FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT

 

This FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (the “Amendment”) is made and entered into as of July 8, 2011, by and among Apollo Medical Holdings, Inc., a Delaware corporation (the “Buyer”), on the one hand, and Aligned Healthcare Group LLC, a California limited liability company (“Aligned LLC”), Aligned Healthcare Group – California, Inc., a California professional medical corporation (“Aligned Corp.”), Raouf Khalil (“Khalil”), Jamie McReynolds, M.D. (“McReynolds”), BJ Reese & Associates, LLC (“Reese LLC”) and BJ Reese (“Reese”), on the other hand, and amends in certain respects that certain Stock Purchase Agreement dated as of February 15, 2011 by and among the parties (the “Purchase Agreement”). Capitalized terms used but not defined in this Amendment shall have the meanings given to such terms in the Purchase Agreement.

 

A.           The Buyer and the Aligned Parties have previously entered into the Purchase Agreement and the Transaction Documents which provide, among other things, that the Aligned Parties will not engage in the Call Center Business anywhere in the United States outside of the Aligned Territory during the Restricted Period.

 

B.           The Buyer and the Aligned Parties desire to amend the Purchase Agreement to provide, among other things, that the Call Center Business includes the “wrap around business,” and that Aligned LLC and Aligned Corp. may engage in the Call Center Business within and outside of the Aligned Territory solely as and to the extent expressly provided in this Amendment and in that certain Services Agreement, dated the date hereof (the “Services Agreement”), among the Aligned Healthcare, Inc. (the “Company”), Aligned LLC and Aligned Corp., the form of which is attached hereto as Exhibit A.

 

NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto, each intending to be bound hereby, agree as follows:

 

1.          Designated Contracts. Notwithstanding anything to the contrary in the Purchase Agreement or the Transaction Documents, subject to the terms and conditions of this Amendment, the Purchase Agreement and the Services Agreement, Aligned LLC and Aligned Corp. may enter into one or more contracts with Anthem Blue Cross for the provision of services relating to the Call Center Business solely within the State of California (each such contract is referred to individually as a “Designated Contract” and, collectively, as the “Designated Contracts”). As provided in the Purchase Agreement, the Aligned Parties may also enter into contracts with any other health plan for the provision of services relating to the Call Center Business solely within the Aligned Territory, and such contracts shall not be deemed to be Designated Contracts. During the term of the Services Agreement, the Company shall not enter into any contract with (a) Anthem Blue Cross for the provision of services relating to the Call Center Business within the State of California, or (b) any other health plan for the provision of services relating to the Call Center Business within the Aligned Territory, it being acknowledged and agreed that nothing contained in this Amendment, the Purchase Agreement or the Services Agreement shall in any way whatsoever prevent the Company or any of its affiliates from engaging in the Call Center Business with Anthem Blue Cross outside of the State of California or with any other health plan outside of the Aligned Territory. Each Designated Contract shall be deemed to be a written agreement between the Company, on the one hand, and a health plan, an Independent Physician Association or a hospital, on the other hand, for the purpose of determining whether the Company has entered into a Qualified MSO Contract under Section 1.2(d) of the Original Purchase Agreement, it being expressly understood that no Designated Contract shall be a Qualified MSO Contract unless it meets all of the conditions stated in Section 1.2(d) of the Original Purchase Agreement.

 

 

2.            Other Call Center Contracts. The Company, Buyer or their affiliates may, in their sole and exclusive discretion, enter into one or more contracts with third parties for the provision of services relating to the Call Center Business and which are not Designated Contracts (each such contract, an “Other Call Center Contract”). By way of example, the Company may enter into an Other Call Center Contract with a third party other than Anthem Blue Cross for the provision of services relating to the Call Center Business within the State of California or with any third party for the provision of services relating to the Call Center Business outside of the State of California. In connection with each such Other Call Center Contract, subject to the written consent of the counterparty to such Other Call Center Contract, the Company, the Buyer or the affiliate thereof that enters into such Other Call Center Contract shall enter into a License Agreement with an Aligned Party in form and substance mutually agreeable to the Company and the Aligned Parties (each, a “License Agreement”). Each License Agreement shall provide, among other things, that (a) so long as no Aligned Party is in default under any Transaction Document, the Aligned Party shall have exclusive operational authority relating to the services to be provided under the applicable Other Call Center Contract, (b) the Aligned Party shall be entitled to payment for its services under the License Agreement in accordance with terms of that agreement, including an apportionment of costs similar to that set forth in this Agreement, (c) the Aligned Parties shall indemnify, defend and hold harmless the Company, the Buyer and their respective affiliates for any claims or damages arising out of or related to the Aligned Parties’ services under the License Agreement, (d) the Aligned Parties shall make customary representations and warranties and be bound by customary covenants relating to their performance of the License Agreement, including those relating to HIPAA compliance, (e) the Company shall license to the applicable Aligned Party the rights necessary to perform its services under the License Agreement, and (f) the Company or its designee shall be the exclusive owner of any and all work product or other intellectual property created by the Aligned Parties in connection with their engagement under the License Agreement.

 

3.            Amendment to Aligned Parties’ Restrictive Covenants.

 

(a)          Clause (a) of Section 5.1(a)(i) of the Purchase Agreement is hereby amended and restated in full as follows:

 

(a) the Buyer, as the purchaser of the Shares, following the Closing will be engaged in the provision of services relating to (I) patient case management or the management, administration and operation of 24-hour physician and nursing call centers and related services (the “Call Center Services”) and (II) post-discharge management services, including but not limited to coordination of patient discharge from acute care facilities to skilled nursing facilities, long term acute care facilities or home, repatriation to personal care physicians, post-discharge outbound calls to members and providers, telephonic transition management for high risk members to assure compliance, access and early identification of complication, medication compliance, and patient monitoring to limit readmission to acute care facilities (the “Wrap Around Business” and, together with the Call Center Services, the “Call Center Business”);

 

 

(b)          Section 5.1(a)(iv) of the Purchase Agreement is hereby amended and restated in full as follows:

 

(iv)         The term “Restricted Period” shall mean the period beginning on the Closing Date and ending on the later of (A) the earliest to occur of (x) the removal or failure to re-elect Khalil as president of the Company, (y) the termination for any reason of Khalil’s engagement with the Company or any of its affiliates as an employee or consultant, and (z) the exercise by the Buyer of its right under Section 1.2(d) to repurchase all of the Buyer Stock then outstanding, and (B) the latest termination date of (x) any of the Designated Contracts entered into by Aligned Corp. or Aligned LLC under that certain Services Agreement dated as of July 8, 2011 among the Company, Aligned LLC and Aligned Corp. and (y) any Other Call Center Agreement. The Restricted Period shall be extended by the number of days in any period in which any Aligned Party or an affiliate of any Aligned Party is determined by a court of competent jurisdiction to be in default or breach of this Section 5.1(a).

 

4.            Services Agreement; License Agreements. As a condition to the Company’s execution and delivery of this Amendment, Aligned LLC and Aligned Corp. shall concurrently enter into the Services Agreement and the HIPAA Business Associate Agreement attached thereto, and the Services Agreement and such HIPAA Business Associate Agreement shall each be deemed to be a Transaction Document under the Purchase Agreement. Each License Agreement, if any, shall be deemed to be a Transaction Document under the Purchase Agreement.

 

5.            Consulting Arrangements. Khalil and Reese shall continue to provide consulting services to the Company pursuant to their Consulting Agreements in accordance with the terms thereof.

 

6.            Consent of Anthem Blue Cross. The Aligned Parties represent and warrant that they have obtained the consent of Anthem Blue Cross to the terms of this Amendment and the Services Agreement.

 

7.           Restatement of Schedule 2.2. Schedule 2.2 to the Purchase Agreement is hereby amended and restated in its entirety as attached hereto.

 

8.           Effect of Amendment. Except as expressly amended by this Amendment, all of the terms of the Purchase Agreement and the Transaction Documents shall remain unchanged and in full force and effect, including without limitation (a) Buyer’s and the Company’s rights to and ownership of revenues and profits associated with the Designated Contracts outside of the Aligned Territories and (b) the terms of Section 5.1 of the Purchase Agreement, including as they relate to the Hospitalist Business. In the event of any inconsistency or conflict between the provisions of the Purchase Agreement and this Amendment, the provisions of this Amendment will prevail and govern.

 

 

9.          Counterparts. The parties may execute this Amendment in any number of counterparts and, as so executed, the counterparts shall constitute one and the same agreement. The parties agree that each such counterpart is an original and shall be binding upon all of the parties, even though all of the parties are not signatories to the same counterpart.

 

 

IN WITNESS WHEREOF, this Amendment has been executed as of the day and year first above written.

 

	APOLLO MEDICAL HOLDINGS, INC.,
	a Delaware corporation
	By	: /s/ Warren Hosseinion
	Name: Warren Hosseinion
	Title: Chief Executive Officer and Director
	ALIGNED HEALTHCARE GROUP – CALIFORNIA, INC.,
	a California professional medical corporation
	By:	/s/ Hany Khalil
	Name: Hany Khalil
	Title: President
	ALIGNED HEALTHCARE GROUP LLC,
	a California limited liability company
	By:	/s/ Marcelle Khalil
	Name: Marcelle Khalil
	Title: Managing Member
	By:	/s/ Raouf Khalil
	RAOUF KHALIL
	By:	/s/ Jamie McReynolds
	JAMIE MCREYNOLDS, M.D.
	By:	/s/ BJ Reese
	BJ REESE
	BJ REESE & ASSOCIATES, LLC
	By:	/s/ BJ Reese
	Name: BJ Reese
	Title: Managing Member

 

  

Exhibit A

 

SERVICES AGREEMENT

 

This SERVICES AGREEMENT (this “Agreement”) is made and entered into as of July 8, 2011 (the “Effective Date”), by and between Aligned Healthcare, Inc., a California corporation (the “Company”), Aligned Healthcare Group LLC, a California limited liability company (“Aligned LLC”), and Aligned Healthcare Group – California, Inc., a California professional medical corporation (“Aligned Corp.”). Aligned LLC and Aligned Corp are sometimes collectively referred to herein as the “Aligned Parties” and individually as an “Aligned Party”. All parties hereto are sometimes collectively referred to herein as the “Parties” or individually as a “Party.”

 

A.           Apollo Medical Holdings, Inc., a Delaware corporation (“ApolloMed”), purchased the outstanding shares of the Company, pursuant to that certain Stock Purchase Agreement, dated as of February 14, 2011 (the “Original Purchase Agreement”), by and among ApolloMed, the Company, Aligned LLC, Aligned Corp. and certain other parties named therein, as amended by the First Amendment to Purchase Agreement dated July 8, 2011 (“First Amendment” and, together with the Original Purchase Agreement, the “Purchase Agreement”). Capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Purchase Agreement.

 

B.           The Parties agreed in the First Amendment that the Aligned Parties may engage in the Call Center Business outside of the Aligned Territory solely as and to the extent expressly provided in this Agreement and the First Amendment.

 

C.           The Parties desire enter into this Agreement to further define their rights and obligations with respect to the Designated Contracts and the Call Center Business (which, as defined in the Purchase Agreement, includes the Wrap Around Business).

 

D.           But for Aligned Corp. and Aligned LLC executing and delivering this Agreement, the Company and ApolloMed would not have entered into the First Amendment.

 

NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto, each intending to be bound hereby, agree as follows:

 

1.            Designated Contracts. As provided in the Purchase Agreement, subject to the terms and conditions of this Agreement and the Purchase Agreement, Aligned LLC and Aligned Corp. may enter into one or more contracts with Anthem Blue Cross for the provision of services relating to the Call Center Business solely within the State of California (each such contract is referred to individually as a “Designated Contract” and, collectively, as the “Designated Contracts”). The Aligned Parties shall provide the Company with a copy of each draft of each proposed Designated Contract prior to the execution of such proposed Designated Contract (or any amendments, modifications, extensions or renewals thereof) within ten (10) days following receipt by any Aligned Party, and consult with the Company and ApolloMed as to any comments either party may have to such drafts. The Aligned Parties shall further provide the Company with a true and complete copy of each executed Designated Contract (and any amendments, modifications, extensions or renewals thereof) and all exhibits, schedules and attachments thereto within ten (10) days following the execution and delivery of such Designated Contract (or any amendments, modifications, extensions or renewals thereof). No Aligned Party shall enter into any Designated Contract or any amendments, modification, extensions or renewals thereof without the prior written consent of the Company. As provided in the Purchase Agreement, the Aligned Parties may also enter into contracts with any other health plan for the provision of services relating to the Call Center Business solely within the Aligned Territory, and such contracts shall not be deemed to be Designated Contracts.

 

 

2.            License of Rights.

 

10.         Grant of License. Subject to the terms and conditions of this Agreement, the Company grants each Aligned Party that is a party to an Designated Contract a nonexclusive, nontransferable license to use the Marks and the Assets during the term of this Agreement solely in connection with the performance of such Designated Contract. The Aligned Parties may not use the Marks or the Assets for any other purpose and shall not have any right to sublicense or authorize others to use the Marks or the Assets in any manner. The Company expressly reserves all rights in the Marks and the Assets not expressly granted herein.

 

11.         Restrictions on Use of Marks and Assets. Other than the express rights licensed under this Agreement, each Aligned Party acknowledges that it is not acquiring any right, title or interest in or to the Marks or the Assets. No Aligned Party shall, whether during or after the term of this Agreement, adopt or apply for registration of any Mark, or any trade name or copyright that includes, refers to or uses, directly or indirectly, the Marks, or any design or logo of the Company or its affiliates, or any confusingly similar marks, names or designs. Specifically, the Aligned Parties shall not use the words or names, Aligned Healthcare, or any abbreviation, acronym or derivative thereof, or any confusingly similar word, name or abbreviation in its business name or in connection with any business operations in the United States outside of the Aligned Territory other than in connection with the performance of the Designated Contracts.

 

12.         Ownership of Rights. Each Aligned Party acknowledges and agrees that the Company is the sole owner of the Assets and has the exclusive right to use the Marks in the United States outside of the Aligned Territory, and is also the sole owner of all copyrights and other intellectual property rights to all of the foregoing, including all rights to register and apply for registration of such intellectual property rights. Each Aligned Party agrees that the license rights granted herein with respect to logos, unregistered marks and slogans exist only to the extent that the Company has such rights, and that no warranty, express or implied, is made by the Company with respect thereto or with respect to the absence of any rights of any third party that may conflict with the rights granted herein. Each Aligned Party agrees that it shall not, directly or indirectly, during or after the term of this Agreement, challenge or interfere with, or assist others to challenge or interfere with, the ownership and use of the Assets and the Marks by the Company.

 

 

3.            Payments to the Company.

 

Gross Revenues. The Aligned Parties shall pay to the Company all of the gross revenues paid to the Aligned Parties or any of their affiliates under the Designated Contracts (“Gross Revenues”), less the costs with respect to such Gross Revenues expressly described on Schedule A hereto (the “Allowable Costs”). The amount of Gross Revenues for any period less Allowable Costs for such period shall be the “Net Revenues” for such period, and the amount of Net Revenues for any period as adjusted as described on Schedule A hereto shall be the “Adjusted Net Revenues” for such period. Except as otherwise stated on Schedule A, no adjustments to or deductions of any kind or nature whatsoever shall be made from Gross Revenues. No Aligned Party shall take any credit or offset against Gross Revenues in the event of any uncollected or bad debt arising out of any Designated Contract or any penalty, fee, deduction, rebate or discount assessed or incurred in connection with any Designated Contract. Gross Revenues shall include, in addition to payments on invoiced billings received by the Aligned Parties, any and all other payments or amounts received by the Aligned Parties or any of their affiliates with respect to the Designated Contracts, and in no event shall the Gross Revenues reported by the Aligned Parties be less than the amounts actually received by the Aligned Parties from the Designated Contracts.

 

Manner of Payment; Monthly Statements. The Aligned Parties shall pay to the Company within ten (10) days after receipt of any payment under or relating to any Designated Contract the Adjusted Net Revenues for the period covered by such payment. The Aligned Parties shall deliver to the Company with each payment of Adjusted Net Revenues a statement showing, at a minimum: (i) the amount of Gross Revenues for such period (with supporting computations), (ii) a detailed statement of all Allowable Costs deducted by the Aligned Parties from Gross Revenues for that period for the purposes of calculating Net Revenues (with supporting computations), (iii) the Net Revenues for that period and the calculations thereof and (iv) the Adjusted Net Revenues for that period and the calculations thereof (collectively, the “Adjusted Net Revenue Calculations”). Time is of the essence with respect to all payments under this Agreement. If payment is not received by the Company on the due date, a late charge of one-and-one-half percent (1-½%) per month, or the maximum legal rate, whichever is less, shall be added to the unpaid balance until said balance (plus all accrued interest) is paid in full.

 

Resolution of Disputes. If the Company accepts the Adjusted Net Revenue Calculations for any period, or if the Company fails to give notice to the Aligned Parties of any objection within thirty (30) days after receipt of the Adjusted Net Revenue Calculations for any period, the Adjusted Net Revenue Calculations shall be the final and binding calculation of the Adjusted Net Revenues for the applicable period. If the Company gives notice to the Aligned Parties of an objection to such Adjusted Net Revenue Calculations within thirty (30) days after receipt of such Adjusted Net Revenue Calculations, the Company and the Aligned Parties shall attempt in good faith to resolve their differences. If the Company and the Aligned Parties are able to resolve their differences, the Adjusted Net Revenue Calculations, as modified to reflect the resolution of the differences between the Company and the Aligned Parties, shall be the final and binding calculation of the Adjusted Net Revenues for the applicable period. If, however, the Company and the Aligned Parties are unable to resolve their differences, the Company and the Aligned Parties shall submit any disputed items to a certified public accountant reasonably satisfactory to the Company and the Aligned Parties for a resolution of the dispute. The determination of the certified public accountant shall be final and binding on the Company and the Aligned Parties, and the Adjusted Net Revenue Calculations, as modified to reflect (i) those differences, if any, that the Company and the Aligned Parties were able to resolve, and (ii) the certified public accountant’s determination with regard to the remaining disputed items, shall be the final and binding resolution of the Adjusted Net Revenues for the applicable period.

 

 

4.            Certain Covenants and Obligations of the Aligned Parties.

 

The Aligned Party that enters into each Designated Contract shall be solely responsible for the performance of its obligations under such Designated Contract, and, so long as no Aligned Party is in default under any Transaction Document, shall have exclusive operational authority relating to the services to be provided under each such Designated Contract. Each such Aligned Party shall, to the best of its ability, render the services under such Designated Contract in a timely and professional manner consistent with the highest professional and industry standards and all applicable legal requirements. In no event shall the Company or any of its affiliates have any obligation or liability whatsoever with respect to any of the duties or obligations of any Aligned Party under any Designated Contract, including without limitation the payment of any amounts to any party to a Designated Contract (including the Aligned Parties) in respect thereof.

 

13.         Within ten (10) days after receipt, the Aligned Parties shall provide the Company with copies of any and all notices, statements or other correspondence received from any counterparty to a Designated Contract or any of such counterparty’s affiliates or representatives relating to any Designated Contract, including without limitation notices of default or breach or of such counterparty’s termination or election to not renew any such Designated Contract.

 

14.         The Aligned Parties shall use their best efforts to collect promptly after they become due any and all amounts due and payable under the Designated Contracts, and shall hold any amounts received from any Person under the Designated Contracts in trust for the benefit of the Company until such amounts are allocated among the Aligned Parties and the Company and paid to the Company in accordance with the terms of this Agreement.

 

15.         If ApolloMed determines in its sole and absolute discretion that it is necessary or would be advisable to consolidate for financial reporting purposes the revenues received under the Designated Contracts pursuant to this Agreement, then the Aligned Parties shall reasonably cooperate ApolloMed and its auditors in facilitating such consolidation, and any costs associated therewith shall be split between ApolloMed and the Aligned Parties.

 

16.         No Aligned Party shall pledge, hypothecate, mortgage, grant liens in or upon, or grant security interests in, any of its assets, or otherwise use any such assets as collateral without the Company’s prior written consent, which may be withheld by the Company in its sole discretion.

 

 

17.         No Aligned Party shall, without the Company’s prior written consent, incur any indebtedness, unless any such indebtedness is incurred in the ordinary course or business or is explicitly subordinated to the amounts payable to the Company under this Agreement, which subordination shall be in a form reasonably acceptable to the Company, or loan any amounts to any directors, managers, officers, employees or affiliates of any Aligned Party.

 

18.         No Aligned Party shall redeem or otherwise repurchase, or pay any dividends or make any distributions in respect of, any of its shares, membership interests or other equity interests.

 

19.         The Aligned Parties shall maintain true and accurate books of account and records with respect to all transactions involving the Designated Contracts, in accordance with their historical accounting practices, consistently applied.

 

5.            HIPAA Matters. As a condition to the Company’s execution and delivery of this Agreement, Aligned LLC and Aligned Corp. shall concurrently enter into the HIPAA Business Associate Agreement attached thereto as Exhibit A.

 

6.            Representations and Warranties of the Aligned Parties. The Aligned Parties represent, warrant and covenant that:

 

Each Aligned Party has the full power and authority to enter into this Agreement and to perform its obligations hereunder and under each Designated Contract, without the need for any consents, approvals or immunities not yet obtained.

 

This Agreement has been duly authorized, executed and delivered by each Aligned Party which is a party hereto and is the legal, valid and binding agreement of each such Aligned Party, enforceable against each such Aligned Party in accordance with its terms.

 

Each Aligned Party and each of its professional employees shall comply with all statutes, laws, codes, standards, ordinances, rules, regulations, specifications, standards of care, judgments, orders and decrees (collectively, “Laws”) applicable to such Aligned Party or any of such persons in the performance of such Aligned Party’s obligations under this Agreement and the Designated Contracts, including, without limitation, any Laws relating to the practice of medicine.

 

7.            Other Call Center Contracts. The Company, ApolloMed or their affiliates may, in their sole and exclusive discretion, enter into one or more contracts with third parties for the provision of services relating to the Call Center Business and which are not Designated Contracts (each such contract, an “Other Call Center Contract”). By way of example, the Company may enter into an Other Call Center Contract with a third party other than Anthem Blue Cross for the provision of services relating to the Call Center Business within the State of California or with any third party for the provision of services relating to the Call Center Business outside of the State of California. In connection with each such Other Call Center Contract, subject to the written consent of the counterparty to such Other Call Center Contract, the Company, ApolloMed or the affiliate thereof that enters into such Other Call Center Contract shall enter into a License Agreement with an Aligned Party in form and substance mutually agreeable to the Company and the Aligned Parties (each, a “License Agreement”). Each License Agreement shall provide, among other things, that (a) so long as no Aligned Party is in default under any Transaction Document, the Aligned Party shall have exclusive operational authority relating to the services to be provided under the applicable Other Call Center Contract, (b) the Aligned Party shall be entitled to payment for its services under the License Agreement in accordance with terms of that agreement, including an apportionment of costs similar to that set forth in this Agreement, (c) the Aligned Parties shall indemnify, defend and hold harmless the Company, ApolloMed and their respective affiliates for any claims or damages arising out of or related to the Aligned Parties’ services under the License Agreement, (d) the Aligned Parties shall make customary representations and warranties and be bound by customary covenants relating to their performance of the License Agreement, including those relating to HIPAA compliance, (e) the Company shall license to the applicable Aligned Party the rights necessary to perform its services under the License Agreement, and (f) the Company shall be the exclusive owner of any and all work product or other intellectual property created by the Aligned Parties in connection with their engagement under the License Agreement.

 

 

8.          Right to Examine Books and Records. The Company shall have the right, exercisable at its sole discretion at any time upon reasonable notice to the Aligned Parties, to audit the Aligned Parties’ books and records to determine the accuracy of the Aligned Parties’ statements and reports and the calculation of the amounts and payments due the Company hereunder, provided that the Company may not exercise this right more than once in any calendar quarter. The Company shall pay the cost of any such audit; provided, however, that if any audit reveals that the Aligned Parties have underpaid any amount due under this Agreement (an “Underpayment”) by five percent (5%) or more, the Aligned Parties shall be required to and shall pay for the cost of such audit. Any Underpayment shall accrue a late charge at the rate of one-and-one-half percent (1 ½%) per month, or the maximum legal rate, whichever is less, from the date of the Underpayment until paid in full. If the audit reveals an Underpayment, the Aligned Parties shall pay the Company the amount of the Underpayment, all late charges thereon and the cost of the audit within thirty (30) days after the date the Company notifies Aligned Parties in writing of such Underpayment.

 

9.          Insurance. Each Aligned Party shall maintain, at its own expense, the following insurance coverage with a financially sound insurance company acceptable to the Company throughout the term of this Agreement and for a period of three (3) years thereafter: (a) worker’s compensation, occupational disease, employer’s liability (with limits of not less than $1,000,000 for bodily injury), disability benefit and other similar insurance required under the laws of the State of California; (b) commercial general liability insurance including blanket contractual liability and personal injury coverage with a combined single limit of at least $5,000,000; and (c) professional liability insurance of not less than $1,000,000 per claim and $3,000,000 annual aggregate coverage limits. The Aligned Parties shall, upon execution of this Agreement and annually thereafter, deliver to the Company a certificate of such insurance from the insurance carriers setting forth the scope of coverage and the limits of liability required by this Section 9.

 

 

10.         Indemnification. Each Aligned Party shall, jointly and severally, defend, indemnify and hold the Company, its affiliates and their respective officers, directors, employees, agents, affiliates, successors and assigns harmless from any and all suits, actions, claims, liabilities, losses, costs, expenses (including reasonable attorneys’ fees and costs) and damages that the Company or any of such persons may incur or suffer as a result of, arising out of or in connection with, the Designated Contracts or the performance or failure by any Aligned Party to perform its duties under this Agreement or under any Designated Contract, or any breach by any Aligned Party of its obligations under this Agreement or under any Designated Contract or otherwise resulting from any act or omission of any Aligned Party in connection with its activities under or related to this Agreement or any Designated Contract. The Aligned Parties shall give the Company prompt notice in writing of all such suits, claims, complaints or other actions (including but not limited to any notice of default or breach from any counterparty under a Designated Contract), and the Aligned Parties shall assume and direct the defense thereof at their own cost, although the Company shall thereafter have the right to be represented by its own counsel in any such claim or proceeding.

 

11.         Effect of Agreement. Except as expressly provided by this Agreement, all of the terms of the Purchase Agreement and the Transaction Documents shall remain unchanged and in full force and effect, including without limitation (a) ApolloMed’s and the Company’s rights to and ownership of revenues and profits associated with the Designated Contracts outside of the Aligned Territories and (b) the terms of Section 5.1 of the Purchase Agreement, including as they relate to the Hospitalist Business.

 

12.         Termination. This Agreement may be terminated only as follows:

 

by the Company upon (i) the determination of a court of competent jurisdiction that an Aligned Party has engaged in fraudulent conduct in connection with this Agreement or the performance of its obligations under any Designated Contract; (ii) the filing of a petition by or against any Aligned Party under any provision of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar law relating to bankruptcy, insolvency or other relief for debtors and such proceeding shall not be dismissed or discharged within 30 days of commencement; or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of any Aligned Party; or the insolvency of any Aligned Party; or the making of a general assignment for the benefit of creditors by any Aligned Party or the dissolution or liquidation of any Aligned Party; or the taking of any action for the purpose of effecting any of the foregoing or any analogous action in any other jurisdiction; or any Aligned Party ceases to carry on its business or substantially the whole of its business or substantially changes the nature of its business; or (iii) the material breach by any Aligned Party under this Agreement or under any Designated Contract.

 

by the Aligned Parties upon (i) the determination of a court of competent jurisdiction that the Company has engaged in fraudulent conduct in connection with this Agreement; or (ii) the filing of a petition by or against the Company under any provision of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar law relating to bankruptcy, insolvency or other relief for debtors and such proceeding shall not be dismissed or discharged within 30 days of commencement; or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of the Company; or the insolvency of the Company; or the making of a general assignment for the benefit of creditors by the Company or the dissolution or liquidation of the Company; or the taking of any action for the purpose of effecting any of the foregoing or any analogous action in any other jurisdiction; or the Company ceases to carry on its business or substantially the whole of its business or substantially changes the nature of its business; or

 

by mutual written agreement of the Parties;

 

 

 

provided, however, that the termination of this Agreement shall not terminate the Parties’ rights and obligations with respect to any Designated Contract then in effect, and this Agreement shall remain in effect as a binding obligation of the Parties with respect to any such Designated Contract until such Designated Contract terminates.

 

13.         Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if sent by certified mail, postage prepaid, or delivered by hand or courier, addressed as follows:

 

To the Company:

 

450 N. Brand Blvd.

Suite 600

Glendale, California 91203

Attn.: Chief Executive Officer

Fax: (818) 291-6444

 

With a copy to:

Shartsis Friese LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111-3598
Attn: P. Rupert Russell, Esq.
Fax: (415) 421-2922

 

To the Aligned Parties:

 

Aligned Healthcare Group LLC

Aligned Healthcare Group – California, Inc.

860 Hampshire Road, Suite A

Westlake Village, CA 91361

Attn: Raouf Khalil

Fax: (805) 379-0267

 

With a copy to:

Carl D. Hasting, Esq.

Attorney at Law

Certified Public Accountant

CDH Associates, Inc.

5655 Lindero Canyon Rd., Suite 226

Westlake Village, CA 91362

Fax: (818) 879-1562

 

or such other address as shall be furnished in writing by any party, and any such notice or communication shall be deemed to have been given as of the date so mailed or, if delivered by hand or courier, on the date received.

 

 

14.         Non-Agency of Parties. This Agreement does not constitute and shall not be construed as constituting an agency, a partnership or joint venture between the Company and any of the Aligned Parties. No Aligned Party shall have any right to obligate or bind the Company or any of its affiliates in any matter whatsoever.

 

15.         Expenses. All legal and other costs and expenses incurred by the Company, on the one hand, and the Aligned Parties, on the other hand, in connection with the preparation and negotiation of this Agreement, shall be borne by the Company and the Aligned Parties, respectively.

 

16.         Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, personal representative, successors and assigns.

 

17.         Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same and shall become effective when one or more counterparts have been signed by each party and delivered to the other Parties.

 

18.         Interpretation. Each Party has been represented by sophisticated counsel in this transaction and agrees that if any issue arises as to the meaning or construction of any word, phrase or provision hereof, that no Party shall be entitled to the benefit of the principles of the construction and interpretation of contracts or written instruments which provide that any ambiguity is to be construed in favor of the Party who did not draft the disputed word, phrase or provision.

 

19.         Choice of Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California, without regard to the choice of law principles thereof.

 

20.         Section Headings. The section headings are for reference only and shall not limit or control the meaning of any provision of this Agreement.

 

21.         Severability. If any provision of this Agreement shall be held invalid under any applicable law, such invalidity shall not affect any other provision of this Agreement that can be given effect without the invalid provision, and, to this end, the provisions hereof are severable.

 

22.         Third Party Beneficiary. ApolloMed is an intended third party beneficiary of this Agreement and shall be entitled to enforce the terms of this Agreement as if it were a signatory hereto.

 

23.         Nonassignability.

 

No Assignment. Neither this Agreement nor any of the Aligned Parties’ rights hereunder are assignable or transferable by any Aligned Party, without the Company’s prior written consent, which may be withheld in the Company’s sole discretion. Each of the following shall be deemed to be an assignment of this Agreement for purposes of this Section 23(a): (i) any merger or reorganization involving an Aligned Party, (ii) the sale, exclusive license or other transfer of all or substantially all of the assets of an Aligned Party, or (iii) the transfer of more than twenty-five percent (25%) in the aggregate of the shares of stock or other evidence of beneficial ownership (or other beneficial interests) of an Aligned Party. The Company may assign its rights under this Agreement without the Aligned Parties’ consent.

 

 

No Sublicense. No Aligned Party may grant any sublicenses of any of its rights under this Agreement without the Company’s prior written consent, which may be withheld in the Company’s sole discretion. No Aligned Party may subcontract any Designated Contract or the performance of any Designated Contract without the Company’s prior written consent, which may be withheld in the Company’s sole discretion.

 

24.         No Implied Waivers. The failure of any Party at any time to require performance by any other Party of any provision hereof shall not affect in any way the full right to require such performance at any time thereafter. The waiver by any Party of a breach of any provision hereof shall not be construed or held to be a waiver of the provision itself.

 

25.         Time. Time is of the essence of this Agreement.

 

26.         Equitable Remedies. In addition to any other rights or remedies available at Law or in equity, upon the breach or threatened breach of any of the covenants, agreements or obligations of any Party, the non-breaching Party shall be entitled to file an action for specific performance or injunctive or other equitable relief without being required to post a bond or provide any other security.

 

27.         Remedies Cumulative. The remedies provided in this Agreement shall be cumulative and shall not preclude any Party from asserting any other right, or seeking any other remedies, against any other Party.

 

28.         Further Action. Each Party agrees to act in good faith and to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions hereof.

 

 

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written.

 

ALIGNED HEALTHCARE, INC.,			ALIGNED HEALTHCARE GROUP –
a California corporation			CALIFORNIA, INC.,
			a California professional medical corporation
By:	/s/ Warren Hosseinion		By:	/s/ Hany R. Khalil
Name:	Warren Hosseinion		Name:	Hany R. Khalil
Title:	Chief Executive Officer		Title:	President
			ALIGNED HEALTHCARE GROUP LLC,
			a California limited liability company
			By:	/s/ Marcelle Khalil
			Name:	Marcelle Khalil
			Title:	Managing Member