Purchase Agreement for Sale of Units in Tuscarawas Ambulatory Surgery Center, L.L.C. by Orion HealthCorp, Inc., Selling Investors, and Union Hospital

Summary

This agreement, dated September 30, 2005, is between Tuscarawas Ambulatory Surgery Center, L.L.C. (TASC), Orion HealthCorp, Inc., several physician investors, and Union Hospital. The Sellers (Orion and the physicians) agree to sell a total of 70% of TASC's ownership units to Union Hospital for a set price per unit. The agreement outlines payment terms, delivery of units, and mutual indemnification obligations. The transaction is subject to certain closing conditions and legal compliance, including securities law restrictions on resale of the units.

EX-2.1 2 a4990076ex211.txt EXHIBIT 2.1 PART 1 Exhibit 2.1(1) PURCHASE AGREEMENT RELATING TO TUSCARAWAS AMBULATORY SURGERY CENTER, L.L.C. THIS PURCHASE AGREEMENT is made as of September 30, 2005 by and among TUSCARAWAS AMBULATORY SURGERY CENTER, L.L.C., an Ohio limited liability company ("TASC"), ORION HEALTHCORP, INC. (formerly known as SurgiCare, Inc.), a Delaware corporation ("ORION"), each of the undersigned physicians identified on the signature page hereof (the "SELLING INVESTORS" and together with Orion, the "SELLERS"), and UNION HOSPITAL, an Ohio nonprofit corporation (the "PURCHASER"). WITNESSETH: WHEREAS, the Sellers own units in TASC, which is organized as an Ohio limited liability corporation, with authority to issue units to evidence ownership of TASC, all pursuant to its Operating Agreement dated May 1, 1998, as amended by that certain First Amendment effective May 31, 2002 (the "OPERATING AGREEMENT"); and WHEREAS, the Selling Investors will collectively sell 19% of the units to the Purchaser and Orion will sell 51% of the units to the Purchaser, such that upon the Closing Date (as defined below) the Purchaser will own 70% of the units of TASC (collectively, the "UNITS"); and NOW, THEREFORE, it is mutually understood, agreed and represented as follows: ARTICLE 1 TRANSACTION TERMS 1.1 SALE. The Sellers agree to sell, and the Purchaser agrees to buy, the Units at a price of $12,666.67 per Unit, and each of the Selling Investors shall sell such amount of his or her Units to the Purchaser as is set forth on the signature page hereof. 1.2 PAYMENT AND DELIVERY. The purchase price for the Units, shall be paid by the Purchaser (as set forth in SECTION 2.3 below). At the Closing, the Units being sold shall be delivered by the Sellers to TASC, which shall then re-issue them to the Purchaser. 1.3 AGREEMENT TO INDEMNIFY. a. The Purchaser agrees to indemnify and hold harmless the Sellers from any and all damages, losses, costs, and expenses (including reasonable attorneys' fees) that any one Seller may incur (i) by reason of the Purchaser's failure to fulfill any of the terms and conditions of this Agreement, or (ii) by reason of breach of any of the Purchaser's representations, warranties, or agreements contained herein. The Purchaser further agrees and acknowledges that these indemnifications shall survive any sale or transfer, or attempted sale or transfer, of any portion of the Units. b. Each Seller agrees to indemnify severally (and not jointly and severally) and hold harmless the Purchaser from any and all damages, losses, costs, and expenses (including reasonable attorneys' fees) that it may incur (i) by reason of the Seller's failure to fulfill any of the terms and conditions of this Agreement, and (ii) by reason of breach of any of the Seller's representations, warranties, or agreements contained herein. Each Seller further agrees and acknowledges that these indemnifications shall survive any sale or transfer, or attempted sale or transfer, of any portion of the Units. 1.4 ACKNOWLEDGEMENTS. The Purchaser agrees, acknowledges and understands that: a. No federal or state agency has made any finding or determination as to the fairness of the sale of the Units for investment or any recommendation or endorsement of the Units. b. The Units have not been registered under the Securities Act of 1933, as amended, or any similar law then in effect (the "SECURITIES ACT") and, therefore, Purchaser bears the economic risk of the investment indefinitely because the Units may not be sold unless subsequently registered under the Act or an exemption from such registration is available; registration under the Act is extremely unlikely at any time in the future and the Sellers have not represented or covenanted to take any action necessary to make available any rules or any exemption for sale of the Units without registration. c. Neither the Units nor this Agreement has been registered under the securities laws of any state. The Purchaser agrees that a legend to the foregoing effect may be placed upon any and all certificates and other documents issued to represent the Units. d. To prevent the illegal sale of the Units, TASC will not recognize the transfer of the Units on its records unless sold pursuant to an effective registration statement, pursuant to an exemption under the Act, or in accordance with the Operating Agreement. ARTICLE 2 CLOSING 2.1 THE CLOSING. The consummation of the transactions contemplated by this Agreement (the "CLOSING") shall take place at the offices of Miller & Kyler commencing at 9:00 a.m. local time on the date of this Agreement, or such other place and date as is agreed to by the parties hereto. Following the satisfaction or waiver of all conditions to the obligations of the parties hereto to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective parties hereto will take at the Closing itself), the transactions contemplated by this Agreement to occur upon Closing shall be effective as of 12:01 a.m. on October 1, 2005 (the "CLOSING DATE"). 2.2 DELIVERIES BY SELLERS AND TASC AT THE CLOSING. At the Closing, Sellers will deliver to Purchaser, duly executed by Sellers where appropriate: -2- a. Original certificates evidencing the good standing of TASC, issued as of a recent date prior to the Closing Date, by the Secretary of State of Ohio; b. A release agreement in substantially the form attached hereto at EXHIBIT A (the "RELEASE AGREEMENT"); and c. Such other instruments of title, certificates, consents, endorsements, assignments, assumptions and other documents or instruments, in a form reasonably satisfactory to the Purchaser and its counsel, as set forth herein or as may be reasonably requested by the Purchaser in order to transfer the Units to the Purchaser, to carry out the transaction contemplated by this Agreement and to comply with the terms hereof. 2.3 CLOSING DELIVERIES OF THE PURCHASER. At the Closing, the Purchaser will deliver to Sellers, duly executed by Purchaser where appropriate: a. Payment of seventy percent (70%) of the purchase price payable to Orion in the amount set forth on the signature page hereof in immediately available funds; b. A note payable to Orion for the remaining thirty percent (30%) of the purchase price payable to Orion in the amount set forth on the signature page hereof, in substantially the form attached hereto at EXHIBIT B (the "HOSPITAL NOTE"); c. Payment of 100% of the purchase price to each of the Selling Investors in the amount set forth on the signature page hereof, such amount to be by cashier's or certified check; d. Original Certificate evidencing the good standing of the Purchaser issued as of a recent date prior to the Closing Date by the Secretary of State of Ohio; e. the Release Agreement; and f. Such other instruments, certificates, consents or other documents as set forth herein or as may be reasonably necessary to carry out the transactions contemplated hereby. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 PURCHASER'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. The Purchaser represents, warrants, and covenants to the Sellers that as of the date hereof and the Closing Date: a. The Purchaser is acquiring the Units for the Purchaser's own account, solely for investment, and not with a view to resale or distribution. b. The Purchaser is acquiring the Units without having been furnished any offering literature or prospectus. -3- c. The Purchaser and/or the Purchaser's advisors have received all documents that the Purchaser has requested relating to an investment in TASC and has provided answers to all of the Purchaser's questions concerning such an investment. In evaluating the suitability of an investment in TASC, the Purchaser has not relied upon any representations or other information (whether oral or written) other than those contained in documents executed by Sellers. d. The execution, delivery and performance of this Agreement are within the powers of the Purchaser, have been duly authorized by all necessary action, and do not and will not (i) violate any provision of the governing documents of the Purchaser or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Purchaser; (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority or any other third party; or (iii) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Purchaser pursuant to, any indenture or other agreement or instrument under which the Purchaser is a party hereto or by which it or its properties may be bound or affected. This Agreement constitutes the legal, valid and binding obligation of the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally. 3.2 SELLERS' REPRESENTATIONS, WARRANTIES, AND COVENANTS. Each Seller, as applicable, represents, warrants, and covenants severally (and not jointly and severally) to the Purchaser that as of the date hereof and the Closing Date (it being understood and agreed that none of the Selling Investors but only Orion makes the representation and warranty in Section 3.2.c.): a. He, she or it has good and marketable title to the Units being sold to the Purchaser, subject to no encumbrance or restraint on transfer, except as set forth in the Operating Agreement and the securities laws of Ohio and the Securities Act. b. The execution, delivery and performance of this Agreement are within the powers of each Seller, have been duly authorized by all necessary action, and this Agreement constitutes the legal, valid and binding obligation of each Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally c. The execution, delivery and performance of this Agreement by Orion does not and will not (i) violate any provision of the governing documents of Orion or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Orion; (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority by Orion; or (iii) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of Orion pursuant to, any indenture or other agreement or instrument under which Orion is a party hereto or by which it or its properties may be bound or affected. -4- 3.3 TASC'S REPRESENTATIONS AND WARRANTIES. In order to induce the Purchaser to purchase the Units as provided herein, TASC represents and warrants to the Purchaser as follows as of the Closing Date: a. ORGANIZATION. TASC is a limited liability company duly organized and existing in good standing or active status under the laws of the State of Ohio, and has all requisite power and authority, to conduct its business and to own its properties. TASC is duly licensed or qualified to do business in all jurisdictions in which such qualification is required, and failure to so qualify could have a material adverse effect on the property, financial condition or business operations of TASC. b. AUTHORITY. The execution, delivery and performance of this Agreement are within the powers of TASC, have been duly authorized by all necessary action, and do not and will not (i) violate any provision of the governing documents of TASC or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to TASC; (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iii) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of TASC pursuant to, any indenture or other agreement or instrument under which TASC is a party hereto or by which it or its properties may be bound or affected. This Agreement constitutes the legal, valid and binding obligation of TASC in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally. c. FINANCIAL STATEMENTS. The financial statements furnished to the Purchaser in connection with this Agreement and prior thereto, as set forth on SCHEDULE 3.3.C., were prepared in accordance with generally accepted accounting principles and fairly present the financial condition and results of operations at all dates and for all periods covered thereby. To the best of TASC's knowledge, TASC has no material liability, contingent or otherwise, not disclosed in such statements. To the best of TASC's knowledge, since the date of such statements, there has been no material adverse change in the business, prospects, assets or financial condition of TASC and TASC has not engaged in any material transaction outside the ordinary course of business. d. LIENS. TASC has good and marketable title to all of its assets, free and clear of all material liens, security interests, mortgages and encumbrances of any kind, except for Permitted Liens as set forth on SCHEDULE 3.3.D. hereto. All owned and leased equipment of TASC is, subject to ordinary wear and tear, in good condition, repair and working order and, to the best of TASC's knowledge and belief, conforms in all material respects to all applicable laws, regulations and ordinances. e. TAXES. Except as expressly disclosed in the financial statements, TASC does not have any outstanding unpaid tax liability (except for taxes which are currently accruing from current operations and ownership of property, which are not delinquent), and to the best of TASC's knowledge, no tax deficiencies have been proposed or assessed against TASC. f. ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3.3.F hereto, TASC is not a party to any litigation or administrative proceeding, nor so far as is known by TASC is any litigation or administrative proceeding threatened against it. -5- ARTICLE 4 CONDITIONS TO OBLIGATION TO CLOSE 4.1 CONDITIONS TO OBLIGATION OF THE PURCHASER TO CLOSE. The obligation of the Purchaser to consummate the transactions to be performed by it in connection with this Agreement is subject to satisfaction (or written waiver on or prior to the Closing Date) of the following conditions: a. the representations and warranties of Sellers and TASC set forth in ARTICLE 3 shall be true and correct at and as of the Closing Date; b. Sellers shall have performed and complied with all of their covenants and agreements hereunder through the Closing Date; c. Sellers and Purchaser shall have received all authorizations, consents, and approvals required to be obtained prior to consummation of the transactions contemplated herein; d. the approval of an amended and restated Operating Agreement to be effective as of the Closing Date, in substantially the form attached hereto as EXHIBIT C (the "AMENDED AND RESTATED OPERATING AGREEMENT"); e. on or prior to the Closing Date, Oxford Capital Enterprises Two, LLC shall enter into a binding agreement to sell the real property and the building used by TASC and located at 340 Oxford Street, Dover, Ohio, to either the Purchaser or The Sanders Trust, LLC ("SANDERS"), upon substantially similar terms contained in the offer letter from Sanders, attached hereto as EXHIBIT D (the "PROPERTY SALE AGREEMENT"); f. Sellers and TASC shall have delivered to the Purchaser all documents and other items specified in SECTION 2.2; and g. all actions to be taken by Sellers and TASC in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Purchaser. 4.2 CONDITIONS TO OBLIGATION OF SELLERS TO CLOSE. The obligation of Sellers to consummate the transactions to be performed by them in connection with this Agreement is subject to satisfaction (or written waiver by Sellers, as applicable, on or prior to the Closing Date) of the following conditions: a. the representations and warranties of the Purchaser set forth in ARTICLE 3 above shall be true and correct at and as of the Closing Date; -6- b. the Purchaser shall have performed and complied with all of its covenants and agreements hereunder through the Closing Date; c. Sellers and Purchaser shall have received all approvals, authorizations and consents required to be obtained prior to consummation of the transactions contemplated herein, which includes the prior written consent of Orion's lender, Health Care Business Credit Corporation; d. approval of an Amended and Restated Operating Agreement; e. approval of a Management Services Agreement between Orion and TASC, in substantially the form attached hereto as EXHIBIT E (the "MANAGEMENT AGREEMENT"); f. on prior to the Closing Date, the Property Sale Agreement shall have been entered into by the applicable parties; g. on or prior to the Closing Date, the parties hereto shall have finalized satisfactory agreements for the sale of substantially all of the assets of TASC Anesthesia, LLC to the Purchaser and the provision of anesthesia services to TASC; h. on or prior to the Closing Date, Orion shall have received a note from TASC, in substantially the form attached hereto at EXHIBIT F (the "TASC NOTE"); i. the Purchaser shall have delivered to Sellers all documents and other items specified in SECTION 2.3; and j. all actions to be taken by the Purchaser in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Sellers. ARTICLE 5 POST-CLOSING COVENANTS OF PURCHASER 5.1 POST-CLOSING COVENANTS OF PURCHASER. The Purchaser agrees to the following post-closing covenants: a. the Purchaser shall cause TASC to operate at the existing location for a period of at least ten (10) years following the Closing Date, so long as such operation remains economically feasible and any actions taken related to the location of TASC shall be in accordance with the Amended and Restated Operating Agreement; b. the Purchaser shall cause TASC's Board of Managers to implement a policy which requires a 60-day probationary period for new physicians on the Medical Staff of TASC prior to such physicians becoming eligible to purchase Units in TASC; and -7- c. the Purchaser shall use its best efforts to include TASC in third party payor contracts, including Aultcare, Inc. (to the extent permitted by the payor), and shall agree to negotiate managed care contracts on behalf of TASC within guidelines established by the Purchaser, TASC and Orion, in its management capacity. ARTICLE 6 MISCELLANEOUS 6.1 ENTIRE AGREEMENT. This Agreement (including all Schedules and Exhibits) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or agreements of the parties hereto, written or oral, with respect to such subject matter. 6.2 NOTICES. All notices, requests, demands, claims, and other communications of the parties hereto pursuant to this Agreement will be in writing. Any such notice or other communication shall be deemed duly given one (1) business day after it is sent by overnight courier, or three (3) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to Purchaser: Union Hospital 659 Boulevard Dover, Ohio 44622 Attn: President and Chief Executive Officer Facsimile: 330 ###-###-#### with a copy to: William A. Kyler Miller & Kyler P.O. Box 668 New Philadelphia, Ohio 44663 Facsimile: 330 ###-###-#### If to Orion: Orion HealthCorp, Inc. 1805 Old Alabama Road, Suite350 Roswell, GA 30076 Attn: President Facsimile: with a copy to: McDermott Will & Emery LLP 227 West Monroe Street Chicago, Illinois 60606-5096 Attn: Kerrin Slattery Facsimile: 312 ###-###-#### If to Selling Investors: To each Selling Investor at his or her address listed in the Operating Agreement -8- Any party hereto may send any notice or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, two-day courier service, messenger service, facsimile, ordinary mail, or electronic mail), but no such notice or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party hereto may change the address to which notices and other communications hereunder are to be delivered by giving the other parties hereto notice in the manner herein set forth. 6.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including any other Affiliates. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties hereto. Purchaser shall ensure that any successor or assign shall fulfill Purchaser's post-Closing operating covenants set forth in ARTICLE 5. 6.4 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns. 6.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 6.6 HEADINGS. The Articles and Section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 6.7 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Ohio, without giving effect to any choice or conflict of law provision or rule (whether of the State of Ohio or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Ohio. 6.8 SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 6.9 EXPENSES. Each of the Purchaser and the Sellers will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, except as otherwise set forth herein. 6.10 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. [Signatures on the following page] -9- IN WITNESS WHEREOF, the Purchaser and the Sellers have executed this Agreement as of the day and date first above written. UNION HOSPITAL By: /S/ EUGENE A. THORN ----------------------------------------------------------- Its: VP FINANCE ---------------------------------------------------------- TUSCARAWAS AMBULATORY SURGERY CENTER, L.L.C. By: /S/ KEITH LEBLANC ----------------------------------------------------------- Its: CEO ---------------------------------------------------------- ORION HEALTHCORP, INC. (FORMERLY KNOWN AS SURGICARE, INC.) By: /S/ KEITH LEBLANC ----------------------------------------------------------- Its: PRESIDENT ---------------------------------------------------------- Units: 54.60 Purchase Price: $697,959.18 SELLING INVESTORS: /S/ DAN CLEMENS, M.D. /S/ BLAIR HOLDER, M.D. - ------------------------------------ ---------------------- Dan Clemens, M.D. Blair Holder, M.D. Units sold: 2.68 Units sold: 2.10 Purchase Price: $34,593.84 Purchase Price: $27,180.87 /S/ SCOTT HOLDER, M.D. /S/ ROBERT LEVITT, M.D. - ------------------------------------ ----------------------- Scott Holder, M.D. Robert Levitt, M.D. Units sold: .96 Units sold: 1.82 Purchase Price: $12,354.94 Purchase Price: $23,474.39 /S/ MAUREEN MAY, M.D. /S/ JAMES MCQUILLAN, M.D. - ------------------------------------ ------------------------- Maureen May, M.D. James McQuillan, M.D. Units sold: 2.68 Units sold: .96 Purchase Price: $34,593.84 Purchase Price: $12,354.94$ /S/ MATTHEW PHILLIPS, M.D. /S/ RICHARD RANSOM, D.P.M. - ------------------------------------ -------------------------- Matthew Phillips, M.D. Richard Ransom, D.P.M. Units sold: 5.54 Units sold: 1.82 Purchase Price: $71,658.66 Purchase Price: $23,474.39 /S/ THOMAS TEATER, M.D. - ------------------------------------ Thomas Teater, M.D. Units sold: .96 Purchase Price: $12,354.94 -10- EXHIBIT A RELEASE AGREEMENT A-1 EXHIBIT B HOSPITAL NOTE B-1 EXHIBIT C AMENDED AND RESTATED OPERATING AGREEMENT C-1 EXHIBIT D PROPERTY SALE D-1 EXHIBIT E MANAGEMENT AGREEMENT E-1 EXHIBIT F TASC NOTE F-1 SCHEDULE 3.3.C. FINANCIAL STATEMENTS Unaudited financial statements for fiscal years ending 2004, 2003, and 2002 and year-to-date through August 31, 2005. SCHEDULE 3.3.D. PERMITTED LIENS SEE ATTACHED. SCHEDULE 3.3.F LITIGATION None.