Document:

exhibit101.htm

Exhibit 10.1

 

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 24, 2013, by and between FIRST COLOMBIA GOLD CORP., a Nevada corporation, with headquarters located at Paeso De Berbardez #59 FRACC, Lomas De Bernardez, Guadalupe 986 10, ZAC, Mexico(the “Company”), and ASHER ENTERPRISES, INC., a Delaware corporation, with its address at 1 Linden Place, Suite 207, Great Neck, NY 11021 (the “Buyer”).

WHEREAS:

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $16,500.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.00001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1. Purchase and Sale of Note.

a. Purchase of Note.  On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

 

 

 

 

  

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b. Form of Payment.  On the Closing Date (as defined below), (i)the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

c. Closing Date.  Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about December 31, 2013, or such other mutually agreed upon time.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

a. Investment Purpose.  As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b. Accredited Investor Status.  The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c. Reliance on Exemptions.  The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

 

 

 

  

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d. Information.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company.  Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to such disclosure to the Buyer.  Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.  The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

e. Governmental Review.  The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

f. Transfer or Re-sale.  The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bonafide margin account or other lending arrangement.

 

 

 

 

 

  

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g. Legends.  The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected.  The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

 

 

 

  

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h. Authorization; Enforcement. This Agreement has been duly and validly authorized.  This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

i. Residency.  The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

3. Representations and Warranties of the Company.  The Company represents and warrants to the Buyer that:

a. Organization and Qualification.  The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.  Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated.  The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.  “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.  “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b. Authorization; Enforcement.  (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

 

 

  

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Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of: (i) 850,000,000 shares of Common Stock, $0.00001par value per share, of which  368,871,415 shares are issued and outstanding; and (ii) 150,000,000 shares of Preferred Stock, $no par value per share, of which nos hares are issued and outstanding; and (iii) 50,000,000 shares of Series A Preferred Stock, $0.001 par value per share, of which 47,568,500 shares are issued and outstanding; 500,000 shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note and three(3) prior convertible promissory notes in favor of the Buyer:

(a) prior convertible promissory note in favor of the Buyer dated April 29, 2013 in the amount of $32,500.00; and

(b) prior convertible promissory note in favor of the Buyer dated August 8, 2013 in the amount of $12,995.00;

(c) prior convertible promissory note in favor of the Buyer dated October 30, 2013 in the amount of $16,500.00; and

an aggregate total of 333,826,111 shares of Common Stock are presently reserved for the three (3) prior notes referenced above) and 141,183,889 shares of Common Stock should be reserved for the subject Note for the conversion of the Note. To the best of the Company's knowledge, all of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable.  No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company.  As of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares.  The Company has furnished to the Buyer true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.  The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

  

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c. Issuance of Shares.  The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

d. Acknowledgment of Dilution.  The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

e. No Conflicts.  The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii)  result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect).  Other than the failure of the Company to have three or more directors as required by its By-laws, neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or

 

 

 

  

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regulation of any governmental entity.  Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not in violation of the requirements for quotation on the OTC pink sheets electronic quotation system (the "Pink Sheets") and does not reasonably anticipate that the Common Stock will be ineligible for quotation by the Pink Sheets in the foreseeable future.  The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

f. SEC Documents; Financial Statements.  Since January 1, 2010, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”).  Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and to the Company's knowledge none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof).  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved  and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to September 30, 2013, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act.

 

 

 

 

  

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g. Absence of Certain Changes.  Since September 30, 2013, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations or 1934 Act reporting status of the Company or any of its Subsidiaries.

h. Absence of Litigation.  There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect.  Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect.  The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

i. Patents, Copyrights, etc.  The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing.  The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

j. No Materially Adverse Contracts, Etc.  Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

 

 

 

  

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k. Tax Status.  To the best of the Company's knowledge, the Company and each of its Subsidiaries has made or filed since January 1, 2010 all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations over such time period, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.  The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.  None of the Company’s tax returns is presently being audited by any taxing authority.

l. Certain Transactions.  Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

m. Disclosure.  All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading.  To the best of the Company's knowledgeno event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

 

 

 

  

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n. Acknowledgment Regarding Buyer’ Purchase of Securities.  The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities.  The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

o. No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.  The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

p. No Brokers.  The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

q. Permits; Compliance.  The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits.  Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  Since September 30, 2013, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

 

 

 

 

  

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r. Environmental Matters.

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing.  The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

s. Title to Property.  The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect.  Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

t. [INTENTIONALLY DELETED].

u. [INTENTIONALLY DELETED].

v. Foreign Corrupt Practices.  To the best of the Company's knowledge, neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

 

 

  

- 12 -

  

 

 

 

 

w. [INTENTIONALLY DELETED].

x. No Investment Company.  The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”).  The Company is not controlled by an Investment Company.

y. Breach of Representations and Warranties by the Company.  If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

4. COVENANTS.

a. Best Efforts.  The parties shall use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

b. Form D; Blue Sky Laws.  The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

 

 

 

 

  

- 13 -

  

c. Use of Proceeds.  The Company shall use the proceeds for general working capital purposes.

d. Right of First Refusal.  Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering, including the terms and conditions thereof and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the seventy two (72) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the period beginning on the Closing Date and ending twelve (12) months following the Closing Date.  In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two (72) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended.  The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Offering.  The Right of First Refusal shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Company.  The Right of First Refusal also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.  The Right of First Refusal shall not apply to Future Offerings in excess of $150,000.00.

e. Expenses.  At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents.  When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation with respect to this transaction is limited to reimbursement of Buyer’ in the amount of $1,000.00.

 

 

 

 

  

- 14 -

  

f. Financial Information.  Upon written request the Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders.

g. [INTENTIONALLY DELETED]

h. Listing.  To the extent applicable, the Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note.  The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the trading of its Common Stock on the Pink Sheets or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable.  The Company shall promptly provide to the Buyer copies of any notices it receives from the Pink Sheets and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

i. Corporate Existence.  So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is quoted for trading on the Pink Sheets, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

j. No Integration.  The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

 

 

 

  

- 15 -

  

k. Breach of Covenants.  If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyerpursuant to this Agreement, it will be considered an event of default under Section 3.4 of the Note.

l. Failure to Comply with the 1934 Act.  So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

m. Trading Activities.  Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

5. Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”).  In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement.  The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer

 

 

 

  

- 16 -

  

upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement.  Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities.  If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6. Conditions to the Company’s Obligation to Sell.  The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

 

 

 

  

- 17 -

  

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7. Conditions to The Buyer’s Obligation to Purchase.  The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

b. The Company shall have delivered to the Buyerthe duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest of the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.  The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

 

 

 

  

- 18 -

  

g. The Conversion Shares shall have been authorized for quotation on the Pink Sheets and trading in the Common Stock on the Pink Sheets shall not have been suspended by the SEC or the Pink Sheets.

h. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

 

8. Governing Law; Miscellaneous.

a. Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Buyer waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

 

c. Headings.  The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

 

 

 

  

- 19 -

  

d. Severability.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e. Entire Agreement; Amendments.  This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f. Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Company, to:

FIRST COLOMBIA GOLD CORP.

Paeso De Berbardez #59 FRACC,

Lomas De BernardezGuadalupe 986 10, ZAC,

Mexico Guadalupe 986 10, ZAC, Mexico

Attn: PIERO SUTTI-KEYSER, Chief Executive Officer

facsimile: [enter fax number]

 

 

 

  

- 20 -

  

If to the Buyer:

ASHER ENTERPRISES, INC.

1 Linden Place, Suite 207

Great Neck, NY 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

 

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum &Maday LLP

80 Cuttermill Road, Suite 410

Great Neck, NY11021

facsimile: 516-466-3555

Each party shall provide notice to the other party of any change in address.

g. Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.  Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h. Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i. Survival.  The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.  The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j. Publicity.  The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTC Markets or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTC Markets (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

 

 

 

  

- 21 -

  

k. Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

l. No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

m. Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

FIRST COLOMBIA GOLD CORP.

 

 

 

By /s/     Piero Sutti-Keyser______________________

PIERO SUTTI-KEYSER

Chief Executive Officer

ASHER ENTERPRISES, INC.

 

 

By:  /s/  Curt Kramer                                                                

Name:   Curt Kramer

Title:     President

1 Linden Place, Suite 207

Great Neck, NY  11021

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:                                                                                        $16,500.00

Aggregate Purchase Price:                                                                                                           $16,500.00

 

 

 

  

- 22 -ENSG 12.31.13 EX 10.74

Corporate Integrity Agreement
Between The
Office Of Inspector General
Of The
Department Of Health And Human Services
And
The Ensign Group, inc.

I.    Preamble

The Ensign Group, Inc., a Delaware corporation whose operating subsidiaries provide health care items and services under the structure and organization more fully described in its periodic public filings (collectively referred to herein as “Ensign Group”), hereby enters into this Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG) of the United States Department of Health and Human Services (HHS) to promote compliance with the statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) (Federal health care program requirements).  Contemporaneously with this CIA, Ensign Group is entering into a Settlement Agreement with the United States.

Prior to the execution of this CIA, Ensign Group established a voluntary corporate compliance program (Compliance Program).  The Compliance Program includes a Compliance Officer and a compliance committee responsible for compliance oversight, a Code of Conduct, written policies and procedures, educational and training initiatives, an audit program, a confidential Disclosure Program that allows for the disclosure and investigation of potential compliance violations, screening measures for Ineligible Persons, and oversight from Ensign Group’s Board of Directors.  Ensign Group shall continue the Compliance Program throughout the term of this CIA and shall do so in accordance with the terms set forth below.  Ensign Group may modify the Compliance Program as appropriate, but, at a minimum, Ensign Group shall ensure that the Compliance Program satisfies the obligations set forth herein during the term of this CIA.

II.    Term And Scope Of The CIA

A.    The period of the compliance obligations assumed by Ensign Group under this CIA shall be five years from the effective date of this CIA.  The “Effective Date” shall be the date on which the final signatory of this CIA executes this CIA.  Each one-year period, beginning with the one-year period following the Effective Date, shall be referred to as a “Reporting Period.”  

B.    Sections VII, X, and XI shall expire no later than 120 days after OIG’s receipt of:  (1) Ensign Group’s final annual report; or (2) any additional materials submitted by Ensign Group pursuant to OIG=s request, whichever is later.

C.    The scope of this CIA shall be governed by the following definitions:

1.    “Covered Persons” includes:

		
	a.
	all owners who are natural persons (other than shareholders who have an ownership interest of less than 5% of Ensign Group’s issued and outstanding shares) and officers, directors, and employees of Ensign Group; and  

		
	b.
	all contractors, subcontractors, agents, and other persons who (1) are involved directly or indirectly in the delivery of resident and/or patient care, (2) make assessments of residents and/or patients that affect treatment decisions or reimbursement, or (3) perform billing or coding functions on behalf of Ensign Group, excluding vendors whose sole connection with Ensign Group is selling or otherwise providing medical supplies or equipment to Ensign Group and who do not bill the Federal health care programs for such medical supplies or equipment.

Notwithstanding the above, the term “Covered Persons” does not include part-time or per diem employees, contractors, subcontractors, agents, and other persons who are not reasonably expected to work more than 160 hours per year, except that any such individuals shall become “Covered Persons” at the point when they work more than 160 hours during the calendar year.  Any nonemployee private caregivers and/or attending physicians hired by any resident and/or patient or the family or friends of any resident and/or patient of Ensign Group are not “Covered Persons.”  Subject to OIG approval, any Ensign Group employees who are exclusively employees of an Ensign Group real estate subsidiary or property company that does not participate in Federal health care programs and does not provide services to any operating subsidiary that participates in Federal health care programs are not “Covered Persons.”

2.    “Relevant Covered Persons” includes all Covered Persons who:

		
	a.
	are involved directly or indirectly in the delivery of rehabilitation therapy;

		
	b.
	perform assessments of residents and/or patients that affect treatment decisions regarding rehabilitation therapy;

		
	c.
	perform assessments of residents and/or patients that affect reimbursement for rehabilitation therapy from Federal health care programs, including but not limited to Resource Utilization Groups under Medicare Part A; or

		
	d.
	are involved in the preparation or submission of the Minimum Data Set (MDS) or claims for reimbursement from any Federal health care program.

III.    Corporate Integrity Obligations 

Ensign Group has established and shall continue to maintain a Compliance Program that includes the following elements:

A.    Compliance Officer, Compliance Committee, and Board of Directors

1.    Compliance Officer.  Ensign Group has appointed a Covered Person to serve as its Compliance Officer and shall maintain a Compliance Officer for the term of the CIA.  The Compliance Officer shall be responsible for developing and implementing policies, procedures, and practices designed to ensure compliance with the requirements set forth in this CIA and with Federal health care program requirements.  The Compliance Officer must have sufficient compliance experience to effectively oversee the implementation of the requirements of this CIA.  At all times during the term of this CIA, the Compliance Officer shall be a member of senior management of Ensign Group, shall report directly to the Chief Executive Officer of Ensign Group, shall make periodic (at least quarterly) reports regarding compliance matters directly to the Board of Directors of Ensign Group, and shall be authorized to report on such matters to the Board of Directors at any time.  The Compliance Officer shall not be or be subordinate to the General Counsel or Chief Financial Officer.  The Compliance Officer shall be responsible for monitoring the day-to-day compliance activities engaged in by Ensign Group as well as for any reporting obligations created under this CIA.  Any noncompliance job responsibilities of the Compliance Officer shall be limited and must not interfere with the Compliance Officer’s ability to perform the duties outlined in this CIA.  

Ensign Group shall report to OIG, in writing, any change in the identity of the Compliance Officer, or any actions or changes that would affect the Compliance Officer’s ability to perform the duties necessary to meet the obligations in this CIA, within five days after such a change.

2.    Compliance Committee.  Ensign Group has appointed a Compliance Committee and shall maintain a Compliance Committee for the term of this CIA.  The Compliance Committee shall, at a minimum, include the Compliance Officer, a member Ensign Group’s Board of Directors, and other members of senior management necessary to meet the requirements of this CIA (e.g., senior executives and representatives of relevant operational and support departments, including billing, nursing, therapy, clinical, MDS resources, human resources, audit, medical records, information services, operations, legal, and finance).  The Compliance Officer shall chair the Compliance Committee and the Committee shall support the Compliance Officer in fulfilling his/her responsibilities (e.g., shall assist in the analysis of the Ensign Group’s risk areas and shall oversee monitoring of internal and external audits and investigations).  The Compliance Committee shall meet at least quarterly.

Ensign Group shall report to OIG, in writing, any changes in the composition of the Compliance Committee, or any actions or changes that would affect the Compliance Committee’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

3.    Board of Directors Compliance Obligations.  The Board of Directors (or a committee of the Board) of Ensign Group (Board) shall be responsible for the review and oversight of matters related to compliance with Federal health care program requirements and the obligations of this CIA.  The Board and any such designated committee must include independent (i.e., non-executive) members.  The individuals who serve on the Board and any such designated committee shall be readily available to the Compliance Officer to respond to any issues or questions.

The Board (or its designated committee) shall, at a minimum, be responsible for the following:

		
	a. 
	meeting at least quarterly to review and oversee Ensign Group's Compliance Program, including but not limited to the performance of the Compliance Officer and Compliance Committee;

		
	b.
	ensuring that Ensign Group adopts and implements policies, procedures, and practices designed to ensure compliance with the requirements set forth in this CIA and Federal health care program requirements; and

		
	c. 
	for each Reporting Period of the CIA, adopting a resolution, signed by each member of the Board summarizing its review and oversight of Ensign Group’s compliance with Federal health care program requirements and the obligations of this CIA. 

At minimum, the resolution shall include the following language:

“The Board of Directors, with the assistance of its designated compliance committee, has made a reasonable inquiry into the operations of Ensign Group’s Compliance Program including the performance of the Compliance Officer and the Compliance Committee.  Based on its inquiry and review, the Board has concluded that, to the best of its knowledge, Ensign Group has implemented an effective Compliance Program to meet Federal health care program requirements and the obligations of the Corporate Integrity Agreement.”

If the Board is unable to provide such a conclusion in the resolution, the Board shall include in the resolution a written explanation of the reasons why it is unable to provide the conclusion and the steps it is taking to implement an effective Compliance Program at Ensign Group.

Ensign Group shall report to OIG, in writing, any changes in the composition of the Board and any such designated committee, or any actions or changes that would affect the Board’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

B.    Written Standards

1.    Code of Conduct.  Ensign Group represents that, prior to the Effective Date, Ensign Group developed, implemented, and distributed a written Code of Conduct to all Covered Persons.  Ensign Group shall make the promotion of, and adherence to, the Code of Conduct an element in evaluating the performance of all employees.  The Code of Conduct shall, at a minimum, set forth:

		
	a.
	Ensign Group’s commitment to full compliance with all Federal health care program requirements, including its commitment to prepare and submit accurate claims consistent with such requirements;

		
	b.
	Ensign Group’s requirement that all of its Covered Persons shall be expected to comply with all Federal health care program requirements and with Ensign Group’s own Policies and Procedures;

		
	c.
	the requirement that all of Ensign Group’s Covered Persons shall be expected to report to the Compliance Officer, or other appropriate individual designated by Ensign Group, suspected violations of any Federal health care program requirements or of Ensign Group’s own Policies and Procedures; 

		
	d.
	the possible consequences to both Ensign Group and Covered Persons of failure to comply with Federal health care program requirements and with Ensign Group’s own Policies and Procedures, as well as the failure to report such noncompliance; 

		
	e.
	the requirement that all of Ensign Group’s Covered Persons shall immediately report to the Compliance Officer, or other appropriate individual designated by Ensign Group, credible allegations of resident and/or patient harm and such report shall be complete, full, and honest; and 

		
	f.
	the right of all individuals to use the Disclosure Program described in Section III.E, and Ensign Group’s commitment to nonretaliation and to maintain, as appropriate, confidentiality and anonymity with respect to such disclosures.

To the extent not previously accomplished, within 120 days after the Effective Date, each Covered Person shall certify, in writing or in electronic form, that he or she has received, read, understood, and shall abide by Ensign Group’s Code of Conduct.  New Covered Persons shall receive the Code of Conduct and shall complete the required certification within 30 days after becoming a Covered Person or within 120 days after the Effective Date, whichever is later.

Ensign Group shall periodically review the Code of Conduct to determine if revisions are appropriate and shall make any necessary revisions based on such review.  The Code of Conduct shall be distributed at least annually to all Covered Persons.  

2.    Policies and Procedures.  Ensign Group represents that it has established a comprehensive set of written Policies and Procedures.  Within 120 days after the Effective Date, Ensign Group shall review its written Policies and Procedures regarding the operation of its Compliance Program, including the Compliance Program requirements outlined in this CIA and Ensign Group’s compliance with Federal health care program requirements, to ensure that, at a minimum, the Policies and Procedures address:  
		
	a.
	the Compliance Program requirements outlined in this CIA;

		
	b.
	the subjects relating to the Code of Conduct identified in 

Section III.B.1; and

		
	c.
	delivery, management, and oversight of rehabilitation therapy services provided to residents and/or patients at Ensign Group facilities, including, but not limited to, the requirements that skilled rehabilitation therapy:  

		
	i.
	be pursuant to an individualized plan of care;

		
	ii.
	be consistent with the nature and severity of the resident’s and/or patient’s individual illness or injury;

		
	iii.
	comply with accepted standards of medical practice;

		
	iv.
	be reasonable in terms of duration and quantity;

		
	v.
	be reasonable and necessary given the resident’s and/or patient’s condition and plan of care to improve his or her condition, prevent or slow deterioration of his or her condition, or restore his or her prior levels of function; and

		
	vi.
	only include services that are inherently complex and require the skills of physical, speech, or occupational therapists, among other types of professionals.   

Within120 days after the Effective Date, the Policies and Procedures shall be distributed (electronically or in hard copy form) to all Covered Persons.  Appropriate and knowledgeable staff shall be available to explain the Policies and Procedures.

At least annually (and more frequently, if appropriate), Ensign Group shall assess and update, as necessary, the Policies and Procedures.  Within 30 days after the effective date of any revisions, a description of the revisions shall be communicated to all affected Covered Persons and any revised Policies and Procedures shall be made available to all Covered Persons.

C.    Training and Education 

1.    General Training.  Within 120 days after the Effective Date, Ensign Group shall provide at least two hours of General Training to each Covered Person.  This training, at a minimum, shall explain Ensign Group’s:

a.    CIA requirements; and

		
	b.
	Compliance Program, including the Code of Conduct and the Policies and Procedures as they pertain to general compliance issues.

New Covered Persons shall receive the General Training described above within 30 days after becoming a Covered Person or within 120 days after the Effective Date, whichever is later.  After receiving the initial General Training described above, each Covered Person shall receive at least one hour of General Training in each subsequent Reporting Period.

For purposes of satisfying the initial General Training described in this Section, any Covered Persons, as defined in Section II.C.1 who, during the 90 days prior to the Effective Date of this CIA, received training that meets the requirements for the General Training in Section II.C.1.b shall be considered to have completed the General Training requirements in Section III.C.1.b.

2.    Specific Training.

		
	a.
	Within 120 days after the Effective Date, each Relevant Covered Person who is involved in the preparation or submission of claims for reimbursement from any Federal health care program shall receive at least three hours of Specific Training in addition to the General Training required above.  This Specific Training shall include a discussion of:  

		
	a.
	the Federal health care programs requirements regarding the accurate coding and submission of claims, including, but not limited to, ensuring the accuracy of the clinical data required under the MDS as specified by the Resident Assessment Instrument User’s Manual, and ensuring appropriate and accurate use of the current Resource Utilization Groups classification system; 

		
	i.
	the policies and procedures implemented pursuant to Section III.B.2;

		
	ii.
	applicable reimbursement statutes, regulations, and program requirements and directives; 

		
	iii.
	policies, procedures, and other requirements applicable to the documentation of medical records;

		
	iv.
	the personal obligation of each individual involved in the claims submission process to ensure that such claims are accurate;

		
	v.
	the legal sanctions for violations of the Federal health care program requirements; and

		
	vi.
	examples of proper and improper claims submission practices.

		
	b.
	Within 120 days after the Effective Date, each Relevant Covered Person who is involved directly or indirectly in the delivery of rehabilitation therapy, or performs assessments of residents and/or patients that affect treatment decisions regarding rehabilitation therapy services or that affect reimbursement for rehabilitation therapy, shall receive at least three hours of Specific Training pertinent to their responsibilities in addition to the General Training required above.  This Specific Training shall include a discussion of:

		
	i.  
	policies, procedures, and other requirements applicable to the documentation of medical records;

		
	ii.
	the coordinated interdisciplinary approach to providing care and related communication between disciplines;  

		
	iii.
	the policies and procedures implemented pursuant to Section III.B.2;

		
	iv.  
	the personal obligation of each individual involved in resident and/or patient care to ensure that care is appropriate and meets professionally recognized standards of care;

		
	v.  
	examples of proper and improper care; and

		
	vi.  
	legal sanctions for violations of the Federal health care program requirements.

New Relevant Covered Persons shall receive this training within 30 days after the beginning of their employment or becoming Relevant Covered Persons, or within 120 days after the Effective Date, whichever is later.  

For purposes of satisfying the initial Specific Training described in this Section, any Relevant Covered Persons, as defined in Section II.C.2 who, during the 120 days prior to the Effective Date of this CIA, received training that meets the requirements for Specific Training shall be considered to have completed the Specific Training requirements in Section III.C.2.

After receiving the initial Specific Training described in this section, each Relevant Covered Person shall receive at least three hours of Specific Training, in addition to the General Training, in each subsequent Reporting Period. 

3.    Competency-Based Training.  All Specific Training required in this section shall be competency-based.  Specifically, the training must be developed and provided in such a way as to focus on Relevant Covered Persons achieving learning outcomes to a specified competency and to place emphasis on what a Relevant Covered Person has learned as a result of the training. 

4.    Board Member Training.  Within 120 days after the Effective Date, Ensign Group shall provide at least two hours of training to each member of the Board of Directors, in addition to the General Training.  This training shall address the responsibilities of board members and corporate governance.  

New members of the Board of Directors shall receive the Board Member Training described above within 90 days after becoming a member or within 120 days after the Effective Date, whichever is later.

5.    Certification.  Each individual who is required to attend training shall certify, in writing or in electronic form, that he or she has received the required training.  The certification shall specify the type of training received and the date received.  The Compliance Officer (or designee) shall retain the certifications, along with all course materials.  

6.    Qualifications of Trainer.  Persons providing the training shall be knowledgeable about the subject area.
7.    Update of Training.  Ensign Group shall review the training annually, and, where appropriate, update the training to reflect changes in Federal health care program requirements, any issues discovered during internal audits, the MDS Review, or the Therapy Systems Assessment, and any other relevant information.

8.    Computer-based Training.  Ensign Group may provide the training required under this CIA through appropriate computer-based training approaches.  If Ensign Group chooses to provide computer-based training, it shall make available appropriately qualified and knowledgeable staff or trainers to answer questions or provide additional information to the individuals receiving such training.

D.    Review Procedures

1.    General Description

		
	a.
	Engagement of Independent Review Organization.  Within 90 days after the Effective Date, Ensign Group shall engage an entity (or entities), such as an accounting, auditing, or consulting firm (hereinafter “Independent Review Organization” or “IRO”), to perform the reviews listed in this Section III.D. The applicable requirements relating to the IRO are outlined in Appendix A to this CIA, which is incorporated by reference.  

		
	b.
	Retention of Records.  The IRO and Ensign Group shall retain and make available to OIG, upon request, all work papers, supporting documentation, correspondence, and draft reports (those exchanged between the IRO and Ensign Group) related to the reviews.

		
	c.
	Selection of Facilities.  For each Reporting Period, the IRO shall randomly select twelve facilities to assess and review.  The twelve facilities selected for the Reporting Period shall be known as the “Subject Facilities.”

2.    Minimum Data Set Review.  For each Reporting Period, the IRO shall review Ensign Group’s coding, billing, and claims submission to Medicare Part A and the reimbursement received (MDS Review) at the Subject Facilities and shall prepare a MDS Review Report, as outlined in Appendix B to this CIA, which is incorporated by reference.

3.    Therapy Systems Assessment.  For each Reporting Period, the IRO shall assess the effectiveness, reliability, and thoroughness of Ensign Group’s oversight of its therapy services at a randomly selected subset of eight of the Subject Facilities, as outlined in Appendix C to this CIA, which is incorporated by reference.

4.    Unallowable Cost Review.  For the first Reporting Period, the IRO shall conduct a review of Ensign Group’s compliance with the unallowable cost provisions of the Settlement Agreement.  For the six operating companies identified in the Settlement Agreement, the IRO shall determine whether Ensign Group has complied with its obligations not to charge to, or otherwise seek payment from, federal or state payors for unallowable costs (as defined in the Settlement Agreement) and its obligation to identify to applicable federal or state payors any unallowable costs included in payments previously sought from the United States, or any state Medicaid program.  This unallowable cost analysis shall include, but not be limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by Ensign Group or any affiliates.  To the extent that such cost reports, cost statements, information reports, or payment requests, even if already settled, have been adjusted to account for the effect of the inclusion of the unallowable costs, the IRO shall determine if such adjustments were proper.  In making this determination, the IRO may need to review cost reports and/or financial statements from the year in which the Settlement Agreement was executed, as well as from previous years.

5.    Unallowable Cost Review Report.  The IRO shall prepare a report based upon the Unallowable Cost Review performed (Unallowable Cost Review Report). The Unallowable Cost Review Report shall include the IRO’s findings and supporting rationale regarding the Unallowable Cost Review and whether Ensign Group has complied with its obligation not to charge to, or otherwise seek payment from, federal or state payors for unallowable costs (as defined in the Settlement Agreement) and its obligation to identify to applicable federal or state payors any unallowable costs included in payments previously sought from such payor.

6.    Validation Review.  In the event OIG has reason to believe that: (a) Ensign Group’s MDS Review, Therapy Systems Assessment, or Unallowable Cost Review fails to conform to the requirements of this CIA; or (b) the IRO’s findings or MDS Review, Therapy Systems Assessment, or Unallowable Cost Review results are inaccurate, OIG may, at its sole discretion, conduct its own review to determine whether the MDS Review, Therapy Systems Assessment, or Unallowable Cost Review complied with the requirements of the CIA and/or the findings or MDS Review, Therapy Systems Assessment, or Unallowable Cost Review results are inaccurate (Validation Review).  Ensign Group shall pay for the reasonable cost of any such review performed by OIG or any of its designated agents.  Any Validation Review of Reports submitted as part of Ensign Group’s final Annual Report shall be initiated no later than one year after Ensign Group’s final submission (as described in Section II) is received by OIG.

Prior to initiating a Validation Review, OIG shall notify Ensign Group of its intent to do so and provide a written explanation of why OIG believes such a review is necessary.  To resolve any concerns raised by OIG, Ensign Group may request a meeting with OIG, and OIG shall meet with Ensign Group prior to its Validation Review to:  (a) discuss the results of any MDS Review, Therapy Systems Assessment, or Unallowable Cost Review submissions or findings; (b) present any 

additional information to clarify the results of the MDS Review, Therapy Systems Assessment, or Unallowable Cost Review or to correct the inaccuracy of the MDS Review, Therapy Systems Assessment, or Unallowable Cost Review; and/or (c) propose alternatives to the proposed Validation Review.  Ensign Group agrees to provide any additional information as may be requested by OIG under this Section III.D.5 in an expedited manner.  OIG will attempt in good faith to resolve any MDS Review, Therapy Systems Assessment, or Unallowable Cost Review issues with Ensign Group prior to conducting a Validation Review.  However, the final determination as to whether or not to proceed with a Validation Review shall be made at the sole discretion of OIG. 

7.    Independence and Objectivity Certification.  The IRO shall include in its report(s) to Ensign Group a certification that the IRO has (a) evaluated its professional independence and objectivity with respect to the reviews conducted under this Section III.D and (b) concluded that it is, in fact, independent and objective, in accordance with the requirements specified in Appendix A to this CIA.

E.    Disclosure Program  

Ensign Group represents that, prior to the Effective Date, it established a Disclosure Program designed to facilitated communications relating to compliance with Federal health care program requirements and Ensign Group’s Policies and Procedures.  During the term of the CIA, Ensign Group shall maintain a Disclosure Program, as required herein, that includes a mechanism (e.g., a toll-free compliance telephone line) to enable individuals to disclose, to the Compliance Officer or some other person who is not in the disclosing individual’s chain of command, any identified issues or questions associated with Ensign Group’s policies, conduct, practices, or procedures with respect to a Federal health care program believed by the individual to be a potential violation of criminal, civil, or administrative law.  Ensign Group shall appropriately publicize the existence of the disclosure mechanism (e.g., via periodic e-mails to employees or by posting the information in prominent common areas).

The Disclosure Program shall emphasize a nonretribution, nonretaliation policy, and shall include a reporting mechanism for anonymous communications for which appropriate confidentiality shall be maintained.  Upon receipt of a disclosure, the Compliance Officer (or designee) shall gather all relevant information from the disclosing individual.  The Compliance Officer (or designee) shall make a preliminary, good faith inquiry into the allegations set forth in every disclosure to ensure that he or she has obtained all of the information necessary to determine whether a further review should be conducted.  For any disclosure that is sufficiently specific so that it reasonably:  (1) permits a determination of the appropriateness of the alleged improper practice; and (2) provides an opportunity for taking corrective action, Ensign Group shall conduct an internal review of the allegations set forth in the disclosure and ensure that proper follow-up is conducted.

The Compliance Officer (or designee) shall maintain a disclosure log, which shall include a record and summary of each disclosure received (whether anonymous or not), the status of the respective internal reviews, and any corrective action taken in response to the internal reviews.  

F.    Ineligible Persons

1.    Definitions.  For purposes of this CIA:

		
	a.
	an “Ineligible Person” shall include an individual or entity who:

i.    is currently excluded, debarred, suspended, or otherwise ineligible to participate in the Federal health care programs or in Federal procurement or nonprocurement programs; or

ii.    has been convicted of a criminal offense that falls within the scope of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise declared ineligible.

b.    “Exclusion Lists” include:

i.    the HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://www.oig.hhs.gov); and 

ii.    the General Services Administration’s System for Award Management (available through the Internet at http://www.sam.gov).

2.    Screening Requirements.  Ensign Group shall ensure that all prospective and current Covered Persons are not Ineligible Persons, by implementing the following screening requirements.  

		
	a.
	Ensign Group shall screen all prospective Covered Persons against the Exclusion Lists prior to engaging their services and, as part of the hiring or contracting process, shall require such Covered Persons to disclose whether they are Ineligible Persons.

		
	b.
	Ensign Group shall screen all Covered Persons against the Exclusion Lists within 90 days after the Effective Date and on a monthly basis thereafter.  

		
	c.
	Ensign Group shall implement a policy requiring all Covered Persons to disclose immediately any debarment, exclusion, suspension, or other event that makes that person an Ineligible Person.

Nothing in Section III.F affects Ensign Group’s responsibility to refrain from (and liability for) billing Federal health care programs for items or services furnished, ordered, or prescribed by excluded persons.  Ensign Group understands that items or services furnished, ordered or prescribed by excluded persons are not payable by Federal health care programs and that Ensign Group may be liable for overpayments and/or criminal, civil, and administrative sanctions for employing or contracting with an excluded person regardless of whether Ensign Group meets the requirements of Section III.F.

3.    Removal Requirement.  If Ensign Group has actual notice that a Covered Person has become an Ineligible Person, Ensign Group shall remove such Covered Person from responsibility for, or involvement with, Ensign Group’s business operations related to the Federal health care programs and shall remove such Covered Person from any position for which the Covered Person’s compensation or the items or services furnished, ordered, or prescribed by the Covered Person are paid in whole or part, directly or indirectly, by Federal health care programs or otherwise with Federal funds at least until such time as the Covered Person is reinstated into participation in the Federal health care programs.  

4.    Pending Charges and Proposed Exclusions.  If Ensign Group has actual notice that a Covered Person is charged with a criminal offense that falls within the scope of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(1)-(3), or is proposed for exclusion during the Covered Person’s employment or contract term or, Ensign Group shall take all appropriate actions to ensure that the responsibilities of that Covered Person have not and shall not adversely affect the quality of care rendered to any beneficiary, patient, or resident, or any claims submitted to any Federal health care program. 

G.    Notification of Government Investigation or Legal Proceedings

Within 30 days after discovery, Ensign Group shall notify OIG, in writing, of any ongoing investigation or legal proceeding known to Ensign Group conducted or brought by a governmental entity or its agents involving an allegation that Ensign Group has committed a crime or has engaged in fraudulent activities.  This notification shall include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding.  Ensign Group shall also provide written notice to OIG within 30 days after the resolution of the matter, and shall provide OIG with a description of the findings and/or results of the investigation or proceedings, if any.

H.    Repayment of Overpayments  

1.    Definition of Overpayments.  For purposes of this CIA, an “Overpayment” shall mean the amount of money Ensign Group has received in excess of the amount due and payable under any Federal health care program requirements. 

2.    Repayment of Overpayments  

		
	a.
	If, at any time, Ensign Group identifies or learns of any Overpayment, Ensign Group shall repay the Overpayment to the appropriate payor (e.g., Medicare fiscal intermediary or carrier) within 60 days after identification of the Overpayment and take remedial steps within 90 days after identification (or such additional time as may be agreed to by the payor) to correct the problem, including preventing the underlying problem and the Overpayment from recurring.  If not yet quantified, within 60 days after identification, Ensign Group shall notify the payor of its efforts to quantify the Overpayment amount along with a schedule of when such work is expected to be completed.  Notification and repayment to the payor shall be done in accordance with the payor’s policies. 

		
	b.
	Notwithstanding the above, notification and repayment of any Overpayment amount that routinely is reconciled or adjusted pursuant to policies and procedures established by the payor should be handled in accordance with such policies and procedures. 

I.    Reportable Events

1.    Definition of Reportable Event.  For purposes of this CIA, a “Reportable Event” means anything that involves:

a.    a substantial Overpayment;

		
	b.
	a matter that a reasonable person would consider a probable violation of criminal, civil, or administrative laws applicable to any Federal health care program for which penalties or exclusion may be authorized; 

		
	c.
	the employment of or contracting with a Covered Person who is an Ineligible Person as defined by Section III.F.1.a; or

d.    the filing of a bankruptcy petition by The Ensign Group, Inc.

A Reportable Event may be the result of an isolated event or a series of occurrences.

2.    Reporting of Reportable Events.  If Ensign Group determines (after a reasonable opportunity to conduct an appropriate review or investigation of the allegations) through any means that there is a Reportable Event, Ensign Group shall notify OIG, in writing, within 30 days after making the determination that the Reportable Event exists. 

3.    Reportable Events under Section III.I.1.a.  For Reportable Events under Section III.I.1.a, the report to OIG shall be made at the same time as the repayment to the payor required in Section III.H, and shall include:

		
	a.
	a copy of the notification and repayment to the payor required in Section III.H.2;

		
	b.
	a description of the steps taken by Ensign Group to identify and quantify the Overpayment;

		
	c.
	a complete description of the Reportable Event, including the relevant facts, persons involved, and legal and Federal health care program authorities implicated;

		
	d.
	a description of Ensign Group’s actions taken to correct the Reportable Event; and

		
	e.
	any further steps Ensign Group plans to take to address the Reportable Event and prevent it from recurring.

Within 60 days of identification of the Overpayment, Ensign Group shall provide OIG with a copy of the notification and repayment to the payor required in Section III.H.2.

4.    Reportable Events under Section III.I.1.b and c.  For Reportable Events under Section III.I.1.b and III.I.1.c, the report to OIG shall include:

		
	a.
	a complete description of the Reportable Event, including the relevant facts, persons involved, and legal and Federal health care program authorities implicated;

		
	b.
	a description of Ensign Group’s actions taken to correct the Reportable Event; 

		
	c.
	any further steps Ensign Group plans to take to address the Reportable Event and prevent it from recurring; and 

		
	d.
	if the Reportable Event has resulted in an Overpayment, a description of the steps taken by Ensign Group to identify and quantify the Overpayment.

5.    Reportable Events under Section III.I.1.d.  For Reportable Events under Section III.I.1.d, the report to the OIG shall include documentation of the bankruptcy filing and a description of any Federal health care program authorities implicated.

6.      Reportable Events Involving the Stark Law.  Notwithstanding the reporting requirements outlined above, any Reportable Event that involves only a probable violation of section 1877 of the Social Security Act, 42 U.S.C. §1395nn (the Stark Law) should be submitted by Ensign Group to the Centers for Medicare & Medicaid Services (CMS) through the self-referral disclosure protocol (SRDP), with a copy to the OIG.  The requirements of Section III.H.2 that require repayment to the payor of any identified Overpayment within 60 days shall not apply to any Overpayment that may result from a probable violation of only the Stark Law that is disclosed to CMS pursuant to the SRDP.  If Ensign Group identifies a probable violation of the Stark Law and repays the applicable Overpayment directly to the CMS contractor, then Ensign Group is not required by this Section III.I to submit the Reportable Event to CMS through the SRDP.

		
	IV.
	SUCCESSOR LIABILITY; Changes to Business Units or Locations

A.    Sale of Business, Business Unit, or Location.  

In the event that, after the Effective Date, Ensign Group proposes to sell any or all of its business, business units or locations (whether through a sale of assets, sale of stock, or other type of transaction) that are subject to this CIA, Ensign Group shall notify OIG of the proposed sale at least 30 days prior to the scheduled sale of such business, business unit or location.  This notification shall include a description of the business, business unit or location to be sold, a brief description of the terms of the sale, and the name and contact information of the prospective purchaser.  This CIA shall be binding on the purchaser of the business, business unit or location, unless otherwise determined and agreed to in writing by the OIG.

B.    Change or Closure of Business, Business Unit, or Location  

In the event that, after the Effective Date, Ensign Group changes locations or closes a business, business unit or location related to the furnishing of items or services that may be reimbursed by Federal health care programs, Ensign Group shall notify OIG of this fact as soon as possible, but no later than within 30 days after the date of change or closure of the business, business unit or location.

C.    Purchase or Establishment of New Business, Business Unit, or Location  

In the event that, after the Effective Date, Ensign Group purchases or establishes a new business, business unit, or location related to the furnishing of items or services that may be reimbursed by Federal health care programs, Ensign Group shall notify OIG at least 30 days prior to the date scheduled for such purchase or the commencement of operation of the new business, business unit, or location.  If Ensign Group does not know at least 30 days prior to such purchase or the operation of the new business, business unit, or location, then Ensign Group shall notify OIG on the earliest date it anticipates such purchase or the operation of the new business, business unit, or location.  This notification shall include the address of the new business, business unit or location, phone number, fax number, the location’s Medicare and state Medicaid program provider number and/or supplier number(s); and the name and address of each Medicare and state Medicaid program contractor to which the new business, business unit, or location currently submits claims.  Each such new business, business unit or location and all Covered Persons at each new business, business unit or location shall be subject to the applicable requirements of this CIA, unless otherwise agreed to in writing by the OIG. 

V.    Implementation and Annual Reports

A.    Implementation Report

Within 150 days after the Effective Date, Ensign Group shall submit a written report to OIG summarizing the status of its implementation of the requirements of this CIA (Implementation Report).  The Implementation Report shall, at a minimum, include:

1.    the name, address, phone number, and position description of the Compliance Officer required by Section III.A, and a summary of other noncompliance job responsibilities the Compliance Officer may have; 

2.    the names and positions of the members of the Compliance Committee required by Section III.A;

3.    the names and positions of the members of the Board of Directors who are responsible for satisfying the Board of Directors compliance obligations described in Section III.A.3;

4.    a copy of Ensign Group’s Code of Conduct required by Section III.B.1;

5.    the number of individuals required to complete the Code of Conduct certification required by Section III.B.1, the percentage of individuals who have completed such certification, and an explanation of any exceptions (the documentation supporting this information shall be available to OIG upon request); 

6.    a summary of all Policies and Procedures required by Section III.B (copies of the Policies and Procedures shall be made available to OIG upon request);

7.    the following information regarding each type of training required by Section III.C:

		
	a.
	a description of such training, including a summary of the topics covered, the length of sessions, and a schedule of training sessions; 

		
	b.
	the number of individuals required to be trained, percentage of individuals actually trained, and an explanation of any exceptions.

A copy of all training materials and the documentation supporting this information shall be made available to OIG upon request.

8.    a description of the Disclosure Program required by Section III.E;

9.    the following information regarding the IRO(s): (a) identity, address, and phone number; (b) a copy of the engagement letter; (c) information to demonstrate that the IRO has the qualifications outlined in Appendix A to this CIA; (d) a summary and description of any and all current and prior engagements and agreements between Ensign Group and the IRO; and (e) a certification from the IRO regarding its professional independence and objectivity with respect to Ensign Group;

10.    a description of the process by which Ensign Group fulfills the requirements of Section III.F regarding Ineligible Persons;

11.    a list of all of Ensign Group’s locations (including locations and mailing addresses); the corresponding name under which each location is doing business; the corresponding phone numbers and fax numbers; each location’s Medicare and state Medicaid program provider number and/or supplier number(s); and the name and address of each Medicare and state Medicaid program contractor to which Ensign Group currently submits claims; 

12.    a description of Ensign Group’s corporate structure, including identification of any parent and sister companies, subsidiaries, and their respective lines of business; and

13.    the certifications required by Section V.C.

B.    Annual Reports

      Ensign Group shall submit to OIG annually a report with respect to the status of, and findings regarding, Ensign Group’s compliance activities for each of the five Reporting Periods (Annual Report).  Each Annual Report shall include, at a minimum:

1.    any change in the identity, position description, or other noncompliance job responsibilities of the Compliance Officer and any change in the membership of the Compliance Committee described in Section III.A;

2.    any change in the identity or positions of the members of the Board of Directors;

3.    the Board resolution required by Section III.A.3;

4.     a summary of any changes or amendments to Ensign Group’s Code of Conduct required by Section III.B.1 and the reason for such changes, along with a copy of the revised Code of Conduct;

5.    the number of individuals required to complete the Code of Conduct certification required by Section III.B.1, the percentage of individuals who have completed such certification, and an explanation of any exceptions (the documentation supporting this information shall be made available to OIG upon request);

6.    a summary of any significant changes or amendments to the Policies and Procedures required by Section III.B and the reasons for such changes (e.g., change in contractor policy);

7.    the following information regarding each type of training required by Section III.C:

		
	a.
	a description of the initial and annual training, including a summary of the topics covered, the length of sessions, and a schedule of training sessions; and

		
	b.
	the number of individuals required to complete the initial and annual training, the percentage of individuals who actually completed the initial and annual training, and an explanation of any exceptions.

A copy of all training materials and the documentation to support this information shall be made available to OIG upon request.

8.    a complete copy of all reports prepared pursuant to Section III.D, along with a copy of the IRO’s engagement letter;

9.    Ensign Group’s response to the reports prepared pursuant to Section III.D, along with corrective action plan(s) related to any issues raised by the reports; 

10.    a summary and description of any and all current and prior engagements and agreements between Ensign Group and the IRO (if different from what was submitted as part of the Implementation Report);

11.    a certification from the IRO regarding its professional independence and objectivity with respect to Ensign Group;

12.    a summary of Reportable Events (as defined in Section III.I) identified during the Reporting Period and the status of any corrective action relating to all such Reportable Events;

13.    a report of the aggregate Overpayments that have been returned to the Federal health care programs during the Reporting Period.  Overpayment amounts shall be broken down into the following categories:  inresident and/or inpatient Medicare, outresident and/or outpatient Medicare, Medicaid (report each applicable state separately, if applicable), and other Federal health care programs.  Overpayment amounts that are routinely reconciled or adjusted pursuant to policies and procedures established by the payor do not need to be included in this aggregate Overpayment report;

14.    a summary of the disclosures in the disclosure log required by Section III.E that relate to Federal health care programs (the complete disclosure log shall be made available to OIG upon request);

15.    any changes to the process by which Ensign Group fulfills the requirements of Section III.F regarding Ineligible Persons;

16.    a summary describing any ongoing investigation or legal proceeding required to have been reported pursuant to Section III.G.  The summary shall include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding;

17.    a description of all changes to the most recently provided list of Ensign Group’s locations (including addresses) as required by Section V.A.11; the corresponding name under which each location is doing business; the corresponding phone numbers and fax numbers; each location’s Medicare and state Medicaid program provider number(s) and/or supplier number(s); and the name and address of each Medicare and state Medicaid program contractor to which Ensign Group currently submits claims; and

18.    the certifications required by Section V.C.

The first Annual Report shall be received by OIG no later than 60 days after the end of the first Reporting Period.  Subsequent Annual Reports shall be received by OIG no later than the anniversary date of the due date of the first Annual Report.
C.    Certifications

The Implementation Report and each Annual Report shall include a certification by the Compliance Officer that:  

1.    to the best of his or her knowledge, except as otherwise described in the report, Ensign Group is in compliance with all of the requirements of this CIA; 

2.    he or she has reviewed the report and has made reasonable inquiry regarding its content and believes that the information in the report is accurate and truthful; and 

3.    to the best of his or her knowledge, Ensign Group has complied with its obligations under the Settlement Agreement:  (a) not to resubmit to any Federal health care program payors any previously denied claims related to the Covered Conduct addressed in the Settlement Agreement, and not to appeal any such denials of claims; (b) not to charge to or otherwise seek payment from federal or state payors for unallowable costs (as defined in the Settlement Agreement); and (c) to identify and adjust any past charges or claims for unallowable costs.

A.Designation of Information

Ensign Group shall clearly identify any portions of its submissions that it believes are trade secrets, or information that is commercial or financial and privileged or confidential, and therefore potentially exempt from disclosure under the Freedom of Information Act (FOIA), 5 U.S.C. § 552.  Ensign Group shall refrain from identifying any information as exempt from disclosure if that information does not meet the criteria for exemption from disclosure under FOIA.

VI.    Notifications and Submission of Reports

Unless otherwise stated in writing after the Effective Date, all notifications and reports required under this CIA shall be submitted to the following entities:

OIG:
Administrative and Civil Remedies Branch 
Office of Counsel to the Inspector General
Office of Inspector General
U.S. Department of Health and Human Services
Cohen Building, Room 5527
330 Independence Avenue, S.W.
Washington, DC  20201
Telephone:  202.619.2078
Facsimile:  202.205.0604

Ensign Group:
Deborah M. Miller
Chief Compliance Officer
The Ensign Group, Inc.
27101 Puerta Real, Suite 450
Mission Viejo, CA  92691
Telephone:  949.487.9500
Facsimile:  888.519.8334

Unless otherwise specified, all notifications and reports required by this CIA may be made by certified mail, overnight mail, hand delivery, or other means, provided that there is proof that such notification was received.  For purposes of this requirement, internal facsimile confirmation sheets do not constitute proof of receipt.  Upon request by OIG, Ensign Group may be required to provide OIG with an electronic copy of each notification or report required by this CIA in searchable portable document format (pdf), in addition to a paper copy.

VII.    OIG Inspection, Audit, and Review Rights

In addition to any other rights OIG may have by statute, regulation, or contract, OIG or its duly authorized representative(s) may examine or request copies of Ensign Group’s books, records, and other documents and supporting materials and/or conduct on-site reviews of any of Ensign Group’s locations for the purpose of verifying and evaluating:  (a) Ensign Group’s compliance with the terms of this CIA; and (b) Ensign Group’s compliance with the requirements of the Federal health care programs.  The documentation described above shall be made available by Ensign Group to OIG or its duly authorized representative(s) at all reasonable times for inspection, audit, or reproduction.  Furthermore, for purposes of this provision, OIG or its duly authorized representative(s) may interview any Covered Persons and any of Ensign Group’s employees, contractors, or agents who consent to be interviewed at the individual’s place of business during normal business hours or at such other place and time as may be mutually agreed upon between the individual and OIG.  Ensign Group shall assist OIG or its duly authorized representative(s) in contacting and arranging interviews with such individuals upon OIG’s request.  Ensign Group’s employees may elect to be interviewed with or without a representative of Ensign Group present.

VIII.    Document and Record Retention

Ensign Group shall maintain for inspection all documents and records relating to reimbursement from the Federal health care programs and to compliance with this CIA for six years (or longer if otherwise required by law) from the Effective Date.

IX.      Disclosures 

Consistent with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall make a reasonable effort to notify Ensign Group prior to any release by OIG of information submitted by Ensign Group pursuant to its obligations under this CIA and identified upon submission by Ensign Group as trade secrets, or information that is commercial or financial and privileged or confidential, under the FOIA rules.  With respect to such releases, Ensign Group shall have the rights set forth at 45 C.F.R. § 5.65(d).  

X.    Breach and Default Provisions  

Ensign Group is expected to fully and timely comply with all of its CIA obligations.  

A.    Stipulated Penalties for Failure to Comply with Certain Obligations  

As a contractual remedy, Ensign Group and OIG hereby agree that failure to comply with certain obligations as set forth in this CIA may lead to the imposition of the following monetary penalties (hereinafter referred to as “Stipulated Penalties”) in accordance with the following provisions.

1.    A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Ensign Group fails to establish and implement any of the following obligations as described in Section III:

a.    a Compliance Officer;

		
	b.
	a Compliance Committee;

		
	c.
	the Board of Directors compliance obligations;

d.    a written Code of Conduct;

e.    written Policies and Procedures;

		
	f.
	the training of Covered Persons, Relevant Covered Persons, and Board of Directors; 

g.    a Disclosure Program;

h.    Ineligible Persons screening and removal requirements; 
		
	i.
	notification of Government investigations or legal proceedings; and

j.    reporting of Reportable Events.

2.    A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Ensign Group fails to engage and use an IRO, as required in Section III.D, Appendix A, Appendix B, and Appendix C.

3.    A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Ensign Group fails to submit the Implementation Report or any Annual Reports to OIG in accordance with the requirements of Section V by the deadlines for submission.  

4.    A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Ensign Group fails to submit any MDS Review Report, Therapy Systems Assessment Report, or Unallowable Cost Review Report or any response to such report in accordance with the requirements of Section III.D, Appendix B, and Appendix C.  

5.    A Stipulated Penalty of $1,500 for each day Ensign Group fails to grant access as required in Section VII.  (This Stipulated Penalty shall begin to accrue on the date Ensign Group fails to grant access.) 

6.    A Stipulated Penalty of $50,000 for each false certification submitted by or on behalf of Ensign Group as part of its Implementation Report, Annual Report, additional documentation to a report (as requested by the OIG), or otherwise required by this CIA.

7.    A Stipulated Penalty of $1,000 for each day Ensign Group fails to comply fully and adequately with any obligation of this CIA.  OIG shall provide notice to Ensign Group stating the specific grounds for its determination that Ensign Group has failed to comply fully and adequately with the CIA obligation(s) at issue and steps Ensign Group shall take to comply with the CIA.  (This Stipulated Penalty shall begin to accrue 10 days after Ensign Group receives this notice from OIG of the failure to comply.)  A Stipulated Penalty as described in this Subsection shall not be demanded for any violation for which OIG has sought a Stipulated Penalty under Subsections 1- 6 of this Section. 

B.    Timely Written Requests for Extensions

Ensign Group may, in advance of the due date, submit a timely written request for an extension of time to perform any act or file any notification or report required by this CIA.  Notwithstanding any other provision in this Section, if OIG grants the timely written request with respect to an act, notification, or report, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until one day after Ensign Group fails to meet the revised deadline set by OIG.  Notwithstanding any other provision in this Section, if OIG denies such a timely written request, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until three business days after Ensign Group receives OIG’s written denial of such request or the original due date, whichever is later.  A “timely written request” is defined as a request in writing received by OIG at least five business days prior to the date by which any act is due to be performed or any notification or report is due to be filed.

C.    Payment of Stipulated Penalties

1.    Demand Letter.  Upon a finding that Ensign Group has failed to comply with any of the obligations described in Section X.A and after determining that Stipulated Penalties are appropriate, OIG shall notify Ensign Group of:  (a) Ensign Group’s failure to comply; and (b) OIG’s exercise of its contractual right to demand payment of the Stipulated Penalties.  (This notification shall be referred to as the “Demand Letter.”)

2.    Response to Demand Letter.  Within 10 days after the receipt of the Demand Letter, Ensign Group shall either:  (a) cure the breach to OIG’s satisfaction and pay the applicable Stipulated Penalties or (b) request a hearing before an HHS administrative law judge (ALJ) to dispute OIG’s determination of noncompliance, pursuant to the agreed upon provisions set forth below in Section X.E.  In the event Ensign Group elects to request an ALJ hearing, the Stipulated Penalties shall continue to accrue until Ensign Group cures, to OIG’s satisfaction, the alleged breach in dispute.  Failure to respond to the Demand Letter in one of these two manners within the allowed time period shall be considered a material breach of this CIA and shall be grounds for exclusion under Section X.D.

3.    Form of Payment.  Payment of the Stipulated Penalties shall be made by electronic funds transfer to an account specified by OIG in the Demand Letter.

4.    Independence from Material Breach Determination.  Except as set forth in Section X.D.1.c, these provisions for payment of Stipulated Penalties shall not affect or otherwise set a standard for OIG’s decision that Ensign Group has materially breached this CIA, which decision shall be made at OIG’s discretion and shall be governed by the provisions in Section X.D, below.

D.    Exclusion for Material Breach of this CIA

1.    Definition of Material Breach.  A material breach of this CIA means:

		
	a.
	a repeated or flagrant violation of the obligations under this CIA, including, but not limited to, the obligations addressed in Section X.A;  

		
	b.
	a failure by Ensign Group to report a Reportable Event, take corrective action, and make the appropriate refunds, as required in Section III.I;

		
	c.
	a failure to respond to a Demand Letter concerning the payment of Stipulated Penalties in accordance with Section X.C; or

		
	d.
	a failure to engage and use an IRO in accordance with Section III.D, Appendix A, Appendix B, and Appendix C.

2.    Notice of Material Breach and Intent to Exclude.  The parties agree that a material breach of this CIA by Ensign Group constitutes an independent basis for Ensign Group’s exclusion from participation in the Federal health care programs.  Upon a determination by OIG that Ensign Group has materially breached this CIA and that exclusion is the appropriate remedy, OIG shall notify Ensign Group of:  (a) Ensign Group’s material breach; and (b) OIG’s intent to exercise its contractual right to impose exclusion.  (This notification shall be referred to as the “Notice of Material Breach and Intent to Exclude.”)

3.    Opportunity to Cure.  Ensign Group shall have 30 days from the date of receipt of the Notice of Material Breach and Intent to Exclude to demonstrate to OIG’s satisfaction that:

		
	a.
	Ensign Group is in compliance with the obligations of the CIA cited by OIG as being the basis for the material breach;

b.    the alleged material breach has been cured; or

		
	c.
	the alleged material breach cannot be cured within the 30 day period, but that: (i) Ensign Group has begun to take action to cure the material breach; (ii) Ensign Group is pursuing such action with due diligence; and (iii) Ensign Group has provided to OIG a reasonable timetable for curing the material breach.

4.    Exclusion Letter.  If, at the conclusion of the 30 day period, Ensign Group fails to satisfy the requirements of Section X.D.3, OIG may exclude Ensign Group from participation in the Federal health care programs.  OIG shall notify Ensign Group in writing of its determination to exclude Ensign Group.   (This letter shall be referred to as the “Exclusion Letter.”)  Subject to the Dispute Resolution provisions in Section X.E, below, the exclusion shall go into effect 30 days after the date of Ensign Group’s receipt of the Exclusion Letter.  The exclusion shall have national effect.  Reinstatement to program participation is not automatic.  After the end of the period of exclusion, Ensign Group may apply for reinstatement by submitting a written request for reinstatement in accordance with the provisions at 42 C.F.R. §§ 1001.3001-.3004.

E.    Dispute Resolution

1.    Review Rights.  Upon OIG’s delivery to Ensign Group of its Demand Letter or of its Exclusion Letter, and as an agreed-upon contractual remedy for the resolution of disputes arising under this CIA, Ensign Group shall be afforded certain review rights comparable to the ones that are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion sought pursuant to this CIA.  Specifically, OIG’s determination to demand payment of Stipulated Penalties or to seek exclusion shall be subject to review by an HHS ALJ and, in the event of an appeal, the HHS Departmental Appeals Board (DAB), in a manner consistent with the provisions in 42 C.F.R. § 1005.2-1005.21.  Notwithstanding the language in 42 C.F.R. § 1005.2(c), the request for a hearing involving Stipulated Penalties shall be made 

within 10 days after receipt of the Demand Letter and the request for a hearing involving exclusion shall be made within 25 days after receipt of the Exclusion Letter. 

2.    Stipulated Penalties Review.  Notwithstanding any provision of Title 42 of the United States Code or Title 42 of the Code of Federal Regulations, the only issues in a proceeding for Stipulated Penalties under this CIA shall be:  (a) whether Ensign Group was in full and timely compliance with the obligations of this CIA for which OIG demands payment; and (b) the period of noncompliance.  Ensign Group shall have the burden of proving its full and timely compliance and the steps taken to cure the noncompliance, if any.  OIG shall not have the right to appeal to the DAB an adverse ALJ decision related to Stipulated Penalties.  If the ALJ agrees with OIG with regard to a finding of a breach of this CIA and orders Ensign Group to pay Stipulated Penalties, such Stipulated Penalties shall become due and payable 20 days after the ALJ issues such a decision unless Ensign Group requests review of the ALJ decision by the DAB.  If the ALJ decision is properly appealed to the DAB and the DAB upholds the determination of OIG, the Stipulated Penalties shall become due and payable 20 days after the DAB issues its decision.

3.    Exclusion Review.  Notwithstanding any provision of Title 42 of the United States Code or Title 42 of the Code of Federal Regulations, the only issues in a proceeding for exclusion based on a material breach of this CIA shall be:

a.    whether Ensign Group was in material breach of this CIA;

		
	b.
	whether such breach was continuing on the date of the Exclusion Letter; and 

		
	c.
	whether the alleged material breach could not have been cured within the 30-day period, but that: (i) Ensign Group had begun to take action to cure the material breach within that period; (ii) Ensign Group has pursued and is pursuing such action with due diligence; and (iii) Ensign Group provided to OIG within that period a reasonable timetable for curing the material breach and Ensign Group has followed the timetable.

For purposes of the exclusion herein, exclusion shall take effect only after an ALJ decision favorable to OIG, or, if the ALJ rules for Ensign Group, only after a DAB decision in favor of OIG.  Ensign Group’s election of its contractual right to appeal to the DAB shall not abrogate OIG’s authority to exclude Ensign Group upon the issuance of an ALJ’s decision in favor of OIG.  If the ALJ sustains the determination of OIG and determines that exclusion is authorized, such exclusion shall take effect 20 days after the ALJ issues such a decision, notwithstanding that Ensign Group may request review of the ALJ decision by the DAB.  If the DAB finds in favor of OIG after an ALJ decision adverse to OIG, the exclusion shall take effect 20 days after the DAB decision.  Ensign Group shall waive its right to any notice of such an exclusion if a decision upholding the exclusion is rendered by the ALJ or DAB.  If the DAB finds in favor of Ensign Group, Ensign Group shall be reinstated effective on the date of the original exclusion.

4.    Finality of Decision.  The review by an ALJ or DAB provided for above shall not be considered to be an appeal right arising under any statutes or regulations.  Consequently, the parties to this CIA agree that the DAB’s decision (or the ALJ’s decision if not appealed) shall be considered final for all purposes under this CIA. 

XI.    Effective and Binding Agreement

Ensign Group and OIG agree as follows:

A.    This CIA shall be binding on the successors, assigns, and transferees of Ensign Group.

B.    This CIA shall become final and binding on the date the final signature is obtained on the CIA.

C.    This CIA constitutes the complete agreement between the parties and may not be amended except by written consent of the parties to this CIA.

D.    OIG may agree to a suspension of Ensign Group’s obligations in whole or in part under this CIA based on a certification by Ensign Group that it is no longer providing health care items or services that will be billed directly or indirectly to any Federal health care program and that it does not have any ownership or control interest, as defined in 42 U.S.C. §1320a-3, in any entity that bills any Federal health care program.  If Ensign Group is relieved of its CIA obligations, Ensign Group will be required to notify OIG in writing at least 30 days in advance if Ensign Group plans to resume providing health care items or services that are billed to any Federal health care program or to obtain an ownership or control interest in any entity that bills any Federal health care program.  At such time, OIG shall evaluate whether the CIA will be reactivated or modified.

E.    The undersigned Ensign Group signatories represent and warrant that they are authorized to execute this CIA.  The undersigned OIG signatories represent that they are signing this CIA in their official capacities and that they are authorized to execute this CIA.

F.    This CIA may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same CIA.  Facsimiles of signatures shall constitute acceptable, binding signatures for purposes of this CIA.

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