STOCK PURCHASE AGREEMENT by and between: SCHC Acquisition, A Medical Corporation, a California professional corporation; and THE SHAREHOLDERS OF SOUTHERN CALIFORNIA HEART CENTERS, A MEDICAL CORPORATION, a California professional corporation; and...
Exhibit 2.1
by and between:
SCHC Acquisition, A Medical Corporation,
a California professional corporation;
and
THE SHAREHOLDERS OF SOUTHERN CALIFORNIA HEART CENTERS, A MEDICAL CORPORATION,
a California professional corporation;
and
SOUTHERN CALIFORNIA HEART CENTERS, A MEDICAL CORPORATION,
a California professional corporation.
Dated as of July 21, 2014
This STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of July 21, 2014, by and between SCHC Acquisition, A Medical Corporation, a California professional corporation (the “Purchaser”), those individuals who have executed the signature page to this Agreement as stockholders of Southern California Heart Centers, A Medical Corporation (collectively, the “Sellers” and individually, a “Seller”), and Southern California Heart Centers, A Medical Corporation, a California professional corporation (the “Company”).
WHEREAS, the Sellers desire to sell, and Purchaser desires to purchase, all issued and outstanding shares (the “Shares”) of capital stock of the Company, for the consideration and on the terms set forth in this Agreement;
WHEREAS, the Company is a medical group engaged in the business of providing professional medical services (collectively, the “Business”);
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:
(a) Except as otherwise set forth herein, the Exhibits, and the Disclosure Schedule, the following terms shall have the meanings specified in this Section 1.1:
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.
“Business Day” means any day of the year on which national banking institutions in California are open to the public for conducting business and are not required or authorized to close.
“CBB Term Loan” means that certain Business Term Loan from Citizens Business Bank to Company in the principal amount of $250,000 evidenced by a Promissory Note dated October 15, 2012.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Benefit Plan” means any Employee Benefit Plan or ERISA Affiliate Plan (as defined in Section 4.12(a)).
“Confidential Information” means any confidential information with respect to the Business, including, methods of operation, patients, patient lists, patient records, products, prices, fees, costs, Technology, inventions, Trade Secrets, know-how, software, marketing methods, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters.
“Contract” means any contract, agreement, indenture, note, bond, loan, instrument, lease, license, security agreement, sales and purchase orders, commitment or other arrangement or agreement, whether written or oral, including any amendments, modifications, or supplements thereto.
“Documents” means all files, documents, instruments, papers, books, reports, records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer lists, regulatory filings, operating data and plans, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web pages, etc.), and other similar materials related to the Business in each case whether or not in electronic form.
“Environmental Law” means any foreign, federal, state or local statute, regulation, ordinance, rule of common law or other legal requirement, as now or hereafter in effect, in any way relating to the protection of human health and safety, the environment or natural resources including, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.) the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as each has been or may be amended and the regulations promulgated pursuant thereto.
“Encumbrance” means any charge, claim, community or other marital property interest, condition, equitable interest, lien, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal, or similar restriction, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
“ERISA” means the Employment Retirement Income Security Act of 1974, as amended.
“Escrow Account” means the escrow account set up pursuant to the Escrow Agreement.
“Escrow Agreement” means the Escrow Agreement between Purchaser, Sellers and Commerce Escrow Company as escrow agent (the “Escrow Agent”), substantially in the form of Exhibit E hereto.
“Furniture and Equipment” means all furniture, fixtures, furnishings, equipment, vehicles, leasehold improvements, and other tangible personal property owned or used by the Company and its Affiliates in the conduct of the Business, including all artwork, desks, chairs, tables, hardware, copiers, telephone lines and numbers, telecopy machines and other telecommunication equipment, cubicles and miscellaneous office furnishings and supplies.
“GAAP” means generally accepted accounting principles in the United States as of the date hereof.
“Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).
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“Government Reimbursement Programs” means the federal Medicare program, the California state Medi-Cal program, and any other governmental program responsible for payment or reimbursement for professional medical services.
“Hazardous Material” means any substance, material or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold, and urea formaldehyde insulation.
“Indebtedness” of any Person means, without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement; (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (v) the liquidation value of all redeemable preferred stock of such Person; (vi) all obligations of the type referred to in clauses (i) through (v) of any Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; and (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).
“Intellectual Property Licenses” means (i) any grant to a third Person of any right to use any of the Purchased Intellectual Property, and (ii) any grant to the Seller of a right to use a third Person’s intellectual property rights which is necessary in connection with the Business or for the use of any Purchased Intellectual Property.
“IRS” means the Internal Revenue Service.
“Inventory” means all merchandise and inventory owned and intended for resale in connection with the Business, all manufactured and purchased parts, goods in process, raw materials, supply and packing materials and finished goods and other tangible personal property that is used in connection with the Business, wherever located, in each case as of the Closing Date.
“Knowledge” means (i) with respect to the Sellers, the knowledge after due inquiry of either Seller, and (ii) with respect to the Purchaser, the knowledge after due inquiry of Xx. Xxxxxx Xxxxxxxxxx, and (iii) with respect to the Company, the knowledge after due inquiry of the Sellers.
“Law” means any federal, state or local law (including common law), statute, code, ordinance, rule, regulation or other requirement.
“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or claims or proceedings by or before any Person.
“Liability” means any debt, loss, damage, adverse claim, liability or obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise), and including all costs and expenses relating thereto.
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“Lien” means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever.
“Losses” means any losses, liabilities, obligations, damages, costs, penalties, interest and expenses (including all reasonable attorneys’, accountants’ and experts’ fees).
“Material Adverse Effect” means (i) a material adverse effect on the historical, near-term or long-term projected business, assets, properties, results of operations, condition (financial or otherwise) or prospects of the Company or of the Business, or (ii) a material adverse effect on the ability of any one or more Seller to consummate the transactions contemplated by this Agreement or perform their obligations under this Agreement or the Seller Documents (as defined in Section 4.2(a)).
“Net Working Capital as of the Closing Date” means the Company’s (x) current assets less (y) current liabilities as of the Closing Date.
“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.
“Ordinary Course of Business” means the ordinary and usual course of day-to-day operations of the Business through the date hereof consistent with past practice.
“Permits” means any approvals, authorizations, consents, licenses, permits or certificates issued by any Person.
“Permitted Exceptions” means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been made available to the Purchaser; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve is established therefor; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens that are not material to the Business so encumbered and that are not resulting from a breach, default or violation by the Company of any Contract or any Law; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body, provided that such regulations have not been violated; and (v) such other imperfections in title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of any properties used in the Business.
“Person” means any individual, limited liability company, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.
“Purchased Intellectual Property” means all intellectual property rights used by the Company and its Affiliates in connection with the Business arising from or in respect of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) all patents and applications therefor, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon (collectively, “Patents”), (ii) all trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, Internet domain names and corporate names and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof, (collectively, “Marks”), (iii) copyrights and registrations and applications therefor, works of authorship and mask work rights (collectively, “Copyrights”), (iv) discoveries, concepts, ideas, research and development, know-how, formulae, inventions, compositions, manufacturing and production processes and techniques, technical data, procedures, designs, drawings, specifications, databases, and other proprietary and confidential information, including customer lists, supplier lists, pricing and cost information, and business and marketing plans and proposals of the Company and its Affiliates, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents (collectively, “Trade Secrets”), and (v) all software and Technology of the Seller and its Affiliates used in connection with the Business.
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“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor environment, or into or out of any property.
“Remedial Action” means all actions to (i) clean up, remove, treat or in any other way address any Hazardous Material; (ii) prevent the Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) to correct a condition of noncompliance with Environmental Laws.
“SBA Loan” means that certain SBA Loan dated October 16, 2006 administered by Global Management Services, LLC for $700,000 in favor of the Company.
“Seller Benefit Plan” means any Employee Benefit Plan or ERISA Affiliate Plan (as defined in Section 4.11).
“Subsidiary” means any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by the Company.
“Taxes” means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i) and (iii) any transferee liability in respect of any items described in clauses (i) and/or (ii) payable by reason of contract, assumption, transferee liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under Law) or otherwise.
“Taxing Authority” means the IRS and any other Governmental Body responsible for the administration of any Tax.
“Tax Return” means any return, report or statement required to be filed with respect to any Tax (including any attachments thereto, and any amendment thereof) including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, combined, consolidated or unitary returns for any group of entities that includes the Company or any of its Affiliates.
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“Technology” means, collectively, all designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or relate to, or are used by the Seller.
(b) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:
(i) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day;
(ii) any reference in this Agreement to $ shall mean U.S. dollars;
(iii) the Exhibits, the Disclosure Schedule and the other schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement; all Exhibits, the Disclosure Schedule and the other schedules attached 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 schedule, the Disclosure Schedule, or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement;
(iv) any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa;
(v) the provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement;
(vi) all references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified;
(vii) the words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires; and
(viii) the word “including” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(c) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
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ARTICLE
II
PURCHASE AND SALE OF SHARES
3.1 Consideration. The aggregate consideration for the Shares shall be (a) an amount equal to Two Million Dollars ($2,000,000), plus the amount equal to fifty percent (50%) of the amount required to pay off and discharge the SBA Loan at Closing (not to exceed $170,000), plus the amount required to pay off and discharge the CBB Term Loan at Closing (collectively, the “Purchase Price”), plus (b) stock warrants (the “Stock Warrants”) representing 1,000,000 Shares of stock in Apollo Medical Holdings, Inc. (“Holdings”) at the strike price of $1.00 per share, with an expiration date no earlier than the third anniversary of the Closing and no later than the fourth (4th) anniversary of the Closing, plus an additional contingent amount of One Million Dollars ($1,000,000), calculated in accordance with Section 3.4 below.
3.3 Adjustment of Purchase Price.
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Any and all payments made pursuant to this Section 3.3 shall be consistently treated as adjustments to the Purchase Price for all Tax purposes by the Sellers and the Purchaser.
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(a) At the end of each December and June for the first two years following the Closing, each Seller shall be eligible to receive additional consideration based on the following criteria:
(i) Such Seller shall have achieved a wRVU of at least 10,550 for the six-month period just ended (the “Baseline”).
(ii) Purchaser shall pay or cause the Company to pay such Seller a sum equal to the wRVUs for such six-month period above the Baseline, multiplied by $45.00.
(b) Such additional payments to Sellers shall be subject to the following caps:
(i) $200,000 in the case of Seller Dr. Xxxxxxx Xxx (“Xxx”), and $50,000 in the case of Seller Xx. Xxx Xxx Xxx (“Kok”) for services rendered during the second half of 2014,
(ii) $400,000 in the case of Xxx, and $100,000 in the case of Kok, for services rendered during 2015, and
(iii) 80% in the case of Xxx, and 20% in the case of Kok, of the balance remaining of the Contingent Purchase Payment, for services rendered in the first half of 2016.
(c) Only CPT codes which are deemed covered services by Medicare or the applicable payor may be included in the computation of wRVUs.
(d) Such payments shall be calculated as of end of each six-month period ending December and June as described above, and shall be paid to each Seller, as applicable, no later than thirty (30) days following the calculation date.
(e) For purposes of this Section 3.4, the following definitions shall apply:
(i) Work Relative Value Units (“wRVUs”) refers to the specific Relative Value Units for the physician work component associated with each approved CPT code billable under the Medicare program. The wRVU units or weights are established by the Centers for Medicare and Medicaid Services (CMS) and are updated periodically. The most recent updates to the wRVU values will be utilized for the purposes herein. The wRVUs shall be limited to those wRVUs personally generated by each Seller (including any readings and interpretations performed by such Seller).
(ii) wRVUs, for purposes of this Agreement and the calculation of any monies due each Seller, does not include the CPT codes associated services that are not provided for Company patients.
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ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERs and the Company
Except as specifically set forth in the disclosure schedule prepared by the Sellers and the Company, dated as of the date hereof, and delivered to the Purchaser concurrently with the parties’ execution of this Agreement setting forth specific exceptions to the Sellers’ and Company’s representations and warranties set forth herein in accordance with Article IV (collectively, the “Disclosure Schedule”), the Sellers and the Company, jointly and severally, represent and warrant to the Purchaser as of the date hereof and through the Closing Date, as follows:
4.1 Organization and Good Standing.
(a) The Company is a professional corporation duly organized, validly existing and in good standing under the laws of the California and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted to own or use its assets, and to perform all its obligations under Applicable Contracts.
(b) The Sellers have delivered to the Purchaser accurate and complete copies of the certificate of incorporation and bylaws as amended to date and currently in effect, and there has been no violation of any of the provisions of the Company’s certificate of incorporation or bylaws.
(c) The Company has not conducted business under or otherwise used, for any purpose or in any jurisdiction, any legal, fictitious, assumed, or trade name other than “Southern California Heart Centers, A Medical Corporation” and “Synergy Imaging Center Inc.”
4.2 Authorization; Due Execution.
(a) Each Seller and the Company has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement to which he, she, or it is a party in connection with the consummation of the transactions contemplated by this Agreement (together with this Agreement, the “Seller Documents”), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each of the Sellers Documents by each Seller and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required corporate action on the part of the Company, its board of directors and stockholders, and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement and the Seller Documents by the Company or the Sellers or to consummate the transactions contemplated hereby or thereby.
(b) This Agreement has been, and each of the Sellers Documents will be at or prior to the Closing, duly and validly executed and delivered by each Seller and the Company and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the Sellers Documents when so executed and delivered will constitute, legal, valid and binding obligations of each Seller and the Company, enforceable against each Seller and the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
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4.3 Conflicts; Consents of Third Parties.
(a) The execution and delivery by the Sellers of this Agreement or the Sellers Documents, the consummation of the transactions contemplated hereby or thereby, or the compliance by the Sellers with any of the provisions hereof or thereof will not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or give rise to any obligation of the Company to make any payment under, or to the increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Liens upon any of the properties or assets of the Company under, any provision of (i) the certificate of incorporation and bylaws of the Company; (ii) any Contract or Permit to which the Company is a party or by which any of the properties or assets of Business or the Company are bound; (iii) any Order of any Governmental Body applicable to the Business or the Company, or any of the properties or assets of the Business, or the Company as of the date hereof; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations, that would not have a Material Adverse Effect.
(b) Other than as set forth in Section 4.3 of the Disclosure Schedule, no consent, waiver, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Company in connection with (i) the execution and delivery of this Agreement or the Sellers Documents, the compliance by the Sellers with any of the provisions hereof, or the consummation of the transactions contemplated hereby, or (ii) the continuing validity and effectiveness immediately following the Closing of any Permit or Contract of the Company.
4.5 Outstanding Shares; No Restrictions.
(a) The authorized equity securities of the Company consist of 100,000 shares of Class A Common Stock, and 100 shares of Class B Common Stock, of which 10,000 shares of Class A Common Stock and 20 shares of Class B Common Stock, constituting the Shares, are issued and outstanding. Sellers are the owners (of record and beneficially) of all of the Shares, free and clear of all Encumbrances, including any restriction on the right of any Seller to transfer the Shares to Purchaser pursuant to this Agreement. The assignments, endorsements, stock powers, or other Instruments of transfer to be delivered by each Seller to Purchaser at the Closing will be sufficient to transfer such Seller’s entire interest in the Shares (of record and beneficially) owned by such Seller. Upon transfer to Purchaser of the certificates representing the Shares, Purchaser will receive good title to the Shares, free and clear of all Encumbrances. Section 4.5(a) of the Disclosure Schedule lists Sellers and the number of Shares held by each Seller.
(b) Company does not own nor is it a party to or bound by any Contract to acquire, any shares or other security of any Person or any direct or indirect equity or ownership interest in any other business. The Company is not obligated to provide funds to or make any investment (whether in the form of a loan, capital contribution, or otherwise) in any other Person.
(c) There are no outstanding options, warrants, and/or convertible securities pertaining to or issued by the Company. The Company only authorized or issued two (2) classes of common stock and the Shares comprise all of the issued shares of such classes of stock.
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4.6 Financial Statements and Records.
(a) Section 4.6 of the Disclosure Schedule contains a true and complete copy of the following financial statements of the Company: (i) the unaudited balance sheets of the Company and the related unaudited statements of income and of cash flows of the Company for the calendar year ending December 31 for each of 2011, 2012 and, 2013 and (ii) the unaudited balance sheet of the Company as of April 30, 2014 and the related statements of income and cash flows of the Company for the four (4)-month period then ended (the “Unaudited Interim Financial Statements”) (such unaudited statements, including the related notes and schedules thereto, are referred to herein as the “Financial Statements”).
(b) Each of the Financial Statements is complete and correct in all material respects, has been prepared in accordance with GAAP consistently applied by the Company without modification of the accounting principles used in the preparation thereof throughout the periods presented and presents fairly in all material respects the financial position, results of operations and cash flows of the Company as at the dates and for the periods indicated therein. The Company has not incurred any further Liabilities other than in the Ordinary Course of Business, other than those Liabilities reflected in the Company’s balance sheet as of April 30, 2014, provided to Purchaser, including the projected incurred but not reported Liabilities as described in such balance sheet.
(c) The Company makes and keeps books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of its assets. The Company maintains systems of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.
(d) [Intentionally omitted.]
(e) The minute book of the Company contains complete and correct records of all meetings held, and actions taken by written consent, of the holders of voting securities, the board of directors or Persons exercising similar authority, and committees of the board of directors or such Persons of the Company, and no meeting of any such holders, board of directors, Persons, or committee has been held, and no other action has been taken, for which minutes or other evidence of action have not been prepared and are not contained in such minute books. The Company has at all times maintained complete and correct records of all issuances and transfers of its shares. At the Closing, all such minute books and records will be in the possession of the Company and located at its principal office.
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4.8 Condition and Sufficiency of Assets.
(a) To Sellers’ Knowledge, the buildings, equipment, and other assets (whether real or personal, tangible or intangible) owned or leased by the Company are structurally sound, in good operating condition and repair, and adequate for the uses to which they are being put, and none of such buildings, equipment or other assets is in need of maintenance or repairs other than ordinary, routine maintenance that is not material in nature or cost.
(b) The assets owned and leased (whether real or personal, tangible or intangible) by the Company constitutes all the assets used in connection with the Business. Such assets constitute all the assets necessary for the Company to continue to conduct its business from and after the Closing Date without interruption as it has been conducted by the Company prior to the date of this Agreement.
4.9 Absence of Certain Developments.
(a) Except as expressly contemplated by this Agreement or as set forth on Section 4.9 of the Disclosure Schedule, since April 30, 2014, (i) the Company has conducted the Business only in the Ordinary Course of Business, (ii) there has not been any damage, destruction or loss with respect to any material property or asset of the Business, (iii) issuance of or change in the authorized or issued shares of the Company; purchase, redemption, retirement, or other acquisition by the Company of any shares of the Company; or declaration or payment of any dividend or other distribution or payment in respect of the shares of the Company, and (iv) there has not been any event, change, occurrence or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the generality of the foregoing and except as set forth on Section 4.9 of the Disclosure Schedule, since April 30, 2014, the Company has not:
(i) declared, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock (or other equity interest) of the Company;
(ii) repurchased, redeemed or acquired any outstanding shares of capital stock (or other equity interest) or other securities of, or other ownership interest in, the Company;
(iii) awarded or paid any bonuses to any Business Employee (as defined in Section 4.11(b)) or any Physician (as defined in Section 4.11(a)), other than as set forth on the Disclosure Schedule;
(iv) entered into any employment, deferred compensation, severance or similar agreement (nor amended any such agreement) or agreed to increase the compensation payable or to become payable by it to any of the Company’s directors, officers, employees, agents or representatives or agreed to increase the coverage or benefits available under the Company Benefit Plan (as defined in 4.12(a));
(v) changed its accounting or Tax reporting principles, methods or policies;
(vi) made or rescinded any election relating to Taxes, settled or compromised any claim relating to Taxes;
(vii) failed to promptly pay and discharge current Liabilities except where disputed in good faith by appropriate proceedings;
(viii) made any loans, advances or capital contributions to, or investments in, any Person or paid any fees or expenses to any director, officer, partner, stockholder or Affiliate;
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(ix) mortgaged, pledged or subjected to any Lien any of its assets, properties or rights relating to the Business;
(x) terminated, entered into or amended any Material Contract (as defined in Section 4.17(a));
(xi) made or committed to make any capital expenditures in excess of $10,000 individually or $25,000 in the aggregate;
(xii) issued, created, incurred, assumed or guaranteed any Indebtedness;
(xiii) suffered any material change in the productivity or compensation of the Physicians (as defined in Section 4.11(a)) as reflected in Section 4.11(a) of the Disclosure Schedule;
(xiv) instituted or settled any Legal Proceeding; or
(xv) agreed, committed, arranged or entered into any agreement to do any of the foregoing.
(a) The Company (i) has timely filed all Tax Returns required to be filed by or on behalf of the Company and such Tax Returns have been duly and timely filed with the appropriate Taxing Authority in all jurisdictions in which such Tax Returns are required to be filed (after giving effect to any valid extensions of time in which to make such filings), and all such Tax Returns are true, complete and correct in all material respects; and (ii) have fully and timely paid all Taxes payable by or on behalf of the Company. With respect to any period for which Tax Returns have not yet been filed or for which Taxes are not yet due or owing, the Company have made due and sufficient accruals for such Taxes in the Financial Statements and its books and records. All required estimated Tax payments sufficient to avoid any underpayment penalties have been made by or on behalf of the Company.
(b) The Company has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has duly and timely withheld and paid over to the appropriate Taxing Authority all amounts required to be so withheld and paid under all applicable Laws. No claim has been made by a Taxing Authority in a jurisdiction where the Company does not file Tax Returns such that it is or may be subject to taxation by that jurisdiction.
(c) All deficiencies asserted or assessments made as a result of any examinations by any Taxing Authority of the Tax Returns of, or including, the Company have been fully paid, and there are no other audits or investigations by any Taxing Authority in progress. The Company has not received any notice from any Taxing Authority that it intends to conduct such an audit or investigation. No issue has been raised by a Taxing Authority in any prior examination of the Company which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency for any subsequent taxable period.
(d) The Company is not a party to any tax sharing, allocation, indemnity or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing. There are no liens as a result of any unpaid Taxes upon any of the assets of the Company.
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4.11 Physicians; Business Employees.
(a) Section 4.11(a) of the Disclosure Schedule contains a complete and accurate list of all physicians who provide services, professional or otherwise, on behalf of the Company (collectively, the “Physicians”) and accurately and correctly reflects for each Physician: (i) their respective California medical license numbers, (ii) their subspecialties of practice, (iii) productivity and compensation information for the preceding three (3) years from the date of this Agreement, and all fringe benefits provided by the Company, and (iv) a detailed description of any situation in which a Physician’s professional privileges or rights of any kind, including medical staff privileges, licensure, or Medicare or Medi-Cal certification, are or have been reviewed, suspended, terminated, curtailed, or a xxxxxxx assigned by the Company or any Governmental Body. To the Sellers’ and Company’s Knowledge, there are no pending or threatened disputes of any nature between the Company and any Physician or allied health professionals.
(b) Section 4.11(b) of the Disclosure Schedule contains a complete and accurate list of all persons (other than Physicians) who are employees, independent contractors or consultants of the Business as of the date hereof (collectively, the “Business Employees”), and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof.
(c) To Sellers’ Knowledge, no Person has claimed or has reason to claim that any Physician, Business Employee or other Person affiliated with the Company: (i) is in violation of any term of any employment Contract, patent disclosure agreement, noncompetition agreement or any restrictive covenant with such Person; (ii) has disclosed or utilized any Trade Secret or proprietary information or documentation of such Person; or (iii) has interfered in the employment relationship between such Person and any of its present or former employees. To the Knowledge of the Sellers, no Physician, Business Employee or other Person affiliated with the Company has used or proposed to use any Trade Secret, information or documentation proprietary to any former employer or violated any confidential relationship with any Person in connection with the development, manufacture or sale of any product or proposed product, or the development or sale of any service or proposed service, of the Company.
(d) To the Knowledge of the Company and the Sellers all Physicians and Sellers plan to remain employees of the Company for at least two (2) years following the Closing Date.
(a) Section 4.12(a) of the Disclosure Schedule sets forth a complete and correct list of: (i) all “employee benefit plans”, as defined in Section 3(3) of ERISA, and all other employee benefit arrangements or payroll practices, including, without limitation, bonus plans, consulting or other compensation agreements, incentive, equity or equity-based compensation, or deferred compensation arrangements, stock purchase, severance pay, sick leave, vacation pay, salary continuation, disability, hospitalization, medical insurance, life insurance, scholarship programs maintained by the Company and its Subsidiaries or to which the Company contributed or is obligated to contribute thereunder for current or former employees of the Company (the “Employee Benefit Plans”), and (ii) all “employee pension plans”, as defined in Section 3(2) of ERISA, subject to Title IV of ERISA or Section 412 of the Code, maintained by the Sellers and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Company under Section 414(b), (c), (m) or (o) of the Code (“ERISA Affiliate”) or to which the Sellers and any ERISA Affiliate contributed or has ever been obligated to contribute thereunder (the “ERISA Affiliate Plans”). Section 4.12(a) of the Disclosure Schedule separately sets forth each Company or ERISA Affiliate Plan which is a multiemployer plan as defined in Section 3(37) of ERISA (“Multiemployer Plans”), or has been subject to Sections 4063 or 4064 of ERISA (“Multiple Employer Plans”).
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(b) True, correct and complete copies of the following documents, with respect to each of the Employee Benefit Plans and ERISA Affiliate Plans (as applicable), have been delivered to the Purchaser (i) any plans and related trust documents, and all amendments thereto, (ii) the most recent Forms 5500 for the past three (3) years and schedules thereto, (iii) the most recent financial statements and actuarial valuations for the past three (3) years, (iv) the most recent IRS determination letter, (v) the most recent summary plan descriptions (including letters or other documents updating such descriptions) and (vi) written descriptions of all non-written agreements relating to the Employee Benefit Plans and ERISA Affiliate Plans.
(c) Each of the Employee Benefit Plans and ERISA Affiliate Plans intended to qualify under Section 401 of the Code (“Qualified Plans”) so qualify and the trusts maintained thereto are exempt from federal income taxation under Section 501 of the Code, and, except as disclosed on Schedule 5.13(c), nothing has occurred with respect to the operation of any such plan which could cause the loss of such qualification or exemption or the imposition of any liability, penalty or tax under ERISA or the Code.
(d) All contributions and premiums required by law or by the terms of any Employee Benefit Plan or ERISA Affiliate Plan or any agreement relating thereto have been timely made (without regard to any waivers granted with respect thereto) to any funds or trusts established thereunder or in connection therewith, and no accumulated funding deficiencies exist in any of such plans subject to Section 412 of the Code, and all contributions for any period ending on or before the Closing Date which are not yet due will have been paid or accrued on the Company’s balance sheet on or prior to the Closing Date.
(e) The benefit liabilities, as defined in Section 4001(a)(16) of ERISA, of each of the Employee Benefit Plans and ERISA Affiliate Plans subject to Title IV of ERISA using the actuarial assumptions that would be used by the Pension Benefit Guaranty Corporation (the “PBGC”) in the event it terminated each such plan do not exceed the fair market value of the assets of each such plan. The liabilities of each Employee Benefit Plan that has been terminated or otherwise wound up, have been fully discharged in full compliance with applicable Law.
(f) There has been no “reportable event” as that term is defined in Section 4043 of ERISA and the regulations thereunder with respect to any of the Employee Benefit Plans or ERISA Affiliate Plans subject to Title IV of ERISA which would require the giving of notice, or any event requiring notice to be provided under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(g) None of the Company, any ERISA Affiliate or any organization to which the Company is a successor or parent corporation, within the meaning of Section 4069(b) of ERISA, has engaged in any transaction, within the meaning of Section 4069 of ERISA.
(h) None of the Employee Benefit Plans which are “welfare benefit plans” within the meaning of Section 3(1) of ERISA provide for continuing benefits or coverage for any participant or any beneficiary of a participant post-termination of employment except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and at the expense of the participant or the participant’s beneficiary. Each of the Company and any ERISA Affiliate which maintains a “group health plan” within the meaning of Section 5000(b)(1) of the Code has complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder.
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(i) There has been no violation of ERISA or the Code with respect to the filing of applicable returns, reports, documents and notices regarding any of the Employee Benefit Plans or ERISA Affiliate Plans with the Secretary of Labor or the Secretary of the Treasury or the furnishing of such notices or documents to the participants or beneficiaries of the Employee Benefit Plans or ERISA Affiliate Plans.
(j) There are no pending Legal Proceedings which have been asserted or instituted against any of the Employee Benefit Plans or ERISA Affiliate Plans, the assets of any such plans or the Company, or the plan administrator or any fiduciary of the Employee Benefit Plans or ERISA Affiliate Plans with respect to the operation of such plans (other than routine, uncontested benefit claims), and there are no facts or circumstances which could form the basis for any such Legal Proceeding.
(k) Each of the Employee Benefit Plans and ERISA Affiliate Plans has been maintained, in all material respects, in accordance with its terms and all provisions of applicable Law. All amendments and actions required to bring each of the Employee Benefit Plans and ERISA Affiliate Plans into conformity in all material respects with all of the applicable provisions of ERISA and other applicable Laws have been made or taken except to the extent that such amendments or actions are not required by Law to be made or taken until a date after the Closing Date and are disclosed on Section 4.12(k) of the Disclosure Schedule.
(l) The Sellers and any ERISA Affiliate which maintains a “benefits plan” within the meaning of Section 5000(b)(1) of ERISA, have complied with the notice and continuation requirements of Section 4980B of the Code or Part 6 of Title I of ERISA and the applicable regulations thereunder.
(m) None of the Company or any ERISA Affiliate or any organization to which any is a successor or parent corporation, has divested any business or entity maintaining or sponsoring a defined benefit pension plan having unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or transferred any such plan to any person other than the Sellers or any ERISA Affiliate during the five-year period ending on the Closing Date.
(n) Neither the Company nor any “party in interest” or “disqualified person” with respect to the Employee Benefit Plans or ERISA Affiliate Plans has engaged in a non-exempt “prohibited transaction” within the meaning of Section 4975 of the Code or Section 406 of ERISA.
(o) None of the Company or any ERISA Affiliate has terminated any Employee Benefit Plan or ERISA Affiliate Plan subject to Title IV of ERISA, or incurred any outstanding liability under Section 4062 of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA.
(p) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee of Company; (ii) increase any benefits otherwise payable under any Employee Benefit Plan or ERISA Affiliate Plan; or (iii) result in the acceleration of the time of payment or vesting of any such benefits.
(q) The Company is not a party to any contract, plan or commitment, whether legally binding or not, to create any additional Employee Benefit Plan or ERISA Affiliate Plan, or to modify any existing Employee Benefit Plan or Pension Pan.
(r) No stock or other security issued by the Company forms or has formed a material part of the assets of any Employee Benefit Plan or ERISA Affiliate Plan.
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(s) Any individual who performs services for the Company (other than through a contract with an organization other than such individual) and who is not treated as an employee for federal income Tax purposes by the Company is not an employee for such purposes.
(a) Section 4.16 of the Disclosure Schedule sets forth an accurate and complete list of all Intellectual Property Licenses and all Patents, registered Marks, pending applications for registrations of any Marks and unregistered Marks, registered Copyrights, and pending applications for registration of Copyrights, owned or filed by the Company or its Affiliates and used in the Business. The Company is the sole and exclusive owners of all right, title and interest in and to all of the Patents, the Marks, each of the registered Copyrights and pending applications filed by the Company. Except as disclosed in Section 4.16 of the Disclosure Schedule, the Company is the sole and exclusive owner of, or has valid and continuing rights to use, sell and license, as the case may be, all other Purchased Intellectual Property used, sold or licensed by the Company in the Business as presently conducted and as currently proposed to be conducted, free and clear of all Liens or obligations to others.
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(b) Except with respect to licenses of commercial off-the-shelf software, the Company is not required, obligated, or under any Liability whatsoever, to make any payments by way of royalties, fees or otherwise to any owner, licensor of, or other claimant to any Intellectual Property, or other third party, with respect to the use thereof or in connection with the conduct of the Business. No Trade Secret or any other non-public, proprietary information material to the Business has been authorized to be disclosed or, to the Knowledge of the Sellers, has been actually disclosed by the Company to any employee or any third party other than pursuant to a non-disclosure agreement restricting the disclosure and use of the Purchased Intellectual Property. The Company has taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all the Trade Secrets of the Business and any other confidential information, including invention disclosures, not covered by any patents owned or patent applications filed by the Company, which measures are reasonable in the industry in which the Company operates. As of the date hereof, the Company is not the subject of any pending or, to the Knowledge of the Sellers, threatened Legal Proceedings which involve a claim of infringement, unauthorized use, or violation by any Person against the Company or challenging the ownership, use, validity or enforceability of, any material Purchased Intellectual Property. To the Knowledge of the Sellers, no Person is infringing, violating, misusing or misappropriating any material Purchased Intellectual Property used in the Business. No such claims have been made against any Person by the Company. There are no Orders to which the Company is a party or by which the Company is bound which restrict, in any material respect, the rights to use any of the Purchased Intellectual Property. No present or former employee of the Company has any right, title, or interest, directly or indirectly, in whole or in part, in any material Intellectual Property owned by Company and used in the Business. No employee, consultant or independent contractor of the Company is, as a result of or in the course of such employee’s, consultant’s or independent contractor’s engagement by the Company, in default or breach of any material term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement.
(a) Section 4.17 of the Disclosure Schedule sets forth all of the following Contracts to which the Company is a party or by which the Company is bound and that are related to the Business (collectively, the “Material Contracts”):
(i) any Contract with a licensed healthcare service plan;
(ii) Contracts with any current or former officer, director, stockholder or Affiliate of the Company;
(iii) Contracts for the sale of any of the assets of the Company or for the grant to any person of any preferential rights to purchase any of its assets;
(iv) Contracts for joint ventures, strategic alliances or partnerships;
(v) Contracts containing covenants of the Company not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with the Company in any line of business or in any geographical area;
(vi) Contracts relating to the acquisition by the Company of any operating business or the capital stock of any other Person;
(vii) Contracts relating to the incurrence, assumption or guarantee of any Indebtedness or imposing a Lien on any of its assets;
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(viii) Contracts under which the Company have made advances or loans to any other Person;
(ix) Contracts providing for severance, retention, change in control or other similar payments to any Company Employee;
(x) Contracts for the employment of any individual on a full-time, part-time or consulting or other basis;
(xi) Contracts for the provision of goods or services involving consideration in excess of $10,000 annually or $25,000 in the aggregate over the term of the Contract;
(xii) Contracts (or group of related contracts) which involve the expenditure of more than $10,000 annually or $25,000 in the aggregate or require performance by any party more than one year from the date hereof;
(xiii) any Intellectual Property Licenses;
(xiv) all non-disclosure, confidentiality, or non-solicitation agreements between (A) the Company and any of its current or former employees, consultants or agents, and (B) the Company and any other Person; and
(xv) Contracts otherwise material to the Business.
(b) Each Material Contract is in full force and effect and is the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). The Company is not in default under any Material Contract, and, to the Knowledge of the Sellers, no other party to any Material Contract in default thereunder. No event has occurred that with the lapse of time or the giving of notice or both would constitute a default under any Material Contract. No party to any of the Material Contracts has exercised any termination rights with respect thereto. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of all of the Material Contracts, together with all amendments, modifications or supplements thereto. Execution of this Agreement and consummation of the transactions contemplated herein does not constitute a breach or a default under any of the Material Contracts, except as explicitly noted on Section 4.3 of the Disclosure Schedule, for which Company shall obtain the necessary consents prior to the Closing Date.
4.19 Compliance with Laws; Permits.
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4.20 Inventory. The Company does not hold any Inventory.
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ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller that:
(a) The Purchaser has all requisite power and authority to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by the Purchaser in connection with the consummation of the transactions contemplated by this Agreement (together with this Agreement, the “Purchaser Documents”), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each of the Purchaser Documents by the Purchaser and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required corporate action on the part of the Purchaser and its board of directors, and no other corporate proceedings on the part of the Purchaser are necessary to authorize the execution, delivery and performance of this Agreement and the Purchaser Documents by the Purchaser or to consummate the transactions contemplated hereby or thereby.
(b) This Agreement has been, and each of the Purchaser Documents will be at or prior to the Closing, duly and validly executed and delivered by the Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the Purchaser Documents when so executed and delivered will constitute, legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
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(a) the Company shall, from the date hereof prior to the Closing Date:
(i) conduct its respective businesses in the Ordinary Course of Business including the maintenance of all records;
(ii) use its best efforts to preserve the present operations and goodwill of its business;
(iii) confer with Purchaser prior to implementing operation decisions of a material nature;
(iv) report to Purchaser at such times as Purchaser may reasonably request concerning the status of the Company;
(v) maintain the assets owned or used by the Company in a state of repair and conditions that complies with the Company’s Contracts and is consistent with the requirements and normal conduct of the Company;
(vi) comply with all Contracts of the Company;
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(vii) continue in full force and effect all insurance coverage of the Company; and
(viii) take no action, or fail to take any reasonable action within its control, as a result of which any of the changes or events listed in Section 4.9 would be likely to occur.
(b) the Company shall not, from the date hereof prior to the Closing Date:
(i) amend any of its organizational documents;
(ii) declare, set aside or pay any dividend or make any other distribution in respect of any shares of capital stock (or other equity interest) of the Company;
(iii) repurchase, redeem or acquire any outstanding shares of capital stock (or other equity interest) or other securities of, or other ownership interest in, the Company;
(iv) award or pay any bonuses to any Business Employee (as defined in Section 4.11(b)) or any Physician (as defined in Section 4.11(a)), other than as set forth on the Disclosure Schedule;
(v) enter into any employment, deferred compensation, severance or similar agreement (nor amended any such agreement) or agree to increase the compensation payable or to become payable by it to any of the Company’s directors, officers, employees, agents or representatives or agree to increase the coverage or benefits available under the Company Benefit Plan (as defined in Section 4.12(a));
(vi) change its accounting or Tax reporting principles, methods or policies;
(vii) make or rescind any election relating to Taxes, settled or compromised any claim relating to Taxes;
(viii) fail to promptly pay and discharge current Liabilities except where disputed in good faith by appropriate proceedings;
(ix) make any loans, advances or capital contributions to, or investments in, any Person or paid any fees or expenses to any director, officer, partner, stockholder or Affiliate;
(x) mortgage, pledge or subject to any Lien any of its assets, properties or rights relating to the Business;
(xi) terminate, enter into or amend any Material Contract;
(xii) make or commit to make any capital expenditures in excess of $10,000 individually or $25,000 in the aggregate;
(xiii) issue, create, incur, assume or guarantee any Indebtedness;
(xiv) suffer any material change in the productivity or compensation of the Physicians;
(xv) institute or settle any Legal Proceeding without Purchaser’s written consent; or
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(xvi) agree, commit, arrange or enter into any agreement to do any of the foregoing.
(a) From the date hereof, and after the Closing Date, except in furtherance of the transaction described in this Agreement and as necessary in the ordinary course of business, (i) the Sellers and the Company shall not, and shall cause its Affiliates not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person (other than authorized officers, directors and employees of the Purchaser or the Company) or use or otherwise exploit for its own benefit or for the benefit of anyone other than Purchaser or the Company, any Confidential Information relating to the Company or the Company Subsidiaries and (ii) the Purchaser shall not, and shall cause its Affiliates not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person (other than authorized officers, directors and employees of the Sellers) or use or otherwise exploit for its own benefit or for the benefit of anyone other than Sellers, any Confidential Information relating to the Sellers; provided, however, that in the event disclosure of any Confidential Information is required by applicable Law in either clause (i) or (ii) above, the receiving party of such Confidential Information shall, to the extent reasonably possible, provide to the disclosing party with prompt notice of such requirement prior to making any disclosure so that the disclosing party may seek an appropriate protective order.
(b) For purposes of this Section 6.6, “Confidential Information” shall mean any confidential information with respect to any disclosing party, including, methods of operation, customers, customer lists, products, prices, fees, costs, inventions, know-how, marketing methods, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters; provided, however, that the term “Confidential Information” does not include, and there shall be no obligation of any receiving party hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement or (ii) becomes generally available to the public other than as a result of a disclosure not otherwise permissible hereunder.
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ARTICLE
VII
POST-CLOSING COVENANTS
7.2 Further Assurances; Further Conveyances and Assumptions; Consent of Third Parties.
(a) Following the Closing, each of the Purchaser and the Sellers shall use their commercially reasonable efforts to take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement. To the extent the parties determine after the Closing that any of the assets used in the Business are held by any Affiliate of the Company, then the Sellers shall cause the owner of such assets to transfer such assets to the Company without additional consideration and, upon request, to execute and deliver a xxxx of sale or such other instruments of transfer evidencing such transfer.
(b) From time to time following the Closing, Sellers and the Purchaser shall, and shall cause the Company their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquaintances and such other instruments, and shall take such further actions, as may be necessary or appropriate to assure fully to the Purchaser and its respective successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to the Purchaser under this Agreement and to otherwise make effective the transactions contemplated hereby and thereby.
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(a) After the Closing, each Seller shall cooperate with Purchaser and the Company in their efforts to continue and maintain for the benefit of Purchaser and the Company those business relationships of the Company and of such Seller relating to the business of the Company, including relationships with any patients, referral sources, suppliers, licensors, licensees, lessors, employees, regulatory authorities, and others. Each Seller shall refer to Purchaser and the Company all inquiries and communications received by such Seller relating to the Company or the Business after the Closing.
(b) After the Closing, no Seller shall take any action, either directly or indirectly, that could diminish the value of the Company or interfere with the Business.
(c) It is the desire of all parties to closely work together after the Closing. Sellers and Purchaser agree that for the first three (3) months after Closing, they will meet weekly in person to ensure they are aligned and for Purchaser to assist the Company to grow the business and ensure appropriate employee continuity. Thereafter, the parties will revisit the meeting schedule in light of their mutual goals with respect to the Company’s growth and success. In addition to the operational meetings described above, an Executive Committee comprised of Xx. Xxxxxx Xxxxxxxxxx, Xxxx Augusta and Xxxxx Xxxxx will meet at least quarterly and in person, which will have oversight over the Company.
(d) Subject to Board approval, Purchaser will arrange for Dr. Xxxxxxx Xxx to hold a seat as a “Board Observer” on the Board of Holdings after the Closing.
ARTICLE
VIII
CONDITIONS TO CLOSING
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(k) Form W-9. The Sellers shall each have delivered to the Purchaser a duly completed Form W-9;
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(i) SNDA. Purchaser shall have caused AMM to execute as lessee and deliver to the Purchaser, the Subordination, Nondisturbance and Attornment Agreement in the form of Exhibit G hereto
(k) Stock Warrants. Holdings shall have delivered to the Sellers the Stock Warrants;
(a) by mutual consent of the Purchaser and Sellers;
(b) by Purchaser if a material breach of any provisions of this Agreement has been committed by Sellers or the Company;
(c) by Sellers if a material breach of any provisions of this Agreement has been committed by Purchaser;
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(d) by Purchaser if satisfaction of any condition in Article VIII by September 1, 2014 or such later date as the parties may agree upon (the “End Date”) becomes impossible (other than through the failure of Purchaser to comply with its obligations under this Agreement);
(e) by Purchaser if the Closing has not occurred on or before the End Date, unless Purchaser is in material breach of this Agreement; or
(f) by Sellers if the Closing has not occurred on or before the End Date, unless Sellers are in material breach of this Agreement.
(a) In the event that this Agreement is terminated by Purchaser pursuant to Section 9.1(b), Sellers shall pay or cause to be paid, to Purchaser by wire transfer promptly following notice by Purchaser an amount equal to Purchaser’s documented out-of-pocket fees and expenses set forth in such notice and reasonably incurred by it in connection with this Agreement and related transactions in an aggregate amount not to exceed $20,000.
(b) In the event that this Agreement is terminated by Sellers pursuant to Section 9.1(c), Purchaser shall pay or cause to be paid, to Sellers by wire transfer promptly following notice by Sellers an amount equal to Sellers’ documented out-of-pocket fees and expenses set forth in such notice and reasonably incurred by it in connection with this Agreement and related transactions in an aggregate amount not to exceed $20,000.
ARTICLE
X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
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(a) Subject to Section 10.1, Section 10.3, the Sellers, jointly and severally, shall indemnify and hold the Purchaser and its respective directors, officers, employees, Affiliates, stockholders, agents, attorneys, representatives, successors, heirs, and assigns (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all Losses, based upon, attributable to, or resulting from:
(i) any inaccuracy in or breach of the representations and warranties made by the Sellers or the Company set forth in this Agreement or in any Seller Document;
(ii) any breach of any covenant or other agreement on the part of the Sellers or the Company under this Agreement or any Seller Document;
(iii) any fraudulent act (including billing practices) of the Company, or the negligent act or omission in the provision of professional services by the Company or by any Seller on behalf of the Company prior to the Closing Date; and
(iv) any distribution or allocation of the Closing Payment or the Purchase Price by any one or more Seller.
(b) Subject to Sections 10.1 and 10.3, the Purchaser hereby agrees to indemnify and hold the Sellers, their agents, attorneys, representatives, successors, heirs, and assigns (collectively, the “Seller Indemnified Parties”) harmless from and against any and all Losses based upon, attributable to or resulting from:
(i) any inaccuracy in or breach of any representation or warranty of the Purchaser set forth in this Agreement or in any Purchaser Document; and
(ii) any breach of any covenant or other agreement on the part of the Purchaser under this Agreement or any Purchaser Document.
(c) For purposes of determining whether indemnification is available under this Article X and for purposes of calculating Losses hereunder, any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to the representations, warranties, covenants and agreements shall be ignored.
10.3 Limitations on Indemnification for Breaches of Representations and Warranties.
(a) Neither the Sellers nor the Purchaser shall have any liability under Section 10.2(a)(i) or Section 10.2(b)(i) hereof unless the aggregate amount of Losses to the indemnified parties finally determined to arise thereunder based upon, attributable to or resulting from the inaccuracy of or the failure of any representation or warranty to be true and correct exceeds $10,000 (the “Basket”) and, in the event Losses exceed the amount of the Basket, the indemnifying party shall be required to pay the entire amount of all such Losses from the first dollar.
(b) Notwithstanding any provision to the contrary in this Agreement, Sellers’ maximum aggregate liability for any Losses under this Article X and any other obligation under this Agreement shall not exceed $500,000.
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10.4 Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be instituted or that any claim or demand shall be asserted by any Person in respect of which payment may be sought under Section 10.2 hereof (regardless of the limitations set forth in Section 10.3) (“Indemnification Claim”), the indemnified party shall promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party. The indemnifying party shall have the right, at its sole expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder; provided that the indemnifying party shall have acknowledged in writing to the indemnified party its unqualified obligation to indemnify the indemnified party as provided hereunder; provided, further, that if the indemnifying party is the Sellers, then such indemnifying Party shall not have the right to defend or direct the defense of any such Indemnification Claim that (x) is asserted directly by or on behalf of a Person that is a healthcare service plan, other payor, vendor, supplier or customer of the Business, or (y) seeks an injunction or other equitable relief against the Indemnified Party. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, it shall within five (5) days (or sooner, if the nature of the Indemnification Claim so requires) notify the indemnified party of its intent to do so. If the indemnifying party (i) elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, (ii) fails to notify the indemnified party of its election as herein provided, (iii) contests its obligation to indemnify the indemnified party for such Losses under this Agreement or (iv) fails to diligently prosecute the defense of such Indemnification, then the indemnified party may pay, compromise, defend against, negotiate or otherwise deal with such Indemnification Claim and obtain indemnification from the indemnifying party for any and all Losses based upon, arising from or relating to such Indemnification Claim. If the indemnified party defends any Indemnification Claim, then the indemnifying party shall reimburse the indemnified party for the expenses of defending such Indemnification Claim upon submission of periodic bills. If the indemnifying party shall assume the defense of any Indemnification Claim, the indemnified party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party, a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel for all indemnified parties in connection with any Indemnification Claim. The parties shall fully cooperate with each other in all reasonable respects in connection with the defense of any Indemnification Claim, including making available (subject to the provisions of Section 10.1) records relating to such Indemnification Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Indemnification Claim. Notwithstanding anything in this Section 10.4 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party, settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all liability in respect of the Indemnification Claim.
(b) After any final decision, judgment or award shall have been rendered by a Governmental Body of competent jurisdiction, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter and the indemnifying party shall be required to pay all of the sums so due and owing to the indemnified party by wire transfer of immediately available funds within ten (10) Business Days after the date of such notice. The parties hereto agree that should an indemnifying party not make full payment of any such obligations within such ten (10) Business Day period, any amount payable shall accrue interest from and including the date of the agreement of the indemnifying party or final adjudication to including the date such payment has been made at a rate per annum equal to four percent (4%). Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed.
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(c) The failure of the indemnified party to give reasonably prompt notice of any Indemnification Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure.
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12.2 [Intentionally Omitted.]
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If to the Purchaser, to:
SCHC Acquisition, A Medical Corporation
000 Xxxxx Xxxxx Xxxxxxxxx. Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx Xxxxxxx LLP
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq. (xxxxxxx@xxxxxxxxxxxx.xxx)
Facsimile: (000) 000-0000
If to the Sellers:
Xxxxxxx Xxx, M.D.
0000 Xxxxx Xxxx
Xx Xxxxxx, XX 00000
Yih Xxx Xxx, M.D.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, XX 00000
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with a copy (which shall not constitute notice) to:
Xxxx Xxxxxx Associates, LLP
Xxx Xxxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxx-Xxxxx Yong (xxxxx@xxxxxx.xxx)
Facsimile: (000) 000-0000
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(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed by its officers thereunto duly authorized, as of the date first written above.
| PURCHASER: | |
| SCHC ACQUISITION, A MEDICAL CORPORATION | |
| Xxxxxx Xxxxxxxxxx, M.D. | |
| President | |
| COMPANY: | |
| SOUTHERN CALIFORNIA HEART CENTERS, A MEDICAL CORPORATION | |
| Xxxxxxx Xxx, M.D. | |
| President | |
| SELLERS: | |
| XXXXXXX XXX, M.D. | |
| YIH XXX XXX, M.D. | |
| For purposes of Section 3.1 only: | |
| APOLLO MEDICAL HOLDINGS, INC. | |
| Xxxxxx Xxxxxxxxxx, M.D. | |
| Chief Executive Officer |
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Exhibit A
Employment Agreement (Xxx)
| 1 |
Exhibit B
Employment Agreement (Kok)
| 2 |
Exhibit C
Non-Competition Agreement (Xxx)
| 3 |
Exhibit D
Non-Competition Agreement (Kok)
| 4 |
Exhibit E
Escrow Agreement
| 5 |
Exhibit F
Lease
| 6 |
Exhibit G
Subordination, Nondisturbance and Attornment Agreement
| 7 |
Schedule 3.3(a)
Seller’s Reference Statement
| 8 |
[Numbered sections to correspond to the applicable Section in Article IV of this Agreement]
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Listing of Exhibits and Schedules
Exhibit A-Employment Agreement (Xxx)
Exhibit B-Employment Agreement (Kok)
Exhibit C-Non-Competition Agreement (Xxx)
Exhibit D-Non-Competition Agreement (Kok)
Exhibit E-Escrow Agreement
Exhibit F-Lease
Exhibit G-Subordination, Nondisturbance and Attornment Agreement
Schedule 3.3(a)-Seller’s Reference Statement
Disclosure Schedule
Apollo Medical Holdings, Inc. agrees to furnish supplementally a copy of any omitted exhibit or schedule to the U.S. Securities and Exchange Commission upon request.
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