Full Press Release Details
AGREEMENT AND PLAN OF MERGER
APOLLO MEDICAL HOLDINGS, INC.,
APOLLO ACQUISITION CORP.,
NETWORK MEDICAL MANAGEMENT,
THE SHAREHOLDERS' REPRESENTATIVE
Dated as of December 21, 2016
| Page | ||
| ARTICLE I THE MERGER | 2 | |
| 1.1 | The Merger | 2 |
| 1.2 | Closing | 2 |
| 1.3 | Effective Time | 3 |
| 1.4 | Effects of the Merger | 3 |
| 1.5 | Articles of Incorporation and Bylaws of the Surviving Entity | 3 |
| 1.6 | Tax Consequences | 3 |
| ARTICLE II EFFECT ON CAPITAL STOCK; MERGER CONSIDERATION | 4 | |
| 2.1 | Effect on Capital Stock | 4 |
| 2.2 | No New Shareholders | 5 |
| 2.3 | Merger Consideration | 5 |
| 2.4 | Payment and Exchange | 5 |
| 2.5 | [Omitted] | 6 |
| 2.6 | Withholding | 6 |
| 2.7 | Stock Transfer Books | 7 |
| 2.8 | No Fractional Shares | 7 |
| 2.9 | Termination of Exchange Fund | 7 |
| 2.10 | Lost Certificates | 7 |
| 2.11 | Investment of Exchange Fund | 8 |
| 2.12 | No Liability | 8 |
| 2.13 | Holdback Shares | 8 |
| 2.14 | Release of the Holdback Shares | 8 |
| 2.15 | Consideration Spreadsheet | 9 |
| ARTICLE III PRE-CLOSING COVENANTS | 9 | |
| 3.1 | Reasonable Best Efforts | 9 |
| 3.2 | Operation of the Company | 9 |
| 3.3 | Operation of Parent | 12 |
| 3.4 | Access to Information; Due Diligence | 15 |
| 3.5 | Exclusivity; No Negotiation | 15 |
| 3.6 | Notices of Certain Events; Continuing Disclosure | 17 |
| 3.7 | Confidentiality, Press Releases and Public Announcements | 19 |
| 3.8 | Third Party Consents and Approvals | 20 |
| 3.9 | Proxy/Registration Statement | 21 |
| 3.10 | Company Shareholder Approval | 22 |
| 3.11 | Parent Shareholder Approval | 23 |
| 3.12 | Company Financial Statements | 24 |
| 3.13 | Distribution of Company Distributable Cash and Parent Warrants | 24 |
| 3.14 | Working Capital Loan | 24 |
| 3.15 | Minimum Company Cash | 25 |
| 3.16 | Company Repurchase of Dissenting Shareholder Interests | 25 |
| Page | ||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 25 | |
| 4.1 | Authority of the Company; No Conflicts | 26 |
| 4.2 | Organization; Power and Authority | 26 |
| 4.3 | Financial Statements; Accounts Receivable | 27 |
| 4.4 | Absence of Certain Changes | 27 |
| 4.5 | Material Contracts | 30 |
| 4.6 | Litigation | 31 |
| 4.7 | Business Employees and Employee Relations | 31 |
| 4.8 | Employee Benefit Plans | 33 |
| 4.9 | Taxes | 35 |
| 4.10 | Solvency | 36 |
| 4.11 | Brokers and Finders | 36 |
| 4.12 | Sufficiency of Assets | 36 |
| 4.13 | Equity Interests | 37 |
| 4.14 | Legal and Regulatory Compliance | 37 |
| 4.15 | Permits and Licenses | 38 |
| 4.16 | Condition of Assets | 39 |
| 4.17 | Financing Statements; Indebtedness | 39 |
| 4.18 | Real Property | 39 |
| 4.19 | Related-Party Transactions | 40 |
| 4.20 | Insurance | 40 |
| 4.21 | Intangible Personal Property; Software | 41 |
| 4.22 | Environmental | 41 |
| 4.23 | Books and Records | 43 |
| 4.24 | Disclosure | 43 |
| 4.25 | Accredited Investor | 43 |
| ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | 43 | |
| 5.1 | Authority of Parent; No Conflicts | 43 |
| 5.2 | Organization and Power and Authority of Parent | 44 |
| 5.3 | Organization and Power and Authority of Merger Sub | 44 |
| 5.4 | Financial Statements; Accounts Receivable | 45 |
| 5.5 | Absence of Certain Changes | 45 |
| 5.6 | Material Contracts | 48 |
| 5.7 | Litigation | 48 |
| 5.8 | Business Employees and Employee Relations | 49 |
| 5.9 | Employee Benefit Plans | 50 |
| 5.10 | Taxes | 53 |
| 5.11 | Solvency | 54 |
| 5.12 | Brokers and Finders | 54 |
| 5.13 | Sufficiency of Assets | 54 |
| Page | ||
| 5.14 | Equity Interests | 54 |
| 5.15 | Legal and Regulatory Compliance | 55 |
| 5.16 | Permits and Licenses | 56 |
| 5.17 | Condition of Assets | 56 |
| 5.18 | Financing Statements; Indebtedness | 57 |
| 5.19 | Real Property | 57 |
| 5.20 | Related-Party Transactions | 57 |
| 5.21 | Insurance | 58 |
| 5.22 | Intangible Personal Property; Software | 58 |
| 5.23 | Environmental | 59 |
| 5.24 | Books and Records | 60 |
| 5.25 | Disclosure | 60 |
| 5.26 | No Disqualification Event | 61 |
| 5.27 | SEC Reports; Financial Statements | 61 |
| ARTICLE VI CONDITIONS TO CLOSING | 61 | |
| 6.1 | Conditions to Obligations of All Parties | 61 |
| 6.2 | Conditions to the Obligations of Parent and Merger Sub | 62 |
| 6.3 | Closing Conditions Precedent to Obligations of the Company | 64 |
| 6.4 | Frustration of Closing Conditions | 65 |
| ARTICLE VII POST CLOSING COVENANTS | 65 | |
| 7.1 | Employment and Employee Benefits | 65 |
| 7.2 | Noncompete and Nonsolicitation | 66 |
| 7.3 | Post-Closing Parent Governance | 66 |
| ARTICLE VIII INDEMNIFICATION | 67 | |
| 8.1 | Survival | 67 |
| 8.2 | Indemnification of Parent Indemnified Parties | 67 |
| 8.3 | Indemnification of Shareholder Indemnified Parties | 68 |
| 8.4 | Notice of Asserted Liability | 69 |
| 8.5 | Third Party Claims | 69 |
| 8.6 | Limitations on Indemnification | 71 |
| 8.7 | Recourse for Indemnity Claims | 72 |
| 8.8 | Mitigation | 72 |
| ARTICLE IX TERMINATION | 72 | |
| 9.1 | Termination Events | 72 |
| 9.2 | Effects of Termination | 74 |
| 9.3 | Fees and Expenses | 75 |
| Page | ||
| ARTICLE X DISPUTE RESOLUTION | 77 | |
| 10.1 | Executive Administration | 77 |
| 10.2 | Judicial Reference | 77 |
| 10.3 | Equitable Relief and Enforcement | 78 |
| ARTICLE XI SHAREHOLDERS' REPRESENTATIVE | 79 | |
| 11.1 | Appointment of Shareholders' Representative | 79 |
| 11.2 | Successor Shareholders' Representative | 79 |
| 11.3 | Power and Authority | 79 |
| 11.4 | Limitation on Liability; Indemnification | 80 |
| 11.5 | Reliance | 80 |
| ARTICLE XII GENERAL PROVISIONS | 80 | |
| 12.1 | Notices | 80 |
| 12.2 | Assignment | 81 |
| 12.3 | No Third-Party Beneficiaries | 81 |
| 12.4 | Execution of Agreement; Counterparts; Electronic Signature | 82 |
| 12.5 | Governing Law; Exclusive Jurisdiction | 82 |
| 12.6 | Entire Agreement; Modification | 82 |
| 12.7 | Conflict Between Transaction Documents | 82 |
| 12.8 | Construction/Severability | 82 |
| 12.9 | Extension; Waiver | 82 |
| 12.10 | Ambiguities | 83 |
| 12.11 | Interpretation | 83 |
| 12.12 | Expenses | 84 |
| 12.13 | References to U.S. Dollars | 84 |
| 12.14 | Specific Performance | 84 |
| ARTICLE XIII DEFINITIONS | 85 | |
| 13.1 | Definitions | 85 |
| Exhibit A | Form of Voting Agreement |
| Exhibit B | Form of Shareholder Lock-Up Agreement |
| Exhibit C | Form of Exchange Agent Agreement |
| Exhibit D | Consent and Waiver Agreement |
| Exhibit E | Form of Letter of Transmittal |
| Exhibit F | Working Capital Note |
| Exhibit G | Shareholder Representations |
| Exhibit H-1 | Certificate of Amendment |
| Exhibit H-2 | Amendment to Bylaws |
AGREEMENT AND PLAN OF MERGER
Plan of Merger (this "Agreement") is made and entered into as of this 21st day of December, 2016 (the "Execution
Date"), by and among Apollo Medical Holdings, Inc., a Delaware corporation ("Parent"), Apollo Acquisition
Corp., a California corporation ("Merger Sub"), Network Medical Management, Inc., a California corporation (the
"Company"), and Kenneth Sim, M.D. (the "Shareholders' Representative"). Parent, Merger
Sub, the Company, and the Shareholders' Representative shall sometimes be referred to herein collectively as the "Parties"
and individually as a "Party." The Shareholders' Representative, acting in such capacity, is a Party to
this Agreement solely in his capacity as the Shareholders' Representative and solely for the purpose of the specific provisions
of this Agreement relating to the Shareholders' Representative. Capitalized terms used herein have the meanings ascribed
to them in Article XIII below.
of directors of the Company (the "Company Board"), the board of directors of Parent and the board of directors
of Merger Sub have adopted this Agreement and have determined that it is in the best interests of their respective companies and
shareholders to consummate the strategic business combination provided for in this Agreement in which Merger Sub will merge with
and into the Company, with the Company surviving such merger (collectively, the "Merger") and continuing as
a wholly-owned subsidiary of Parent in accordance with the California General Corporation Law (the "CGCL") on
the terms and subject to the conditions set forth herein;
board of directors of Parent and the board of directors of Merger Sub have approved and declared it advisable for Merger Sub to
enter into this Agreement providing for the Merger upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in connection
with this Agreement, the sole shareholder of Maverick Medical Group, Inc., a California professional corporation ("Maverick
IPA") and an affiliate of the Parent, intend to enter into a stock purchase agreement (the "Maverick Purchase
Agreement") no later than January 20, 2017, pursuant to which all of the issued and outstanding capital stock of Maverick
IPA will be acquired at the Effective Time (as such term is defined below) by APC-LSMA Designated Shareholder Medical Corporation,
a California professional corporation, an affiliate of Allied Physicians of California, a California professional medical corporation
WHEREAS, as a condition
to, and simultaneously with, the execution of this Agreement, certain Shareholders (as such term is defined below) are entering
into a voting agreement with Parent in the form attached hereto as Exhibit A (the "Voting Agreement"),
pursuant to which they have agreed, among other things, to vote in favor of the approval and adoption of the Merger and this Agreement;
WHEREAS, prior to or
concurrently with the consummation of the transactions contemplated by this Agreement and as a condition to the willingness of
Parent and Merger Sub to consummate the transactions contemplated hereby, each shareholder of the Company (other than Dissenting
Shareholders) (each a "Shareholder," and collectively the "Shareholders") will enter into
a lock-up agreement with Parent in the form attached hereto as Exhibit B (the "Lock-Up Agreement");
WHEREAS, prior to or
concurrently with the consummation of the transactions contemplated by this Agreement and as a condition to Parent's and
Merger Sub's willingness to consummate the transactions contemplated hereby, the Shareholders' Representative will
enter into an Exchange Agent Agreement with the Exchange Agent and Parent in the form attached hereto as Exhibit C with
such changes as the Exchange Agent reasonably requires (the "Exchange Agreement");
WHEREAS, concurrently
with the consummation of the transactions contemplated by this Agreement and as a condition to Parent's and Merger Sub's
willingness to consummate the transactions contemplated hereby, the Company shall relinquish its redemption rights to preferred
stock of the Parent by entering into a Consent and Waiver Agreement in substantially the form attached hereto as Exhibit D
(the "Consent and Waiver Agreement"); and
WHEREAS, for federal
income Tax purposes, it is the intent of the Parties that the Merger qualify as a "reorganization" within the meaning
of Section 368(a) of the Code, and this Agreement is intended to be and is adopted as a "plan of reorganization" within
the meaning of Section 1.368-2(g) of the Treasury Regulations.
consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and incorporating the above recitals with and into this Agreement, the Parties hereto
Merger. At the Effective Time (as defined in Section 1.3), subject to the terms and conditions of this Agreement
and in accordance with the provisions of the CGCL, and in reliance upon the representations, warranties, covenants and agreements
contained herein, (i) Merger Sub shall be merged with and into the Company, (ii) the separate corporate existence of Merger
Sub shall cease and (iii) the Company shall continue as the surviving entity and a wholly-owned subsidiary of Parent (hereinafter
sometimes referred to post-Closing as the ("Surviving Entity")) and shall continue to be governed by the laws
of the State of California, and the separate corporate existence of the Company, with all its rights, privileges, immunities, powers
and franchises, shall continue unaffected by the Merger, except as set forth in Section 1.5.
The closing of the Merger (the "Closing") shall take place on the second (2nd) Business Day after all of the
conditions set forth in Article VI have been satisfied or waived (other than conditions
that by their terms are to be satisfied at the Closing) or at such other date and time as may be mutually agreed upon by the Parties
in writing. The Closing shall occur at the offices of McDermott Will & Emery, LLP, 2049 Century Park East, 38th
Floor, Los Angeles, California 90067 or such other place as mutually agreed to by the Parties. The time and date on which the Closing
is actually held is referred to herein as the "Closing Date."
Time. On the Closing Date, the Parties shall cause the Merger to be consummated by filing with the Secretary of State of the
State of California a certificate of merger (the "Certificate of Merger"), executed in accordance with the provisions
of the CGCL, and shall make all other filings or recordings required under the CGCL in order to effect the Merger. The Merger shall
be effective upon the filing of the Certificate of Merger with the Secretary of State of the State of California or at such later
time as is agreed to by the Parties in writing and specified in the Certificate of Merger. The time at which the Merger becomes
effective is hereinafter referred to as the "Effective Time."
of the Merger. The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the CGCL. Without
limiting the generality of the foregoing, at the Effective Time, all of the assets, rights, privileges, powers and franchises
of the Company and the Merger Sub shall vest in the Surviving Entity, and all debts, liabilities and duties of the Company and
the Merger Sub shall become the debts, liabilities and duties of the Surviving Entity.
of Incorporation and Bylaws of the Surviving Entity.
articles of incorporation of the Company shall be amended and restated at and as of the Effective Time to read as did the articles
of incorporation of Merger Sub immediately prior to the Effective Time; provided, that such articles of incorporation shall
be amended to reflect that the name of the Surviving Entity shall be "Network Medical Management, Inc." Such amended
and restated articles of incorporation shall be the articles of incorporation of the Surviving Entity and shall continue in full
force and effect until further amended in the manner prescribed therein and in accordance with the CGCL.
bylaws of the Company shall be amended and restated at and as of the Effective Time to read as did the bylaws of Merger Sub immediately
prior to the Effective Time. Such amended and restated bylaws of the Company shall be the bylaws of the Surviving Entity and shall
continue in full force and effect until further amended in the manner prescribed therein and by the CGCL; provided, that
such bylaws shall be amended to reflect that the name of the Surviving Entity shall be "Network Medical Management, Inc."
Consequences. It is intended that the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, and that this Agreement shall constitute, and is adopted as, a "plan of reorganization" within
the meaning of Section 1.368-2(g) of the Treasury Regulations.
EFFECT ON CAPITAL STOCK; MERGER CONSIDERATION
on Capital Stock. As of the Effective Time, by virtue of the Merger, and without further action on the part of Parent, Merger
Sub, the Company, the Shareholders' Representative or the Shareholders:
Sub Shares. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time, shall