. The above two bank deposits
shall be the sole and absolute property of the Seller, except that
Seller shall use such amounts as may be necessary to pay the
payroll and related taxes of NEPM. In the event the above two bank
deposits are paid, and Seller fails to timely pay the payroll above
due on January 30, 2008, then Buyer shall reduce the Cash Due
at Closing due at Closing by the amount unpaid above. |
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6.2 |
Wire Transfer. Buyer shall transfer by wire transfer in
immediate available funds the net cash amount equal to the above
Cash Due at Closing of Three Hundred Thousand Dollars ($300,000)
(the “Cash Due At Closing”), in accordance with the
instructions provided on the Closing Statement; |
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6.3 |
Note. Buyer shall enter into that certain Note in favor
of Seller, in substantially the same form as attached hereto as
EXHIBIT “F” (the “Note”). The Note
shall provide for the payment of One Hundred Seventy-Five Thousand
Dollars ($175,000), accruing interest at 10% simple per annum, all
principal and interest payable over three (3) consecutive
months, in equal installments of $$59,308.24 per month, commencing
on March 1, 2008; |
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6.4 |
Security Agreement. The Parties shall enter into a
Security Agreement in substantially the same form as attached
hereto as EXHIBIT “G” (the “Security
Agreement”) pursuant to which Seller shall have a security
interest in all of NEPM’s Assets, including all of
NEPM’s Accounts Receivable and any proceeds from the
collection of NEPM’s Accounts Receivable, until such time as
all amounts due hereunder have been paid in full. Seller shall file
or cause to be filed a UCC-1 financing statements to perfect
Sellers’ security interest in all of NEPM’s Assets
aforementioned; |
Page 5 of 21
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6.5 |
Sale of PainCare Stock. Buyer owns 233,334 shares of
PainCare Stock and Buyer agrees not to sell, assign, or transfer
the PainCare Stock unless instructed to do so by Seller. The sale
of the PainCare Stock is to be arranged by a broker selected by
Seller (the “Broker”). At the Closing, the Buyer will
execute and deliver all documents necessary (the “Broker
Documents”) to open and transfer the PainCare Stock to his
account at the Broker and in connection therewith will deliver to
the Broker, as instructed, the PainCare Stock. The Buyer represents
and warrants to the Seller that the PainCare Stock constitutes all
of the shares of PainCare stock owned by the Buyer immediately
prior to Closing. Commencing upon receipt of the PainCare Stock,
and as the Buyer shall instruct in writing, Broker shall arrange
for the sale of the PainCare Stock, the net proceeds (gross sale
proceeds less commissions) of which will be promptly paid (and in
all cases within 5 days of the sale) to, unless otherwise notified
in writing by HBK and PainCare, HBK on behalf of PainCare, to be
credited to the HBK Debt as follows: (i) Broker will attempt
to sell the PainCare Stock, as requested by PainCare, at any price,
which shall be the highest price Broker can obtain for the PainCare
Stock, at that time, the net proceeds (gross sale proceeds, less
commissions) of which shall be promptly paid (and in all cases
within five (5) dates of the sale) to, unless otherwise
notified in writing by HBK and PainCare, HBK on behalf of PainCare,
to be credited to the HBK Debt. The Parties will enter into a
pledge agreement in substantially the same form as attached hereto
as “ EXHIBIT H ” (the Pledge Agreement”)
pursuant to which the Seller shall have a security interest in the
PainCare Stock, until such time as the PainCare Stock have been
sold, and the proceeds have been paid to Seller, as provided
herein). For avoidance of doubt, the Parties acknowledge and agree
that (i) the Buyer is not guaranteeing any particular price or
amount of proceeds resulting from the sale of the PainCare Stock,
and (ii) no further performance or other obligations other
than as provided herein shall exist on the part of the Buyer with
respect to the PainCare Stock after the Closing. All PainCare
options, if any, are hereby cancelled. |
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7.1 |
Buyers’ General Release . In consideration of
(i) the releases given by Seller, (ii) the agreement of
PainCare to terminate the Merger Agreement and all other related
agreements, (iii) the agreement of Seller to sell the NEPM
Stock to Buyer, and (iv) other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Buyer shall enter into that certain General
Release in favor of Seller attached hereto as EXHIBIT
“I” ; |
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7.2 |
PainCare’s General Release . In consideration of
(i) the releases given by the Buyer, (ii) the agreement
of the Buyer to terminate the Merger Agreement and all other
related agreements, (iii) the agreement of Buyer to buy the
NEPM Stock, and (iv) other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Seller shall enter into that certain General Release in favor of
the Buyer and NEPM attached hereto as EXHIBIT
“J” ; and |
Page 6 of 21
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7.3 |
Seller shall cause HBK and any of its related entities to
effect, and HBK shall effect full, unconditional, and absolute
releases of all liens of any kind whatsoever on NEPM’s stock,
and on all of NEPM’s assets, including, but not limited to,
NEPM’s Accounts Receivable, as of the Closing
Date. |
| 8. |
Representations and Warranties by the Buyer . The
Buyer represents, warrants and covenants to Seller as
follows: |
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8.1 |
The statements made by the Buyer in this Section are and will
be correct and complete as of the Closing Date; |
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8.2 |
The Buyer has the full power and authority to execute, deliver
and perform this Settlement Agreement and the Settlement Documents
related thereto; |
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8.3 |
This Settlement Agreement and the Settlement Documents to be
executed and delivered by Buyer constitute the legal, valid and
binding obligations of the Buyer, enforceable against the Buyer,
subject to bankruptcy, insolvency, moratorium, reorganization and
similar laws of general applicability affecting the rights and
remedies of creditors and to general principles of equity,
regardless of whether enforcement is sought in proceedings in
equity or at law; |
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8.4 |
The execution and delivery by the Buyer of this Settlement
Agreement and the Settlement Documents, and the fulfillment of and
compliance with this respective terms by the Buyer does not and
will not (i) conflict with or result in a breach of the terms,
conditions, or provisions of, (ii) constitute a default or
event of default under, (iii) give any third party the right
to accelerate any obligation under, (iv) result in a violation
of, or (v) require any authorization, consent, approval
exemption or other action by or notice to any court or governmental
authority pursuant to, the articles of incorporation or bylaws or
any regulation, order or contract to which the Buyer is
subject; |
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8.5 |
The Buyer has not employed any broker, finder, advisor,
consultant or other intermediary in connection with this Settlement
Agreement or Settlement Documents, or any other transaction
contemplated hereby who is or might be entitled to any fee,
commission or other compensation from PainCare upon or as a result
of the execution of this Settlement Agreement or Settlement
Documents, or the consummation of the transactions contemplated
hereby; and |
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8.6 |
During the period that any amount due under the Note remains
outstanding, the Buyer shall not enter into any transaction in
which all or substantially all of the Assets of NEPM, including
NEPM’s Accounts Receivable, are pledged, transferred,
assigned, sold or otherwise encumbered to or for the benefit of any
person or entity, without Seller’s written
consent. |
Page 7 of 21
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8.7 |
The Buyer is not aware of any pending or threatened claims
which would affect Buyer’s ability to perform under this
Settlement Agreement. Buyer further represents and warrants that it
is not aware of any pending or threatened voluntary or involuntary
bankruptcy petition relative to Buyer. |
| 9. |
Representations and Warranties by Seller . The
Seller represents and warrants to the Buyer as follows: |
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9.1 |
The statements made by the Seller in this Section are and will
be correct and complete as of the Closing Date; |
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9.2 |
Each of the Sellers (PainCare and Subsidiary) is a corporation,
validly existing and in good standing under the laws of the State
in which they are domiciled; |
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9.3 |
This Settlement Agreement and the Settlement Documents to be
executed and delivered by the Seller have been duly approved by all
requisite action of the Seller and they have full power and
authority to execute, deliver and perform this Settlement
Agreement, together with all of the Settlement Documents to be
executed and delivered by them; |
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9.4 |
The Subsidiary has lawful title to all of the NEPM Stock and
will transfer same to Buyer free and clear of all claims, liens or
encumbrances; |
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9.5 |
The Subsidiary owns, has not assigned, and has the full right
to sell all of the NEPM Assets, free and clear of any claim, lien,
encumbrance, option to purchase by, or other rights of any third
person arising by, through or under any Seller, and any imposed by
any prior or current agreements to which any Buyer is a party other
than that certain lien imposed pursuant to the HBK Debt, which will
be released prior to or simultaneously with Closing (as defined
below); |
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