Document:

EXHIBIT 10.10

 

SERVICES AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

  

  

 

2.           License of Rights.

 

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

 

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

 

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

 

3.           Payments to the Company.

 

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

 

  

  

  

 

(b)           Manner of Payment; Monthly Statements.  The Aligned Parties shall pay to the Company within ten (10) days after receipt of any payment under or relating to any Designated Contract the Adjusted Net Revenues for the period covered by such payment.  The Aligned Parties shall deliver to the Company with each payment of Adjusted Net Revenues a statement showing, at a minimum:  (i) the amount of Gross Revenues for such period (with supporting computations), (ii) a detailed statement of all Allowable Costs deducted by the Aligned Parties from Gross Revenues for that period for the purposes of calculating Net Revenues (with supporting computations), (iii) the Net Revenues for that period and the calculations thereof and (iv) the Adjusted Net Revenues for that period and the calculations thereof (collectively, the “Adjusted Net Revenue Calculations”).  Time is of the essence with respect to all payments under this Agreement.  If payment is not received by the Company on the due date, a late charge of one-and-one-half percent (1-1⁄2%) per month, or the maximum legal rate, whichever is less, shall be added to the unpaid balance until said balance (plus all accrued interest) is paid in full.

 

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

 

  

  

  

 

4.           Certain Covenants and Obligations of the Aligned Parties.

 

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

 

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

 

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

 

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

 

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

 

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

 

  

  

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

  

  

 

8.           Right to Examine Books and Records.  The Company shall have the right, exercisable at its sole discretion at any time upon reasonable notice to the Aligned Parties, to audit the Aligned Parties’ books and records to determine the accuracy of the Aligned Parties’ statements and reports and the calculation of the amounts and payments due the Company hereunder, provided that the Company may not exercise this right more than once in any calendar quarter.  The Company shall pay the cost of any such audit; provided, however, that if any audit reveals that the Aligned Parties have underpaid any amount due under this Agreement (an “Underpayment”) by five percent (5%) or more, the Aligned Parties shall be required to and shall pay for the cost of such audit.  Any Underpayment shall accrue a late charge at the rate of one-and-one-half  percent (1 1⁄2%) per month, or the maximum legal rate, whichever is less, from the date of the Underpayment until paid in full.  If the audit reveals an Underpayment, the Aligned Parties shall pay the Company the amount of the Underpayment, all late charges thereon and the cost of the audit within thirty (30) days after the date the Company notifies Aligned Parties in writing of such Underpayment.

 

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

 

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

 

  

  

  

 

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

 

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

 

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

 

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

 

(c)           by mutual written agreement of the Parties;

 

  

  

  

 

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

 

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

 

To the Company:

450 N. Brand Blvd.

Suite 600

Glendale, California 91203

Attn.:  Chief Executive Officer

Fax:   (818) 291-6444

With a copy to:

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, CA  94111-3598

Attn:  P. Rupert Russell, Esq.

Fax:  (415) 421-2922

To the Aligned Parties:

Aligned Healthcare Group LLC

Aligned Healthcare Group – California, Inc.

860 Hampshire Road, Suite A

Westlake Village, CA 91361

Attn:  Raouf Khalil

Fax:  (805) 379-0267

With a copy to:

Carl D. Hasting, Esq.

Attorney at Law

Certified Public Accountant

CDH Associates, Inc.

5655 Lindero Canyon Rd., Suite 226

Westlake Village, CA 91362

Fax:  (818) 879-1562

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

 

  

  

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23.           Nonassignability.

 

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

 

  

  

  

 

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

 

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

 

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

 

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

 

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

 

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

 

 

  

  

  

 

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

 

	
ALIGNED HEALTHCARE, INC.,

	
ALIGNED HEALTHCARE GROUP –

	
a California corporation

	
CALIFORNIA, INC.,

a California professional medical corporation

 

	

By:  /s/ Warren Hosseinion

Name:  Warren Hosseinion

Title:    Chief Executive Officer

	

By:  /s/ Hany R. Khalil

Name:  Hany R. Khalil

Title:    President

	
  

	 	 	 

ALIGNED HEALTHCARE GROUP LLC,

a California limited liability company

By:  /s/ Marcelle Khalil

Name:  Marcelle Khalil

Title:  Managing MemberUnassociated Document

AMENDMENT

TO

DEBENTURE AND WARRANTS

This Amendment (the “Amendment”), dated as of July 7, 2010, is made to the 8% Secured Convertible Debenture (the “Debenture”), and the Class B Common Stock purchase warrants (the “Warrants”) issued pursuant to the Securities Purchase Agreement dated as of December 29, 2009 (the “Purchase Agreement”), between InferX Corporation, Inc., a Delaware corporation (the “Company”) and the purchasers identified on the signatures pages thereto (the “Purchasers”).

WHEREAS, pursuant to Section 2(a) of the Debenture, the entire principal amount, together with all accrued and unpaid interest, is due and payable on June 30, 2010 (the “Maturity Date”);

WHEREAS, Section 16 of the Debenture provides that no provision of the Debenture may be amended, waived, modified or discharged without written consent of the holders of the Debenture;

WHEREAS, the Exercise Price for the Warrants is $0.50 per share;

WHEREAS, Section 18 of the Warrants provides that no provision of the Warrants may be amended unless by written consent of the warrant holders holding, in the aggregate, Warrants exercisable for shares of Warrant Stock greater than 67% of all shares of Warrant Stock available for exercise;

WHEREAS, the Company and the Holders signatory hereto (the “Signatory Holders”), which Signatory Holders (a) hold all of the outstanding Debentures wish to amend the Debenture to extend the Maturity Date until August 31, 2010 (the “Extension”) and (b) hold Warrants exercisable for shares of Warrant Stock greater than 67% of all shares of Warrant Stock available for exercise currently outstanding wish to amend the Warrants in order to reduce the respective Exercise Prices to $0.20;

WHEREAS, as partial consideration for the Extension, the Company wishes to issue to the Signatory Holders 200,000 shares of Common Stock pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

NOW, THEREFORE, in consideration of the terms and conditions contained in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows:

1. Definitions.  Terms used as defined terms herein and not otherwise defined shall have the meanings provided therefore in the Purchase Agreement, the Debenture and the Warrants.

  

  

  

 

(a) “Commission” means the United States Securities and Exchange Commission.

(b) “Legend Removal Date” shall have the meaning ascribed to such term in Section 6(c).

(c) “Liens” means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

(d) “Public Information Failure” shall have the meaning ascribed to such term in Section 7.

(e) “Public Information Failure Payments” shall have the meaning ascribed to such term in Section 7.

(f) “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

(g) “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Signatory Holders of a majority in interest of the Shares then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

2. Amendment to Maturity Date of the Debenture.  The maturity date of the Debenture shall be extended until August 31, 2010.  As such, Section 2(a) of the Debenture shall be amended and restated in its entirety to read as follows:

  

  

  

 

“The entire principal amount of this Debenture, together with all accrued interest and unpaid interest, shall be due and payable on August 31, 2010 (the “Maturity Date”).”

3. Amendments to Warrant Exercise Prices.

	 	
(a)  

	
Series B Warrant.  The Exercise Price of the Series B Warrant shall be reduced to $0.20 per share from $0.50 per share.  As such, Section 1.2 of the Series B Warrant shall be amended and restated in its entirety to read as follows:

““Exercise Price” means $0.20 per share, subject to adjustment as provided herein.”

	 	
(b)  

	
References to the Exercise Prices in the Transaction Documents.  Any and all references to the Exercise Price of $0.50 for the Warrants in the Transaction Documents shall be disregarded.

4. Issuance of Shares.  On the date hereof, as partial consideration for the amendments hereunder, the Company shall issue to the Signatory Holders, in the aggregate, 200,000 shares of Common Stock (the “Shares”).

 

 

5. Representations and Warranties of the Company.  The Company hereby makes the representations and warranties set forth below to the Signatory Holders as of the date of this Amendment:

(a) Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into this Amendment and otherwise to carry out its obligations hereunder.  The execution and delivery of this Amendment by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company's stockholders in connection therewith.  This Amendment has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) No Conflicts.  The execution, delivery and performance of this Amendment by the Company and the consummation by the Company of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of the Company’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other material instrument (evidencing Company debt or otherwise) or other material understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected.

  

  

  

 

(c) Issuance of the Shares.  The Shares are duly authorized and, when issued and paid for in accordance with this Amendment, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Amendment.

(d) Bring Down.  The Company expressly reaffirms that each of the representations and warranties set forth in the Purchase Agreement (as supplemented or qualified by the disclosures in any disclosure schedule to Purchase Agreement), continues to be true, accurate and complete in all material respects as of the date hereof, and except for any representation and warranty made as of a certain date, in which case such representation and warranty shall be true, accurate and complete as of such date, and the Company hereby remakes and incorporates herein by reference each such representation and warranty as though made on the date of this Amendment.

6. Transfer Restrictions.

(a) The Shares may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Shares other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Signatory Holder or in connection with a pledge as contemplated in Section 6(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Amendment and shall have the rights and obligations of a Signatory Holder under this Amendment.

(b) The Signatory Holders agree to the imprinting, so long as is required by this Section 6, of a legend on any of the Securities in the following form:

  

  

  

 

THIS SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Signatory Holder may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Amendment and, if required under the terms of such arrangement, such Signatory Holder may transfer pledged or secured Shares to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Signatory Holder’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares.

(c) Certificates evidencing the Shares shall not contain any legend (including the legend set forth in this Section 6), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Shares pursuant to Rule 144, (iii) if such Shares are eligible for sale under Rule 144 or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).  The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after any event in (i)-(iv) herein if required by the Transfer Agent to effect the removal of the legend hereunder. The Company agrees that following such time as such legend is no longer required under this Section 6(c), it will, no later than three Trading Days following the delivery by a Signatory Holder to the Company or the Transfer Agent of a certificate representing Shares, as the case may be, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Signatory Holder a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 6.  Certificates for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Signatory Holder by crediting the account of the Signatory Holder’s prime broker with the Depository Trust Company System as directed by such Signatory Holder.

  

  

  

 

(d) In addition to such Signatory Holder’s other available remedies, the Company shall pay to a Signatory Holder, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Shares (based on the VWAP of the Common Stock on the date such Shares are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 6(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Signatory Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Shares as required by this Amendment, and such Signatory Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

(e) Each Signatory Holder, severally and not jointly with the other Signatory Holders, agrees with the Company that such Signatory Holder will sell any Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Shares are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Shares as set forth in this Section 6 is predicated upon the Company’s reliance upon this understanding.

7. Public Information.  At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Shares may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Signatory Holder’s other available remedies, the Company shall pay to a Signatory Holder, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Shares, an amount in cash equal to $20 per $1,000 of Shares (based on the VWAP of the Common Stock on the Trading Day immediately prior to the date hereof) on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required  for the Signatory Holders to transfer the Shares pursuant to Rule 144.  The payments to which a Signatory Holder shall be entitled pursuant to this Section 7(b) are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Signatory Holder’s right to pursue actual damages for the Public Information Failure, and such Signatory Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

  

  

  

 

8. Public Disclosure.  On or before 9:30 am (New York City time) on the first Trading Day immediately following the date hereof, the Company shall file a Current Report on Form 8-K, reasonably acceptable to the Signatory Holders disclosing the material terms of the transactions contemplated hereby and attaching this Amendment as an exhibit thereto.

9. Reference to the Debentures and Warrants.  On and after the date hereof, each reference to “this Debenture,” “Warrant,” “hereunder,” “hereof,” “herein,” or words of like import shall mean and be a reference to the Debenture and Warrants as amended hereby.  No reference to this Amendment need be made in any instrument or document at any time referring to the Debenture or Warrants, a reference to the Debenture or Warrants in any such instrument or document to be deemed to be a reference to the Debenture or Warrants as amended hereby.

10. Effect on Transaction Documents. Except as expressly set forth above, all of the terms and conditions of the Debenture, Warrants and the Transaction Documents shall continue in full force and effect after the execution of this Amendment and shall not be in any way changed, modified or superseded by the terms set forth herein.  Notwithstanding the foregoing, this Amendment shall be deemed for all purposes as an amendment to the Debenture and Warrants as required to serve the purposes hereof, and in the event of any conflict between the terms and provisions of the Debenture and Warrants, on the one hand, and the terms and provisions of this Amendment, on the other hand, the terms and provisions of this Amendment shall prevail.

11. Amendments and Waivers. The provisions of this Amendment can be amended or waived in the manner permitted under the Debenture and Warrants.

12. Execution. This Amendment may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

  

  

  

 

13. Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Amendment shall be determined pursuant to the Governing Law provision of the Purchase Agreement.

14. Entire Agreement.  This Amendment contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Amendment.

[SIGNATURE PAGE FOLLOWS]

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized signatories as of the date first indicated above.

	
INFERX CORPORATION, INC.

 

 

	
By:/s/ B.K. Gogia___________________

     Name: B.K. Gogia

     Title: Secretary and Chairman

	  

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

  

  

  

 

[SIGNATURE PAGE OF HOLDERS TO NRFX AMENDMENT]

Name of Holder: __________________________

Signature of Authorized Signatory of Holder: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

[SIGNATURE PAGES CONTINUE]

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