THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT OF HEALTH PLUS MANAGEMENT SERVICES, L.L.C., and STUART BLUMBERG
THIRD
AMENDMENT TO
MEMBERSHIP INTEREST PURCHASE AGREEMENT
OF
HEALTH PLUS MANAGEMENT SERVICES, L.L.C.,
and
XXXXXX XXXXXXXX
MEMBERSHIP INTEREST PURCHASE AGREEMENT
OF
HEALTH PLUS MANAGEMENT SERVICES, L.L.C.,
and
XXXXXX XXXXXXXX
THIS
THIRD AMENDMENT (“Amendment”)
dated
as of August 7, 2006, by and among BASIC CARE NETWORKS, INC., a Delaware
corporation (the “Purchaser”),
HEALTH PLUS MANAGEMENT SERVICES, LLC, a New York limited liability company
(the
“Company”),
and
XXXXXX XXXXXXXX (“Xxxxxxxx”
or
the
“Principal”),
is an
amendment to that certain Membership Interest Purchase Agreement dated November
18, 2005 by and among the Buyer and Seller (the “Agreement”).
WHEREAS,
the parties desire to increase the Purchase Price in Section 2.1(a) of the
Agreement by $100,000, to compensate the Principal for certain construction
costs borne by the Principal during the extended period prior to
Closing;
WHEREAS,
the parties deem it desirable to change the Annualized Earn-Out Period to
January 1, 2006 through June 30, 2006;
WHEREAS,
the parties wish to extend the deadline for effectiveness under Section 5.10
of
the Agreement;
WHEREAS,
the parties also deem it desireable to make certain other adjustments to the
purchase price provision in the Agreement.
THE
PARTIES HEREBY AGREE AS FOLLOWS:
1.
The
parties mutually agree that Section 5.10 of the Agreement is hereby amended
and
restated to read in its entirety as follows:
“5.10
Registration
Statement Effective.
The
Registration Statement (as defined in Section 7.6, below) shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC
(as defined in Section 7.6, below); provided, however, that in the event the
Registration Statement (i) has not been filed on or before March 15, 2006,
or
(ii) has not become effective on or before October 16, 2006, the Principal
shall
have the right, in its sole discretion, to terminate this Agreement without
cost
or penalty.”
2.
Section
2.1 of the Agreement is hereby amended and restated to read in its entirety
as
follows:
“Section
2.1 Purchase
Price.
Subject
to the terms of this Agreement, as full consideration for the sale, assignment,
transfer and delivery of the Purchased Interests and the execution and delivery
of the agreements referenced herein, the Purchaser shall deliver to Principal
the following aggregate consideration of (the “Purchase
Price”):
(a)
TWELVE MILLION, ONE HUNDRED THIRTY-TWO THOUSAND, THREE HUNDRED AND FIFTY-SIX
DOLLARS ($12,132,356) (the “Unadjusted
Closing Cash Amount”),
less
an
amount equal to the accrued employee bonus compensation payable by the Company,
in an amount to be determined by the Principal, on behalf of the Company, on
or
prior to the Closing Date (the “Employee
Bonus Amount”),
which
Employee Bonus Amount shall be an assumed liability of the Purchaser hereunder
(the Unadjusted Closing Cash Amount, less the Employee Bonus Amount, shall
be
referred to herein as the “Closing
Cash Amount”).
At
the Closing, the Principal shall inform the Purchaser of the specific amount
of
the Employee Bonus Amount, which shall be paid by the Purchaser in accordance
with instructions provided by the Principal at or prior to the
Closing.
(b)
The
Closing Cash Amount shall be paid by the Purchaser at the Closing as follows:
(i) first,
to
Health Management Corporation of America (“HMCA”),
an
amount equal to all principal and accrued interest, if any, owed by the Company
under that certain promissory note, dated July 28, 2005 between the Company,
as
Maker, and HMCA, as Payee (the “HMCA
Note Amount”),
by
wire transfer of immediately available U.S. funds, to an account designated
in
writing by HCMA at or prior to the Closing; and (ii) second,
to
Principal, an amount equal to the Closing Cash Amount, less the HMCA Note
Amount, by
wire
transfer of immediately available U.S. funds,
to an
account designated in writing by Principal at or prior to the
Closing.
(c)
In
addition to the foregoing, and subject to the remaining terms of this
subparagraph, a promissory note (the “Promissory
Note”)
will
be issued (if applicable) within three (3) business days following the Closing
in the form attached as Exhibit
I
in the
principal amount equal to: three (3) times the excess, if any, of (i) Adjusted
EBITDA for the annualized period of January 1, 2006 through June 30, 2006
(unaudited) (the “Annualized
Earn-Out Period”),
over
(ii) Two Million, Nine Hundred and Eighty-Three Thousand, Eighty-Nine Dollars
($2,983,089) (the “Base
Year Amount”),
provided,
however
that notwithstanding the foregoing,
| (A) |
the
principal amount of the Promissory Note to be issued hereunder shall
not
exceed $2,000,000;
|
| (B) |
the
Employee Bonus Amount shall not be considered as an expense to be
taken
into account in determining Adjusted EBITDA (and thus shall be added
back
to reach Adjusted EBITDA) in all determinations of Adjusted EBITDA
under
this Agreement and all other agreements entered into in connection
with
the transactions contemplated hereby;
and
|
| (C) |
any
amount in excess of $100,000 in any given year paid to Xxxxxx Xxxxxxxx
as
compensation (including salary, bonuses or other forms of compensation)
for acting as President and Chief Operating Officer (or any position
with
similar responsibilities) of the Purchaser shall not be treated as
an
expense to be taken into account in determining Adjusted EBITDA (and
thus
shall be added back to reach Adjusted EBITDA) in all determinations
of
Adjusted EBITDA under this Agreement and all other agreements entered
into
in connection with the transactions contemplated hereby.
|
For
clarity, the parties acknowledge that (i) if Adjusted EBITDA for the Annualized
Earn-Out Period does not exceed the Base Year Amount, no Promissory Note shall
be issued pursuant to this Section, and (ii) if, for example, Adjusted EBITDA
for the Annualized Earn-Out Period exceeds the Base Year Amount by $500,000,
the
Promissory Note shall be issued in the principal face amount of $1,500,000
(i.e.,
$500,000 x 3 = $1,500,000).
(d)
The
parties acknowledge and agree that, in the event the Promissory Note is issued
but not paid, or in the event the Purchaser commits a material default under
the
Promissory Note which is not cured within the applicable cure period, and in
addition to any of the remedies available to the Company and Principal,
including, without limitation, any action for breach hereunder and under the
Promissory Note, (i) the Non-Competition Agreement between Principal and the
Company shall automatically terminate and be of no further force or effect,
and
(ii) at Principal’s option, the Consulting Agreement between Principal and the
Company shall automatically terminate and be of no further force or effect,
in
which event Principal shall give the Company written notice of such
termination.
Upon
issuance of the Promissory Note, interest on unpaid principal under the
Promissory Note shall accrue at the simple rate of six percent (6%) per annum
from and after the date of issuance. Any and all accrued interest under the
Promissory Note shall be due and payable six (6) months after the date of
issuance of the Promissory Note, with the remainder of all outstanding accrued
interest and principal under the Promissory Note due and payable eleven (11)
months after the date of issuance of said Promissory Note, but no later than
June 30, 2007. For purposes of this Agreement, “Adjusted EBITDA” shall mean
earnings of the Purchaser derived from the P.C.s before taxes, interest,
depreciation and amortization, determined in accordance with GAAP on an accrual
basis by the Company’s independent auditor, adjusted as follows:
|
(1)
neither
the proceeds from nor any dividends or refunds with respect to, nor
any
increases in the cash surrender value of, any life insurance policy
under
which the Purchaser or the P.C.s, is the named beneficiary or is
otherwise
entitled to recovery, shall be included as income, and the premium
expense
related to any such life insurance policy shall not be treated as
an
expense;
|
|
(2)
the
Employee Bonus Amount shall not be treated as an expense, and thus
shall
be added back to reach Adjusted EBITDA;
and
|
|
(3)
any
extraordinary or unusual gains or losses and any gains or losses
from the
sale of any capital assets used by the Purchaser or the P.C.s or
any
subsidiary thereof in its operations during the applicable twelve-month
periods under comparison (as opposed to assets acquired in the ordinary
course of the business of the Purchaser, the P.C.s and its subsidiaries
for resale or other disposition) shall be excluded from
income.”
|
[Remainder
of Page Left Blank Intentionally]
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment, on the day
and
year first above written.
| PURCHASER: | BASIC CARE NETWORKS, INC. | |
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxxx | |
|
Name:
Xxxxxx Xxxxxxxx
Title:
Chief Executive Officer
|
||
| PRINCIPAL: | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxxx | |
|
Xxxxxx
Xxxxxxxx
|
||
| COMPANY: | HEALTH PLUS MANAGEMENT SERVICES, L.L.C. | |
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxxx | |
|
Name: Xxxxxx Xxxxxxxx |
||
| Title: | ||
