Exhibit 10.2 EXECUTION COPY

 

 

 

INVESTMENT AGREEMENT

 

between

 

APOLLO MEDICAL HOLDINGS, INC.

 

and

 

NNA OF NEVADA, INC.

 

March 28, 2014

 

 

 

 

 

 

Table of Contents

 

    Page         ARTICLE I           DEFINITIONS         1.1 Defined Terms 1 1.2
Additional Definitions 8 1.3 Singular/Plural 8         ARTICLE II          
PURCHASE AND SALE OF THE SECURITIES         2.1 Purchase and Sale 8 2.2 Closing
9 2.3 Closing Deliveries 9 2.4 Calculation of Conversion Price 9 2.5 Warrants 9
2.6 Acceptability of Proceedings at Closing 10         ARTICLE III          
REPRESENTATIONS AND WARRANTIES OF COMPANY         3.1 Corporate Organization and
Power 10 3.2 Authorization 10 3.3 Reservation; Valid Issuance 11 3.4 No
Conflicts; Consents and Approvals; No Violation 11 3.5 Brokers Fees 11 3.6
Capitalization 12 3.7 Offering; Investment Company Act 13 3.8 SEC Documents;
Financial Statements; Internal Controls and Procedures 13 3.9 Absence of
Undisclosed Liabilities 14 3.10 Absence of Certain Changes 14 3.11 Litigation 14
3.12 Credit Documents 15         ARTICLE IV           REPRESENTATIONS AND
WARRANTIES OF PURCHASER         4.1 Organization 15 4.2 Authorization 15 4.3 No
Conflicts; Consents and Approvals; No Violation 16 4.4 Brokers or Finders 16

 

-i-

 

 

Table of Contents

(continued)

 

    Page       4.5 Securities Law Matters 16 4.6 Availability of Funds 17 4.7 No
Reliance 17 4.8 Restricted Securities 17 4.9 Legends 18         ARTICLE V      
    COVENANTS         5.1 Public Announcements 18 5.2 Consents, Approvals and
Filings 18 5.3 Further Assurances 19 5.4 Quotation and Listing 19 5.5
Reservation of Common Stock 19 5.6 Integration 19 5.7 Rule 144 and 144A
Information 19 5.8 CUSIP 20 5.9 Confidential Information 20 5.10 Notification of
Certain Matters 21 5.11 Funding Fee 21 5.12 Market Stand-off Agreement 21      
  ARTICLE VI           bOARD AND OTHER RIGHTS         6.1 Board Rights 22 6.2
Vacancies 23 6.3 Subscription Rights 23 6.4 Certain Other Covenants 26        
ARTICLE VII           CONDITIONS TO CLOSING         7.1 Conditions to
Obligations of Purchaser and Company at Closing 26 7.2 Additional Conditions to
Obligations of Purchaser at Closing 26 7.3 Additional Conditions to Obligations
of Company at Closing 28

 

-ii-

 

 

Table of Contents

(continued)

 

    Page         ARTICLE VIII           SURVIVAL; INDEMNIFICATION         8.1
Survival of Representations and Warranties 28 8.2 Indemnification 29 8.3 Method
of Asserting Indemnification for Third Party Claims 29 8.4 Method of Asserting
Indemnification for Other Claims 30 8.5 Limitations on Indemnification 30      
  ARTICLE IX           MISCELLANEOUS         9.1 Fees and Expenses 30 9.2
Independent Contractors 31 9.3 Specific Enforcement 31 9.4 Successors and
Assigns 31 9.5 Entire Agreement 31 9.6 Notices 32 9.7 Time Periods; Business
Days 32 9.8 Amendments 33 9.9 Waiver 33 9.10 Descriptive Headings; No Strict
Construction 33 9.11 Governing Law 33 9.12 Consent to Jurisdiction; Waiver of
Jury Trial 33 9.13 Severability 34 9.14 Counterparts 34 9.15 Captions 34      
EXHIBITS       A. Form of Convertible Note   B. Form of Warrant   C. Form of
Registration Rights Agreement  

 

-iii-

 

 

INVESTMENT AGREEMENT

 

THIS INVESTMENT AGREEMENT, dated as of March 28, 2014 (the “Effective Date”), is
entered into by and between Apollo Medical Holdings, Inc., a Delaware
corporation (“Company”), and NNA of Nevada, Inc., a Nevada corporation
(“Purchaser”).

 

BACKGROUND STATEMENT

 

A.              In connection with the consummation of the transactions
contemplated by this Agreement, Company and Purchaser are entering into a credit
agreement, dated as of March 28, 2014, pursuant to which Purchaser, as lender,
will provide to Company, as borrower, (i) a revolving credit facility of up to
$1,000,000 and (ii) a term loan of $7,000,000 (such credit agreement, as
amended, restated, refinanced, extended, renewed, supplemented or otherwise
modified from time to time, the “Credit Agreement”).

 

B.              Upon the terms and subject to the conditions set forth in this
Agreement, Company wishes to sell to Purchaser and Purchaser wishes to purchase
from Company the following: (i) a convertible note of Company providing an
option for Company to borrow $2,000,000 pursuant to the terms thereof, (ii)
2,000,000 shares of Common Stock of Company, $.001 par value, at a price of
$1.00 per share, (iii) warrants to purchase 1,000,000 shares of Common Stock at
an exercise price of $1.00 per share if Company borrows under the convertible
note as described in clause (i) above, (iv) warrants to purchase 1,000,000
shares of Common Stock at an exercise price of $1.00 per share in connection
with Purchaser’s purchase of Common Stock referenced in clause (ii) above, and
(v) (a) warrants to purchase 1,000,000 shares of Company’s Common Stock at an
exercise price of $1.00 per share and (b) warrants to purchase 2,000,000 shares
of Company’s Common Stock at an exercise price of $2.00 per share, each in
connection with the loans extended by Purchaser pursuant to the Credit
Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1              Defined Terms. In addition to the words and terms defined
elsewhere in this Agreement, the following terms when used herein shall have the
following respective meanings:

 

“Acquisition” means any transaction or series of related transactions,
consummated on or after the Effective Date, by which Company or any of its
Subsidiaries, (i) acquires all or substantially all of the assets of any Person
or any going business, division thereof or line of business, whether through
purchase of assets, merger or otherwise, (ii) acquires Capital Stock of any
Person having at least a majority of combined voting power of the then
outstanding Capital Stock of such Person or (iii) enters into a Physician
Practice Management Agreement (as defined in the Convertible Note), some other
physician practice management agreement or such other agreement with another
Person and the effect of which is to cause such Person to be consolidated with
Company in accordance with GAAP.

 

 

 

 

“Affiliate” means, as to any Person, (i) any other Person which directly, or
indirectly through one or more intermediaries, controls such Person or is
consolidated with such Person in accordance with GAAP, (ii) any other Person
which directly, or indirectly through one or more intermediaries, is controlled
by or is under common control with such Person, or (iii) any other Person of
which such Person owns, directly or indirectly, ten percent (10%) or more of the
common stock or equivalent equity interests. As used herein, the term “control”
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities or otherwise.

 

“Agreement” means this Investment Agreement and all schedules and exhibits
hereto, together with any amendments, modifications, replacements and
supplements hereto, any substitutes herefor, and any replacements, renewals or
extensions hereof, in whole or in part, and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.

 

“Business Day” means any day of the year on which banks are open for business in
Waltham, Massachusetts.

 

“Capital Stock” means (i) with respect to any Person that is a corporation, any
and all shares, interests or equivalents in capital stock (whether voting or
nonvoting, and whether common or preferred) of such corporation, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership, limited liability company or other equity interests of such Person;
and in each case, any and all warrants, rights or options to purchase any of the
foregoing.

 

“Capital Stock Equivalents” means any evidences of indebtedness, shares of
capital stock or other securities (including without limitation the Warrants and
Convertible Note) that are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, shares of Capital
Stock, and any and all options, warrants or other securities or rights to
subscribe for, purchase or otherwise acquire shares of Capital Stock or any of
the foregoing and any other security or instrument representing, convertible
into or exchangeable for Capital Stock or any of the foregoing, in each case
whether or not immediately exercisable.

 

“Common Stock” means common stock of Company.

 

“Common Stock Equivalents” means any evidences of indebtedness, Capital Stock,
shares of stock or other securities (including without limitation the Warrants
and Convertible Note) that are convertible into or exchangeable for, with or
without payment of additional consideration in cash or property, shares of
Common Stock, and any options, warrants or other securities or rights to
subscribe for, purchase or otherwise acquire shares of Common Stock or any of
the foregoing, in each case whether or not immediately exercisable.

 

2

 

 

“Company Board” means the Board of Directors of Company and each board of
directors of the Subsidiaries of which Company owns, directly or indirectly,
more than fifty percent (50%) of the voting securities thereof.

 

“Company Parties” means Company and the Subsidiary Guarantors.

 

“Confidential Information” means, with respect to a party hereto or any of its
Affiliates (the “Disclosing Party”), any and all confidential or proprietary
information and material disclosed by the Disclosing Party to the other party
hereto or any of its Affiliates (the “Receiving Party”) or obtained by the
Receiving Party through inspection or observation of the Disclosing Party’s
property or facilities (whether in writing, or in oral, graphic, electronic or
any other form), whether disclosed or obtained before, on or after the Effective
Date, including any (a) trade secret, know-how, idea, invention, process,
technique, algorithm, program (whether in source code or object code form),
hardware, device, design, schematic, drawing, formula, data, plan, strategy and
forecast of, and (b) technical, engineering, manufacturing, product, marketing,
servicing, financial, personnel, log-in or identification passwords and other
information and materials of, the Disclosing Party and its employees,
consultants, investors, Affiliates, licensors, suppliers, vendors, customers,
clients and other Persons, provided, that Confidential Information shall not
include any such information which (a) was in the public domain on the Closing
Date or comes into the public domain other than through the fault or negligence
of the other party hereto (the “Receiving Party”) or any of its Affiliates, (b)
was lawfully obtained by the Receiving Party from a third party, but only to the
extent that such source is not known by the Receiving Party to be bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the Disclosing Party or any other party with
respect to such information, (c) was known to the Receiving Party or any of its
Affiliates at the time of disclosure of such Confidential Information to the
Receiving Party by the Disclosing Party, provided that the Receiving Party was
not, at such time, subject to any confidentiality obligation to the Disclosing
Party with respect thereto, or (d) was independently developed by the Receiving
Party without making use of any Confidential Information. For the avoidance of
doubt, it is expressly agreed and understood that (i) financial projections of
Company were disclosed by Company to Purchaser (or any person on behalf of the
Purchaser) on March 4, 2014 and on March 11, 2014 (collectively, the
"Projections") as required by Purchaser and the Projections were prior to the
date hereof subject to the confidentiality provisions of Section 9.6 of the
Credit Agreement, dated as of October 15, 2013, as amended by the First
Amendment To Credit Agreement, dated as of December 20, 2013 (as so amended, the
“Existing Credit Agreement”), (ii) information that was subject to the
confidentiality provisions of Section 9.6 of the Existing Credit Agreement,
including the Projections, shall be deemed Confidential Information and subject
to the confidentiality provisions of Section 5.9, and (iii) Purchaser
acknowledges that the Projections have only been used to determine the financial
covenants in the Convertible Note and the Credit Agreement and shall not be used
for any other purpose

 

“Convertible Note” means the Convertible Note of Company providing an option for
Company to borrow $2,000,000 pursuant to the terms thereof and substantially in
the form of Exhibit A to be issued in accordance with ARTICLE II.

 

“Credit Documents” has the meaning set forth in the Credit Agreement.

 

3

 

 

“Equity-Based Payments” means any payments arising out of or in connection with
any phantom equity rights, equity appreciation rights, profits interests,
bonuses or other payments calculated in reference to the valuation or changes in
valuation of Company’s equity, including without limitation, any phantom equity,
profits interests and/or similar rights granted by Company pursuant to any
employment or consulting agreement or any employee benefit plan.

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock, options or
other Common Stock Equivalents, in each case at or above Fair Market Value of
Common Stock at the time of issuance, to employees, consultants, officers or
directors of Company pursuant to the 2013 Equity Incentive Plan, (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder, (c) Common Stock Equivalents listed on Schedule 3.6(b), provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, (d) shares of Common
Stock pursuant to the conversion or exercise of Common Stock Equivalents
previously treated as a Subsequent Issuance for the anti-dilution protection in
the Warrants and the Convertible Note and a New Security for the subscription
rights in Section 6.3, (e) shares of Common Stock and Common Stock Equivalents
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company Board, provided that any such
issuance shall only be to a Person (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of Company and shall provide
to Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities, and (f) shares of Common Stock in a bona fide, firmly
underwritten public offering pursuant to a registration statement under the
Securities Act, and with a purchase price per share of at least $2.00 (such
offering pursuant to this clause (f), a “Qualified IPO”).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, as in
effect from time to time (except as provided herein).

 

“Fair Market Value” means, with respect to a share of Common Stock, an option or
other Common Stock Equivalent issued by Company, for any date, the price
determined by the first of the following clauses that applies: (a) the average
of the daily volume weighted average trading price of the Common Stock for the
five Trading Days immediately prior to such date on the Principal Trading
Market, or (b) if the Common Stock is not so listed or quoted, as reasonably
determined by the Company Board in good faith; provided, that in connection with
an Acquisition, the Fair Market Value shall be determined based upon the cash
and fair market value of any securities and other consideration as would be
received for such Common Stock.

 

“Fully Diluted Basis” means, with respect to the Common Stock, as of any date of
determination, the number of shares of outstanding Common Stock as of such date
plus, without duplication, the maximum number of shares of Common Stock issuable
as of such date upon exercise of the purchase, conversion or exchange rights
associated with all issued and outstanding Common Stock Equivalents.

 

4

 

 

“GAAP” means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants, consistently applied and
maintained on a consistent basis for Company and its Subsidiaries on a
consolidated basis throughout the period indicated and consistent with the
financial practice of Company and its Subsidiaries prior to the Effective Date.

 

“Governmental Authority” means any nation or government, any state, department,
agency or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to any government, and any corporation or other entity owned or
controlled (through stock or capital ownership or otherwise) by any of the
foregoing.

 

“Guaranty” means a guaranty agreement, dated as of the Effective Date, made by
the Subsidiary Guarantors in favor of Purchaser, as amended, modified, restated
and supplemented from time to time.

 

“Laws” mean all United States and foreign national, federal, state, and local
laws, statutes, ordinances, rules or regulations.

 

“Liabilities” means, in respect of a Person, all indebtedness, obligations, and
other liabilities of such Person, whether absolute, accrued, contingent, known
or unknown, fixed or otherwise, or whether due or to become due.

 

“Lien” means any interest in property securing an obligation owed to, or claim
by, a Person other than the owner of such property, whether such interest arises
by virtue of contract, statute or common law, including but not limited to the
lien or security interest arising from a mortgage, security agreement, pledge,
lease, conditional sale, consignment or bailment for security purposes or from
attachment, judgment or execution. The term “Lien” shall include any easements,
covenants, restrictions, conditions, encroachments, reservations, rights-of-way,
leases and other title exceptions and encumbrances affecting real property. For
the purpose of this Agreement, Company Parties shall be deemed to own, subject
to a Lien, any proceeds of a sale with recourse of accounts receivable, any
asset leased under any “sale and lease back” or similar arrangement and any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, financing lease or other title
retention agreement relating to such asset.

 

“Material Adverse Effect” means a material adverse effect upon, or a material
adverse change in, any of (i) the financial condition, operations, business or
properties of Company Parties, taken as a whole, (ii) the ability of Company
Parties to perform under this Agreement or any other Transaction Document in any
material respect or any other material contract in any material respect to which
any one or more of them is a party; (iii) the legality, validity or
enforceability of this Agreement or any other Transaction Document; or (iv) the
rights and remedies of Purchaser under this Agreement or any other Transaction
Document (other than a change resulting from any act or omission by Purchaser),
except with respect to clauses (ii) and (iv), the failure of Company to perform
its obligations under Section 2(c) of the Registration Rights Agreement related
to or resulting from (A) a change in the financial, banking or securities
markets generally (including any disruption thereof and any decline in the price
of any security or any market index), (B) changes in Laws or other binding
directives issued by any Governmental Authority or (C) the failure for any
reason whatsoever (other than because of any failure of Company to perform the
covenants and obligations within its control under the Registration Rights
Agreement) of the SEC to declare effective any registration statement of Company
as required under the Registration Rights Agreement.

 

5

 

 

“NASDAQ” means the NASDAQ Stock Market or, when used with reference to a
particular market tier of the NASDAQ Stock Market, including without limitation
the NASDAQ Global Select Market or NASDAQ Global Market, means and includes that
particular market tier and its related listing criteria and rules.

 

”Order” means any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, sentence, subpoena, writ or
award issued, made, entered or rendered by (i) any court, administrative agency
or other Governmental Authority or (ii) any arbitrator that is legally binding.

 

“Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

 

“Principal Trading Market” means the OTC Markets Group, Inc.’s OTCQB
Marketplace, NASDAQ, or, if the Common Stock is not listed or traded on a
marketplace maintained by either the OTC Markets Group, Inc. or NASDAQ, the
national securities exchange, automated quotation system or other securities
trading market on which the Common Stock is then primarily listed or quoted.

 

“Purchase Shares” means the 2,000,000 shares of Common Stock to be purchased and
sold in accordance with ARTICLE II.

 

“Registration Rights Agreement” means the registration rights agreement in the
form of Exhibit C to be entered into by Purchaser and Company on the Closing
Date.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, as in
effect from time to time.

 

“Securities” means, collectively, the Convertible Note, the Conversion Shares,
the Purchase Shares, the Warrants and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, as in effect from
time to time.

 

“Shareholders Agreement” means the Shareholders Agreement, dated as of the
Effective Date, by and between certain shareholders of Company and Purchaser.

 

“Subsequent Issuance” means any issue, sale, grant by Company of Common Stock or
Common Stock Equivalents or rights to acquire any of the foregoing after the
initial issuance of the Warrants and the Convertible Note.

 

6

 

 

“Subsidiary” means any corporation, partnership, limited liability company,
association or other business entity (i) of which Company owns, directly or
indirectly, more than fifty percent (50%) of the voting securities thereof or
(ii) the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, by Company and is consolidated with Company
in accordance with GAAP.

 

“Subsidiary Guarantor” means any Subsidiary of Company that is a guarantor of
the obligations under the Guaranty (or under another guaranty agreement in form
and substance satisfactory to Purchaser as holder of the Convertible Note).

 

“Trading Day” means any day on which the Common Stock is traded on the Principal
Trading Market; provided that “Trading Day” shall not include any day on which
the Common Stock is scheduled to trade on the Principal Trading Market for less
than 4.5 hours or any day that the Common Stock is suspended from trading during
the final hour of trading on the Principal Trading Market (or if the Principal
Trading Market does not designate in advance the closing time of trading
thereon, then during the hour ending at 4:00 p.m., New York City time).

 

“Transaction Documents” means each and all of this Agreement, the Registration
Rights Agreement, the Convertible Note, the Warrants, the Guaranty, the Credit
Documents, the Shareholders Agreement and any and all other agreements,
instruments and documents now or hereafter executed by or behalf of Company
Parties or delivered to Purchaser with respect to this Agreement or with respect
to the transactions contemplated by this Agreement, and in each case, together
with any amendments, modifications and supplements thereto, any replacements,
renewals, extensions and restatements thereof, and any substitutes therefor, in
whole or in part.

 

“2013 Equity Incentive Plan” means the 2013 equity incentive plan of Company as
in effect on the Closing Date.

 

“Warrants” mean the Common Stock Purchase Warrants in substantially the form of
Exhibit B to be issued in accordance with ARTICLE II, which Warrants shall mean
and include each of the following: (a) warrants to purchase 1,000,000 shares of
Common Stock at an initial exercise price of $1.00 per share in connection with
Purchaser’s purchase of the Purchase Shares, (b) warrants to purchase 1,000,000
shares of Company’s Common Stock at an initial exercise price of $1.00 per
share, in connection with Purchaser’s purchase of the Convertible Note, and (c)
(i) warrants to purchase 1,000,000 shares of Company’s Common Stock at an
initial exercise price of $1.00 per share and (ii) warrants to purchase
2,000,000 shares of Company’s Common Stock at an exercise price of $2.00 per
share, each of such warrants described in (c)(i) and (ii) in connection with the
loans extended by Purchaser pursuant to the Credit Agreement.

 

“Warrant Shares or Warrant Number” means, with respect to any Warrant, the
number of shares of Common Stock issuable upon cash exercise in full of such
Warrant and, with respect to all Warrants, the aggregate total number of shares
of Common Stock issuable upon cash exercise in full of all such Warrants.

 

7

 

 

1.2              Additional Definitions.

 

The following terms have the meanings set forth in the corresponding Sections of
this Agreement:

 

  Term   Section   Board Observer   6.1   Closing   2.2   Closing Date   2.2  
Common Stock   Background Statement   Company   Preamble   Consents, Approvals
and Filings   3.4   Conversion Shares   3.2   Credit Agreement   Background
Statement   Disclosing Party   Definition of Confidential Information  
Effective Date   Preamble   Express Company Representations   4.7   Indemnity
Notice   8.4   Losses   8.2(a)   New Security   6.3(a)   OTCQB   3.6(c)  
Principal Officer Certifications   3.8(c)   Purchaser   Preamble   Purchaser
Director   6.1   Qualified IPO   Clause (e) of Exempt Issuances   Receiving
Party   Definition of Confidential Information   Requisite Holder Condition  
6.1   Response Period   6.3(b)   SEC   3.8(a)   SEC Documents   3.8(a)  
Subscription Proposals   6.3(c)   Superior Trading Market   5.4

 

1.3              Singular/Plural. Unless the context otherwise requires, words
in the singular include the plural and words in the plural include the singular.

 

ARTICLE II

 

PURCHASE AND SALE OF THE SECURITIES

 

2.1              Purchase and Sale. Upon the terms and subject to the conditions
set forth herein, at Closing, Company shall issue and sell to Purchaser, and
Purchaser shall purchase from Company, as specified below, the Securities:

 

(a)         the Convertible Note, for a purchase price equal to the principal
amount of the loan to be funded thereunder at Closing;

 

(b)         the Purchase Shares, for a purchase price of $1.00 per share;

 

8

 

 

(c)         the Warrants, to purchase an aggregate of 5,000,000 shares of Common
Stock, in such amounts and at such initial exercise prices as specified in
Section 1.1 in the definition of “Warrants.”

 

2.2              Closing. The closing of the purchase and sale of the
Convertible Note, the Purchase Shares and the Warrants pursuant to Section 2.1
(the “Closing”) shall take place remotely via exchange of documents on the first
Business Day following the satisfaction or waiver of the applicable conditions
set forth in ARTICLE VII (other than those conditions that by their nature are
to be satisfied at such Closing, but subject to the satisfaction or waiver of
those conditions), provided, that the Closing may take place at such other
place, time or date as shall be mutually agreed upon by Company and Purchaser
(the date of the Closing, the “Closing Date”).

 

2.3              Closing Deliveries. At the Closing, Company shall deliver to
Purchaser (a) the Convertible Note, (b) the Purchase Shares, (c) the Warrants
and (d) such other deliveries as are specified in Section 7.2(f). Delivery of
the Convertible Note, the Purchase Shares and the Warrants and such other
deliveries shall be made against receipt by Company of (i) the purchase price
payable for such Securities as specified in Section 2.1, which shall be paid by
Purchaser by wire transfer of immediately available funds to Company’s account
designated in writing to Purchaser not later than the second Business Day before
the Closing Date, and (ii) such other deliveries as are specified in Section
7.3(c).

 

2.4              Calculation of Conversion Price. The Convertible Note shall,
subject to adjustment as provided in the Convertible Note, initially be
convertible into a number of shares of Common Stock derived by dividing the
aggregate outstanding principal amount of the Convertible Note to be converted
by $1.00. The Conversion Price and other terms of the Convertible Note will be
subject to adjustment as provided in the Convertible Note.

 

2.5              Warrants. Company and Purchaser hereby acknowledge and agree
that (i) the Warrants are part of an investment unit within the meaning of
Section 1273(c)(2) of the Code, (ii) for United States federal income tax
purposes, (A) the issue price of the Warrants referred to in clause (a) of the
definition thereof within the meaning of Section 1273(b) of the Code, which
issue price was determined pursuant to Section 1.1273-2(h)(1) of the Treasury
Regulations, is equal to $10,000 (or $0.01 per warrant as of the Effective
Date), (B) the issue price of the Warrants referred to in clause (b) of the
definition thereof within the meaning of Section 1273(b) of the Code, which
issue price was determined pursuant to Section 1.1273-2(h)(1) of the Treasury
Regulations, is equal to $0.01 per warrant as of the date of its issuance, (C)
the issue price of the Warrants referred to in clause (c) of the definition
thereof within the meaning of Section 1273(b) of the Code, which issue price was
determined pursuant to Section 1.1273-2(h)(1) of the Treasury Regulations, is as
set forth in Section 2.14 of the Credit Agreement, and (iii) each of Company and
Purchaser shall use such issue price for all income tax purposes with respect to
the issuance of the Warrants.

 

9

 

 

2.6              Acceptability of Proceedings at Closing. All actions to be
taken and all documents to be executed and delivered by the Company Parties and
other related Persons in connection with the consummation of the transactions
contemplated at the Closing shall be reasonably satisfactory in form and
substance to Purchaser and its counsel, and all actions to be taken and all
documents to be executed and delivered by Purchaser in connection with the
consummation of the transactions contemplated at the Closing shall be reasonably
satisfactory in form and substance to Company and its counsel. All actions to be
taken and all documents to be executed and delivered by all parties hereto at
the Closing shall be deemed to have been taken and executed and delivered
simultaneously, and no action shall be deemed taken nor any document executed or
delivered until all have been taken, executed, and delivered.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF COMPANY

 

To induce Purchaser to enter into this Agreement and the transactions
contemplated hereby, Company represents and warrants to Purchaser as of the
Closing Date as follows:

 

3.1              Corporate Organization and Power. Each Company Party (i) is a
corporation or a limited liability company duly organized or formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or formation, as the case may be (which jurisdictions, as of the
Closing Date, are set forth on Schedule 3.1) and (ii) is duly qualified to do
business as a foreign corporation or limited liability company and is in good
standing in each jurisdiction where the nature of its business or the ownership
of its properties requires it to be so qualified, except where the failure to be
so qualified, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.

 

3.2              Authorization. Each Company Party has the requisite corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each Company
Party of this Agreement and each of the other Transaction Documents to which it
is a party, the issuance, sale and delivery of the Securities by Company, the
compliance by each Company Party with each of the provisions of this Agreement
and each of the other Transaction Documents to which it is a party (including
the reservation and issuance of the Common Stock issuable upon conversion of the
Convertible Note if the term loan is made thereunder (the “Conversion Shares”)
and the reservation, issuance and sale of the Warrant Shares), and the
consummation by each Company Party of the transactions contemplated hereby and
thereby (a) are within the corporate power and authority of Company (including
such approval and authorization by the Company Board required under the Laws of
the State of Delaware and Company’s certificate of incorporation and bylaws) and
each of its Subsidiaries and (b) have been duly authorized by all necessary
corporate action of Company and each of its Subsidiaries. This Agreement has
been, and each of the other Transaction Documents to which each Company Party is
a party, when executed and delivered by such Company Party shall be, duly and
validly executed and delivered by such Company Party. Assuming due
authorization, execution and delivery by Purchaser of the Transaction Documents
to which it is a party, this Agreement constitutes, and each of such other
Transaction Documents when executed and delivered by each Company Party that is
intended to be a party thereto shall constitute a valid and binding agreement of
each such Company Party enforceable against it in accordance with its terms,
except (i) as such enforcement is limited by bankruptcy, insolvency and other
similar Laws affecting the enforcement of creditors’ rights generally and (ii)
for limitations imposed by general principles of equity.

 

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3.3              Reservation; Valid Issuance. The Purchase Shares, when issued
and delivered in accordance with this Agreement, shall be duly and validly
issued and outstanding, fully paid and non-assessable, and not subject to the
preemptive or other similar rights of the stockholders of Company or any other
Person. As of the Closing Date, the Conversion Shares and the Warrant Shares
have been reserved for issuance upon conversion of the Convertible Note and
exercise of the Warrants and, when issued and delivered in accordance with the
terms of the Convertible Note and the Warrants, respectively, shall be duly and
validly issued and outstanding, fully paid and non-assessable, and not subject
to the preemptive or other similar rights of the stockholders of Company, any
other Company Party or any other Person.

 

3.4              No Conflicts; Consents and Approvals; No Violation. Neither the
execution, delivery or performance by each Company Party of this Agreement or
any of the other Transaction Documents to which it is a party nor the
consummation by each Company Party of the transactions contemplated hereby or
thereby shall (a) result in a breach or a violation of, any provision of its
certificate of incorporation or bylaws; (b) constitute, with or without notice
or the passage of time or both, a breach, violation or default, create a Lien,
or give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i) any
Law or (ii) any provision of any agreement or other instrument to which it is a
party or pursuant to which any of it or any of its assets or properties is
subject, except for, in the case of each clause (i) and (ii), (A) the Liens
granted in favor of Purchaser pursuant to the Credit Documents and (B)
violations, breaches or defaults, which, individually or in the aggregate, would
not constitute a Material Adverse Effect; or (c) require any consent, Order,
approval or authorization of, notification or submission to, filing with,
license or permit from, or exemption or waiver by, any Governmental Authority or
any other Person (collectively, the “Consents, Approvals and Filings”) on its
part, except for (w) the Consents, Approvals and Filings required under the
Securities Act, the Exchange Act and applicable state securities Laws and the
Principal Trading Market, (x) filings of Uniform Commercial Code financing
statements and other instruments and actions necessary to perfect the Liens
created by the Credit Documents, (y) consents, authorizations and filings that
have been (or on or prior to the Closing Date will have been) made or obtained
and that are (or on the Closing Date will be) in full force and effect, which
consents, authorizations and filings are listed on Schedule 3.4, and (z) such
other Consents, Approvals and Filings which the failure of a Company Party to
make or obtain would not, individually or in the aggregate, constitute a
Material Adverse Effect. No Company Party is in violation or breach of any term
or provision of its certificate of incorporation or bylaws, and, other than any
violation or breach that would not, individually or in the aggregate, constitute
a Material Adverse Effect, no Company Party is in violation or breach of any
provision of any other agreement, indebtedness, mortgage, indenture, contract,
Law or Order applicable to any Company Party.

 

3.5              Brokers Fees. No agent, broker, investment banker or other
Person is or shall be entitled to any broker’s or finder’s fee or any other
commission or similar fee from any of the Company Parties in connection with any
of the transactions contemplated by this Agreement to occur on the Closing Date.

 

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3.6              Capitalization.

 

(a)         As of the Effective Date, the authorized Capital Stock of Company
consists of (i) 100,000,000 shares of Common Stock, par value $.001 per share,
47,134,549 shares of which, as of the close of business on February 28, 2014,
were issued and outstanding and no more of which additional shares (excluding
any shares issued upon exercise of outstanding options) have been issued between
February 28, 2014 and the Effective Date; and (ii) 5,000,000 shares of Preferred
Stock, par value $.001 per share, no shares of which as of the Effective Date
are issued and outstanding. All of the issued and outstanding shares of Common
Stock have been duly authorized and are validly issued, fully paid and
non-assessable.

 

(b)         As of the Effective Date, except as contemplated by this Agreement
and as disclosed on Schedule 3.6(b), there are (i) no authorized or outstanding
securities, rights (preemptive or other), subscriptions, calls, commitments,
warrants, options, or other agreements that give any Person the right to
purchase, subscribe for, or otherwise receive or be issued Capital Stock of
Company or any security convertible into or exchangeable or exercisable for
Capital Stock of Company, (ii) no outstanding debt or equity securities of
Company that upon the conversion, exchange, or exercise thereof would require
the issuance, sale, or transfer by Company of any new or additional Capital
Stock of Company (or any other securities of Company which, whether after
notice, lapse of time, or payment of monies, are or would be convertible into or
exchangeable or exercisable for Capital Stock of Company), (iii) no agreements
or commitments obligating Company to repurchase, redeem, or otherwise acquire
Capital Stock or other securities of Company or its Subsidiaries, (iv) no
agreements or commitments to which Company is a party or is otherwise bound or
that otherwise exists to the knowledge of Company with respect to the voting
(including, without limitation, any voting trusts or proxies), registration
under the Securities Act, or sale or transfer (including, without limitation,
agreements relating to preemptive rights, rights of first refusal, rights of
first offer, buy-sell rights, co-sale rights or “drag along” rights) of any
Capital Stock of Company and (v) no outstanding or authorized stock appreciation
rights, phantom stock, stock rights, or other equity-based interests in respect
of Company. Except as disclosed on Schedule 3.6(b), Company has not issued any
indebtedness that is exercisable or exchangeable for or convertible into Capital
Stock of Company. As of the Effective Date, the Purchase Shares, the Conversion
Shares (assuming the Convertible Note is funded) and the Warrant Shares,
assuming the amount of the Convertible Note is fully borrowed, constitute
12.9987% of Company’s issued and outstanding Capital Stock and Capital Stock
Equivalents, in each case, calculated on a Fully Diluted Basis.

 

(c)         Company has registered its Common Stock pursuant to Section 12(g) of
the Exchange Act. The Common Stock is currently quoted on the OTCQB Marketplace
(the “OTCQB”) maintained by the OTC Markets Group Inc. under the symbol “AMEH.”
Company has not received any oral or written notice that its Common Stock is not
eligible or will become ineligible for quotation on the OTCQB nor that its
Common Stock does not meet all the requirements for the continuation of such
quotation.

 

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(d)         Schedule 3.6(d) sets forth, as of the Effective Date, as to each
Subsidiary Guarantor and, to the knowledge of Company, each other Subsidiary
(x) the number of shares, units or other interests of each class of Capital
Stock outstanding in each such Subsidiary, and the number and effect, if
exercised, of all outstanding options, warrants, rights of conversion or
purchase and similar rights and (y) the registered holders of all such Capital
Stock of the Subsidiaries and the number of shares, units, interests, options,
warrants or other purchase rights held by each. All outstanding shares of
Capital Stock of the Subsidiary Guarantors and, to the knowledge of Company,
each other Subsidiary are duly and validly issued, fully paid and nonassessable.
Except for the shares of Capital Stock and the other equity arrangements
expressly indicated on Schedule 3.6(d), as of the Effective Date there are no
shares of Capital Stock, warrants, rights, options or other equity securities,
or other Capital Stock of any Subsidiary Guarantor and, to the knowledge of
Company, each other Subsidiary outstanding or reserved for any purpose.

 

3.7              Offering; Investment Company Act.

 

(a)         Assuming the accuracy of the representations and warranties of
Purchaser set forth in ARTICLE IV, the offer, sale, and issuance of the
Securities, as contemplated hereby are or will be exempt from the registration
requirements of the Securities Act and are or will have been registered or
qualified (or are exempt from registration and qualification) under the
registration or qualification requirements of all applicable state securities
Laws.

 

(b)         Company is not, and after giving effect to the issuance of the
Securities and the conversion and exercise, as applicable, of the Convertible
Note and the Warrants and the application of the proceeds thereof will not be,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

 

3.8              SEC Documents; Financial Statements; Internal Controls and
Procedures.

 

(a)         Company has filed or furnished all forms, documents and reports
required to be filed or furnished by it with the Securities and Exchange
Commission (the “SEC”) on a timely basis since January 31, 2011 (together with
any documents so filed or furnished during such period and the period between
the Effective Date and the Closing Date, in each case as may have been, or
between the Effective Date and the Closing Date may be, amended, the “SEC
Documents”). Each of the SEC Documents, including all SEC Documents filed or
furnished after the Effective Date but prior to or on the Closing Date, complied
or, if not yet filed, will comply, as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the
Sarbanes-Oxley Act. As of the date filed or furnished with the SEC, none of the
SEC Documents, including all SEC Documents filed or furnished after the
Effective Date but prior to or on the Closing Date, contained or, if not yet
filed, will contain any untrue statement of a material fact or omitted, or if
not yet filed, will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of the Effective
Date, there are no material outstanding or unresolved comments received from the
SEC with respect to any of the SEC Documents.

 

(b)         Since January 31, 2011, subject to any applicable grace periods,
Company has been and is in compliance with the applicable provisions of the
Sarbanes-Oxley Act and the applicable rules and regulations of the OTCQB, except
for any such noncompliance that would not, individually or in the aggregate,
constitute a Material Adverse Effect.

 

13

 

 

(c)         Except as disclosed in the SEC Documents, Company has designed and
maintained disclosure controls and procedures and internal control over
financial reporting (as such terms are defined in paragraphs (e) and (f),
respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15
under the Exchange Act and as necessary to permit preparation of financial
statements in conformity with GAAP. Company’s disclosure controls and procedures
are reasonably designed to ensure that all material information required to be
disclosed by Company in the reports that it files or furnishes under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and that all such material
information is accumulated and communicated to Company’s principal executive
officer and its principal financial officer by others in Company or its
Subsidiaries to allow timely decisions regarding required disclosure and to make
the certifications required pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act (the “Principal Officer Certifications”). As required by the
Sarbanes-Oxley Act and in accordance with the most recent Principal Officer
Certifications, Company’s Principal Executive Officer and Principal Financial
Officer have disclosed, based on their most recent evaluation prior to the
Effective Date, to Company’s auditors and the audit committee of the Company
Board (i) any material weaknesses in its internal control over financial
reporting and (ii) any allegation of fraud that involves management of Company
or any other employees of Company and its Subsidiaries who have a significant
role in Company’s internal control over financial reporting or disclosure
controls and procedures. Since January 31, 2011, neither Company nor any of its
Subsidiaries has received any written complaint, allegation, assertion or claim
regarding the accounting or auditing practices, procedures, methodologies or
methods of Company or the Subsidiaries or their respective internal accounting
controls.

 

3.9              Absence of Undisclosed Liabilities. Except (a) as disclosed,
reflected or reserved against in the consolidated balance sheet of Company and
its Subsidiaries as of January 31, 2013 (or the notes thereto), (b) for
Liabilities incurred under or in accordance with the Transaction Documents or in
connection with the transactions contemplated hereby or thereby, (c) for
Liabilities incurred under any contract or other agreement or arising under any
applicable Law (other than Liabilities due to breaches thereunder or violations
thereof), in each case, in the ordinary course of business since January 31,
2013, (d) for other Liabilities incurred in the ordinary course of business
since January 31, 2013 and (e) for Liabilities that have been discharged or paid
in full, neither Company nor any Subsidiary has any Liabilities that would be
required by GAAP to be reflected on, or reserved against in, a consolidated
balance sheet (or the notes thereto) of Subsidiaries, other than as does not
constitute, individually or in the aggregate, a Material Adverse Effect.

 

3.10            Absence of Certain Changes. There has been no Material Adverse
Effect since January 31, 2013, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Effect.

 

3.11            Litigation. There are no actions, investigations, suits or
proceedings pending or, to the knowledge of Company, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority,
arbitrator or other Person, (i) against or affecting any of the Company Parties
or any of their respective properties that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, or (ii) with respect
to this Agreement, the other Transaction Documents or any of the transactions
contemplated hereby or thereby.

 

14

 

 

3.12            Credit Documents. Each of the representations and warranties
contained in the Credit Documents made by Company and each of its Subsidiaries
is true and correct. Company and each of the Subsidiaries agrees that, by this
reference, such representations and warranties contained in the Credit Documents
by Company and each of its Subsidiaries, without limiting any of the
representations and warranties otherwise contained herein or in any other
Transaction Document, hereby are incorporated herein, mutatis mutandis, for the
benefit of Purchaser.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

To induce Company to enter into this Agreement and the transactions contemplated
hereby, Purchaser represents and warrants to Company as of the Closing Date as
follows:

 

4.1              Organization. Purchaser is an entity duly organized, validly
existing and in good standing under the Laws of its jurisdiction of formation
and has the requisite corporate power and authority to carry on its business as
it is now being conducted.

 

4.2              Authorization. Purchaser has the requisite corporate power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Purchaser of this Agreement
and each of the other Transaction Documents to which it is a party and the
compliance by Purchaser with each of the provisions of this Agreement and each
of the Transaction Documents to which it is a party (including the consummation
by Purchaser of the transactions contemplated hereby and thereby) (a) are within
the corporate power and authority of Purchaser and (b) have been duly authorized
by all necessary corporate action on the part of Purchaser (including such
approvals and authorizations by the Board of Directors of Purchaser required
under the Laws of the State of Nevada and the articles of incorporation and
bylaws of Purchaser). This Agreement has been, and each of the other Transaction
Documents to which it is a party when executed and delivered by Purchaser shall
be, duly and validly executed and delivered by Purchaser. Assuming due
authorization, execution and delivery by Company of the Transaction Documents to
which it is a party, this Agreement constitutes, and each of such other
Transaction Documents when executed and delivered by Purchaser shall constitute,
a valid and binding agreement of Purchaser enforceable against Purchaser in
accordance with its terms, except (i) as such enforcement is limited by
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors’ rights generally and (ii) for limitations imposed by general
principles of equity.

 

15

 

 

4.3              No Conflicts; Consents and Approvals; No Violation. Neither the
execution, delivery or performance by Purchaser of this Agreement or any of the
other Transaction Documents to which it is a party nor the consummation of the
transactions contemplated hereby or thereby shall (a) result in a breach or a
violation of, any provision of the articles of incorporation or bylaws of
Purchaser; (b) constitute, with or without notice or the passage of time or
both, a breach, violation or default, create a Lien, or give rise to any right
of termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration, under (i) any Law, or (ii) any provision of any
agreement or other instrument to which Purchaser is a party or pursuant to which
Purchaser or its assets or properties is subject, except for, in the case of
each clause (i) and (ii), violations, breaches or defaults, which, individually
or in the aggregate, would not materially adversely affect the ability of
Purchaser to perform its obligations under this Agreement or any Transaction
Document to which it is a party or to consummate the transactions contemplated
hereby or thereby; or (c) require any Consents, Approvals and Filings on the
part of Purchaser, except for (x) the Consents, Approvals and Filings required
under the Exchange Act and applicable state securities Laws and (y) such other
Consents, Approvals and Filings which the failure of Purchaser to make or obtain
would not materially adversely affect the ability of Purchaser to perform its
obligations under this Agreement or any Transaction Document to which it is a
party or to consummate the transactions contemplated hereby or thereby.

 

4.4              Brokers or Finders. No agent, broker, investment banker or
other Person is or shall be entitled to any broker’s or finder’s fee or any
other commission or similar fee from Purchaser in connection with the
transactions contemplated by this Agreement to occur on the Closing Date.

 

4.5              Securities Law Matters.

 

(a)         Purchaser is acquiring the Securities for its own account, for
investment and not with a view to, or for sale in connection with, the
distribution thereof within the meaning of the Securities Act (it being
understood that except as otherwise provided in this Agreement and the other
Transaction Documents to which it is a party, Purchaser does not agree to hold
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with the Securities Act and
state securities Laws applicable to such disposition).

 

(b)         Purchaser is an “accredited investor,” as that term is as defined in
Rule 501(a) of Regulation D under the Securities Act. Purchaser has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of its investment in the Securities and is
capable of bearing the economic risks of such investment.

 

(c)         Purchaser and its advisers have been furnished with all materials
relating to the business, finances and operations of Company, its Subsidiaries
and materials relating to the offer and sale of the Securities which have been
requested by Purchaser or its advisers. Purchaser and its advisers have been
afforded the opportunity to ask questions of Company’s management concerning
Company and the Securities.

 

(d)         Purchaser understands that except as provided in this Agreement or
the Registration Rights Agreement, the sale or re-sale of the Securities has not
been and is not being registered under the Securities Act or any applicable
state securities Laws, and the Securities may not be offered, sold or otherwise
transferred unless (i) the Securities are offered, sold or transferred pursuant
to an effective registration statement under the Securities Act, or (ii) the
Securities are offered, sold or transferred pursuant to an exemption from
registration under the Securities Act and any applicable state securities Laws.

 

16

 

 

(e)         The principal offices of Purchaser and the offices of Purchaser in
which it made its decision to purchase the Securities are located in the State
of Massachusetts.

 

4.6              Availability of Funds. Purchaser has sufficient funds to pay
the purchase price for the respective Securities it is purchasing pursuant to
ARTICLE II.

 

4.7              No Reliance. Purchaser has substantial investment experience so
that Purchaser has the capacity to protect its own interests and is fully
capable of evaluating the merits and risks of its purchase of the Securities
hereunder. Purchaser acknowledges that it has made its own decision to purchase
the Securities hereunder without reliance on any representation or warranty of
Company or any other party (other than with respect to the representations and
warranties made by Company herein and in the other Transaction Documents (the
“Express Company Representations”)). Purchaser further acknowledges that none of
Company, its Subsidiaries or any third party has any responsibility with respect
to any statements, representations or warranties that have been made or may be
made regarding Company or the value of the Securities (except with respect to
the Express Company Representations), that Company has not made any
representation, warranty or covenant, express or implied and that, except with
respect to the Express Company Representations, Company has not made any
representation, warranty or covenant, express or implied. Specifically, Company
has not made any representation, warranty or covenant, express or implied, with
respect to Company’s business, financial condition, prospects, or value, or the
value of the Securities (except with respect to the Express Company
Representations). Purchaser has access to and the opportunity to review
financial and business information concerning Company, including its public
filings made with the SEC, as necessary to make a deliberate and informed
decision as to whether to purchase the Securities on the terms provided in this
Agreement. Purchaser represents that it has had a full, fair and complete
opportunity to value the Securities. Purchaser acknowledges that the purchase
price of the Securities may not be indicative of the actual fair market value of
the Securities. Purchaser has been given the opportunity to (i) ask questions of
and receive answers from Company and Company concerning the terms and conditions
of the Securities, and the business and financial condition of Company and (ii)
obtain any additional information that Company possesses with respect to the
Securities. Purchaser has such knowledge and experience in financial or business
matters and with respect to Company’s business, financial condition, operating
results and prospects that Purchaser is capable of evaluating the merits and
risks of the purchase contemplated by this Agreement.

 

4.8              Restricted Securities. Purchaser understands that the
Securities have not been registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of Purchaser’s representations as expressed herein. Purchaser
understands that the Securities are “restricted securities” under applicable
U.S. federal and state securities Laws and that, pursuant to these Laws,
Purchaser must hold the Securities until such time as they are registered with
the SEC and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. Purchaser acknowledges
that if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Securities, and on requirements
relating to Company which are outside of Purchaser’s control.

 

17

 

 

4.9              Legends. Purchaser understands that the Securities and any
securities issued in respect of or exchange therefor, may be notated with one or
all of the following legends:

 

(a)         “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(b)         Any legend set forth in, or required by, the other Transaction
Agreements.

 

(c)         Any legend required by the securities laws of any state to the
extent such laws are applicable to the Securities represented by the
certificate, instrument, or book entry so legended.

 

ARTICLE V

 

COVENANTS

 

5.1              Public Announcements. Company and Purchaser shall consult with
each other before issuing any press release or other public disclosure with
respect to this Agreement or the transactions contemplated hereby and neither
shall issue any such press release or make any such public statement with
respect thereto without the prior consent of the other, which consent shall not
be unreasonably withheld, delayed or conditioned; provided, however, that a
party may, without the prior consent of the other party, issue such press
release or make such public disclosure as may upon the advice of counsel be
required by Law or by the rules of the OTCQB, provided that, to the extent time
permits, such party has used all commercially reasonable efforts to consult with
the other party prior thereto. Company and Purchaser agree that the initial
press release or other public disclosure relating to this Agreement and the
transactions contemplated herein shall state, among other things, that Purchaser
is an Affiliate of Fresenius Medical Care Holdings, Inc.

 

5.2              Consents, Approvals and Filings. Subject to the terms of this
Agreement and the other Transaction Documents, Company and Purchaser each shall
use their respective commercially reasonable efforts to take, or cause to be
taken, all actions, and do, or cause to be done, and to assist and cooperate
with the other party in doing, all things necessary, proper, desirable or
advisable to obtain and make all Consents, Approvals and Filings required to be
obtained or made by Company and its Subsidiaries or Purchaser, as the case may
be, in connection with the authorization, execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby.

 

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5.3              Further Assurances. Except as otherwise expressly provided in
this Agreement and the other Transaction Documents, Company and Purchaser each
shall use their respective commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate the transactions
contemplated by this Agreement or any Transaction Document; provided that the
foregoing shall not impose any obligations on Purchaser to convert the
Convertible Note into Conversion Shares or exercise any Warrant for Warrant
Shares If any administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement or any Transaction
Document, each party shall use commercially reasonable efforts to cooperate in
all respects with the other party, to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any Order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts the consummation of the transactions
contemplated by this Agreement or any Transaction Document; provided, however,
that neither Company nor Purchaser shall be required to expend any material
funds in connection with such commercially reasonable efforts.

 

5.4              Quotation and Listing. For so long as any Securities are
outstanding, Company shall use its commercially reasonable efforts to
(i) continue to have the Common Stock quoted on the OTCQB; provided, however,
that if and to the extent Company’s Common Stock meets the qualifications for
quotation and/or listing on the OTCQX or any tier of any other nationally
recognized U.S. securities trading market, including without limitation, the
NASDAQ Stock Market or any other national securities exchange that imposes more
stringent criteria for listing or trading of the Common Stock (each such market
or exchange, a “Superior Trading Market”) than Company’s then Principal Trading
Market, then upon the approval of the Company Board (which it may grant or
withhold in its sole and absolute discretion), Company shall use its
commercially reasonable efforts to apply for, pay all applicable fees and
expenses in connection with, and obtain authorization for the listing or
quotation of the Common Stock, including the Securities as and when represented
by or converted into Common Stock, on such Superior Trading Market.

 

5.5              Reservation of Common Stock. Company at all times shall reserve
and keep available, free of preemptive rights, solely for issuance and delivery
upon conversion of the Convertible Note and upon exercise of the Warrants, the
number of shares of Conversion Shares and Warrants Shares, as the case may be,
from time to time issuable upon conversion of the Convertible Note or upon
exercise of the Warrants, in each case at the time outstanding.

 

5.6              Integration. Company agrees that it will not and will cause its
Affiliates not to, directly or indirectly, solicit any offer to buy, sell or
make any offer or sale of, or otherwise negotiate in respect of, securities of
Company of any class if counsel to Company advises it that, as a result of the
doctrine of “integration” referred to in Rule 502 under the Securities Act,
there is a substantial likelihood that such offer or sale would render invalid
(for the purpose of (i) the sale of the Securities by Company to Purchaser, or
(ii) the resale of the Securities by Purchaser to any subsequent transferee) the
exemption from the registration requirements of the Securities Act provided by
Section 4(a)(2) thereof or by Rule 144, Rule 144A or by Regulation S thereunder
or otherwise.

 

5.7              Rule 144 and 144A Information. Company agrees that, in order to
render the Securities eligible for resale pursuant to Rule 144 or, to the extent
available, Rule 144A under the Securities Act, while any of such Securities
remain outstanding, Company will make available, upon request, to Purchaser or
any prospective transferee of such Securities the information specified in Rule
144(c)(2) and/or Rule 144A(d)(4), as applicable, unless Company furnishes
information to the SEC pursuant to Section 13 or 15(d) of the Exchange Act in
compliance with Rule 144(c)(1) and/or so as to exempt it from the information
requirements in Rule 144A(d)(4), as applicable.

 

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5.8              [Reserved]

 

5.9              Confidential Information. In the event the Receiving Party
(including its officers, employees, counsel, accountants, partners, Board
Observer and other authorized representatives) obtains or has obtained from the
Disclosing Party any Confidential Information, the Receiving Party (i) shall
treat all such Confidential Information as confidential, (ii) shall use such
Confidential Information only for the purposes contemplated in this Agreement
and the other Transaction Documents (and related documents), (iii) shall protect
such Confidential Information with the same degree of care as the Receiving
Party uses to protect its own confidential and proprietary information against
public disclosure, but in no case with less than reasonable care, and (iv) shall
not disclose such Confidential Information to any third party except to such
officers, employees, counsel, accountants, partners and other authorized
representatives of the Receiving Party, its Affiliates or potential permitted
transferees of the Receiving Party’s rights under this Agreement and the other
Transaction Documents who need to know such Confidential Information for any
proper purpose related to this Agreement and the other Transaction Documents or
any transaction contemplated hereby or thereby and who have been informed of and
have agreed in writing to protect the confidential nature of such Confidential
Information and not to use such Confidential Information for any unlawful
purpose (and the Receiving Party shall be responsible for compliance with this
Section 5.9 by its and its Affiliates’ officers, employees, counsel,
accountants, partners and other authorized representatives) or to the extent
required by applicable Requirements of Law, provided that, if not prohibited by
applicable Requirements of Law, the Receiving Party will (i) provide reasonable
advance notice to the Disclosing Party of such disclosure so that the Disclosing
Party may seek an appropriate protective order and (ii) to cooperate with the
Disclosing Party, at the Disclosing Party’s expense, to obtain such protective
order. Each party agrees that, due to the unique nature of the Confidential
Information, the unauthorized disclosure or use of any Confidential Information
of the Disclosing Party may cause irreparable harm and significant injury to the
Disclosing Party, the extent of which may be difficult to ascertain and for
which there may be no adequate remedy at law. Accordingly, each party agrees
that the Disclosing Party, in addition to any other available remedies, shall
have the right to seek an immediate injunction and other equitable relief
enjoining any breach or threatened breach of this Section 5.9 without the
necessity of posting any bond or other security. The Receiving Party shall
notify the Disclosing Party in writing immediately upon the Receiving Party’s
becoming aware of any such breach or threatened breach. Notwithstanding anything
to the contrary set forth in this Agreement or any other Transaction Document,
this Section 5.9 shall survive the termination of this Agreement.

 

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5.10              Notification of Certain Matters. Each party shall give prompt
notice to the other party of, and shall use their respective commercially
reasonable efforts to prevent or promptly remedy, (i) the occurrence or failure
to occur, or the impending or threatened occurrence or failure to occur, of any
event which occurrence or failure to occur would cause any of its
representations or warranties in this Agreement or any other Transaction
Document to be untrue or inaccurate in any material respect (or in all respects
in the case of any representation or warranty containing any materiality
qualification) at any time after the Effective Date but on or prior to the
Closing Date and (ii) any material failure (or any failure in the case of any
covenant, condition or agreement containing any materiality qualification) on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any other Transaction
Document. The delivery of any notice pursuant to this Section 5.10 shall not
limit or otherwise affect the remedies available under this Agreement or any
other Transaction Document to any party receiving such notice.

 

5.11              Funding Fee. Company agrees to pay to Purchaser a funding fee
of $20,000.00 if Company borrows the term loan pursuant to Section 2.1 of the
Convertible Note. The funding fee shall be fully earned when it becomes due and
payable under this Section and shall not be subject to refund to Company for any
reason, including without limitation any prepayment by Company of outstanding
principal under the Convertible Note.

 

5.12              Market Stand-off Agreement. In the event of a Qualified IPO,
Purchaser hereby agrees that it will not, if so requested by the managing
underwriter for such Qualified IPO, without the prior written consent of such
managing underwriter, during the period commencing on the date of the final
prospectus relating to such Qualified IPO, and ending on the date specified by
such managing underwriter (such period not to exceed one hundred eighty (180)
days, or such other period as may be requested by such underwriter to
accommodate regulatory restrictions on (1) the publication or other distribution
of research reports, and (2) analyst recommendations and opinions, including,
but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE
Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend;
offer; pledge; sell; contract to sell; sell any option or contract to purchase;
purchase any option or contract to sell; grant any option, right, or warrant to
purchase; or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable (directly or indirectly) for Common Stock (whether such shares or
any such securities are then owned by Purchaser or are thereafter acquired) or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of such
securities, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or other securities, in cash, or
otherwise. The foregoing provisions of this Section 5.12 shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting agreement, and
shall be applicable to Purchaser only if all Company officers and directors are
subject to the same restrictions. The underwriters in connection with such
Qualified IPO are intended third-party beneficiaries of this Section 5.12 and
shall have the right, power and authority to enforce the provisions hereof as
though they were a party hereto. Purchaser further agrees to execute such
agreements as may be reasonably requested by the underwriters in connection with
such Qualified IPO that are consistent with this Section 5.12 or that are
necessary to give further effect thereto.

 

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ARTICLE VI

 

bOARD AND OTHER RIGHTS

 

6.1              Board Rights.

 

(a)         For so long as  Purchaser holds any combination of Common Stock,
Convertible Note (if Company borrows the term loan thereunder), Conversion
Shares, Warrants or Warrant Shares that in the aggregate either represent or
entitle Purchaser to acquire at least 2,000,000 shares of Common Stock (the
“Requisite Holder Condition”), (A) Purchaser shall have the right to appoint one
(1) representative (the “Board Observer”) to attend all meetings of the Company
Board and any committee thereof in a nonvoting observer capacity, and (B)
Purchaser shall have the right to have one (1) representative (the “Purchaser
Director”) nominated as a member of the Company Board and each committee
thereof, including without limitation Company’s compensation committee.
Purchaser shall notify Company in writing in any manner provided in Section 9.6
of this Agreement of its election to appoint a Board Observer and a Purchaser
Director. Any such Purchaser Director shall enter into Company’s standard form
of Board Member Service Agreement on terms no less favorable to such Purchaser
Director than required of any other member of the Company Board prior and as a
condition to such Purchaser Director serving on the Company Board.

 

(b)         As of and from the time of Purchaser’s notification to Company of
its election to exercise such right: (1) the Company Board or any committee
thereof shall, if necessary, increase the size of the Company Board or such
committee, to accommodate the addition of the Purchaser Director and take all
corporate action required by Law to promptly appoint such Purchaser Director to
the Company Board or such committee and (2) the Company Board shall, for so long
as the Requisite Holder Condition is satisfied and unless Purchaser notifies
Company of its election to cease having such Purchaser Director serve on the
Company Board or any committee thereof, renominate and reappoint such Purchaser
Director to the Company Board and each committee thereof annually or from time
to time at such time as it renominates and reappoints other members of the
Company Board or any such committee (or to the extent that Company in the future
submits nominations for directors to the Company Board to a vote of Company’s
stockholders (or action by written consent of stockholders in lieu of a
meeting), Company, the Company Board and any committee of the Company Board that
oversees nominations to the Company Board shall use all commercially reasonable
efforts to have the Purchaser Director reelected as to the Company Board by
Company’s stockholders and shall solicit proxies for the Purchaser Director and
take any and all such other actions to facilitate such reelection of the
Purchaser Director to the same extent as it does for any of Company’s other
nominees to the Company Board); (C) Company shall reimburse the Board Observer
and Purchaser Director for all reasonable costs and expenses customarily
incurred in attending meetings of the Company Board (other than the cost of
airfare and hotel accommodations); (D) within one hundred eighty (180) days
after the Closing Date, Company’s certificate of incorporation shall provide for
indemnification of the members of the Company Board, or any committee thereof,
to the broadest extent permitted by applicable law; (E) Company shall ensure
that the Purchaser Director is afforded coverage under any Directors and
Officers insurance policy then in effect on the same terms as other members of
the Company Board; (F) Company shall enter into an indemnity agreement with the
Purchaser Director on terms no less favorable than those included in the most
director-favorable form of indemnity agreement provided to any member of the
Company Board; and (G) Company shall give the Board Observer copies of all
notices, minutes, consents and other materials that it provides to its directors
and when so provided; provided, however, that the Board Observer agrees in a
written agreement in form and substance reasonably satisfactory to Company to
hold in confidence pursuant to the terms in Section 5.9 with respect to all
information so provided; and, provided further, that Company reserves the right
to withhold any information and to exclude the Board Observer from any meeting
or portion thereof if access to such information or attendance at such meeting
could adversely affect the attorney-client privilege between Company and its
counsel.

 

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(c)         Purchaser shall notify Company in writing in any manner provided in
Section 9.6 of this Agreement of its election to appoint a Board Observer and a
Purchaser Director.

 

Notwithstanding anything in this Agreement to the contrary, the rights set forth
in this Section 6.1 shall survive for so long as the Requisite Holder Condition
is satisfied. Purchaser may assign its rights in this Section 6.1 to one or more
Affiliates of Purchaser. Otherwise, (i) the Purchaser Director rights set forth
in this Section 6.1 may not be assigned or transferred to any other Person and
(ii) the Board Observer rights set forth in this Section 6.1 may be assigned or
transferred to any other Person in connection with the sale, assignment or
transfer to such Person of all of the Securities then owned beneficially and of
record by Purchaser to the extent it may otherwise assign or transfer such
Securities under this Agreement or a related Transaction Document, and any such
assignee shall be treated as the “Purchaser” for purposes of this Section 6.1
relating to the Board Observer.

 

6.2              Vacancies. In the event that either the Purchaser Director or
the Board Observer ceases to serve in his or her capacity as such during his or
her term for any reason, and at such time Purchaser has the right to appoint or
nominate a Purchaser Director or appoint a Board Observer, as the case may be,
Purchaser shall have the right to submit a replacement Purchaser Director or
Board Observer.

 

6.3              Subscription Rights.

 

(a)              Sale of New Securities. For so long as the Requisite Holder
Condition is satisfied, if Company at any time or from time to time makes any
public or non-public offering of any equity (including Common Stock, Common
Stock Equivalent, Capital Stock, Capital Stock Equivalents, preferred stock and
restricted stock), or any other securities, warrants, options or debt that are
convertible or exchangeable into equity or that include an equity component
(such as an “equity kicker”) (including any hybrid security) (any such security
a “New Security”), Purchaser shall be afforded the opportunity (provided, in the
case of an offering that is not a registered public offering, that Purchaser
satisfies any applicable “accredited investor,” “qualified institutional buyer”
or other investor criteria applicable to such offering) to subscribe for a pro
rata share of any New Security so offered for the same price and on the same
terms as such New Security is proposed to be offered to others. Purchaser’s pro
rata share, for purposes of this Section 6.3, is the ratio of the number of
shares of Common Stock owned by Purchaser immediately prior to the issuance of a
New Security (assuming all Common Stock Equivalents owned by Purchaser are
converted into or exchanged for shares of Common Stock) to the total number of
shares of Common Stock outstanding on a Fully Diluted Basis immediately prior to
the issuance of such New Security. Notwithstanding the foregoing, the
subscription rights set forth under this Section 6.3 shall not apply to (1) any
offering by Company pursuant to an Exempt Issuance or (2) issuances of any
securities issued as a result of a stock split, stock dividend, reclassification
or reorganization or similar event, but solely to the extent such issuance is
made to all holders of Common Stock Equivalents. For the avoidance of doubt, to
the extent that Company complies with its obligations pursuant to this Section
6.3 with respect to any securities that are convertible or exchangeable into (or
exercisable for) Common Stock or other equity, Purchaser shall not have an
additional right to purchase pursuant to this Section 6.3 additional securities
as a result of the issuance of New Securities upon the conversion, exchange or
exercise of such earlier issued securities (whether or not such Purchaser
exercised its right to purchase such earlier issued securities). Purchaser may
assign the right to exercise the subscription rights set forth in this Section
6.3 with respect to any Securities to the extent it may otherwise transfer or
assign such Securities under this Agreement or a related Transaction Document,
and any such assignee shall be treated as the “Purchaser” for purposes of this
Section 6.3.

 

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(b)         Notice. In the event Company proposes to offer New Securities, it
shall give Purchaser written notice (or, if such a written notice would be
required to be filed with the SEC, oral notice) of its intention, describing, to
the extent then known, the price (or range of prices), anticipated amount of
securities, timing and other terms upon which Company proposes to offer the same
(including, in the case of a registered public offering and to the extent
possible, a copy of the prospectus included in the registration statement filed
with respect to such offering) no later than five Business Days, as the case may
be, after the initial filing of a registration statement with the SEC with
respect to an underwritten public offering, after the commencement of marketing
with respect to a Rule 144A offering or after Company commences the marketing of
any other offering; provided that for purposes of this Section 6.3, in addition
to providing notice to Purchaser in accordance as set forth above, Company shall
use its commercially reasonable efforts to effect actual notice of Purchaser as
promptly as practicable, including via telephone and/or electronic mail
(provided that Company shall contact only those persons listed in Section 9.6 of
this Agreement and shall have no obligation to use electronic mail if such
electronic mail would be required to be filed with the SEC). Company may provide
such notice to Purchaser on a confidential basis (and Purchaser shall keep the
information conveyed by notice confidential) prior to public disclosure of such
offering. Purchaser shall have (i) twenty Business Days from the date of receipt
of notice as set forth above but without accounting for any notice provided
pursuant to the proviso above requiring Company to use commercially reasonable
efforts to provide notice via telephone and/or electronic mail or, (ii) in the
case or a “shelf takedown” from a shelf registration statement, two days from
the receipt of such notice (such twenty or two day period, as applicable, the
“Response Period”) to notify Company in writing whether it will exercise such
subscription rights and as to the amount of New Securities Purchaser desires to
purchase, up to its pro rata share of New Securities being offered. Such notice
shall constitute a binding commitment by Purchaser to purchase the amount of New
Securities so specified at the price and other terms set forth in Company’s
notice to it and subject to other customary closing conditions and provided,
with respect to a registered offering, that such notice shall not be binding
unless and until Company can accept a binding commitment under applicable Laws.
The failure of Purchaser to respond within the Response Period shall be deemed
to be a waiver of Purchaser’s rights under this Section 6.3 only with respect to
the offering described in the applicable notice.

 

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(c)         Purchase Mechanism. Subject to the next sentence, each of Company
and Purchaser agrees to use its commercially reasonable efforts to secure any
regulatory or stockholder approvals or other consents, and to comply with any
law or regulation necessary in connection with and prior to the offer, sale and
purchase of such New Securities, including calling a meeting of Company’s
stockholders to vote on any matters requiring stockholder approval in connection
with the offer, sale and purchase of such New Securities (the “Subscription
Proposals”), recommending to Company’s stockholders that such stockholders vote
in favor of any Subscription Proposals and soliciting proxies for approval of
any Subscription Proposals. By the earlier of (i) within one hundred eighty
(180) days after Closing and (ii) twenty (20) Business Days prior to the offer,
sale and purchase of New Securities, Company shall amend its certificate of
incorporation in order to permit Purchaser’s exercise of its rights under this
Section 6.3 and such amendment shall be in form and substance reasonably
satisfactory to Purchaser.

 

(d)         Failure to Purchase. In the event Purchaser fails to exercise its
subscription rights provided in this Section 6.3 within the Response Period, or,
if so exercised, such Purchaser is unable to consummate such purchase upon the
closing of the sale and issuance of New Securities for any reason, Company shall
thereafter be entitled during the period of 60 days following the conclusion of
the applicable period to sell or enter into an agreement (pursuant to which the
sale of the New Securities covered thereby shall be consummated, if at all,
within 30 days from the date of said agreement) to sell the New Securities not
elected to be purchased pursuant to this Section 6.3 or which Purchaser does not
or is unable to purchase, at a price and upon terms no more favorable to
purchasers of such securities than were specified in Company’s notice to such
Purchaser. Notwithstanding the foregoing, if such sale is subject to the receipt
of any regulatory or stockholder approval or consent or the expiration of any
waiting period, the time period during which such sale may be consummated shall
be extended until the expiration of five Business Days after all such approvals
or consents have been obtained or waiting periods expired, but in no event shall
such time period exceed 90 days from the date of the applicable agreement with
respect to such sale. In the event Company has not sold the New Securities or
entered into an agreement to sell the New Securities within said 60-day period
(or sold and issued New Securities in accordance with the foregoing within 30
days from the date of said agreement (as such period may be extended in the
manner described above for a period not to exceed 90 days from the date of said
agreement)), Company shall not thereafter offer, issue or sell such New
Securities without first offering such securities to such Purchaser in the
manner provided above.

 

(e)         Non-Cash Consideration. In the case of the offering of securities
for a consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors; provided, however, that
such fair value as determined by the Board of Directors shall not exceed the
aggregate market price of the securities being offered as of the date the Board
of Directors authorizes the offering of such securities.

 

(f)         Cooperation. Company and Purchaser shall cooperate in good faith to
facilitate the exercise of such Purchaser’s rights pursuant to this Section 6.3,
including securing any required approvals or consents.

 

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6.4              Certain Other Covenants.

 

(a)         At the appropriate time and for so long as the Requisite Holder
Condition is satisfied, Company shall (i) consider in good faith (A)
establishing, maintaining and utilizing governance and oversight committees
(including for Affiliate transactions), (B) evaluating compliance plans and
policies, including policies and procedures for monitoring adherence to
Company’s non-solicitation and other restrictive covenants, and (C) hiring a
compliance officer to implement and monitor such plans and policies and (ii)
maintain and utilize its existing committees for audit and compensation.

 

(b)         Company shall ensure that (i) Company’s compensation committee
approves all compensation for each officer and director of Company and those
Persons who are Subsidiaries of Company pursuant to clause (i) of the definition
of Subsidiary and (ii) no member of Company’s compensation committee shall vote
to approve any of his or her own compensation.

 

ARTICLE VII

 

CONDITIONS TO CLOSING

 

7.1              Conditions to Obligations of Purchaser and Company at Closing.
The obligations of Purchaser and Company to consummate the transactions
contemplated hereby to be consummated at the Closing are subject to the
satisfaction or waiver at or prior to the Closing Date of each of the following
conditions:

 

(a)         no preliminary or permanent injunction or other Order by any
Governmental Authority which prevents the consummation of the transactions
contemplated hereby shall have been issued and remain in effect (each party
agreeing to use its commercially reasonable efforts to have any such injunction
or Order lifted);

 

(b)         any Consents, Approvals and Filings that are necessary for the
consummation of the transactions contemplated by this Agreement shall have been
made or obtained except where (i) Company’s failure to make or obtain such
Consents, Approvals and Filings would not, individually or in the aggregate,
constitute a Material Adverse Effect or (ii) Purchaser’s failure to obtain such
Consents, Approvals and Filings would not have a material adverse effect on
Purchaser’s ability to perform its obligations under this Agreement; and

 

(c)         no suit, claim, investigation, action or other proceeding shall be
pending or, to the knowledge of Company or Purchaser, respectively, threatened
against Purchaser or Company Parties before any Governmental Authority which
reasonably could be expected to result in the restraint or prohibition of any
such party, or the obtaining of damages or other relief from any such party, in
connection with this Agreement or the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby.

 

7.2              Additional Conditions to Obligations of Purchaser at Closing.
The obligations of Purchaser to consummate the transactions contemplated hereby
to be consummated at the Closing shall be subject to the satisfaction or waiver
at or prior to the Closing Date of each of the following additional conditions:

 

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(a)              each of the representations and warranties made by Company in
ARTICLE III shall be true and correct in all material respects (except to the
extent any such representation or warranty is qualified as to materiality or by
Material Adverse Effect, in which case such representation or warranty shall be
true in all respects) on and as of such date with the same effect as if made on
and as of such date (except to the extent any such representation or warranty
related to a specific date, in which case such representation or warranty shall
be true and correct in all material respects as of such date (except to the
extent any such representation or warranty is qualified as to materiality or
Material Adverse Effect, in which case such representation or warranty shall be
true in all respects as of such date));

 

(b)         Company shall have performed, in all material respects, all of its
obligations contemplated herein to be performed by Company on or prior to the
Closing Date;

 

(c)         from the Effective Date through the Closing Date, there shall not
have occurred, and be continuing, a Material Adverse Effect;

 

(d)         the Purchase Shares, the Conversion Shares and the Warrant Shares
shall have been duly authorized and reserved for issuance and shall have been
authorized for quotation on the OTCQB, subject only to notice of issuance;

 

(e)         the trading of the Common Stock shall not have been suspended by the
SEC, the OTCQB or any supervising authority over the OTCQB authority;

 

(f)         Company shall have delivered the following to Purchaser:

 

(i)         an officer’s certificate certifying as to Company’s compliance with
the conditions set forth in clauses (a) through (e) of this Section 7.2;

 

(ii)         the Convertible Note, executed by a duly authorized officer of
Company;

 

(iii)        Certificates Representing the Purchase Shares, executed by a duly
authorized officer of Company and authenticated by Company’s Transfer Agent;

 

(iv)        the Warrants, executed by a duly authorized officer of Company;

 

(v)         the Guaranty, duly completed and executed by the Subsidiary
Guarantors, in form and substance satisfactory to Purchaser;

 

(vi)        the Registration Rights Agreement, executed by a duly authorized
officer of Company;

 

(vii)       the Shareholders Agreement, executed by the parties specified
therein;

 

(viii)      the portion of the funding fee, if any, required to be paid to
Purchaser on the Closing Date pursuant to Section 5.11; and

 

(ix)         such other documents as may be required by this Agreement or
reasonably requested by Purchaser; and

 

(g)         all conditions precedent for closing the Credit Agreement shall have
been satisfied to the reasonable satisfaction of Purchaser.

 

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7.3              Additional Conditions to Obligations of Company at Closing. The
obligations of Company to consummate the transactions contemplated hereby to be
consummated at Closing shall be subject to the satisfaction or waiver at or
prior to the Closing Date of each of the following additional conditions:

 

(a)         each of the representations and warranties made by Purchaser in
ARTICLE IV shall be true and correct in all material respects (except to the
extent any such representation or warranty is qualified as to materiality or by
Material Adverse Effect, in which case such representation or warranty shall be
true in all respects) on and as of such date with the same effect as if made on
and as of such date (except to the extent any such representation or warranty
related to a specific date, in which case such representation or warranty shall
be true and correct in all material respects as of such date (except to the
extent any such representation or warranty is qualified as to materiality or
Material Adverse Effect, in which case such representation or warranty shall be
true in all respects as of such date));

 

(b)         Purchaser shall have performed, in all material respects, all of its
obligations contemplated herein to be performed by Purchaser on or prior to the
Closing Date;

 

(c)         Purchaser shall have delivered the following to Company:

 

(i)         an officer’s certificate certifying as to Purchaser’s compliance
with the conditions set forth in clauses (a) and (b) of this Section 7.3;

 

(ii)         the purchase price payable for the Convertible Note and the
Purchase Shares;

 

(iii)        the Registration Rights Agreement, executed by a duly authorized
officer of Purchaser;

 

(iv)        the Shareholders Agreement, executed by the parties specified
therein; and

 

(v)         such other documents as may be required by this Agreement or
reasonably requested by Company.

 

(d)         all conditions precedent for closing the Credit Agreement shall have
been satisfied to the reasonable satisfaction of Company.

 

ARTICLE VIII

 

SURVIVAL; INDEMNIFICATION

 

8.1              Survival of Representations and Warranties. All representations
and warranties set forth in this Agreement shall survive the transactions
contemplated by this Agreement to be consummated at the Closing (regardless of
any investigation, inquiry, or examination made by any party or on its behalf or
any knowledge of any party or the acceptance by any party of any certificate or
opinion) for a period of eighteen (18) months and thereupon shall terminate,
unless an Indemnity Notice shall have been delivered with respect thereto with
such period.

 

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8.2              Indemnification.

 

(a)         Company shall indemnify and hold harmless Purchaser, its Affiliates,
and their respective directors and officers, and each Person, if any, who
controls Purchaser or any of its Affiliates (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) against all losses,
claims, damages, liabilities and expenses (including reasonable attorneys’ and
accountants’ fees, disbursements and expenses, as incurred) (collectively,
“Losses”) incurred by such Person entitled to indemnification hereunder arising
out of or based upon any breach of a representation or warranty or breach of or
failure to perform any covenant or agreement on the part of Company contained in
this Agreement.

 

(b)         Purchaser shall indemnify and hold harmless Company, its directors
and officers, and each Person, if any, who controls Company (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) against
all Losses incurred by such Person entitled to indemnification hereunder arising
out of or based upon any breach of a representation or warranty or breach of or
failure to perform any covenant or agreement on the part of Purchaser contained
in this Agreement.

 

8.3              Method of Asserting Indemnification for Third Party Claims. Any
Person entitled to indemnification hereunder shall give prompt written notice to
the indemnifying party after the receipt by such indemnified party of any
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified party
may claim indemnification pursuant to this Agreement, provided that failure to
give such notification shall not affect the obligations of the indemnifying
party pursuant to this ARTICLE VIII except to the extent that the indemnifying
party shall have been actually prejudiced as a result of such failure. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation, unless in the reasonable judgment of any indemnified party, based
on the written opinion of counsel, a conflict of interest is likely to exist
between the indemnifying party and such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall not be liable for the fees and expenses of more than one counsel for
all indemnified parties selected by such parties (which selection shall be
reasonably satisfactory to the indemnifying party), in each case in connection
with any one action or separate but similar or related actions. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
shall not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party, based on the written
opinion of counsel, a conflict of interest is likely to exist between the
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel. No indemnifying party, in defense of
any such action, suit, proceeding or investigation, shall, except with the
consent of each indemnified party, consent to the entry of any judgment or entry
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such action, suit, proceeding or investigation to
the extent such liability is covered by the indemnity obligations set forth in
this Section 8.2. No indemnified party shall consent to entry of any judgment or
entry into any settlement without the consent of each indemnifying party.

 

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8.4              Method of Asserting Indemnification for Other Claims. In the
event any indemnified party should have a claim under Section 8.2 against the
indemnifying party that does not involve a third party claim, the indemnified
party shall deliver a written notification of a claim for indemnity under
Section 8.2 specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an “Indemnity Notice”) with reasonable
promptness to the indemnifying party. The failure by any indemnified party to
give the Indemnity Notice shall not impair such party’s rights under Section 8.2
except to the extent that the indemnifying party shall have been actually
prejudiced as a result of such failure.

 

8.5              Limitations on Indemnification. The maximum amount that Company
or Purchaser can recover for Losses pursuant to this ARTICLE VIII for breaches
of representations and warranties shall not in the aggregate exceed the
aggregate purchase price of the Securities. The maximum amount that Company or
Purchaser can recover for Losses pursuant to this ARTICLE VIII for breaches of
covenants shall not in the aggregate exceed the sum of (i) the aggregate
purchase price of the Securities plus (ii) an amount equal to twenty percent
(20%) per annum of the aggregate purchase price of the Securities, which amount
shall compound on each anniversary of the Closing Date and shall be treated
under clause (i) of this Section 8.5 as part of the aggregate purchase price of
the Securities. Neither Company nor Purchaser shall have any obligation under
this ARTICLE VIII to indemnify any Person for lost profits or for indirect,
incidental, punitive, special or exemplary damages. The indemnification provided
in this ARTICLE VIII shall be the sole and exclusive remedy for monetary damages
available to Company and Purchaser for matters for which indemnification is
provided under this ARTICLE VIII.

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1              Fees and Expenses. Except as otherwise provided in any
Transaction Document, each party shall pay its owns expenses incurred in
connection with the preparation, negotiation, execution, delivery, and
performance of this Agreement and each Transaction Document and the consummation
of the transactions contemplated hereby and thereby. Company agrees to pay on
demand all reasonable out-of-pocket expenses of Purchaser, including reasonable
fees and disbursements of counsel, in connection with: (i) any amendments,
supplements, consents or waivers hereto, the Transaction Documents because of
actual or prospective defaults hereunder or Defaults or Events of Default, as
such term is defined in the Convertible Note, and (ii) the enforcement of this
Agreement and the other Transaction Documents. In addition, Company shall pay
any and all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of this
Agreement and the other Transaction Documents and agrees to save Purchaser
harmless from and against any and all Liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees. It is the
intention of the parties hereto that Company shall pay amounts referred to in
this Section 9.1 directly. In the event Purchaser pays any of the amounts
referred to in this Section 9.1 directly, Company will reimburse Purchaser for
such advances and interest on such advance shall accrue until reimbursed at the
Default Rate applicable for the Term Loan as defined in the Credit Agreement.

 

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9.2              Independent Contractors. Each party shall act solely as an
independent contractor, and nothing in this Agreement shall be construed to give
either party the power or authority to act for, bind, or commit the other party
in any way. Nothing herein shall be construed to create the relationship of
partners, principal and agent, or joint-venture partners between the parties.

 

9.3              Specific Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific intent or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which they may be entitled by law or equity.

 

9.4              Successors and Assigns. Company may not assign, delegate, or
otherwise transfer (whether by operation of law, by contract, or otherwise) its
rights and obligations under this Agreement or any of the other Transaction
Documents or any portion hereof or thereof. Nothing in this Agreement or any
other Transaction Document shall prohibit Purchaser from assigning, delegating
or transferring this Agreement and Purchaser’s rights and obligations under any
of the other Transaction Documents to an Affiliate of Purchaser. Otherwise,
Purchaser may not assign, delegate or otherwise transfer (whether by operation
of law, by contract or otherwise) its rights and obligations under this
Agreement or any of the other Transaction Documents or any portion hereof or
thereof (i) at any time prior to the first anniversary of the Effective Date
and, (ii) thereafter, to any Person whose principal business is providing
integrated healthcare services or who otherwise is a competitor of Company as
determined reasonably and in good faith by the Company Board. Subject to the
foregoing and to the second paragraph of Section 6.1, nothing in this Agreement
or any other Transaction Document shall prohibit Purchaser from assigning,
delegating, pledging or transferring this Agreement and Purchaser’s rights under
any of the other Transaction Documents, including collateral therefor, so long
as any such assignee, delegatee, pledgee or transferee is a “United States
Person” for purposes of Section 7701(a)(30) of the Code. Any attempted
assignment, delegation, or transfer in violation of this Section 9.4 shall be
void and of no force or effect.

 

9.5              Entire Agreement. THIS AGREEMENT AND THE TRANSACTION DOCUMENTS
AND INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL
PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING
TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS
EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

 

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9.6              Notices. All demands, notices, approvals, consents, requests,
and other communications hereunder shall be in writing and shall be deemed to
have been given when the writing is delivered, if given or delivered by hand,
overnight delivery service or facsimile transmitter (with confirmed receipt), or
five (5) days after being mailed, if mailed, by first class, registered or
certified mail, postage prepaid, to the address or telecopy number set forth
below. If any time period for giving notice or taking action hereunder expires
on a day that is not a Business Day, the time period shall automatically be
extended to the Business Day immediately following such day. Such notices,
demands, requests, consents and other communications shall be sent to the
following Persons at the following addresses.

 

(i)             if to Company, to:

 

Apollo Medical Holdings, Inc.

700 N. Brand Blvd., Suite 220

Glendale, California 91203

Attention: Chief Financial Officer

Telephone: (818) 396-8050

Fax: (818) 844-3888

 

(ii)            if to Purchaser, to:

 

NNA of Nevada, Inc.

920 Winter Street

Waltham, Massachusetts 02451

Attention: Mark Fawcett/Christine Smith

Telephone: (781) 699-2668/(781) 699-9165

Fax: (781) 699-9756

 

Company or Purchaser may, by notice given hereunder, designate any further or
different addresses or telecopy numbers to which subsequent demands, notices,
approvals, consents, requests or other communications shall be sent or persons
to whose attention the same shall be directed.

 

9.7              Time Periods; Business Days. Any action required hereunder to
be taken within a certain number of days shall, except as may otherwise be
expressly provided herein, be taken within that number of calendar days
excluding the day on which the counting is initiated and including the final day
of the period; provided, however, that if the last day for taking such action
falls on a day which is not a Business Day, the period during which such action
may be taken shall automatically be extended to the Business Day immediately
following such day.

 

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9.8              Amendments. Any provision of this Agreement or any other
Transaction Document to which Company is a party may be amended if such
amendment is in writing and is signed by Company and Purchaser.

 

9.9              Waiver. The rights and remedies provided for herein are
cumulative and not exclusive of any right or remedy that may be available to any
party whether at law, in equity, or otherwise. No delay, forbearance, or neglect
by any party, whether in one or more instances, in the exercise or any right,
power, privilege, or remedy hereunder or in the enforcement of any term or
condition of this Agreement shall constitute or be construed as a waiver
thereof. No waiver of any provision hereof, or consent required hereunder, or
any consent or departure from this Agreement, shall be valid or binding unless
expressly and affirmatively made in writing and duly executed by the party to be
charged with such waiver. No waiver shall constitute or be construed as a
continuing waiver or a waiver in respect of any subsequent breach, either of
similar or different nature, unless expressly so stated in such writing.

 

9.10              Descriptive Headings; No Strict Construction. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The parties to this Agreement
have participated jointly in the negotiation and drafting of this Agreement. If
an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly 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 of the provisions of this Agreement. The parties
agree that prior drafts of this Agreement shall be deemed not to provide any
evidence as to the meaning of any provision hereof or the intention of the
parties hereto with respect to this Agreement.

 

9.11              Governing Law. This Agreement and, unless otherwise provided
in any other Transaction Document, the other Transaction Documents shall be
governed by and interpreted in accordance with the laws of the State of New York
(including Sections 5-1401 and 5-1402 of the New York General Obligations Law,
but excluding all other choice of law and conflicts of law rules).

 

9.12              Consent to Jurisdiction; Waiver of Jury Trial. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH OF COMPANY AND PURCHASER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF FEDERAL COURT SITTING IN THE
SOUTHERN DISTRICT OF THE STATE OF NEW YORK AND THE COURTS OF NEW YORK SITTING IN
THE BOROUGH OF MANHATTAN FOR ANY ACTION TO WHICH COMPANY AND PURCHASER ARE
PARTIES. TO THE EXTENT PERMITTED BY LAW, EACH OF COMPANY AND PURCHASER WAIVES
TRIAL BY JURY AND WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON LACK OF
JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
ACTION INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER TRANSACTION DOCUMENTS, OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS, OR ANY OTHER PROCEEDING TO WHICH COMPANY OR PURCHASER IS
A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF OR IN CONNECTION WITH
ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENT (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF PURCHASER OR COMPANY. COMPANY ALSO CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

 

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9.13              Severability. In the event that any provision of this
Agreement shall be determined to be invalid or unenforceable by any court of
competent jurisdiction, such determination shall not invalidate or render
unenforceable any other provision hereof.

 

9.14              Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, together
shall constitute but one and the same instrument.

 

9.15              Captions. The captions to the various sections and subsections
of this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof.

 

[signature page follows]

 

34

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers as of the
date first above written.

 

  COMPANY:       APOLLO MEDICAL HOLDINGS, INC.         By: /s/ Kyle Francis  
Name: Kyle Francis   Title: CFO

 

Signature Page to Investment Agreement (1 of 1)

 

 

 

 

  PURCHASER:       NNA OF NEVADA, INC.         By: /s/ Mark Fawcett   Name: Mark
Fawcett   Title: Vice President and Treasurer

 

Signature Page to Investment Agreement (2 of 2)

 

 

 

 

EXHIBIT A

 

FORM OF CONVERTIBLE NOTE

 

 

 

 

EXHIBIT B

 

FORM OF WARRANT

 

 

 

 

EXHIBIT C

 

FORM OF REGISTRATION RIGHTS AGREEMENT