Exhibit 10.4

 

EXECUTION VERSION

 

 

 

STOCK PURCHASE AGREEMENT

 

by and among:

 

APOLLO PALLIATIVE SERVICES LLC,
a California limited liability company;

and

 

THE SOLE SHAREHOLDER OF HOLISTIC CARE HOME HEALTH AGENCY, INC.,

a California corporation;

 

and

 

HOLISTIC CARE HOME HEALTH AGENCY, INC.,

a California corporation.

 

Dated as of October 27, 2014

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
October 27, 2014, by and among Apollo Palliative Services LLC, a California
limited liability company (the “Purchaser”), the individual who has executed the
signature page to this Agreement as the sole shareholder of Holistic Care Home
Health Agency, Inc., a California corporation (the “Seller”), and Holistic Care
Home Health Agency, Inc., a California corporation (the “Company”).

 

WITNESSETH:

 

WHEREAS, the Company is a home care provider providing medical care and
assistance with daily tasks (collectively, the “Business”);

 

WHEREAS, as of the date of this Agreement but prior to giving effect to the
contribution described in the following recital, the Seller owns all issued and
outstanding capital stock of the Company (the “Shares”);

 

WHEREAS, immediately prior to the Closing, the Seller contributed a portion of
the issued and outstanding Shares to the Purchaser pursuant to the Contribution
Agreement (the “Contribution Agreement”) to be executed by the Seller, and the
Purchaser, in turn, issued certain equity interests to the same; and

 

WHEREAS, upon the terms set forth in this Agreement, the Seller is selling to
the Purchaser, and the Purchaser is acquiring from the Seller, all of the Shares
not contributed to the Purchaser pursuant to the Contribution Agreement, for the
consideration and on the terms set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1          Certain Definitions.

 

(a)          Except as otherwise set forth herein, the Exhibits, and the
Disclosure Schedule, the following terms shall have the meanings specified in
this Section 1.1:

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person, and the term “control” (including
the terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.

 

“Business Day” means any day of the year on which national banking institutions
in California are open to the public for conducting business and are not
required or authorized to close.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

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“Company Benefit Plan” means any Employee Benefit Plan or ERISA Affiliate Plan
(as defined in Section 4.12(a)).

 

“Contract” means any contract, agreement, indenture, note, bond, loan,
instrument, lease, license, security agreement, sales and purchase orders,
commitment or other arrangement or agreement, whether written or oral, including
any amendments, modifications, or supplements thereto.

 

“Environmental Law” means any foreign, federal, state or local statute,
regulation, ordinance, rule of common law or other legal requirement, as now or
hereafter in effect, in any way relating to the protection of human health and
safety, the environment or natural resources including, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.),
the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C.
§ 7401 et seq.) the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as each
has been or may be amended and the regulations promulgated pursuant thereto.

 

“ERISA” means the Employment Retirement Income Security Act of 1974, as amended.

 

“GAAP” means generally accepted accounting principles in the United States as of
the date hereof.

 

“Governmental Body” means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).

 

“Government Reimbursement Programs” means the federal Medicare program, the
California state Medi-Cal program, and any other governmental program
responsible for payment or reimbursement for professional medical services.

 

“Hazardous Material” means any substance, material or waste that is regulated,
classified, or otherwise characterized under or pursuant to any Environmental
Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” or words
of similar meaning or effect, including petroleum and its by-products, asbestos,
polychlorinated biphenyls, radon, mold, and urea formaldehyde insulation.

 

“Indebtedness” of any Person means, without duplication, (i) the principal of
and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement; (iii) all
obligations of such Person under leases required to be capitalized in accordance
with GAAP; (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker’s acceptance or similar credit
transaction; (v) the liquidation value of all redeemable preferred stock of such
Person; (vi) all obligations of the type referred to in clauses (i) through (v)
of any Persons for the payment of which such Person is responsible or liable,
directly or indirectly, as obligor, guarantor, surety or otherwise, including
guarantees of such obligations; and (vii) all obligations of the type referred
to in clauses (i) through (vi) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person).

 

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“Intellectual Property Licenses” means (i) any grant to a third Person of any
right to use any of the Purchased Intellectual Property, and (ii) any grant to
the Seller of a right to use a third Person’s intellectual property rights which
is necessary in connection with the Business or for the use of any Purchased
Intellectual Property.

 

“IRS” means the Internal Revenue Service.

 

“Inventory” means all merchandise and inventory owned and intended for resale in
connection with the Business, all manufactured and purchased parts, goods in
process, raw materials, supply and packing materials and finished goods and
other tangible personal property that is used in connection with the Business,
wherever located, in each case as of the Closing Date.

 

“Knowledge” means (i) with respect to the Seller, the knowledge after reasonable
inquiry of the Seller, and (ii) with respect to the Purchaser, the knowledge
after due inquiry of Dr. Warren Hosseinion, and (iii) with respect to the
Company, the knowledge after reasonable inquiry of the Seller.

 

“Law” means any federal, state or local law (including common law), statute,
code, ordinance, rule, regulation or other requirement.

 

“Legal Proceeding” means any judicial, administrative or arbitral actions,
suits, proceedings (public or private) or claims or proceedings by or before any
Person.

 

“Liability” means any debt, loss, damage, adverse claim, liability or obligation
(whether direct or indirect, known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise), and
including all costs and expenses relating thereto.

 

“Lien” means any community or other marital property interest, lien, pledge,
mortgage, deed of trust, security interest, claim, lease, charge, option, right
of first refusal, right of way, easement, encroachment, servitude, proxy,
equitable interest, right of first option, right of first refusal, or similar
restriction, voting trust or agreement, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever.

 

“Losses” means any losses, liabilities, obligations, damages, costs, penalties,
interest and expenses (including all reasonable attorneys’, accountants’ and
experts’ fees).

 

“Material Adverse Effect” means (i) a material adverse effect on the historical,
near-term or long-term projected business, assets, properties, results of
operations, condition (financial or otherwise) or prospects of the Company or of
the Business, (ii) the effect of any change arising in connection with any
natural disasters, outbreak of hostilities, terrorist activities or war, or any
material worsening of any such hostilities, activities or war underway as of the
date hereof, or (iii) a material adverse effect on the ability of any one or
more Seller to consummate the transactions contemplated by this Agreement or
perform their obligations under this Agreement or the Seller Documents (as
defined in Section 4.2(a)).

 

“Net Working Capital as of the Closing Date” means the Company’s (x) current
assets less (y) current liabilities as of the Closing Date

 

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Body.

 

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“Ordinary Course of Business” means the ordinary and usual course of day-to-day
operations of the Business through the date hereof consistent with past
practice.

 

“Permits” means any approvals, authorizations, consents, licenses, permits or
certificates issued by any Person.

 

“Permitted Exceptions” means (i) all defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance which have been made available to the Purchaser; (ii) statutory liens
for current Taxes, assessments or other governmental charges not yet delinquent
or the amount or validity of which is being contested in good faith by
appropriate proceedings, provided an appropriate reserve is established
therefor; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens
that are not material to the Business so encumbered and that are not resulting
from a breach, default or violation by the Company of any Contract or any Law;
(iv) zoning, entitlement and other land use and environmental regulations by any
Governmental Body, provided that such regulations have not been violated; and
(v) such other imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of or materially
interfere with the present use of any properties used in the Business.

 

“Person” means any individual, limited liability company, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.

 

“Purchased Intellectual Property” means all intellectual property rights used by
the Company and its Affiliates in connection with the Business arising from or
in respect of the following, whether protected, created or arising under the
laws of the United States or any other jurisdiction: (i) all patents and
applications therefor, including continuations, divisionals,
continuations-in-part, or reissues of patent applications and patents issuing
thereon (collectively, “Patents”), (ii) all trademarks, service marks, trade
names, service names, brand names, trade dress rights, logos, Internet domain
names and corporate names and general intangibles of a like nature, together
with the goodwill associated with any of the foregoing, and all applications,
registrations and renewals thereof, (collectively, “Marks”), (iii) copyrights
and registrations and applications therefor, works of authorship and mask work
rights (collectively, “Copyrights”), (iv) discoveries, concepts, ideas, research
and development, know-how, formulae, inventions, compositions, manufacturing and
production processes and techniques, technical data, procedures, designs,
drawings, specifications, databases, and other proprietary and confidential
information, including customer lists, supplier lists, pricing and cost
information, and business and marketing plans and proposals of the Company and
its Affiliates, in each case excluding any rights in respect of any of the
foregoing that comprise or are protected by Copyrights or Patents (collectively,
“Trade Secrets”), and (v) all software and Technology of the Seller and its
Affiliates used in connection with the Business.

 

“Release” means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property.

 

“Remedial Action” means all actions to (i) clean up, remove, treat or in any
other way address any Hazardous Material; (ii) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations or post-remedial monitoring and care; or (iv) to
correct a condition of noncompliance with Environmental Laws.

 

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“Subsidiary” means any Person of which a majority of the outstanding voting
securities or other voting equity interests are owned, directly or indirectly,
by the Company.

 

“Taxes” means (i) all federal, state, local or foreign taxes, charges, fees,
imposts, levies or other assessments, including all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, (ii) all interest, penalties, fines, additions to tax or additional
amounts imposed by any Taxing Authority in connection with any item described in
clause (i) and (iii) any transferee liability in respect of any items described
in clauses (i) and/or (ii) payable by reason of contract, assumption, transferee
liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any
predecessor or successor thereof of any analogous or similar provision under
Law) or otherwise.

 

“Taxing Authority” means the IRS and any other Governmental Body responsible for
the administration of any Tax.

 

“Tax Return” means any return, report or statement required to be filed with
respect to any Tax (including any attachments thereto, and any amendment
thereof) including any information return, claim for refund, amended return or
declaration of estimated Tax, and including, where permitted or required,
combined, consolidated or unitary returns for any group of entities that
includes the Company or any of its Affiliates.

 

“Technology” means, collectively, all designs, formulae, algorithms, procedures,
methods, techniques, ideas, know-how, research and development, technical data,
programs, subroutines, tools, materials, specifications, processes, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
apparatus, creations, improvements, works of authorship and other similar
materials, and all recordings, graphs, drawings, reports, analyses, and other
writings, and other tangible embodiments of the foregoing, in any form whether
or not specifically listed herein, and all related technology, that are used in,
incorporated in, embodied in, displayed by or relate to, or are used by the
Seller.

 

(b)          Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:

 

(i)          when calculating the period of time before which, within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date that is the reference date in calculating such period shall be
excluded. If the last day of such period is a non-Business Day, the period in
question shall end on the next succeeding Business Day;

 

(ii)         any reference in this Agreement to $ shall mean U.S. dollars;

 

(iii)        the Exhibits, the Disclosure Schedule and the other schedules to
this Agreement are hereby incorporated and made a part hereof and are an
integral part of this Agreement; all Exhibits, the Disclosure Schedule and the
other schedules attached hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein; any
capitalized terms used in any schedule, the Disclosure Schedule, or Exhibit but
not otherwise defined therein shall be defined as set forth in this Agreement;

 

(iv)        any reference in this Agreement to gender shall include all genders,
and words imparting the singular number only shall include the plural and vice
versa;

 

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(v)         the division of this Agreement into Articles, Sections and other
subdivisions and the insertion of headings are for convenience of reference only
and shall not affect or be utilized in construing or interpreting this
Agreement;

 

(vi)        all references in this Agreement to any “Section” are to the
corresponding Section of this Agreement unless otherwise specified;

 

(vii)       the words such as “herein,” “hereinafter,” “hereof,” and “hereunder”
refer to this Agreement as a whole and not merely to a subdivision in which such
words appear unless the context otherwise requires; and

 

(viii)      the word “including” or any variation thereof means “including,
without limitation” and shall not be construed to limit any general statement
that it follows to the specific or similar items or matters immediately
following it.

 

(c)          The parties hereto have participated jointly in the negotiation and
drafting of this Agreement and, in the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as jointly drafted
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provision of this
Agreement.

 

ARTICLE II

PURCHASE AND SALE OF SHARES

 

2.1          Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, and in reliance upon the representations, warranties, covenants
contained in this Agreement, at the Closing (as defined below), the Purchaser
shall purchase the Shares from the Seller, and the Seller shall sell and
transfer the Shares to the Purchaser, free and clear of any Liens.

 

2.2          Closing. The consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of Nixon Peabody LLP,
555 West Fifth Street, 46th Floor, Los Angeles, California, or via overnight
courier, facsimile or portable document format (PDF) as agreed by the parties,
at 10:00 a.m. (Pacific Standard Time) on October 27, 2014 or as promptly as
practicable following the execution of this Agreement and satisfaction or waiver
of each of the conditions set forth in Article VIII (the “Closing Date”);
provided, that the Closing will be effective as of 11:59 p.m. Pacific Standard
Time on the Closing Date.

 

ARTICLE III

CONSIDERATION

 

3.1          Consideration. The aggregate consideration for the Shares shall be
an amount up to and not exceeding Four Hundred and Fifty Thousand Dollars
($450,000.00), subject to adjustment after the Closing as provided in
Section 3.3 (the “Purchase Price”). The Purchase Price shall consist of Three
Hundred Thousand Dollars ($300,000.00) (the “Closing Payment”) to be paid at the
Closing in accordance with Section 3.2 plus an additional contingent amount of
up to and not exceeding One Hundred Fifty Thousand Dollars ($150,000),
calculated and payable in accordance with Section 3.4 below.

 

3.2          Closing Payment. At the Closing, the Purchaser shall pay the
Closing Payment by wire transfer of immediately available funds into one (1)
account designated by the Seller.

 

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3.3          Adjustment of Purchase Price.

 

(a)          Closing Statement. No later than one hundred twenty (120) days
following the Closing Date, the Purchaser shall prepare and deliver to the
Seller a written statement of the Net Working Capital as of the Closing Date
together with a detailed analysis of the line items included therein (the
“Closing Statement”). The Seller shall have a period of up to sixty (60) days
from the receipt of the Closing Statement to review the Purchaser’s Closing
Statement, during which period the Seller shall, and the Purchaser shall cause
the Seller to, make available to the Seller all relevant books and records in
the Purchaser’s possession or control and all personnel with knowledge of
information relevant to the determination of the Net Working Capital as of the
Closing Date. If as a result of such review, the Seller disagrees with the
Closing Statement, the Seller shall deliver to the Purchaser a written notice of
disagreement (a “Dispute Notice”) prior to the expiration of such sixty (60) day
review period setting forth the basis for such dispute.

 

(b)          Acceptance; Failure to Respond. If the Seller does not disagree
with the Purchaser’s Closing Statement, the Seller shall deliver a written
statement to the Purchaser within such sixty (60) day period accepting the
Closing Statement (an “Acceptance Notice”), in which case the Purchaser’s
determination of the Net Working Capital as of the Closing Date as shown on the
Closing Statement shall be final and binding on the parties, effective as of the
date on which the Purchaser receives the Acceptance Notice. If the Seller does
not deliver a Dispute Notice or an Acceptance Notice within such sixty (60) day
period, then the Purchaser’s determination of the Net Working Capital as of the
Closing Date as shown on the Closing Statement shall be final and binding on the
parties, effective as of the first Business Day after the expiration of such
sixty (60) day review period.

 

(c)          Resolution of Disputes. If the Seller delivers a Dispute Notice to
the Purchaser in a timely manner, then the Purchaser and the Seller shall
attempt in good faith to resolve such dispute within thirty (30) days from the
date of the Dispute Notice. If the Purchaser and the Seller cannot reach
agreement within such thirty (30) day period (or such longer period as they may
mutually agree), then the dispute shall be promptly referred to an independent
accounting firm of national reputation mutually acceptable to the Purchaser and
the Seller, or if the parties are unable to agree on such a firm within ten (10)
days (or such longer period as they may mutually agree), to BDO (the
“Independent Auditor”) for binding resolution. The Independent Auditor shall
determine the Net Working Capital as of the Closing Date (which amount may not
be greater than as set forth in the Seller’s Dispute Notice or less than as set
forth in the Purchaser’s Closing Statement) in accordance with the provisions of
this Agreement as promptly as may be reasonably practicable and shall endeavor
to complete such process within a period of no more than sixty (60) days. The
Independent Auditor may conduct such proceedings as the Independent Auditor, in
its sole discretion, determines will assist in the determining the Net Working
Capital as of the Closing Date and shall deliver to the Purchaser and the Seller
concurrently a written opinion setting forth a final determination of the Net
Working Capital as of the Closing Date calculated in accordance with the
provisions of this Agreement. The determination of the Independent Auditor shall
be final and binding on the Purchaser and the Seller, effective as of the date
the Independent Auditor’s written opinion is received by the Purchaser and the
Seller. The Seller and the Purchaser shall each be responsible for one-half of
the costs and expenses of the Independent Auditor. The Seller and the Purchaser
shall each bear their own legal, accounting and other fees and expenses of
participating in such dispute resolution procedure. The Net Working Capital as
of the Closing Date as finally determined pursuant to clause (c) or clause (d)
of this Section 3.3, is referred to as the “Actual Net Working Capital as of the
Closing Date.”

 

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(d)          Final Settlement. If the Actual Net Working Capital as of the
Closing Date is less than fifty thousand dollars ($50,000) (the “Target
Amount”), then, subject to the following sentence, the Seller shall, within five
(5) business days of the date of final determination of the Actual Net Working
Capital as of the Closing Date, pay to the Purchaser the amount equal to the
absolute value of the difference between the Target Amount and the Actual Net
Working Capital as of the Closing Date, together with interest on the amount of
such difference calculated at the rate of four percent (4%) per annum from the
Closing Date to the date of payment, such payment to be made by wire transfer of
immediately available funds to such bank account as the Purchaser may designate
(or in the absence of any such designation, by corporate check mailed to the
Purchaser). Any payment the Seller is obligated to make to the Purchaser
pursuant to this Section 3.3(d)(i) shall, at the Purchaser’s sole election,
either be paid by Seller by wire transfer of immediately available funds, or be
paid and deducted from any Contingent Payment. If any amount payable to the
Purchaser under this Section 3.3(d) is not satisfied from any Contingent
Payment, then the Seller shall pay the balance to the Purchaser in accordance
with this Section 3.3(d). Any and all payments made pursuant to this Section 3.3
shall be consistently treated as adjustments to the Purchase Price for all Tax
purposes by the Seller and the Purchaser.

 

3.4          At each of the first and second anniversaries of the Closing Date
(provided that as of such anniversaries the Seller shall continue to be employed
by Company or has been terminated without cause), the Seller shall be eligible
to receive additional consideration based on the following criteria (each, a
“Contingent Payment” and, collectively, the “Contingent Payments”):

 

(a)          If the Seller shall have a total number of Active Accounts (as
defined below) of at least seventeen (17), as of the first anniversary of the
Closing Date, then $75,000 shall be paid to the Seller no later than sixty (60)
days following such anniversary date.

 

(b)          If the Seller shall have a total number of Active Accounts of at
least seventeen (17), as of the second anniversary of the Closing Date, then
$75,000 shall be paid to the Seller no later than sixty (60) days following such
anniversary date.

 

(c)          For purposes of this Section 3.4, “Active Accounts” shall include
all accounts held by the Company that have provided at least one (1) referral to
the Company in the previous eight (8) months.

 

Notwithstanding the foregoing in this Section 3.4, the Purchaser may, at its
option which it may exercise in its sole and absolute discretion, offset any
amounts payable to the Purchaser by the Seller in accordance with the terms of
this Agreement, including Section 3.3 (Adjustment of Purchase Price) and Article
X (Indemnification), against any Contingent Payment and any such Contingent
Payment shall be reduced accordingly.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE Seller and the Company

 

Except as specifically set forth in the disclosure schedule prepared by the
Seller and the Company, dated as of the date hereof, and delivered to the
Purchaser concurrently with the parties’ execution of this Agreement setting
forth specific exceptions to the Seller’s and Company’s representations and
warranties set forth herein in accordance with Article IV (collectively, the
“Disclosure Schedule”), the Seller and the Company, jointly and severally,
represent and warrant to the Purchaser as of the date hereof and through the
Closing Date, as follows:

 

4.1          Organization and Good Standing.

 

(a)          The Company is a corporation duly organized, validly existing and
in good standing under the laws of the California and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now conducted to own or use its assets, and to perform
all its obligations under the Material Contracts (as defined in Section
4.17(a)).

 

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(b)          The Seller has delivered to the Purchaser accurate and complete
copies of the articles of incorporation and bylaws as amended to date and
currently in effect, and there has been no violation of any of the provisions of
the Company’s articles of incorporation or bylaws.

 

(c)          The Company has not conducted business under or otherwise used, for
any purpose or in any jurisdiction, any legal, fictitious, assumed, or trade
name other than “Holistic Care Home Health Agency, Inc.”

 

4.2          Authorization; Due Execution.

 

(a)          Each of the Seller and the Company has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and each other agreement, document, or instrument or certificate
contemplated by this Agreement to which he, she, or it is a party in connection
with the consummation of the transactions contemplated by this Agreement
(together with this Agreement, the “Seller Documents”), and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each of the Seller Documents by the Seller and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all required corporate action on the part of the Company, its board of directors
and shareholders, and no other corporate proceedings on the part of the Company
are necessary to authorize the execution, delivery and performance of this
Agreement and the Seller Documents by the Company or the Seller or to consummate
the transactions contemplated hereby or thereby.

 

(b)          This Agreement has been, and each of the Seller Documents will be
at or prior to the Closing, duly and validly executed and delivered by each of
the Seller and the Company and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each of the Seller Documents when so executed and delivered will constitute,
legal, valid and binding obligations of each of the Seller and the Company,
enforceable against each of the Seller and the Company in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).

 

4.3          Conflicts; Consents of Third Parties.

 

(a)          The execution and delivery by the Seller of this Agreement or the
Seller Documents, the consummation of the transactions contemplated hereby or
thereby, or the compliance by the Seller with any of the provisions hereof or
thereof will not conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or give rise to any obligation of the Company to make
any payment under, or to the increased, additional, accelerated or guaranteed
rights or entitlements of any Person under, or result in the creation of any
Liens upon any of the properties or assets of the Company under, any provision
of (i) the articles of incorporation or bylaws of the Company; (ii) any Contract
or Permit to which the Company is a party or by which any of the properties or
assets of Business or the Company are bound; (iii) any Order of any Governmental
Body applicable to the Business or the Company, or any of the properties or
assets of the Business, or the Company as of the date hereof; or (iv) any
applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such
conflicts, violations, defaults, terminations or cancellations, that would not
have a Material Adverse Effect.

 

- 9 -

 

 

(b)          Other than as set forth in Section 4.3 of the Disclosure Schedule,
no consent, waiver, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the
part of the Company in connection with (i) the execution and delivery of this
Agreement or the Seller Documents, the compliance by the Seller with any of the
provisions hereof, or the consummation of the transactions contemplated hereby,
or (ii) the continuing validity and effectiveness immediately following the
Closing of any Permit or Contract of the Company.

 

4.4          No Subsidiaries. The Company does not have, and has never had, any
Subsidiaries, and Company does not own or hold any shares of capital stock or
other security or interest in any other Person or any rights to acquire any such
security or interest.

 

4.5          Outstanding Shares; No Restrictions.

 

(a)          The authorized equity securities of the Company consist of 1,000
shares of stock (“Common Stock”), of which 1,000 shares, constituting the
Shares, are issued and outstanding. The Seller is the owner (of record and
beneficially) of 1,000 shares of Common Stock, free and clear of all Liens,
including any restriction on the right of the Seller to transfer the Shares to
the Purchaser pursuant to this Agreement. The assignments, endorsements, stock
powers, or other Instruments of transfer to be delivered by the Seller to the
Purchaser at the Closing will be sufficient to transfer such Seller’s entire
interest in the Shares (of record and beneficially) owned by such Seller. Upon
transfer to the Purchaser of the certificates representing the Shares, the
Purchaser will receive good title to the Shares, free and clear of all Liens.
Section 4.5(a) of the Disclosure Schedule lists the Seller and the number of
Shares held by the Seller.

 

(b)          Company does not own nor is it a party to or bound by any Contract
to acquire, any shares or other security of any Person or any direct or indirect
equity or ownership interest in any other business. The Company is not obligated
to provide funds to or make any investment (whether in the form of a loan,
capital contribution, or otherwise) in any other Person.

 

(c)          There are no outstanding options, warrants, and/or convertible
securities pertaining to or issued by the Company. The Company only authorized
or issued one (1) class of stock and the Shares comprise all of the issued
shares of such class of stock.

 

4.6          Financial Statements and Records.

 

(a)          Section 4.6 of the Disclosure Schedule contains a true and complete
copy of the following financial statements of the Company: (i) the unaudited
balance sheets of the Company as of the date of this Agreement and the related
unaudited statements of income and of cash flows of the Company for the prior
three (3) years and (ii) the unaudited balance sheet of the Company as of the
date of this Agreement and the related statements of income and cash flows of
the Company for the twelve (12)-month period then ended (the “Unaudited Interim
Financial Statements”) (such unaudited statements, including the related notes
and schedules thereto, are referred to herein as the “Financial Statements”).

 

(b)          Each of the Financial Statements is complete and correct in all
material respects, and presents fairly in all material respects the financial
position, results of operations and cash flows of the Company as at the dates
and for the periods indicated therein.

 

- 10 -

 

 

(c)          The Company makes and keeps books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of its assets. The Company maintains systems of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management’s general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of financial
statements and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the actual levels at reasonable intervals and appropriate action is taken with
respect to any differences.

 

(d)          The financial projections and business plan provided by the Seller
to the Purchaser prior to the date hereof were reasonably prepared on a basis
reflecting the Seller’s best estimates, assumptions and judgments, at the time
provided to the Purchaser, as to the future financial performance of the
Business.

 

(e)          The minute book of the Company contains complete and correct
records of all meetings held, and actions taken by written consent, of the
holders of voting securities, the board of directors or Persons exercising
similar authority, and committees of the board of directors or such Persons of
the Company, and no meeting of any such holders, board of directors, Persons, or
committee has been held, and no other action has been taken, for which minutes
or other evidence of action have not been prepared and are not contained in such
minute books. The Company has at all times maintained complete and correct
records of all issuances and transfers of its shares. At the Closing, all such
minute books and records will be in the possession of the Company and located at
its principal office.

 

4.7          No Undisclosed Liabilities. The Company has no Liabilities except
for those Liabilities: (i) identified as such in the “liabilities” column of the
balance sheet included in the Unaudited Interim Financial Statements; (ii)
incurred subsequent to the date of the Unaudited Interim Financial Statements in
the Ordinary Course of Business; (iii) under Contracts entered into by the
Company in the Ordinary Course of Business that are not required under GAAP to
be reflected in the Financial Statements (none of which is a liability resulting
from breach of contract, breach of warranty, tort, infringement, claim or
lawsuit and it being understood and agreed that the Financial Statements are not
prepared in accordance with GAAP); and (iv) commitments incurred in the Ordinary
Course of Business described in Section 4.7 of the Disclosure Schedule that are
not required under GAAP to be reflected in the Financial Statements ( and it
being understood and agreed that the Financial Statements are not prepared in
accordance with GAAP).

 

4.8          Condition and Sufficiency of Assets.

 

(a)          The buildings, equipment, and other assets (whether real or
personal, tangible or intangible) owned or leased by the Company are
structurally sound, in good operating condition and repair, and adequate for the
uses to which they are being put, and none of such buildings, equipment or other
assets is in need of maintenance or repairs other than ordinary, routine
maintenance that is not material in nature or cost.

 

(b)          The assets owned and leased (whether real or personal, tangible or
intangible) by the Company constitutes all the assets used in connection with
the Business. Such assets constitute all the assets necessary for the Company to
continue to conduct its business from and after the Closing Date without
interruption as it has been conducted by the Company prior to the date of this
Agreement.

 

- 11 -

 

 

4.9          Absence of Certain Developments.

 

(a)          Except as expressly contemplated by this Agreement or as set forth
on Section 4.9 of the Disclosure Schedule, since May 30, 2014 (i) the Company
has conducted the Business only in the Ordinary Course of Business, (ii) there
has not been any damage, destruction or loss with respect to any material
property or asset of the Business, (iii) issuance of or change in the authorized
or issued shares of the Company; purchase, redemption, retirement, or other
acquisition by the Company of any shares of the Company; or declaration or
payment of any dividend or other distribution or payment in respect of the
shares of the Company, and (iv) there has not been any event, change, occurrence
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.

 

(b)          Without limiting the generality of the foregoing and except as set
forth on Section 4.9 of the Disclosure Schedule, since May 30, 2014, the Company
has not:

 

(i)          declared, set aside or paid any dividend or made any other
distribution in respect of any shares of capital stock (or other equity
interest) of the Company;

 

(ii)         repurchased, redeemed or acquired any outstanding shares of capital
stock (or other equity interest) or other securities of, or other ownership
interest in, the Company;

 

(iii)        awarded or paid any bonuses to any Business Employee (as defined in
Section 4.11(b)) or any Physician (as defined in Section 4.11(a)), other than as
set forth on the Disclosure Schedule;

 

(iv)        entered into any employment, deferred compensation, severance or
similar agreement (nor amended any such agreement) or agreed to increase the
compensation payable or to become payable by it to any of the Company’s
directors, officers, employees, agents or representatives or agreed to increase
the coverage or benefits available under the Company Benefit Plan (as defined in
Section 4.12(a));

 

(v)         changed its accounting or Tax reporting principles, methods or
policies;

 

(vi)        made or rescinded any election relating to Taxes, settled or
compromised any claim relating to Taxes;

 

(vii)       failed to promptly pay and discharge current Liabilities except
where disputed in good faith by appropriate proceedings;

 

(viii)      made any loans, advances or capital contributions to, or investments
in, any Person or paid any fees or expenses to any director, officer, partner,
shareholder or Affiliate;

 

(ix)         mortgaged, pledged or subjected to any Lien any of its assets,
properties or rights relating to the Business;

 

(x)          terminated, entered into or amended any Material Contract (as
defined in Section 4.16(a));

 

(xi)         made or committed to make any capital expenditures in excess of
$5,000 individually or $15,000 in the aggregate;

 

(xii)        issued, created, incurred, assumed or guaranteed any Indebtedness;

 

- 12 -

 

 

(xiii)       suffered any material change in the productivity or compensation of
the Physicians (as defined in Section 4.11(a)) as reflected in Section 4.11 of
the Disclosure Schedule;

 

(xiv)      instituted or settled any Legal Proceeding; or

 

(xv)       agreed, committed, arranged or entered into any agreement to do any
of the foregoing.

 

4.10        Taxes.

 

(a)          The Company (i) has timely filed all Tax Returns required to be
filed by or on behalf of the Company and such Tax Returns have been duly and
timely filed with the appropriate Taxing Authority in all jurisdictions in which
such Tax Returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings), and all such Tax Returns are
true, complete and correct in all material respects; and (ii) have fully and
timely paid all Taxes payable by or on behalf of the Company. With respect to
any period for which Tax Returns have not yet been filed or for which Taxes are
not yet due or owing, the Company have made due and sufficient accruals for such
Taxes in the Financial Statements and its books and records. All required
estimated Tax payments sufficient to avoid any underpayment penalties have been
made by or on behalf of the Company.

 

(b)          The Company has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has duly
and timely withheld and paid over to the appropriate Taxing Authority all
amounts required to be so withheld and paid under all applicable Laws. No claim
has been made by a Taxing Authority in a jurisdiction where the Company does not
file Tax Returns such that it is or may be subject to taxation by that
jurisdiction.

 

(c)          All deficiencies asserted or assessments made as a result of any
examinations by any Taxing Authority of the Tax Returns of, or including, the
Company have been fully paid, and there are no other audits or investigations by
any Taxing Authority in progress. The Company has not received any notice from
any Taxing Authority that it intends to conduct such an audit or investigation.
No issue has been raised by a Taxing Authority in any prior examination of the
Company which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.

 

(d)          The Company is not a party to any tax sharing, allocation,
indemnity or similar agreement or arrangement (whether or not written) pursuant
to which it will have any obligation to make any payments after the Closing.
There are no liens as a result of any unpaid Taxes upon any of the assets of the
Company.

 

4.11        Physicians; Business Employees.

 

(a)          Section 4.11(a) of the Disclosure Schedule contains a complete and
accurate list of all physicians who provide services, professional or otherwise,
on behalf of the Company (collectively, the “Physicians”) and accurately and
correctly reflects for each Physician: (i) their respective California medical
license numbers, (ii) their subspecialties of practice, (iii) productivity and
compensation information for the preceding three (3) years from the date of this
Agreement, and all fringe benefits provided by the Company, and (iv) a detailed
description of any situation in which a Physician’s professional privileges or
rights of any kind, including medical staff privileges, licensure, or Medicare
or Medi-Cal certification, are or have been reviewed, suspended, terminated,
curtailed, or a proctor assigned by the Company or any Governmental Body. To the
Seller’s and Company’s Knowledge, there are no pending or threatened disputes of
any nature between the Company and any Physician or allied health professionals.

 

- 13 -

 

 

(b)          Section 4.11(b) of the Disclosure Schedule contains a complete and
accurate list of all persons (other than Physicians) who are employees,
independent contractors or consultants of the Business as of the date hereof
(collectively, the “Business Employees”), and sets forth for each such
individual the following: (i) name; (ii) title or position (including whether
full or part time); (iii) hire date; (iv) current annual base compensation rate;
(v) commission, bonus or other incentive-based compensation; and (vi) a
description of the fringe benefits provided to each such individual as of the
date hereof.

 

(c)          No Person has claimed or has reason to claim that any Physician,
Business Employee or other Person affiliated with the Company: (i) is in
violation of any term of any employment Contract, patent disclosure agreement,
noncompetition agreement or any restrictive covenant with such Person; (ii) has
disclosed or utilized any Trade Secret or proprietary information or
documentation of such Person; or (iii) has interfered in the employment
relationship between such Person and any of its present or former employees. To
the Knowledge of the Seller, no Physician, Business Employee or other Person
affiliated with the Company has used or proposed to use any Trade Secret,
information or documentation proprietary to any former employer or violated any
confidential relationship with any Person in connection with the development,
manufacture or sale of any product or proposed product, or the development or
sale of any service or proposed service, of the Company.

 

4.12        Company Benefit Plans.

 

(a)          Section 4.12(a) of the Disclosure Schedule sets forth a complete
and correct list of: (i) all “employee benefit plans”, as defined in
Section 3(3) of ERISA, and all other employee benefit arrangements or payroll
practices, including bonus plans, consulting or other compensation agreements,
incentive, equity or equity-based compensation, or deferred compensation
arrangements, stock purchase, severance pay, sick leave, vacation pay, salary
continuation, disability, hospitalization, medical insurance, life insurance,
scholarship programs maintained by the Company and its Subsidiaries or to which
the Company contributed or is obligated to contribute thereunder for current or
former employees of the Company (the “Employee Benefit Plans”), and (ii) all
“employee pension plans”, as defined in Section 3(2) of ERISA, subject to Title
IV of ERISA or Section 412 of the Code, maintained by the Seller and any trade
or business (whether or not incorporated) which are or have ever been under
common control, or which are or have ever been treated as a single employer,
with the Company under Section 414(b), (c), (m) or (o) of the Code (“ERISA
Affiliate”) or to which the Seller and any ERISA Affiliate contributed or has
ever been obligated to contribute thereunder (the “ERISA Affiliate Plans”).
Section 4.12(a) of the Disclosure Schedule separately sets forth each Company or
ERISA Affiliate Plan which is a multiemployer plan as defined in Section 3(37)
of ERISA, or has been subject to Sections 4063 or 4064 of ERISA.

 

(b)          True, correct and complete copies of the following documents, with
respect to each of the Employee Benefit Plans and ERISA Affiliate Plans (as
applicable), have been delivered to the Purchaser (i) any plans and related
trust documents, and all amendments thereto, (ii) the most recent Forms 5500 for
the past three (3) years and schedules thereto, (iii) the most recent financial
statements and actuarial valuations for the past three (3) years, (iv) the most
recent IRS determination letter, (v) the most recent summary plan descriptions
(including letters or other documents updating such descriptions) and (vi)
written descriptions of all non-written agreements relating to the Employee
Benefit Plans and ERISA Affiliate Plans.

 

- 14 -

 

 

(c)          Each of the Employee Benefit Plans and ERISA Affiliate Plans
intended to qualify under Section 401 of the Code (“Qualified Plans”) so qualify
and the trusts maintained thereto are exempt from federal income taxation under
Section 501 of the Code, and, except as disclosed on Schedule 5.13(c), nothing
has occurred with respect to the operation of any such plan which could cause
the loss of such qualification or exemption or the imposition of any liability,
penalty or tax under ERISA or the Code.

 

(d)          All contributions and premiums required by law or by the terms of
any Employee Benefit Plan or ERISA Affiliate Plan or any agreement relating
thereto have been timely made (without regard to any waivers granted with
respect thereto) to any funds or trusts established thereunder or in connection
therewith, and no accumulated funding deficiencies exist in any of such plans
subject to Section 412 of the Code, and all contributions for any period ending
on or before the Closing Date which are not yet due will have been paid or
accrued on the Company’s balance sheet on or prior to the Closing Date.

 

(e)          The benefit liabilities, as defined in Section 4001(a)(16) of
ERISA, of each of the Employee Benefit Plans and ERISA Affiliate Plans subject
to Title IV of ERISA using the actuarial assumptions that would be used by the
Pension Benefit Guaranty Corporation (in the event it terminated each such plan
do not exceed the fair market value of the assets of each such plan. The
liabilities of each Employee Benefit Plan that has been terminated or otherwise
wound up, have been fully discharged in full compliance with applicable Law.

 

(f)          There has been no “reportable event” as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to any of the
Employee Benefit Plans or ERISA Affiliate Plans subject to Title IV of ERISA
which would require the giving of notice, or any event requiring notice to be
provided under Section 4041(c)(3)(C) or 4063(a) of ERISA.

 

(g)          None of the Company, any ERISA Affiliate or any organization to
which the Company is a successor or parent corporation, within the meaning of
Section 4069(b) of ERISA, has engaged in any transaction, within the meaning of
Section 4069 of ERISA.

 

(h)          None of the Employee Benefit Plans which are “welfare benefit
plans” within the meaning of Section 3(1) of ERISA provide for continuing
benefits or coverage for any participant or any beneficiary of a participant
post-termination of employment except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and at the
expense of the participant or the participant’s beneficiary. Each of the Company
and any ERISA Affiliate which maintains a “group health plan” within the meaning
of Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.

 

(i)          There has been no violation of ERISA or the Code with respect to
the filing of applicable returns, reports, documents and notices regarding any
of the Employee Benefit Plans or ERISA Affiliate Plans with the Secretary of
Labor or the Secretary of the Treasury or the furnishing of such notices or
documents to the participants or beneficiaries of the Employee Benefit Plans or
ERISA Affiliate Plans.

 

(j)          There are no pending Legal Proceedings which have been asserted or
instituted against any of the Employee Benefit Plans or ERISA Affiliate Plans,
the assets of any such plans or the Company, or the plan administrator or any
fiduciary of the Employee Benefit Plans or ERISA Affiliate Plans with respect to
the operation of such plans (other than routine, uncontested benefit claims),
and there are no facts or circumstances which could form the basis for any such
Legal Proceeding.

 

- 15 -

 

 

(k)          Each of the Employee Benefit Plans and ERISA Affiliate Plans has
been maintained, in all material respects, in accordance with its terms and all
provisions of applicable Law. All amendments and actions required to bring each
of the Employee Benefit Plans and ERISA Affiliate Plans into conformity in all
material respects with all of the applicable provisions of ERISA and other
applicable Laws have been made or taken except to the extent that such
amendments or actions are not required by Law to be made or taken until a date
after the Closing Date and are disclosed on Section 4.12(k) of the Disclosure
Schedule.

 

(l)          The Seller and any ERISA Affiliate which maintains a “benefits
plan” within the meaning of Section 5000(b)(1) of ERISA, have complied with the
notice and continuation requirements of Section 4980B of the Code or Part 6 of
Title I of ERISA and the applicable regulations thereunder.

 

(m)         None of the Company or any ERISA Affiliate or any organization to
which any is a successor or parent corporation, has divested any business or
entity maintaining or sponsoring a defined benefit pension plan having unfunded
benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or
transferred any such plan to any person other than the Seller or any ERISA
Affiliate during the five-year period ending on the Closing Date.

 

(n)          Neither the Company nor any “party in interest” or “disqualified
person” with respect to the Employee Benefit Plans or ERISA Affiliate Plans has
engaged in a non-exempt “prohibited transaction” within the meaning of
Section 4975 of the Code or Section 406 of ERISA.

 

(o)          None of the Company or any ERISA Affiliate has terminated any
Employee Benefit Plan or ERISA Affiliate Plan subject to Title IV of ERISA, or
incurred any outstanding liability under Section 4062 of ERISA to the Pension
Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of
ERISA.

 

(p)          Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee of Company; (ii) increase any benefits
otherwise payable under any Employee Benefit Plan or ERISA Affiliate Plan; or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.

 

(q)          The Company is not a party to any contract, plan or commitment,
whether legally binding or not, to create any additional Employee Benefit Plan
or ERISA Affiliate Plan, or to modify any existing Employee Benefit Plan or
Pension Pan.

 

(r)          No stock or other security issued by the Company forms or has
formed a material part of the assets of any Employee Benefit Plan or ERISA
Affiliate Plan.

 

(s)          Any individual who performs services for the Company (other than
through a contract with an organization other than such individual) and who is
not treated as an employee for federal income Tax purposes by the Company is not
an employee for such purposes.

 

4.13        Real Property. The Company does not own (and has never owned) any
real property. Section 4.13 of the Disclosure Schedule sets forth a list of all
real property currently leased by the Company or otherwise used or occupied by
the Company for the operation of the Business (the “Leased Real Property”). To
the Knowledge of the Company, the Leased Real Property is (i) in good operating
condition and repair, and is free from structural, physical and mechanical
defects; (ii) maintained in a manner consistent with standards generally
followed with respect to similar properties; and (iii) available for use in and
sufficient for the purposes and current demands of the Business and operation of
the Company as currently conducted.

 

- 16 -

 

 

4.14        Tangible Personal Property. Section 4.14 of the Disclosure Schedule
sets forth (i) all leases of personal property (“Personal Property Leases”)
involving annual payments in excess of $5,000 relating to personal property used
in the Business or to which the Company are a party or by which the properties
or assets relating to the Business are bound and (ii) all items of tangible
personal property which, individually or in the aggregate, are material to the
operation of the Business. The Company has good and marketable title to all of
the items of tangible personal property reflected on Section 4.14 of the
Disclosure Schedule, free and clear of any and all Liens, other than the
Permitted Exceptions. The Company has a valid and enforceable leasehold interest
under each of the Personal Property Leases, and each of the Personal Property
Leases is in full force and effect. There is no default under any Personal
Property Lease by the Company or, to the Knowledge of the Seller, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder. No party to any
of the Personal Property Leases has exercised any termination rights with
respect thereto. Execution of this Agreement and consummation of the
transactions contemplated herein does not constitute a breach or a default under
any of the Personal Property Leases, except as explicitly noted on Section 4.3
of the Disclosure Schedule, for which Company shall obtain the necessary
consents prior to the Closing Date.

 

4.15        Intellectual Property.

 

(a)          Section 4.15 of the Disclosure Schedule sets forth an accurate and
complete list of all Intellectual Property Licenses and all Patents, registered
Marks, pending applications for registrations of any Marks and unregistered
Marks, registered Copyrights, and pending applications for registration of
Copyrights, owned or filed by the Company or its Affiliates and used in the
Business. The Company is the sole and exclusive owners of all right, title and
interest in and to all of the Patents, the Marks, each of the registered
Copyrights and pending applications filed by the Company. The Company is the
sole and exclusive owner of, or has valid and continuing rights to use, sell and
license, as the case may be, all other Purchased Intellectual Property used,
sold or licensed by the Company in the Business as presently conducted and as
currently proposed to be conducted, free and clear of all Liens or obligations
to others.

 

(b)          Except with respect to licenses of commercial off-the-shelf
software, the Company is not required, obligated, or under any Liability
whatsoever, to make any payments by way of royalties, fees or otherwise to any
owner, licensor of, or other claimant to any Intellectual Property, or other
third party, with respect to the use thereof or in connection with the conduct
of the Business. No Trade Secret or any other non-public, proprietary
information material to the Business has been authorized to be disclosed or, to
the Knowledge of the Seller, has been actually disclosed by the Company to any
employee or any third party other than pursuant to a non-disclosure agreement
restricting the disclosure and use of the Purchased Intellectual Property. The
Company has taken commercially reasonable security measures to protect the
secrecy, confidentiality and value of all the Trade Secrets of the Business and
any other confidential information, including invention disclosures, not covered
by any patents owned or patent applications filed by the Company, which measures
are reasonable in the industry in which the Seller operate. To the Knowledge of
the Seller, the Company has not interfered with, infringed upon, misappropriated
or otherwise come into conflict with any intellectual property rights of any
Person or, to the Knowledge of the Seller, committed any acts of unfair
competition. As of the date hereof, the Company is not the subject of any
pending or, to the Knowledge of the Seller, threatened Legal Proceedings which
involve a claim of infringement, unauthorized use, or violation by any Person
against the Company or challenging the ownership, use, validity or
enforceability of, any material Purchased Intellectual Property. To the
Knowledge of the Seller, no Person is infringing, violating, misusing or
misappropriating any material Purchased Intellectual Property used in the
Business. No such claims have been made against any Person by the Company. There
are no Orders to which the Company is a party or by which the Company is bound
which restrict, in any material respect, the rights to use any of the Purchased
Intellectual Property. No present or former employee of the Company has any
right, title, or interest, directly or indirectly, in whole or in part, in any
material Intellectual Property owned by Company and used in the Business. No
employee, consultant or independent contractor of the Company is, as a result of
or in the course of such employee’s, consultant’s or independent contractor’s
engagement by the Company, in default or breach of any material term of any
employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement.

 

- 17 -

 

 

4.16        Material Contracts.

 

(a)          Section 4.16 of the Disclosure Schedule sets forth all of the
following Contracts to which the Company is a party or by which the Company is
bound and that are related to the Business (collectively, the “Material
Contracts”):

 

(i)          any Contract with a licensed healthcare service plan;

 

(ii)         Contracts with any current or former officer, director, shareholder
or Affiliate of the Company;

 

(iii)        Contracts for the sale of any of the assets of the Company or for
the grant to any person of any preferential rights to purchase any of its
assets;

 

(iv)        Contracts for joint ventures, strategic alliances or partnerships;

 

(v)         Contracts containing covenants of the Company not to compete in any
line of business or with any Person in any geographical area or covenants of any
other Person not to compete with the Company in any line of business or in any
geographical area;

 

(vi)        Contracts relating to the acquisition by the Company of any
operating business or the capital stock of any other Person;

 

(vii)       Contracts relating to the incurrence, assumption or guarantee of any
Indebtedness or imposing a Lien on any of its assets;

 

(viii)      Contracts under which the Company have made advances or loans to any
other Person;

 

(ix)         Contracts providing for severance, retention, change in control or
other similar payments to any Company Employee;

 

(x)          Contracts for the employment of any individual on a full-time,
part-time or consulting or other basis;

 

(xi)         Contracts for the provision of goods or services involving
consideration in excess of $5,000 annually or $15,000 in the aggregate over the
term of the Contract;

 

(xii)        Contracts (or group of related contracts) which involve the
expenditure of more than $5,000 annually or $15,000 in the aggregate or require
performance by any party more than one year from the date hereof;

 

(xiii)       any Intellectual Property Licenses;

 

- 18 -

 

 

(xiv)      all non-disclosure, confidentiality, or non-solicitation agreements
between (A) the Company and any of its current or former employees, consultants
or agents, and (B) the Company and any other Person; and

 

(xv)       Contracts otherwise material to the Business.

 

(b)          Each Material Contract is in full force and effect and is the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). The Company is not in default under any Material Contract, and, to the
Knowledge of the Seller, no other party to any Material Contract in default
thereunder. No event has occurred that with the lapse of time or the giving of
notice or both would constitute a default under any Material Contract. No party
to any of the Material Contracts has exercised any termination rights with
respect thereto. The Company has delivered or otherwise made available to the
Purchaser true, correct and complete copies of all of the Material Contracts,
together with all amendments, modifications or supplements thereto. Execution of
this Agreement and consummation of the transactions contemplated herein does not
constitute a breach or a default under any of the Material Contracts, except as
explicitly noted on Section 4.3 of the Disclosure Schedule, for which Company
shall obtain the necessary consents prior to the Closing Date.

 

4.17        Litigation. There is no Legal Proceeding pending or, to the
Knowledge of the Seller, threatened against the Company (or pending or
threatened, against any of the officers, or directors of the Company,
Physicians, or Business Employees with respect to their business activities on
behalf of the Company), or to which the Company or the Seller is otherwise a
party before any Governmental Body, nor is there any reasonable basis for any
such Legal Proceeding.

 

4.18        Compliance with Laws; Permits.

 

(a)          Compliance. The Company has not failed to comply with or has
violated any Law applicable to the Business. No investigation or review by any
Governmental Body is pending or, to the Knowledge of the Seller, has been
threatened against the Company. No event has occurred, and no condition or
circumstance exists, that will (with or without notice or lapse of time)
constitute or result in a violation by the Seller of, or a failure on the part
of the Company to comply with, any applicable Law. The Company has never
received any notice or other communication from any Person regarding any actual
or possible violation of, or failure to comply with, any applicable Law.

 

(b)          Orders. There is no Order binding upon the Company or to which any
assets owned or used by the Company is subject, including any Orders or
Contracts with respect to (i) Environmental Laws, (ii) Remedial Action or (iii)
any Release or threatened Release of a Hazardous Material. To the Knowledge of
the Seller, no officer or other employee of the Seller is subject to any Order
that prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Business.

 

(c)          Permits. The Company holds, to the extent required by applicable
Law, all Permits from, and has made all declarations and filings with, all
Governmental Bodies for the operation of its business as presently conducted,
including the sale, transport, export, import or shipment of any items or
materials (whether in tangible form or otherwise) to any jurisdiction. No
suspension or cancellation of any such Permit is pending or, to the Knowledge of
the Seller, threatened, each such Permit is valid and in full force and effect,
and the Company is and always has been in compliance with the terms of such
Permits. Section 4.18(c) of the Disclosure Schedule provides an accurate and
complete list of all Permits held by the Company, and the Seller has delivered
to the Purchaser accurate and complete copies of each such Permit. The Company
has never received any notice or other communication from any Governmental Body
regarding: (i) any actual or possible violation of or failure to comply with any
term or requirement of any Permit; or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any Permit.

 

- 19 -

 

 

(d)          Government Reimbursement Programs. The Company is qualified for
participation in and has current and valid provider contracts with the
Government Reimbursement Programs and/or their carriers and complies with the
conditions of participation therein. The Company is entitled to payment under
the Government Reimbursement Programs for services rendered to qualified
beneficiaries. Except to the extent the Company's Liabilities and contractual
adjustments under the Government Reimbursement Programs have been properly
reflected and adequately reserved in the Financial Statements, to the Seller's
and Company’s Knowledge, neither the Company nor any Physician has not received
or submitted any false or misleading claim for payment and neither the Company
nor the Physicians have received written notice of any dispute or claim by any
Governmental Body, carrier or other Person regarding the Government
Reimbursement Programs or the Company’s or Physicians’ participation therein.

 

4.19        Inventory. The Inventory is in good and marketable condition, and is
saleable in the Ordinary Course of Business.  The Inventory constitutes
sufficient quantities for the normal operation of Business in accordance with
past practice.  The Inventory set forth in the Unaudited Interim Financial
Statements was properly stated therein.

 

4.20        Accounts and Notes Receivable. All Company accounts and notes
receivable have arisen from bona fide transactions consistent with past practice
and are payable on ordinary trade terms. All Company accounts and notes
receivable reflected on the Unaudited Interim Financial Statements are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts reflected thereon, which reserves are
adequate and were calculated in a manner consistent with past practice and in
accordance with GAAP consistently applied. All accounts and notes receivable
arising after the date of the Unaudited Interim Financial Statements are good
and collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts, which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied. None of the Company accounts or the notes receivable
(i) are, to the Knowledge of the Seller, subject to any setoffs or
counterclaims, or (ii) represent obligations for goods sold on consignment, on
approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement. All cash collected or received by or on behalf of the
Company with respect to any accounts and notes receivable has been accurately
recorded and applied to such outstanding Company accounts and notes receivable
as of the date hereof and as of the Closing Date.

 

4.21        Related Party Transactions. No director, officer, partner,
shareholder or Affiliate of the Company owns any direct or indirect interest of
any kind in, or controls or is a director, officer, employee or partner of, or
consultant to, or lender to or borrower from or has the right to participate in
the profits of, any Person which is (A) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Business, or (B) engaged in a
business related to the Business.

 

4.22        Financial Advisors. No Person has acted, directly or indirectly, as
a broker, finder or financial advisor for the Company, its Affiliates, or the
Seller in connection with the transactions contemplated by this Agreement, and
no Person is entitled to any fee or commission or like payment in respect
thereof.

 

- 20 -

 

 

4.23        Insurance. The Company has insurance policies in full force and
effect for such amounts as are sufficient for all requirements of Law and all
agreements to which the Company is a party or by which it is bound, including
professional liability policies covering professional services provided by all
Physicians and all applicable Business Employees. Set forth on Section 4.23 of
the Disclosure Schedule is a complete and correct list of all insurance policies
and all fidelity bonds held by or applicable to the Company setting forth, in
respect of each such policy, the policy name, policy number, carrier, term, type
and amount of coverage and annual premium. No event relating to the Company has
occurred which could reasonably be expected to result in a retroactive upward
adjustment in premiums under any such insurance policies or which could
reasonably be expected to result in a prospective upward adjustment in such
premiums. Excluding insurance policies that have expired and been replaced in
the Ordinary Course of Business, no insurance policy has been cancelled within
the last two (2) years and, to the Knowledge of the Seller, no threat has been
made to cancel any insurance policy of the Company during such period. All such
insurance will remain in full force and effect and all such insurance is
assignable or transferable to the Purchaser. No event has occurred, including
the failure by the Company to give any notice or information or the Company
giving any inaccurate or erroneous notice or information, which limits or
impairs the rights of the Company under any such insurance policies.

 

4.24        Banks. Section 4.24 of the Disclosure Schedule contains a complete
and correct list of the names and locations of all banks in which the Company
has accounts or safe deposit boxes and the names of all persons authorized to
draw thereon or to have access thereto. No person holds a power of attorney to
act on behalf of Company.

 

4.25        Full Disclosure. This Agreement (including the Disclosure Schedule)
does not: (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact; or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained herein and therein (in the light of the circumstances
under which such representations, warranties and information were made or
provided) not false or misleading. The Company and the Seller, jointly and
severally, have no Knowledge of any information or other fact that is or may
become materially adverse to the business, condition (financial or otherwise),
assets, capitalization, Intellectual Property, Liabilities, operations, results
of operations or financial performance of the Company that has not been set
forth in this Agreement or in the Disclosure Schedule.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to the Seller that:

 

5.1          Organization and Good Standing. The Purchaser is a California
limited liability company duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite limited
liability company power and authority to own, lease and operate properties and
carry on its business.

 

5.2          Authorization.

 

(a)          The Purchaser has all requisite power and authority to execute and
deliver this Agreement and each other agreement, document, or instrument or
certificate contemplated by this Agreement or to be executed by the Purchaser in
connection with the consummation of the transactions contemplated by this
Agreement (together with this Agreement, the “Purchaser Documents”), and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and each of the Purchaser Documents by the Purchaser
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all required limited liability company action on the
part of the Purchaser and its manager, and no other limited liability company
proceedings on the part of the Purchaser are necessary to authorize the
execution, delivery and performance of this Agreement and the Purchaser
Documents by the Purchaser or to consummate the transactions contemplated hereby
or thereby.

 

- 21 -

 

 

(b)          This Agreement has been, and each of the Purchaser Documents will
be at or prior to the Closing, duly and validly executed and delivered by the
Purchaser and (assuming the due authorization, execution and delivery by the
other parties hereto and thereto) this Agreement constitutes, and each of the
Purchaser Documents when so executed and delivered will constitute, legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

5.3          Conflicts; Consents of Third Parties. The execution and delivery by
the Purchaser of this Agreement and of the Purchaser Documents, the consummation
of the transactions contemplated hereby or thereby, or the compliance by the
Purchaser with any of the provisions hereof or thereof will not (i) conflict
with, or result in the breach of, any provision of the articles of organization
or operating agreement of the Purchaser, (ii) conflict with, violate, result in
the breach of, or constitute a default under any note, bond, mortgage,
indenture, license, agreement or other obligation to which the Purchaser is a
party or by which the Purchaser or its properties or assets are bound or
(iii) violate any statute, rule, regulation or Order of any Governmental Body by
which the Purchaser is bound, except, in the case of clause (ii) and (iii), for
such violations, breaches or defaults as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Purchaser to
consummate the transactions contemplated by this Agreement. No consent, waiver,
Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person is required on the part of the Purchaser in
connection with the execution and delivery of this Agreement or the Purchaser
Documents or the compliance by the Purchaser with any of the provisions hereof
or thereof.

 

5.4          Litigation. There are no Legal Proceedings pending or, to the
Knowledge of the Purchaser, threatened that are reasonably likely to prohibit or
restrain the ability of the Purchaser to enter into this Agreement or consummate
the transactions contemplated hereby.

 

5.5          Financial Advisors. No Person has acted, directly or indirectly, as
a broker, finder or financial advisor for the Purchaser in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect thereof.

 

ARTICLE VI

COVENANTS

 

6.1          Access to Information. From the date hereof until the Closing Date,
the Seller and the Company shall afford the Purchaser and its representatives
reasonable access to the books and records of the Company, and the Company shall
make available to the Purchaser such financial and operating data of the Company
as the Purchaser may reasonably request; provided, however, that any such access
or furnishing of information shall be during normal business hours upon
reasonable advance notice and in such a manner as not to interfere in any
significant manner with the normal operations of the Company. Notwithstanding
anything herein to the contrary (i) no such investigation or examination shall
be permitted to the extent that it would require the Company or the Seller to
disclose information subject to attorney-client privilege or conflict with any
confidentiality obligations to which the Company or the Seller is bound and (ii)
the Purchaser shall not contact any suppliers to, or customers or employees of,
the Company without the prior written consent of the Seller (which may not be
unreasonably be withheld, delayed or conditioned).

 

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6.2          Conduct of the Business Pending the Closing. Except (A) as set
forth on Section 6.2 of the Disclosure Schedules, (B) as required by applicable
Law, (C) as otherwise contemplated by this Agreement, (D) for the transfer of
cash from the Company to the Seller, or (E) with the prior written consent of
the Purchaser (which consent may be withheld, delayed or conditioned):

 

(a)          the Company shall, from the date hereof prior to the Closing Date:

 

(i)          conduct its respective businesses in the Ordinary Course of
Business including the maintenance of all records;

 

(ii)         use its best efforts to preserve the present operations and
goodwill of its business;

 

(iii)        confer with the Purchaser prior to implementing operation decisions
of a material nature;

 

(iv)        report to the Purchaser at such times as the Purchaser may
reasonably request concerning the status of the Company;

 

(v)         maintain the assets owned or used by the Company in a state of
repair and conditions that complies with the Company’s Contracts and is
consistent with the requirements and normal conduct of the Company;

 

(vi)        comply with all Contracts of the Company;

 

(vii)       continue in full force and effect all insurance coverage of the
Company; and

 

(viii)      take no action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Section 4.9
would be likely to occur.

 

(b)          the Company shall not, from the date hereof prior to the Closing
Date:

 

(i)          amend any of its organizational documents;

 

(ii)         declare, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock (or other equity
interest) of the Company;

 

(iii)        repurchase, redeem or acquire any outstanding shares of capital
stock (or other equity interest) or other securities of, or other ownership
interest in, the Company;

 

(iv)        award or pay any bonuses to any Business Employee (as defined in
Section 4.11(b)) or any Physician (as defined in Section 4.11(a)), other than as
set forth on the Disclosure Schedule;

 

(v)         enter into any employment, deferred compensation, severance or
similar agreement (nor amended any such agreement) or agree to increase the
compensation payable or to become payable by it to any of the Company’s
directors, officers, employees, agents or representatives or agree to increase
the coverage or benefits available under the Company Benefit Plan (as defined in
Section 4.12(a));

 

- 23 -

 

 

(vi)        change its accounting or Tax reporting principles, methods or
policies;

 

(vii)       make or rescind any election relating to Taxes, settled or
compromised any claim relating to Taxes;

 

(viii)      fail to promptly pay and discharge current Liabilities except where
disputed in good faith by appropriate proceedings;

 

(ix)         make any loans, advances or capital contributions to, or
investments in, any Person or paid any fees or expenses to any director,
officer, partner, shareholder or Affiliate;

 

(x)          mortgage, pledge or subject to any Lien any of its assets,
properties or rights relating to the Business;

 

(xi)         terminate, enter into or amend any Material Contract;

 

(xii)        make or commit to make any capital expenditures in excess of
$10,000 individually or $15,000 in the aggregate;

 

(xiii)       issue, create, incur, assume or guarantee any Indebtedness;

 

(xiv)      suffer any material change in the productivity or compensation of the
Physicians;

 

(xv)       institute or settle any Legal Proceeding without the Purchaser’s
written consent; or

 

(xvi)      agree, commit, arrange or enter into any agreement to do any of the
foregoing.

 

6.3          Exclusive Dealing. Until this Agreement shall have been terminated
pursuant to Article IX the Seller shall not, and the Seller shall cause the
Company not to, directly or indirectly, solicit, initiate, encourage or
entertain any inquires or proposals from, discuss or negation with, provide any
nonpublic information to, or consider the merits of any inquires or propels from
any Person (other than the Purchaser) relating to any business combination
transaction involving the Company, however structured, including the sale of the
Business or assets by any merger, consolidation or similar transaction or
arrangement. The Seller shall notify the Purchaser of any such inquiry or
proposal within 24 hours of receipt thereof by Seller, the Company, or any of
their respective Representatives.

 

6.4          Notice. Prior to the Closing Date, the Seller shall promptly
provide notice to the Purchaser of any fact or circumstance that could make the
satisfaction of any condition of Article VIII impossible or unlikely. No such
notice will be deemed to have cured any breach of any covenant or affect any
right or remedy of the Purchaser under this Agreement.

 

- 24 -

 

 

6.5          Further Assurances. Each of the Seller, the Company, and the
Purchaser shall use best efforts to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, including all necessary filings with any governmental agency,
including, without limitation, all filings related to licensure, or Medicare or
Medi-Cal certification, and to use best efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including (i) cooperating in
responding to inquiries from, and making presentations to, Governmental
Authorities and (ii) defending against and responding to any Legal Proceeding
challenging or relating to this Agreement, or the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed.

 

6.6          Confidentiality.

 

(a)          From the date hereof, and after the Closing Date, except in
furtherance of the transaction described in this Agreement and as necessary in
the ordinary course of business, (i) the Seller and the Company shall not, and
shall cause its Affiliates not to, directly or indirectly, disclose, reveal,
divulge or communicate to any Person (other than authorized officers, directors
and employees of the Purchaser or the Company) or use or otherwise exploit for
its own benefit or for the benefit of anyone other than the Purchaser or the
Company, any Confidential Information relating to the Company or the Company
Subsidiaries and (ii) the Purchaser shall not, and shall cause its Affiliates
not to, directly or indirectly, disclose, reveal, divulge or communicate to any
Person (other than authorized officers, directors and employees of the Seller)
or use or otherwise exploit for its own benefit or for the benefit of anyone
other than the Seller, any Confidential Information relating to the Seller;
provided, however, that in the event disclosure of any Confidential Information
is required by applicable Law in either clause (i) or (ii) above, the receiving
party of such Confidential Information shall, to the extent reasonably possible,
provide to the disclosing party with prompt notice of such requirement prior to
making any disclosure so that the disclosing party may seek an appropriate
protective order.

 

(b)          For purposes of this Section 6.6, “Confidential Information” shall
mean any confidential information with respect to any disclosing party,
including, methods of operation, customers, customer lists, patients, patient
lists, patient records, products, prices, fees, costs, Technology, inventions,
Trade Secrets, know-how, software, marketing methods, plans, personnel,
suppliers, competitors, markets or other specialized information or proprietary
matters; provided, however, that the term “Confidential Information” does not
include, and there shall be no obligation of any receiving party hereunder with
respect to, information that (i) is generally available to the public on the
date of this Agreement or (ii) becomes generally available to the public other
than as a result of a disclosure not otherwise permissible hereunder.

 

ARTICLE VII
POST-CLOSING COVENANTS

 

7.1          Access to Information. Following the Closing, to the extent the
Purchaser reasonably requests, the Seller shall provide the Purchaser and its
representatives with access to any books and records in the Seller’s possession
concerning periods prior to the Closing. No investigation by the Purchaser prior
to or after the date of this Agreement shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Seller contained in
this Agreement or the Seller Documents.

 

7.2          Further Assurances; Further Conveyances and Assumptions; Consent of
Third Parties.

 

(a)          Following the Closing, each of the Purchaser and the Seller shall
use their commercially reasonable efforts to take all actions necessary or
appropriate to consummate the transactions contemplated by this Agreement. To
the extent the parties determine after the Closing that any of the assets used
in the Business are held by any Affiliate of the Company, then the Seller shall
cause the owner of such assets to transfer such assets to the Company without
additional consideration and, upon request, to execute and deliver a bill of
sale or such other instruments of transfer evidencing such transfer.

 

- 25 -

 

 

(b)          From time to time following the Closing, the Seller and the
Purchaser shall, and shall cause the Company their respective Affiliates to,
execute, acknowledge and deliver all such further conveyances, notices,
assumptions, releases and acquaintances and such other instruments, and shall
take such further actions, as may be necessary or appropriate to assure fully to
the Purchaser and its respective successors or assigns, all of the properties,
rights, titles, interests, estates, remedies, powers and privileges intended to
be conveyed to the Purchaser under this Agreement and to otherwise make
effective the transactions contemplated hereby and thereby.

 

(c)          Each of the Seller, the Company and the Purchaser shall use best
efforts to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, including all
necessary filings with any governmental agency, including, without limitation,
all filings related to licensure, or Medicare or Medi-Cal certification.

 

7.3          Cooperation and Proceedings; Access to Records. After the Closing,
the Seller shall cooperate with the Purchaser and its counsel and make itself
and its representatives available to the Purchaser and the Company in connection
with the institution or defense of any proceeding, whether existing, threatened,
or anticipated, involving or relating to the contemplated transactions, the
Purchaser, the Seller, or the Company, including providing testimony, records,
and other information.

 

7.4          Preservation of Records. The Seller and the Purchaser agree that
each of them shall preserve and keep the records held by them relating to the
Business for a period of five (5) years from the Closing Date and shall make
such records and personnel available to the other as may be reasonably required
by such party in connection with, among other things, any insurance claims by,
legal proceedings against or governmental investigations of the Company, the
Seller or the Purchaser or any of its Affiliates or in order to enable the
Seller or the Purchaser to comply with their respective obligations under this
Agreement and each other agreement, document or instrument contemplated hereby
or thereby. In the event the Seller or the Purchaser wishes to destroy (or
permit to be destroyed) such records after that time, such party shall first
give thirty (30) days prior written notice to the other and such other party
shall have the right at its option and expense, upon prior written notice given
to such party within that thirty (30) day period, to take possession of the
records within sixty (60) days after the date of such notice.

 

7.5          Release of Liens. To the extent any Liens on the Company’s assets
are not terminated prior to the Closing, the Seller shall use commercially
reasonable efforts, at the Seller’s sole cost and expense, following the Closing
to cause such Liens to be released and terminated in a form and substance
reasonably satisfactory to the Purchaser and its counsel.

 

ARTICLE VIII

CONDITIONS TO CLOSING

 

8.1          Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part in its sole discretion):

 

(a)          Representations and Warranties. The representations and warranties
of the Seller contained in Article IV that are true and correct in all respects
as of the date of this Agreement and as of the Closing Date as though made at
and as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all respects, on and
as of such earlier date);

 

- 26 -

 

 

(b)          Performance of Covenants. Each of the Company and the Seller shall
have performed and complied in all respects with all covenants and agreements
required in this Agreement to be performed or complied with by them prior to the
Closing Date;

 

(c)          No Orders. There shall not be in effect any Order restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;

 

(d)          No Material Adverse Effect. After the date of this Agreement, no
event shall have occurred and be in existence and continuing as of the Closing
Date that, singularly or in the aggregate, has had a Material Adverse Effect;

 

(e)          Employment Agreement. Each of the Seller and the Company shall have
executed and delivered an employment agreement (the “Employment Agreement”) to
the Purchaser in the form of Exhibit A hereto;

 

(f)          Non-Competition Agreement. Each of the Seller and the Company shall
have executed and delivered to the Purchaser a non-competition agreement in the
form of Exhibit B hereto;

 

(g)          Certificates for the Shares. The Seller shall have delivered, or
caused to be delivered, to the Purchaser the certificates representing the
Shares, duly endorsed in blank or accompanied by transfer powers;

 

(h)          Officers Certificate. The Seller shall have delivered to the
Purchaser a certificate executed by an officer of the Company confirming (i) the
accuracy of its representations and warranties as of the date hereof and as of
the Closing Date and (ii) the performance of and compliance with its covenants
and obligations to be performed or complied with at or prior to the Closing
Date.

 

(i)          Secretary Certificate. The Seller shall have delivered to the
Purchaser a certificate of the Secretary or an Assistant Secretary (or
equivalent officer) of the Company certifying (i) that attached thereto are true
and complete copies of all resolutions adopted by the board of directors and
shareholders of the Company authorizing the execution, delivery and performance
of this Agreement and the other Seller Documents and the consummation of the
transactions contemplated hereby and thereby, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection with
the transactions contemplated hereby and thereby, (ii) the names and signatures
of the officers of the Company authorized to sign this Agreement, the Seller
Documents and the other documents to be delivered hereunder and thereunder, and
(iii) that attached thereto are copies of the articles of incorporation, bylaws
and good standing certificate of the Company;

 

(j)          FIRPTA Certificate. The Seller shall have delivered to the
Purchaser a certificate, in a form and substance reasonably satisfactory to the
Purchaser and its counsel, pursuant to Treasury Regulations Section 1.1445-2(b)
that the Seller is not a foreign person within the meaning of Section 1445 of
the Code duly executed by the Seller;

 

(k)          Pay-off Letters and Lien Releases. The Seller shall have delivered,
or caused to be delivered, to the Purchaser pay-off letters and lien releases
related to the payoff of any Indebtedness as requested by the Purchaser at the
Closing, which shall include confirmation that any Contract evidencing or giving
rise to such Indebtedness shall be terminated upon receipt of applicable payoff
amounts (other than any provisions of such Contract that survive termination);

 

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(l)          Landlord Consent. The Seller shall have delivered a consent to
assignment of the lease for the Leased Real Property executed by the landlord to
the Leased Real Property;

 

(m)         Required Consents. The Seller shall have delivered to the Purchaser
copies of all consents from any Governmental Body or any Person as listed on
Section 4.3 of the Disclosure Schedule in each case in a form and substance
reasonably satisfactory to the Purchaser and its counsel;

 

(n)          Operating Agreement and Contribution Agreement. Each of the Seller
and the Company shall have executed and delivered to the Purchaser the
Purchaser’s then effective operating agreement and the Contribution Agreement;

 

(o)          Due Diligence. The Purchaser is reasonably satisfied with its due
diligence investigation and the Seller has provided requested diligence
materials as the Purchaser or its counsel reasonably requested;

 

(p)          Lender Consent. The Purchaser shall have received all necessary
consents to the transactions contemplated by this Agreement from its lender, NNA
of Nevada, Inc.; and

 

(q)          Other Documents. The Seller shall have delivered to the Purchaser
such other documents or instruments as the Purchaser or its counsel shall
reasonably request and are reasonably necessary to consummate the transactions
contemplated by this Agreement.

 

8.2          Conditions Precedent to Obligations of the Seller. The obligations
of the Seller to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions (any or all of which may be waived by the Seller in whole
or in part in their sole discretion):

 

(a)          Representations and Warranties. The representations and warranties
of the Purchaser set forth in Article V that are true and correct in all
respects as of the date of this Agreement and as of the Closing Date as though
made at and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all respects on and
as of such earlier date);

 

(b)          Performance of Covenants. The Purchaser shall have performed and
complied in all material respects with all covenants and agreements required in
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing Date;

 

(c)          No Orders. There shall not be in effect any Order restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;

 

(d)          Officers Certificate. The Purchaser shall have delivered to the
Seller a certificate executed by an officer of the Purchaser confirming (i) the
accuracy of its representations and warranties as of the date hereof and as of
the Closing Date and (ii) the performance of and compliance with its covenants
and obligations to be performed or complied with at or prior to the Closing
Date;

 

(e)          Operating Agreement and Contribution Agreement. The Purchaser shall
have executed and delivered to the Seller the Purchaser’s then effective
operating agreement and the Contribution Agreement;

 

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(f)          Closing Payment. The Purchaser shall have made the Closing Payment
in accordance with Section 3.2 hereof; and

 

(g)          Other Documents. The Purchaser shall have delivered to the Seller
such other documents or instruments as the Seller or its counsel shall
reasonably request and are reasonably necessary to consummate the transactions
contemplated by this Agreement.

 

ARTICLE IX
TERMINATION

 

9.1          Termination. Subject to Section 9.2, by notice given prior to or at
the Closing, this Agreement may be terminated as follows:

 

(a)          by mutual consent of the Purchaser and Seller;

 

(b)          by the Purchaser if a material Breach of any provisions of this
Agreement has been committed by Seller or the Company;

 

(c)          by Seller if a material Breach of any provisions of this Agreement
has been committed by the Purchaser;

 

(d)          By the Purchaser if satisfaction of any condition in Article VIII
by October 31, 2014 or such later date as the parties may agree upon (the “End
Date”) becomes impossible (other than through the failure of the Purchaser to
comply with its obligations under this Agreement);

 

(e)          by the Purchaser if the Closing has not occurred on or before the
End Date, unless the Purchaser is in material Breach of this Agreement; or

 

(f)          by Seller if the Closing has not occurred on or before the End
Date, unless Seller is in material Breach of this Agreement.

 

9.2          Effect of Termination. Each party’s right of termination under
Section 9.1 is in addition to any other right it may have under this Agreement
or otherwise and the exercise of a party’s right of termination will not
constitute an election of remedies. If this Agreement is terminated pursuant to
Section 9.1, this Agreement will be of no further force or effect; provided,
however, that (i) this Section 9.2, the parties’ obligations to maintain
confidentiality of all Confidential Information pursuant to Section 6.6 herein
and Article XII will survive the termination of this Agreement and will remain
in full force and effect, and (ii) the termination of this Agreement will not
relieve any party from any liability for any Breach of this Agreement prior to
termination.

 

ARTICLE X

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

10.1        Survival of Representations and Warranties. The representations and
warranties of the parties contained in Articles IV and V of this Agreement shall
survive the Closing until two (2) years following the Closing (the “Survival
Period”); provided, however, that any obligations to indemnify and hold harmless
shall not terminate with respect to any Losses as to which the Person to be
indemnified shall have given notice (stating in reasonable detail the basis of
the claim for indemnification) to the indemnifying party in accordance with
Section 10.4(a) before the termination of the applicable Survival Period. The
covenants and agreements of the parties contained in this Agreement shall
survive the Closing indefinitely or for the period explicitly specified therein.
Subject to the provisions of this Section 10.1, the parties acknowledge and
agree that the Survival Periods set forth in this Section 10.1 and the
limitation on the parties’ right to make claims for recovery of Losses in
connection therewith are in lieu of all applicable statutes of limitations.

 

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10.2        Indemnification.

 

(a)          Subject to Section 10.1, Section 10.3 and Article X hereof, the
Seller shall indemnify and hold the Purchaser and its respective directors,
officers, employees, Affiliates, shareholders, agents, attorneys,
representatives, successors, heirs, and assigns (collectively, the “Purchaser
Indemnified Parties”) harmless from and against any and all Losses, based upon,
attributable to, or resulting from:

 

(i)          any inaccuracy in or breach of the representations and warranties
made by the Seller or the Company set forth in this Agreement or in any Seller
Document;

 

(ii)         any breach of any covenant or other agreement on the part of the
Seller or the Company under this Agreement or any Seller Document;

 

(iii)        any act or omission of the Company or the Seller prior to the
Closing Date;

 

(iv)         the operation of the Business (including billing practices), or
professional services provided by or on behalf of the Company, prior to the
Closing Date; or

 

(v)         any distribution or allocation of the Closing Payment, any
Contingent Payment or the Purchase Price by the Seller.

 

(b)          Subject to Sections 10.1 and 10.3, the Purchaser hereby agrees to
indemnify and hold the Seller, its agents, attorneys, representatives,
successors, heirs, and assigns (collectively, the “Seller Indemnified Parties”)
harmless from and against any and all Losses based upon, attributable to or
resulting from:

 

(i)          any inaccuracy in or breach of any representation or warranty of
the Purchaser set forth in this Agreement or in any Purchaser Document; and

 

(ii)         any breach of any covenant or other agreement on the part of the
Purchaser under this Agreement or any Purchaser Document.

 

(c)          For purposes of determining whether indemnification is available
under this Article X and for purposes of calculating Losses hereunder, any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to the representations, warranties, covenants and
agreements shall be ignored.

 

10.3        Limitations on Indemnification for Breaches of Representations and
Warranties. Neither the Seller nor the Purchaser shall have any liability under
Section 10.2(a)(i) or Section 10.2(b)(i) hereof unless the aggregate amount of
Losses to the indemnified parties finally determined to arise thereunder based
upon, attributable to or resulting from the inaccuracy of or the failure of any
representation or warranty to be true and correct exceeds $20,000 (the “Basket”)
and, in the event Losses exceed the amount of the Basket, the indemnifying party
shall be required to pay the entire amount of all such Losses from the first
dollar.

 

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10.4        Indemnification Procedures.

 

(a)          In the event that any Legal Proceedings shall be instituted or that
any claim or demand shall be asserted by any Person in respect of which payment
may be sought under Section 10.2 hereof (regardless of the limitations set forth
in Section 10.3) (“Indemnification Claim”), the indemnified party shall promptly
cause written notice of the assertion of any Indemnification Claim of which it
has knowledge which is covered by this indemnity to be forwarded to the
indemnifying party. In the event that the Indemnification Claim relates to a
claim asserted by any claimant other than the indemnified party, then the
indemnifying party shall have the right, at its sole expense, to be represented
by counsel of its choice, which must be reasonably satisfactory to the
indemnified party, and to defend against, negotiate, settle or otherwise deal
with any Indemnification Claim which relates to any Losses indemnified against
hereunder; provided that the indemnifying party shall have acknowledged in
writing to the indemnified party its unqualified obligation to indemnify the
indemnified party as provided hereunder; provided, further, that if the
indemnifying party is the Seller, then such indemnifying Party shall not have
the right to defend or direct the defense of any such Indemnification Claim that
(x) is asserted directly by or on behalf of a Person that is a healthcare
service plan, other payor, vendor, supplier or customer of the Business, or (y)
seeks an injunction or other equitable relief against the Indemnified Party. If
the indemnifying party elects to defend against, negotiate, settle or otherwise
deal with any Indemnification Claim which relates to any Losses indemnified
against hereunder, it shall within five (5) days (or sooner, if the nature of
the Indemnification Claim so requires) notify the indemnified party of its
intent to do so. If the indemnifying party (i) elects not to defend against,
negotiate, settle or otherwise deal with any Indemnification Claim which relates
to any Losses indemnified against hereunder, (ii) fails to notify the
indemnified party of its election as herein provided, (iii) contests its
obligation to indemnify the indemnified party for such Losses under this
Agreement or (iv) fails to diligently prosecute the defense of such
Indemnification, then the indemnified party may pay, compromise, defend against,
negotiate or otherwise deal with such Indemnification Claim and obtain
indemnification from the indemnifying party for any and all Losses based upon,
arising from or relating to such Indemnification Claim. If the indemnified party
defends any Indemnification Claim, then the indemnifying party shall reimburse
the indemnified party for the expenses of defending such Indemnification Claim
upon submission of periodic bills. If the indemnifying party shall assume the
defense of any Indemnification Claim, the indemnified party may participate, at
his or its own expense, in the defense of such Indemnification Claim; provided,
however, that such indemnified party shall be entitled to participate in any
such defense with separate counsel at the expense of the indemnifying party if
(i) so requested by the indemnifying party to participate or (ii) in the
reasonable opinion of counsel to the indemnified party, a conflict or potential
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation advisable; and provided, further, that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Indemnification
Claim. The parties shall fully cooperate with each other in all reasonable
respects in connection with the defense of any Indemnification Claim, including
making available (subject to the provisions of Section 10.1) records relating to
such Indemnification Claim and furnishing, without expense (other than
reimbursement of actual out-of-pocket expenses) to the defending party,
management employees of the non-defending party as may be reasonably necessary
for the preparation of the defense of such Indemnification Claim.
Notwithstanding anything in this Section 10.4 to the contrary, neither the
indemnifying party nor the indemnified party shall, without the written consent
of the other party, settle or compromise any Indemnification Claim or permit a
default or consent to entry of any judgment unless the claimant and such party
provide to such other party an unqualified release from all liability in respect
of the Indemnification Claim.

 

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(b)          After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction, or a settlement shall
have been consummated, or the indemnified party and the indemnifying party shall
have arrived at a mutually binding agreement with respect to an Indemnification
Claim hereunder, the indemnified party shall forward to the indemnifying party
notice of any sums due and owing by the indemnifying party pursuant to this
Agreement with respect to such matter and the indemnifying party shall be
required to pay all of the sums so due and owing to the indemnified party by
wire transfer of immediately available funds within ten (10) Business Days after
the date of such notice. The parties hereto agree that should an indemnifying
party not make full payment of any such obligations within such ten (10)
Business Day period, any amount payable shall accrue interest from and including
the date of the agreement of the indemnifying party or final adjudication to
including the date such payment has been made at a rate per annum equal to four
percent (4%). Such interest shall be calculated daily on the basis of a 365 day
year and the actual number of days elapsed.

 

(c)          The failure of the indemnified party to give reasonably prompt
notice of any Indemnification Claim shall not release, waive or otherwise affect
the indemnifying party’s obligations with respect thereto except to the extent
that the indemnifying party can demonstrate actual loss and prejudice as a
result of such failure.

 

10.5        Effect of Knowledge. The representations, warranties and covenants
of the Indemnifying Party, and the Indemnified Party’s right to indemnification
with respect thereto, shall not be affected or deemed waived by reason of any
investigation made by or on behalf of the Indemnified Party (including by any of
its representatives) or by reason of the fact that the Indemnified Party or any
of its Representatives knew or should have known that any such representation or
warranty is, was or might be inaccurate.

 

10.6        Other Rights Not Affected. The indemnification rights of the parties
under this Article X are independent of, and in addition to, such rights and
remedies as the parties may have at Law or in equity or otherwise for any
misrepresentation, breach of warranty or failure to fulfill any covenant,
agreement or obligation hereunder on the part of any party hereto, including the
right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.

 

10.7        Right to Setoff. Notwithstanding any provision of this Article X to
the contrary, if the Purchaser has a good faith claim for indemnification of
Losses pursuant to this Article X, in addition to any of its other rights and
remedies, the Purchaser may enforce such claim for Losses by an appropriate
setoff against, or deduction from, any Contingent Payment due or which become
due to Seller pursuant to the terms of this Agreement.

 

10.8        Tax Treatment of Indemnity Payments. The Seller and the Purchaser
agree to treat any indemnity payment made pursuant to this Article X as an
adjustment to the purchase price for federal, state, local and foreign income
Tax purposes. If, notwithstanding the treatment required by the preceding
sentence, any indemnification payment under Article X (including this
Section 10.8) is determined to be taxable to the party receiving such payment by
any Taxing Authority, the paying party shall also indemnify the party receiving
such payment for any Taxes incurred by reason of the receipt of such payment and
any expenses incurred by the party receiving such payment in connection with
such Taxes (or any asserted deficiency, claim, demand, action, suit, proceeding,
judgment or assessment, including the defense or settlement thereof, relating to
such Taxes).

 

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ARTICLE XI

TAX MATTERS

 

11.1        Transfer Taxes. The Seller shall (i) be responsible for (and shall
indemnify and hold harmless the Purchaser Indemnified Parties against) any and
all Liabilities for any sales, use, stamp, documentary, filing, recording,
transfer, real estate transfer, stock transfer, gross receipts, registration,
duty, securities transactions or similar fees or taxes or governmental charges
(together with any interest or penalty, addition to tax or additional amount
imposed) as levied by any Taxing Authority in connection with the transactions
contemplated by this Agreement and the Contribution Agreement (collectively,
“Transfer Taxes”), regardless of the Person liable for such Transfer Taxes under
applicable Law and (ii) timely file or caused to be filed all necessary
documents (including all Tax Returns) with respect to Transfer Taxes.

 

11.2        Prorations. The Seller shall bear all property and ad valorem tax
liability with respect to the Company’s assets if the Lien or assessment date
arises prior to the Closing Date irrespective of the reporting and payment dates
of such Taxes. All other real property taxes, personal property taxes, or ad
valorem obligations and similar recurring taxes for taxable periods beginning
before, and ending after, the Closing Date, shall be prorated between the
Purchaser and the Seller as of 11:59 p.m. pacific standard time on the Closing
Date. With respect to Taxes described in this Section 11.2, the Seller shall
timely file all Tax Returns due before the Closing Date with respect to such
Taxes and the Purchaser shall prepare and timely file all Tax Returns due after
the Closing Date with respect to such Taxes. If one party remits to the
appropriate Taxing Authority payment for Taxes, which are subject to proration
under this Section 11.2 and such payment includes the other party’s share of
such Taxes, such other party shall promptly reimburse the remitting party for
its share of such Taxes.

 

11.3        Cooperation on Tax Matters. The Purchaser and the Seller shall
furnish or cause to be furnished to each other, as promptly as practicable, such
information and assistance relating to the assets of the Company as is
reasonably necessary for the preparation and filing of any Tax Return, claim for
refund or other required or optional filings relating to Tax matters, for the
preparation for any Tax audit, for the preparation for any Tax protest, for the
prosecution or defense of any suit or other proceeding relating to Tax matters.

 

ARTICLE XII

MISCELLANEOUS

 

12.1        Expenses. Except as otherwise provided in this Agreement, the Seller
and the Purchaser shall bear their own fees and expenses incurred in connection
with the negotiation and execution of this Agreement and each other agreement,
document and instrument contemplated by this Agreement and the consummation of
the transactions contemplated hereby and thereby.

 

12.2        Specific Performance. The Seller acknowledges and agrees that the
breach of this Agreement would cause irreparable damage to the Purchaser and
that the Purchaser will not have an adequate remedy at law. Therefore, the
obligations of the Seller under this Agreement, including the Seller’s
obligation to sell the Shares to the Purchaser, shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.

 

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12.3        Submission to Jurisdiction; Consent to Service of Process. The
parties hereto irrevocably elect as the sole judicial forum for the adjudication
of any matters arising under or in connection with this Agreement or any of the
transactions contemplated hereby, and consent to the jurisdiction of, the courts
of the County of Los Angeles, State of California of the United States of
America for the Central District of California. Each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action proceeding
related thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each of the parties hereto
hereby consents to process being served by any party to this Agreement in any
suit, action or proceeding by delivery of a copy thereof in accordance with the
provisions of Section 11.7.

 

12.4        Entire Agreement. This Agreement (including the schedules and
exhibits hereto, the Seller Documents, and the Purchaser Documents) represents
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.

 

12.5        Amendment; Waiver; Remedies. This Agreement can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.

 

12.6        Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and performed in such state.

 

12.7        Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received: (i) if delivered by hand, when
delivered; (ii) if sent on a Business Day by facsimile transmission before 5:00
p.m. (recipient’s time) on the day sent by facsimile and receipt is confirmed,
when transmitted; (iii) if sent by facsimile transmission or by e-mail of a PDF
document on a day other than a Business Day and receipt is confirmed, or if sent
by facsimile transmission or by email of a PDF document after 5:00 p.m.
(recipient’s time) on the day sent by facsimile or email and receipt is
confirmed, on the Business Day following the date on which receipt is confirmed;
(iv) if sent by registered, certified or first class mail, the third Business
Day after being sent; and (v) if sent by overnight delivery via a national
courier service, two Business Days after being delivered to such courier, in
each case to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto):

 

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If to the Purchaser, to:

 

Apollo Palliative Services LLC

700 N. Brand Avenue, Suite 220

Glendale, CA 91203

Facsimile: (818) 844-3888

 

with a copy (which shall not constitute notice) to:

 

Nixon Peabody LLP

555 West Fifth Street, 46th Floor

Los Angeles, California 90013

Attention: Jill Gordon, Esq. (jgordon@nixonpeabody.com)

 

If to the Seller:

 

Holistic Care Home Health Agency, Inc.

10999 Riverside Drive, Suite 308

Toluca Lake, CA 91602

Attention: Rob Mikitarian

Facsimile: (818) 755-8808

 

with a copy (which shall not constitute notice) to:

 

Knapp, Petersen & Clarke

550 N. Brand Boulevard, Suite 1500

Glendale, CA 91203-1922

Attention: Diron M. Ohanian

Facsimile: (818) 547-5239

 

12.8        Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

 

12.9        Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Seller or the
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that the Purchaser may assign this
Agreement and any or all rights or obligations hereunder (including the
Purchaser’s rights to seek indemnification hereunder) to (i) any Affiliate of
the Purchaser, (ii) any Person from which it has borrowed money, or (iii) any
Person to which the Purchaser or any of its Affiliates proposes to sell all or
substantially all of the assets of the Purchaser or the Business. Upon any such
permitted assignment, the references in this Agreement to the Purchaser shall
also apply to any such assignee unless the context otherwise requires.

 

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12.10        Non-Recourse. No past, present or future director, officer,
employee, incorporator, member, partner, shareholder, Affiliate, agent, attorney
or representative of the Purchaser shall have any liability for any obligations
or liabilities of the Purchaser under this Agreement or for any claim based on,
in respect of, or by reason of, the transactions contemplated hereby.

 

12.11        Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement. The exchange of a fully executed
Agreement (in counterparts or otherwise) by electronic transmission in .PDF
format or by facsimile shall be sufficient to bind the parties to the terms and
conditions of this Agreement.

 

12.12        Disclosure Schedule. The Disclosure Schedule shall be arranged in
separate parts corresponding to the numbered and lettered sections and
subsections contained in this Agreement, and the information disclosed in any
numbered or lettered part shall be deemed to relate to and to qualify only the
particular representation or warranty set forth in the corresponding numbered or
lettered section or subsection of this Agreement, except to the extent that such
information is cross-referenced in another part of the Disclosure Schedule or it
is reasonably apparent from the face of such disclosure that it is relevant to
any part of the Disclosure Schedule. From time to time prior to the Closing, the
Seller and the Company shall have the right to supplement or amend the
Disclosure Schedules with respect to any matter hereafter arising or discovered
after the delivery of the Disclosure Schedules pursuant to this Agreement.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made in this Agreement, unless the
applicable part of the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
The mere listing of a document or other item in, or attachment of a copy thereof
to, the Disclosure Schedule will not be deemed adequate to disclose an exception
to a representation or warranty made in this Agreement (unless the
representation or warranty pertains directly to the existence of the document or
other item itself). No reference to or disclosure of any item or other matter in
the Disclosure Schedule shall be construed as an admission or indication that
such item or other matter is material or that such item or other matter is
required to be referred to or disclosed in the Disclosure Schedule. No
disclosure in the Disclosure Schedule relating to any possible breach or
violation of any Contract or Law shall be construed as an admission or
indication that any such breach or violation occurred or exists. In disclosing
the information set forth in the Disclosure Schedule, the Seller do not waive,
and expressly reserves, any attorney-client privilege associated with such
information or any protection afforded by the work-product doctrine with respect
to any of the matters disclosed or discussed herein.

 

12.13        Tax and Government Reimbursement Program Effect. None of the
parties (nor such parties’ counsel or accountants) has made or is making in this
Agreement any representation to any other party (or such party’s counsel or
accountants) concerning any of the Tax or Government Reimbursement Program
effects or consequences on the other party in connection with the transactions
contemplated by this Agreement. Each party represents that it has obtained, or
may obtain, independent advice concerning the Tax and Government Reimbursement
Program with respect thereto and upon which it, if so obtained, has solely
relied.

 

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12.14        Attorneys’ Fees. The non-prevailing party in any action or
proceeding related to this Agreement shall pay to the prevailing party
reasonable fees and costs incurred in such proceeding or action, including
attorneys’ fees and costs and the fees and costs of experts and consultants. The
prevailing party shall be the party who is entitled to recover its costs of suit
(as determined by the court of competent jurisdiction or arbitrator or
mediator), whether or not the action or proceeding proceeds to final judgment or
award.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

 

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

 

  PURCHASER:       APOLLO PALLIATIVE SERVICES LLC,   a California limited
liability company       By:     Name:  Liviu Chindris , M.D.   Title:  President

 

[Signature Page to Holistic Care Home Health Agency, Inc. Stock Purchase
Agreement]

 

 

 

 

  COMPANY:       HOLISTIC CARE HOME HEALTH AGENCY, INC.,   a California
corporation       By:     Name:  Rob Mikitarian   Title:  President      
SELLER:           Rob Mikitarian

 

[Signature Page to Holistic Care Home Health Agency, Inc. Stock Purchase
Agreement]

 

 

 

 

Exhibit A

 

Mikitarian Employment Agreement

 

 

 

 

Exhibit B

 

Mikitarian Non-Competition Agreement

 

 

 

 

Disclosure Schedule

 

[See attached.]