RadNet, Inc 8-K, filed Oct 26, 2026
RadNet, Inc. (RDNT)
About this 8-K
RadNet, Inc filed this 8-K on October 26, 2026.
RadNet agreed to acquire OnRad for $350,000,000 in cash and 5,000,000 RadNet shares, plus an earn-out of up to $210,000,000 based on Post-Closing Annual Adjusted EBITDA for the fiscal year ending December 31, 2027; closing is expected in early 2027. AI summary
Items reported
- Item 1.01: Entered into a material agreement
- Item 3.02: Unregistered sale of equity
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On October 26, 2026, RadNet, Inc., a Delaware corporation (the “Company,” “RadNet,” “we,” and “us”), and Radnet Management, Inc., a California corporation and direct wholly owned subsidiary of the Company (“Purchaser”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with OnRad, Inc., a Delaware corporation (“OnRad”), Red Rover Merger Sub, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Purchaser (the “Surviving Merger Sub”), Javelin Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of the Surviving Merger Sub (the “First Merger Sub,” and together with Surviving Merger Sub, the “Merger Subs”), and, solely for purposes of the specified provisions therein, Housatonic IV CF, L.P., a Delaware limited partnership, solely in its capacity as the securityholder representative (“Securityholder Representative”).
Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, (a) First Merger Sub will merge with and into OnRad, with OnRad surviving the First Merger as a direct wholly owned subsidiary of Surviving Merger Sub (the “First Merger”), and (b) immediately thereafter, OnRad will merge with and into Surviving Merger Sub, with Surviving Merger Sub surviving the Second Merger as a direct wholly owned subsidiary of Purchaser (the “Second Merger,” and, together with the First Merger, the “Mergers”).
At the closing of the Mergers (the “Closing”), the holders (the “OnRad Holders”) of OnRad’s common stock, par value $0.0001 per share (the “OnRad Common Stock”) (including any then outstanding shares of OnRad Common Stock into which the holders of OnRad’s outstanding preferred stock and warrants have converted in accordance with the Merger Agreement, but in all cases excluding Dissenting Shares (as defined in the Merger Agreement)) and the holders of Vested Company Options (as defined in the Merger Agreement) will receive an aggregate of (i) $350,000,000 in cash, subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses and subject to certain escrow holdbacks, and (ii) 5,000,000 shares (the “Closing Shares”) of common stock of the Company, par value $0.0001 per share (the “RadNet Common Stock”).
In addition, the OnRad Holders may also be entitled to an earn-out payment of up to $210,000,000 (the “Earn-Out Amount”) if OnRad achieves a certain target Post-Closing Annual Adjusted EBITDA (as defined in the Merger Agreement) for the fiscal year ending December 31, 2027. The Earn-Out Amount may be paid in cash, shares of RadNet Common Stock (the “Earn-Out Shares”) or a combination thereof subject to certain tax-related requirements.
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Pursuant to the Merger Agreement, the Company has agreed to file prospectus supplements to its automatic shelf registration statement on Form S-3 (Registration No. 333-291945) (the “Registration Statement”) to register the resale of the Closing Shares and, if any, the Earn-Out Shares, within three (3) business days following the Closing and the Earn-Out Amount Determination Date (as defined in the Merger Agreement), respectively.
The Mergers are expected to close in early 2027, subject to customary closing conditions, including, but not limited to, (i) the making or receipt of certain state healthcare regulatory filings and approvals; (ii) the absence of any law or order prohibiting the Mergers; (iii) the delivery of the written consent of OnRad’s stockholders approving the Merger Agreement and the transactions contemplated thereunder (the “Required Stockholder Approval”); (iv) David M. Engert, who is currently serving as OnRad’s President and Chief Executive Officer, remaining employed by OnRad through the Closing and not having revoked, rescinded or repudiated that certain Employment Agreement entered into between OnRad and Mr. Engert on October 26, 2026, which will become effective at, and is contingent upon, the Closing; (v) the conveyance of all ownership interests in each of OnRad’s contracted professional entities to a physician designated by Purchaser; and (vi) the effectiveness of the Registration Statement. The Merger Agreement may be terminated under certain circumstances, including by either party if the Mergers have not been consummated by February 23, 2027 (which date automatically extends to June 1, 2027 if the only unsatisfied closing condition is the receipt of the required governmental and regulatory filings and approvals), and by Purchaser if the Required Stockholder Approval is not timely delivered. The parties previously filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the waiting period has expired.
The parties to the Merger Agreement have made customary representations and warranties in the Merger Agreement. The Merger Agreement also contains certain other customary covenants and agreements.
The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached as Exhibit 2.1 to this Current Report on Form 8-K and incorporated by reference herein. The Merger Agreement and the foregoing description of such agreement have been included to provide investors and stockholders with information regarding the terms of such agreement. The assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in confidential disclosure schedules delivered by OnRad to Purchaser in connection with the signing of the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties to the Merger Agreement. Accordingly, the representations and warranties in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts and circumstances of OnRad or the Company, as applicable, at the time they were made and investors should consider the information in the Merger Agreement in conjunction with the entirety of the factual disclosure about the Company in its public reports filed with the Securities and Exchange Commission. Information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
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Restrictive Covenant and Support Agreement
In connection with the execution of the Merger Agreement, Purchaser, OnRad and each of certain stockholders of OnRad (collectively, the “RCS Stockholders”), entered into that certain Restrictive Covenant and Support Agreement, dated October 26, 2026 (collectively, the “RCS Agreements”), substantially in the form attached to the Merger Agreement and filed as Exhibit 10.1 to this Current Report on Form 8-K. The restrictive covenants and lock-up provisions of the RCS Agreements will become effective at the Closing and the remaining provisions become effective upon execution.
Under the RCS Agreements, the RCS Stockholders made customary representations regarding its ownership of OnRad securities and agreed, among other things, to (i) non-competition covenant with respect to the provision of teleradiology services in the United States; (ii) non-solicitation and no-hire covenants with respect to OnRad’s employees and business relationships; (iii) a lock-up on transfers of the Closing Shares during specified periods); (iv) confidentiality and non-disparagement obligations; and (v) a general release of claims against OnRad, effective following the Closing.
The foregoing description of the RCS Agreements is a summary only and is qualified in its entirety by reference to the full text of the form of RCS Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference into this Item 1.01 in its entirety.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under the caption “Merger Agreement” in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
The Closing Shares and any Earn-Out Shares to be issued as consideration under the Merger Agreement will be issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Rule 506 of Regulation D promulgated thereunder.
Item 7.01 Regulation FD Disclosure.
On October 26, 2026, the Company issued a press release announcing the entry into the Merger Agreement. A copy of the press release is furnished herewith as Exhibit 99.1.
The Company will host a webcast and conference call at 8:00 A.M. (Eastern Daylight Time) on Tuesday, October 27, 2026 to discuss the transaction.
The information in this Item 7.01 and Exhibit 99.1 hereto (i) is furnished pursuant to Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section; and (ii) shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 2.1*# | Agreement and Plan of Merger, dated as of October 26, 2026, by and among RadNet, Inc., Radnet Management, Inc., Red Rover Merger Sub, LLC, Javelin Merger Sub, Inc., OnRad, Inc. and, solely for the limited purposes set forth therein, Housatonic IV CF, L.P., as Securityholder Representative | |
| 10.1*# | Form of Restrictive Covenant and Support Agreement, dated October 26, 2026, between Radnet Management, Inc., OnRad, Inc. and certain stockholders of OnRad, Inc. named therein | |
| 99.1** | Press release dated October 26, 2026 | |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
* Filed herewith.
** Furnished herewith.
# Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) and/or Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of such schedules and exhibits, or any section thereof, to the U.S. Securities and Exchange Commission (the “SEC”) upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 under the Exchange Act for any exhibits or schedules so furnished.
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K, including the exhibits hereto, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical fact, included in this Current Report on Form 8-K that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the Mergers, the expected timing and completion of the Mergers, the anticipated benefits of the Mergers, the potential Earn-Out Amount, the expected financial impact of the Mergers on the Company and other statements that are not historical facts. Forward-looking statements are based on current plans, estimates, expectations and assumptions as of the time they are made, are not guarantees of future performance and should not be relied on as predictions of future events, and there can be no assurance that such estimates, assumptions and expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties, many of which are difficult to predict and are generally outside the Company's control, and other factors that could cause the Company’s actual results or financial condition to differ materially from those expressed or implied by forward-looking statements, including (i) the risk that the conditions to the Closing, including required regulatory approvals, are not satisfied or waived on a timely basis or at all, and the risk that the Mergers may not be completed on the anticipated terms, in the anticipated timeframe or at all, (ii) the occurrence of any event that could give rise to the termination of the Merger Agreement, (iii) the risks and costs associated with the Mergers and integrating OnRad and achieving the anticipated benefits of the Mergers, (iv) potential disruption to the businesses of the Company and OnRad, including the ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners, as well as diversion of management’s time and attention from ordinary course business operations to completion of the Mergers and integration matters, (v) potential litigation or regulatory action relating to the Mergers, (vi) the effect of the Mergers on the Company’s indebtedness and leverage, credit ratings and liquidity, (vii) legislative, regulatory and economic developments, including in the healthcare industry, (viii) the effect of the announcement, pendency or completion of the Mergers on the market price of the RadNet Common Stock, and (ix) the other risks described under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. There may be additional risks, uncertainties and factors that we do not currently view as material or that are not necessarily known. Please read the Company’s filings with the SEC, which are available on the SEC’s website at https://www.sec.gov, for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. All forward-looking statements in this Current Report on Form 8-K are qualified in their entirety by these cautionary statements. Except as required by law, the Company undertakes no obligation and does not intend to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
No Offer or Solicitation
This communication is for informational purposes only and shall not constitute or form part of, an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities, in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: October 26, 2026 | RADNET, INC. | ||
| By: | /s/ Mark D. Stolper | ||
| Mark D. Stolper | |||
| Chief Financial Officer | |||
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
ONRAD, INC.,
RADNET MANAGEMENT, INC.,
RADNET, INC.,
RED ROVER MERGER SUB, LLC,
JAVELIN MERGER SUB, INC.,
and, with respect to Articles II, VIII and IX,
HOUSATONIC IV CF, L.P., solely in its capacity as Securityholder Representative
Dated as of October 26, 2026
Table of Contents
Page
| Article I The Mergers | |
| 1.1 The Mergers | 2 |
| 1.2 Closing | 2 |
| 1.3 Governing Documents of the First Surviving Corporation and the Second Surviving Company. | 3 |
| 1.4 Directors and Officers of the First Surviving Corporation and the Second Surviving Company. | 3 |
| Article II Purchase Price; Effect on Shares | |
| 2.1 Effect of the Mergers on Capital Stock | 4 |
| 2.2 Treatment of Company Options | 5 |
| 2.3 Treatment of Company Preferred Stock and Company Warrants | 6 |
| 2.4 Closing Deliverables | 6 |
| 2.5 Delivery of Estimated Closing Statement | 9 |
| 2.6 Purchase Price Adjustment | 10 |
| 2.7 Earn-Out Payment | 12 |
| 2.8 Exchange Agent and Exchange Procedures. | 15 |
| 2.9 Escrow Agent; Escrow Amounts. | 17 |
| 2.10 Withholding | 18 |
| i |
| Article III Representations and Warranties of the Company | |
| 3.1 Incorporation, Good Standing and Qualification | 18 |
| 3.2 Authority; Approval | 19 |
| 3.3 Capital Structure | 19 |
| 3.4 Subsidiaries; Managed Entities | 20 |
| 3.5 Governmental Filings; No Conflicts | 21 |
| 3.6 Company Financial Statements; Undisclosed Liabilities | 21 |
| 3.7 Absence of Certain Changes | 22 |
| 3.8 Litigation | 23 |
| 3.9 Employee Benefits | 23 |
| 3.10 Licenses; Compliance with Laws | 26 |
| 3.11 Regulatory Matters and Compliance with Healthcare Laws | 26 |
| 3.12 Environmental Matters | 29 |
| 3.13 Taxes | 29 |
| 3.14 Labor Matters | 32 |
| 3.15 Real Property | 34 |
| 3.16 Tangible Personal Property | 35 |
| 3.17 Intellectual Property; Information Technology; Data Privacy | 35 |
| 3.18 Contracts | 39 |
| 3.19 Significant Customers | 41 |
| 3.20 Affiliated Transactions | 41 |
| 3.21 Insurance | 42 |
| 3.22 Brokers and Finders | 42 |
| 3.23 Anti-Bribery and Anti-Corruption | 43 |
| 3.24 HSR Filing | 43 |
| 3.25 Securityholder Investment Matters | 43 |
| 3.26 No Other Representations and Warranties | 44 |
| Article IV Representations and Warranties of Purchaser, Parent and Merger Subs | |
| 4.1 Organization and Good Standing. | 44 |
| 4.2 Authority; Approval. | 45 |
| 4.3 Governmental Filings; No Conflicts | 45 |
| 4.4 SEC Documents | 45 |
| 4.5 Financial Statements | 46 |
| 4.6 Brokers and Finders | 46 |
| 4.7 Availability of Funds | 46 |
| 4.8 Securities Matters | 46 |
| 4.9 R&W Insurance Policy | 46 |
| 4.10 Issuance of Shares of Parent Common Stock | 47 |
| 4.11 HSR Filing | 47 |
| 4.12 Investigation; Non-Reliance | 47 |
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| Article V Covenants of the Parties | |
| 5.1 Interim Operations | 51 |
| 5.2 Cooperation and Efforts | 52 |
| 5.3 Regulatory Filings/Approvals | 53 |
| 5.4 Access | 54 |
| 5.5 Publicity | 55 |
| 5.6 Employee Matters | 56 |
| 5.7 Indemnification; Tail Insurance | 57 |
| 5.8 Expenses | 58 |
| 5.9 Further Assurances | 58 |
| 5.10 R&W Insurance Policy | 58 |
| 5.11 Obligations of Merger Subs | 58 |
| 5.12 Stockholder Consent | 58 |
| 5.13 Applicable Securities Law Exemptions; Shelf Registration; Prospectus Supplement | 59 |
| 5.14 Tax Matters. | 63 |
| 5.15 Exclusivity | 65 |
| 5.16 Notification of Certain Matters | 66 |
| 5.17 Section 280G. | 66 |
| 5.18 Specified Actions | 66 |
| 5.19 Medical Malpractice Insurance | 66 |
| Article VI Closing Conditions | |
| 6.1 Conditions to Each Party’s Obligation to Effect the Transactions | 67 |
| 6.2 Conditions to Obligations of Purchaser, Parent and Merger Subs | 67 |
| 6.3 Conditions to Obligations of the Company | 68 |
| 6.4 Frustration of Closing Conditions | 69 |
| iii |
| Article VII Termination | |
| 7.1 Termination by Mutual Consent | 69 |
| 7.2 Termination by Either Purchaser or the Company | 69 |
| 7.3 Termination by the Company | 70 |
| 7.4 Termination by Purchaser for Breach | 70 |
| 7.5 Termination by Purchaser for Failure to Deliver Required Stockholder Approval | 70 |
| 7.6 Effect of Termination and Abandonment | 70 |
| Article VIII Indemnification | |
| 8.1 Survival | 71 |
| 8.2 Indemnification by Securityholders | 72 |
| 8.3 Claim Procedures | 74 |
| 8.4 Losses and Recoveries | 76 |
| 8.5 Indemnification Payments | 77 |
| 8.6 Indemnity Escrow Account Release | 77 |
| 8.7 Minimizing and Mitigating Losses | 78 |
| 8.8 Exclusive Remedies | 78 |
| Article IX Securityholder Representative | |
| 9.1 Acknowledgement | 79 |
| 9.2 Securityholder Representative Expense Amount | 80 |
| iv |
| Article X Miscellaneous and General | |
| 10.1 Amendment; Waivers, Etc. | 80 |
| 10.2 Counterparts; Effectiveness | 80 |
| 10.3 GOVERNING LAW | 81 |
| 10.4 Consent to Jurisdiction; Waiver of Jury Trial | 81 |
| 10.5 Notices | 81 |
| 10.6 Entire Agreement; Confidentiality | 83 |
| 10.7 No Third Party Beneficiaries | 83 |
| 10.8 Definitions | 83 |
| 10.9 Severability | 83 |
| 10.10 Interpretation | 83 |
| 10.11 Assignment | 84 |
| 10.12 Release | 84 |
| 10.13 Specific Performance | 85 |
| 10.14 Waiver of Conflicts Regarding Representations; Non-Assertion of Attorney-Client Privilege | 85 |
| 10.15 No Recourse | 87 |
| 10.16 Guarantee | 87 |
ANNEXES
Annex ADefinitions
Annex BAccounting Principles and Illustrative Net Working Capital Example
Annex C-1Earn-Out Definitions and Principles
Annex C-2Earn-Out Period Operational Principles
Annex DSample Adjusted EBITDA Calculation
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EXHIBITS
Exhibit AForm of Restrictive Covenant Agreement
Exhibit BForm of Housatonic Restrictive Covenant Agreement
Exhibit CForm of FIRPTA Certificate
Exhibit DForm of Director Resignation Letter
Exhibit E-1Form of Letter of Transmittal
Exhibit E-2Form of Option Letter of Transmittal
Exhibit FForm of R&W Insurance Policy
Exhibit GForm of Escrow Agreement
Exhibit HForm of Exchange Agent Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of October 26, 2026, by and among OnRad, Inc., a corporation formed under the laws of Delaware (the “Company”), Radnet Management, Inc., a corporation formed under the laws of California and a direct wholly owned subsidiary of Parent (“Purchaser”), RadNet, Inc., a corporation formed under the laws of Delaware (“Parent”), Red Rover Merger Sub, LLC, a limited liability company formed under the laws of Delaware and a direct wholly owned subsidiary of Purchaser (“Surviving Merger Sub”), Javelin Merger Sub, Inc., a corporation formed under the laws of Delaware and a direct wholly owned subsidiary of Surviving Merger Sub (“First Merger Sub”, and together with Surviving Merger Sub, the “Merger Subs”), and with respect to Articles II, VIII and IX, Housatonic IV CF, L.P., a Delaware limited partnership, solely in its capacity as Securityholder Representative (the “Securityholder Representative”). All of the signatories to this Agreement are collectively referred to as the “Parties” and individually as a “Party.”
RECITALS
WHEREAS, the Parties intend that, on the terms and subject to the conditions set forth herein, (a) First Merger Sub shall merge with and into the Company (the “First Merger”) pursuant to the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), with the Company surviving the First Merger as a direct wholly owned subsidiary of Surviving Merger Sub, and (b) immediately following the First Merger, the Company shall merge with and into Surviving Merger Sub (the “Second Merger”, and together with the First Merger, the “Mergers”) pursuant to the provisions of the DGCL and the Limited Liability Company Act of the State of Delaware (the “DLLCA”), with Surviving Merger Sub surviving the Second Merger as a direct wholly owned subsidiary of Purchaser;
WHEREAS, in connection with the execution and delivery of this Agreement, the employee of the Company set forth on Schedule 1.1(a) of the Company Disclosure Letter (the “Key Employee”) has executed and delivered to Purchaser an employment agreement with the Company (the “Employment Agreement”);
WHEREAS, in connection with the execution and delivery of this Agreement, each stockholder of the Company set forth on Schedule 1.1(b) of the Company Disclosure Letter has executed and delivered to Purchaser a restrictive covenant agreement with the Company in the form attached hereto as Exhibit A;
WHEREAS, in connection with the execution and delivery of this Agreement, Housatonic IV CF, L.P., a Delaware limited partnership (“Housatonic”) has entered into a restrictive covenant agreement with the Company in the form attached hereto as Exhibit B (the restrictive covenant agreements referred to in this recital and the immediately preceding recital, collectively, the “Restrictive Covenant Agreements”);
WHEREAS, the board of directors of the Company (the “Company Board”) has (a) approved and declared advisable this Agreement and the Mergers and the other transactions contemplated by this Agreement (collectively, the “Transactions”), on the terms and subject to the conditions set forth in this Agreement, (b) determined that this Agreement and the Transactions, are fair to, and in the best interests of, the Company and the Stockholders and (c) resolved to recommend that the Stockholders approve the Transactions and adopt this Agreement;
WHEREAS, the board of directors of Purchaser and Parent have approved this Agreement and the Transactions, on the terms and subject to the conditions set forth in this Agreement and has caused each Merger Sub to approve the Transactions and adopt this Agreement;
WHEREAS, for U.S. federal income tax purposes, it is intended that, to the extent permitted under applicable Law, (a) the Mergers, taken together, shall constitute an “integrated plan” described in IRS Rev. Rul. 2001-46, 2001-2 C.B. 321, (b) the Mergers, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (c) this Agreement be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354, 361 and 368 of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”); and
WHEREAS, the Parties desire to make certain representations, warranties and agreements in connection with, and also to prescribe certain conditions to, the Transactions.
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NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
Article
I
The Mergers
1.1 The Mergers.
(a) On the terms and subject to the conditions set forth in this Agreement, (i) at the First Effective Time, First Merger Sub will be merged with and into the Company in accordance with the DGCL and the separate corporate existence of First Merger Sub shall thereupon cease, and the Company will be the surviving corporation in the First Merger (the “First Surviving Corporation”), and (ii) immediately following the First Merger, at the Second Effective Time, the First Surviving Corporation will be merged with and into Surviving Merger Sub in accordance with the DGCL and the separate corporate existence of the First Surviving Corporation shall thereupon cease, and Surviving Merger Sub will be the surviving company in the Second Merger (the “Second Surviving Company”).
(b) On the Closing Date, (i) the Company shall cause a certificate of merger relating to the First Merger (the “First Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and the DLLCA and (ii) immediately following the filing of the First Certificate of Merger, Surviving Merger Sub shall cause a certificate of merger relating to the Second Merger (the “Second Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and the DLLCA. The First Merger will become effective at the time when the First Certificate of Merger has been duly filed with and accepted by the Secretary of State of the State of Delaware (such date and time, the “First Effective Time”), and the Second Merger will become effective at the time when the Second Certificate of Merger has been duly filed with and accepted by the Secretary of State of the State of Delaware (such date and time, the “Second Effective Time”).
1.2 Closing. The closing of the Mergers (the “Closing”) will take place at the offices of Sullivan & Cromwell LLP, 1888 Century Park East, 21st Floor, Los Angeles, California 90067, at 9:00 a.m. local time on the third Business Day following the day on which the last to be satisfied or waived of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied or waived at the Closing (so long as such conditions are reasonably capable of being satisfied), but subject to the satisfaction or waiver of those conditions) will be satisfied or waived in accordance with this Agreement or at such other date, time or place (or by means of remote communication) as the Company and Purchaser may mutually agree in writing (the date on which the Closing actually occurs, the “Closing Date”).
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1.3 Governing Documents of the First Surviving Corporation and the Second Surviving Company.
(a) At the First Effective Time: (i) the certificate of incorporation of First Merger Sub as in effect immediately prior to the First Effective Time (amended so that the name of the First Surviving Corporation shall be such name as determined by the Purchaser in its sole discretion prior to the Closing) shall be the certificate of incorporation of the First Surviving Corporation until thereafter amended in accordance with the DGCL and such certificate of incorporation; and (ii) the bylaws of First Merger Sub as in effect immediately prior to the First Effective Time (amended so that the name of the First Surviving Corporation shall be such name as determined by the Purchaser in its sole discretion prior to the Closing) shall be the bylaws of the First Surviving Corporation until thereafter amended in accordance with the DGCL and such bylaws.
(b) At the Second Effective Time: (i) the certificate of formation of Surviving Merger Sub as in effect immediately prior to the Second Effective Time (amended so that the name of the Second Surviving Company shall be such name as determined by the Purchaser in its sole discretion prior to the Closing), shall be the certificate of formation of the Second Surviving Company until thereafter amended in accordance with DLLCA and such certificate of formation; and (ii) the limited liability company agreement of Surviving Merger Sub as in effect immediately prior to the Second Effective Time (amended so that the name of the Second Surviving Company shall be such name as determined by the Purchaser in its sole discretion prior to the Closing) shall be the limited liability company agreement of the Second Surviving Company.
1.4 Directors and Officers of the First Surviving Corporation and the Second Surviving Company.
(a) (i) The directors of the Company as of immediately prior to the First Effective Time shall be the initial directors of the First Surviving Corporation as of the First Effective Time and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal and (ii) the officers of the Company as of immediately prior to the First Effective Time shall be the initial officers of the First Surviving Corporation as of the First Effective Time and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
(b) (i) The directors of the First Surviving Corporation as of immediately prior to the Second Effective Time shall be the initial managers of the Second Surviving Company as of the Second Effective Time and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal and (ii) the officers of the First Surviving Corporation as of immediately prior to the Second Effective Time shall be the initial officers of the Second Surviving Company as of the Second Effective Time and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.
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Article
II
Purchase Price; Effect on Shares
2.1 Effect of the Mergers on Capital Stock.
(a) First Merger. At the First Effective Time, as a result of the First Merger and without any action on the part of any Party or any holder of securities of any Party:
(i) First Merger Sub. Each share of common stock, par value $0.001 per share, of First Merger Sub issued and outstanding immediately prior to the First Effective Time shall be converted into one share of common stock, par value $0.0001 per share, of the First Surviving Corporation.
(ii) Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the First Effective Time (including, for the avoidance of doubt, any then outstanding shares of Company Common Stock into which Company Warrants and Company Preferred Stock have converted in accordance with Section 2.3 hereof, but in all cases excluding Dissenting Shares) shall be converted into the right to receive, in each case subject to applicable withholding Taxes, (A) a number of shares of Parent Common Stock equal to the Exchange Ratio (the “Per Share Stock Consideration”), (B) a cash amount equal to the sum of the applicable Per Share Cash Consideration and the Per Share Adjustment Payment (if and to the extent any Per Share Adjustment Payment is due and payable pursuant to the terms hereof) and (C) the Per Share Earn-Out Amount (if and to the extent any Per Share Earn-Out Amount is due and payable pursuant to the terms hereof) (the amounts in the foregoing clauses (A) through (C), collectively, the “Per Share Merger Consideration”), and shall thereupon cease to be outstanding, shall be cancelled and shall cease to exist. Each such share of Company Common Stock formerly represented by a certificate or that is non-certificated in the form of a book-entry share (in each case, other than Dissenting Shares) shall thereafter represent only the right to receive the Per Share Merger Consideration.
(iii) Cancellation of Dissenting Shares; Appraisal Rights. Notwithstanding any provisions of this Agreement to the contrary, any Dissenting Shares shall not be converted into the right to receive any portion of the applicable consideration payable or receivable pursuant to Section 2.1(a)(ii) but shall, by virtue of the First Merger, cease to be outstanding and shall automatically be cancelled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the right to receive the fair value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL. For the avoidance of doubt, if, after the First Effective Time, any such holder of Dissenting Shares fails to perfect or effectively withdraws or loses such right, such Dissenting Shares will thereupon be treated as if they had been converted into, at the First Effective Time, the right to receive the Per Share Merger Consideration, without interest, and the Second Surviving Company shall remain liable for payment of the Per Share Merger Consideration for such shares. The Company shall provide to Purchaser prompt notice of any demands for appraisal or purchase received by the Company, withdrawals of such demands and any other instruments related to such demands served pursuant to Section 262 of the DGCL and received by the Company. The Company shall not, except with the prior written consent of Purchaser, or as otherwise required under Section 262 of the DGCL, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares.
(b) Second Merger. At the Second Effective Time, as a result of the Second Merger and without any action on the part of any Party or any holder of securities of any Party, (i) each limited liability company interest of Surviving Merger Sub issued and outstanding immediately prior to the Second Effective Time shall remain outstanding, all of which limited liability company interests shall be held by Purchaser and which shall not be affected by the Second Merger and (ii) each share of common stock, par value $0.0001 per share, of the First Surviving Corporation issued and outstanding immediately prior to the Second Effective Time shall be cancelled and shall cease to exist, and no consideration shall be paid with respect thereto, such that, immediately following the Second Merger, the Second Surviving Company shall be a direct wholly owned subsidiary of Purchaser.
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2.2 Treatment of Company Options.
(a) Treatment of Vested Company Options. As of the First Effective Time, each Company Option (or portion thereof) that (i) is outstanding as of immediately prior to the First Effective Time, (ii) is vested as of the First Effective Time (including any Company Option the vesting of which automatically accelerates solely as a result of the First Effective Time) and (iii) is not an Out-of-the-Money Company Option (each, a “Vested Company Option”) shall, automatically and without any required action on the part of the Optionholder, be cancelled and shall only entitle such Optionholder to receive (without interest), with respect to each share of Company Common Stock subject to such Vested Company Option immediately prior to the First Effective Time (A) an amount in cash equal to the Per Share Cash Consideration, less the exercise price per share of such Vested Company Option immediately prior to the First Effective Time (the “Closing Option Payment Amount”), (B) the Per Share Stock Consideration, (C) an amount in cash equal to the Per Share Adjustment Payment (if and to the extent any Per Share Adjustment Payment is due and payable pursuant to the terms hereof), and (D) the Per Share Earn-Out Amount (if and to the extent any Per Share Earn-Out Amount is due and payable pursuant to the terms hereof), subject, in each case, to the requirements and contingencies set forth in this Agreement and applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes (which, for purposes of any such Taxes in respect of the Per Share Stock Consideration and the portion of the Securityholder Representative Expense Amount allocable to a Vested Company Option, shall be satisfied by first withholding an amount in cash equal to such Taxes from the Closing Option Payment Amount and then, to the extent not otherwise satisfied from other sources and to the extent required in order to satisfy the full amount of such Taxes, withholding a number of shares of Parent Common Stock (rounded up to the nearest whole number of shares) having a value based on the Parent Stock Price equal to the remaining amount of such Taxes).
(b) Treatment of Unvested Company Options and Out-of-the-Money Company Options. As of the First Effective Time, each Company Option (or portion thereof) that is not a Vested Company Option shall, automatically and without any required action on the part of the holder, be cancelled without consideration in exchange therefor.
(c) Board Resolutions and Other Actions. Prior to the First Effective Time, the Company Board shall take, or cause to be taken, all necessary action under the Company Stock Plan, and shall obtain all such necessary consents, to (i) provide for and give effect to the treatment of Company Options contemplated by Section 2.2, and (ii) terminate the Company Stock Plan, effective as of the First Effective Time. Prior to the First Effective Time, the Company shall provide notice (in a form reasonably satisfactory to Purchaser) to each holder of Company Options outstanding as of immediately prior to the First Effective Time of the treatment of Company Options contemplated by Section 2.2.
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2.3 Treatment of Company Preferred Stock and Company Warrants.
(a) Treatment of Company Preferred Stock. All shares of Company Preferred Stock outstanding as of the Closing Date that are not otherwise converted pursuant to their terms prior to the First Effective Time, shall, as of immediately prior to the First Effective Time, convert into shares of Company Common Stock upon the terms and conditions otherwise set forth in the Company Charter.
(b) Treatment of Company Warrants. Pursuant to the terms of the Company Warrants, as a result of the First Merger and without any action on the part of any Party or any other Person, all Company Warrants outstanding as of the Closing Date that are not otherwise converted pursuant to their terms prior to the Closing Date, shall, as of immediately prior to the Closing, automatically convert into shares of Company Common Stock upon the terms and conditions set forth in the Company Warrants.
2.4 Closing Deliverables.
(a) By the Company. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (or at such later time as is specified below in the case of clause (iv)), the Company shall deliver or cause to be delivered:
(i) to Purchaser a certificate, signed by a duly authorized officer of the Company, as contemplated by Section 6.2(c);
(ii) to Purchaser, the Escrow Agent and the Securityholder Representative a counterpart to the Escrow Agreement, duly executed by the Company and the Securityholder Representative;
(iii) to Purchaser, the Exchange Agent and the Securityholder Representative a counterpart to the Exchange Agent Agreement, duly executed by the Company and the Securityholder Representative;
(iv) as soon as administratively practicable after the Closing (but in no event later than fifteen (15) days following the Closing, other than in the case of an Employee Optionholder who delivers a properly completed and duly executed Letter of Transmittal in accordance with Section 2.8(b) following the Closing, in which case the deadline shall be no later than thirty (30) days following delivery of such Letter of Transmittal) and subject to Purchaser’s compliance with its obligations pursuant to Section 2.4(b)(ii), (x) to each Employee Optionholder, an amount in cash equal to the Closing Option Payment Amount payable to such Employee Optionholder in respect of such holder’s Vested Company Options in accordance with Section 2.2(a), and (y) to the applicable Governmental Entities, an amount in cash equal to the employee portion of amounts required to be withheld in accordance with Section 2.2(a) and the employer portion of any payroll, employment, FICA, unemployment, or similar Taxes imposed in connection with the Closing Option Payment Amount and the Per Share Stock Consideration payable in respect of Vested Company Options in accordance with Section 2.2(a) and the portion of the Securityholder Representative Expense Amount allocable to such holder’s Vested Company Options, in each case to be paid through the Company’s ordinary payroll process;
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(v) to Purchaser, an invoice from each third-party payee of any Transaction Cost required or contemplated to be repaid at the Closing, which sets forth the amounts required to pay in full all Transaction Costs owed to such payee on the Closing Date, together with an IRS Form W-9 or the appropriate version of an IRS Form W-8 properly completed and duly executed by such payee, and wire transfer instructions for the payment of such Transaction Cost to such payee;
(vi) to Purchaser, a duly authorized and executed certificate from each of the Company and Managed Entities, in each case, in substantially the form attached hereto as Exhibit C and dated as of the Closing Date, certifying that no interest in such Person is a “United States real property interest” within the meaning of Section 897(c)(1) of the Code, which certificate shall satisfy the requirements of Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c)(3);
(vii) to Purchaser, duly executed Payoff Letters with respect to all outstanding amounts due in respect of the Indebtedness set forth in Schedule 2.4(a)(vii) (collectively, the “Payoff Indebtedness”), together with an IRS Form W-9 or the appropriate version of an IRS Form W-8 properly completed and duly executed by each holder (or payee) of each Payoff Indebtedness;
(viii) to Purchaser, a certificate of good standing (or equivalent certificates) of the Company, its Subsidiaries and the Managed Entities, issued not earlier than five (5) days prior to the Closing Date, by the applicable Governmental Entity of each respective jurisdiction in which the Company is organized or qualified to do business; and
(ix) to Purchaser, resignation letters, in form attached hereto as Exhibit D, effective as of (but contingent upon) the consummation of the Closing, of directors and officers of the Company, its Subsidiaries and the Managed Entities (other than the Key Employee) as set forth in Schedule 2.4(a)(ix).
(b) By Purchaser and Parent. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser and Parent, as applicable, shall deliver or cause to be delivered:
(i) to the Exchange Agent, in trust and for the benefit of, and further payment to, each holder of Company Common Stock (including, for the avoidance of doubt, any holders of Company Common Stock into which Company Warrants and Company Preferred Stock have converted in accordance with Section 2.3 hereof), the aggregate amount payable to the holders of Company Common Stock in respect of the Per Share Cash Consideration, by wire transfer of immediately available funds to an account or accounts specified by the Exchange Agent, pursuant to instructions given to Purchaser by the Company prior to the Closing;
(ii) to the Second Surviving Company, the aggregate cash amount payable to Employee Optionholders and applicable Governmental Entities pursuant to Section 2.4(a)(iv), by wire transfer of immediately available funds, to the Second Surviving Company’s payroll account (or such other payroll-related account designated by the Company prior to the Closing, if applicable), pursuant to instructions given to Purchaser by the Company prior to the Closing;
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(iii) to the Exchange Agent for the benefit of, and further payment to, each Non-Employee Optionholder, a cash amount equal to the aggregate applicable Closing Option Payment Amounts payable to the Non-Employee Optionholders in respect of their Vested Company Options in accordance with Section 2.2(a), by wire transfer of immediately available funds, to an account or accounts specified by the Exchange Agent, pursuant to instructions given to Purchaser by the Company prior to the Closing;
(iv) to the Escrow Agent, the Adjustment Escrow Amount, by wire transfer of immediately available funds, to the Adjustment Escrow Account and the Indemnity Escrow Amount, by wire transfer of immediately available funds, to the Indemnity Escrow Account, in each case, pursuant to instructions given to Purchaser by the Company prior to the Closing, which amounts shall be held, safeguarded and released pursuant to the terms of the Escrow Agreement;
(v) to the Securityholder Representative, an amount equal to $500,000 (the “Securityholder Representative Expense Amount”), by wire transfer of immediately available funds, to an account specified by the Securityholder Representative, pursuant to instructions given to Purchaser by the Company prior to the Closing;
(vi) to the applicable lenders identified in the Payoff Letters, all outstanding amounts due in respect of the Payoff Indebtedness, by wire transfer of immediately available funds, pursuant to instructions given to Purchaser by the Company in the Payoff Letters;
(vii) to the applicable third party recipients, all outstanding amounts due to third party recipients of Transaction Costs, pursuant to instructions given to Purchaser by the Company prior to the Closing;
(viii) to the Company, the Escrow Agent and the Securityholder Representative a counterpart to the Escrow Agreement, duly executed by Purchaser;
(ix) to the Company, the Exchange Agent and the Securityholder Representative a counterpart to the Exchange Agent Agreement, duly executed by Purchaser and Parent;
(x) to the Company a certificate, signed by duly authorized officers of Purchaser, Parent and Merger Subs, as contemplated by Section 6.3(c); and
(xi) to Parent’s transfer agent, an instruction letter to issue at the Closing in book-entry form and without any restrictive legend, to the Exchange Agent, for the benefit of the holders of Company Common Stock and Vested Company Options, all of the shares of Parent Common Stock constituting the aggregate Per Share Stock Consideration payable at the Closing pursuant to this Agreement, which shares shall be held by the Exchange Agent as part of the Exchange Fund and which shares Purchaser shall cause the Exchange Agent to deliver to each such holder in accordance with Section 2.8(b) as promptly as practicable (but in no event later than (x) three (3) Business Days following the later of the filing of the Closing Prospectus Supplement and the proper delivery of a fully executed Letter of Transmittal in accordance with Section 2.8(b), or (y) in the case of holders that deliver Letters of Transmittal within three (3) months following the Closing, seven (7) Business Days following the later of the filing of the Closing Prospectus Supplement and the proper delivery of a fully executed Letter of Transmittal in accordance with Section 2.8(b), or (z) otherwise in accordance with Section 5.13(h)(ii) (subject to the proper delivery of a fully executed Letter of Transmittal in accordance with Section 2.8(b))).
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(c) By Securityholder Representative. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Securityholder Representative shall deliver or cause to be delivered:
(i) to Purchaser, the Company and the Escrow Agent a counterpart to the Escrow Agreement, duly executed by the Securityholder Representative; and
(ii) to Purchaser, the Company and the Exchange Agent, a counterpart to the Exchange Agent Agreement, duly executed by the Securityholder Representative.
2.5 Delivery of Estimated Closing Statement.
(a) Four (4) Business Days prior to the Closing, the Company shall deliver to Purchaser:
(i) a statement (the “Estimated Closing Statement”) containing its estimate of the amount of (i) the Net Working Capital as of 12:01 A.M., New York City time, on the Closing Date (such time, the “Measurement Time” and such amount, the “Estimated Closing Net Working Capital”), (ii) Cash as of the Measurement Time (the “Estimated Closing Cash”), (iii) Indebtedness as of immediately prior to the Closing (the “Estimated Closing Indebtedness”, provided that, for the avoidance of doubt, for this purpose, (A) the amount of Pre-Closing Taxes shall be computed as of the end of the day on the Closing Date, and (B) any Taxes payable in connection with any compensatory items or similar amounts included in the definition of Indebtedness shall be treated as payable and outstanding as of immediately prior to the Closing) and (iv) Transaction Costs as of the Measurement Time (the “Estimated Transaction Costs”), as well as the Closing Cash Consideration resulting therefrom, in each case, including reasonably detailed calculations and supporting information of the components thereof and in a manner consistent with the definitions and other applicable provisions hereof; and
(ii) a schedule (the “Payment Schedule”) setting forth: (i) the aggregate cash consideration payable to Securityholders pursuant to Section 2.4 at the Closing; (ii) the aggregate number of shares of Parent Common Stock payable to Securityholders pursuant to Section 2.4 at the Closing; (iii) the portion of the cash consideration that is payable to each Securityholder pursuant to Section 2.4 at the Closing; (iv) the number of shares of Parent Common Stock payable to each Securityholder pursuant to Section 2.4 at the Closing (before reduction in the number of shares of Parent Common Stock for Taxes as contemplated by Section 2.2); (v) with respect to each Securityholder, whether any payment or issuance of the Per Share Cash Consideration, the Per Share Stock Consideration, the Per Share Adjustment Payment, the Per Share Earn-Out Amount or any other consideration that is required to be paid or issued pursuant to any Transaction Document to such Securityholder will be subject to any applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes and whether the portion of such consideration that is payable in cash to such Securityholder will be paid by the Exchange Agent or through the Second Surviving Company’s payroll (or other appropriate payroll-related account, if applicable), and (vi) an illustration of the allocation of the Adjustment Escrow Amount, the Indemnity Escrow Amount and the Securityholder Representative Expense Amount to each Securityholder assuming that the Post-Closing Adjustment is finally determined to be equal to zero, no payments are made out of the Indemnity Escrow Account to any Purchaser Indemnified Party, and no expenses are incurred by the Securityholder Representative, in each case, including reasonably detailed calculations and supporting information of the components thereof and in a manner consistent with the definitions and other applicable provisions hereof.
(b) The Company shall provide Purchaser and its representatives reasonable access to information that Purchaser reasonably requests relating to the Closing Cash Consideration and the Company’s presentation thereof. Purchaser shall be entitled to comment on the Closing Cash Consideration, and the Company shall consider in good faith any changes Purchaser proposes to the Closing Cash Consideration to ensure compliance with the applicable terms of and definitions set forth in this Agreement. Notwithstanding the foregoing, the Company shall have final authority with respect to the preparation and delivery of the Estimated Closing Statement and the Payment Schedule, and no disagreement between Purchaser and the Company regarding any amount or calculation set forth therein shall delay or otherwise affect the Closing or Purchaser’s obligations at the Closing.
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2.6 Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than ninety (90) days following the Closing Date, Purchaser shall deliver to the Securityholder Representative a statement (the “Purchase Price Adjustment Statement”) containing, in reasonable detail, the amount of Net Working Capital as of the Measurement Time (“Closing Net Working Capital”), the amount of Cash as of the Measurement Time (“Closing Cash”), the amount of Indebtedness immediately prior to the Closing (“Closing Indebtedness”, provided that, for the avoidance of doubt, for this purpose, (a) the amount of Pre-Closing Taxes shall be computed as of the end of the day on the Closing Date, and (b) any Taxes payable in connection with any compensatory items or similar amounts included in the definition of Indebtedness shall be treated as payable and outstanding as of immediately prior to the Closing) and the amount of Transaction Costs as of the Measurement Time (“Closing Transaction Costs”), as well as the Closing Cash Consideration resulting therefrom, in each case, including reasonably detailed calculations and supporting information of the components thereof and in a manner consistent with the definitions and other applicable provisions hereof. The Purchase Price Adjustment Statement shall be prepared in accordance with the definitions and other applicable provisions hereof. The Estimated Closing Statement and the Purchase Price Adjustment Statement shall disregard any financing or refinancing arrangements entered into at any time by Purchaser or its Affiliates in connection with the consummation of the transactions contemplated hereby.
(b) After receipt from Purchaser of the Purchase Price Adjustment Statement and for the forty-five (45) day period thereafter (the “Objection Period”), the Securityholder Representative and his authorized representatives shall have the right to have reasonable access during normal business hours to those employees, accountants and other personnel of Purchaser and the Second Surviving Company who prepared the Purchase Price Adjustment Statement to discuss Purchaser’s calculation of Closing Net Working Capital, Closing Cash, Closing Indebtedness and Closing Transaction Costs set forth in the Purchase Price Adjustment Statement and to inspect the books and records and workpapers (including those prepared by advisors and other third parties, subject to the execution of any confidentiality agreement or similar agreement required by such advisors or third parties) that are reasonably related to the preparation or assessment of the Purchase Price Adjustment Statement. If the Securityholder Representative fails to challenge Purchaser’s determination of Closing Net Working Capital, Closing Cash, Closing Indebtedness or Closing Transaction Costs by the delivery of a written notice to Purchaser (the “Objection Notice”) within the Objection Period, the calculations included in the Purchase Price Adjustment Statement shall be final, conclusive and binding for all purposes of this Agreement.
(c) If the Securityholder Representative delivers an Objection Notice to Purchaser upon or prior to the end of the Objection Period, then Purchaser and the Securityholder Representative shall attempt to resolve such dispute within thirty (30) days from the date of delivery of the Objection Notice. Any items and amounts not specifically objected to by the Securityholder Representative within the Objection Notice will be final and binding. If Purchaser and the Securityholder Representative cannot reach agreement within such thirty (30)-day period (or such longer period as they may mutually agree in writing), then either Purchaser or the Securityholder Representative shall have the unilateral right to request that the resolution of all unresolved items from the Objection Notice (the “Disputed Items”) be referred to the Accounting Arbitrator on behalf of both Purchaser and the Securityholder Representative to resolve any remaining disagreements. For purposes of this Section, the “Accounting Arbitrator” means RSM US LLP or such other independent accounting firm of recognized national standing in the United States as may be mutually agreed upon by Purchaser and the Securityholder Representative in writing, in each case on terms that are agreeable to both Purchaser and the Securityholder Representative. If for any reason RSM US LLP shall not be able to act as the Accounting Arbitrator and Purchaser and the Securityholder Representative cannot mutually agree on another independent accounting firm of recognized national standing in the United States to serve in such capacity, then the Securityholder Representative shall deliver to Purchaser a list of three independent accounting firms of recognized national standing in the United States (other than RSM US LLP) and Purchaser shall select one of such three accounting firms to act as the Accounting Arbitrator.
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(d) Each of the Securityholder Representative and Purchaser shall, promptly (but in any event within ten (10) Business Days) following the formal engagement of the Accounting Arbitrator, provide the Accounting Arbitrator with a written presentation setting forth its respective calculations of and assertions regarding the Disputed Items, which presentation cannot assert any amounts, estimates or values for such Disputed Items that are greater than the greatest value for such item claimed by the Securityholder Representative (in the Objection Notice) or Purchaser (in the Purchase Price Adjustment Statement) or less than the smallest value claimed by either such party. Each of the Securityholder Representative and Purchaser will, and will cause their accountants to, cooperate with and assist the Accounting Arbitrator in its calculations of the Disputed Items (and no other items) and in the review of any such calculations by the Accounting Arbitrator. The Accounting Arbitrator shall be instructed to, as soon as reasonably possible (but in any event within thirty (30) days following its engagement), deliver to Purchaser and the Securityholder Representative a written report setting forth its determination with respect to the Disputed Items (such report, the “Final Adjustment Report”). Each of Purchaser and the Securityholder Representative shall cooperate with and timely respond to any requests for information from such Accounting Arbitrator. The determination of the Accounting Arbitrator shall be conclusive, binding and non-appealable by the Parties. The Parties agree that the failure of the Accounting Arbitrator to strictly conform to any deadline or time period in this Agreement shall not render the determination of the Accounting Arbitrator invalid and shall not be a basis for seeking to overturn any determination rendered by the Accounting Arbitrator. The Accounting Arbitrator shall be functioning as an expert and not as an arbitrator, shall not conduct an independent investigation and shall base its determination solely on (i) the written submissions of the parties delivered pursuant to and in accordance with this Section 2.6(d), (ii) the definitions of Cash, Indebtedness, Net Working Capital and Transaction Costs set forth in this Agreement, as well as the Accounting Principles and (iii) the Disputed Items (as determined by the initial submissions actually delivered to the Accounting Arbitrator pursuant to this Section 2.6(d)). Additionally, the Accounting Arbitrator may not assign a value to any Disputed Item that is greater than the greatest value for such item claimed by the Securityholder Representative (in the Objection Notice) or Purchaser (in the Purchase Price Adjustment Statement) or less than the smallest value claimed by either such party. The costs of the Accounting Arbitrator shall be paid by the Securityholder Representative, on the one hand, and the Purchaser, on the other hand, in inverse proportion as they may prevail on the Disputed Items in the Post-Closing Adjustment determined by the Accounting Arbitrator, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by the Accounting Arbitrator in the Final Adjustment Report.
(e) Within four (4) Business Days after Final Net Working Capital, Final Closing Cash, Final Closing Indebtedness and Final Transaction Costs are agreed to or any remaining Disputed Items are ultimately resolved pursuant to Sections 2.6(b), 2.6(c) and 2.6(d):
(i) if the Post-Closing Adjustment is a positive number, then Purchaser shall pay to the Exchange Agent (for the benefit of the Securityholders) an amount equal to the Post-Closing Adjustment by wire transfer in immediately available funds to an account or accounts specified by the Securityholder Representative and the Securityholder Representative and Purchaser shall submit a joint written instruction directing the Escrow Agent to release from the Adjustment Escrow Account the Adjustment Escrow Amount to the Exchange Agent to be paid to each Securityholder in accordance with their Per Share Adjustment Payment; provided that any payments to Employee Optionholders shall be made to the Second Surviving Company’s payroll account (or such other applicable payroll-related account designated by Purchaser, if applicable) for the benefit of, and further payment to, the Employee Optionholders on the next applicable regularly scheduled payroll date that is at least five (5) Business Days following the date of such payment, subject to applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes;
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(ii) if the Post-Closing Adjustment is a negative number, the Securityholder Representative and Purchaser shall submit a joint written instruction directing the Escrow Agent to distribute to Purchaser an amount equal to the absolute value of the Post-Closing Adjustment from the Adjustment Escrow Account by wire transfer in immediately available funds to an account specified by Purchaser and if the absolute value of the Post-Closing Adjustment exceeds the then available funds in the Adjustment Escrow Account, the Securityholders shall, prior to the date on which the Post-Closing Adjustment payment is due, deposit additional funds in the amount of such deficiency (on a several but not joint basis based on such Securityholder’s Pro Rata Share) in the Adjustment Escrow Account and the Securityholder Representative and Purchaser shall submit a joint written instruction directing the Escrow Agent to distribute to Purchaser such additional amount from the Adjustment Escrow Account by wire transfer in immediately available funds to an account specified by Purchaser; provided, that to the extent the Securityholders fail to fund any such deficiency in full, Purchaser shall be entitled, at its election and without limiting any other remedy available to it, to set off the unfunded amount of such deficiency against the Earn-Out Amount, Indemnity Escrow Amount or any other amounts otherwise payable to the Securityholders under this Agreement. If such absolute value of the Post-Closing Adjustment is less than the Adjustment Escrow Amount, Securityholder Representative and Purchaser shall submit a joint written instruction directing the Escrow Agent to release any remaining amounts in the Adjustment Escrow Account (following any distribution to Purchaser) to the Exchange Agent to be paid to each Securityholder in accordance with their Per Share Adjustment Payment; provided that any payments to Employee Optionholders shall be made to the Second Surviving Company’s payroll account (or such other applicable payroll-related account designated by Purchaser, if applicable) for the benefit of, and further payment to, the Employee Optionholders on the next applicable regularly scheduled payroll date that is at least five (5) Business Days following the date of such payment, subject to applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes; and
(iii) if the Post-Closing Adjustment is zero, the Securityholder Representative and Purchaser shall submit a joint written instruction directing the Escrow Agent to release all amounts in the Adjustment Escrow Account to the Exchange Agent to be paid to each Securityholder in accordance with their Per Share Adjustment Payment; provided that any payments to Employee Optionholders shall be made to the Second Surviving Company’s payroll account (or such other applicable payroll-related account designated by Purchaser, if applicable) for the benefit of, and further payment to, the Employee Optionholders on the next applicable regularly scheduled payroll date that is at least five (5) Business Days following the date of such payment, subject to applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes.
(f) The terms “Final Net Working Capital”, “Final Closing Cash”, “Final Closing Indebtedness” and “Final Transaction Costs” shall mean the definitive Closing Net Working Capital, Closing Cash, Closing Indebtedness and Closing Transaction Costs, respectively, agreed to by Purchaser and the Securityholder Representative or the definitive Closing Net Working Capital, Closing Cash, Closing Indebtedness and Closing Transaction Costs, respectively, resulting from the determinations made by the Accounting Arbitrator.
2.7 Earn-Out Payment.
(a) Earn-Out Payment. As additional consideration for the Transactions, Purchaser shall pay or cause to be paid the amount calculated in accordance with Section 2.7(b) (the “Earn-Out Amount”), for distribution to each Securityholder an amount equal to their applicable Per Share Earn-Out Amount, as determined in accordance with this Section 2.7 and subject to applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes. Purchaser may pay (or cause to be paid) the Earn-Out Amount in cash, shares of Parent Common Stock, or any combination of the foregoing, as determined by Purchaser in its sole discretion (for the avoidance of doubt, subject to Section 5.14(d)(ii)). For purposes of calculating the number of shares of Parent Common Stock payable as part of the Earn-Out Amount (including for purposes of calculating the aggregate dollar value of the Earn-Out Amount payable by Purchaser pursuant to this Agreement), each such share shall be deemed to have a value equal to the Parent VWAP, subject to adjustment in accordance with Section 2.8(c) with respect to any reclassification, stock split (including a reverse stock split), recapitalization, split-up, combination, exchange of shares, readjustment, or other similar transaction taking place between the expiration of the Earn-Out Period and the applicable payment date, or any stock dividend thereon that is declared with a record date within said period. In the event the Per Share Earn-Out Amount is paid in a combination of cash and shares of Parent Common Stock, any applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes in respect of the Parent Common Stock allocable to a Vested Company Option, shall be satisfied by first withholding an amount in cash equal to such Taxes from the cash portion of the Per Share Earn-Out Amount and then, to the extent not otherwise satisfied from other sources and to the extent required in order to satisfy the full amount of such Taxes, withholding a number of shares of Parent Common Stock (rounded up to the nearest whole number of shares) having a value (as determined using the Earn-Out Payment Date VWAP) equal to the remaining amount of such Taxes.
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(b) Determination of Earn-Out Amount. The Earn-Out Amount shall equal the product of (i) fifteen (15) multiplied by (ii) the lesser of (A) the amount (if any) by which the Post-Closing Annual Adjusted EBITDA exceeds $56,000,000 and (B) $14,000,000. The Post-Closing Annual Adjusted EBITDA and the Earn-Out Amount shall be calculated in accordance with the definitions, adjustment and calculation principles attached hereto as Annex C-1 (the “Earn-Out Definitions and Principles”) and the sample Adjusted EBITDA calculation (based on Adjusted EBITDA for the year ended December 31, 2025) set forth in Annex D hereto (the “Sample Adjusted EBITDA Calculation”). For the avoidance of doubt, if the Post-Closing Annual Adjusted EBITDA is less than $56,000,000, the Earn-Out Amount shall be zero.
(c) Earn-Out Statement. Within ninety (90) calendar days following the end of the Earn-Out Period, Purchaser shall prepare and deliver to the Securityholder Representative a statement (the “Earn-Out Statement”) setting forth in writing Purchaser’s good faith calculation of (i) the Post-Closing Annual Adjusted EBITDA and (ii) the Earn-Out Amount (if any) resulting therefrom, prepared in accordance with the Earn-Out Definitions and Principles. If Purchaser’s calculation of the Earn-Out Amount as set forth in the Earn-Out Statement exceeds zero, Purchaser shall, as promptly as practicable (and in any event within thirty (30) calendar days of delivery of the Earn-Out Statement), pay, or cause to be paid, subject to any claim for set off rights against the Earn-Out Amount pursuant to this Agreement, the cash and stock amounts comprising such amount in accordance with Section 2.7(f).
(d) Resolution of Earn-Out Dispute.
(i) After receipt from Purchaser of the Earn-Out Statement, the Securityholder Representative and its authorized representatives shall have the right to have reasonable access upon reasonable notice during normal business hours to the relevant personnel and accountants of Purchaser and the Second Surviving Company to review and discuss Purchaser’s calculation of the Earn-Out Amount set forth in the Earn-Out Statement and to inspect the books, records, workpapers, and supporting documentation (including those prepared by advisors or third parties, subject to the execution of any confidentiality agreement or similar agreement required by such advisors or third parties) that are reasonably related to the preparation or assessment of the Earn-Out Statement. If the Securityholder Representative fails to challenge Purchaser’s determination of the Earn-Out Amount by delivering a written notice to Purchaser (the “Earn-Out Objection Notice”) within thirty (30) days after receipt by the Securityholder Representative of the Earn-Out Statement (the “Earn-Out Objection Period”), the calculations included in the Earn-Out Statement with respect to the Earn-Out Amount shall be final, conclusive, and binding for all purposes of this Agreement. The Earn-Out Objection Notice shall include the amount in dispute and the basis for the dispute for each objection, together with reasonably necessary supporting documentation. The Securityholder Representative shall provide Purchaser and its representatives reasonable access to the personnel and accountants who prepared the Earn-Out Objection Notice as well as any books, records, workpapers, and supporting documentation that are reasonably related to the preparation or assessment of the Earn-Out Objection Notice (subject to the execution of any confidentiality agreement or similar agreement required by advisors or third parties).
(ii) If the Securityholder Representative delivers an Earn-Out Objection Notice to Purchaser upon or prior to the end of the Earn-Out Objection Period, then Purchaser and the Securityholder Representative shall attempt to resolve such dispute within thirty (30) days from the date of delivery of such Earn-Out Objection Notice (or such longer period as they may mutually agree in writing). If Purchaser and the Securityholder Representative resolve all disputes, the mutually agreed component(s) of the Earn-Out Amount shall be final, conclusive, and binding for all purposes of this Agreement.
(iii) If Purchaser and the Securityholder Representative are unable to resolve all disputed items within the agreed period, either Purchaser or the Securityholder Representative shall have the unilateral right to request that the resolution of all unresolved items from the Earn-Out Objection Notice, including related or dependent items (the “Disputed Earn-Out Items”) be referred to the Accounting Arbitrator on behalf of both Purchaser and the Securityholder Representative to resolve any remaining disagreements.
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(iv) Each of the Securityholder Representative and Purchaser shall, promptly (but in any event within ten (10) Business Days) following the formal engagement of the Accounting Arbitrator, provide the Accounting Arbitrator (copying the other upon submission) with a single written presentation setting forth its respective calculations of and assertions regarding the applicable Disputed Earn-Out Items, which presentation cannot assert any amounts, estimates, or values for such Disputed Earn-Out Items that are greater than the greatest value for such item claimed by the Securityholder Representative (in the applicable Earn-Out Objection Notice) or Purchaser (in the Earn-Out Statement) or less than the smallest value claimed by either such Party. The Accounting Arbitrator shall make its determination based solely on (i) the written submissions of the Parties delivered pursuant to and in accordance with this Section 2.7(d)(iv), (ii) the definitions of Post-Closing Annual Adjusted EBITDA and all other applicable defined terms in this Agreement, and (iii) the applicable Disputed Earn-Out Items (as determined by the initial submissions actually delivered to the Accounting Arbitrator). The Accounting Arbitrator shall not assign a value to any Disputed Earn-Out Item that is greater than the greatest value for such item claimed by the Securityholder Representative or Purchaser or less than the smallest value claimed by either such Party.
(v) The Accounting Arbitrator shall deliver a written report setting forth its determination of the applicable Disputed Earn-Out Items within thirty (30) days of engagement or as soon as practicable thereafter. The Accounting Arbitrator’s determination shall be conclusive, binding, and non-appealable on all Parties. The costs of the Accounting Arbitrator shall be paid by the Securityholder Representative, on the one hand, and the Purchaser, on the other hand, in inverse proportion as they may prevail on the final component(s) of the Earn-Out Amount determined by the Accounting Arbitrator, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by the Accounting Arbitrator together with the determination of such component(s) of the Earn-Out Amount.
(vi) Any adjustments to any component(s) of the Earn-Out Amount determined pursuant to this Section 2.7, subject to any claim for set off rights against the Earn-Out Amount pursuant to this Agreement, shall be paid by Purchaser in accordance with Section 2.7(f), no later than thirteen (13) Trading Days following the final determination of the Earn-Out Amount. Any date on which an Earn-Out Amount is determined to be due pursuant to this Section 2.7(d)(vi) or the last sentence of Section 2.7(c), an “Earn-Out Amount Determination Date”.
(e) Restrictive Covenants.
(i) Notwithstanding anything in this Agreement to the contrary, Purchaser shall not, and Purchaser shall cause the Second Surviving Company and its and their respective Affiliates not to, take any action, or omit to take any action, the primary purpose or primary intent of which is to circumvent, reduce, delay, or avoid the payment to the Securityholders of any payments contemplated by this Section 2.7.
(ii) Without limitation to, and in furtherance of, Section 2.7(e)(i), during the Earn-Out Period, Purchaser shall, and Purchaser shall cause the Second Surviving Company and its and their respective Affiliates to: (A) maintain the Second Surviving Company and its Subsidiaries as separate legal entities and maintain books and records of the Second Surviving Company and its Subsidiaries in a manner reasonably calculated to facilitate the calculation of the Post-Closing Annual Adjusted EBITDA in accordance with the Earn-Out Definitions and Principles and the Sample Adjusted EBITDA Calculation, and solely to the extent not inconsistent with the Earn-Out Definitions and Principles and the Sample Adjusted EBITDA Calculation, the Accounting Principles; and (B) operate the Second Surviving Company, its Subsidiaries and their respective businesses as a separate business unit of Purchaser and its Subsidiaries, the day-to-day ordinary course of business operations of which shall be managed and overseen by the Key Employee (subject to the general oversight of Purchaser’s Chief Executive Officer and the principles set forth in Annex C-2).
(f) Earn-Out Payment Procedures. Purchaser shall pay, or cause to be paid or issued, the cash amounts and shares of Parent Common Stock (if any) comprising the Earn-Out Amount when required by Section 2.7(c) and Section 2.7(d)(vi) as follows:
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(i) to the Exchange Agent, in trust and for the benefit of, and further payment or delivery to, each holder of Company Common Stock (including, for the avoidance of doubt, any holders of Company Common Stock into which Company Warrants and Company Preferred Stock have converted in accordance with Section 2.3 hereof), (A) the aggregate cash amounts payable in respect of the Company Common Stock held by such holders by wire transfer of immediately available funds to accounts specified by the Exchange Agent pursuant to instructions given to Purchaser by the Securityholder Representative and/or (B) the aggregate number of shares of Parent Common Stock (if any) issuable in respect of the Company Common Stock held by such holders, by causing Parent’s transfer agent to issue such shares to the Exchange Agent in book-entry form in accordance with Section 5.13(h), for delivery to each such holder who has properly delivered a Letter of Transmittal in accordance with Section 2.8(b);
(ii) to the Second Surviving Company, the aggregate cash amount payable (before deduction of applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes) to Employee Optionholders in respect of their Vested Company Options, by wire transfer of immediately available funds, to the Second Surviving Company’s payroll account (or such other applicable payroll-related account designated by Purchaser, if applicable) pursuant to instructions given to Purchaser by the Second Surviving Company; and
(iii) to the Exchange Agent, (A) for the benefit of, and further payment or delivery to, each Non-Employee Optionholder, the aggregate cash amount payable to the Non-Employee Optionholders in respect of their Vested Company Options, by wire transfer of immediately available funds, to an account or accounts specified by the Exchange Agent pursuant to instructions given to Purchaser by the Securityholder Representative, for delivery to each such holder who has properly delivered a Letter of Transmittal in accordance with Section 2.8(b) and/or (B) for the benefit of, and further payment or delivery to, each holder of Vested Company Options, the aggregate number of shares of Parent Common Stock (if any) issuable to such holder in respect of their Vested Company Options, by causing Parent’s transfer agent to issue such shares to the Exchange Agent in book-entry form in accordance with Section 5.13(h), for delivery to each such holder who has properly delivered a Letter of Transmittal in accordance with Section 2.8(b).
2.8 Exchange Agent and Exchange Procedures.
(a) At the Closing, the Parties shall appoint Equiniti Trust Company, LLC to act as Exchange Agent hereunder (the “Exchange Agent”) pursuant to the Exchange Agent Agreement. All fees, costs and expenses of the Exchange Agent will be paid and borne equally by Purchaser and the Company.
(b) At or prior to the First Effective Time, (A) Purchaser shall deposit, or shall cause to be deposited, with the Exchange Agent, in trust and for the benefit of, and further payment or delivery to, each holder of Company Common Stock and each Non-Employee Optionholder, the aggregate amount of cash payable pursuant to Section 2.4(b) and (B) Purchaser shall cause Parent’s transfer agent to issue in book-entry form and without any restrictive legend, to the Exchange Agent, in trust and for the benefit of, and further payment or delivery to, each holder of Company Common Stock and Vested Company Options, all of the shares of Parent Common Stock constituting the aggregate Per Share Stock Consideration payable at the Closing pursuant to this Agreement in accordance with Section 2.4(b)(xi) and Section 5.13(h) (the cash and shares described in the foregoing clauses (A) and (B), collectively, the “Exchange Fund”). The following provisions shall be applicable to (i) the payment of the cash consideration and the delivery of the Per Share Stock Consideration to which each holder of Company Common Stock (including, for the avoidance of doubt, any holder of Company Warrants and Company Preferred Stock to be converted into shares of Company Common Stock in accordance with Section 2.3 hereof) is entitled pursuant to Section 2.1(a)(ii), (ii) the payment of the cash consideration to which each Non-Employee Optionholder is entitled pursuant to Section 2.2, and (iii) the delivery of the Per Share Stock Consideration to which each Optionholder is entitled pursuant to Section 2.2 (collectively, such holders, “Exchange Fund Participants”):
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(i) At least five (5) Business Days prior to the First Effective Time, the Parties shall cause the Exchange Agent to mail or otherwise physically or electronically deliver to each Exchange Fund Participant a letter of transmittal in the form(s) attached hereto as Exhibit E-1 and Exhibit E-2, as applicable (together with any related Tax forms as provided or otherwise described therein, a “Letter of Transmittal”), which shall specify that delivery of the consideration due to such Exchange Fund Participant (including any shares of Parent Common Stock) shall be effected, only upon proper delivery of a fully executed Letter of Transmittal in accordance therewith to the Exchange Agent and instructions for use in completing such Letter of Transmittal and receiving the applicable consideration.
(ii) After the First Effective Time, there shall be no transfers on the register of members or books and records of the Second Surviving Company of any shares of Company Common Stock that were outstanding immediately prior to the First Effective Time. If, after the First Effective Time, valid evidence of ownership of shares of Company Common Stock is presented to and accepted by the Exchange Agent, such shares of Company Common Stock shall be deemed to be surrendered and canceled against delivery of the Per Share Merger Consideration as provided in this Article II.
(iii) No interest shall accrue or be paid on the Per Share Merger Consideration or any other consideration payable or issuable upon the delivery of the Letter of Transmittal. None of Purchaser, Parent, the Second Surviving Company, the Exchange Agent or any of their respective Affiliates shall be liable to any Exchange Fund Participant for any cash or interest thereon delivered to a public official pursuant to and as required by any applicable abandoned property, escheat or similar Laws.
(iv) After the Closing, any Exchange Fund Participant will be entitled to look only to the Second Surviving Company for payment of their respective claims for the consideration due to such Exchange Fund Participant on the Closing as set forth in this Article II, without interest thereon, but will have no greater rights against the Second Surviving Company than may be accorded to general creditors thereof under applicable Law.
(v) Promptly (and in any event within two (2) Business Days) following any date on which the Exchange Agent has been paid any amounts or issued any shares of Parent Common Stock to be held for the benefit of the Exchange Fund Participants (including, for the avoidance of doubt, any amounts payable pursuant to Section 2.6(e) and Section 2.7(f)), Purchaser shall cause the Exchange Agent to pay or deliver the applicable amounts and shares to be paid or delivered, each as applicable, to such holders for each such holder who has properly completed, duly executed and delivered a Letter of Transmittal (and, for any holder who delivers a Letter of Transmittal thereafter, within three (3) Business Days following such delivery); provided, that the delivery of any shares of Parent Common Stock issued to the Exchange Agent at the Closing and each Earn-Out Amount Determination Date shall be governed by Section 2.8(b)(vi).
(vi)
(A) The shares of Parent Common Stock issued to the Exchange Agent at the Closing shall be held by the Exchange Agent as nominee for the benefit of the applicable Exchange Fund Participants and shall not be delivered to any Exchange Fund Participant prior to the filing of the Closing Prospectus Supplement (other than in accordance with Section 5.13(h)). Immediately following the filing of the Closing Prospectus Supplement on the date thereof, Parent shall deliver, or cause to be delivered, to the Exchange Agent written instructions directing the Exchange Agent to deliver, in book-entry form, to each Exchange Fund Participant who has properly completed, duly executed and delivered a Letter of Transmittal, the number of shares of Parent Common Stock set forth opposite such Exchange Fund Participant’s name on the Payment Schedule (which instructions may be included in the instruction letter delivered pursuant to Section 2.4(b)(xi), in which case Parent shall confirm to the Exchange Agent in writing that the Closing Prospectus Supplement has been filed), and Purchaser shall cause the Exchange Agent to make such delivery of shares of Parent Common Stock to each such Exchange Fund Participant as promptly as practicable (but in no event later than three (3) Business Days, or, in the case of holders that deliver Letters of Transmittal within three (3) months following the Closing, seven (7) Business Days) following the later of the filing of the Closing Prospectus Supplement and the proper delivery of a fully executed Letter of Transmittal in accordance with Section 2.8(b), or otherwise in accordance with Section 5.13(h)(ii). The payment of any cash consideration payable to an Exchange Fund Participant at the Closing shall not be delayed pending the delivery of the shares of Parent Common Stock pursuant to this Section 2.8(b)(vi)(A).
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(B) The shares of Parent Common Stock issued to the Exchange Agent at each Earn-Out Amount Determination Date shall be held by the Exchange Agent as nominee for the benefit of the applicable Exchange Fund Participants and shall not be delivered to any Exchange Fund Participant prior to the filing of the applicable Earn-Out Prospectus Supplement (other than in accordance with Section 5.13(h)). Immediately following the filing of the applicable Earn-Out Prospectus Supplement on the date thereof, Parent shall deliver, or cause to be delivered, to the Exchange Agent written instructions directing the Exchange Agent to deliver, in book-entry form, to each Exchange Fund Participant who has properly completed, duly executed and delivered a Letter of Transmittal, the number of shares of Parent Common Stock set forth opposite such Exchange Fund Participant’s name as set forth in writing by the Securityholder Representative, and Purchaser shall cause the Exchange Agent to make such delivery of shares of Parent Common Stock to each such Exchange Fund Participant as promptly as practicable (but in no event later than three (3) Business Days, or in the case of holders that deliver Letters of Transmittal within three (3) months following the Closing, seven (7) Business Days) following the later of the filing of the Closing Prospectus Supplement and the proper delivery of a fully executed Letter of Transmittal in accordance with Section 2.8(b), or otherwise in accordance with Section 5.13(h)(ii). The payment of any cash consideration payable to an Exchange Fund Participant at any Earn-Out Amount Determination Date shall not be delayed pending the delivery of the shares of Parent Common Stock pursuant to this Section 2.8(b)(vi)(B).
(c) Notwithstanding anything to the contrary in this Agreement:
(i) If, from the date hereof until the latest date on which any payment is due to any Securityholder pursuant to this Agreement, the outstanding shares of Parent Common Stock shall have been changed into a different number of shares or a different class by reason of any reclassification, stock split (including a reverse stock split), recapitalization, split-up, combination, exchange of shares, readjustment, or other similar transaction, or a stock dividend thereon shall be declared with a record date within said period, then the number of shares of Parent Common Stock payable as consideration and any other similarly dependent items, as the case may be, shall be appropriately adjusted to provide Purchaser and the Stockholders the same economic effect as contemplated by this Agreement prior to such event. Nothing in this Section 2.8(c)(i) shall be construed to permit any Party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.
(ii) No certificates or scrip representing less than one share of Parent Common Stock shall be issued pursuant to this Agreement. Notwithstanding any other provision of this Agreement, each Stockholder who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all Company securities held by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional amount multiplied by (i) with respect to any amounts payable at the Closing or pursuant to Section 2.6(e), the Parent Stock Price and (ii) with respect to any amounts payable pursuant to Section 2.7(f), the Parent VWAP, in each case of clauses (i) and (ii), subject to any applicable adjustment pursuant to Section 2.8(c)(i).
2.9 Escrow Agent; Escrow Amounts.
(a) Appointment of Escrow Agent. At the Closing, the Parties shall appoint Equiniti Trust Company, LLC to act as escrow agent hereunder (the “Escrow Agent”) pursuant to the Escrow Agreement. All fees, costs and expenses of the Escrow Agent will be paid and borne equally by Purchaser and the Company.
(b) Adjustment Escrow Amount. The Securityholders shall be responsible for any purchase price shortfall resulting from the Post-Closing Adjustment being a negative number, as described in Section 2.6(e). To secure solely such payment obligation, at the Closing, Purchaser shall deposit the Adjustment Escrow Amount to an account specified by the Escrow Agent (the “Adjustment Escrow Account”), and any amounts in the Adjustment Escrow Account shall be distributed and released in accordance with Section 2.6(e).
(c) Indemnity Escrow Amount. At the Closing, Purchaser shall deposit the Indemnity Escrow Amount to an account specified by the Escrow Agent (the “Indemnity Escrow Account”), and any amounts in the Indemnity Escrow Account shall be distributed and released in accordance with Article VIII.
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2.10 Withholding. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, (1) with respect to any amounts or other consideration required to be paid or issued pursuant to this Agreement or any other Transaction Document, any Party, any Affiliate of a Party (including the Second Surviving Company and any of its Subsidiaries after the Closing), the Securityholders, the Exchange Agent, the Escrow Agent and any of their respective agents and representatives (each, a “Withholding Agent”), as the case may be, shall be entitled to deduct or withhold, or cause to be deducted or withheld, from any such amount or other consideration, the amounts required to be deducted or withheld under the Code, or any provision of any other applicable Laws, and (2) to the extent that amounts are so deducted or withheld by a Withholding Agent and timely and properly remitted to the applicable Governmental Entity, such amounts shall be treated for all purposes of this Agreement or any other applicable Transaction Document as having been paid or issued to such Person in respect of which such deduction or withholding was made. Except with respect to (i) any amounts treated as compensatory for Tax purposes or (ii) any withholding or deduction required by reason of any failure by any Person to provide any applicable Tax form or certificate as required pursuant to this Agreement or any other Transaction Document, (a) the applicable Party required to make the payment under this Agreement or any other applicable Transaction Document and any applicable Affiliate or Withholding Agent (collectively, the “Payor”) shall use commercially reasonable efforts to cooperate in good faith with the Person entitled to receive such payment or, in the case of any payment required to be paid to any Securityholders pursuant to this Agreement, the Securityholder Representative (in each case, the “Payee”) to eliminate or minimize such deduction or withholding to the extent permitted under applicable Law; (b) at least three (3) Business Days prior to making any such deduction or withholding (unless such notice is not reasonably practicable under the circumstances, in which case, the notice shall be provided as soon as reasonably practicable), the applicable Payor shall provide the Payee with written notice of the intended deduction or withholding, including the legal basis therefor and a calculation thereof; and (c) as promptly as reasonably practicable after the amount deducted or withheld by the applicable Payor is remitted to a Governmental Entity, such applicable Payor shall provide the Payee with reasonable evidence of such remittance.
Article
III
Representations and Warranties of the Company
Except as set forth in the corresponding sections of the disclosure letter delivered to Purchaser on or before entering into this Agreement (the “Company Disclosure Letter”) (it being agreed that disclosure of any item in any part of the Company Disclosure Letter shall be deemed disclosure with respect to any other part to which the relevance of such item is reasonably apparent on the face of such disclosure without reference to the contents therein), the Company hereby represents and warrants to Purchaser, Parent and Merger Subs as of the date hereof and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case as of such date) as follows:
3.1 Incorporation, Good Standing and Qualification.
(a) The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. The Company is duly qualified to do business and is in good standing (to the extent such concept is recognized in the applicable jurisdiction) in each other jurisdiction in which the nature of its business or the ownership, lease or operation of its properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. True, correct and complete copies of the Organizational Documents of the Company (as in effect on the date hereof) have been made available to Purchaser. The Company is not in violation of its Organizational Documents.
(b) Each of the Company’s Subsidiaries is duly organized, validly existing and in good standing (to the extent such concept is recognized in the applicable jurisdiction) under the Laws of its jurisdiction of organization and has all requisite corporate, limited liability company or other organizational power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. Each of the Company’s Subsidiaries is duly qualified to do business and is in good standing (to the extent such concept is recognized in the applicable jurisdiction) in each jurisdiction in which the nature of its business or the ownership, lease or operation of its properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. True, correct and complete copies of the Organizational Documents of each of the Company’s Subsidiaries (in each case, as in effect on the date hereof) have been made available to Purchaser. None of the Company’s Subsidiaries are in material violation of their Organizational Documents.
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3.2 Authority; Approval.
(a) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement, the other Transaction Documents, and to consummate the Transactions, subject only to receipt of the Required Stockholder Approval. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party and to consummate the Transactions have been duly authorized by all requisite action on the part of the Company, and no other proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the Transactions, subject only to receipt of the Required Stockholder Approval. This Agreement and the other Transaction Documents have been duly executed and delivered by the Company and constitute valid and binding agreements of the Company enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “Bankruptcy and Equity Exception”).
(b) The Company Board has (i) approved and declared advisable this Agreement, the other Transaction Documents, the Mergers and the Transactions, on the terms and subject to the conditions set forth in this Agreement, (ii) determined that this Agreement, the other Transaction Documents, the Mergers and the Transactions, are fair to, and in the best interests of, the Company and the Stockholders, and (iii) resolved to recommend that the Stockholders approve the Transactions and adopt this Agreement.
(c) The Required Stockholder Approval is the only vote or consent of the holders of any class or series of the Company’s capital stock required to approve and adopt this Agreement and the other Transaction Documents, approve the Mergers and consummate the Transactions.
3.3 Capital Structure.
(a) As of the date of this Agreement, the authorized capital stock of the Company consists of 10,920,235 shares of Company Common Stock, of which 2,655,235 shares were issued and outstanding, 5,583,527 shares of Company Preferred Stock, of which (i) 4,327,248 shares are designated as Company Series A Preferred Stock, of which 3,953,761 shares were issued and outstanding, and (ii) 1,256,279 shares are designated Company Series A-1 Preferred Stock, of which 978,095 shares were issued and outstanding. All of the issued and outstanding shares of Company Capital Stock have been and are duly authorized and are validly issued, fully paid and nonassessable. Other than 120,779 shares of Company Common Stock reserved for issuance under the Company Stock Plan, the Company has no shares of Company Capital Stock reserved for issuance.
(b) All of the issued and outstanding shares of Company Capital Stock have been and are (i) not subject to any preemptive rights created by statute, the Organizational Documents of the Company or any agreement to which the Company is a party; (ii) not issued in violation of the Organizational Documents of the Company; (iii) offered, sold, issued and delivered by the Company in all material respects in compliance with the terms of any applicable Contract of the Company to which the Company is a party and all applicable Laws; and (iv) free of any Liens created by the Company in respect thereof, other than any transfer restrictions imposed by federal and state securities Laws, the Company’s Organizational Documents or the Company Stock Plan, and other rights of the Company to repurchase certain shares of Company Capital Stock in accordance with the terms of the grant or issuance of such Company Capital Stock.
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(c) Schedule 3.3(c) of the Company Disclosure Letter sets forth a complete list of Company Options that are outstanding as of the date of this Agreement, including, with respect to each Company Option the number of shares of Company Capital Stock subject to such Company Options and the holder, date of grant, vesting schedule (including the vesting commencement date), exercise price per share and expiration date with respect to such Company Options. Except for the Company Options and the Company Warrants and as set forth in the Organizational Documents of the Company and its Subsidiaries, there are no other preemptive or other outstanding rights, options, warrants, agreements, arrangements or commitments of any character under which the Company or any of its Subsidiaries is or may become obligated to sell, or giving any Person a right to acquire or in any way dispose of, any shares of capital stock or other securities from the Company or any of its Subsidiaries or any securities or obligations exercisable or exchangeable for, or convertible into, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are issued or outstanding. All Company Options have been granted and all amendments to Company Options have been made in compliance in all material respects with the Company Stock Plan and applicable Laws. Upon any issuance of any shares of Company Capital Stock in accordance with the terms of the Company Stock Plan, such shares of Company Capital Stock will be duly authorized, validly issued, fully paid and nonassessable and free and clear of any Liens (other than any transfer restrictions imposed by federal and state securities Laws, the Company’s Organizational Documents or the Company Stock Plan).
(d) Except as set forth in this Agreement and the Company’s Organizational Documents, the issued and outstanding shares of Company Capital Stock are not subject to any voting trust agreements, proxies, or other Contracts with respect to the voting, purchase, repurchase, dividend rights, disposition or transfer of Company Capital Stock. Except as set forth on Schedule 3.3(d) of the Company Disclosure Letter, there are no outstanding or authorized stock appreciation, dividend equivalent, phantom stock, profit participation or other similar rights with respect to the Company or any of the Company’s equity interests.
(e) Except for the Company Options and the Company Warrants, the Company does not have outstanding any bonds, debentures, notes or other obligations, the holders of which have the right to vote (or convert into or exercise for securities having the right to vote) with the stockholders of the Company on any matter.
(f) All distributions, dividends, repurchases and redemptions of the ownership interests of the Company were undertaken in compliance with the Organizational Document then in effect, any Contract to which the Company then was a party, and applicable Law.
3.4 Subsidiaries; Managed Entities.
(a) A complete list of the Subsidiaries of the Company is set forth in Schedule 3.4(a) of the Company Disclosure Letter, and such list sets forth, with respect to each such Subsidiary, its jurisdiction of organization or formation. All of the outstanding Equity Interests of each Subsidiary of the Company (other than the Managed Entities) is respectively owned by the Company, directly or indirectly, free and clear of any Lien (other than any transfer restrictions imposed by federal and state securities Laws or the Organizational Documents of the applicable Subsidiary of the Company). All of the outstanding Equity Interests of the Subsidiaries of the Company have been duly authorized and are validly issued, fully-paid and non-assessable. There are no preemptive or other outstanding rights, options, warrants, agreements, arrangements or commitments of any character under which any Subsidiary of the Company is or may become obligated to sell, or giving any Person a right to acquire or in any way dispose of, any Equity Interests of such Subsidiary of the Company, and no securities or obligations evidencing such rights are issued or outstanding. There are no bonds, debentures, notes or other indebtedness of any Subsidiary of the Company, the holders of which have the right to vote (or convert into or exercise for securities having the right to vote) with the equity holders of such Subsidiary on any matter. The Equity Interests of any Subsidiary of the Company are not subject to any voting trust agreements, proxies or other Contracts of such Subsidiary, with respect to the voting, purchase, repurchase, dividend rights, disposition or transfer of the Equity Interests of such Subsidiary.
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(b) As of the date hereof, all of the outstanding Equity Interests of each Managed Entity are held of record and beneficially owned by the Persons and in the respective amounts set forth on Schedule 3.4(b) of the Company Disclosure Letter.
(c) Other than with respect to the Subsidiaries, neither the Company nor its Subsidiaries owns any equity interests in any other Person.
(d) Direct Radiology Wisconsin, Service Corporation (i) does not have any employees, (ii) is not a party to or bound by any Contract, (iii) does not own any assets or conduct any business or operations and (iv) is not doing business in the State of Wisconsin or in any other jurisdiction.
3.5 Governmental Filings; No Conflicts.
(a) Except as set forth at Schedule 3.5(a) of the Company Disclosure Letter, other than (i) the filings, applications, consents and/or notices under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (ii) the filing of the Certificates of Merger, no notices, reports, filings or other approvals are required to be made or effected by the Company or its Subsidiaries with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company or its Subsidiaries from, any domestic or foreign governmental or regulatory authority, agency, commission, body or other governmental entity, including quasi-governmental entities (“Governmental Entity”), in connection with the execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation of the Transactions, except those that the failure to make or obtain would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
(b) The execution and delivery of this Agreement and the other Transaction Documents by the Company, the performance of its obligations hereunder and thereunder and the consummation of the Transactions will not constitute or result in (i) assuming receipt of the Required Stockholder Approval, a breach or violation of the Organizational Documents of the Company or of any of its Subsidiaries; (ii) conflict with or result in a violation or breach of any provision of any Law or Order applicable to the Company; (iii) a breach, violation or termination of, or a default under, or the acceleration of any obligations or the loss of a benefit under, or the creation of a Lien on the assets of the Company or any of the Company’s Subsidiaries (with or without notice, lapse of time or both) pursuant to any Material Contract; or (iv) assuming compliance with the matters referred to in Section 3.5(a), conflict with, breach or violate any Law applicable to the Company or any of the Company’s Subsidiaries or by which their properties are bound or affected, except, in the case of clauses (iii) or (iv), for any breach or violation that would not, individually or in the aggregate, be material to the Company and the Company’s Subsidiaries, taken as a whole.
3.6 Company Financial Statements; Undisclosed Liabilities.
(a) Set forth on Schedule 3.6 of the Company Disclosure Letter are complete and correct copies of the following financial statements (collectively, the “Company Financial Statements”): (i) the audited balance sheet of the Company and its consolidated Subsidiaries as of December 31, 2024 and December 31, 2025, and the related audited consolidated statements of income, consolidated statements of stockholders’ equity and the consolidated statements of cash flows for the twelve (12)-month period then ended, including any notes thereto; and (ii) the unaudited balance sheet of the Company and its consolidated Subsidiaries as of June 30, 2026, and the related unaudited consolidated statements of income, consolidated statements of stockholders’ equity and the consolidated statements of cash flows for the six (6) month period then ended, including any notes thereto (the “Interim Company Financial Statements”).
(b) The Company Financial Statements (i) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved except as may be noted therein; and (ii) present fairly, in all material respects, the financial position of the Company and its Subsidiaries on a consolidated basis as at the dates thereof and the results of operations and comprehensive operations, changes in stockholders’ equity and cash flows of the Company and its Subsidiaries on a consolidated basis for the periods then ended (subject, in the case of the Interim Company Financial Statements, to the absence of notes and normal year-end audit adjustments, none of which are material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole).
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(c) The Company and its Subsidiaries do not have any liabilities of any nature whatsoever, whether accrued or unaccrued, absolute or contingent, direct or indirect, asserted or unasserted, fixed or variable, known or unknown, due or to become due, or otherwise except for (i) liabilities of the Company and its Subsidiaries reflected or reserved against in the Company Financial Statements; (ii) liabilities which have arisen in the ordinary course of business; (iii) liabilities that arise under applicable Law or are executory obligations under Contracts to which the Company or any of its Subsidiaries is a party and bound; (iv) liabilities that have been incurred pursuant to and in connection with exploration, preparation, negotiation, authorization, execution, delivery or performance of this Agreement or the consummation of the Transactions; or (v) liabilities that would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole, or prevent, delay or impair the consummation of the Transactions.
(d) All accounts receivable reflected on the Interim Company Financial Statements (including unbilled receivables) represent bona fide amounts arising from sales actually made or services actually performed in the ordinary course of business and, to the Company’s Knowledge, are collectible in the ordinary course of business in the aggregate recorded amounts thereof, net of the allowance for doubtful accounts, returns, payment discounts and other reserves reflected in such financial statements. Except as reflected in such reserves, to the Company’s Knowledge, no such accounts receivable are subject to any pending counterclaim or right of setoff.
(e) The Company and its Subsidiaries have established and maintain a system of internal accounting controls sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures are being executed and made only in accordance with appropriate authorizations of management, (ii) that transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with GAAP and (2) to maintain accountability for assets, (iii) regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries and (iv) that the amount recorded for assets on the books and records of the Company and its Subsidiaries is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. There are no significant deficiencies or material weaknesses in the design or operation of the Company’s or any Subsidiary’s internal controls that could adversely affect the Company or such Subsidiary’s ability to record, process, summarize and report financial data.
3.7 Absence of Certain Changes.
(a) Except as set forth on Schedule 3.7(a) of the Company Disclosure Letter, since June 30, 2026, neither the Company nor any of its Subsidiaries has taken any action which, if taken during the period between the date of this Agreement and the Closing, would require the consent of Purchaser pursuant to Section 5.1(a) other than pursuant to Section 5.1(a)(ii)(E) (or 5.1(a)(ii)(U) to the extent pertaining to any actions taken pursuant to Section 5.1(a)(ii)(E)).
(b) Since December 31, 2025 and through the date of this Agreement, and other than in connection with the Transactions, the Company and its Subsidiaries have conducted their business only in the ordinary and usual course of business in all material respects; and
(c) Since December 31, 2025, there has not been any change, effect, event, occurrence, state of facts or development in the financial condition, properties, business, assets or results of operations of the Company or its Subsidiaries that, individually or in the aggregate, has had or would reasonably be likely to have a Material Adverse Effect.
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3.8 Litigation.
(a) As of the date hereof, (a) there are no, and since January 1, 2022 there have been no, Actions pending or, to the Company’s Knowledge, threatened against the Company or any of its Subsidiaries and (b) there are no actions pending or threatened in writing, or to the Company’s Knowledge, verbally, against or affecting the Company or any of its Subsidiaries, or any of their respective properties at law or in equity before any Governmental Entity. Neither the Company nor any of its Subsidiaries is planning to initiate any Action before any Governmental Entity with respect to the business of the Company or any of the Company’s Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries are a party to or subject to, nor are any of their assets or any portion of their business otherwise bound by or subject to, the provisions of any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling or writ of any Governmental Entity (an “Order”) that restricts the manner in which the Company and the Company’s Subsidiaries conduct their businesses. Since January 1, 2022, to the Company’s Knowledge, no event has occurred and no circumstances exist that may constitute or result in (with or without notice or lapse of time) a violation of any such Order. Neither the Company nor any of its Subsidiaries are party to any Contract involving the settlement of an actual or threatened Action with respect to which any amount remains unpaid.
3.9 Employee Benefits.
(a) Schedule 3.9(a) of the Company Disclosure Letter sets forth a list of each Benefit Plan. Neither the Company nor its Subsidiaries has any agreement, commitment or obligation, whether formal or informal, whether written or unwritten and whether legally binding or not, to create, enter into or contribute to any additional Benefit Plan, or to continue, modify or amend any existing Benefit Plan (except for amendments required by applicable Law with respect to which the amendment deadline has not lapsed).
(b) With respect to each Benefit Plan, the Company has provided to Purchaser, to the extent applicable (and, with respect to each Benefit Plan that is sponsored or provided by a professional employer organization (“PEO”), to the extent in the Company’s possession after reasonable request to the PEO), true, correct, and complete copies of each of the following: (i) the current Benefit Plan document and all amendments thereto, or, if such Benefit Plan is not in writing, a written description of the material terms of such Benefit Plan; (ii) all Contracts relating to such Benefit Plan, including all trust agreements, annuity Contracts, insurance Contracts, funding arrangements, investment management agreements, investment advisory agreements, recordkeeping agreements and other service provider agreements, and all amendments thereto; (iii) the last three annual reports (e.g., Form 5500s and all schedules and attachments thereto) filed with any Governmental Entity with respect to such Benefit Plan; (iv) the most recent audited financial statements, actuarial or other valuation reports, in each case as prepared for such Benefit Plan; (v) the most recent summary plan description, and all summaries of material modifications related thereto, distributed to participants in such Benefit Plan; (vi) the most recent IRS determination, opinion, or advisory letter issued by the IRS with respect to such Benefit Plan; (vii) all nonroutine notices and correspondence since December 31, 2023 to or from any Governmental Entity relating to such Benefit Plan; (viii) all coverage, nondiscrimination, top-heavy and Code Section 415 tests performed with respect to such Benefit Plan for the three (3) most recently completed plan years; and for each of the last three (3) years in which the Company or any Managed Entity (individually or when aggregated with any other employer(s)) was considered an Applicable Large Employer under the PPACA (as defined below), a copy of the Form 1094-C filed with the IRS by the Company or a Managed Entity, a sample Form 1095-C filed with the IRS with respect to an employee of the Company or a Managed Entity, and documentation evidencing the Company’s timely submission of such forms with the IRS in each such year. The Company has delivered or made available to Purchaser a copy of the Company Stock Plan and the forms of all award agreements evidencing such Company Options.
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(c) With respect to each Benefit Plan: (i) such Benefit Plan was properly and legally established; (ii) such Benefit Plan is, and at all times since its inception has been, documented, maintained, administered, operated, and funded in all material respects in accordance with its terms and in compliance with all applicable requirements of ERISA, the Code and all other applicable Laws; (iii) the Company, its Subsidiaries, their respective Affiliates, and, to the Knowledge of the Company, each other Person, as applicable, has, at all times, properly performed in all material respects all of its duties and obligations (whether arising by operation of Law, by Contract or otherwise) under or with respect to such Benefit Plan; (iv) all returns, reports (including all Form 5500 series annual reports, together with all schedules and attachments thereto), notices, statements and other disclosures relating to such Benefit Plan required to be filed with any Governmental Entity or provided to any participant in such Benefit Plan (or the beneficiary of any such participant) have been properly filed or provided on or before their respective due dates and were complete and accurate in all material respects when filed or provided; (v) none of the Company, its Subsidiaries, nor, to the Knowledge of the Company, any other Person has breached any fiduciary duty imposed upon it by ERISA or any other applicable Law; (vi) no prohibited transaction within the meaning of ERISA Section 406 or 407 or Code Section 4975 (and not otherwise exempt under ERISA Section 408 and Code Section 4975(c)(2) or 4975(d)) has occurred or is threatened or about to occur (including any of the Transactions); (vii) all contributions, premiums and other payments due or required to have been paid to (or with respect to) such Benefit Plan have been timely paid or accrued in accordance with the terms of such Benefit Plan and applicable Law or, if not due until after the Closing Date, have been fully accrued as a liability on the Company Financial Statements or paid; (viii) all Taxes that are required by applicable Law to have been withheld from benefits derived under such Benefit Plan have been properly withheld and remitted to the proper depository in a timely manner; and (ix) neither the Company nor its Subsidiaries has incurred (whether or not assessed), and there exists no condition or set of circumstances in connection with which Company, any Managed Entity, Surviving Merger Sub, Purchaser, or any of their respective Subsidiaries or Affiliates could incur, directly or indirectly, any applicable payment, penalty, Tax, fine, Lien, or liability under ERISA, the Code or any other applicable Law or pursuant to any indemnification, contribution, or similar agreement.
(d) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and its related trust is exempt from taxation under Code Section 501(a). Each such Benefit Plan is the subject of an unrevoked favorable determination letter from the Internal Revenue Service (the “IRS”) as to the qualified status of such Benefit Plan under Section 401(a) of the Code (or in the case of a pre-approved plan, is the subject of a current, unrevoked favorable opinion or advisory letter from the IRS upon which the Company and its Subsidiaries are entitled to rely in accordance with Revenue Procedure 2011-49, as modified from time to time with respect to the qualified status of the plan document). Nothing has occurred or failed to occur and no facts or circumstances exist that could adversely affect the qualified status of any such Benefit Plan or the exempt status of its related trust or require the filing of a submission under the IRS’s Employee Plans Compliance Resolution System (“EPCRS”) or the taking of any corrective action under EPCRS in order to maintain the qualified status of such Benefit Plan.
(e) The Company, its Subsidiaries, and each ERISA Affiliate is and, at all relevant times, has been in compliance in all material respects with the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (“PPACA”), the Health Care and Education Reconciliation Act of 2010, Pub. L. No.111-152, and all regulations and guidance issued thereunder, to the extent applicable thereto, including, to the extent applicable, the market reform mandates, the employer shared responsibility provisions relating to the offer of medical coverage that qualifies as “minimum essential coverage” that is “affordable” and provides “minimum value” to “full time employees” and their “dependents” (as those terms are defined in Code Section 4980H and the related Treasury Regulations), and the applicable information reporting requirements under Code Sections 6055 and 6056.
(f) None of the Company or any of its Subsidiaries or any ERISA Affiliate sponsors, maintains, participates in or contributes to, or has in the last six (6) years sponsored, maintained, participated in or contributed to (or been obligated to sponsor, maintain, participate in or contribute to), or has (or could have) any current or future liability (including any contingent liability) under or with respect to, any, nor is any Benefit Plan: (i) an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) that is, or at any time was, subject to ERISA Section 302 or 303, Title IV of ERISA, or Code Section 412 or 430; (ii) a “multiemployer plan” (within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Code Section 414(f)); (iii) a “multiple employer plan” (within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code); (iv) a “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA); (v) a self-funded (or self-insured) group health plan (including any such plan pursuant to which a stop-loss policy or Contract applies), or (vi) a compensation or benefit plan, scheme, fund, program, policy, practice, Contract or arrangement that is subject to the applicable Laws of any jurisdiction outside of the United States (whether or not United States law also applies) or that covers or benefits employees, independent contractors or other service providers who reside or provide services outside of the United States.
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(g) Excluding routine claims for benefits, there is no Action pending or, to the Knowledge of the Company, threatened against any Benefit Plan, the assets of any of the trusts under such plans, the plan sponsor or administrator, or the fiduciary of any plan, before any court or arbitrator or any Governmental Entity, or federal, state or local official, nor, to Knowledge of the Company, is there a reasonable basis for any such Action. No Benefit Plan is (or within the last six (6) years has been) the subject of an investigation, examination, audit or review by a Governmental Entity or the subject of an application or filing under, or a participant in, any amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Entity, and, to Knowledge of the Company, no such investigation, examination, audit or review is contemplated or under consideration by any Governmental Entity.
(h) Neither the Company nor its Subsidiaries, nor any Benefit Plan provides (or contributes toward the cost of) or has any obligation, commitment or agreement to provide (or contribute toward the cost of) life insurance, medical or other welfare benefits (within the meaning of Section 3(1) of ERISA) to any current or former owner, employee, officer, director, manager, consultant, independent contractor or service provider of or to the Company, its Subsidiaries, or any ERISA Affiliate (or the spouse, domestic partner, dependent or beneficiary of any such individual) after their retirement or other termination of ownership, employment or service, other than continuation coverage mandated by ERISA Sections 601 through 608 and Code Section 4980B(f) (or any comparable provision of state law) for which the covered individual pays the entire premium cost.
(i) Neither the execution of this Agreement nor the consummation of the Transactions (whether alone or in connection with any other event) will or may (i) entitle any current or former employee, officer, director, manager, consultant, independent contractor (who is a natural person), or other service provider of or to the Company or any of its Subsidiaries to severance, retention or change of control payments or benefits, unemployment compensation or any other payment (whether under a Benefit Plan or otherwise and whether in cash or equity); (ii) otherwise increase the amount of compensation due to any current or former employee, officer, director, manager, consultant, independent contractor, or other service provider of or to the Company or forgive indebtedness owed by any such individual; (iii) result in any benefit or right becoming established or increased, or accelerate the time of payment or vesting of any benefit, whether pursuant to a Benefit Plan or otherwise; (iv) result in any payment or funding (through a grantor trust or otherwise) of any compensation or benefits under any Benefit Plan, or require the Company, any Managed Entity, any ERISA Affiliate, the Second Surviving Company, Purchaser, or any of their respective Subsidiaries or Affiliates to transfer or set aside any assets to fund or otherwise provide for any benefits for any current or former employee, officer, director, manager, consultant, independent contractor, or other service provider of or to the Company or its Subsidiaries; (v) limit or impair any of the rights of the Company, any Managed Entity, any ERISA Affiliate, Second Surviving Company, Purchaser, or any of their respective Subsidiaries or Affiliates under or with respect to any Benefit Plan, including the right to merge, amend, terminate, or transfer the assets of any Benefit Plan; or (vi) give rise to any “excess parachute payment” as defined in Section 280G(b)(1) of the Code.
(j) Each Benefit Plan can be unilaterally amended or terminated by the Company or applicable Managed Entity at any time (whether before or after Closing) and for any reason without any penalty, cost, expense or liability to the Company, any Managed Entity, Surviving Corporation, Purchaser, any of their respective Subsidiaries or Affiliates, or such Benefit Plan (including any surrender charge, market rate adjustment or other early termination charge or penalty), other than ordinary, de minimis administrative expenses of a type typically incurred in terminations of similar employee benefit plans.
(k) Each Benefit Plan that provides, in any part, deferred compensation that is subject to Section 409A of the Code satisfies the documentary and operational requirements of Sections 409A(a)(2), 409A(a)(3) and 409A(a)(4) of the Code and the regulations, rulings and other guidance issued thereunder. No Company Option is or has ever been a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and Treasury Regulation Section 1.409A-1(b)(1).
(l) Neither the Company nor any of its Subsidiaries maintains any obligations to gross-up or reimburse any individual for any tax or related interest or penalties incurred by such individual, including under Sections 409A or 4999 of the Code or otherwise.
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3.10 Licenses; Compliance with Laws.
(a) The Company and its Subsidiaries have been duly granted all Permits, including all Healthcare Permits, under all Laws necessary for the Company and its Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (collectively, the “Company Permits”). Schedule 3.10(a) of the Company Disclosure Letter lists each Company Permit currently held by the Company and its Subsidiaries. All such Company Permits are valid and in full force and effect, and to the Company’s Knowledge, neither the Company nor any of its Subsidiaries is, in any material respect, in breach or violation of, or default under, any such Company Permit. To the Company’s Knowledge, there are no material actions or investigations pending or, to the Company’s Knowledge, threatened in writing against the Company or any Subsidiary of the Company, that seek the revocation, cancellation or adverse modification of any Company Permit. Since January 1, 2022, neither the Company nor any of its Subsidiaries has received or, to the Company’s Knowledge, been subject to any written notice, claim or assertion alleging any violations of any Company Permits, nor, to the Company’s Knowledge, has any such notice, claim or assertion been threatened. Since January 1, 2022, all applications required to have been filed for the renewal of any Company Permits have been duly filed on a timely basis with the appropriate Governmental Entities.
(b) Each of the Company and its Subsidiaries is, and since January 1, 2022 has been, in compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, rules, regulations, Orders, licenses and permits enacted, issued, promulgated, enforced or entered by any Governmental Entity of competent jurisdiction (collectively, “Laws”) or by which any of their properties is bound or affected, except for such non-compliance that would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole, or prevent, materially delay or materially impair the consummation of the Transactions.
3.11 Regulatory Matters and Compliance with Healthcare Laws. Except as would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole:
(a) Each of the Company and its Subsidiaries (and to the Knowledge of the Company, each Licensed Provider solely with respect to professional healthcare services furnished on behalf of a Managed Entity) is, and since January 1, 2022 has been, in material compliance with all applicable Healthcare Laws relating to the conduct of its businesses, including, as applicable, the requirements of Medical Reimbursement Programs. Except as set forth on Schedule 3.11(a) of the Company Disclosure Letter, since January 1, 2022, (i) neither the Company nor any of its Subsidiaries, and to the Knowledge of the Company, no Licensed Provider solely with respect to professional healthcare services furnished on behalf of a Managed Entity, has received any written notice from any Governmental Entity alleging any material violation of any applicable Healthcare Law (including with respect to the Managed Entity Agreements), and (ii) the only Managed Entities that bill and collect reimbursement directly from Medical Reimbursement Programs are On-Line Radiology Medical Group, Inc. and PCO, P.C.
(b) The current contractual and other arrangements of the Company and its Subsidiaries with the Managed Entities, including the Managed Entity Agreements, have been structured and implemented in material compliance with applicable Healthcare Laws.
(c) To the Knowledge of the Company, the Licensed Providers, solely with respect to the professional services they provide on behalf of the Managed Entities, hold all Healthcare Permits required for such Persons to conduct their respective businesses as currently conducted by them, and such Healthcare Permits are in full force and effect. A list of all such Healthcare Permits is set forth on Schedule 3.11(c) of the Company Disclosure Letter. To the Knowledge of the Company, no suspension, revocation or withdrawal of any material Healthcare Permit held by a Licensed Provider is pending or threatened.
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(d) Neither the Company nor any of its Subsidiaries and, to the Knowledge of the Company, no Licensed Provider solely to the extent acting on behalf of a Managed Entity, is excluded, suspended, debarred or otherwise ineligible to participate in any “Federal Health Care Program” (as defined in 42 U.S.C. § 1320a-7b(f)) (the “Federal Health Care Program”), any state health care program (as defined in 42 U.S.C. § 1320a-7(h)), or any other Medical Reimbursement Program, or has committed any offense that would reasonably be expected to serve as the basis for any such exclusion, suspension, debarment or ineligibility. To the Knowledge of the Company, no such exclusion, suspension, debarment or ineligibility is pending or threatened. Schedule 3.11(d) of the Company Disclosure Letter sets forth a true and complete list of all Federal Health Care Programs in which the Company and its Subsidiaries participate, including the enrollment number and all enrolled locations.
(e) Neither the Company nor any of its Subsidiaries and, to the Knowledge of the Company, no Licensed Provider solely in connection with professional healthcare services provided on behalf of a Managed Entity, has, since January 1, 2022, offered, paid, solicited or received any remuneration, or entered into any financial arrangement, in material violation of applicable Healthcare Laws relating to fraud and abuse, including the federal Anti-Kickback Statute or the federal Physician Self-Referral Law, or knowingly submitted or caused to be submitted any material false or fraudulent claim for payment to any Medical Reimbursement Program.
(f) Since January 1, 2022, neither the Company nor any of its Subsidiaries (and to the Knowledge of the Company, Licensed Provider solely in connection with professional healthcare services provided on behalf of a Managed Entity), (i) has received any written notice from any Governmental Entity alleging any material violation of any applicable Healthcare Law, (ii) is subject to any material consent decree, injunction or similar Order relating to Healthcare Laws, or (iii) is party to any corporate integrity agreement, deferred prosecution agreement, material reporting obligation, or similar settlement, remediation or oversight agreement with any Governmental Entity relating to Healthcare Laws. To the Knowledge of the Company, no Licensed Provider providing professional healthcare services on behalf of any Managed Entity is the subject of any pending or threatened disciplinary proceeding by any applicable licensing board or Governmental Entity that would reasonably be expected to result in the suspension, revocation or restriction of such Licensed Provider’s professional license or other material Healthcare Permit.
(g) There are no material pending or, to the Knowledge of the Company, threatened Actions by any Governmental Entity against the Company, any of its Subsidiaries, or to the Knowledge of the Company, any Licensed Provider solely in connection with professional healthcare services provided on behalf of a Managed Entity, alleging material noncompliance with applicable Healthcare Laws or applicable requirements of any Medical Reimbursement Program, and to the Knowledge of the Company, there are no such material Actions pending or threatened by any Governmental Entity against any Licensed Provider in connection with professional healthcare services provided on behalf of a Managed Entity.
(h) To the Company’s Knowledge, each of the Company and its Subsidiaries is making, and since January 1, 2022, have made, reasonable efforts to ensure that all Licensed Providers and other Persons (including, but not limited to, radiologists, radiologist assistants, technologists, and other licensed professionals, employed or contracted by the Company and its Subsidiaries) and medical imaging services have been properly supervised and acted within their scope of practice in compliance with all applicable federal, state, and local Laws, rules, and regulations, as well as the standards of all relevant licensing bodies. Neither the Company nor any of the Company’s Subsidiaries has since January 1, 2022, received notice of, or to the Company’s Knowledge, is currently the subject of, an action or investigation by a Federal Health Care Program, Medical Reimbursement Program, licensing and accrediting bodies, or other applicable Governmental Entities with respect to the scope of practice or supervision of its employed and contracted health care providers.
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(i) Since January 1, 2020, no material claims for recoupment of moneys in excess of $25,000 paid to the Company or its Subsidiaries have been asserted or are outstanding from Medical Reimbursement Programs and, to the Company’s Knowledge, no circumstances exist that would result in future material claims or recoupment; (ii) the billing, claims, reporting and documentation practices of each of the Company and its Subsidiaries is in compliance, in all material respects, with all applicable Healthcare Laws and any applicable conditions of participation with all Medical Reimbursement Programs; (iii) since January 1, 2020, other than claims adjustments and processing errors occurring in the ordinary course of business, no billing audits by recovery audit contractors have occurred nor are any such audits currently ongoing, noticed to or otherwise threatened against any of the Company or any of its Subsidiaries; and (iv) to the extent the Company or its Subsidiaries bill the Medicare program for professional component services rendered by radiologists providing teleradiology services, such claims are submitted to the Medicare Administrative Contractor for the jurisdiction in which the interpreting radiologist is located at the time the interpretation is performed, in compliance with applicable Medicare billing jurisdiction requirements.
(j) The Company and its Subsidiaries have had since January 1, 2020 a compliance program reasonably designed to cause the Company and its Subsidiaries, and their respective employees and engaged Licensed Providers, to be in compliance with all applicable Healthcare Laws.
(k) Schedule 3.11(k) of the Company Disclosure Letter sets forth the date and amount of all grants received by the Company and its Subsidiaries from the Provider Relief Fund (the “PRF Payments”). To the Company’s Knowledge, each of the Company and its Subsidiaries (i) is and at all times since January 1, 2020 has been in material compliance with all Laws governing the PRF Payments under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (2020), as amended and Paycheck Protection Program and Health Care Enhancement Act, Pub. L. 116-139 (2020), and (ii) has submitted all material information, including all applications, attestations, reports, or certifications required to qualify for such PRF Payments and with respect to the receipt and retention of the PRF Payments. To the Company’s Knowledge, neither the Company nor any of its Subsidiaries has been made the subject of or received any written notice of any audit or review by any Governmental Entity in connection with the PRF Payments.
(l) Neither the Company nor any of the Company’s Subsidiaries (or, to the Company’s Knowledge, any of the Managed Entities) has received any written notice from the U.S. Food and Drug Administration of any pending or threatened enforcement action, warning letter, untitled letter, Form 483 observation, or other regulatory correspondence alleging any material violation with respect to any software, including any software incorporating artificial intelligence or machine learning algorithms, that is used for clinical purposes, including for radiology interpretations.
(m) Each Licensed Provider employed by or contracted with the Company or its Subsidiaries to provide professional health care services at any hospital or other health care facility has been duly credentialed and, where applicable, granted clinical privileges by each such facility where credentialing and privileging is required for the provision of such services. To the Company’s Knowledge, no Licensed Provider providing professional health care services on behalf of any Managed Entity has, since January 1, 2022, had any application for credentialing or clinical privileges denied, withdrawn, suspended, revoked, or placed on probation, or been subject to any adverse action by any facility’s peer review or quality assurance committee.
(n) All compensation paid or payable by any Managed Entity to the Company or any of its Subsidiaries pursuant to a Management Services Agreement, is, and since January 1, 2022, has been, consistent with fair market value. No service fee or other form of compensation paid or payable under a Management Services Agreement was conditioned on the providing of referrals between the parties thereto.
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3.12 Environmental Matters.
(a) Except as would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole, the Company and its Subsidiaries are in compliance with all applicable Environmental Laws and possess all permits, licenses, registrations, authorizations and approvals required under applicable Environmental Laws for the operation of the businesses of the Company and its Subsidiaries as presently conducted.
(b) Except as would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole, the Leased Real Property (A) is not the subject of any pending written notice from any Governmental Entity or any other Person alleging the violation of any applicable Environmental Law; and (B) is not the subject of any Order arising under any Environmental Law.
3.13 Taxes.
(a) All income and other material Tax Returns that are required to be filed by or with respect to the Company or any of its Subsidiaries (i) have been timely filed (taking into account validly obtained extensions of time to file), and (ii) are true, correct, complete and accurate in all material respects. Neither the Company nor any of its Subsidiaries is currently the beneficiary of any extension of time to file any Tax Return that has not been filed. All income and other material Taxes that are due and payable by (or otherwise imposed on) the Company or any of its Subsidiaries (whether or not such Taxes were reflected on any Tax Return) have been timely and properly paid in full.
(b) The unpaid Taxes of (or otherwise imposed on) the Company or any of its Subsidiaries (i) did not, as of the Balance Sheet Date, materially exceed the amount accrued for current Taxes payable (for clarity, excluding any deferred Tax liabilities established to reflect timing differences between book and Tax income) set forth on the face of the consolidated balance sheet of the Company and its Subsidiaries included in the Interim Company Financial Statements (rather than in any notes thereto), and (ii) will not, as of the Closing Date, materially exceed the amount of the unpaid Taxes of the Company or any of its Subsidiaries taken into account in the computation of the Final Net Working Capital, the Final Closing Indebtedness or Final Transaction Costs; provided that for purposes of this clause (ii) the amount of unpaid Taxes shall be calculated in a manner consistent with the principles set forth in the definition of Pre-Closing Taxes.
(c) There are no Liens for Taxes upon any of the assets of the Company or any of its Subsidiaries other than statutory liens for current Taxes that are not yet due and payable.
(d) Each of the Company and its Subsidiaries has timely and properly paid or withheld with respect to any employee or any other Person (and timely paid over any withheld amounts to the appropriate Governmental Entity) all material amounts of Taxes required to be withheld or paid, and has complied in all material respects with all applicable Laws relating to the payment, collection and withholding of Taxes.
(e) Each of the Company and its Subsidiaries has (i) timely and properly collected all material sales, use, value added, goods and services, and similar Taxes (such Taxes, “Sales Taxes”) required to be collected, (ii) timely and properly paid all material Sales Taxes required to be paid to the appropriate Governmental Entity in accordance with applicable Law, and (iii) received and maintained (and submitted to the appropriate Governmental Entity if necessary) all material records and supporting documents (including any applicable exemption certificates or other proof of exemption) with respect to any Sales Taxes in the manner required by applicable Law.
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(f) No Governmental Entity in a jurisdiction where the Company or any of its Subsidiaries, as applicable, does not file a particular type of Tax Return or pay a particular type of Tax has made a claim in writing (or, to the Knowledge of the Company, otherwise) that the Company or such Subsidiary, as applicable, is or may be required to file such particular type of Tax Return or pay such particular type of Tax in such jurisdiction.
(g) No Tax Contest is currently in progress (or, for the avoidance of doubt, unresolved), pending, or threatened in writing (or, to the Knowledge of the Company, otherwise) against or with respect to the Company or any of its Subsidiaries, which Tax Contest has not been finally resolved or settled (with all related Taxes and liabilities paid in full). There are no Tax deficiencies or assessments claimed, proposed, or asserted against or with respect to the Company or any of its Subsidiaries, which have not been fully paid and finally resolved or settled.
(h) Neither the Company nor any of its Subsidiaries has (i) extended or waived (or requested to extend or waive) any statute of limitations period for the assessment or collection of any material amount of Tax, which extension or waiver is currently in effect, (ii) received or requested any private letter rulings from the IRS (or any comparable Tax rulings from any other Governmental Entity) or (iii) entered into (or requested to enter into) any Contract with any Governmental Entity with respect to Taxes, including any closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law). No power of attorney is currently in effect with respect to any Taxes or Tax Returns of the Company or any of its Subsidiaries.
(i) Neither the Company nor any of its Subsidiaries has (i) “participated” within the meaning of Treasury Regulations Section 1.6011-4(c)(3) in any “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b) or (ii) entered into or engaged in any other transaction requiring disclosure under any applicable corresponding or similar provision of state, local or non-U.S. Tax Law.
(j) None of the Company, any of its Subsidiaries, Purchaser, or any Affiliate of Purchaser will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) transaction or event involving, or accounting method used by, the Company or any of its Subsidiaries on or prior to the Closing Date pursuant to Sections 481 or 263A of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law), (ii) change in method of accounting made, or use of an improper method of accounting, by the Company or any of its Subsidiaries on or prior to the Closing Date, (iii) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) entered into by the Company or any of its Subsidiaries on or prior to the Closing Date, (iv) “intercompany transaction” within the meaning of Treasury Regulations Section 1.1502-13 (or any corresponding or similar provision of state, local or non-U.S. Tax Law) involving the Company or any of its Subsidiaries and occurring on or prior to the Closing Date, (v) “excess loss account” within the meaning of Treasury Regulations Section 1.1502-19 (or any corresponding or similar provision of state, local or non-U.S. Tax Law) involving the Company or any of its Subsidiaries and in existence on the Closing Date, (vi) installment sale or open transaction disposition entered into by the Company or any of its Subsidiaries on or prior to the Closing Date or (vii) prepaid amount received or deferred revenue accrued by the Company or any of its Subsidiaries on or prior to the Closing Date. Each of the Company and any of its Subsidiaries uses the accrual method of Tax accounting for all applicable income tax purposes.
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(k) Neither the Company nor any of its Subsidiaries is, or has ever been, engaged in a trade or business, and neither the Company nor any of its Subsidiaries has, or has ever had, a “permanent establishment” (within the meaning of any applicable income tax treaty or under any applicable Law) or a fixed place of business, in each case, in any country other than the United States.
(l) Neither the Company nor any of its Subsidiaries has been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) at any time during the five year period ending on the Closing Date.
(m) Neither the Company nor any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” within the respective meanings of such terms under Section 355(a)(1)(A) of the Code in any distribution of stock qualifying or intended to qualify under Section 355 or Section 361 of the Code occurring during the two-year period ending on the date hereof or (ii) that could otherwise constitute part of a “plan” or “series of related transactions” within the meaning of Section 355(e) of the Code in connection with the Transactions.
(n) Neither the Company nor any of its Subsidiaries has requested or claimed any material Tax credits (or received any material refund or advance payment thereof) under the Families First Coronavirus Response Act (P.L. 116-127), as amended, the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), as amended, or Sections 3131, 3132 or 3134 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law).
(o) For U.S. federal and applicable state and local income tax purposes, the Company is, and since its formation has always been, properly classified and treated as a “C corporation” within the meaning of Section 1361(a)(2) of the Code (and any corresponding or similar provision of state, local or non-U.S. Tax Law). Schedule 3.13(o) of the Company Disclosure Letter (i) sets forth each Subsidiary of the Company and (ii) identifies (A) the classification of each such Subsidiary for U.S. federal and applicable state and local income tax purposes, and (B) each such Subsidiary for which an election under Treasury Regulations Section 301.7701-3(c) (or any corresponding or similar provision of state, local or non-U.S. Tax Law) has been filed. Neither the Company nor any of its Subsidiaries owns, or has ever owned, directly or indirectly, an equity interest in any Person that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code.
(p) The Company has made available to Purchaser true, correct and complete copies of all (i) income and other material Tax Returns filed by the Company or any of its Subsidiaries with respect to all Tax periods beginning on or after January 1, 2022 and (ii) material written correspondences with any Governmental Entity related to Taxes of (or otherwise imposed on) the Company or any of its Subsidiaries (including revenue agents reports, examination reports, notices of deficiency, notices of proposed adjustments, notices of assessment, notices of liens, rulings, and closing agreements).
(q) Neither the Company nor any of its Subsidiaries (i) is a party to or bound by any Tax allocation, Tax indemnity, Tax reimbursement, Tax sharing, or similar agreement or Contract (other than (A) an agreement or Contract solely between or among the Company and its Subsidiaries or between or among such Subsidiaries or (B) customary commercial, leasing, financing, employment or similar agreements entered into with unrelated third parties in the ordinary course of business the primary purpose of which is not related to Taxes), (ii) has any liability for any Taxes of (or otherwise imposed on) any other Person pursuant to Treasury Regulations Section 1.1502-6 (or any corresponding or similar provision of state, local or non-U.S. Tax Law), pursuant to any Contract (other than (A) an agreement or Contract solely between or among the Company and its Subsidiaries or between or among such Subsidiaries or (B) customary commercial, leasing, financing, employment or similar agreements entered into with unrelated third parties in the ordinary course of business the primary purpose of which is not related to Taxes), as a transferee or successor, by assumption, by operation of Law or otherwise or (iii) is, or has ever been, a member of any Tax Group.
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(r) No share of Company Capital Stock, nor any other shares or securities of the Company or any of its Subsidiaries, constitutes a “covered security” within the meaning of Treasury Regulations Section 1.6045-1(a)(15).
(s) Except as set forth in Schedule 3.13(s) of the Company Disclosure Letter, each share of Company Capital Stock is property that is “substantially vested” within the meaning of Treasury Regulations Section 1.83-3(b) (and any corresponding or similar provision of state, local or non-U.S. Tax Law). With respect to each share of Company Capital Stock set forth in Schedule 3.13(s) of the Company Disclosure Letter and any other share of Company Capital Stock that was not “substantially vested” within the meaning of Treasury Regulations Section 1.83-3(b) (or any corresponding or similar provision of state, local or non-U.S. Tax Law) at the time of issuance, transfer or grant, a timely and valid election was made under Section 83(b) of the Code (and any corresponding or similar provision of state, local or non-U.S. Tax Law), and each such election is currently in effect and has not been revoked, terminated or declared invalid. No payment or issuance to any holder of Company Warrants of any amount or other consideration pursuant to this Agreement, nor any exercise or conversion of any Company Warrants (including, for the avoidance of doubt, in accordance with Section 2.3 hereof), will result in any compensatory income.
(t) Neither the Company nor any of its Subsidiaries is a party to any joint venture, partnership, or other arrangement or Contract that would be treated as a partnership for U.S. federal or applicable state and local income tax purposes.
3.14 Labor Matters.
(a) Schedule 3.14(a) of the Company Disclosure Letter sets forth a list by name of all employees of the Company and its Subsidiaries, and for each individual, such employee’s: (i) job title, (ii) primary location of employment (city/state), (iii) employing entity, (iv) hire date, (v) base salary or hourly rate, as applicable, (vi) exempt or non-exempt status under the Fair Labor Standards Act (“FLSA”) or other applicable wage-and-hour laws, (vii) eligibility for commission, bonus or other incentive-based compensation, and (viii) full-time or part-time status.
(b) Schedule 3.14(b) of the Company Disclosure Letter sets forth a list by name of all individual independent contractors engaged by the Company and its Subsidiaries, and for each person, the contractor’s: (i) name; (ii) engagement start date; (iii) location; and (iv) engaging entity. The Company has made available complete and correct copies of all Contracts with each such independent contractor disclosed in Schedule 3.14(b) in effect as of the date hereof to Purchaser.
(c) Neither the Company nor any of its Subsidiaries are a party to or bound by any collective bargaining agreement or other agreement with a labor union or like organization and no collective bargaining agreement is being negotiated by the Company or any of its Subsidiaries. As of the date of the Agreement, no labor strike, material labor dispute, walk-out, work stoppage, slow-down or lockout involving the Company or any of its Subsidiaries is pending or, to the Knowledge of the Company, threatened, and to the Knowledge of the Company, there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor unions, to organize any employees of the Company or any of its Subsidiaries.
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(d) Each of the Company and its Subsidiaries is, and has been since January 1, 2023, in compliance in all material respects with all applicable Laws with respect to employment and employment practices, including all Laws relating to labor relations, equal employment opportunity, fair employment practices, employment discrimination, harassment, retaliation, pay equity, reasonable accommodations, disability rights, immigration, employee classification (under the FLSA) or other applicable state or local Laws, minimum wages, overtime pay, meal and rest breaks, pay equity, payment of wages, wage deduction practices, use of consumer reports, obtaining and use of criminal history, child labor, employee privacy, workplace safety and health, workers’ compensation, leaves of absence (paid or unpaid) and unemployment insurance. The Company and its Subsidiaries have paid all wages, salaries, commissions, bonuses, severance and termination payments, fees, and other compensation that has become due and payable to its employees or independent contractors under applicable Law, Benefit Plan, or Contract. Any current and former employees of the Company and its Subsidiaries who have been classified as “exempt” under the FLSA and all other applicable laws have been properly classified as “exempt” under the FLSA and all other applicable Laws, and have been properly so classified since January 1, 2023. Any Person currently or formerly providing services for the Company and its Subsidiaries as a consultant or independent contractor has been properly so classified under all applicable Laws and was not or is not in fact an employee of the Company and its Subsidiaries, in each case since January 1, 2023.
(e) To the Knowledge of the Company, all employees of the Company and its Subsidiaries are authorized to work in the United States and have presented acceptable documentation of such authorization. The Company and its Subsidiaries have in their respective files, complete and compliant copies of Form I-9s for all current employees and former employees (as applicable), in each case, that comply with applicable Law. Since January 1, 2023, neither the Company nor any of its Subsidiaries have received written notice, or to the Knowledge of the Company, verbal notice from any Governmental Entity regarding any violation or alleged violation of any law relating to hiring, recruiting, employing of (or continuing to employ) any individual not authorized to work in the United States or with respect to compliance with obligations under the Immigration Reform and Control Act, including Form I-9 practices.
(f) There are no Actions pending against the Company or any of its Subsidiaries or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries concerning or relating to any current or former employee or independent contractor of the Company or any of its Subsidiaries. Since January 1, 2023, neither the Company nor any of its Subsidiaries have received written notice, or, to the Knowledge of the Company, verbal notice, from any Governmental Entity responsible for the enforcement of labor or employment Laws indicating its intent to conduct an investigation with respect to the Company or any of its Subsidiaries, no such investigation is in progress, and, to the Knowledge of the Company, no Governmental Entity intends to or has threatened to conduct such investigation.
(g) Since January 1, 2023, no allegations of sexual harassment or sexual misconduct have been made to the Company or any of its Subsidiaries against any officer or employee of the Company or any of its Subsidiaries or any member of the Company Board and neither the Company nor any of its Subsidiaries has entered into any settlement agreement in respect of the foregoing. To the Knowledge of the Company, there are no facts that would reasonably be expected to give rise to a claim of sexual harassment or misconduct against the Company and its Subsidiaries arising from the conduct of any officer or employee of the Company and its Subsidiaries or any member of the Company Board.
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(h) Neither the Company nor any of its Subsidiaries have experienced a “mass layoff” or “plant closing” as those terms are defined under the Worker Adjustment and Retraining Notification Act of 1988 or any similarly applicable state or local Law requiring notice to employees in the event of a closing or layoff (“WARN”) and no such mass layoff, plant closing, or other employment loss is, as of the date of this Agreement, contemplated that could reasonably be expected to result in any notice obligations or liability under WARN.
(i) To the Knowledge of the Company, no employee or independent contractor of the Company or its Subsidiaries are in violation of any contractual obligation related to noncompetition, nonsolicitation, nondisclosure provision or other common law nondisclosure obligation, fiduciary duty or other legal duty (i) to the Company and its Subsidiaries or (ii) to a former employer or other third party that limits the right of any such person to (A) be employed or engaged by the Company or its Subsidiaries in their present capacity or (B) use or disclose confidential information of the former employer or other third party.
(j) Section 3.14(j) of the Company Disclosure Letter sets forth as of the date hereof a true, correct and complete list of each current or former service provider of the Company, any of its Subsidiaries or any Managed Entity who is contractually entitled to severance pay or termination pay.
(k) Section 3.14(k) of the Company Disclosure Letter sets forth as of the date hereof a true, correct and complete list of each transaction, retention, change-in-control, or similar bonus or payment (other than the treatment of Company Options under Section 2.2) that may become payable to any current or former service provider of the Company, any of its Subsidiaries or any Managed Entity in connection with the Transactions.
3.15 Real Property.
(a) Neither the Company nor any of its Subsidiaries owns or has owned any real property for the five (5) years immediately preceding the date hereof.
(b) Schedule 3.15(b) of the Company Disclosure Letter contains a list, as of the date hereof, of all contracts or agreements pursuant to which the Company or any of its Subsidiaries leases, subleases, licenses, uses, operates or occupies, or has the right to lease, sublease, use, operate or occupy any real property (each, whether written, oral or otherwise, a “Lease” and any real property, land buildings and other improvements covered by each Lease, being the “Leased Real Property”) and for each Lease, the street address of the Leased Real Property that is the subject of the Lease. The Company has made available complete and correct copies of all Leases in effect as of the date hereof to Purchaser.
(c) Each of the Leases is legal, valid and binding and in full force and effect and, to the Knowledge of the Company, is enforceable against the landlord which is party thereto in accordance with its terms subject to the Bankruptcy and Equity Exception, and there exists no material default or event of default (or any event that with notice or lapse of time or both would become a material default or event of default) on the part of the Company or any of its Subsidiaries under any Leases, or, to the Knowledge of the Company, any other party thereto.
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(d) No condition in respect of the Leased Real Property exists requiring repairs, alterations or corrections, except as would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries has received since January 1, 2023 and prior to the date of this Agreement any written notice of the intention of any Governmental Entity or other Person to take all or any part of any Leased Real Property. No condemnation action is pending or, to the Knowledge of the Company, threatened that would preclude or materially impair the current use of any Leased Real Property. To the Knowledge of the Company, the Company’s and its Subsidiaries’ current use of the Leased Real Property does not violate in any material respect any restrictive covenant of record that materially affects any of the Leased Real Property. The Company has not received written notice of any violation of Laws with respect to any Lease or any Leased Real Property.
(e) The Leased Real Property is not subject to any leases or tenancies of any kind, except the Leases.
(f) The continued maintenance and operation of the Leased Real Property as currently maintained and operated is not dependent on facilities located at other property, and, to the Company’s Knowledge, the continued maintenance and operation of any other property is not dependent on facilities located on the Leased Real Property. To the Company’s Knowledge, no building or other improvement not part of the Leased Real Property relies on the Leased Real Property or any part thereof or any interest therein to fulfill any requirement of any governmental authority, and no building or other improvement on the Leased Real Property relies on any property not included within the Leased Real Property to fulfill any requirement of any governmental authority.
3.16 Tangible Personal Property. The Company and its Subsidiaries have good and valid title to, or a valid leasehold or licensed interest in, all of the machinery, equipment, vehicles and other items of tangible personal property and assets of the Company and its Subsidiaries (collectively, the “Personal Property”) used in the conduct of the business of the Company or its Subsidiaries, other than property and assets sold or otherwise disposed of in the ordinary course of business since the date of the Company Financial Statements, in each case free and clear of all Liens, other than Permitted Liens. The Personal Property is structurally sound, is in good operating condition and repair, and is adequate for the uses to which they are being put, and none of such Personal Property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.
3.17 Intellectual Property; Information Technology; Data Privacy.
(a) Schedule 3.17(a) of the Company Disclosure Letter sets forth a complete list, as of the date hereof, of all Company Owned Intellectual Property (which, for the avoidance of doubt, does not include Intellectual Property owned or purported to be owned by the Managed Entities) that have been issued by, registered with, or are the subject of a pending application before, any Governmental Entity (or, in the case of Internet domain names, a domain name registrar) (collectively, the “Registered Intellectual Property”), including, for each item listed, as applicable, (i) the owner, (ii) the jurisdiction (or, in the case of Internet domain names, the domain name registrar) in which each such item of Registered Intellectual Property has been issued, registered or in which any such application has been filed, (iii) the registration or application number, and (iv) the issuance, registration or application date. All Registered Intellectual Property is subsisting, valid and enforceable. All Registered Intellectual Property has been obtained and maintained in material compliance with all Laws and applicable rules, policies and procedures of the applicable Governmental Entity or domain name registrar (or other applicable entity responsible for maintaining domain names), including with respect to the filing of all necessary registration, maintenance and renewal fees due or other actions to be taken by the Company to avoid material prejudice to or impairment or abandonment of any the foregoing, in each case within thirty (30) days of the date hereof in connection with each item of Registered Intellectual Property and all necessary documents, recordations and certificates in connection with such Registered Intellectual Property with the United States Patent and Trademark Office or equivalent authority anywhere else in the world, as the case may be, for the purposes of prosecuting or maintaining such Registered Intellectual Property.
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(b) The Company and its Subsidiaries have not granted any material exclusive license of or similar exclusive right to any Company Owned Intellectual Property to any third party. The Company Owned Intellectual Property is fully transferable, alienable, and licensable by the Company or its Subsidiaries without payment of any kind to, or approval by, any third party, subject to any licenses or other rights granted to third parties that qualify as Permitted Liens. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in (A) the loss or impairment of any Company Intellectual Property, (B) any right of any person to terminate any rights under or exercise any new or additional rights under any Company Intellectual Property, (C) a requirement for additional consideration for the right of the Purchaser, any Merger Sub, the Company or its Subsidiaries to own, maintain, or continue to use any of the Company Intellectual Property, or (D) the Company’s business being bound by or subject to any exclusivity obligations, non-compete, or other restrictions.
(c) Each current and former employee, consultant, and independent contractor of the Company who independently or jointly contributed to or is contributing to the conception, development, authoring, creation, or reduction to practice of any material Company Owned Intellectual Property (each, an “Author”) has executed and delivered to the Company a valid and enforceable written agreement that: (i) contains an assignment to the Company or its applicable Subsidiary of all such Intellectual Property developed, invented, or reduced to practice by such Author in the scope of such Author’s employment by or engagement with such Company unencumbered by any Lien (other than Permitted Liens); and (ii) includes confidentiality obligations in favor of the Company or its applicable Subsidiary ((i), and (ii), collectively, the “Invention Assignment Agreements”). The Company has made available to Purchaser true, correct, and complete copies of all forms of Invention Assignment Agreements and, to the Knowledge of the Company, no Author is: (x) in breach of any Invention Assignment Agreement or any other Contract by virtue of such Author being employed by, or performing services for, the Company; or (y) subject to any contract or obligation with any third party that is reasonably likely to materially and adversely affect the Company’s rights in or to the Company Owned Intellectual Property, that restricts or limits the work in which such Author may be engaged, or that requires such Author to disclose information concerning such Author’s work to any person other than the Company.
(d)
(i) The Company or one of its Subsidiaries (A) is the sole and exclusive owner of the Company Owned Intellectual Property, free and clear of all Liens other than Permitted Liens (and neither the Company nor one of its Subsidiaries has authorized or agreed to joint ownership of any Company Owned Intellectual Property), and (B) has the right to use all other Intellectual Property used in or necessary for the conduct of its and their respective businesses as presently conducted (collectively, the “Company Intellectual Property”).
(ii) The respective businesses of the Company and its Subsidiaries as presently conducted do not infringe, misappropriate, or otherwise violate, and have not, since January 1, 2023, infringed, misappropriated, or otherwise violated, any Intellectual Property rights of any Person. Neither the Company nor any of its Subsidiaries are the subject of any pending Action alleging infringement, misappropriation or other violation by the Company or any of its Subsidiaries of any Intellectual Property of any Person.
(iii) To the Knowledge of the Company, no Person is infringing, misappropriating or otherwise violating any Company Owned Intellectual Property.
(iv) The Company and its Subsidiaries take commercially reasonable measures to protect the confidentiality of all Trade Secrets included in the Company Owned Intellectual Property. Since January 1, 2023, no such Trade Secret has been disclosed by the Company or its Subsidiaries, to any third Person, other than, in each case, pursuant to commercially reasonable restrictions on the disclosure and use thereof.
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(v) No funding, facilities, personnel, or resources of a Governmental Entity or of an educational institution, non-profit organization, or research center was used by the Company or any of its Subsidiaries in the creation or development of any Company Owned Intellectual Property and no Governmental Entity, educational institution, non-profit organization, or research center, has any valid claim of right or license to, ownership of, or other Lien (other than Permitted Liens) on any Company Owned Intellectual Property. No Author was employed by or has performed services for any Governmental Entity, educational institution, non-profit organization, or research center during the time during which such Author was also performing services for the Company or, to the Knowledge of the Company, during the twelve (12) month period immediately prior to their services for the Company.
(vi) No Company Product incorporates or is distributed or integrated with or linked to any Open Source Software in a manner that would, as a condition of use, modification, or distribution of the Open Source Software pursuant to the Open Source License governing such Open Source Software: (i) require delivery, distribution, or disclosure of any Company Software or any Company Source Code to a third party, or contribution of any modifications to any Company Software or Company Source Code to any open source project, (ii) require making any Company Software or Company Source Code available to third parties under terms that allow preparation of derivative works, (iii) require making any Company Software or Company Source Code available under terms that allow such Company Software or Company Source Code to be reverse engineered, reverse assembled or disassembled (other than to the extent any contrary restriction would be unenforceable under applicable Law), (iv) require making any Company Software or Company Source Code available at no or minimal cost, including for the purpose of making additional copies or derivative works; (v) obligate the Company to grant, or purport to grant to any Person, any material rights or immunities under any Company Software or Company Source Code; or (vi) otherwise restricts the ability of the Company to commercially exploit Company Software or Company Source Code (any Open Source License meeting any of subsections (i) through (vi), an “Excluded License”). The Company and its Subsidiaries have at all times maintained policies and procedures regarding the use of Open Source Software by applicable employees, consultants and contractors, including policies to ensure compliance with Open Source Licenses and have taken all commercially reasonable steps to ensure that no employee, consultant or contractor uses any Open Source Software in any manner not permitted by such policies and procedures.
(vii) The Company and its Subsidiaries have not disclosed or delivered any Company Source Code (and are not obligated, and have not permitted a third party, to do so), nor has there been any unauthorized or inadvertent disclosure of any Company Source Code, other than disclosures to employees, contractors, consultants, and advisors, in each case, with a valid reason to know the same and subject to a written confidentiality agreement, and no circumstance or condition exists that would reasonably be expected to result in any of the foregoing. The Company and its Subsidiaries are not party to any Contract with any Person requiring the Company to deposit into an escrow account any Company Source Code.
(viii) The Company and its Subsidiaries’ use of AI Technology and practices relating to the operation, training, testing, improvement, and development of any AI Technology, and any resulting outputs, complies (and all times since January 1, 2023, has complied) in all material respects with applicable: (i) Laws; (ii) Privacy Laws; and (iii) contractual obligations and industry standards to which the Company or any of its Subsidiaries is bound. The Company and its Subsidiaries do not use facial recognition with AI Technologies. The Company owns or has all necessary rights in and to any data that it uses to operate, train, test, improve, or develop AI Technologies, including as incorporated into Company Products, and maintains and adheres to commercially reasonable policies, protocols, and procedures relating to the ethical and responsible use of AI Technologies, including commercially reasonable policies, protocols, and procedures for: (x) developing and implementing AI Technologies in a way that promotes transparency, accountability, and human interpretability; (y) identifying and mitigating bias in AI Technologies and any data used to operate, train, test, improve, or develop AI Technologies; (z) preventing AI Technologies from hallucinating, reproducing Personal Information or confidential information, or otherwise producing harmful or inaccurate results; and (xx) requiring management oversight and approval of the Company’s use and implementation of AI Technologies; and, in each case of subsections (x) through (xx), there has been no actual or alleged material noncompliance with any of the foregoing policies, protocols, and procedures. The Company has not received any written notice or communication from any Governmental Entity or other Person alleging that the Company’s use of AI Technologies is not in compliance with applicable Law, and no circumstance or condition exists that would reasonably be expected to result in any of the foregoing.
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(ix) The Company or one of its Subsidiaries (A) is the sole and exclusive owner of the Company IT Systems, free and clear of all Liens other than Permitted Liens, and (B) has the right to use or access all other IT Systems used in the conduct of its business as presently conducted.
(x) The Company IT Systems do not contain any viruses, worms, trojan horses or other malicious code; and, since January 1, 2022, there have been no Security Incidents or other occurrences involving unauthorized access to or unauthorized use of any Company IT System or any other IT Systems used in the businesses of the Company and its Subsidiaries, or of any Personal Information in the possession or control of the Company or any of its Subsidiaries. Since January 1, 2022, neither the Company nor any of its Subsidiaries has notified, or been required to notify under applicable Privacy Laws, any Person or Governmental Entity of a Security Incident. No circumstance has, since January 1, 2022, arisen that would require the Company or any of its Subsidiaries to notify a Person, including any Governmental Entity, of a Security Incident and the Company has not, since January 1, 2022, provided or been provided with any such notice of a Security Incident.
(xi) The Company and its Subsidiaries have complied in all material respects with applicable Privacy Laws and neither the Company nor any of its Subsidiaries are the subject of any pending Action, or any Action threatened in writing, alleging that the Company, its Subsidiaries, or any of the Managed Entities have violated any applicable Privacy Laws in any material respect. The Company and its Subsidiaries maintain commercially reasonable safeguards designed to protect the Personal Information in their possession against loss, theft or unauthorized access, use or disclosure and have fully addressed and remediated all material threats and deficiencies identified in any risk assessments.
(e) Each of the Company and its Subsidiaries has implemented reasonable administrative, physical and technical safeguards sufficient to protect the Personal Information created, received, maintained and transmitted or otherwise processed by the Company and its Subsidiaries, as applicable, and such safeguards are sufficient for the size and scope of the Company and its Subsidiaries and the risks posed to such Personal Information. None of the Company and its Subsidiaries have breached or violated the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 as amended by the Health Information Technology for Economic and Clinical Health Act, including all implementing regulations (“HIPAA”), nor has any “breach” or any successful “security incident” (as defined in 45 C.F.R. § 164.304) occurred with respect to “protected health information” (as defined in 45 C.F.R. § 160.103) in the possession or under the control of any of the Company and its Subsidiaries. The collection, maintenance, transmission, use, disclosure and disposal of Personal Information by any of the Company and its Subsidiaries complies in all material respects with: (i) the contracts to which each such Person is a party, including, without limitation, any business associate agreement; (ii) HIPAA and other Laws governing the privacy and security of Personal Information; and (iii) each Managed Entity’s notice of privacy practices. The Company and its Subsidiaries are each a party to business associate agreements and subcontractor business associate agreements (as defined under HIPAA) as required pursuant to HIPAA. Since January 1, 2022, to the extent the Company or its Subsidiaries have purported to de-identify protected health information, such de-identification by the Company or its Subsidiaries has been in accordance with the requirements of HIPAA and, since January 1, 2022, to the extent the Company or its Subsidiaries (or the Managed Entities) have sold or commercialized any de-identified protected health information, the Company or its Subsidiaries have sold or commercialized such data in accordance with the requirements of HIPAA.
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3.18 Contracts.
(a) Schedule 3.18(a) of the Company Disclosure Letter lists all Material Contracts in effect as of the date hereof. The term “Material Contracts” means all of the following types of Contracts to which the Company or any of its Subsidiaries are a party and bound as of the date of this Agreement (other than (x) the Organizational Documents of the Company and its Subsidiaries, (y) Benefit Plans and employment and similar agreements related to labor matters and (z) real property leases (which arrangements are addressed in Sections 3.9, 3.14 and 3.15, respectively)):
(i) each Contract creating indebtedness for borrowed money in amounts in excess of $100,000;
(ii) all Contracts providing for payments to or from the Company and its Subsidiaries in excess of $1,000,000 in the twelve-month period ended June 30, 2026;
(iii) each joint venture, partnership and other similar Contract involving the sharing of profits of the Company or any of its Subsidiaries with any third party;
(iv) all Contracts since January 1, 2021 providing for the acquisition or disposition by the Company or any of its Subsidiaries of any business, division or product line or the capital stock of any other Person;
(v) all Contracts that limit, or purport to limit, in any respect that is material to the Company and its Subsidiaries, taken as a whole (A) the ability of the Company or any of its Subsidiaries to compete in any line of business or with any Person or to operate in any geographic area or during any period of time, (B) the ability of the Company or any of its Subsidiaries to solicit customers or employees or (C) the ability of the Company or its Subsidiaries to purchase products or services from any Person;
(vi) all Contracts that (A) require any of the Company or any of its Subsidiaries to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions, (B) contain any minimum purchase requirements binding the Company or any of its Subsidiaries, (C) contain any “make-whole” payment obligations by any of the Company or any of its Subsidiaries, or (D) contain any minimum revenue requirements or obligations binding the Company or any of its Subsidiaries the failure of which to meet or achieve gives rise to a right of termination, acceleration, payment, reimbursement or refund to the counterparty to such Contract (i.e., not the Company or any of its Subsidiaries);
(vii) all finance leases or any other lease or other contractual obligation relating to any personal property providing for aggregate rental payments in excess of $100,000 under which any such personal property is held or used by the Company or any of its Subsidiaries;
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(viii) all Contracts requiring the Company or any of its Subsidiaries to make capital expenditures in excess of $100,000;
(ix) all Contracts granting to any Person (A) a right of first refusal or right of first offer on the sale of any part of the business or any material assets or properties of the Company or any of its Subsidiaries or (B) a “most favored nation” right to a third party;
(x) all Contracts that reflect a settlement of any threatened or other Action either (A) entered into since January 1, 2023 in connection with which such Action was settled for an amount not less than $10,000, or (B) containing continuing obligations or restrictions on the Company or any of its Subsidiaries (excluding confidentiality, non-disparagement and other customary provisions that do not impose any ongoing operational restrictions on the Company or any of its Subsidiaries);
(xi) all Contracts with any Person providing for the payment of any cash or other compensation or benefits by the Company or any of its Subsidiaries by virtue of the consummation of the Mergers;
(xii) all Contracts that provide for the assumption by the Company or any of its Subsidiaries of any Tax or environmental liability of any Person (other than the Company or any of its Subsidiaries), other than Contracts that contain indemnification provisions entered into in the ordinary course of business;
(xiii) all Contracts that provide for the indemnification of any director, manager, officer or employee of the Company or any of its Subsidiaries;
(xiv) all Contracts pursuant to which the Company or any of its Subsidiaries (other than the Managed Entities) has granted to a third Person, or a third Person has granted to the Company or any of its Subsidiaries (other than the Managed Entities), a license or similar right under any Intellectual Property excluding, in each case, (A) nonexclusive licenses granted to or from customers, employees or vendors in the ordinary course of business, (B) non-exclusive licenses, access rights or similar rights for commercially available off-the-shelf software or IT Systems that are subject to generally non-negotiated terms (other than pricing terms), (C) employment agreements entered into in the ordinary course of business, and (D) Contracts in which the grant of rights under Intellectual Property is incidental and is not to the primary commercial purpose of the Contract;
(xv) all Contracts related to severance pay, incentive or phantom equity, retention, change in control, success or other similar bonus payments for any director, manager, officer, employee, or other individual service provider;
(xvi) Contracts with any U.S. federal or state healthcare program or any private or commercial health insurer or other third-party payor involving payment by or to Company or its Subsidiaries or Managed Entities of more than $250,000 in the twelve-month period ended June 30, 2026;
(xvii) all Contracts between the Company or any of its Subsidiaries, on the one hand, and a Governmental Entity, on the other hand;
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(xviii) Contracts with Significant Customers;
(xix) Contracts with Licensed Providers contracted to the Company or its Subsidiaries; and
(xx) all Managed Entity Agreements.
(b) As of the date hereof, each Material Contract is in full force and effect and valid, binding and enforceable against the Company or its Subsidiaries, as the case may be, and, to the Knowledge of the Company, each other party thereto in accordance with its terms, subject to the Bankruptcy and Equity Exception, except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. As of the date hereof, none of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other Person is in breach of or default under in any material respect, or has provided or received any written or, to the Knowledge of the Company, oral notice of any intention to terminate, any Material Contract, except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. As of the date hereof, to the Company’s Knowledge, no event or circumstance has occurred that would result in a breach of or default under or give rise to any penalty or right of termination, cancellation or acceleration of any right or obligation under (in each case, with or without notice or lapse of time, or both) any Material Contract. The Company and its Subsidiaries, as applicable, have performed all material obligations required to be performed by it under the Material Contracts and has not been notified of any claim of default under any Material Contract. Complete and correct copies of each Material Contract as in effect on the date hereof have been made available to Purchaser.
3.19 Significant Customers.
(a) Schedule 3.19(a) of the Company Disclosure Letter sets forth a complete and accurate list of the top twenty-five (25) customers of the Company and its Subsidiaries (including any customers for which the Company or any of its Subsidiaries indirectly provides products or services through a distributor or other intermediary) for the twelve-month period ended June 30, 2026 based on revenues received from each such customer during such period (each, a “Significant Customer”).
(b) During the twelve (12) months preceding the date of this Agreement, no Significant Customer has cancelled or otherwise terminated its relationship with the Company or any of its Subsidiaries or has materially altered, in a manner adverse to the Company or any of its Subsidiaries, its relationship with the Company or any of its Subsidiaries, except for any such cancellations, terminations or alterations that would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole. To the Knowledge of the Company, as of the date hereof, no such Significant Customer has any plan or intention, and has not threatened, to terminate, cancel or otherwise materially modify its relationship with the Company or any of its Subsidiaries, except for any such plan, intention or threat with respect to terminations, cancellations or modifications that would not, individually or in the aggregate, reasonably be likely to be material to the Company and its Subsidiaries, taken as a whole.
3.20 Affiliated Transactions. Except for (i) advances to employees, officers and directors of the Company or any of the Company’s Subsidiaries for expenses incurred in the ordinary course of business, (ii) employment agreements with any employee, officer or consultant of the Company or any of the Company’s Subsidiaries or the Managed Entities, (iii) any Benefit Plan and the Organizational Documents of the Company, the Company’s Subsidiaries and the Managed Entities and (iv) any Managed Entity Agreements, no officer, manager, director, employee (or its equivalent) or Affiliate of the Company or any of the Company’s Subsidiaries (other than the Company or one of the Company’s Subsidiaries) (each, a “Related Party”) (A) is a party to any Contract with the Company or any of the Company’s Subsidiaries or (B) has any material interest in any property used by the Company or any of the Company’s Subsidiaries.
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3.21 Insurance.
(a) Schedule 3.21(a) of the Company Disclosure Letter sets forth each insurance policy maintained by the Company or any of the Company’s Subsidiaries in effect as of the date hereof for the benefit of the Company or any of the Company’s Subsidiaries and with respect to each such policy specifies the first named insured, policy/bond number, insurer(s), major limits, deductibles, and term (the “Insurance Policies”). All of the Insurance Policies are in full force and effect, and, to the Company’s Knowledge, neither the Company nor any of its Subsidiaries is in default with respect to its payment obligations under any of the Insurance Policies. To the extent required by the terms of the Insurance Policies, all premiums with respect to the Insurance Policies covering all periods up to and including the date of this Agreement have been paid.
(b) Neither the Company nor any of its Subsidiaries has received written notice of any pending or threatened cancellation with respect to any of its Insurance Policies. There are no claims related to the business of any of the Company or any of its Subsidiaries pending under any of the Insurance Policies as to which coverage has been disputed, and there are no claims made under any such Insurance Policy that have been denied, and, to the Company’s Knowledge, there are no claims or litigation being defended by insurance companies under a reservation of rights basis. The assets and properties of the Company and its Subsidiaries are insured in amounts no less than required by applicable Law and any Contract to which the Company or any of its Subsidiaries, as applicable, is a party.
(c) Each of the Company and its Subsidiaries maintains professional liability insurance (including medical malpractice insurance) covering all Licensed Providers providing professional healthcare services on behalf of any Managed Entity, with coverage limits that are commercially reasonable for similarly situated teleradiology companies and that satisfy the minimum insurance requirements of all Material Contracts with hospitals, imaging centers, and other health care facility clients of the Company. Schedule 3.21(c) of the Company Disclosure Letter sets forth a complete and accurate list of all professional liability insurance policies maintained by or for the benefit of the Company and its Subsidiaries, including the insurer, policy limits, retention or deductible amounts, and the current expiration date. Since January 1, 2023, no insurer under any such professional liability insurance policy has denied coverage, reserved rights, or cancelled or threatened to cancel any such policy. Except as set forth on Schedule 3.21(c) of the Company Disclosure Letter, there are no pending or, to the Company’s Knowledge, threatened medical malpractice or professional liability claims or lawsuits against the Company, its Subsidiaries, or any Licensed Provider providing professional healthcare services on behalf of any Managed Entity.
3.22 Brokers and Finders. Except for Robert W. Baird & Co., neither the Company nor any of its Subsidiaries, or any of their respective directors or officers, as applicable, has employed any investment banker, broker or finder or incurred or will incur any liability for any brokerage payments, investment banking fees, commissions, finders’ fees or other similar payments in connection with the Transactions.
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3.23 Anti-Bribery and Anti-Corruption. Excluding the payment of Taxes, custom duties, license fees and other charges required or permitted to be paid by applicable Laws, neither the Company nor any of its Subsidiaries has, nor, any representative of the Company or any of its Subsidiaries, since January 1, 2022, (a) directly or indirectly through third parties, paid, promised or offered to pay, or authorized the payment of, anything of value to (i) any officer, employee, agent, representative, department, agency, de facto official, corporate entity, instrumentality or subdivision of any foreign government, military or international organization, including any state-owned or affiliated company or hospital, or (ii) any candidate for political office, any political party or any official of a political party (clauses (i) and (ii) together, a “Foreign Public Official or Entity”) for purposes of corruptly obtaining or retaining business; (b) used or attempted to use any funds for any unlawful contribution, gift, entertainment, travel expense or other unlawful expenses relating to political activity or charitable donation; (c) paid any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any Foreign Public Official or Entity or domestic government official or employee; or (d) otherwise violated any Anti-Bribery/Anti-Corruption Laws. No governmental official (i) holds any ownership or other economic interest, direct or indirect, in the Company or any of its Subsidiaries; (ii) serves as a representative of the Company or any of its Subsidiaries; or (iii) will receive any economic benefit from the Company or any of its Subsidiaries as a result of this Agreement or the Transactions. None of the Company, any of its Subsidiaries, nor any of their directors, officers, managers, employees, agents or third-party representatives, is or has been the subject of any investigation, inquiry or enforcement proceedings by any Governmental Entity regarding any offense or alleged offense under any Anti-Bribery/Anti-Corruption Laws and no such investigation, inquiry or proceedings are pending or, to the Company’s Knowledge, threatened. Since January 1, 2022, neither the Company nor any of its Subsidiaries has received written (or, to the Company’s Knowledge, oral) notification or communication from any Governmental Entity asserting that the Company or any of its Subsidiaries has violated any Anti-Bribery/Anti-Corruption Law.
3.24 HSR Filing. Prior to the date hereof, each applicable Party (or its applicable Affiliate) has filed with the United States Federal Trade Commission and the Antitrust Division of the DOJ a Notification and Report Form pursuant to the HSR Act with respect to the Transactions.
3.25 Securityholder Investment Matters. (a) No more than thirty-five (35) Securityholders are not “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act and (b) each Securityholder (i) is either (x) an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act or (y) either alone or together with such Securityholder’s purchaser representative (if any), possesses such knowledge and experience in financial and business matters that such Securityholder is capable of evaluating the merits and risks of an investment in the Parent Common Stock; (ii) is acquiring such shares for its own account and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject, however, to such dispositions as may be made in compliance with the Securities Act (whether pursuant to an effective registration statement or an applicable exemption from registration thereunder); (iii) acknowledges that the shares of Parent Common Stock to be received by such Securityholder have not been registered under the Securities Act and constitute “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be transferred except in compliance with the Securities Act; (iv) is able to bear the economic risk of holding shares of Parent Common Stock for an indefinite period and can afford the complete loss of such investment; (v) has had access to publicly available information concerning Parent and the Parent Common Stock and has had an adequate opportunity to ask questions of, and receive answers from, the officers and management employees of Purchaser and Parent concerning the terms and conditions of the transactions contemplated hereby and the business and financial condition of Parent; and (vi) acknowledges that it has received all information it has deemed necessary to make an informed investment decision with respect to the Parent Common Stock and has had an opportunity to consult with its own tax, legal and financial advisors regarding the transactions contemplated hereby.
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3.26 No Other Representations and Warranties. Except for the representations and warranties contained in this Article III (taking into account the Company Disclosure Letter), the other Transaction Documents or any certificate delivered by or at the direction of the Company pursuant to thereto, none of the Company or any of its Subsidiaries or any other Person has made or makes any other representation or warranty of any kind or nature whatsoever, oral or written, express or implied, on behalf of the Company and its Subsidiaries, including any relating to the financial condition, results of operations, assets, liabilities or prospects of any of the foregoing entities or to the accuracy or completeness of any information regarding the Company and its Subsidiaries furnished or made available to Purchaser, Parent and their respective representatives (including any information, documents or material made available to Purchaser or Parent by or on behalf of the Company including in any electronic documentation site established on behalf of the Company and its Subsidiaries, management presentations or in any other form in expectation of the Transactions) or as to the future revenue, profitability or success of the Company or any of its Subsidiaries, or any representation or warranty arising from statute or otherwise in Law.
Article
IV
Representations and Warranties of Purchaser, Parent and Merger Subs
Except as set forth in the corresponding sections of the disclosure letter delivered to the Company on or before entering into this Agreement (the “Purchaser Disclosure Letter”) (it being agreed that disclosure of any item in any part of the Purchaser Disclosure Letter shall be deemed disclosure with respect to any other part to which the relevance of such item is reasonably apparent on the face of such disclosure without reference to the contents therein) or in the Parent SEC Documents (as defined below), Purchaser, Parent and each Merger Sub, jointly and severally, hereby represent and warrant to the Company as of the date hereof and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case as of such date) as follows:
4.1 Organization and Good Standing.
(a) Parent is a Delaware corporation duly organized, validly existing and in good standing under the laws of Delaware and has all requisite power and authority to own and operate its properties and assets and to carry on its business as presently conducted.
(b) Purchaser is a California corporation duly organized, validly existing and in good standing under the laws of California and has all requisite power and authority to own and operate its properties and assets and to carry on its business as presently conducted.
(c) Each Merger Sub is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all requisite power and authority to own and operate its properties and assets and to carry on its business as presently conducted. Each Merger Sub is a newly formed entity and does not have any operations or liabilities other than incident to its formation, this Agreement and the Mergers. Each Merger Sub was formed solely for the purpose of engaging in the Mergers. All of the outstanding equity interests of First Merger Sub are owned directly by Surviving Merger Sub, and all of the outstanding equity interests of Surviving Merger Sub are owned directly by Purchaser. There are no options, warrants or other rights, agreements, arrangements or commitments to which any Merger Sub is a party relating to the issued or unissued equity interests in such Merger Sub or obligating such Merger Sub to grant, issue or sell any equity interests in such Merger Sub, by sale or otherwise. There are no obligations, contingent or otherwise, of any Merger Sub to repurchase, redeem or otherwise acquire any equity interests of such Merger Sub.
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4.2 Authority; Approval.(a) Each of Purchaser, Parent, Surviving Merger Sub and First Merger Sub has all requisite power and authority and has taken all action necessary in order to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. This Agreement and the other Transaction Documents have been duly authorized and executed by Purchaser, Parent and each Merger Sub and are valid and binding agreements of Purchaser, Parent and each Merger Sub, enforceable against Purchaser, Parent and Merger Subs in accordance with their terms, except as limited by the Bankruptcy and Equity Exception. No vote or consent of the holders of any class or series of share capital or other equity interest of Purchaser or Parent is necessary to approve this Agreement, the other Transaction Documents or the Transactions (including, for the avoidance of doubt, the Mergers and the issuance of the shares of Parent Common Stock contemplated by this Agreement).
4.3 Governmental Filings; No Conflicts.
(a) Other than (i) the filings and/or notices under the HSR Act and (ii) the filing of the Certificates of Merger, no notices, reports, filings or other approvals are required to be made or effected by Purchaser, Parent or Merger Subs with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Purchaser, Parent or Merger Subs from, any Governmental Entity, in connection with the execution and delivery of this Agreement by Purchaser, Parent and Merger Subs or the performance of their obligations hereunder.
(b) The execution and delivery of this Agreement by Purchaser, Parent and Merger Subs, the performance of their respective obligations hereunder and the consummation of the Transactions will not constitute or result in (A) a breach or violation of, or a default under, the Organizational Documents of Purchaser, Parent or Merger Subs, as applicable; (B) a breach or violation of, or a default under, or the acceleration of any obligations or the creation of a Lien on the assets of Purchaser, Parent or Merger Subs (with or without notice, lapse of time or both) pursuant to, any Contract binding upon Purchaser, Parent or Merger Subs; or (C) assuming (solely with respect to performance of this Agreement and consummation of the Transactions) compliance with the matters referred to in Section 4.3(a), conflict with, breach or violate any Law applicable to Purchaser, Parent or Merger Subs or by which their respective properties are bound or affected, except, in the case of clauses (B) or (C) above, for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, would not reasonably be likely to prevent, materially delay or materially impair the consummation of the Transactions.
4.4 SEC Documents.
(a) Parent has timely filed with or furnished to the SEC all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed with or furnished to the SEC by Parent since January 1, 2023 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “Parent SEC Documents”).
(b) As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, as of the date of such amended or superseding filing), (i) the Parent SEC Documents filed or furnished prior to the date of this Agreement complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and (ii) each Parent SEC Document filed or furnished prior to the date of this Agreement did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. No Subsidiary of Parent is required to file or furnish any report, schedule, form, statement, prospectus, registration statement or other document with the SEC.
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(c) Each Parent SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act, as of the date such registration statement or amendment became effective, and as of the date of such amendment or supplement, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in any material respect. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC staff with respect to any of the Parent SEC Documents, and, to the knowledge of Purchaser or Parent, none of the Parent SEC Documents are subject to ongoing SEC review. Parent is in compliance in all material respects with the applicable listing requirements of the Nasdaq Global Market and Parent has not received written notice from the Nasdaq Global Market regarding any failure to so comply.
4.5 Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of Parent included or incorporated by reference in the Parent SEC Documents (or, if any such Parent SEC Document is amended or superseded by a filing prior to the date of this Agreement, such amended or superseding Parent SEC Document) (collectively, the “Parent Financial Statements”) (i) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved except as may be noted therein; and (ii) present fairly, in all material respects, the financial position of Parent and its Subsidiaries on a consolidated basis as at the dates thereof and the results of operations and comprehensive operations, changes in stockholders’ equity and cash flows of Parent and its Subsidiaries on a consolidated basis for the periods then ended (subject, in the case of the interim financial statements of Parent, to the absence of notes and normal year-end audit adjustments).
4.6 Brokers and Finders. None of Purchaser, Parent, Merger Subs or any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder’s fees in connection with the Transactions.
4.7 Availability of Funds. As of the date hereof and as of the Closing Date, Purchaser has cash on hand sufficient to enable it to consummate the Transactions and satisfy all of its obligations under this Agreement when required to do so pursuant to the terms hereof, including payment of all amounts due by Purchaser on and after the Closing pursuant to Article II.
4.8 Securities Matters. Purchaser is acquiring, by way of the Mergers, the Equity Interests of the Second Surviving Company for its own account and without a view to the public distribution or sale of the shares or any interest in such shares. Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Equity Interests of the Second Surviving Company, and Purchaser is capable of bearing the economic risks of such investment, including a complete loss of its investment in the Equity Interests of the Second Surviving Company. Purchaser understands and agrees that it may not sell, transfer, assign, pledge or otherwise dispose of the Equity Interests of the Second Surviving Company other than pursuant to a registered offering in compliance with, or in a transaction exempt from, the registration requirements of the Securities Act and applicable state and foreign securities laws.
4.9 R&W Insurance Policy. Prior to the date hereof, Purchaser has obtained a binder to a representations and warranties insurance policy in a form reasonably acceptable to the Company, which is attached hereto as Exhibit F and will be effective as of the Closing (the “R&W Insurance Policy”). Prior to the date hereof, Purchaser has made available to the Company a true, correct and complete statement of the R&W Costs.
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4.10 Issuance of Shares of Parent Common Stock. The issuance of shares of Parent Common Stock pursuant to this Agreement has been duly authorized by Parent and, when issued and delivered to the Securityholders in accordance with the terms of this Agreement, such shares of Parent Common Stock will be validly issued, fully paid, nonassessable and free and clear of Liens, and issued in compliance with all applicable Laws concerning the issuance of securities. Parent has, and at the Closing will have, sufficient authorized but unissued shares of capital stock to effect the issuance of such shares of Parent Common Stock. None of the shares of Parent Common Stock issued pursuant to this Agreement will, upon issuance, be subject to any preemptive rights, rights of first refusal, or other rights to purchase the Parent Common Stock (whether in favor of Parent or any other Person) pursuant to any Contract of Parent.
4.11 HSR Filing. Prior to the date hereof, the Parties have filed with the United States Federal Trade Commission and the Antitrust Division of the DOJ a Notification and Report Form pursuant to the HSR Act with respect to the Transactions.
4.12 Investigation; Non-Reliance. Each of Purchaser, Parent, Surviving Merger Sub and First Merger Sub acknowledges and agrees that it has made its own inquiry and investigation into the Company and its Subsidiaries as it has deemed appropriate in connection with the Transactions and has had the opportunity to request and receive information concerning the Company and its Subsidiaries. Each of Purchaser, Parent, Surviving Merger Sub and First Merger Sub further acknowledges and agrees that (a) the only representations and warranties made by the Company or any other Person on its behalf are the representations and warranties made in Article III of this Agreement; and (b) except as set forth in Article III, any certificate delivered pursuant to this Agreement or any other Transaction Document, the Company and any other Person do not make any other representation or warranty of any kind or nature whatsoever, oral or written, express or implied, with respect to the Company and its Subsidiaries, this Agreement or the Transactions. Except in the case of Fraud, each of Purchaser, Parent, Surviving Merger Sub and First Merger Sub acknowledges and agrees that it has not relied on, and the Company and its Subsidiaries shall not have any liability with respect to, any representation or warranty other than those expressly set forth in Article III, any certificate delivered pursuant to this Agreement or any other Transaction Document. Notwithstanding the foregoing, nothing in this Agreement shall limit or otherwise impair (a) any claim based upon Fraud by the Company and its Subsidiaries or any Person acting on any of their behalf, (b) Purchaser’s right to rely upon the representations and warranties expressly set forth in Article III, any certificate delivered pursuant to this Agreement or any other Transaction Document, or (c) any rights or remedies otherwise expressly provided under this Agreement. For the avoidance of doubt, nothing in this Section 4.12 shall be construed to preclude Purchaser from asserting any claim for breach of the representations and warranties expressly contained in this Agreement or any certificate delivered pursuant hereto.
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Article
V
Covenants of the Parties
5.1 Interim Operations.
(a) Interim Operations of the Company.
(i) Except as described in Schedule 5.1(a) of the Company Disclosure Letter, or as otherwise expressly required, permitted or otherwise contemplated by this Agreement, or as otherwise required by applicable Law or the terms of any Contract or Benefit Plan, the Company covenants and agrees as to itself and its Subsidiaries and the Managed Entities that, during the period from the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article VII, unless Purchaser shall otherwise approve in writing (such approval not to be unreasonably conditioned, withheld or delayed), the Company and its Subsidiaries and Managed Entities shall use their commercially reasonable efforts to conduct their respective businesses in the ordinary course in all material respects and, to the extent consistent therewith, the Company shall, and shall cause its Subsidiaries and the Managed Entities to, use their respective commercially reasonable efforts to preserve their business organizations intact and maintain their existing business relations and goodwill.
(ii) Except as described in Schedule 5.1(a) of the Company Disclosure Letter, or as otherwise expressly required, permitted or otherwise contemplated by this Agreement, or as otherwise required by applicable Law or the terms of any Contract or Benefit Plan, the Company covenants and agrees as to itself and its Subsidiaries and the Managed Entities that, during the period from the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article VII, unless Purchaser shall otherwise approve in writing (such approval not to be unreasonably conditioned, withheld or delayed), none of the Company, any Subsidiaries or any Managed Entities will:
(A) amend its Organizational Documents;
(B) merge or consolidate with any Person or completely or partially liquidate;
(C) transfer, abandon, lease, sell, dispose of or encumber (other than Permitted Liens) any material portion of their respective assets (excluding Company Intellectual Property, which is the subject to Schedule 5.1(a)(ii)(D)), other than in the ordinary course of business consistent with past practice;
(D) transfer, abandon, exclusively license, sell, dispose of or encumber (other than Permitted Liens) any material Company Intellectual Property, other than (A) licenses or similar rights granted in the ordinary course of business, or (B) the cancellation, lapse, abandonment or expiration of any Registered Intellectual Property at the end of its natural term;
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(E) (1) increase the compensation or benefits payable or to become payable to any officer, employee, individual independent contractor, consultant, or director of the Company or any of its Subsidiaries, other than (x) merit increases in the ordinary course of business consistent with past practice and (y) the payment of annual bonuses for completed periods based on actual performance in the ordinary course of business consistent with past practice; (2) grant any rights to severance or termination pay, change in control or retention payments to any officer, employee, individual independent contractor, consultant or director of the Company or any of its Subsidiaries or the Managed Entities; (3) grant any new awards, or amend or modify the terms of any outstanding awards, under any Benefit Plan; (4) take any action to accelerate the vesting or payment of, or otherwise fund or secure the payment of, any compensation or benefits under any Benefit Plan; or (5) establish, adopt, enter into, modify or materially amend, any Benefit Plan or plan, policy, program or agreement that would have constituted a Benefit Plan if it had been in effect on the date of this Agreement, except for amendments (i) required by applicable Law, (ii) to address changes resulting from annual insurance coverage renewal or (iii) otherwise in the ordinary course of business with respect to broad-based health and welfare plans that would not have a material effect on the cost of maintaining the Benefit Plan;
(F) establish, adopt, enter into, commence participation in or amend any collective bargaining agreement or other agreement with a labor union, works council or similar organization;
(G) except in the ordinary course of business consistent with past practice, materially amend or terminate (other than (i) pursuant to renewals, terminations or non-renewals in accordance with their terms or (ii) in connection with entering into an amendment or a new Contract, in each case, the aggregate economic effect of which is reasonably anticipated to be more favorable to the Company and its Subsidiaries than the existing contractual arrangement) any Material Contract or enter into any Contract that would have been a Material Contract had it been entered into prior to this Agreement (other than any new Contract of the type described in the immediately preceding clause (i) or (ii));
(H) acquire by merger, consolidation, acquisition of assets or Equity Interests or any similar transaction any corporation, partnership, limited liability company or other business organization or all or substantially all of the assets of any such entity;
(I) except (1) in the ordinary course of business or (2) with respect to medical malpractice claims, settle or compromise any claims or litigation for an amount in excess of $500,000, net of any amount covered by insurance, indemnification or existing reserves established in accordance with GAAP;
(J) make any material change, other than as required by GAAP, to its accounting principles or procedures;
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(K) (1) make, change or revoke any material Tax election, (2) amend any Tax Return, (3) adopt or change any Tax accounting period, practice or method, (4) settle, adjust or compromise any Tax Contest, (5) enter into or amend (or request to enter into or amend) any closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) or other Contract with any Governmental Entity with respect to any Tax or Tax Return, (6) affirmatively surrender or relinquish any claim for any refund of material Taxes (or credits received in lieu thereof) or (7) extend or waive (or request to extend or waive) any statute of limitations period for the assessment or collection of any Tax (other than in connection with automatic or customary extensions of time to file Tax Returns obtained in the ordinary course of business);
(L) make any material capital expenditures or commitments therefor, except any unbudgeted capital expenditures not to exceed $100,000 individually or $600,000 in the aggregate per year;
(M) incur, guarantee or become liable for any indebtedness for borrowed money, other than (1) intercompany loans and (2) borrowings, letters of credit and other extensions of credit under the Credit Facility (including any incremental revolving commitments, incremental term loans or other increases, extensions or refinancings thereof incurred to finance acquisitions, investments or similar strategic transactions with respect to which Purchaser has provided consent, or with respect to which the consent of Purchaser is not required under this Agreement);
(N) enter into, modify or amend in any respect, any Contract with a Related Party, or Contract that would have been a Contract with a Related Party, if entered into prior to the date hereof, other than (1) with respect to any employment agreements, Benefit Plans or similar arrangements, which, in each case, are subject to the limitations set forth in Section 5.1(a)(ii)(E), or (2) any intercompany loans permitted by Section 5.1(a)(ii)(M);
(O) plan, announce, implement or effect any reduction in force, lay off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company, or any of its Subsidiaries or Managed Entities (other than routine employee terminations);
(P) except for the issuance of shares of Company Common Stock upon the exercise of Company Options or the conversion of Company Preferred Stock or Company Warrants, issue, sell or deliver (I) any capital stock of, or other equity or voting interest in, the Company or any of its Subsidiaries or the Managed Entities or (II) any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire any (1) shares of capital stock of, or other equity or voting interest in, the Company or any of its Subsidiaries or the Managed Entities, (2) securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire, any shares of the capital stock of, or other equity or voting interest in, the Company or any of its Subsidiaries or the Managed Entities including rights, warrants or options, or (3) phantom stock or similar equity based payment option;
(Q) declare, pay or set aside any dividend or make any distribution (other than dividends or distributions by any Subsidiary of the Company to the Company or any other wholly owned Subsidiary of the Company) with respect to, or split, combine, redeem, reclassify, purchase or otherwise acquire directly, or indirectly, any shares of capital stock of, or other equity or voting interest in, the Company or any of its Subsidiaries, or make any other change in the capital structure of the Company or any of its Subsidiaries or the Managed Entities;
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(R) accelerate, delay, or otherwise vary the collection of accounts receivable, or delay, accelerate, or otherwise vary the payment of accounts payable or other liabilities, or make any change in the timing of, or default under, the payment of any of the foregoing, in each case other than in the ordinary course of business consistent with past practice;
(S) fail to pay any accounts payable, or extend the timing of payment of any accounts payable, other than in the ordinary course of business consistent with past practice or as required by the terms thereof;
(T) modify any Material Contract, or practices with respect to the same, or delay entry into any Contract that would be a Material Contract with any existing or potential customer, in a manner that would delay the timing or amount of accounts receivable beyond the Closing Date; in each case other than (x) in the ordinary course of business consistent with past practice or (y) in connection with entering into an amendment or a new Contract, in each case, the aggregate economic effect of which is reasonably anticipated to be more favorable to the Company and its Subsidiaries than the existing contractual arrangement; or
(U) authorize or enter into an agreement to do any of the foregoing.
(iii) Nothing contained in this Agreement is intended to give Purchaser or Parent, directly or indirectly, the right to control or direct any of the operations of the Company, its Subsidiaries or the Managed Entities prior to the Closing Date. Prior to the Closing Date, the Company shall exercise, consistent with and subject to the terms and conditions of this Agreement, complete control and supervision over its and each of its Subsidiaries’ respective operations and, only to the extent permitted under the Managed Entity Agreements and applicable Law (including Healthcare Laws), the non-clinical operations of the Managed Entities. Furthermore, and notwithstanding anything to the contrary in this Agreement, the covenants and restrictions herein (including Sections 5.1, 5.4 and 5.15) that purport to apply to the Managed Entities shall only apply to the Managed Entities, and the Company and its Subsidiaries shall be required to cause or otherwise direct the Managed Entities to act (or refrain to act) in compliance therewith, only if and to the extent the Company has the contractual right under the applicable Managed Entity Agreements to cause compliance, and only to the extent such compliance would not (i) require any Managed Entity or the Company to violate or conflict with corporate practice of medicine, fee-splitting or similar Healthcare Laws, or (ii) interfere with, or influence, clinical decision-making, professional judgment or the practice of medicine.
(b) Interim Operations of Purchaser and Parent.
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(i) Except as described in Schedule 5.1(b)(i) of the Purchaser Disclosure Letter, or as otherwise expressly required, permitted or otherwise contemplated by this Agreement, or as otherwise required by applicable Law, Purchaser and Parent each covenants and agrees as to itself and its Subsidiaries that, during the period from the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article VII, unless the Company shall otherwise approve in writing (such approval not to be unreasonably conditioned, withheld or delayed), each of Purchaser and Parent will not and will not permit its Subsidiaries to:
(A) amend the Organizational Documents of Purchaser, Parent or any Merger Sub in a manner that would (A) adversely affect the Stockholder relative to the other holders of Parent Common Stock or (B) reasonably be expected to prevent or delay Purchaser’s, Parent’s or any Merger Sub’s ability to consummate the transactions contemplated hereby as promptly as practicable;
(B) authorize or pay any dividends or make any distribution with respect to outstanding shares of Parent Common Stock (whether in property, equity interests or other securities of Parent or any of its Subsidiaries) other than cash dividends; or
(C) authorize or enter into an agreement to do any of the foregoing.
(ii) Nothing contained in this Agreement is intended to give the Company, directly or indirectly, the right to control or direct any of the operations of any of Purchaser or Parent or their Subsidiaries prior to the Closing Date. Prior to the Closing Date, each of Purchaser and Parent shall exercise, consistent with and subject to the terms and conditions of this Agreement, complete control and supervision over its and each of its Subsidiaries’ respective operations.
5.2 Cooperation and Efforts. Upon the terms and subject to the conditions set forth in this Agreement, the Parties shall cooperate with each other and shall (and shall cause their respective controlled Affiliates to) take or cause to be taken all actions necessary, proper or advisable on their part under this Agreement to consummate the Transactions as promptly as reasonably practicable. The Company shall use commercially reasonable efforts to obtain all third party consents, waivers and approvals required to be obtained by the Company pursuant to its Contracts as a result of the Transactions and to fulfill the condition to consummation of the transactions contemplated hereby set forth in Section 6.2(f) and shall deliver all notices required in connection with the Transactions, in each case, as set forth on Schedule 5.2 of the Company Disclosure Letter or as otherwise reasonably requested by Purchaser. Notwithstanding anything to the contrary herein, nothing in this Agreement shall be deemed to impose an obligation on the Company or its Subsidiaries to make any payments to or provide any other concessions to third parties to obtain any third-party consents, waivers, or approvals. To the extent Purchaser or Company becomes aware after the date of this Agreement of any third party consents to the Transactions required by Law or any Contract applicable to Company and not disclosed in Schedule 3.5 or Schedule 5.2 of the Company Disclosure Letter, the Company shall promptly notify Purchaser of the same, and shall seek, and use commercially reasonable efforts to obtain, such consents, upon Purchaser’s reasonable request.
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5.3 Regulatory Filings/Approvals.
(a) Submission of Filings and Notices.
(i) Exchanging Information. Subject to applicable Laws, the Company and Purchaser shall each, upon request by the other, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and equityholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of Purchaser, the Company or any of their Subsidiaries to any Governmental Entity in connection with the Transactions. The Parties may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this Section 5.3 as “outside counsel only.” Such materials and the information contained therein shall be given only to the outside legal counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient, unless express written permission is obtained in advance from the source of the materials.
(ii) Initial Submissions. The Company and Purchaser shall identify, prepare and file as promptly as practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, clearances, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any Governmental Entity in order to consummate the Transactions, including without limitation those required by all applicable Healthcare Transaction Oversight Laws, and all state healthcare regulatory filings, notices, or approvals that may be required in connection with the change of ownership of the Company, its Subsidiaries, or any Managed Entity. Whether or not the Transactions are consummated, Purchaser shall be responsible for all filing fees and payments to any Governmental Entity (including, for the avoidance of doubt, the filing fees for the Notification and Report Forms previously filed by Purchaser and Housatonic (or applicable Affiliate thereof) pursuant to the HSR Act with respect to the Transactions). Neither the Company nor Purchaser shall (A) withdraw, or offer to commit to withdraw any such filing or notification or (B) commit to or agree with any Governmental Entity to stay, toll or extend any applicable waiting period under the HSR Act or any other applicable Law or not consummate the Transactions, in each case, without the prior written consent of the Purchaser (in the case of the Company or the Securityholders) or the Company (in the case of the Purchaser), in each case, such consent not to be unreasonably withheld, conditioned, or delayed.
(iii) Subsequent Submissions. The Company and Purchaser shall promptly provide all documents requested by any Governmental Entity to the extent reasonably necessary, proper or advisable to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from such Governmental Entity in order to consummate the Transactions.
(iv) Conduct of Interactions with Governmental Entities. Subject to applicable Laws relating to the exchange of information, Purchaser and the Company shall have the right to review in advance and, to the extent practicable, each will consult with the other on and consider in good faith the views of the other in connection with, all the information relating to Purchaser or the Company, as the case may be, and any of their respective Subsidiaries, that appears in any filing made with, or written materials submitted to, any Governmental Entity in connection with the Transactions. In exercising the foregoing rights, the Company and Purchaser shall act reasonably and as promptly as practicable. Neither the Company nor Purchaser shall permit any of its officers or any other representatives or agents to participate in any substantive meeting with any Governmental Entity in respect of any filing, investigation or other inquiry relating to the Transactions unless it consults with the other in advance and, to the extent reasonably practicable and permitted by such Governmental Entity, gives the other the opportunity to attend and participate thereat.
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(b) Each of Purchaser, Parent and Merger Sub shall use commercially reasonable efforts to avoid or eliminate impediments under any Antitrust Laws that may be asserted by any Governmental Entity with respect to the transactions contemplated by this Agreement so as to enable the Closing to occur as promptly as practicable, and in any event prior to the Termination Date; provided that in no event shall Purchaser, Parent or any of their Affiliates (including, on or after the Closing Date, the Company or any of its Subsidiaries or the Managed Entities) be required to (i) negotiate, commit to or effect, by consent decree, hold separate order or otherwise, the sale, lease, license, divestiture or disposition of any assets, rights, product lines or businesses of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (ii) terminate any existing relationships, contractual rights or obligations of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (iii) terminate any joint venture or other arrangement of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (iv) create any relationship, contractual rights or obligations of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (v) effectuate any other change or restructuring of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (vi) otherwise take or commit to take any actions, including agreeing to prior approval restrictions, with respect to the businesses, product lines or assets of Purchaser, Parent, Company or any of their respective Subsidiaries or Affiliates or the Managed Entities, (vii) litigate, defend against or otherwise contest any Action brought by or before any Governmental Entity in connection with the Transactions, (viii) appeal or seek to have vacated, lifted, reversed, overturned or otherwise rendered inapplicable any Order, or (ix) take any action or agree to any condition or restriction that is not conditioned upon, and effective as of, the consummation of the Transactions.
(c) Parent shall not, and shall cause its controlled Affiliates not to, knowingly enter into any transaction, or any agreement to effect any transaction (including any merger or acquisition), with the intent of materially delaying or materially impairing the consummation of the Transactions or the expiration or termination of the waiting period under the HSR Act applicable to the Transactions. Nothing in this Section 5.3(c) shall restrict Parent or any of its controlled Affiliates from entering into, negotiating, consummating any other transaction (including any merger, acquisition or disposition) in the ordinary course of its business or otherwise, whether or not such transaction requires the filing of a notification under the HSR Act or otherwise gives rise to a filing or approval requirement under any other Antitrust Law.
5.4 Access.
(a) Pre-Closing Access. From the date of this Agreement until the earlier of the Closing and the termination of this Agreement pursuant to Article VII, upon reasonable advance notice, the Company shall, and shall cause each of its Subsidiaries and the Managed Entities to, afford Purchaser and its officers, employees, financing sources, counsel, accountants and other authorized representatives reasonable access, during normal business hours and, to the extent reasonably requested, at other mutually agreeable times, to its properties, personnel (including senior management), books, contracts, records and other information of the Company, its Subsidiaries and the Managed Entities as Purchaser may reasonably request for purposes of consummating the Transactions, preparing required regulatory filings, satisfying the conditions to Closing, or conducting integration planning. The Company shall, and shall cause each of its Subsidiaries and the Managed Entities to, promptly furnish to Purchaser such financial, operational and other information concerning its businesses, assets, liabilities, operations and personnel as Purchaser may reasonably request, other than any such matters that relate to the negotiation and execution of this Agreement, including with respect to the consideration or valuation of the Transactions or any financial or strategic alternatives thereto. Notwithstanding anything to the contrary in this Agreement, the Company, the Company’s Subsidiaries and the Managed Entities may withhold, redact, or condition access to any information if any of the foregoing determine in their sole reasonable discretion that providing such access could (i) waive or adversely affect any attorney-client privilege, work product protection, or other legal privilege or immunity, (ii) result in the disclosure of any Trade Secrets or other confidential or competitively sensitive information of the Company, the Company’s Subsidiaries, the Managed Entities or any of their respective Affiliates, or (iii) violate applicable Law or any contractual, fiduciary or confidentiality obligation; provided, that the Company shall, and the Company shall cause its Subsidiaries and the Managed Entities to, use commercially reasonable efforts to make alternative disclosure arrangements that would not jeopardize any applicable legal privilege or Trade Secret protection or contravene any Laws, contracts or obligation of confidentiality. Purchaser and its representatives shall conduct any activities pursuant to this Section 5.4(a) in such a manner as not to interfere unreasonably with the respective business or operations of the Company and/or the Company’s Subsidiaries and/or the Managed Entities. All requests for information made pursuant to this Section 5.4(a) shall be directed to the individual(s) designated in writing by the Company, provided that such designation shall not unreasonably delay or impede Purchaser’s exercise of its rights under this Section 5.4(a). All such information provided pursuant to this Section 5.4(a) shall be governed by the terms of the Confidentiality Agreement.
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(b) Post-Closing Access. Subject to applicable Law, from and after the Closing, Purchaser shall cause the Second Surviving Company and each of its Subsidiaries to, and the Second Surviving Company and each of its Subsidiaries shall, and shall cause each of the Managed Entities to (i) retain its books, ledgers, files, reports, plans, operating records and other material documents that are in existence at the Closing and are required to be retained pursuant to applicable document retention policies or applicable Law (collectively, the “Records”) for a period of seven years from the Closing Date, and (ii) to the extent reasonably necessary for the Stockholders to comply with applicable legal, tax or regulatory obligations or to pursue or defend claims relating to their ownership of Company Capital Stock or Equity Interests in the Managed Entities or their service as current or former directors or officers of the Company, the Company’s Subsidiaries or the Managed Entities, and not for any competitive or other commercial purpose, provide the Stockholders or their representatives, at the Stockholders’ sole cost and expense, with reasonable access during normal business hours, upon reasonable advance written notice, and under the supervision of Purchaser’s or the Second Surviving Company’s personnel, to inspect (and, at the Stockholders’ expense, copy) the Records with respect to periods or occurrences prior to the Closing Date, provided that such access does not unreasonably interfere with the business or operations of Purchaser, the Second Surviving Company or any of their respective Affiliates. Notwithstanding anything to the contrary in this Agreement, Purchaser and the Second Surviving Company may withhold, redact, or condition access to any Records or other information if Purchaser or the Second Surviving Company, as applicable, determine in its sole reasonable discretion that providing such access could (i) waive or adversely affect any attorney-client privilege, work product protection, or other legal privilege or immunity, (ii) result in the disclosure of any Trade Secrets or other confidential or competitively sensitive information of Purchaser, the Second Surviving Company or any of their respective Affiliates, or (iii) violate applicable Law or any contractual, fiduciary or confidentiality obligation; provided, that Purchaser and the Second Surviving Company shall, and shall cause each of the Managed Entities to, use commercially reasonable efforts to make alternative disclosure arrangements that would not jeopardize any applicable legal privilege or Trade Secret protection or contravene any Laws, contracts or obligation of confidentiality.
5.5 Publicity. The initial press release with respect to the Transactions shall be in a form mutually agreed by the Company and Purchaser. Following the issuance of the initial press release, the Parties shall consult with each other in good faith before issuing any press release or making any public announcement or filing with any third party or Governmental Entity relating to this Agreement or the Transactions. No Party shall issue any such press release, public announcement or filing without the prior written consent of the Securityholder Representative, the Company and Purchaser (in each case, not to be unreasonably withheld, conditioned or delayed); provided, however, that (a) any Party may make disclosures as required by Law (including any applicable stock exchange rules); provided that, to the extent legally permissible, such Party shall provide the other Parties with prior written notice of such required disclosure, (b) the Company and its Subsidiaries may make internal communications to their respective employees and communications to customers, suppliers and other business relationships to the extent reasonably necessary to facilitate the consummation of the Transactions or the operation of the business following the Closing, (c) Parent may make a press release, public announcement or disclosure regarding the Transactions to the extent the contents of such release or announcement have previously been released publicly by Parent or Purchaser. For the avoidance of doubt, from and after the Closing there shall be no restriction on Parent making public statements regarding the operation of the business of the Company and its Subsidiaries, and no Securityholder that is (or affiliated with) a financial investor shall be prohibited from providing general information limited to the occurrence of the Transaction in connection with fundraising, marketing, informational or reporting activities (including current or prospective limited partners).
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5.6 Employee Matters.
(a) Subject to the terms and conditions of this Section 5.6, Purchaser and the Company agree that during the period commencing on the Closing Date and ending on the first anniversary thereof (or such earlier date on which the applicable employee’s employment terminates), each employee of the Company or any of its Subsidiaries who continues to be employed by Purchaser or its Affiliates (including the Second Surviving Company or any of its Subsidiaries or the Managed Entities) after the Closing (a “Continuing Employee”) will continue to be provided with, except as otherwise determined by the Chief Executive Officer of the Second Surviving Company (to the extent in accordance with Annex C-2) (i) base salary or base wage that is no less favorable than the base salary or base wage provided by the Company and its Subsidiaries or the Managed Entities to each such Continuing Employee immediately prior to the First Effective Time, (ii) target annual cash bonus opportunities that are substantially similar in the aggregate to the target annual cash bonus opportunities provided by the Company and its Subsidiaries or Managed Entities to each such Continuing Employee immediately prior to the First Effective Time (provided that cash target incentive opportunities of equivalent value will be provided in lieu of equity target incentive opportunities unless Purchaser otherwise approves in writing), and (iii) other employee and welfare benefits (excluding, for the avoidance of doubt, equity incentives) that are substantially similar in the aggregate to those provided by the Company and its Subsidiaries or the Managed Entities to such Continuing Employees immediately prior to the First Effective Time.
(b) Purchaser will cause each employee Benefit Plan or program or service-based policy of Purchaser or its Affiliates (including the Company and its Subsidiaries) in which Continuing Employees are eligible to participate to take into account, for purposes of eligibility, vesting and benefit accrual (other than benefit accrual under any defined benefit pension plan and equity vesting) and levels of benefits thereunder, the pre-Closing service of such employees with the Company and its Subsidiaries (including any predecessors thereto) as if such service had been performed with Purchaser or its Affiliates; provided, that such crediting of service (i) will only be made to the extent such Continuing Employee’s pre-Closing service was taken into account under the equivalent Benefit Plan, program, or service-based policy maintained by the Company pre-Closing; and (ii) does not result in any duplication of benefits.
(c) Purchaser will use commercially reasonable efforts to cause each employee benefit plan or program that is a group health plan of Purchaser or its Affiliates (including the Company and its Subsidiaries) in which a Continuing Employee may be eligible to participate after the Closing (a “New Plan”), to (i) waive, or cause the waiver of, all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements, other than limitations or waiting periods that are already in effect with respect to such employee and that have not been satisfied as of the Closing under the corresponding Benefit Plan immediately prior to the Closing; and (ii) provide such employee with credit for any co-payments, deductibles paid and out-of-pocket expenses incurred, during the portion of the plan year under a corresponding provision of the corresponding Benefit Plan ending on the date on which participation in the New Plan begins in satisfying any applicable coinsurance, deductible or-out of-pocket requirements under any such New Plan.
(d) Nothing contained in this Agreement is intended to (i) create any third-party beneficiary rights in any employee of the Company or any of its Subsidiaries, any beneficiary or dependent thereof, any collective bargaining representative thereof, or any other Person that is not a party to this Agreement, (ii) be deemed to constitute the adoption, amendment or modification of any employee benefit plan, including the Benefit Plans, or limit the right of Purchaser or any of its Affiliates to amend, modify or terminate any employee benefit plan, including the Benefit Plans, or (iii) limit the right of Purchaser or any of its Affiliates to terminate any employee at any time and for any reason.
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5.7 Indemnification; Tail Insurance.
(a) Purchaser agrees that all rights to indemnification and exculpation from liabilities, including advancement of expenses, for acts or omissions or other matter occurring at or prior to the First Effective Time now existing in favor of the current or former director and officer of the Company or any of its Subsidiaries (in each case, when acting in such capacity), determined as of the Closing (the “Indemnitees”) as provided in the Organizational Documents of the Company or any of its Subsidiaries or any indemnification contract between such directors or officers and the Company or any of its Subsidiaries, as applicable (in each case, as in effect on, and, in the case of any indemnification contracts, to the extent made available to Purchaser prior to, the date of this Agreement) shall survive the Mergers and shall continue in full force and effect. For a period of six (6) years from the First Effective Time, the Second Surviving Company and its Subsidiaries shall, and Purchaser shall cause the Second Surviving Company and its Subsidiaries to, maintain in effect the exculpation, indemnification and advancement of expenses equivalent to the provisions of its (or its predecessor’s) Organizational Documents as in effect immediately prior to the First Effective Time with respect to acts or omissions or other matters occurring prior to the First Effective Time and shall not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any Indemnitees; provided that all rights to indemnification in respect of any claim made for indemnification within such period shall continue until the disposition of such action or resolution of such claim.
(b) At the Closing Date, the Second Surviving Company shall obtain, and the Second Surviving Company shall bear all costs of and pay the premium for, “tail” insurance extensions of (i) the Company and its Subsidiaries’ existing directors’ and officers’ insurance policies and (ii) the Company’s existing fiduciary liability insurance policies (collectively, “D&O Insurance”), in each case with an extended claims reporting period or discovery period of at least six years from and after the Closing from one or more insurance carriers with the same or better credit rating as the Company’s insurance carrier as of the date of this Agreement with respect to the D&O Insurance with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as the Company’s existing policies with respect to actual or alleged acts or omissions of an insured that are first committed or attempted at or prior to the Closing (including in connection with the Transactions); provided that the Second Surviving Company shall not be required to spend in respect of such D&O Insurance in excess of 300% of the latest annual premium of the Company. Purchaser shall, and shall cause the Second Surviving Company to, maintain the D&O Insurance in full force and effect from and after the Closing Date.
(c) If the Second Surviving Company or any of its successors or assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of the Second Surviving Company shall assume all of the obligations set forth in this Section 5.7.
(d) The foregoing provisions of this Section 5.7 are intended to be for the benefit of, and from and after the Closing shall be enforceable by, each Indemnitee, each of which shall be a third party beneficiary of this Section 5.7 and Section 5.9 in connection herewith.
(e) On or after the Closing Date, the Second Surviving Company shall obtain “tail” insurance extensions of the Company and its Subsidiaries’ medical malpractice insurance policies set forth in Schedule 5.7(e) of the Company Disclosure Letter (the “MedMal Tail”), at the direction of Purchaser and with the reasonable cooperation of the Company.
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5.8 Expenses. Except as otherwise specifically provided in this Agreement, the Company, on the one hand, and Purchaser and Parent, on the other hand, shall bear their respective expenses, costs and fees (including attorneys’, auditors’ and financing fees, if any) in connection with the Transactions, including the preparation, execution and delivery of this Agreement and compliance herewith, whether or not the Transactions are effected. Notwithstanding the foregoing, (a) Purchaser shall be responsible for, and shall pay directly or promptly reimburse the Company for amounts paid by or on behalf of the Company in respect of (i) fees in respect of filings made under the HSR Act, and (ii) the costs and expenses relating to the preparation and filing of the Prospectus Supplements, (b) the Company shall be responsible for, and shall pay directly or promptly reimburse Purchaser for amounts paid by or on behalf of Purchaser in respect of (i) the costs and expenses otherwise payable by Purchaser in connection with binding and issuing the R&W Insurance Policy at the Closing (the “R&W Costs”) and (ii) the costs and expenses of the D&O Insurance, and (c) Purchaser and the Company shall each be responsible for, and shall pay directly or promptly reimburse the other Party for amounts paid by or on behalf of such other Party in respect of, fifty percent (50%) of the fees of the Exchange Agent and Escrow Agent.
5.9 Further Assurances. Subject to, and not in limitation of, Section 5.3, until the Closing or earlier termination of this Agreement, each of the Parties shall execute and deliver, or cause to be executed and delivered, such documents and other instruments and take, or cause to be taken, such further actions as may be reasonably required to carry out the provisions of this Agreement and give effect to the Transactions.
5.10 R&W Insurance Policy. The R&W Insurance Policy shall expressly waive any claims of subrogation (except in the case of losses resulting from Fraud with respect to the making of the representations and warranties contained in Article III of this Agreement (as qualified by the Company Disclosure Letter)) against the Securityholders, the Company, its Subsidiaries or any of their respective employees or Affiliates. None of Purchaser or any of its Affiliates shall terminate or amend, waive, modify or otherwise revise the R&W Insurance Policy in any manner inconsistent with the foregoing or otherwise adverse to the Securityholders (including, for the avoidance of doubt, by reducing the scope or amount of coverage, increasing the retention or otherwise making any such termination, amendment, waiver, modification or revision that would reasonably be expected to increase the Securityholders’ potential indemnification exposure under Article VIII), without the prior written consent of the Securityholder Representative.
5.11 Obligations of Merger Subs. Merger Subs shall, and Purchaser shall cause Merger Subs to, perform when due its obligations under this Agreement and consummate the Transactions pursuant to the terms and subject to the conditions set forth in this Agreement.
5.12 Stockholder Consent. Within twenty-four (24) hours of the execution of this Agreement, the Company shall obtain, in accordance with applicable Law, the written consent of Stockholders of the Company constituting the Required Stockholder Approval adopting and approving this Agreement and the Transactions.
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5.13 Applicable Securities Law Exemptions; Shelf Registration; Prospectus Supplements.
(a) Applicable Securities Law Exemptions.
(i) Parent Common Stock issued pursuant to the terms of this Agreement will be issued in a transaction exempt from registration under the Securities Act (by reason of Regulation S promulgated under the Securities Act, Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act) and therefore may not be re-offered or resold other than in conformity with the registration requirements of the Securities Act and such other applicable rules and regulations or pursuant to an exemption therefrom.
(ii) Each Securityholder agrees (A) to resell any securities of Parent only in accordance with the provisions of Regulation S promulgated under the Securities Act, Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act, pursuant to registration under the Securities Act or pursuant to any other available exemption from registration requirements and not to engage in hedging transactions with regard to any securities of Parent unless in compliance with the Securities Act, and (B) that Parent is hereby required to refuse to register any transfer of any securities of Parent issued to such Securityholder not made in accordance with the provisions of Regulation S promulgated under the Securities Act, Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act, pursuant to registration under the Securities Act or pursuant to any other available exemption from registration requirements. For the avoidance of doubt, no Securityholder shall be required to obtain or deliver any opinion of counsel or other evidence of compliance in connection with any transfer effected pursuant to an effective Registration Statement.
(iii) Parent shall cause its transfer agent and exchange agent, as applicable, to take such actions as are necessary or advisable to give effect to the issuance of shares of Parent Common Stock to the Securityholders at the Closing or thereafter pursuant to this Agreement, or any subsequent transfer of shares of Parent. Prior to the issuance of any such shares, Parent shall, at its sole cost and expense, take all actions reasonably necessary to ensure that no such shares contain any restrictive legend, including delivering (or causing to be delivered) to its transfer agent and exchange agent, as applicable, any legal opinions, officer's certificates, transfer instructions or other documentation reasonably necessary to effect such removal or any permitted transfer. Parent shall cause its transfer agent and exchange agent, as applicable, to cooperate in promptly effecting any permitted transfer of Parent Common Stock.
(b) Maintenance of Automatic Shelf Registration Statement. From the date of this Agreement until the earlier of (A) six (6) months following the latest date on which shares of Parent Common Stock may be issued to Securityholders pursuant to this Agreement, (B) the termination of this Agreement in accordance with its terms, and (C) the date on which all shares of Parent Common Stock issued or may be issuable pursuant to this Agreement cease to be Registrable Securities, Parent shall (i) maintain its status as a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) and remain eligible to use an automatic shelf registration statement on Form S-3, (ii) not voluntarily take any action that would reasonably be expected to cause it to cease to be so eligible, and (iii) maintain in full force and effect its Registration Statement on Form S-3 (File No. 333-291945) (or a successor automatic shelf registration statement filed in replacement thereof) covering the resale of Parent Common Stock by selling securityholders, including by filing any replacement automatic shelf registration statement as may be necessary to maintain continuous effectiveness of such registration statement (any such registration statement, the “Registration Statement”).
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(c) Prospectus Supplements.
(i) Parent shall, at its sole cost and expense, prepare and, promptly (but in no event later than the third (3rd) Business Day) following the Closing, file with the SEC a prospectus supplement pursuant to Rule 424(b) under the Securities Act (together with any amendments or supplements thereto, the “Closing Prospectus Supplement”) identifying the Securityholders as selling securityholders and shall take all such other actions as are necessary so that, immediately following such filing, all shares of Parent Common Stock issued to the Securityholders at the Closing pursuant to this Agreement may be offered and resold by such holders pursuant to the Registration Statement, subject only to compliance by such holders with applicable securities laws and the delivery of any information reasonably requested by Parent that is required to be included in the Closing Prospectus Supplement under applicable Law.
(ii) Parent shall, at its sole cost and expense, prepare and, promptly (but in no event later than the third (3rd) Business Day) following each Earn-Out Amount Determination Date on which shares of Parent Common Stock are determined to be issuable, file with the SEC a prospectus supplement pursuant to Rule 424(b) under the Securities Act (in each case, together with any amendments or supplements thereto, an “Earn-Out Prospectus Supplement”) identifying the Securityholders as selling securityholders and shall take all such other actions as are necessary so that, immediately following such filing, all shares of Parent Common Stock issued to the Securityholders as part of the Earn-Out Amount pursuant to this Agreement may be offered and resold by such holders pursuant to the Registration Statement, subject only to compliance by such holders with applicable securities laws and the delivery of any information reasonably requested by Parent that is required to be included in the Earn-Out Prospectus Supplement under applicable Law.
(d) Preparation; Review. Parent shall prepare each of the Closing Prospectus Supplement and Earn-Out Prospectus Supplement (collectively, the “Prospectus Supplements” and, each, a “Prospectus Supplement”) in consultation with the Company or the Securityholder Representative, as applicable. Parent shall provide the Company or the Securityholder Representative, as applicable, and its counsel with a reasonable opportunity to review and comment on each such Prospectus Supplement (and any amendment or supplement thereto) prior to filing and shall consider in good faith all reasonable comments of the Company or the Securityholder Representative, as applicable; provided that such comments are provided to Parent no later than five (5) Business Days of receipt of the draft of such Prospectus Supplement. Parent shall consult with the Company or the Securityholder Representative, as applicable, prior to filing any Prospectus Supplement and prior to filing any amendment or supplement thereto. The Prospectus Supplements shall only include the Registrable Securities, and as a condition to its obligations under this Section 5.13, the Securityholders shall furnish to Parent not less than five (5) Business Days prior to the date of filing such Prospectus Supplement information that is required to satisfy the disclosure requirements relating to the registration and the distribution of such securities under the Securities Act and the rules and regulations promulgated thereunder as Parent may from time to time reasonably request in writing. None of the information supplied (or to be supplied) by or on behalf of the Securityholders for inclusion or incorporation by reference in the applicable Registration Statement or Prospectus Supplement will, at the time any post-effective amendments or supplements become effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading.
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(e) Maintenance of Registration; Updates. From the Closing Date until the earlier of (A) six (6) months following the latest date on which shares of Parent Common Stock may be issued to Securityholders pursuant to this Agreement, (B) the termination of this Agreement in accordance with its terms, and (C) the date on which all shares of Parent Common Stock issued or may be issuable pursuant to this Agreement cease to be Registrable Securities, Parent shall maintain the continued effectiveness of the Registration Statement and the availability of the Prospectus Supplements for the resale of shares of Parent Common Stock, in each case, subject to Parent’s right to suspend the use of the Registration Statement and the Prospectus Supplements pursuant to Section 5.13(f), including by (i) filing on a timely basis all prospectus supplements, amendments and, if required, post-effective amendments necessary under the Securities Act and the rules and regulations promulgated thereunder to keep the Registration Statement effective and the Prospectus Supplements current and usable for resales of shares of Parent Common Stock, (ii) filing any replacement registration statement if necessary to maintain such effectiveness, and (iii) complying in all material respects with the Securities Act and the Exchange Act in connection therewith.
(f) Suspension of Registration Statement. Parent shall have the right at any time, upon written notice to the Securityholder Representative (with immediate effect), to suspend the use of the Registration Statement or the Prospectus Supplements after effectiveness and require that the Securityholders immediately cease sales of shares pursuant to any Registration Statement or Prospectus Supplement, in each case, (A) if Parent reasonably determines that continued use of the Registration Statement or Prospectus Supplement would require disclosure of material nonpublic information that Parent has a bona fide business purpose for preserving as confidential and whose disclosure would reasonably be expected to result in a violation of applicable securities laws, (B) there is a contemplated financing, acquisition, disposition, corporate reorganization, merger, or other similar transaction or other material event or circumstance affecting Parent or its securities, or (C) any other event occurs as a result of which the Registration Statement or any Prospectus Supplement, including any document incorporated by reference therein, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (each, a “Suspension Period”). Parent shall promptly notify the Securityholder Representative of the commencement of any Suspension Period (without being required to disclose the underlying confidential information). If Parent suspends the use of any Registration Statement or Prospectus Supplement and requires the Securityholders to cease sales of shares pursuant to this Section 5.13(f), Parent shall, as promptly as reasonably practicable following the termination of the circumstance which entitled Parent to do so, take such actions as may be reasonably necessary to terminate such suspension and give written notice to the Securityholder Representative authorizing the Securityholders to resume sales pursuant to such Registration Statement and the applicable Prospectus Supplement. No Suspension Period shall exceed forty-five (45) consecutive days, and the aggregate duration of all Suspension Periods shall not exceed ninety (90) days during any twelve (12)-month period. Promptly following the termination of any Suspension Period (and in any event within two (2) Business Days thereafter), Parent shall notify the Securityholder Representative that resales may resume and shall take all actions reasonably necessary to permit the prompt resale of the Registrable Securities, including delivering any transfer agent instructions, legal opinions, officer's certificates or other documentation reasonably required by its transfer agent and removing any restrictive legends or stop-transfer instructions no longer required under applicable securities Laws.
(g) Indemnification. Each Securityholder shall, severally and not jointly, indemnify, defend and hold harmless Parent and its directors, officers, employees, agents and Affiliates from and against any and all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any information furnished by or on behalf of such Securityholder for inclusion in the Registration Statement or any Prospectus Supplement, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such Losses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished to Parent by or on behalf of such Securityholder for use therein.
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(h) Issuance of Parent Common Stock; Absence of Restrictive Legends.
(i) Parent shall cause its transfer agent to issue, in book-entry form and without any restrictive legend and any stop-transfer restrictions applicable thereto, (A) at the Closing, to the Exchange Agent, to be held as part of the Exchange Fund and delivered to the applicable holders in accordance with Section 2.8(b), the shares of Parent Common Stock issuable in connection with the Closing and (B) at each Earn-Out Amount Determination Date, any shares of Parent Common Stock issuable as part of the Earn-Out Amount in accordance with Section 2.7. Parent shall, at its sole cost and expense, deliver (or cause to be delivered) any legal opinions, officer’s certificates, transfer agent instructions or other documentation reasonably necessary to effect such issuance without any restrictive legend or stop-transfer restrictions applicable thereto.
(ii) Without limitation to any of the rights of the Securityholders or the Securityholder Representative, if any Prospectus Supplement has not been timely filed in accordance with the requirements set forth in this Agreement, Parent shall promptly cause the shares of Parent Common Stock that were otherwise contemplated to be subject to such Prospectus Supplement to be issued in book-entry form on the date by which such Prospectus Supplement was required to be filed, subject to any restrictive legends required by applicable Law, and shall cause such legends to be removed when (A) the applicable Prospectus Supplement has been filed, (B) such shares have been sold pursuant to Rule 144, (C) such shares are eligible for sale pursuant to Rule 144 without volume limitation or other restrictions on transfer thereunder, or (D) such shares otherwise become freely transferable under applicable securities Laws, in each case, upon delivery to Parent of such certifications as Parent may reasonably require to confirm that such legend removal or transfer is appropriate.
(iii) Notwithstanding anything to the contrary herein, each applicable holder shall be entitled to receive (A) with respect to any such shares issuable in connection with the Closing as of the First Effective Time, any dividends or other distributions declared with a record date occurring on or after the First Effective Time and (B) with respect to any such shares issuable as part of the Earn-Out Amount as of the applicable Earn-Out Amount Determination Date, any dividends or other distributions declared with a record date occurring on or after the applicable Earn-Out Amount Determination Date.
(i) Lock-Up. Each Securityholder agrees that it shall not, and shall cause and direct each of its controlled Affiliates not to, Transfer any shares of Parent Common Stock originally received by such Securityholder as Per Share Stock Consideration pursuant to this Agreement and which is either held by such Securityholder or controlled Affiliate at such time, during each of (A) the period beginning on the tenth (10th) Trading Day prior to December 31, 2027 until December 31, 2027 and (B) the period beginning on the tenth (10th) Trading Day prior to the date that is three (3) Trading Days prior to the Earn-Out Amount Determination Date until such Earn-Out Amount Determination Date.
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5.14 Tax Matters.
(a) Straddle Periods. For the applicable purposes of this Agreement, in the case of any Straddle Period, (i) in the case of any Taxes that are not described in clause (ii) below, the amount of such Taxes for the Straddle Period that is allocated to the portion of such Straddle Period ending on and including the Closing Date shall be deemed to be the amount that would be payable if the taxable period ended at the end of the day on the Closing Date based on an interim closing of the books as of the close of business on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions), other than with respect to property acquired or placed in service after the Closing, shall be allocated on a daily basis; and (ii) in the case of any property or other similar ad valorem Taxes that are imposed on a periodic basis, the amount of such Taxes for the Straddle Period that is allocated to the portion of such Straddle Period ending on and including the Closing Date shall be the amount of such Taxes for such entire Straddle Period multiplied by a fraction the numerator of which shall be the number of calendar days in the portion of such Straddle Period ending on and including the Closing Date and the denominator of which shall be the number of calendar days in such entire Straddle Period.
(b) Transfer Taxes. Transfer Taxes shall be borne and paid fifty percent (50%) by Purchaser, on the one hand, and fifty percent (50%) by the Securityholders, on the other hand. Purchaser or the other Party responsible under applicable Law for filing the Tax Returns with respect to any Transfer Taxes shall file, or cause to be filed, all such Tax Returns, and the Securityholder Representative shall reasonably cooperate with Purchaser with respect to such Tax Returns. Notwithstanding anything to the contrary in this Agreement, the portion of any Transfer Taxes borne by the Securityholders pursuant to this Section 5.14(b) shall be reduced, without duplication, by the amount of the Securityholders’ portion of such Transfer Taxes taken into account in the calculation of Final Transaction Costs.
(c) Purchaser Tax Matters. For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement or any other Transaction Document, (1) Purchaser and its Affiliates shall not have any obligation to provide the Securityholder Representative or any other Person any Tax Returns of Purchaser or any of its Affiliates or any related books and records or other information except as solely relating to the Company and its Subsidiaries, on a standalone basis, solely with respect to a Pre-Closing Tax Period, and (2) Purchaser and its Affiliates shall have the right, in such Person’s sole and absolute discretion, to conduct and control, through counsel of such Person’s choosing, the defense of any Tax Contest against or with respect to such Person and to settle, adjust, or compromise any such Tax Contest; provided, however, that, notwithstanding the foregoing or Section 8.3(b), with respect to any Tax Contest of the Company or any of its Subsidiaries with respect to any Pre-Closing Tax Period (i) the subject of which Tax Contest would reasonably be expected to impact (x) the computation of the Final Net Working Capital, the Final Closing Indebtedness or Final Transaction Costs or (y) the amount of Pre-Closing Tax Refund as finally determined under Section 5.14(e) or (ii) for which a Purchaser Indemnified Party provides a Claim Notice to the Securityholder Representative pursuant to Section 8.3 (a “Pre-Closing Tax Contest”), Purchaser shall (A) keep the Securityholder Representative reasonably informed of material developments therein, (B) permit the Securityholder Representative, at its sole cost and expense, to participate in such Pre-Closing Tax Contest, including by providing the Securityholder Representative with copies of material written correspondence and submissions and a reasonable opportunity to comment thereon, which comments Purchaser shall consider in good faith, and (C) not settle, adjust, or compromise such Pre-Closing Tax Contest in a manner that would reasonably be expected to result in or increase any amount economically borne by any Securityholder without the prior written consent of the Securityholder Representative, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, further, that in the event that the Securityholder Representative has consented in writing to any such settlement, adjustment or compromise, such settlement, adjustment or compromise shall be determinative of the existence and amount of Losses and neither the Securityholder Representative nor any Securityholder shall have any power or authority to object to the amount of any claim by any Purchaser Indemnified Party for indemnity with respect to such settlement, adjustment or compromise. For the avoidance of doubt, the conduct and control of any Tax Contests shall be governed solely by the provisions of this Section 5.14(c), and not by the terms of Section 8.3(b).
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(d) Intended Tax Treatment.
(i) After the Closing, if the Mergers and this Agreement satisfy the requirements under applicable Law for the Intended Tax Treatment, including the requirements of Treasury Regulations Section 1.368-1(e), the Parties shall file U.S. federal and applicable state and local income Tax Returns consistently with the Intended Tax Treatment, unless otherwise required by or as a result of any (i) change in applicable Law or (ii) Governmental Entity in connection with or following any Tax Contest. Notwithstanding the foregoing or anything else to the contrary in this Agreement or any other Transaction Document, except for the covenants expressly set forth in this Section 5.14(d), none of Purchaser, Parent, Surviving Merger Sub, First Merger Sub, or any other Affiliate or representative of Purchaser makes or provides any representations, warranties, guarantees, indemnities or covenants to the Company, any Affiliate of the Company, any Securityholder, the Securityholder Representative or any other Person regarding (A) the Intended Tax Treatment, (B) the Tax treatment of the Mergers or the Transactions or (C) any of the Tax consequences to the Company, any Affiliate of the Company, any Securityholder or any other Person of this Agreement, the Mergers or the Transactions. Each of the Company, any Affiliate of the Company, the Securityholder Representative and any Securityholder agrees and acknowledges that (1) such Person has had an adequate opportunity to review with its own Tax advisors the Tax treatment and the Tax consequences of this Agreement, the Mergers or the Transactions, (2) such Person must rely solely on its own advisors and not on any statements or representations by Purchaser, Parent, Surviving Merger Sub, First Merger Sub, or any other Affiliate or representative of Purchaser, and (3) such Person will be solely responsible for any Taxes imposed on or with respect to such Person as a result of or in connection with the Transactions. Until the date that is the two (2) year anniversary of the Closing Date, if the requirements for the Intended Tax Treatment are otherwise satisfied, Purchaser and its Affiliates shall not take any action (or formulate or adopt any plan to take any action) (I) that would reasonably be expected to prevent the “continuity of business enterprise” requirement under Treasury Regulations Section 1.368-1(d) from being satisfied (excluding, for the avoidance of doubt, any transfer permitted under Treasury Regulations Section 1.368-2(k)) or (II) to effect or permit any liquidation of Purchaser (including any deemed liquidation of Purchaser for U.S. federal income tax purposes), in each case of clauses (I) and (II), which would reasonably be expected to have a material adverse impact on the Intended Tax Treatment, except as expressly contemplated under this Agreement or any other Transaction Document (including that this covenant shall not affect the structure of the contemplated transactions or amount or form of the consideration as contemplated by this Agreement); provided that none of Purchaser or any of its Affiliates shall be deemed to have breached, or shall have any liability to any Person in respect of, the covenant set forth in this Section 5.14(d)(i) to the extent that any failure of any requirement under applicable Law for the Intended Tax Treatment to be satisfied is attributable, in whole or in part, to, (x) any action taken (or plan formulated or adopted) by or on behalf of the Company, any of its Subsidiaries or any Managed Entity at or prior to the Closing or (y) any action taken (or plan formulated or adopted) by, at the direction of or with the consent of the Securityholder Representative or the Key Employee, in each case of clauses (x) and (y), whether such action (or plan) operates alone or in combination with any other action taken (or plan formulated or adopted) by Purchaser or any of its Affiliates.
(ii) The Earn-Out Amount shall be paid in shares of Parent Common Stock to the extent necessary, if possible, so that the Earn-Out Amount does not cause the “continuity of interest” requirement under Treasury Regulations Section 1.368-1(e) in relation to the Intended Tax Treatment to not be satisfied; provided that, for purposes of computing the number of shares of Parent Common Stock required to be paid as Earn-Out Amount for purposes of this Section 5.14(d)(ii), the Parties agree that: (1) the minimum proportion of the proprietary interests in the Company required to be preserved under Treasury Regulations Section 1.368-1(e) is forty percent (40%); (2) the Securityholders’ rights to receive the Earn-Out Amount shall not be valued on an estimated basis on the Closing Date, and instead valued as any Earn-Out Amount becomes actually payable pursuant to Section 2.7; (3) the Per Share Stock Consideration shall be valued using the Parent Stock Price; and (4) any share of Parent Common Stock to be paid as Earn-Out Amount shall be valued using the Earn-Out Payment Date VWAP. Purchaser and Securityholder Representative shall cooperate reasonably and in good faith to determine the minimum amount (if any) of the Earn-Out Amount to be paid in shares of Parent Common Stock in advance of any payment of the Earn-Out Amount consistently with the requirements of this Section 5.14(d)(ii) and taking into account the Per Share Merger Consideration. For the avoidance of doubt, (1) nothing in this Section 5.14(d)(ii) shall (A) increase the aggregate Earn-Out Amount payable pursuant to Section 2.7 or (B) alter the requirement that the aggregate cash portion of any Earn-Out Amount be determined by valuing any shares of Parent Common Stock payable as part of such Earn-Out Amount using the Parent VWAP and subtracting such aggregate value of the shares of Parent Common Stock from the Earn-Out Amount as finally determined pursuant to Section 2.7; and (2) after the Earn-Out Amount has been paid with the number of shares of Parent Common Stock (if any) and the amount of cash (if any) as mutually agreed by the Purchaser and the Securityholder Representative pursuant to this Section 5.14(d)(ii), Purchaser and its Affiliates shall not have any further obligation or liability to any Person under this Section 5.14(d)(ii).
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(e) Any refunds of Taxes (or credits received in lieu of Tax refunds) of the Company for any Pre-Closing Tax Period that (i) are received by Purchaser or its Affiliates after the Closing Date but before December 31, 2027, (ii) were not taken into account in the computation of the Final Adjustment Amount, (iii) do not arise out of, or relate to, the carryback of any loss, deduction, credit or other Tax attribute arising in any taxable period (or portion thereof) beginning after the Closing, (iv) are not required to be paid over to any third party pursuant to any Contract entered into prior to Closing, and (v) are received with respect to Taxes for which the Securityholders would be responsible pursuant to this Agreement (such refund of Taxes, “Pre-Closing Tax Refunds”), shall be, as reduced by all Taxes of the Purchaser or any of its Affiliates arising as a result thereof and any reasonable out-of-pocket expenses and costs incurred by Purchaser or any of its Affiliates related to such Pre-Closing Tax Refunds, for the account of the Securityholders. Within ten (10) days after such Pre-Closing Tax Refund is actually received by Purchaser or any of its Affiliates (or in the case of a credit in lieu of tax refunds, within ten (10) days after the date of filing of the Tax Return (other than an estimated Tax Return) upon which such credit is utilized), Purchaser shall pay, or cause to be paid, the amount required to be paid under this Section 5.14(e) in cash, pursuant to the same procedure described in Section 2.7(f), mutatis mutandis. To the extent that, prior to the date that is the two (2) year anniversary of the date a Pre-Closing Tax Refund is paid to the Securityholders pursuant to this Section 5.14(e), a Tax Contest is initiated with respect to (or otherwise involving) such Pre-Closing Tax Refund, the Securityholders shall repay to Purchaser (including by offset against any Earn-Out Amount or amounts released or releasable from the Adjustment Escrow Account or the Indemnity Escrow Account), within ten (10) days after the Securityholder Representative’s receipt of a written request from Purchaser accompanied by reasonable supporting documentation of such determination and the amount claimed, the amount of such Pre-Closing Tax Refund that is determined through such Tax Contest to be disallowed or required to be returned or repaid to the applicable Governmental Entity (together with any applicable interest, penalties, fines and other additions imposed by such Governmental Entity, but excluding any such interest or penalties to the extent resulting from (i) any breach of this Agreement by Purchaser or its Affiliates or (ii) any failure by Purchaser or its Affiliates to timely file any Tax Return or pay any amount when due (other than, in each case of the immediately foregoing clauses (i) and (ii), for the avoidance of doubt, any such breach or failure by the Company prior to the Closing)).
5.15 Exclusivity. During the period from the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article VII, the Company shall not, and shall cause the Company’s Subsidiaries, Securityholders, the Managed Entities and the employees, officers and directors of the Company, its Subsidiaries and the Managed Entities not to, and shall instruct the Managed Entities and the third-party representatives of the Company and its Subsidiaries not to, (i) solicit, initiate or engage in any inquiries, negotiations or discussions with, or enter into any agreement, arrangement or understanding with any Person (other than Purchaser, Merger Subs, their respective Affiliates, and their respective representatives) concerning, any Acquisition Proposal (and to cease any existing discussions or negotiations or information access with respect thereto) (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding an Acquisition Proposal, or furnish to any Person any non-public information or data for the purpose of facilitating an Acquisition Proposal or any inquiry, proposal or offer that is reasonably likely to lead to any Acquisition Proposal (in each case other than, in response to an inquiry that did not result from or arise in connection with a breach of this Section 5.15, solely to clarify the terms of this Section 5.15), (iii) enter into any agreement in principle, memorandum of understanding, letter of intent, term sheet, definitive acquisition agreement, merger agreement, share exchange agreement, consolidation agreement, option agreement, joint venture agreement, partnership agreement or other agreement providing for an Acquisition Proposal, or (iv) publicly propose to do any of the foregoing. Notwithstanding the foregoing, in response to an inquiry that did not result from a breach of this Section 5.15, the Company and its representatives may inform the Person making such inquiry of the restrictions contained in this Section 5.15. The Company shall, and shall instruct its Affiliates and representatives to, terminate any existing discussions or negotiations with any Person (other than Purchaser, Parent, Merger Subs and their respective representatives) regarding an Acquisition Proposal. During the period from the date of this Agreement until the earlier of the Closing or the termination of this Agreement pursuant to Article VII, the Company shall notify Purchaser in writing within 48 hours after receipt by the Company of any Acquisition Proposal.
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5.16 Notification of Certain Matters. During the period from the date of this Agreement until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article VII, each Party shall give prompt notice to the other Party of any event which such Party becomes aware of, the occurrence, or non-occurrence of which causes any of the conditions set forth in Article VI to fail at any time from the date of this Agreement to the First Effective Time.
5.17 Section 280G.
(a) Parachute Payment Waiver. The Company shall use its commercially reasonable efforts to obtain prior to the initiation of the stockholder approval procedure under Section 5.17(b), a waiver of the right to receive payments that could constitute “parachute payments” under Section 280G of the Code and regulations promulgated thereunder (a “Parachute Payment Waiver”), in a form reasonably acceptable to Purchaser, from each applicable “disqualified individual” (within the meaning of Section 280G of the Code and the regulations promulgated thereunder), as determined immediately prior to the initiation of the stockholder approval procedure under Section 5.17(b), who the Company believes might otherwise receive, have received, or have the right or entitlement to receive any parachute payment under Section 280G of the Code.
(b) 280G Stockholder Approval. The Company shall use its commercially reasonable efforts to obtain stockholder approval as is required by the terms of Section 280G(b)(5)(B) of the Code and the regulations promulgated thereunder so as to render the parachute payment provisions of Section 280G of the Code inapplicable to any and all payments and/or benefits provided pursuant to the Contracts or arrangements that, in the absence of the executed Parachute Payment Waivers by the affected Persons under Section 5.17(a), might otherwise result, separately or in the aggregate, in the payment of any amount and/or the provision of any benefit that would not be deductible by reason of Section 280G of the Code, with such stockholder vote to be obtained in a manner which satisfies all applicable requirements of Section 280G(b)(5)(B) of the Code and the regulations promulgated thereunder. The Company shall provide to Purchaser, prior to obtaining any executed Parachute Payment Waivers, (a) a draft of the form of Parachute Payment Waiver and the documents relating to the stockholder approval procedure under this Section 5.17(b), including a draft of the disclosure to be provided to the applicable stockholders in accordance with Section 280G(b)(5)(B) of the Code and Q-7 of Section 1.280G-1 of the Treasury Regulations and (b) copies of documentation regarding the determination of the parachute payments pursuant to the Parachute Payment Waivers, including any applicable calculations prepared by the Company or the Company’s advisors. The Company shall incorporate any reasonable comments made by Purchaser to the form of Parachute Payment Waiver and such documents prior to the Company soliciting executed Parachute Payment Waivers and submitting a written resolution to the applicable stockholders for approval in accordance with this Section 5.17(b), which comments shall not be unreasonably withheld, conditioned or delayed. Prior to the Closing, the Company shall deliver to Purchaser evidence either (i) the requisite stockholder approval was obtained with respect to any payments or benefits that were subject to the stockholder vote (the “280G Shareholder Approval”) or (ii) that the 280G Shareholder Approval was not obtained.
5.18 Specified Actions. Prior to the Closing, the Company shall, and shall cause its applicable Subsidiaries to, use commercially reasonable efforts to complete the actions set forth in Schedule 5.18 of the Company Disclosure Letter.
5.19 Medical Malpractice Insurance. From the date of this Agreement until the earlier of the Closing and the termination of this Agreement under Article VII, the Company shall, and shall cause its Subsidiaries and the Managed Entities to: (a) keep each medical malpractice insurance policy listed on Schedule 5.7(e) of the Company Disclosure Letter (the “MedMal Policies”) in full force and effect, on the same or no less favorable terms to the Company and its Subsidiaries as those in effect on the date of this Agreement (including coverage limits, retentions and deductibles, scope of coverage, covered persons), (b) not cancel, terminate, allow to lapse, fail to renew, surrender or reduce coverage under any MedMal Policy, and not amend, modify or waive any term of any MedMal Policy in a manner that would make it less favorable to the Company and its Subsidiaries than on the date of this Agreement and (c) timely pay all premiums and other amounts due under each MedMal Policy and otherwise comply in all material respects with its terms.
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Article
VI
Closing Conditions
6.1 Conditions to Each Party’s Obligation to Effect the Transactions. The respective obligations of each Party to consummate the Transactions is subject to the satisfaction or, to the extent lawful, waiver by Purchaser and the Company at or prior to the Closing of each of the following conditions:
(a) Governmental and Regulatory Filings. The notices, consents, approvals, waiting periods or other actions required prior to the Closing set forth on Schedule 6.1(a) have been submitted, obtained, expired, waived or taken, as applicable.
(b) No Legal Prohibition. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) that is in effect and makes illegal, enjoins or otherwise prohibits consummation of the Transactions, and there shall not be any pending Action by any Governmental Entity of competent jurisdiction before a court of competent jurisdiction seeking the enforcement of any Order that would make illegal, enjoin or otherwise prohibit the consummation of the Transactions.
6.2 Conditions to Obligations of Purchaser, Parent and Merger Subs. The obligations of Purchaser, Parent and Merger Subs to consummate the Transactions is also subject to the satisfaction or, to the extent lawful, waiver by Purchaser at or prior to the Closing of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Company set forth in Section 3.7(c) shall be true and correct on and as of the date hereof and as of the Closing Date as though made at and as of such time, (ii) the Company Fundamental Representations shall be true and correct in all material respects on and as of the date hereof and as of the Closing Date as though made at and as of such time (except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case as of such date), and (iii) all other representations and warranties of the Company set forth in Article III, shall be true and correct (without giving effect to qualifications or limitations as to “materiality”, “Material Adverse Effect” or words of similar import as set forth therein) on and as of the date hereof and as of the Closing Date as though made at and as of such time (except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case as of such date), except to the extent that the failure to be true and correct has not had or would not reasonably be expected to have a Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by the Company under this Agreement at or prior to the Closing.
(c) Officer’s Certificate. An officer of the Company shall have executed and delivered to Purchaser on behalf of the Company a certificate certifying that the Company has satisfied the conditions set forth in Section 6.2(a) and Section 6.2(b).
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(d) Key Employee. The Key Employee will not have (i) revoked, rescinded or repudiated the Employment Agreement, (ii) terminated his employment or engagement with the Company, or (iii) failed to remain employed by the Company through the Closing; excluding, in each case of clause (i) through (iii), any termination or cessation of employment by virtue of death or disability.
(e) Managed Entities. The Company and its Subsidiaries, and the directors and equityholders of the Managed Entities, shall have taken all steps required to convey all ownership interests in each Managed Entity to the physician identified in Schedule 6.2(e) of the Company Disclosure Letter (the “Designated Physician”), who shall be licensed as required in each jurisdiction in which such Managed Entity conducts business to allow for such transfer to take place. Notwithstanding the foregoing, with respect to any Managed Entity, the condition in this Section 6.2(e) shall be deemed satisfied if (x) the Designated Physician is not appropriately licensed or registered in any jurisdiction in which such Managed Entity conducts business or other activities and the transfer of the equity interests of such Managed Entity to the Designated Physician fails to occur as a result thereof and (y) the Company has, prior to the Closing, obtained executed signature pages from the owners of such Managed Entity to the applicable definitive agreement contemplated to effectuate such transfer and received authorization from such owners to release their signature pages promptly following the receipt of the appropriate licenses or registrations by the Designated Physician.
(f) Consents. Purchaser shall have received duly executed copies of all third-party consents, approvals, assignments, waivers, authorizations, or other certificates set forth in Schedule 6.2(f) of the Company Disclosure Letter.
(g) Required Stockholder Approval. The written consent of Stockholders of the Company constituting the Required Stockholder Approval shall have been obtained and delivered to Purchaser and such consent shall not have been amended, modified, rescinded or revoked, and shall remain in full force and effect.
(h) Restrictive Covenant Agreements. Each Restrictive Covenant Agreement will be in full force and effect immediately prior to the First Effective Time.
(i) Dissolution. Direct Radiology Wisconsin Service Corporation shall have been dissolved prior to the Closing Date in accordance with all applicable Laws, and its existence shall have been terminated.
6.3 Conditions to Obligations of the Company. The obligations of the Company to consummate the Transactions is also subject to the satisfaction or, to the extent lawful, waiver by the Company at or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties of Purchaser, Parent and Merger Subs set forth in this Agreement shall be true and correct in all material respects on and as of the date hereof and as of the Closing Date as though made at and as of such time (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case as of such date).
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(b) Performance of Obligations of Purchaser, Parent and Merger Subs. Purchaser and Parent shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.
(c) Officer’s Certificate. An officer of each of Purchaser, Parent and each Merger Sub shall have executed and delivered to the Company and the Securityholder Representative on behalf of Purchaser, Parent and each Merger Sub a certificate certifying that each of Purchaser, Parent and each Merger Sub has satisfied the conditions set forth in Section 6.3(a) and Section 6.3(b).
(d) Shelf Registration Statement; Prospectus Supplement. As of the Closing, (i) Parent shall have in effect the Registration Statement, effective and available for use and (ii) no stop order or other Order suspending the effectiveness or use of the Registration Statement shall be in effect or pending or, to the knowledge of Purchaser or Parent, threatened by the SEC.
6.4 Frustration of Closing Conditions. No Party may rely on the failure of any condition set forth in Section 6.1, Section 6.2 or Section 6.3, as the case may be, to be satisfied if such failure was due to the failure of such Party or its Subsidiaries to perform any of its obligations under this Agreement.
Article
VII
Termination
7.1 Termination by Mutual Consent. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing by mutual written consent of Purchaser and the Company.
7.2 Termination by Either Purchaser or the Company. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing by either Purchaser or the Company if (a) the Transactions shall not have been consummated by February 23, 2027, as may be extended pursuant to Section 10.13(b) or the last sentence of this Section 7.2 below (the “Termination Date”), or (b) any Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Order that is in effect and permanently enjoins or otherwise prohibits the consummation of the Transactions and such Order shall become final and non-appealable; provided, that the right to terminate this Agreement pursuant to clause (a) above shall not be available to any party that has breached its obligations under this Agreement in any manner that has been a material cause of or resulted in the failure of the Closing to be consummated on or prior to such date. If, on the date that would otherwise be the Termination Date, the only Closing condition set forth in Article VI that has not been satisfied or waived is the condition set forth in Section 6.1(a) (Governmental and Regulatory Filings), then the Termination Date shall automatically be extended without any action by any Party or any notice to June 1, 2027, in order to permit compliance with any applicable Healthcare Transaction Oversight Laws or other state healthcare regulatory Laws relating to the change of ownership of the Company, its Subsidiaries or any Managed Entity, including without limitation the receipt of any approvals or consents required thereunder.
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7.3 Termination by the Company. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing by the Company if there has been a breach of any representation, warranty, covenant or agreement made by Purchaser, Parent or Merger Subs in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 6.3(a) or 6.3(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier of (a) thirty (30) days after written notice thereof is given by the Company to Purchaser, and (b) the Termination Date; provided, that the Company is not then in material breach of any of its representations, warranties, covenants or obligations under this Agreement, which breach would result in the failure to satisfy one (1) or more of the conditions set forth in Section 6.2.
7.4 Termination by Purchaser for Breach. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing by Purchaser if there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 6.2(a) or 6.2(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier of (a) thirty (30) days after written notice thereof is given by Purchaser to the Company, and (b) the Termination Date; provided, that neither Purchaser, Parent nor any Merger Sub is then in material breach of any of its representations, warranties, covenants or obligations under this Agreement, which breach would result in the failure to satisfy one (1) or more of the conditions set forth in Section 6.3.
7.5 Termination by Purchaser for Failure to Deliver Required Stockholder Approval. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing by Purchaser if written consent of Stockholders of the Company constituting the Required Stockholder Approval shall not have been duly executed and delivered to Purchaser within 24 hours after the execution and delivery of this Agreement.
7.6 Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Transactions pursuant to this Article VII, this Agreement shall become void and of no effect with no liability on the part of any Party (or of any of its directors, managers, officers, employees, agents, legal and financial advisors or other representatives); provided, however, that (a) no such termination shall relieve any Party of any liability or damages resulting from any willful or intentional breach of this Agreement or Fraud (which claims based upon Fraud may only be made against the Person committing such Fraud and not against any other Person) and (b) the provisions set forth in this Section 7.6 (Effect of Termination and Abandonment), Section 3.26 (No Other Representations and Warranties), Section 4.12 (Investigation; Non-Reliance), Section 5.8 (Expenses), Article X (Miscellaneous and General) and the Confidentiality Agreement shall survive the termination of this Agreement. Without limiting the Company’s rights under any other provision of this Agreement (including the Company’s right to specific performance pursuant to Section 10.13), the Company may petition a court to award damages in connection with any willful or intentional breach by Purchaser or Parent of this Agreement, and Purchaser and Parent agree that such damages shall not be limited to reimbursement of expenses or out-of-pocket costs, but shall include the benefit of the bargain lost by the Company and its stockholders (taking into consideration relevant matters, including other transaction opportunities and the time value of money). For purposes hereof, a “willful or intentional breach” shall mean a breach of any material representation, warranty, covenant or other agreement set forth in this Agreement that is a consequence of an act undertaken or failure to act by the breaching party with the actual knowledge that the taking of such act or failure to act would cause a breach of this Agreement. The failure of Purchaser or Parent to consummate the Closing for any reason when required pursuant to the terms of this Agreement and/or to make the payments required under Article I and Article II for any reason when required pursuant to the terms of this Agreement shall, in each case, be a willful and intentional breach of this Agreement by it that (i) is not capable of being cured, (ii) has prevented consummation of the transactions contemplated hereby, and (iii) gives rise to the Company’s termination right pursuant to Section 7.3.
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Article
VIII
Indemnification
8.1 Survival.
(a) Other than in the case of Fraud, the survival date applicable to the Company Fundamental Representations shall be the three (3) year anniversary of the Closing Date, and all other representations and warranties of the Parties contained in this Agreement shall survive the Closing until the date that is twelve (12) months from the Closing Date, and, in each case, subject to Section 8.1(e), after such date there shall be no liability on the part of, nor shall any claim be made by, any Person in respect of such representations and warranties. Without limitation to the foregoing, and other than as set forth in Section 8.2(a)(i) (subject to the limitations herein), the R&W Insurance Policy shall be the sole and exclusive remedy of Purchaser, Parent and their respective Affiliates for all Losses related to or arising from the breach of any representation or warranty set forth in this Agreement (other than the Company Fundamental Representations as provided for in this Article VIII and in the case of Fraud), irrespective of the coverage limits under any such R&W Insurance Policy, or whether Purchaser maintains any R&W Insurance Policy following the Closing, or whether any such R&W Insurance Policy is revoked, cancelled or modified in any manner after issuance.
(b) The covenants and agreements of the Parties contained in this Agreement required by the express terms of this Agreement to be performed or fulfilled at or prior to the Closing shall terminate as of the Closing, and neither Party nor any of its Affiliates nor its or their respective representatives shall have any recourse against the other Party or any of its Affiliates or its or their respective representatives with respect to such covenants and agreements. The right to make claims pursuant to Section 8.2(a)(iii)(A), Section 8.2(a)(iv), Section 8.2(a)(vii), and Section 8.2(a)(viii) shall survive the Closing until the date that is the two (2) year anniversary of the Closing Date, the right to make claims pursuant to Section 8.2(a)(v) shall survive the Closing until the expiration of the Earn-Out Period, the right to make claims pursuant to Section 8.2(a)(iii)(B) shall survive indefinitely (except that the right to make claims as to any covenant or agreement that is contemplated hereunder to expire on a date certain shall only survive until the date that is the two (2) year anniversary of the expiration of such covenant or agreement), and the right to make claims pursuant to Section 8.2(a)(vi) shall survive indefinitely.
(c) All other covenants and agreements contained in this Agreement shall survive the Closing until performed in accordance with their respective terms.
(d) Other than in the case of Fraud, subject to Section 8.1(e), no Party shall have any liability to any Person with respect to any applicable Section of this Article VIII following the applicable survival date specified in this Section 8.1, which supersedes any statute of limitations that would otherwise apply, and no Party shall thereafter assert any claim, cause of action, right or remedy, or any Action, with respect to such applicable Section of this Article VIII.
(e) If on or prior to the last day of the applicable survival period for an item set forth in Section 8.1(a) or Section 8.1(b) (the “Applicable Survival Period”), a Purchaser Indemnified Party has validly and timely delivered to the Securityholder Representative a Claim Notice with respect to any such item in accordance with the requirements set forth in this Article VIII, then the Applicable Survival Period with respect to such claim shall extend until the Final Determination of such indemnification claim. If the Applicable Survival Period is longer than the statute of limitations that would otherwise have been applicable to such item, then, by contract, the applicable statute of limitations with respect to such item shall be increased to the extended Applicable Survival Period contemplated hereby. The Parties further acknowledge that the survival periods in this Section 8.1 are the result of arm’s length negotiation among the Parties and that the Parties intend for such survival periods to be enforced as agreed by the Parties.
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8.2 Indemnification by Securityholders.
(a) Subject to the limitations and other requirements in this Article VIII, following the Closing Date until the expiration of the Applicable Survival Period set forth in Section 8.1, the Securityholders shall, severally and not jointly, indemnify, defend, and hold harmless Purchaser, Parent, the Second Surviving Company, the Managed Entities, and their respective Affiliates, representatives, successors and permitted assigns, in their capacity as such (collectively, the “Purchaser Indemnified Parties”), for, from and against all Losses actually incurred or suffered as the result of:
(i) Any failure of any representation or warranty made by the Company contained in Article III of this Agreement (other than the Company Fundamental Representations) to be true and correct on and as of the date of this Agreement or the Closing Date;
(ii) Any failure of any Company Fundamental Representations to be true and correct on and as of the date of this Agreement or the Closing Date;
(iii) (A) Any failure, partial or total, of the Company or any Securityholder to perform any agreement or covenant required by it prior to the Closing, and (B) (x) any failure, partial or total, of the Securityholder Representative to perform any agreement or covenant required by this Agreement to be performed by it following the Closing and (y) any failure, partial or total, of any Securityholder to (1) fund any deficiency required to be deposited in the Adjustment Escrow Account pursuant to Section 2.6(e)(ii) or (2) perform any agreement, covenant or obligation of such Securityholder required to be performed following the Closing pursuant to Section 5.13(a)(ii), Section 5.13(i) or Section 5.14(e);
(iv) Any demand for appraisal rights, including any amounts paid to a holder of Dissenting Shares in excess of the Per Share Merger Consideration such holder would have otherwise received under this Agreement;
(v) Any Transaction Costs or Indebtedness not taken into account in the calculation of the Final Transaction Costs and Final Closing Indebtedness;
(vi) Any Fraud;
(vii) Any and all Losses under Section 5.13(g); and
(viii) Any of the matters described in Schedule 8.2(a)(viii).
(b) Limitation on Indemnification
(i) Notwithstanding anything to the contrary contained in this Agreement, the Securityholders’ aggregate liability for all Losses to which the Purchaser Indemnified Parties are entitled pursuant to Section 8.2(a)(i) shall not exceed $1,750,000 (the “Cap”); provided, that no provision herein shall prohibit any Purchaser Indemnified Party from recovery of amounts under the R&W Insurance Policy and the Cap shall not apply in the event of Fraud, in each case, subject to the reimbursement, netting and other limitations relating to double recoveries set forth in Section 8.4.
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(ii) Notwithstanding anything in this Agreement or any other Transaction Document to the contrary, following the Closing, the sole recourse and remedy of any Purchaser Indemnified Party for any claim for indemnification under Section 8.2(a)(i) with respect to breaches of any representation or warranty made by the Company in Article III of this Agreement (other than the Company Fundamental Representations or in the case of Fraud) shall be (A) payment of the Cap, as provided in Section 8.3(a), which shall be satisfied from the Indemnity Escrow Account, and (B) the R&W Insurance Policy, in each case, in accordance with Section 8.2(c).
(iii) For purposes of this Article VIII, any inaccuracy in or breach of any representation or warranty and any Losses arising therefrom shall be determined without regard to any materiality or Material Adverse Effect qualification contained in or otherwise applicable to such representation or warranty.
(iv) Other than in the case of Fraud: (A) the maximum aggregate amount of Losses for which the Purchaser Indemnified Parties shall be entitled to be indemnified, defended or held harmless under Section 8.2(a)(i), Section 8.2(a)(iii)(A), Section 8.2(a)(iv), Section 8.2(a)(v), Section 8.2(a)(vii) and Section 8.2(a)(viii), taken together, shall not exceed an amount equal to ten percent (10%) of the Total Purchase Price, (B) the maximum aggregate amount of Losses for which the Purchaser Indemnified Parties shall be entitled to be indemnified, defended or held harmless under Section 8.2(a)(ii) and Section 8.2(a)(iii)(B), taken together, shall not exceed the Total Purchase Price and (C) the maximum aggregate amount of Losses for which the Purchaser Indemnified Parties shall be entitled to be indemnified, defended or held harmless under Section 8.2(a)(i) and Section 8.2(a)(viii) shall not exceed $10,000,000. For the avoidance of doubt, other than in the case of Fraud or any indemnification claims made pursuant to Section 8.2(a)(ii) or Section 8.2(a)(iii)(B), following the Final Earn-Out Payment Date: (1) the maximum aggregate amount of Losses for which the Purchaser Indemnified Parties shall be entitled to be indemnified, defended or held harmless under this Agreement shall not exceed $10,000,000, and (2) the R&W Insurance Policy and the Indemnity Escrow Account shall be sole and exclusive source of recovery for any indemnification claims of the Purchaser Indemnified Parties under this Agreement.
(v) Notwithstanding anything to the contrary contained in this Agreement, the Securityholders shall have no liability or indemnification obligation under Section 8.2(a)(i) with respect to any breach of any representation or warranty set forth in Section 3.13 (other than the representations and warranties set forth in Section 3.13(j), the last sentence of Section 3.13(h), Section 3.13(o), or clause (i) of Section 3.13(q)) to the extent that any Losses arising therefrom consist of or are attributable to Taxes for (A) any taxable period beginning after the Closing Date or (B) the portion of any Straddle Period beginning after the Closing Date, determined in accordance with Section 5.14(a).
(c) R&W Insurance Policy; Recourse.
(i) Notwithstanding anything to the contrary in this Agreement, with respect to any amounts indemnifiable pursuant to Section 8.2(a)(i) or Section 8.2(a)(ii), the Purchaser Indemnified Parties shall use commercially reasonable efforts to pursue coverage under the R&W Insurance Policy; provided that the Purchaser Indemnified Parties shall not be required to exhaust or await the final determination of, any claim under the R&W Insurance Policy as a precondition to seeking indemnification from the Securityholders or accessing the Indemnity Escrow Account.
(ii) Except in the case of Fraud, any payments required to be made to the Purchaser Indemnified Parties pursuant to Section 8.2(a)(i), Section 8.2(a)(iii)(A), Section 8.2(a)(iv), Section 8.2(a)(v) or Section 8.2(a)(vii) shall be satisfied, after application of the limitations in this Article VIII, solely and exclusively, at the Purchaser’s option, by one or any combination of the following methods: (A) by payment, in accordance with the Escrow Agreement, from the Indemnity Escrow Account, (B) by recourse to the R&W Insurance Policy and/or (C) by setting off such amounts against any Earn-Out Amount owed to the Securityholders under this Agreement. For the avoidance of doubt, no Securityholder shall have any direct indemnification obligation or other liability pursuant to Section 8.2(a)(i), Section 8.2(a)(iii)(A), Section 8.2(a)(iv), Section 8.2(a)(v) or Section 8.2(a)(vii) (other than in the case of Fraud), and no Purchaser Indemnified Party shall have the right to set off any amounts that are the subject of this Section 8.2(c)(ii) against any Earn-Out Amount following the actual payment of any such Earn-Out Amount to the Securityholders.
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(iii) Except in the case of Fraud, any payments required to be made to the Purchaser Indemnified Parties pursuant to Section 8.2(a)(ii) or Section 8.2(a)(iii)(B) shall be satisfied, after application of the limitations in this Article VIII, by the following methods: (A) first, by payment, in accordance with the Escrow Agreement, from the Indemnity Escrow Account, and (B) second, at the sole election of Purchaser, (1) by recourse to the R&W Insurance Policy, (2) by setting off such indemnification obligations against any amounts owed to the Securityholders under this Agreement or any other Transaction Document, in each case subject to and in accordance with this Agreement, or (3) directly from the Securityholders (on a several but not joint basis based on such Securityholder’s Pro Rata Share) in cash, by wire transfer of immediately available funds, to the account or accounts specified by Purchaser.
(iv) Except in the case of Fraud, any payments required to be made to the Purchaser Indemnified Parties pursuant to Section 8.2(a)(viii) shall be satisfied, after application of the limitations in this Article VIII, solely and exclusively, at the Purchaser’s option, by one or both of the following methods: (A) by payment, in accordance with the Escrow Agreement, from the Indemnity Escrow Account, and/or (B) by recourse to the R&W Insurance Policy. For the avoidance of doubt, no Securityholder shall have any direct indemnification obligation or other Liability pursuant to Section 8.2(a)(viii) (other than in the case of Fraud).
8.3 Claim Procedures.
(a) In order for a Purchaser Indemnified Party to duly make a valid claim with respect to any of the occurrences specified in Section 8.2(a), the Purchaser Indemnified Party must (promptly, but in no event more than thirty (30) Business Days following the first date on which such Purchaser Indemnified Party has knowledge of facts, matters or circumstances from which it is reasonably apparent that such an occurrence is likely to have occurred), provide written notice to the Securityholder Representative, which notice shall set forth (i) a description in reasonable detail of the occurrence(s) specified in Section 8.2(a) which the Purchaser Indemnified Party alleges to have occurred, (ii) a description of the facts and circumstances giving rise to such occurrences, the estimated amount of Losses actually incurred or suffered as the result thereof, and (iii) a description of any other remedy sought in connection therewith, any relevant time constraints relating thereto and, to the extent practicable, any other material details pertaining thereto (a “Claim Notice”); provided, that the failure to provide prompt notice shall not release the Securityholders from any of their obligations under this Article VIII except to the extent and only to the extent the Securityholders are prejudiced by such failure. The Purchaser Indemnified Party shall cooperate with and provide to the Securityholder Representative such information under the Purchaser Indemnified Party’s control as the Securityholder Representative may reasonably request for the purposes of determining the validity of the allegations made in the Claim Notice and shall keep the Securityholder Representative reasonably and promptly informed of factual and procedural developments in connection therewith. The Securityholder Representative and the Purchaser Indemnified Party shall use commercially reasonable efforts to avoid production of confidential information (consistent with applicable Law) to third parties and to cause all communications among employees, counsel and others representing any party to a Third Party Claim to be made so as to preserve any applicable attorney-client or work product privileges.
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(b) In the event the Claim Notice results from any Action asserted or threatened against, the Purchaser Indemnified Party by a third party (a “Third Party Claim”):
(i) The Purchaser Indemnified Party shall provide the Claim Notice to the Securityholder Representative not later than the 20th Business Day following the Purchaser Indemnified Party’s receipt of the Third Party Claim, provided, that the failure to provide prompt notice shall not release the Securityholders from any of their obligations under this Article VIII except to the extent the Securityholders are prejudiced by such failure.
(ii) During the period ending on the earlier of the 30th calendar day following the Securityholder Representative’s receipt of the Claim Notice and the fifth calendar day preceding the date on which an appearance is required to be made before a court, arbitrator or other tribunal or an answer or similar pleading is required to be filed in a litigation or other proceeding, the Securityholder Representative shall be entitled to notify the Purchaser Indemnified Party of its election to assume and control the defense of the Third Party Claim, unless the Purchaser Indemnified Party has determined in good faith (which determination, if reasonably ascertainable at the time, must be set forth in the Claim Notice delivered to the Securityholder Representative) that (i) the Third Party Claim seeks an injunction or other equitable or non-monetary relief against the Purchaser Indemnified Party (other than injunctive, equitable or non-monetary relief that is incidental to monetary damages as the primary relief sought), (ii) the Third Party Claim arises in connection with any criminal matter, (iii) the Losses sought in connection with such Third Party Claim are reasonably likely to exceed the Cap, (iv) involves any dispute with a payor or customer, or (v) there is a reasonable probability that the Third Party Claim may materially adversely affect the Purchaser Indemnified Party or its Affiliates other than as a result of monetary damages.
(A) In the event that the Securityholder Representative is entitled to and duly and timely makes such election, the Securityholder Representative shall defend the Purchaser Indemnified Party by appropriate proceedings and shall have the sole power (as between the Securityholder Representative and the Purchaser Indemnified Party and their respective Affiliates) to direct and control such defense and the settlement, arbitration, litigation and appellate strategy relating to the Third Party Claim. The Purchaser Indemnified Party shall be entitled but not obligated to participate in any such defense and to employ separate counsel of its choosing for such purpose; provided, that the fees and expenses shall be borne by the Purchaser Indemnified Party and shall not be recoverable from the Securityholders under this Section 8.3. If the Securityholder Representative shall control the defense of any such claim, the Securityholder Representative shall be entitled to settle such claims; provided that, the Securityholder Representative shall not, without the prior written consent of the Purchaser Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), settle, compromise or offer to settle, compromise or cease to defend such Third Party Claim if such settlement, compromise or cessation would result in (i) any monetary liability of the Purchaser Indemnified Party that will not be promptly paid or reimbursed by the Securityholders; (ii) the imposition of a consent order, injunction or decree that would materially restrict the future activity or conduct of the Purchaser Indemnified Party or any of its Affiliates; or (iii) a finding or admission of a material violation of Law by the Purchaser Indemnified Party or any of its Affiliates.
(B) If the Securityholder Representative is not entitled to or does not duly and timely make such election, the Purchaser Indemnified Party shall be entitled but not obligated (subject to Section 8.7 (Minimizing and Mitigating Losses)) to notify the Securityholder Representative of its election to assume and control such defense from the Securityholder Representative, whereupon the Purchaser Indemnified Party and not the Securityholder Representative shall have the powers described in the first sentence of Section 8.3(b)(ii)(A); provided that the Purchaser Indemnified Party’s right to be indemnified, defended and held harmless in respect of the Third Party Claim shall not otherwise be affected by such election; provided, further, that the Purchaser Indemnified Party may not settle any such matter without the prior written consent of the Securityholder Representative (which shall not unreasonably be withheld, conditioned or delayed) if the Purchaser Indemnified Party is seeking or will seek indemnification hereunder with respect to such matter.
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(C) Purchaser may settle, adjust or compromise any Third Party Claim of which it is entitled to control the defense pursuant to Section 8.3(b)(ii), with or without the consent of the Securityholder Representative; provided, that, without the prior written consent of the Securityholder Representative, which consent shall not be unreasonably withheld, delayed or conditioned, no settlement, adjustment, or compromise of any Third Party Claim shall be determinative of the existence of a claim for indemnification under this Article VIII or the amount of Losses relating to such claim (and the Securityholders shall accordingly have no obligation to indemnify, defend or hold harmless any Purchaser Indemnified Party in respect thereof). In the event that the Securityholder Representative has consented in writing to any such settlement, adjustment or compromise, such settlement, adjustment or compromise shall be determinative of the existence and amount of Losses and neither the Securityholder Representative nor any Securityholder shall have any power or authority to object to the amount of any claim by any Purchaser Indemnified Party for indemnity with respect to such settlement, adjustment or compromise.
(iii) The Purchaser Indemnified Party and the Securityholder Representative shall cooperate in order to ensure the proper and adequate investigation and defense of all Third Party Claims, including by providing reasonable access to each other’s relevant business records, documents and employees, for purposes of investigation, document production, testimony and otherwise. The Purchaser Indemnified Party and the Securityholder Representative shall keep each other fully and promptly informed with respect to the status of all Third Party Claims and shall deliver to each other copies of all material written notices and documents (including court papers) received by the other that relate to any Third Party Claims. The Person controlling the defense of a Third Party Claim shall in good faith allow the Securityholder Representative or Purchaser Indemnified Party, as the case may be, to make comments to the materials filed or submitted in such defense, and shall consider such comments in good faith.
8.4 Losses and Recoveries.
(a) No Speculative or Punitive Damages. Notwithstanding anything to the contrary contained in this Agreement, no Securityholder shall have any liability to a Purchaser Indemnified Party, and no Purchaser Indemnified Party shall be entitled to be indemnified, defended or held harmless, in respect of, and Losses shall not include, any speculative damages, punitive damages or consequential damages (other than consequential damages that are reasonably foreseeable), except to the extent awarded to a third party in a Third Party Claim pursuant to a final and non-appealable Order or judgment of a court of competent jurisdiction.
(b) Insurance. In calculating the amount of any Loss, the proceeds actually received by the Purchaser Indemnified Party or any of its Affiliates under any insurance policy or pursuant to any claim, recovery, settlement or payment by or against any other Person, in each case relating to the matters described in the Claim Notice shall be deducted, less the costs incurred in obtaining such recovery, and the amount of any deductibles, retentions, retrospective premiums, or any increase in premiums attributable for such recovery, except to the extent that the adjustment itself would excuse, exclude or limit the coverage of all or part of such Loss. The Purchaser Indemnified Party shall use commercially reasonable efforts to recover any such insurance or other proceeds from third parties. In the event that, after having complied with the preceding sentence, a Purchaser Indemnified Party still has any rights against a third party with respect to any occurrence, claim or Loss that results in a payment by a Securityholder under this Article VIII, such Securityholder shall be subrogated to such rights to the extent of such payment. Each Purchaser Indemnified Party and Securityholder shall duly execute upon request all instruments reasonably necessary to evidence and perfect the subrogation and subordination rights detailed herein, and otherwise cooperate in the prosecution of such claims.
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(c) Reimbursement. If a Purchaser Indemnified Party recovers an amount from a third party in respect of a Loss after all or a portion of such Loss has been paid by the Securityholders pursuant to this Article VIII, the Purchaser Indemnified Party shall promptly remit to the Securityholders the excess (if any) of (i) the amount paid by the Securityholders in respect of such Loss, plus the amount received from the third party in respect thereof, less (ii) the full amount of the Loss, and less (iii) the costs incurred in obtaining such recovery.
(d) No Double Recovery. No Purchaser Indemnified Party shall be entitled to recover more than once in respect of the same Loss (notwithstanding that such Loss may result from more than one of the occurrences specified in Section 8.2(a)).
8.5 Indemnification Payments.
(a) The Securityholders shall pay (or cause to be paid) to the Purchaser Indemnified Party the amount of any Loss for which it is liable hereunder, in immediately available funds, to an account specified by the Purchaser Indemnified Party no later than five (5) Business Days following any Final Determination of the claims set forth in the related Claim Notice.
(b) In the event that any Loss is incurred or suffered by a Purchaser Indemnified Party in a currency other than U.S. Dollars, and the Purchaser Indemnified Party elects for such claim to indemnification to be paid in U.S. Dollars, such foreign currency Loss shall be converted into U.S. Dollars based on the central bank rate in such other country for the conversion of such currency into U.S. Dollars in effect as of the date of Final Determination of the applicable claim.
(c) Upon notice specifying in reasonable detail the basis therefor, Purchaser and each Securityholder shall have the right to set-off any amounts owed under this Article VIII against any amounts owed under any other provisions of this Agreement.
(d) All payments made by a Securityholder to a Purchaser Indemnified Party in respect of any claim pursuant to Section 8.2(a) shall be treated as adjustments to the consideration paid pursuant to the Transactions for Tax purposes, unless otherwise required by applicable Law.
8.6 Indemnity Escrow Account Release.
(a) No later than the first (1st) Business Day following December 31, 2027, Purchaser and the Securityholder Representative shall deliver joint written instructions to the Escrow Agent directing the Escrow Agent to distribute to the Exchange Agent (for further distribution to the Securityholders) an amount equal to the excess, if any, of (x) fifty percent (50%) of the Indemnity Escrow Amount less (y) the sum of (1) all amounts previously distributed to Purchaser Indemnified Parties from the Indemnity Escrow Account and (2) any amounts reasonably and in good faith estimated by Purchaser to be necessary to satisfy each pending and unresolved claim for indemnification asserted by a Purchaser Indemnified Party for which a valid Claim Notice has been timely delivered to the Securityholder Representative in accordance with this Article VIII prior to December 31, 2027.
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(b) No later than the first (1st) Business Day following the date that is two (2) years after the Closing Date, Purchaser and the Securityholder Representative shall deliver joint written instructions to the Escrow Agent directing the Escrow Agent to distribute to the Exchange Agent (for further distribution to the Securityholders) all cash then remaining in the Indemnity Escrow Account (together with any interest and other earnings thereon), less only the amount reasonably and in good faith estimated by Purchaser to be necessary to satisfy each pending and unresolved claim for indemnification asserted by a Purchaser Indemnified Party for which a valid Claim Notice has been timely delivered to the Securityholder Representative in accordance with this Article VIII prior to the two (2)-year anniversary of the Closing Date. For the avoidance of doubt, only the portion of the Indemnity Escrow Account reasonably allocable to each such pending claim shall continue to be retained, and no amounts shall be retained in excess of the amount reasonably necessary to satisfy such claim. Within five (5) Business Days following the Final Determination of any such claim, Purchaser and the Securityholder Representative shall deliver joint written instructions to the Escrow Agent directing the Escrow Agent to distribute to the Exchange Agent (for further distribution to the Securityholders) any portion of the retained amount (together with any interest and other earnings attributable thereto) that is not required pursuant to such Final Determination to satisfy such claim. Notwithstanding anything to the contrary, any amounts payable pursuant to this Section 8.6 to Employee Optionholders shall be made to the Second Surviving Company’s payroll account (or such other applicable payroll-related account designated by Purchaser, if applicable) for the benefit of, and further payment to, the Employee Optionholders on the next applicable regularly scheduled payroll date that is at least five (5) Business Days following the date of such payment, subject to applicable withholding, payroll, employment, FICA, unemployment, and similar Taxes. Notwithstanding anything herein to the contrary, solely to the extent necessary for compliance with Section 409A of the Code, no portion of any of the foregoing payments in this Article VIII to Optionholders will be payable to Optionholders following the fifth (5th) anniversary of the Closing.
8.7 Minimizing and Mitigating Losses. Each Purchaser Indemnified Party shall use commercially reasonable efforts to minimize and mitigate any indemnifiable Loss (including by taking any reasonable actions requested by the Securityholder Representative), and if the Purchaser Indemnified Party fails to do so, the Securityholders shall have no liability for any portion of such Loss that reasonably could have been avoided had the Purchaser Indemnified Party so complied. The costs and expenses incurred by the Purchaser Indemnified Party in such mitigation efforts shall be considered indemnifiable Losses hereunder, subject to the limitations in this Article VIII.
8.8 Exclusive Remedies. Other than in the case of Fraud or to the extent arising out of the other Transaction Documents, following the Closing, no Purchaser Indemnified Party shall assert against any Securityholder any claim, cause of action, right or remedy, or any Action, relating to this Agreement, the Transactions or any instrument delivered in connection herewith or therewith, other than (i) as set forth in Section 2.6 and Section 2.9, (ii) claims pursuant to Section 5.13(g) and this Article VIII, (iii) claims pursuant to Section 10.13 and (iv) claims pursuant to the terms of the Exchange Agent Agreement or the Escrow Agreement. Following the Closing, the claims and remedies specified in clauses (i) through (iv) of the previous sentence shall constitute the sole and exclusive rights and remedies available to the Purchaser Indemnified Parties for any and all Losses or other claims relating to or arising out of this Agreement, the Transactions and any document or instrument delivered in connection herewith or therewith, and shall supersede all other rights and remedies available at law or in equity (including any right of rescission), other than in the case of Fraud.
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Article
IX
Securityholder Representative
9.1 Acknowledgement. Housatonic IV CF, L.P., a Delaware limited partnership, is hereby appointed as the agent and attorney-in-fact of the Securityholders as the Securityholder Representative for and on behalf of the Securityholders. Each Securityholder hereby irrevocably agrees to be bound by all steps, actions and failures to act of the Securityholder Representative in accordance with the provisions of this Agreement. For the avoidance of doubt, Purchaser, Parent, the Exchange Agent and the Escrow Agent shall be entitled to rely upon (without any further inquiry) any action or inaction made by the Securityholder Representative taken on behalf of the Securityholders in connection with the Transactions. Each Securityholder shall be deemed to have authorized and empowered the Securityholder Representative, on its behalf and in its name, directly or through one or more designees of the Securityholder Representative, to:
(a) act for and on behalf of each Securityholder in any and all capacities and to do and perform every act and thing required or permitted to be done, in the reasonable judgment of the Securityholder Representative, under this Agreement or in connection with the Transactions;
(b) give and receive all notices or documents or other information or materials given or to be given to or by the Securityholders pursuant hereto or in connection herewith and to give and receive and accept service of legal process in connection with any suit or proceeding arising under this Agreement;
(c) engage counsel and such accountants and other advisors for the Securityholders and incur such other expenses on behalf of the Securityholders in connection with the Transactions as the Securityholder Representative may deem appropriate;
(d) make or enter into any amendment, waiver or consent with respect to, or termination of, this Agreement, Exchange Agent Agreement or the Escrow Agreement;
(e) take such other action as the Securityholder Representative is authorized to take under this Agreement;
(f) make all determinations required or permitted under this Agreement;
(g) represent each Securityholder or all or certain Securityholders as a group in all litigation and negotiate or enter into settlements and compromises relating to any disputes arising under this Agreement or in connection with the Transactions; and
(h) take all relevant action in all such other matters as the Securityholder Representative may deem necessary or appropriate to consummate the Transactions.
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9.2 Securityholder Representative Expense Amount. The Securityholder Representative Expense Amount shall be treated as having been received and voluntarily set aside by the Securityholders on the Closing Date. The Securityholder Representative shall be entitled to reimbursement for out-of-pocket fees and expenses (including legal, accounting and other advisors’ fees and expenses, if applicable) incurred by the Securityholder Representative in performing its duties under this Agreement. In the event that the Securityholder Representative Expense Amount is insufficient to cover the fees and expenses incurred by the Securityholder Representative in performing its obligations under this Agreement, each Securityholder shall be obligated to pay a portion of such deficiency in an amount equal to the product of the aggregate amount of such deficiency multiplied by the quotient of (a) the sum of (i) the number of shares of Company Capital Stock and (ii) the number of shares of Company Common Stock subject to Vested Company Options, in each case, held by such Securityholder as of immediately prior to the First Effective Time; and (b) the sum of (i) the aggregate number of shares of Company Capital Stock and (ii) the aggregate number of shares of Company Common Stock subject to Vested Company Options, in each case, issued and outstanding as of immediately prior to the First Effective Time. Without limiting the foregoing, the Securityholder Representative shall be entitled to deduct any such fees and expenses in excess of the then-remaining portion of the Securityholder Representative Expense Amount from any amounts payable to the Securityholders in accordance with the terms of this Agreement. The Securityholder Representative may disburse all or any portion of the then-remaining Securityholder Representative Expense Amount whenever it chooses and any amount so disbursed shall be disbursed to the Securityholders in proportion to their respective proportionate share.
Article
X
Miscellaneous and General
10.1 Amendment; Waivers, Etc.
(a) This Agreement may be amended, modified or supplemented by the Parties at any time solely by an instrument in writing signed on behalf of each of the Parties. To the extent permitted under the DGCL, the approval of the Transactions by the Stockholders shall not restrict the ability of the board of directors of the Company to cause the Company to terminate this Agreement in accordance with Article VII, to cause the Company to enter into an amendment to this Agreement pursuant to this Section 10.1(a), or to waive compliance with any of the terms or conditions of this Agreement pursuant to Section 10.1(b).
(b) At any time prior to the Closing, as applicable, the Parties may (a) extend the time for the performance of any of the obligations or other acts of the other Parties, (b) to the extent permitted by Law, waive any inaccuracies in the representations and warranties contained in this Agreement by any other Party or in any document, certificate or writing delivered pursuant hereto by any other applicable Party or (c) waive compliance with any of the covenants, agreements or conditions contained in this Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if expressly set forth in an instrument in writing signed on behalf of such Party. The failure of any Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.
10.2 Counterparts; Effectiveness. This Agreement (a) may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement and (b) shall become effective when each Party shall have received one or more counterparts hereof signed by each of the other Parties. An executed copy of this Agreement delivered by e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original executed copy of this Agreement.
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10.3 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF TO THE EXTENT THAT SUCH PRINCIPLES WOULD DIRECT A MATTER TO ANOTHER JURISDICTION.
10.4 Consent to Jurisdiction; Waiver of Jury Trial. Except as set forth in Section 2.6, each of the Parties agrees that: (a) it shall bring any Action in connection with, arising out of or otherwise relating to this Agreement or the Transactions exclusively in the Court of Chancery of the State of Delaware, or if (and only if) such court lacks subject matter jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Litigation Division); provided that if subject matter jurisdiction over the matter that is the subject of the Action is vested exclusively in the United States federal courts, such Action shall be heard in the United States District Court for the District of Delaware (the “Chosen Courts”); and (b) solely in connection with such Actions, (i) it irrevocably and unconditionally submits to the exclusive jurisdiction of the Chosen Courts, (ii) it waives any objection to the laying of venue in any Action in the Chosen Courts, (iii) it waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any Party, (iii) mailing of process or other papers in connection with any such Action in the manner provided in Section 10.5 shall be valid and sufficient service thereof and (iv) it shall not assert as a defense, any matter or claim waived by the foregoing clauses (i) through (iv) of this Section 10.4 or that any governmental order issued by the Chosen Courts may not be enforced in or by the Chosen Courts. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS. EACH PARTY HEREBY ACKNOWLEDGES AND CERTIFIES (1) THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (3) IT MAKES THIS WAIVER VOLUNTARILY AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS BY, AMONG, OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 10.4. For the avoidance of doubt, this Section 10.4 shall not apply to any action between an insurer of the R&W Insurance Policy and any insured under the R&W Insurance Policy.
10.5 Notices. All notices and other communications to be given or made hereunder shall be in writing and shall be deemed to have been duly given or made on the date of delivery to the recipient thereof if received prior to 5:00 p.m. in the place of delivery and such day is a Business Day (or otherwise on the next succeeding Business Day) if (a) served by personal delivery or by a nationally recognized overnight courier to the Person or entity for whom it is intended, (b) delivered by registered or certified mail, return receipt requested, or (c) sent by e-mail, as provided in this Section 10.5 (provided that no failure message is generated):
if to Purchaser, Parent or Merger Subs:
1510 Cotner Avenue
Los Angeles, CA 90025
Attention: David J. Katz, EVP and Chief Legal Officer
E-mail: David.Katz@RADNET.COM
with a copy (which shall not constitute notice) to:
Ashurst Perkins Coie US LLP
1301 2nd Avenue, Suite 4200
Seattle, WA 98101
Attention: David Martinez
E-mail: david.martinez@ashurstperkins.com
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if to the Company:
4040 E. Camelback Rd, Suite 250
Phoenix, AZ 85018
Attention: David Engert
E-mail: dengert@onradinc.com
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell LLP
1888 Century Park East
Los Angeles, California 90067
Attention: Alison S. Ressler
E-mail: resslera@sullcrom.com
if to the Securityholder Representative:
One Post Street, Suite 2600
San Francisco, CA 94104
Attention: Mark Hilderbrand
E-mail: [&
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell LLP
1888 Century Park East
Los Angeles, California 90067
Attention: Alison S. Ressler
E-mail: resslera@sullcrom.com
or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above.
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10.6 Entire Agreement; Confidentiality.
(a) This Agreement (including any exhibits or annexes hereto), the Company Disclosure Letter, the Exchange Agent Agreement, the Escrow Agreement, and the Confidentiality Agreement constitute the entire agreement, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof.
(b) Notwithstanding the foregoing, each Party acknowledges and agrees that the Confidentiality Agreement shall automatically terminate and be of no further force or effect at and as of the Closing and this Agreement supersedes any provision to the contrary in the Confidentiality Agreement; provided that irrespective of any such termination of the Confidentiality Agreement at the Closing, Purchaser and Parent shall, and shall cause their respective Affiliates and representatives to, keep confidential any information concerning the Securityholders furnished in connection with the Transactions.
10.7 No Third Party Beneficiaries. Except as set forth in (a) Section 5.7 with respect to the Indemnitees and the insureds under the D&O Insurance from and after the Closing, (b) Section 10.14 with respect to Prior Company Counsel, (c) Section 10.12 with respect to the Releasees, (d) Article II with respect to the Securityholders, (e) Section 10.15 with respect to the Non-Recourse Parties, and (f) the Purchaser Indemnified Parties under Article VIII, the Parties agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other Parties, in accordance with and subject to the terms of this Agreement, and this Agreement is not intended to, and does not confer, upon any Person other than the Parties and their respective successors, legal representatives and permitted assigns any rights or remedies, express or implied, hereunder, including without limitation, the right to rely upon the representations and warranties set forth herein.
10.8 Definitions. Capitalized terms used herein have the meanings set forth in Annex A hereto.
10.9 Severability. Should any provision of this Agreement or the application of any provision of this Agreement to any Person or circumstance be held invalid, illegal or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability, illegality or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability, illegality or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability, illegality or prohibition shall not affect or invalidate any other provision of this Agreement.
10.10 Interpretation. The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to an Annex, Exhibit, Section or Schedule, such reference shall be to an Annex, Exhibit, Section or Schedule of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof”, “herein”, “hereunder” and words of similar import referring to this Agreement shall be deemed to refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “or” has the inclusive meaning represented by the phrase “and/or”. The term “ordinary course of business” shall be understood to include any action reasonably taken or not taken in response to exigent circumstances. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day. The words “shall” and “will” shall be construed as creating a mandatory obligation. The parties to this Agreement have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provision of this Agreement.
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10.11 Assignment. The Parties shall not assign (by operation of law or otherwise) this Agreement or any part hereof without the prior written consent of the non-assigning Parties and any assignment in violation of this Section 10.11 shall be null and void ab initio. Any assignment permitted under this Section 10.11 shall not relieve the assigning party of its obligations hereunder. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. For the avoidance of doubt, nothing in this Section 10.11 shall be construed as precluding subrogation or assignment to the insurer that issues the R&W Insurance Policy in the case of losses resulting from Fraud with respect to the making of the representations and warranties contained in Article III of this Agreement (as qualified by the Company Disclosure Letter).
10.12 Release(a). Effective as of the Closing, each of Purchaser and Parent, for itself and its Affiliates and each such Person’s respective successors, assigns, executors, heirs, officers, directors, managers, partners and employees (each a “Purchaser Releasor”), hereby irrevocably, knowingly and voluntarily releases, discharges and forever waives and relinquishes all claims, demands, obligations, liabilities, defenses, affirmative defenses, setoffs, counterclaims, Actions and causes of action of whatever kind or nature, whether known or unknown, which any of the Purchaser Releasors has, might have or might assert now or in the future, against the Securityholders, the Company and their respective officers, directors, managers, partners and employees (in each case solely in their capacity as such) (each, a “Releasee”), arising out of, based upon or resulting from any Contract, transaction, event, circumstance, action, failure to act or occurrence of any sort or type, whether known or unknown, and that occurred, existed or was taken or permitted at or prior to the Closing, in each case to the extent arising from or in connection with the ownership or operation of the Company; provided, that nothing contained in this Section 10.12 shall release, waive, discharge, relinquish or otherwise affect (a) the rights or obligations of any party to the extent arising out of this Agreement or the other Transaction Documents or (b) any rights, claims or obligations of any Purchaser Releasor arising under or relating to any existing commercial Contract between Purchaser or any of its Subsidiaries or Affiliates, on the one hand, and the Company or any of its Subsidiaries, on the other hand, including the Company’s engagement of Purchaser’s eRAD radiology information system and picture archiving and communication system services, in each case whether such rights, claims or obligations arise prior to, on or after the Closing. Each of Purchaser and Parent, for itself and its Affiliates acknowledges that it has been informed of, and that Purchaser, Parent or such Affiliate is familiar with, Section 1542 of the Civil Code of the State of California, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.” Each of Purchaser and Parent, for itself and its Affiliates, hereby waives and relinquishes (x) all rights and benefits such Person has or may have under Section 1542 of the Civil Code of the State of California, to the full extent that such Person may lawfully waive all such rights and benefits pertaining to the subject matters of this Agreement and (y) any similar or comparable protections afforded by any case law or statutes of similar import, whether such laws are in the United States or elsewhere in the world. It is expressly agreed that the Releasees to whom this Section 10.12 applies shall be third-party beneficiaries of this Section 10.12 from and after the Closing and shall be entitled to enforce the releases and covenants contained herein.
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10.13 Specific Performance.
(a) Each of the Parties acknowledges and agrees that the rights of each Party to consummate the Transactions are special, unique and of extraordinary character and that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or damage would be caused for which money damages may not be an adequate remedy. Accordingly, in addition to any other available remedies a Party may have in equity or at law, each Party shall be entitled to enforce specifically the terms and provisions of this Agreement and to obtain an injunction restraining any breach or violation or threatened breach or violation of the provisions of this Agreement in the Chosen Courts without necessity of posting a bond or other form of security. In the event that any proceeding should be brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party hereby waives the defense, that there is an adequate remedy at law.
(b) To the extent any Party brings a proceeding to enforce specifically the performance of the terms and provisions of this Agreement (other than a proceeding to specifically enforce any provision that expressly survives termination of this Agreement) when expressly available to such Party pursuant to the terms and conditions of this Agreement, the Termination Date shall automatically be extended to (i) the twentieth (20) Business Day following the resolution of such proceeding, or (ii) such other time period established by the court presiding over such proceeding.
10.14 Waiver of Conflicts Regarding Representations; Non-Assertion of Attorney-Client Privilege.
(a) Conflicts of Interest. Each of Purchaser and Parent acknowledges that Sullivan & Cromwell LLP (“Prior Company Counsel”) has, on or prior to the Closing Date, represented one or more of the Securityholders, the Securityholder Representative, the Company and its Subsidiaries and other Affiliates, and their respective officers, employees and directors (each such Person, other than the Company and its Subsidiaries, a “Designated Person”) in the negotiation, preparation, execution and delivery of this Agreement, the other Transaction Documents and the consummation of the Transactions and the sale process generally undertaken in connection therewith (each, an “Existing Representation”), and that, in the event of any post-Closing disputes (x) arising under or relating to this Agreement or the other Transaction Documents (including any matter that may be related to a litigation, claim or dispute arising under or related to this Agreement) and (y) in which Purchaser, Parent or any of their respective Affiliates (including the Second Surviving Company and its Subsidiaries), on the one hand, and one or more Designated Persons, on the other hand, are or may be adverse to each other (each, a “Post-Closing Matter”), the Designated Persons reasonably anticipate that Prior Company Counsel will represent them in connection with such matters. Accordingly, from and after the Closing, each of Purchaser, Parent and the Second Surviving Company hereby (i) waives and shall not assert, and agrees after the Closing to cause its Affiliates to waive and to not assert, any conflict of interest arising out of or relating to the representation by one or more Prior Company Counsel of one or more Designated Persons in connection with one or more Post-Closing Matters (the “Post-Closing Representation”), except to the extent required by court order and (ii) agrees that, in the event that a Post-Closing Matter arises, Prior Company Counsel may represent one or more Designated Persons in such Post-Closing Matter even though the interests of such Person(s) may be directly adverse to Purchaser, Parent or any of their respective Affiliates (including the Second Surviving Company and its Subsidiaries), and even though Prior Company Counsel may (A) have represented the Company or its Subsidiaries in a matter substantially related to such dispute or (B) be currently representing the Second Surviving Company or any of its Subsidiaries. Without limiting the foregoing, from and after the Closing each of Purchaser, Parent and the Second Surviving Company (on behalf of itself and its Affiliates) consents to the disclosure by Prior Company Counsel, in connection with one or more Post-Closing Representations, to the Designated Persons of any information to the extent related to such Post-Closing Representations learned by Prior Company Counsel in the course of one or more Existing Representations and to the extent related to such Existing Representations, whether or not such information is subject to the attorney-client privilege of the Company or any of its Subsidiaries or Prior Company Counsel’s duty of confidentiality as to the Company or any of its Subsidiaries and whether or not such disclosure is made before or after the Closing.
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(b) Attorney-Client Privilege. Each of Purchaser, Parent and the Company (on behalf of itself and its Affiliates) waives and shall not assert, and agrees after the Closing to cause its Affiliates to waive and to not assert, any attorney-client privilege, attorney work-product protection or expectation of client confidence with respect to any communication between any Prior Company Counsel, on the one hand, and any Designated Person or the Company or any of its Subsidiaries, on the other hand (collectively, the “Pre-Closing Designated Persons”), or any advice given to any Pre-Closing Designated Person by any Prior Company Counsel, in each case to the extent occurring under one or more Existing Representations (collectively, “Pre-Closing Privileges”) in connection with any Post-Closing Representation, it being the intention of the Parties hereto that all rights to such Pre-Closing Privileges, and all rights to waive or otherwise control such Pre-Closing Privileges, shall be retained by the Securityholders and the Securityholder Representative, and shall not pass to or be claimed or used by Purchaser, Parent or the Company, except as provided in the last sentence of this Section 10.14(b). For the avoidance of doubt, and notwithstanding anything to the contrary in this Section 10.14, any privilege, work-product protection or expectation of confidence attaching to advice given by Prior Company Counsel or any other counsel to the Company or any of its Subsidiaries relating to the ongoing business, operations, compliance or Tax matters of the Company or its Subsidiaries (as opposed to the negotiation, preparation, execution and delivery of this Agreement, the other Transaction Documents and the consummation of the Transactions) shall be an asset of the Company, shall not constitute a Pre-Closing Privilege, and shall be retained and controlled by Purchaser and the Second Surviving Company from and after the Closing. Furthermore, each of Purchaser, Parent and the Company (on behalf of itself and its Affiliates) acknowledges and agrees that any advice given to or communication with any of the Designated Persons to the extent related to an Existing Representation or a Post-Closing Representation shall not be subject to any joint privilege (whether or not the Company or one or more of its Subsidiaries also received such advice or communication) and shall be owned solely by such Designated Persons. Notwithstanding the foregoing, in the event that from and after the Closing a dispute arises between Purchaser, Parent or the Company or any of its Subsidiaries, on the one hand, and a third party other than a Designated Person, on the other hand, the Company shall (and shall cause its Affiliates to) assert to the extent available the Pre-Closing Privileges on behalf of the Designated Persons to prevent disclosure of Privileged Materials to such third party; provided, however, that such privilege may be waived only with the prior written consent of the Securityholder Representative (on behalf of the Securityholders), which consent shall not be unreasonably conditioned, withheld or delayed.
(c) Privileged Materials. All such Pre-Closing Privileges, and all books and records and other documents of the Company and its Subsidiaries to the extent containing any advice or communication that is subject to any Pre-Closing Privilege (“Privileged Materials”), shall be deemed excluded from the acquisition of the shares of Company Capital Stock. Purchaser hereby agrees not to use any Privileged Materials existing on the Purchaser’s servers, electronic backup systems, e-mail archives or any other books and records after the Closing.
(d) Miscellaneous. Each of Purchaser and Parent hereby acknowledges that it has had the opportunity (including on behalf of its Affiliates and the Company and its Subsidiaries) to discuss and obtain adequate information concerning the significance and material risks of, and reasonable available alternatives to, the waivers, permissions and other provisions of this Agreement, including the opportunity to consult with counsel other than Prior Company Counsel. This Section 10.14 shall be irrevocable, and no term of this Section 10.14 may be amended, waived or modified, without the prior written consent of Purchaser and the Securityholder Representative (on behalf of the Securityholders) and Prior Company Counsel affected thereby.
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10.15 No Recourse. Notwithstanding any other provision of this Agreement or any rights of a party at Law or in equity, this Agreement may only be enforced against, and any claim or cause of action (whether in tort, contract or otherwise) based upon, arising out of or related to this Agreement may only be brought against, the parties to this Agreement and to any other Transaction Document and then only with respect to the specific obligations set forth herein or therein (each, a “Contracting Party”). Except to the extent a named party to this Agreement, the Exchange Agent Agreement or the Escrow Agreement (and then only to the extent of the specific obligations undertaken by such named party in this Agreement, the Exchange Agent Agreement or the Escrow Agreement, as applicable, and not otherwise), no former, current or future Affiliate of any Contracting Party (other than another Contracting Party), any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate, successor or assignee of any of the foregoing (except to the extent in the capacity as a Contracting Party) (collectively, the “Non-Recourse Parties”), shall have any liability, whether by the enforcement of any assessment or by any Action, or by virtue of any statute, regulation or other applicable Law, for any obligations or liabilities of the parties or for any claim based on, in respect of, or by reason of, this Agreement; provided, however, that nothing in this Section 10.15 shall limit any liability or other obligation of the parties for breaches of the terms and conditions of this Agreement or the other Transaction Documents. Each Party hereby waives and discharges any such claim, cause of action, right, remedy and Action, and releases (and agrees to execute and deliver any instrument necessary to effectuate the release of) each Non-Recourse Party therefrom. For the avoidance of doubt, nothing in this Section 10.15 shall be construed as limiting the ability of an insured under the R&W Insurance Policy from recovering against the R&W Insurance Policy.
10.16 Guarantee. Parent hereby unconditionally and irrevocably guarantees the performance by Purchaser of all of Purchaser’s covenants and obligations under this Agreement. This guarantee is a guarantee of payment and performance and not merely of collection, and Parent waives any right to require the Company, the Securityholders or the Securityholder Representative to exhaust other remedies before proceeding against Parent. The obligations of Parent hereunder shall remain in full force and effect until all such covenants and obligations of Purchaser have been satisfied in full. Should Purchaser fail to perform any such covenants or obligations when due pursuant to and in accordance with the terms and conditions of this Agreement, Parent promises to pay on demand the applicable amount that Purchaser is liable to pay under this Agreement (and to otherwise perform any other obligation to the extent the performance of such obligation requires actions other than payments). Parent’s obligations under this Section 10.16 shall be in addition to any rights the Company, the Securityholders and the Securityholder Representative may have under any other agreement.
[Signature Pages Follow.]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first written above.
RADNET MANAGEMENT, INC.
| By | /s/ Howard G. Berger, M.D._____________ Name: Howard G. Berger, M.D. Title: Chief Executive Officer |
RADNET, INC.
| By | /s/ Howard G. Berger, M.D._____________ Name: Howard G. Berger, M.D. Title: Chief Executive Officer |
RED ROVER MERGER SUB, LLC
| By | /s/ Howard G. Berger, M.D._____________ Name: Howard G. Berger, M.D. Title: Chief Executive Officer |
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JAVELIN MERGER SUB, INC.
| By | /s/ Howard G. Berger, M.D._____________ Name: Howard G. Berger, M.D. Title: Chief Executive Officer |
ONRAD, INC.
| By | /s/ David Engert______________________ Name: David Engert Title: Chief Executive Officer |
HOUSATONIC IV CF, L.P.
| By | /s/ Mark Hilderbrand__________________ Name: Mark Hilderbrand |
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ANNEX A
DEFINITIONS
“2023 Distribution Amount” means $5,000,000.
“280G Shareholder Approval” shall have the meaning set forth in Section 5.17(b).
“Accounting Arbitrator” shall have the meaning set forth in Section 2.6(c).
“Accounting Principles” means the principles, policies, procedures, categorizations, definitions, methods, practices, classifications, estimation methodologies and techniques as set forth on Annex B hereto.
“Acquisition Proposal” means any written offer, proposal or indication of interest from a third party (or any group of Persons) (other than Purchaser, Parent or Merger Subs, and for the avoidance of doubt, also excluding the Company, the Company’s Subsidiaries and the Managed Entities) relating to any transaction or series of related transactions that, if consummated, would result in (a) the acquisition, directly or indirectly, of (i) any of the outstanding Company Capital Stock (or any class or series thereof) or any other equity securities or rights thereto of any of its Subsidiaries or any of the Managed Entities, (b) the acquisition, directly or indirectly, of a material portion of the business or assets of the Company, the Company’s Subsidiaries and the Managed Entities, taken as a whole, or (c) any merger, consolidation, recapitalization, reorganization, business combination or similar transaction involving the Company, in each case other than the Transactions.
“Action” shall mean any civil, criminal or administrative action, suit, complaint, litigation, investigation, audit, formal proceeding, arbitration or hearing.
“Adjusted EBITDA” shall have the meaning set forth in Annex C-1.
“Adjustment Escrow Account” shall have the meaning set forth in Section 2.9(b).
“Adjustment Escrow Amount” shall mean $5,000,000.
“Affiliate” shall mean with respect to any Person, a Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise. For the avoidance of doubt, prior to the Closing, the Company and its Subsidiaries shall not be “Affiliates” of Purchaser, Parent and Merger Subs.
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“Agreement” shall have the meaning set forth in the Preamble.
“AI Technologies” means any techniques that enable computers to mimic human intelligence, including deep learning, machine learning and other artificial intelligence (AI) technologies and algorithms, software, or systems that make use of or employ neural networks, statistical learning algorithms or reinforcement learning.
“Anti-Bribery/Anti-Corruption Laws” means (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended; (b) the U.S. Travel Act, 18 U.S.C. § 1952; (c) the U.K. Bribery Act of 2010, when applicable; (d) any applicable Law enacted in connection with, or arising under, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; or (e) any other applicable Law of any foreign or domestic jurisdiction of similar effect or that relates to bribery or corruption.
“Anti-Kickback Statute” shall have the meaning set forth in the definition of “Healthcare Laws.”
“Applicable Survival Period” shall have the meaning set forth in Section 8.1(e).
“Author” shall have the meaning set forth in Section 3.17(c).
“Bankruptcy and Equity Exception” shall have the meaning set forth in Section 3.2(a).
“Benefit Plan” shall mean any “employee benefit plan” within the meaning of Section 3(3) of ERISA, and any retirement, pension, profit sharing, savings, cafeteria, medical, dental, vision, hospitalization, life insurance, accidental death and dismemberment, disability, medical expense reimbursement, dependent care assistance, supplemental unemployment, welfare, sick pay, holiday, vacation, retiree medical, life, or other welfare insurance or benefit, employment, independent contractor, consultant, deferred compensation, retention, change in control, severance, retiree stock option, stock purchase, stock appreciation, stock or equity- based, incentive or bonus (whether in cash or stock), profits interest, tuition reimbursement, loan, employee assistance, fringe, or other compensation or benefit plan, scheme, fund, program, Contract, policy, practice, agreement, or arrangement of any kind, whether or not subject to ERISA, whether written or oral, and whether covering a single individual or a group of individuals in each case, (a) which is sponsored, maintained, contributed to, or required to be contributed to by the Company or its respective Subsidiaries (or to which the Company or any of its Subsidiaries is a party) , (b) which covers or benefits any current or former employee, officer, director, owner, manager, consultant, independent contractor or other service provider of or to Company or any of its Subsidiaries (or any spouse, domestic partner, dependent or beneficiary of any such individual); or (c) under or with respect to which the Company or any of its Subsidiaries has (or could have) any current or future potential liability (including any contingent liability, any liability as a result of at any time having an ERISA Affiliate, and any liability with respect to a terminated Benefit Plan), excluding any plan, program or arrangement that is mandated and maintained or administered by a Governmental Entity to the extent fully funded by employment Taxes, social or national insurance contributions or similar obligations, but specifically including any compensation or benefit plan, scheme, fund, program, Contract, policy, practice, agreement, or arrangement of any kind that is (or was) sponsored or maintained by a professional employer organization, co-employer organization, human resources and benefits outsourcing entity, or other similar vendor or provider.
| A-2 |
“Business Day” means any day other than (a) a Saturday or a Sunday or (b) a day on which banking and savings and loan institutions are authorized or required by Law to be closed in Phoenix, Arizona.
“Cap” shall have the meaning set forth in Section 8.2(b)(i).
“Cash” shall mean the sum of all cash, marketable securities, and other cash equivalents required or permitted to be reflected on a consolidated balance sheet of the Company, its Subsidiaries and the Managed Entities as prepared in accordance with the Accounting Principles, (a) reduced by (i) the outstanding or uncleared checks or other instruments written on an account of the Company, its Subsidiaries or the Managed Entities but not yet cleared (but only to the extent not taken into account in the calculation of Net Working Capital), (ii) any cash amount of the Company that is used to pay, satisfy, or otherwise reduce any amount that would otherwise have been included in Transaction Costs or Indebtedness, following the Measurement Time but prior to the Closing, and (iii) Restricted Cash, and (b) increased by deposits or wires made in the account of the Company or its Subsidiaries but not yet cleared (but only to the extent not taken into account in the calculation of Net Working Capital). For the avoidance of doubt, any cash used after the Measurement Time to pay Transaction Costs or Indebtedness shall not reduce Cash to the extent such Transaction Costs or Indebtedness are included in the determination of Transaction Costs or Indebtedness, respectively. Cash, or any component thereof, may be a negative amount.
“Certificates of Merger” means the First Certificate of Merger and the Second Certificate of Merger.
“Chosen Courts” shall have the meaning set forth in Section 10.4.
“Claim Notice” shall have the meaning set forth in Section 8.3(a).
“Closing” shall have the meaning set forth in Section 1.2.
“Closing Cash” shall have the meaning set forth in Section 2.6(a).
“Closing Cash Consideration” shall mean (a) $350,000,000, plus (b) the Estimated Closing Cash, minus (c) the Estimated Closing Indebtedness, plus (d) the Estimated Working Capital Adjustment, minus (e) the Estimated Transaction Costs, plus (f) the aggregate exercise prices of Vested Company Options that are outstanding as of immediately prior to the First Effective Time, plus (g) the aggregate exercise prices of Company Warrants that are outstanding as of immediately prior to the First Effective Time, plus (h) the 2023 Distribution Amount, plus (i) the Purchaser MedMal Tail Share.
“Closing Date” shall have the meaning set forth in Section 1.2.
“Closing Indebtedness” shall have the meaning set forth in Section 2.6(a).
| A-3 |
“Closing Net Working Capital” shall have the meaning set forth in Section 2.6(a).
“Closing Option Payment Amount” shall have the meaning set forth in Section 2.2(a).
“Closing Prospectus Supplement” shall have the meaning set forth in Section 5.13(c)(i).
“Closing Purchase Price” means the sum of (a) the Closing Cash Consideration plus (b) the product of (i) five million (5,000,000) (subject to Section 2.8(c)) multiplied by (ii) the Parent Stock Price.
“Closing Transaction Costs” shall have the meaning set forth in Section 2.6(a).
“Code” shall mean the Internal Revenue Code of 1986, as amended, and all rulings and Treasury regulations promulgated thereunder.
“Company” shall have the meaning set forth in the Preamble.
“Company Board” shall have the meaning set forth in the Recitals.
“Company Capital Stock” shall mean, collectively, the Company Common Stock and the Company Preferred Stock.
“Company Charter” shall mean the certificate of incorporation of the Company, as amended from time to time.
“Company Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company.
“Company Disclosure Letter” shall have the meaning set forth in Article III.
“Company Financial Statements” shall have the meaning set forth in Section 3.6(a).
| A-4 |
“Company Fundamental Representations” shall mean the representations and warranties of the Company set forth in Section 3.1(a), Section 3.2, Section 3.3, and Section 3.22.
“Company Intellectual Property” shall have the meaning set forth in Section 3.17(d)(i).
“Company IT Systems” shall mean all IT Systems that are owned or purported to be owned by the Company or any of its Subsidiaries.
“Company’s Knowledge” or “Knowledge of the Company” shall mean the knowledge of the individuals set forth on Schedule 10.15 of the Company Disclosure Letter after reasonable inquiry of their respective direct reports.
“Company Option” shall mean an option to purchase Company Common Stock granted under the Company Stock Plan.
“Company Owned Intellectual Property” shall mean all Intellectual Property owned or purported to be owned by the Company or any of its Subsidiaries.
“Company Permits” shall have the meaning set forth in Section 3.10(a).
“Company Preferred Stock” shall mean the preferred stock, par value $0.0001 per share, of the Company.
“Company Product” means each product or service of the Company or its Subsidiaries that is currently or was previously produced, marketed, licensed, sublicensed, sold, distributed, provided, or otherwise made commercially available by or on behalf of the Company or any of its Subsidiaries.
“Company Series A Preferred Stock” shall mean the Company Preferred Stock designated as “Series A Preferred Stock”.
“Company Series A-1 Preferred Stock” shall mean the Company Preferred Stock designated as “Series A-1 Preferred Stock”.
“Company Software” means all (a) software or computer programs that are owned or purported to be owned by the Company or any of its Subsidiaries, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code form; (b) electronic databases and compilations of data; and (c) all documentation related to any of the foregoing.
“Company Source Code” means any software source code for any Company Software.
| A-5 |
“Company Stock Plan” shall mean the 2017 Stock Incentive Plan of the Company, as amended from time to time.
“Company Warrants” means the warrants to purchase shares of Company Common Stock issued by the Company identified on Schedule 2.3(b).
“Confidentiality Agreement” shall mean the Confidentiality Agreement, dated as of October 9, 2025, between Radnet Management, Inc. and the Company.
“Continuing Employee” shall have the meaning set forth in Section 5.6(a).
“Contract” shall mean any legally binding (oral or written) contract, agreement, lease, license, note, mortgage, indenture, arrangement or other similar obligation.
“Contracting Party” shall have the meaning set forth in Section 10.15.
“Converted Company Series A Preferred Shares” means the aggregate number of shares of Company Common Stock into which shares of Company Series A Preferred Stock are converted immediately prior to the First Effective Time in accordance with Section 2.3.
“Credit Facility” shall mean that certain Credit Agreement, dated as of December 23, 2024 and as amended from time to time, by and among the Company, as borrower, certain subsidiaries and other entities referred to therein as guarantors and Wells Fargo Bank, National Association, as the lender.
“Designated Person” shall have the meaning set forth in Section 10.14(a).
“Designated Physician” shall have the meaning set forth in Section 6.2(e).
“DGCL” shall have the meaning set forth in the Recitals.
“Disputed Earn-Out Items” shall have the meaning set forth in Section 2.7(d)(iii).
“Disputed Items” shall have the meaning set forth in Section 2.6(c).
“Dissenting Shares” shall mean any shares of Company Capital Stock that are issued and outstanding immediately prior to the First Effective Time and in respect of which the holders have not voted in favor of the adoption of this Agreement or consented thereto in writing and appraisal rights have been perfected and not waived, withdrawn or lost, in accordance with Section 262 of the DGCL, in connection with the Mergers.
| A-6 |
“DLLCA” shall have the meaning set forth in the Recitals.
“D&O Insurance” shall have the meaning set forth in Section 5.7(b).
“Earn-Out Amount” shall have the meaning set forth in Section 2.7(a).
“Earn-Out Amount Determination Date” shall have the meaning set forth in Section 2.7(d)(vi).
“Earn-Out Definitions and Principles” shall have the meaning set forth in Section 2.7(b).
“Earn-Out Objection Notice” shall have the meaning set forth in Section 2.7(d)(i).
“Earn-Out Objection Period” shall have the meaning set forth in Section 2.7(d)(i).
“Earn-Out Period” shall have the meaning set forth in Annex C-1.
“Earn-Out Prospectus Supplement” shall have the meaning set forth in Section 5.13(c)(ii).
“Earn-Out Statement” shall have the meaning set forth in Section 2.7(c).
“Earn-Out Payment Date VWAP” shall mean the volume-weighted average closing price of shares of Parent Common Stock on The Nasdaq Global Market (as reported by Bloomberg L.P. (or its successor) or if not available, by another authoritative source mutually agreed by the Securityholder Representative and Parent) over the five (5) consecutive Trading Days ending on (and including) the date that is three (3) Trading Days prior to the applicable Earn-Out Amount Determination Date.
“Employee Optionholder” shall mean an Optionholder who is, or during the period in which the Vested Company Option held by such Optionholder was outstanding, was an employee of the Company, any of its Subsidiaries, or any of the Managed Entities.
| A-7 |
“Employment Agreement” shall have the meaning set forth in the Recitals.
“Environmental Law” shall mean any applicable law, regulation or code promulgated by, and any license, permit, judgment, decree or injunction from any Governmental Entity (a) relating to the pollution or protection of the environment (including air, surface water, groundwater and soil) and natural resources, (b) the use, storage, handling, release, threatened release or disposal of any Hazardous Substance, material or waste or (c) the protection of human health and safety as it pertains to exposure to Hazardous Substances.
“EPCRS” shall have the meaning set forth in Section 3.9(d).
“Equity Interests” shall mean (a) any capital stock of a corporation, any partnership interest, any limited liability company interest and any other equity interest; and (b) any security or right convertible into, exchangeable for, or evidencing the right to subscribe for any such stock, equity interest or security referred to in clause (a).
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall mean any Person, trade or business, or any other entity that is or, at any relevant time, was treated as a single employer with the Company or any of its Subsidiaries under Section 4001 of ERISA or Section 414 of the Code (or any relevant subsections thereunder).
“Escrow Agent” shall have the meaning set forth in Section 2.9(a).
“Escrow Agreement” means the escrow agreement to be entered into at Closing by the Parties and the Escrow Agent in the form attached hereto as Exhibit G.
“Escrow Amount” shall mean the sum of the Adjustment Escrow Amount and the Indemnity Escrow Amount.
“Estimated Adjustment Amount” shall mean an amount equal to: (a) the Estimated Closing Cash; minus (b) the Estimated Closing Indebtedness; minus (c) the Estimated Transaction Costs; plus (d) the Estimated Working Capital Adjustment.
“Estimated Closing Cash” shall have the meaning set forth in Section 2.5(a)(i).
“Estimated Closing Indebtedness” shall have the meaning set forth in Section 2.5(a)(i).
“Estimated Closing Net Working Capital” shall have the meaning set forth in Section 2.5(a)(i).
“Estimated Closing Statement” shall have the meaning set forth in Section 2.5(a)(i).
| A-8 |
“Estimated Transaction Costs” shall have the meaning set forth in Section 2.5(a)(i).
“Estimated Working Capital Adjustment” shall mean the difference between the Estimated Closing Net Working Capital minus the Target Net Working Capital (which amount may be a negative number).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Agent” shall have the meaning set forth in Section 2.8(a).
“Exchange Agent Agreement” means the Exchange Agent agreement to be entered into at Closing by the Parties and the Exchange Agent in the form attached hereto as Exhibit H.
“Exchange Fund” shall have the meaning set forth in Section 2.8(b).
“Exchange Fund Participants” shall have the meaning set forth in Section 2.8(b).
“Exchange Ratio” shall mean the quotient of (a) five million (5,000,000) (subject to Section 2.8(c)) divided by (b) the Fully Diluted Outstanding Company Shares.
“Excluded License” shall have the meaning set forth in Section 3.17(d)(vi).
“Existing Representation” shall have the meaning set forth in Section 10.14(a).
“Federal Health Care Program” shall have the meaning set forth in Section 3.11(d).
“Final Adjustment Amount” shall mean an amount equal to:
(a)the Final Closing Cash; minus
(b)the Final Closing Indebtedness; minus
(c)the Final Transaction Costs; plus
(d)the Final Working Capital Adjustment.
| A-9 |
“Final Adjustment Report” shall have the meaning set forth in Section 2.6(d).
“Final Closing Cash” shall have the meaning set forth in Section 2.6(f).
“Final Closing Indebtedness” shall have the meaning set forth in Section 2.6(f).
“Final Determination” means, with respect to a dispute, an occurrence where (a) the parties to the dispute have reached an agreement in writing, (b) a court of competent jurisdiction shall have entered a final and non-appealable Order or judgment with respect to a claim, or (c) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto.
“Final Earn-Out Payment Date” shall mean the last date on which the Earn-Out Amount is actually paid to Securityholders pursuant to this Agreement.
“Final Net Working Capital” shall have the meaning set forth in Section 2.6(f).
“Final Transaction Costs” shall have the meaning set forth in Section 2.6(f).
“Final Working Capital Adjustment” shall mean the difference between the Final Net Working Capital minus the Target Net Working Capital (which amount may be a negative number).
“First Certificate of Merger” shall have the meaning set forth in Section 1.1(b).
“First Effective Time” shall have the meaning set forth in Section 1.1(b).
“First Merger” shall have the meaning set forth in the Recitals.
“First Merger Sub” shall have the meaning set forth in the Preamble.
“First Surviving Corporation” shall have the meaning set forth in Section 1.1(a).
“FLSA” shall have the meaning set forth in Section 3.14(a).
“Foreign Public Official or Entity” shall have the meaning set forth in Section 3.23.
| A-10 |
“Fraud” means actual common law fraud under the Laws of the State of Delaware with respect to the making of the representations and warranties set forth in Article III or Article IV, as applicable, any Transaction Document or any certificate delivered hereto or thereto. For the avoidance of doubt, “Fraud” does not include constructive fraud, negligence, gross negligence or recklessness.
“Fully Diluted Outstanding Company Shares” means the sum of (a) the aggregate number of shares of Company Common Stock issued and outstanding as of immediately prior to the First Effective Time (after giving effect to the conversion of Company Warrants and Company Preferred Stock in accordance with Section 2.3 hereof), and (b) the aggregate number of shares of Company Common Stock subject to Vested Company Options issued and outstanding as of immediately prior to the First Effective Time.
“GAAP” shall mean United States generally accepted accounting principles as in effect as of such applicable time.
“Governmental Entity” shall have the meaning set forth in Section 3.5(a).
“Hazardous Substance” shall mean any chemicals, materials, or substances defined as, characterized, listed, or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “hazardous constituents,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “contaminants,” “pollutants,” or “toxic pollutants,” under any Environmental Law, including petroleum or petroleum by-products, friable asbestos, lead-based paint, or polychlorinated biphenyls.
“Healthcare Laws” means all applicable Laws relating to the regulation, development, testing, manufacture, labeling, marketing, distribution, sale, provision or reimbursement of healthcare products and services, including applicable Laws relating to (a) the licensure, certification, qualification, or authority to transact business in connection with the provision of health care services, including any Laws concerning the corporate practice of medicine and the employment of licensed individuals by unlicensed Persons; (b) any Federal Health Care Program, including the Medicare program (including Title XVIII of the Social Security Act) and Medicaid programs (including Title XIX of the Social Security Act) and the regulations adopted thereunder including 42 C.F.R. Parts 422 and 423 and that are administered or enforced by the Centers for Medicare & Medicaid Services; (c) the solicitation or acceptance of improper incentives involving persons operating in the health care industry, including Laws prohibiting or regulating fraud and abuse, patient inducements, patient referrals, or provider incentives generally or under the following statutes: the Federal anti-kickback law (“Anti-Kickback Statute”) (42 U.S.C. § 1320a-7b) and the regulations promulgated thereunder, the federal physician self-referral laws (“Physician Self-Referral Law”) (42 U.S.C. § 1395nn) and the regulations promulgated thereunder, the Federal False Claims Act (31 U.S.C. §§ 3729, et seq.), the Federal Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Federal Program Fraud Civil Remedies Act (31 U.S.C. § 3801 et seq.), the Federal Health Care Fraud law (18 U.S.C. § 1347), and any similar state fraud and abuse laws; (d) coding, coverage, reimbursement, claims submission, billing, and collections related to payors including government programs; (e) state medical practice Laws and regulations, and state professional fee-splitting Laws and regulations; (f) the Patient Protection and Affordable Care Act (Pub. L. 111-148) as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) and the regulations promulgated thereunder; (g) the Clinical Laboratory Improvement Act (42 U.S.C. § 263a, et seq.); (h) the Food, Drug and Cosmetic Act of 1938 (21 U.S.C. § 301, et seq.) and the regulations promulgated thereunder and that are administered or enforced by the U.S. Food and Drug Administration; (i) all applicable Laws governing clinical trials and human subject protection, including good laboratory and good clinical practices; (j) any notification or filing required under federal or state Laws to a Governmental Entity prior to or contemporaneous with the consummation of a transaction involving the provider of health care services or practice management services (“Healthcare Transaction Oversight Laws”); and (k) all applicable Laws administered or enforced by the U.S. Department of Health and Human Services Office of Inspector General, and other applicable Governmental Entities.
| A-11 |
“Healthcare Permits” means all material licenses, permits, registrations, clearances, approvals, certifications, provider numbers, enrollments, accreditations, authorizations and other governmental authorizations (including participation and billing authorizations under applicable Medical Reimbursement Programs, to the extent applicable) required under applicable Healthcare Laws for the conduct of the business of the Company, its Subsidiaries, and/or the Managed Entities, as applicable as currently conducted.
“Healthcare Transaction Oversight Laws” shall have the meaning set forth in the definition of “Healthcare Laws.”
“HIPAA” shall have the meaning set forth in Section 3.17(e).
“Housatonic” shall have the meaning set forth in the Recitals.
“HSR Act” shall have the meaning set forth in Section 3.5(a).
“Indebtedness” shall mean, with respect to the Company or any of its Subsidiaries or the Managed Entities, without duplication and in each case, (a) all obligations and liabilities of the Company or any of its Subsidiaries, including principal, interest, fees, premiums, prepayment penalties, breakage amounts, expense reimbursements or other amounts payable in connection therewith, for borrowed money, (b) all obligations of the Company or any of its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, (c) all obligations and liabilities of the Company or any of its Subsidiaries for the deferred purchase price of assets, goods or services (other than trade payables, accruals or similar liabilities incurred in the ordinary course of business and reflected in the calculation of Net Working Capital), (d) all liabilities of the Company or any of its Subsidiaries in respect of any lease of real or personal property that is required to be classified and accounted for under GAAP as capital or finance leases (excluding, for the avoidance of doubt, any operating leases for real property), (e) unpaid severance or settlement obligations of the Company or any of its Subsidiaries arising from terminations of employment by the Company or any of its Subsidiaries prior to the Closing Date, together with any Taxes payable in connection therewith (including the employer portion of any payroll, employment, FICA, unemployment, or similar Taxes imposed on such amounts), (f) obligations of the Company or any of its Subsidiaries under any interest rate, currency or other hedging Contracts that will be payable upon termination thereof (assuming termination on the date of determination), (g) (i) any bonus, change of control payment or other similar incentive payment that vests and becomes payable by the Company or any of its Subsidiaries as a result of, or in connection with, the Transactions, together with any Taxes payable in connection therewith (including the employer portion of any payroll, employment, FICA, unemployment, or similar Taxes imposed on such amounts) and (ii) the employer portion of any payroll, employment, FICA, unemployment, or similar Taxes arising in connection with (A) any exercise of Company Options on or prior to the First Effective Time or (B) any payments to any Optionholder of the Closing Option Payment Amount or the Per Share Stock Consideration with respect to such holder’s Vested Company Options, (h) all unfunded or underfunded liabilities pursuant to any Benefit Plan, including any deferred but not yet remitted amounts owed to any qualified retirement plan and any Company contributions owed but not yet made to any such plan, and accrued but unpaid compensation (including salary, bonuses, commissions, profit sharing, or discretionary payments, including any pro rata amounts), deferred compensation payments, withdrawal liabilities under multiemployer plans, and similar liabilities triggered by, or in connection with, the Transactions contemplated by this Agreement, in each case for any period prior to the Closing and any Taxes payable in connection therewith (including the employer portion of any payroll, employment, FICA, unemployment, or similar Taxes imposed on such amounts), (i) Pre-Closing Taxes, (j) the maximum amount of any earn-outs, purchase price adjustments, escrows, holdbacks or similar payments, whether contingent or otherwise, payable by the Company or any of its Subsidiaries, (k) deferred revenue, deferred advances, customer advances or similar advances, (l) obligations of the Company or any of its Subsidiaries arising from cash/book overdrafts, (m) any declared but unpaid dividends or distributions payable by the Company or any of its Subsidiaries, (n) any obligations of the Company or any of its Subsidiaries under conditional sale, installment sale or other title retention agreements, and (o) any liabilities pursuant to guarantees by the Company or any Subsidiary of the Company of any of the types of Indebtedness described in the foregoing clause (a) through (o) of any other Person, including, in each case, any accrued interest thereon and prepayment or similar penalties and expenses which would be payable if such indebtedness were paid in full as of the Closing Date; provided, that in no event shall Indebtedness include (i) any indebtedness by and among any of the Company, the Subsidiaries of the Company and/or the Managed Entities, (ii) any undrawn letters of credit or similar instruments, (iii) any performance bonds, bankers acceptances or similar obligations entered into in the ordinary course of business or (iv) any liability that is included in Net Working Capital or Transaction Costs.
| A-12 |
“Indemnitees” shall have the meaning set forth in Section 5.7(a).
“Indemnity Escrow Account” shall have the meaning set forth in Section 2.9(c).
“Indemnity Escrow Amount” means $10,000,000.
“Insurance Policies” shall have the meaning set forth in Section 3.21(a).
“Intellectual Property” shall mean: (a) all trademarks, service marks, trade dress, trade names, Internet domain names and other indicia of origin, and all registrations and applications to register, and renewals of, the foregoing, and all goodwill associated with and symbolized by any of the foregoing; (b) all patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and re-examinations thereof; (c) all trade secrets, know-how, processes, formulae, recipes, methods, techniques, procedures, algorithms, specifications, inventions, ideas, marketing materials, customer and supplier lists, discoveries, and other confidential and proprietary know-how (collectively, “Trade Secrets”); (d) all works of authorship (whether or not copyrightable), copyrights and copyrightable works, whether or not registered or published, and copyright registrations and applications therefor; (e) software (including source code), algorithms, models, and databases; (f) domain names and uniform resource locators (whether or not trademarked), websites, web addresses, web pages, URLs, social media identifiers and the content thereon; and (g) any other intellectual property or proprietary materials, however arising pursuant to the applicable Law of any jurisdiction throughout the world, and whether registered or unregistered.
“Intended Tax Treatment” shall have the meaning set forth in the Recitals.
“Interim Company Financial Statements” shall have the meaning set forth in Section 3.6(a).
“Invention Assignment Agreements” shall have the meaning set forth in Section 3.17(c).
“IRS” shall have the meaning set forth in Section 3.9(d).
“IT Systems” shall mean all computer systems, networks, computer hardware, devices, servers, routers, workstations, and similar information technology equipment.
“Key Employee” shall have the meaning set forth in the Recitals.
“Laws” shall have the meaning set forth in Section 3.10(b).
“Lease” shall have the meaning set forth in Section 3.15(b).
“Leased Real Property” shall have the meaning set forth in Section 3.15(b).
“Letter of Transmittal” shall have the meaning set forth in Section 2.8(b)(i).
| A-13 |
“Licensed Provider” means any physician or other healthcare professional who is required to hold a professional license or other Healthcare Permit to provide healthcare services and who provides professional healthcare services for or on behalf of any Managed Entity.
“Lien” shall mean liens, security interests, claims, charges, pledges, easements, restrictions on transfer of voting or other encumbrances.
“Losses” means any damages, losses, payments, Taxes, interest, and out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees and expenses and amounts paid in investigation, settlement or defense of the foregoing).
“Managed Entities” means the physician-owned professional corporations, professional limited liability companies, professional associations, or other professional entities that are not Subsidiaries of the Company or its Subsidiaries but for which the Company or any of its Subsidiaries provides management, administrative, billing, staffing, consulting, revenue cycle management, compliance or other non-clinical services pursuant to one or more management services agreements or similar arrangements.
“Managed Entity Agreements” means each Management Services Agreement and each Contract evidencing any loan, security interest, transfer restriction, equity transfer, purchase option, right of first refusal or other similar arrangement relating to a Managed Entity or the equity interests therein.
“Management Services Agreement” means any Contract pursuant to which the Company or any of its Subsidiaries provides management, administrative, billing, operational or other support services to a Managed Entity.
“Material Adverse Effect” shall mean any change, effect, event, occurrence, state of facts or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, business, assets, or results of operations of the Company, the Company’s Subsidiaries and the Managed Entities, taken as a whole; provided, that any effect resulting from any of the following, alone or in combination, shall not be considered when determining if a Material Adverse Effect is occurring, has occurred or would reasonably be likely to occur: (a) any change or development in or with respect to any Law or applicable accounting standards, including GAAP, or interpretations or enforcement thereof; (b) any changes, developments, circumstances, facts or effects that are the result of factors generally affecting the industries in which the Company, the Company’s Subsidiaries or the Managed Entities operate; (c) any changes in the relationship of the Company or any of the Company’s Subsidiaries or Managed Entities, contractual or otherwise, with customers, suppliers, vendors, lessors, and employees or Persons having a similar relationship caused by the announcement or pendency of the Transactions or resulting or arising from the identity of Purchaser, Parent or any of their respective Affiliates; (d) any change, development or effect resulting from national or international political or social conditions including acts of war (whether or not declared), civil disobedience, sabotage, terrorism, military actions or the escalation of any of the foregoing, whether perpetrated or encouraged by a state or non-state actor or actors, including cyberattacks, any weather or natural disaster or any other force majeure event, whether or not caused by any Person (other than the Company, the Company’s Subsidiaries or the Managed Entities); (e) any epidemic, pandemic or disease outbreak, or any Law providing for business closures, “sheltering-in-place,” curfews or other restrictions that relate to, or arise out of, an epidemic, pandemic or disease outbreak or any material worsening of such conditions; (f) any failure by the Company, the Company’s Subsidiaries or the Managed Entities to meet any internal projections or forecasts or estimates of revenues or earnings; provided, that any change, development, circumstance, fact or effect (not otherwise excluded under this definition) underlying such failure may be taken into account in determining whether a Material Adverse Effect has occurred; (g) any change, development or effect relating to the financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (h) any actions taken or not taken by the Company, the Company’s Subsidiaries or the Managed Entities pursuant to this Agreement, to the extent contemplated herein, or with Purchaser’s prior written consent or at Purchaser’s instruction as permitted under this Agreement; or (i) compliance by the Company and its Subsidiaries with applicable Law; provided, that with respect to clauses (a), (b), (d), (e) and (g) such changes, developments or effects shall be taken into account in determining whether a “Material Adverse Effect” is occurring, has occurred or would reasonably be expected to occur to the extent it disproportionately and adversely affects the Company, the Company’s Subsidiaries and the Managed Entities (taken as a whole) relative to other competitors of the Company, the Company’s Subsidiaries and the Managed Entities (in which case only the incremental disproportionate and adverse impact may be taken into account, and then only to the extent otherwise permitted by this definition).
| A-14 |
“Material Contracts” shall have the meaning set forth in Section 3.18(a).
“Measurement Time” shall have the meaning set forth in Section 2.5(a)(i).
“Medical Reimbursement Programs” means any federal, state or local governmental healthcare reimbursement or payment program, including Medicare, Medicaid, TRICARE and CHAMPVA, and any private health insurer, managed care organization, health maintenance organization, preferred provider organization or other third-party payor program in which the Company, any Subsidiary or any Managed Entity participates.
“MedMal Policies” shall have the meaning set forth in Section 5.19.
“MedMal Tail” shall have the meaning set forth in Section 5.7(e).
“MedMal Tail Costs” shall mean all costs and premiums of the MedMal Tail.
“Mergers” shall have the meaning set forth in the Recitals.
“Merger Subs” shall have the meaning set forth in the Preamble.
“Net Working Capital” shall mean the Company’s, its Subsidiaries’ and the Managed Entities’ (a) current assets (excluding Cash) minus (b) current liabilities (excluding Indebtedness and Transaction Costs), and shall be determined in accordance with the Accounting Principles, including the illustrative calculation of Net Working Capital set forth therein; provided, that Net Working Capital shall not include any income Tax assets or any income Tax liabilities or any deferred Tax assets or any deferred Tax liabilities.
“New Plan” shall have the meaning set forth in Section 5.6(c).
“Non-Employee Optionholder” shall mean an Optionholder who is, and during the period in which the Vested Company Option held by such Optionholder was outstanding, was not an employee of the Company, any of its Subsidiaries or any of the Managed Entities.
“Non-Recourse Parties” shall have the meaning set forth in Section 10.15.
“Objection Notice” shall have the meaning set forth in Section 2.6(b).
“Objection Period” shall have the meaning set forth in Section 2.6(b).
“Open Source License” means any license, including Excluded Licenses, meeting the “Open Source” definition (as promulgated by the Open Source Initiative) or the Free Software Definition (as promulgated by the Free Software Foundation), or any substantially similar license, including but not limited to any license approved by the Open Source Initiative, or any Creative Commons License and any Excluded License (e.g., the GNU General Public License or the GNU Affero General Public License).
| A-15 |
“Open Source Software” means any software that is distributed as “free software” or as “open source software” or that is subject to an Open Source License.
“Optionholder” means a holder of Vested Company Options.
“Order” shall have the meaning set forth in Section 3.8(b).
“Organizational Documents” shall mean with respect to any corporation, its articles or certificate of incorporation and bylaws, and with respect to a limited liability company, its certificate of formation and operating agreement, in each case as amended through the date of this Agreement.
“Out-of-the-Money Company Option” means any Company Option that is outstanding as of immediately prior to the First Effective Time and that has an exercise price per share that equals or exceeds the Per Share Merger Consideration.
“Parachute Payment Waiver” shall have the meaning set forth in Section 5.17(a).
“Parent” shall have the meaning set forth in the Preamble.
“Parent Common Stock” shall mean the common stock, par value $0.0001 per share, of Parent.
“Parent Financial Statements” shall have the meaning set forth in Section 4.5.
“Parent SEC Documents” shall have the meaning set forth in Section 4.4(a).
“Parent Stock Price” shall mean the closing price of shares of Parent Common Stock on The Nasdaq Global Market (as reported by Bloomberg L.P. (or its successor) or if not available, by another authoritative source mutually agreed by the Company and Parent) on the trading day immediately prior to the Closing Date.
“Parent VWAP” shall have the meaning set forth in Annex C-1.
“Party” or “Parties” shall have the meaning set forth in the Preamble.
“Payee” shall have the meaning set forth in Section 2.10.
“Payment Schedule” shall have the meaning set forth in Section 2.5(a)(ii).
| A-16 |
“Payoff Indebtedness” shall have the meaning set forth in Section 2.4(a)(vii).
“Payoff Letter” shall mean a customary letter providing for the payoff, discharge and termination on the Closing Date of each of the items of Indebtedness set forth on Schedule 2.4(a)(vii) and setting out the amounts required to effectuate such payoff, discharge and termination.
“Payor” shall have the meaning set forth in Section 2.10.
“PEO” shall have the meaning set forth in Section 3.9(b).
“Per Series A Preferred Share 2023 Distribution Amount” means the quotient of (a) the 2023 Distribution Amount divided by (b) the Converted Company Series A Preferred Shares.
“Per Share Adjustment Payment” means a cash amount equal to the quotient of (a) any Post-Closing Adjustment payable pursuant to Section 2.6(e)(i) or Section 2.6(e)(iii) divided by (b) the Fully Diluted Outstanding Company Shares.
“Per Share Cash Consideration” means (a) for purposes of determining the entitlements under Section 2.1(a)(ii) of the Converted Company Series A Preferred Shares, an amount equal to (i) the quotient of (x) the Closing Cash Consideration, divided by (y) the Fully Diluted Outstanding Company Shares minus (ii) the Per Series A Preferred Share 2023 Distribution Amount minus (iii) the Per Share Holdback Amount; and (b) for all other purposes, an amount equal to (i) the quotient of (x) the Closing Cash Consideration, divided by (y) the Fully Diluted Outstanding Company Shares minus (ii) the Per Share Holdback Amount.
“Per Share Earn-Out Amount” means (a) the aggregate Earn-Out Amount payable pursuant to Section 2.7, divided by (b) the Fully Diluted Outstanding Company Shares.
“Per Share Holdback Amount” means an amount equal to the quotient of (a) the sum of (i) the Escrow Amount, plus (ii) the Securityholder Representative Expense Amount divided by (b) the Fully Diluted Outstanding Company Shares.
“Per Share Merger Consideration” shall have the meaning set forth in Section 2.1(a)(ii).
“Per Share Stock Consideration” shall have the meaning set forth in Section 2.1(a)(ii).
“Permits” means, with respect to any Person, any license, permit, approval, certification, registration, qualification or other similar authorization (including any DEA certification or Medicare or Medicaid provider numbers) issued by, or otherwise granted by, any Governmental Entity.
| A-17 |
“Permitted Liens” shall mean the following Liens: (a) Liens for Taxes, assessments or other governmental charges or levies that are not yet due and payable or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen, repairmen and other Liens imposed by Law for amounts not yet delinquent or the amount or validity of which is being contested in good faith; (c) Liens incurred or deposits made to a Governmental Entity in connection with a governmental authorization, registration, filing, license, permit or approval arising in the ordinary course of business; (d) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security; (e) defects of title, easements, rights of way, covenants, restrictions and other similar charges or encumbrances not materially interfering with the ordinary conduct of business or which are shown by a current title report or other similar report or listing previously provided or made available to Purchaser or Parent; (f) Liens not created by the Company or its Subsidiaries that affect the underlying fee interest of any Leased Real Property; (g) Liens incurred in the ordinary course of business securing obligations or liabilities that are not individually or in the aggregate material to the relevant asset or property, respectively; (h) all non-exclusive licenses and similar rights with respect to Intellectual Property granted in the ordinary course of business; (i) zoning, building and other generally applicable land use restrictions; (j) Liens resulting from any facts or circumstances relating to Purchaser, Parent or their respective Affiliates; (k) any set of facts an accurate up-to-date survey would show; provided, such facts do not materially interfere with the present use of the relevant Leased Real Property by the Company and its Subsidiaries, respectively; (l) Liens securing Indebtedness that is specifically disclosed in the Company Financial Statements; (m) Liens securing rental payments under capital or operating lease arrangements; (n) any Liens reflected with specificity in the Company Financial Statements; and (o) any easement that does not interfere in any material respect with the present use of the related Leased Real Property by the Company and its Subsidiaries.
“Person” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.
“Personal Information” shall mean information that identifies or can reasonably be used to identify a particular individual, household, browser or device.
“Personal Property” shall have the meaning set forth in Section 3.16.
“Physician Self-Referral Law” shall have the meaning set forth in the definition of “Healthcare Laws.”
“Post-Closing Adjustment” shall mean the difference between the Final Adjustment Amount minus the Estimated Adjustment Amount (which amount may be a negative number).
“Post-Closing Annual Adjusted EBITDA” shall have the meaning set forth in Annex C-1.
“Post-Closing Matter” shall have the meaning set forth in Section 10.14(a).
“Post-Closing Representation” shall have the meaning set forth in Section 10.14(a).
“PPACA” shall have the meaning set forth in Section 3.9(e).
“Pre-Closing Designated Persons” shall have the meaning set forth in Section 10.14(b).
| A-18 |
“Pre-Closing Privileges” shall have the meaning set forth in Section 10.14(b).
“Pre-Closing Tax Contest” shall have the meaning set forth in Section 5.14(c).
“Pre-Closing Tax Period” shall mean any taxable period ending on or before the Closing Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date.
“Pre-Closing Tax Refunds” shall have the meaning set forth in Section 5.14(e).
“Pre-Closing Taxes” means an amount (which shall not be less than zero in the aggregate) equal to the sum of all unpaid income Taxes of (or otherwise imposed on) the Company, any of its Subsidiaries or any Managed Entities arising in or relating to any Pre-Closing Tax Period; provided that such amount shall be calculated: (i) by taking into account, without duplication, any estimated or other prepaid income Taxes paid by the Company, any of its Subsidiaries or any Managed Entities, as applicable, prior to the Closing with respect to the applicable Pre-Closing Tax Period of such Person, to the extent (and only to the extent) such estimated or other prepaid income Taxes will reduce the income Tax liability of such Person for such Pre-Closing Tax Period or result in income Tax refunds (or credits in lieu thereof) expected to be received (or usable) in a taxable period after such Pre-Closing Tax Period, in each case, at a “more likely than not” or higher standard of confidence; (ii) by reflecting any Transaction Tax Deductions as deductible in the applicable Pre-Closing Tax Period of the Company, its applicable Subsidiary or the applicable Managed Entity; (iii) in a manner consistent with the past practices of the Company, its applicable Subsidiary or the applicable Managed Entity (except as otherwise required by applicable Law); (iv) for any Straddle Period, in accordance with Section 5.14(a); (v) by excluding any deferred Tax assets and deferred Tax liabilities established to reflect timing differences between book and Tax income (but including, for the avoidance of doubt, any items described in clause (viii) regardless of whether a deferred Tax asset or deferred Tax liability has been established related thereto); (vi) by taking into account income Tax assets of the Company or its applicable Subsidiary, including net operating losses, loss carryforwards, Code Section 163(j) carryforwards and income Tax credits, to the extent (and only to the extent) that such income Tax assets are usable (after giving effect to any limitation or restriction on use under applicable Law) to reduce taxable income of the Company, its applicable Subsidiary or the applicable Managed Entity, as applicable, for the applicable Pre-Closing Tax Period at a “more likely than not” or higher standard of confidence; (vii) for the avoidance of doubt, without regard to the effect of (A) any election under Sections 336 or 338 of the Code (and any corresponding or similar provision of state, local or non-U.S. Tax Law) made by the Purchaser or its Affiliates with respect to Mergers or (B) any extraordinary transaction not otherwise contemplated by this Agreement taken by the Purchaser or its Affiliates on the Closing Date after the Closing; (viii) by including the amount of any income Taxes (or taxable income) resulting from any use of the cash receipts and disbursements method of accounting by the Company, any of its Subsidiaries or any Managed Entities in any Pre-Closing Tax Period or any adjustment under Section 481(a) of the Code arising from a change in accounting method of the Company, any of its Subsidiaries or any Managed Entities with respect to any Pre-Closing Tax Period; and (ix) on a jurisdiction-by-jurisdiction basis, on an entity-by-entity basis, and on a Tax-by-Tax basis, and then aggregated (with each such amount permitted to be positive or negative and negative amounts offsetting positive amounts).
“PRF Payments” shall have the meaning set forth in Section 3.11(k).
“Prior Company Counsel” shall have the meaning set forth in Section 10.14(a).
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“Privacy Laws” shall mean (a) all applicable Laws relating to the collection, use, storage, Processing, or disclosure of Personal Information, and industry standards that are binding on the Company or any Subsidiary, including to the extent applicable, the California Consumer Protection Act and other state privacy, data security, and breach notification laws and state social security number protection laws, together with the Health Insurance Portability and Accountability Act of 1996, (b) applicable contractual obligations regarding privacy, data security, data protection or the Processing of Personal Information, and (c) the written notices and policies by which the Company or any of its Subsidiaries is bound or purports to be bound relating to the Processing of Personal Information, or otherwise to privacy, security, data protection, Security Incidents or other data security events, or violations of (a) or (b).
“Privileged Materials” shall have the meaning set forth in Section 10.14(c).
“Process” or “Processing” means any operation or set of operations which is performed on data (including Personal Information) or on sets of data, whether electronically or in any other form or medium and whether or not by automated means, such as collection, creation, analysis, retention, structuring, consultation, de-identification, re-identification, maintenance, processing, distribution, transfer, sale, lease, receipt, import, export, protection (including safeguarding, security measures, and notification in the event of a breach of security), access, disposal, recording, organization, structuring, storage, adaptation or alteration, retrieval, use (including for the purposes of sending telephone calls, text messages, and emails), transmission, dissemination or otherwise making available, erasure or destruction, or any other operation or set of operations performed on data or sets of data.
“Pro Rata Share” means, with respect to a Securityholder, the percentage obtained by dividing (a) the sum of (x) the total number of shares of Company Common Stock (after giving effect to the conversion of Company Warrants and Company Preferred Stock in accordance with Section 2.3 hereof) and (y) the total number of shares of Company Common Stock subject to Vested Company Options held by such Securityholder immediately prior to the First Effective Time by (b) the Fully Diluted Outstanding Company Shares.
“Prospectus Supplements” shall have the meaning set forth in Section 5.13(d).
“Purchase Price Adjustment Statement” shall have the meaning set forth in Section 2.6(a).
“Purchaser” shall have the meaning set forth in the Preamble.
“Purchaser Disclosure Letter” shall have the meaning set forth in Article IV.
“Purchaser Indemnified Parties” shall have the meaning set forth in Section 8.2(a).
“Purchaser MedMal Tail Share” means an amount equal to fifty percent (50%) of the MedMal Tail Costs, as included in the Estimated Transaction Costs set forth in the Estimated Closing Statement.
“Purchaser Releasor” shall have the meaning set forth in Section 10.12.
“R&W Costs” shall have the meaning set forth in Section 5.8.
“R&W Insurance Policy” shall have the meaning set forth in Section 4.9.
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“Records” shall have the meaning set forth in Section 5.4(b).
“Registered Intellectual Property” shall have the meaning set forth in Section 3.17(a).
“Registrable Securities” means the shares of Parent Common Stock issued pursuant to this Agreement; provided, however, that such securities shall cease to constitute Registrable Securities upon the earliest to occur of: (a) the date on which such Registrable Securities have been sold, transferred or otherwise disposed of pursuant to an effective registration statement under the Securities Act; (b) the date on which such Registrable Securities have been sold, transferred or otherwise disposed of pursuant to Rule 144 under the Securities Act; or (c) the first date on which all such Registrable Securities may be sold pursuant to Rule 144 without compliance with any holding period, current public information, volume or manner-of-sale requirements thereunder.
“Registration Statement” shall have the meaning set forth in Section 5.13(b).
“Related Party” shall have the meaning set forth in Section 3.20.
“Releasee” shall have the meaning set forth in Section 10.12.
“Required Stockholder Approval” shall mean the approval of (a) the majority of the votes represented by the then issued and outstanding shares of Company Capital Stock and (b) the majority of the then issued and outstanding shares of the Company Series A Preferred Stock and the Company Series A-1 Preferred Stock, voting together as a single class.
“Restricted Cash” means cash that is not freely available for use by the Company and its Subsidiaries immediately following the Closing due to a contractual or legal restriction on its withdrawal, transfer or use, including any cash held as a deposit, reserve, escrow, holdback, customer deposit or deferred revenue to the extent subject to such contractual or legal restriction, including with respect to the Leased Real Property.
“Restrictive Covenant Agreements” shall have the meaning set forth in the Recitals.
“Rule 144” shall have the meaning set forth in the definition of “Registrable Securities.”
“Sales Taxes” shall have the meaning set forth in Section 3.13(e).
“Sample Adjusted EBITDA Calculation” shall have the meaning set forth in Section 2.7(b).
“Second Certificate of Merger” shall have the meaning set forth in Section 1.1(b).
“Second Effective Time” shall have the meaning set forth in Section 1.1(b).
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“Second Merger” shall have the meaning set forth in the Recitals.
“Second Surviving Company” shall have the meaning set forth in Section 1.1(a).
“Securities Act” means the Securities Act of 1933, as amended.
“Security Incident” shall mean any actual or reasonably suspected breach of security, phishing incident, ransomware or malware attack resulting (or that may result) in the accidental or unlawful destruction, loss, alteration, exfiltration, use, unauthorized disclosure of, or damage or access to, IT Systems or any Personal Information or other data, together with any other event qualifying as a “breach,” “breach of security,” “breach of system security,” “security incident,” or similar event as defined under applicable Laws, including any such incident that would require notification to any Governmental Entity or other Person of such incident under applicable Privacy Laws.
“Securityholder Representative” shall have the meaning set forth in the Preamble.
“Securityholder Representative Expense Amount” shall have the meaning set forth in Section 2.4(b)(v).
“Securityholders” means the Stockholders and the Optionholders.
“Significant Customer” shall have the meaning set forth in Section 3.19(a).
“Stockholders” shall mean holders of shares of Company Capital Stock (including, as of immediately prior to the First Effective Time, any shares of Company Capital Stock into which Company Warrants and Company Preferred Stock have converted in accordance with Section 2.3 hereof).
“Straddle Period” means any taxable period beginning on or before the Closing Date and ending after the Closing Date.
“Subsidiary” shall mean, with respect to any Person, any entity, whether incorporated or unincorporated, of which (a) voting power to elect a majority of the board of directors or others performing similar functions with respect to such other Person is held by the first mentioned Person and/or by any one or more of its Subsidiaries, or (b) at least fifty percent (50%) of the Equity Interests of such other Person is, directly or indirectly, owned or controlled by such first mentioned Person and/or by any one or more of its Subsidiaries; provided, that for convenience only, each Managed Entity shall be deemed a Subsidiary of the Company solely for purposes of Article III, unless otherwise specified therein. For the avoidance of doubt, the foregoing deemed status (x) does not confer or imply any ownership of, or voting or economic rights in, any Managed Entity by the Company or any of its Affiliates; (y) shall not be construed to grant the Company, Parent, Purchaser or any of their Affiliates the right to control, direct or influence the practice of medicine or clinical decision-making of any Managed Entity or Licensed Provider; and (z) shall not require, and shall not be interpreted to require, the Company or any Managed Entity to take or omit any action that would violate, conflict with or be inconsistent with any corporate practice of medicine, fee-splitting or similar Healthcare Laws, or any professional responsibility or ethical obligations applicable to any Managed Entity or Licensed Provider.
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“Surviving Merger Sub” shall have the meaning set forth in the Preamble.
“Suspension Period” shall have the meaning set forth in Section 5.13(f).
“Target Net Working Capital” shall mean $8,250,000.
“Tax” (including, with correlative meaning, the term “Taxes”) shall mean any United States federal, state, local, non-U.S. or other tax, charge, fee, levy, impost, duty, tariff, or other similar assessment or charge in the nature of a tax imposed by any Governmental Entity, including income tax (whether imposed on or measured by net income, gross income, income as specially defined, earnings, profits, or selected items of income, earnings, or profits), estimated tax, goods and services tax, transfer tax, windfall or other profits tax, franchise tax, license tax, gross receipts tax, environmental tax, customs duty, capital tax, severance tax, stamp tax, payroll tax, sales tax, employment tax, FICA tax, employer and employee social security contribution, social security premium, unemployment tax, employment insurance or workers’ compensation premium, disability tax, use tax, property tax, withholding tax or other withholding obligation, excise tax, production tax, value added tax, occupancy tax, occupation tax, premium tax, ad valorem tax, alternative or add-on minimum tax, and registration duty, together with any interest, penalty or addition imposed with respect to any such amount and any interest in respect of such penalty or addition.
“Tax Contest” shall mean any audit, investigation, examination, claim, appeal, dispute, controversy or other Action related to any Taxes or Tax Returns.
“Tax Group” means any “affiliated group” of corporations within the meaning of Section 1504 of the Code, or any other affiliated, combined, consolidated, or unitary group or arrangement for group relief for any Tax purposes under any state, local or non-U.S. Tax Law.
“Tax Return” shall mean any return, statement, report or other document (including any election, declaration, disclosure, schedule, estimate, claim for refund, or information return) filed or required to be filed with a Governmental Entity, or provided or required to be provided to a payee, relating to any Taxes, including any attachment or schedule thereto or any amendment thereof.
“Termination Date” shall have the meaning set forth in Section 7.2.
“Third Party Claim” shall have the meaning set forth in Section 8.3(b).
“Total Purchase Price” means, as of any date of determination, the sum of (a) the Closing Purchase Price plus (b) the aggregate amount of any Earn-Out Amount actually paid to the Securityholders pursuant to Section 2.7 as of such date (with any shares of Parent Common Stock valued as provided in Section 2.7(a)).
“Trade Secrets” shall have the meaning set forth in the definition of “Intellectual Property.”
“Trading Day” shall mean any day on which shares of Parent Common Stock are traded on The Nasdaq Global Market (or, if shares of Parent Common Stock are not then listed on The Nasdaq Global Market, on the principal national securities exchange or quotation system on which shares of Parent Common Stock are then listed or quoted).
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“Transaction Costs” shall mean (a) all unpaid or otherwise outstanding fees and expenses incurred by or charged to or payable by or on behalf of the Company or any of its Subsidiaries or the Managed Entities for services provided through the Closing Date in connection with this Agreement (including the negotiations thereof) and the Transactions, including legal fees and related expenses, investment banking fees and related expenses, if any, and accounting fees and related expenses, (b) the R&W Costs, (c) the costs of the D&O Insurance and the MedMal Tail Costs, (d) fifty percent (50%) of the fees of the Exchange Agent and Escrow Agent, (e) the portion of any Transfer Taxes required to be borne by the Securityholders pursuant to Section 5.14(b) and (f) any purchase price payable by or on behalf of the Company, any of its Subsidiaries or the Managed Entities for the repurchase or transfer of equity interests in any Managed Entity required to satisfy the conditions set forth in Section 6.2(e) (it being understood that this clause (f) shall not include fees of third-party advisors in connection therewith). For the avoidance of doubt, Transaction Costs exclude all filing fees and payments to any Governmental Entity in connection with the Transactions (including, for the avoidance of doubt, the filing fees for the Notification and Report Forms previously filed by Purchaser and Housatonic (or applicable Affiliate thereof) pursuant to the HSR Act with respect to the Transactions).
“Transaction Documents” shall mean this Agreement, the Escrow Agreement, the Exchange Agent Agreement, the Restrictive Covenant Agreements, the R&W Insurance Policy, and all the other agreements to be executed or delivered by one or more of the parties in connection with this Agreement or the consummation of the Transactions.
“Transactions” shall have the meaning set forth in the Recitals.
“Transaction Tax Deductions” shall mean, without duplication, all deductions arising in connection with (a) the payment or repayment of Final Transaction Costs or Final Closing Indebtedness, (b) accelerated vesting on or prior to the First Effective Time of stock of the Company held by employees of the Company or any of its Subsidiaries, (c) any exercise of Company Options on or prior to the First Effective Time, and (d) any payments to any Optionholder of the Closing Option Payment Amount or the Per Share Stock Consideration with respect to such holder’s Vested Company Options, in each case of clauses (a)-(d), solely to the extent deductible in a Pre-Closing Tax Period with a “more-likely-than-not” or higher level of comfort; provided that, for purposes of this definition, the seventy percent (70%) safe harbor election set forth in IRS Revenue Procedure 2011-29 shall be deemed to apply to determine the deductible portion of any “success-based fees” described in such IRS Revenue Procedure, to the extent such safe harbor is applicable.
“Transfer” shall mean, with respect to any shares of Parent Common Stock, (1) the sale or assignment of, offer to sell, contract or agreement to sell, hypothecate, pledge, encumber, grant of any option, right or warrant to purchase, purchase of any option or contract to sell, lend, gift or otherwise transfer or dispose of or agreement to dispose of, directly or indirectly, any such shares or any options or warrants to purchase, or any securities convertible into, exercisable or exchangeable for or that represent the right to receive, such shares, (2) engaging in any hedging or other transaction or arrangement (including any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) with respect to any such shares Stock which is designed to or which reasonably could be expected to lead to or result in a sale, loan, pledge or other disposition (whether by such Securityholder or someone other than such Securityholder), or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of such shares, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of the shares, in cash or otherwise, or (3) the public announcement or disclosure of any intention to effect any transaction or take any action specified in clauses (1) through (2)
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“Transfer Taxes” shall mean all registration, sales, use, value added, goods and services, harmonized sales, transfer (including real property transfer), stamp, documentary, filing, recordation and other similar Taxes and fees that may be imposed by, payable to, or assessed by any Governmental Entity as a result of the Mergers, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties; provided that, for the avoidance of doubt, Transfer Taxes shall exclude any income, withholding, payroll, employment, FICA, unemployment, or similar Taxes or any other Taxes of (or otherwise imposed on) any Securityholder.
“Treasury Regulations” means the Treasury regulations promulgated under the Code.
“Vested Company Option” shall have the meaning set forth in Section 2.2(a).
“WARN” shall have the meaning set forth in Section 3.14(h).
“Withholding Agent” shall have the meaning set forth in Section 2.10.
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Exhibit 10.1
FORM OF RESTRICTIVE COVENANT AND SUPPORT AGREEMENT
This Restrictive Covenant and Support Agreement (this “Agreement”), dated as of October 26, 2026, is by and among OnRad, Inc., a Delaware corporation (together with any successors, the “Company”), Radnet Management, Inc., a California corporation (“Purchaser”), and the undersigned stockholder (“Stockholder”) of the Company.
RECITALS
WHEREAS, Stockholder has executed and delivered this Agreement in connection with that certain Agreement and Plan of Merger, dated as of October 26, 2026 (as the same may be amended or supplemented in accordance with the terms thereof, the “Merger Agreement”), by and among by and among (i) Purchaser; (ii) RadNet, Inc., a Delaware corporation (“Parent”); (iii) the Company; (iv) Red Rover Merger Sub, LLC, a Delaware limited liability company (“Surviving Merger Sub”); (v) Javelin Merger Sub, Inc., a Delaware corporation (“First Merger Sub” and together with Surviving Merger Sub, the “Merger Subs”); and (vi) with respect to Articles II, VIII, and IX of the Merger Agreement, Housatonic IV CF, L.P., solely in its capacity as the Securityholder Representative;
WHEREAS, pursuant to the terms and conditions of the Merger Agreement, (a) First Merger Sub will merge with and into the Company (the “First Merger”), with the Company surviving the First Merger the First Merger as a direct wholly owned subsidiary of Surviving Merger Sub, and (b) immediately following the First Merger, the Company shall merge with and into Surviving Merger Sub, with Surviving Merger Sub surviving the Second Merger as a direct wholly owned subsidiary of Purchaser (together with the First Merger, the “Mergers”, and collectively with the other transactions contemplated by the Merger Agreement and the Transaction Documents, the “Transactions”);
WHEREAS, Stockholder is the beneficial and registered holder of record of the number and class of shares of the Company Securities set forth on Schedule A hereto;
WHEREAS, Stockholder possesses or has access to valuable Confidential Information (as defined below), goodwill and other legitimate business interests of the Company, its Subsidiaries and the Managed Entities, and will receive substantial benefits from the consummation of the Transactions; and
WHEREAS, (a) as a material condition of Purchaser’s willingness to enter into the Merger Agreement and to consummate the Transactions, (b) as additional consideration to Purchaser for the applicable consideration that Stockholder may be entitled to receive pursuant to the Merger Agreement in connection with the Transactions, and (c) to preserve the value and goodwill of the Company after the Transactions, the Merger Agreement contemplates, among other things, that Stockholder shall enter into this Agreement, and the covenants set forth herein shall become effective as of the Closing.
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NOW, THEREFORE, to induce Purchaser and the Merger Subs to perform under the Merger Agreement and to consummate the transactions contemplated by the Merger Agreement, and in consideration of the representations, warranties, covenants, agreements, obligations, and undertakings contained herein, the parties hereto agree as follows.
Article I
DEFINITION AND CONSTRUCTION
Section 1.1 Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below:
“Affiliate” has the meaning ascribed to such term in the Merger Agreement; provided, that for purposes of this Agreement, Affiliates of Stockholder shall include (a) any investment fund, vehicle, or account managed, advised, or controlled by Stockholder or its Affiliates, and (b) any portfolio company controlled by Stockholder or any such investment fund, vehicle, or account.
“Confidential Information” means any and all information of Parent, Purchaser and the Company Entities, of a confidential or proprietary nature (or that is of a nature that it should reasonably be considered as proprietary or confidential whether or not specifically labeled or identified as “confidential”), in any form or medium, including information that relates to the business, financial condition, services, products or research or development of Parent, Purchaser or the Company Entities, or any of their respective suppliers, independent contractors or other business relations. Confidential Information includes, but is not limited to, the following: (i) internal business and financial information (including information relating to strategic and staffing plans and practices, business, finances, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, Parent’s, Purchaser’s and any Company Entity’s suppliers, independent contractors or other business relations and their confidential information; (iii) technology, software, trade secrets, know-how, compilations of data and analyses, protected data, techniques, systems, research, records, reports, manuals, documentation, models, data and data bases relating thereto; and (iv) any information received by Purchaser or the Company from any Person with any understanding, express or implied, that it will not be disclosed.
“Company Entities” means, collectively, (a) the Company, (b) the Second Surviving Company, (c) the Managed Entities, and (d) any Subsidiaries of the foregoing.
“Company Securities” means, collectively, (a) all Company Capital Stock, (b) all options, warrants, or other rights to acquire shares of the Company’s capital stock, and (c) any other equity or equity-linked securities of the Company, in each case, that are beneficially owned by Stockholder as set forth on Schedule A attached hereto.
“Covered Shares” means all Company Securities that are now or hereafter beneficially owned by Stockholder, including any shares of Company Capital Stock acquired by Stockholder after the date hereof, whether by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange, or change of such shares, or upon exercise or conversion of any Company Securities.
“Non-Solicit Restricted Period” means the period commencing on the Closing Date and ending on the second (2nd) anniversary of the Closing Date.
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“Restricted Area” means anywhere in the United States.
“Restricted Business” means the business of providing teleradiology services in the Restricted Area.
“Restricted Employee” means any individual who is or was an employee or an independent contractor of a Company Entity as of the Closing Date or during the twelve (12)-month period immediately preceding the Closing Date.
“Restricted Period” means the period commencing on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date.
Section 1.2 Other Defined Terms.
Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).
Section 1.3 Interpretation; Construction.
The terms and provisions of Section 10.10 of the Merger Agreement are incorporated herein by reference as if set forth herein in their entirety and will apply mutatis mutandis hereto.
Article II
SUPPORT AGREEMENT PROVISIONS
Section 2.1 Stockholder Representations. Stockholder hereby represents and warrants to the Company and Purchaser that: (a) Stockholder has the full legal right, power, capacity, and authority, as applicable, to execute and deliver this Agreement and each other Transaction Document to which Stockholder is or, at Closing, will become a party; (b) (i) as of the date hereof, Stockholder is the beneficial and registered holder of record of the Company Securities set forth opposite Stockholder’s name on Schedule A hereto, (ii) such Company Securities constitute all of the Company Securities held by Stockholder, whether beneficially or of record, as of the date hereof, and (iii) such Company Securities are free and clear of any and all liens, restrictions, claims, charges, and encumbrances; (c) the delivery of this Agreement by Stockholder does not violate, conflict with, or result in a breach of (i) any injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Entity to which Stockholder is subject, or (ii) any Contract of any kind to which Stockholder is a party or is bound by or to which such Company Securities are subject; (d) this Agreement and each other Transaction Document to which Stockholder is or, at the Closing, will become a party, have been or, at the Closing, will be (as the case may be), duly and validly executed and delivered by Stockholder and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, constitute or, with respect to any other Transaction Document to be executed at the Closing, will constitute, the valid and legally binding obligations of Stockholder, enforceable against Stockholder in accordance with their respective terms, except to the extent that enforceability may be limited by the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity; (e) Stockholder has not relied upon any statement by Purchaser, Parent, the Merger Subs, any Company Entity, the Securityholders’ Representative, or any of their respective Affiliates or representatives as to the Merger Agreement or the other Transaction Documents (other than the statements made by such Person in such documents) or the transactions contemplated thereby; (f) Stockholder has had an opportunity to review with Stockholder’s own Tax advisors the Tax consequences to Stockholder of the transactions contemplated by this Agreement, the Merger Agreement, and the other Transaction Documents, and Stockholder understands that he, she, or it must rely solely on his, her, or its advisors and that Stockholder (and not Purchaser, Parent, the Merger Subs, any Company Entity, or the Second Surviving Company) will be solely responsible for Stockholder’s own Tax liability that may arise from the transactions contemplated by this Agreement or the Merger Agreement; (f) except as expressly contemplated by this Agreement or the Merger Agreement, no proxies, voting trusts, voting agreements, or other similar agreements have been given or entered into by or on behalf of Stockholder with respect to any of the Company Securities; and (g) there are no Actions pending or, to the knowledge of Stockholder, threatened against Stockholder or any of Stockholder’s Affiliates that would reasonably be expected to impair or adversely affect Stockholder’s ability to perform Stockholder’s obligations under this Agreement.
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Section 2.2 Restriction on Transfer. Stockholder agrees that, from the date hereof until the earlier of the Closing Date and the date on which the Merger Agreement is validly terminated, Stockholder will not, directly or indirectly, (a) sell, transfer, assign, tender in any tender or exchange offer, pledge, encumber, hypothecate, or similarly dispose of (by merger, by operation of law or otherwise), either voluntarily or involuntarily, or to enter into any Contract, option, or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, lien, hypothecation, or other disposition of (by merger, by operation of law, or otherwise), any Covered Shares held by Stockholder, or (b) deposit any Covered Shares held by Stockholder into a voting trust or enter into a voting agreement or arrangement or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement; provided, however, that nothing in this Section 2.2 shall prohibit a Transfer of Covered Shares by Stockholder (i) to any member of Stockholder's immediate family (meaning any spouse, domestic partner, lineal descendant (including by adoption), parent, or sibling), (ii) to any trust, family limited partnership, limited liability company, or other entity for the direct or indirect benefit of Stockholder or one or more members of Stockholder's immediate family, (iii) to a charitable organization qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or a donor-advised fund, or (iv) upon Stockholder's death, by will, other testamentary document, or the laws of descent and distribution (each, a “Permitted Transfer”), in each case for bona fide estate, tax, or personal planning purposes; provided further that any Permitted Transfer shall be conditioned on the transferee signing and delivering a counterpart of this Agreement (or a joinder in form and substance reasonably satisfactory to Parent) under which the transferee agrees to be bound by all terms of this Agreement applicable to Stockholder with respect to the Covered Shares transferred, as if it were an original party hereto.
Section 2.3 Agreement to be Bound. Stockholder (a) acknowledges the deposit of the Adjustment Escrow Amount and the Indemnity Escrow Amount with the Escrow Agent and of the Securityholder Representative Expense Amount with the Securityholder Representative, in each case on behalf of the Securityholders, upon the terms and conditions set forth in the Merger Agreement, subject to the limitations set forth therein (b) acknowledges and agrees to be bound by the obligation of the Securityholders to fund on a several (and not joint basis) any deficiency pursuant to Section 2.6(e)(ii) of the Merger Agreement, (c) acknowledges and agrees to be bound by the several (and not joint) indemnification obligations of the Securityholders set forth in Sections 8.2(a)(ii) and 8.2(a)(iii)(B) of the Merger Agreement, subject to the limitations set forth therein, and (d) acknowledges the set-off rights set forth in the Merger Agreement, including against any Earn-Out Amount upon the terms and conditions set forth in the Merger Agreement.
Section 2.4 Confidentiality. Except as permitted by Section 3.5(b), Stockholder agrees not to make any public announcement after the date hereof concerning the Merger Agreement or the Transactions without the prior written consent of Purchaser and Company, and, in the event Purchaser and Company have consented to any such public announcement, to furnish to Purchaser and Company all press releases and other prepared public announcements regarding the Merger Agreement, the Merger, and the Transactions before publication. Further, except as permitted by Section 3.5(b), Stockholder shall maintain the confidentiality of, and not disclose, (i) any information arising out of or relating to the Merger Agreement or the Transactions, including (A) the existence of, and information obtained in connection with, negotiations and discussions relating to the Merger Agreement or any other Transaction Document, including this Agreement; and (B) any other information (including documents) obtained by Stockholder in connection with this Agreement, the Merger Agreement, or any other Transaction Document or the Transactions, and (ii) any Confidential Information.
Section 2.5 Lock-Up. Effective as of, and subject to the occurrence of, the Closing, Stockholder agrees that it shall not, and shall cause and direct each of its controlled Affiliates not to, Transfer any shares of Parent Common Stock originally received by such Stockholder as Per Share Stock Consideration pursuant to the Merger Agreement and which is either held by such Stockholder or controlled Affiliate at such time, during each of (A) the period beginning on the tenth (10th) Trading Day prior to December 31, 2027 until December 31, 2027 and (B) the period beginning on the tenth (10th) Trading Day prior to the date that is three (3) Trading Days prior to the Earn-Out Amount Determination Date until such Earn-Out Amount Determination Date.
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Article III
RESTRICTIVE COVENANTS
Section 3.1 Non-Solicitation and No-Hire. Stockholder agrees that, during the Non-Solicit Restricted Period, it will not, and will cause its controlled Affiliates not to, directly or indirectly, hire, engage, solicit or induce, or assist another Person to solicit or induce, any Restricted Employee to resign or otherwise leave the employ of any of the Company Entities or to accept employment with any other Person unaffiliated with Purchaser or any of its Affiliates (including the Company Entities) (whether as an employee, consultant, or independent contractor). Notwithstanding the foregoing, (x) generalized advertisements of employment by Stockholder or any of its Affiliates that are not specifically focused on or targeted at any of the Restricted Employees shall not, solely by way of such generalized advertisement, constitute a violation by Stockholder of this Section 3.1; and (y) this Section 3.1 will not prohibit Stockholder or any of its Affiliates from hiring or engaging any Restricted Employee whose employment or engagement with Purchaser and its Affiliates (including the Company Entities) was terminated following the Closing and who has not been employed or engaged by Purchaser or any of its Affiliates (including the Company, its Subsidiaries and the Managed Entities) for at least six (6) months prior to such hiring or engagement.
Section 3.2 Non-Interference with Business Relationships. Stockholder agrees that, during the Non-Solicit Restricted Period, it will not, and will cause its controlled Affiliates not to, directly or indirectly, (i) solicit, induce, or encourage any customer, client, licensee, payer, supplier, vendor, or other business relation of the Company Entities, in each case as of the Closing, to terminate, reduce, or materially and adversely modify its business relationship with the Purchaser or any of its Affiliates (including the Company Entities), or to divert any such business relationship to any Person other than Purchaser or any of its Affiliates (including the Company Entities), or (ii) otherwise interfere with, disrupt, impair, or adversely affect any business relationship between the Purchaser or any of its Affiliates (including the Company Entities), on the one hand, and any customer, client, licensee, payer, supplier, vendor, or other business relation of the Company Entities, on the other hand, in the case of each of clause (i) and (ii), with respect to the provision of services competitive with the Restricted Business (as defined below). Notwithstanding the foregoing, nothing in this Section 3.2 shall prevent or restrict Stockholder from making any business decisions in his or her capacity as an employee or officer of Parent, Purchaser, the Company Entities, or any of their respective Subsidiaries, as applicable (including terminating any customer, client, licensee, payer, supplier, vendor or other business relation of the Company Entities, or otherwise modifying or amending the terms of any such business relationship).
Section 3.3 Non-Competition. Stockholder hereby covenants and agrees that, during the Restricted Period, it will not, and will cause its controlled Affiliates not to, directly or indirectly, (i) establish, own any interest in, engage in, operate, manage, control, participate in, consult with, render services for (as a director, manager, officer, employee, agent, broker, partner, contractor, consultant or otherwise) or be or become engaged or involved in any Restricted Business, including by being or becoming an organizer, owner, co-owner, trustee, promoter, investor, lender, partner, joint venturer, equityholder, officer, director, employee, manager, or in any other capacity engaging in, owning, managing, operating, rendering services to, or participating in the ownership, management, operation or control of any Restricted Business; (ii) make any investment (whether equity, debt or otherwise) in any Restricted Business; or (iii) otherwise engage in, or compete with, all or any portion of any Restricted Business in the Restricted Area. Notwithstanding the foregoing, nothing in this Section 3.3 shall prevent or restrict Stockholder from (i) owning, as a passive investment, five percent (5%) or less of the outstanding shares of capital stock of a public corporation that is engaged or participates in a Restricted Business, so long as Stockholder is not otherwise associated with such corporation and does not have the ability to, and does not seek to exercise any, control or otherwise influence the management or operations of such corporation, (ii) investing in any fund or other investment vehicle in which Stockholder has no discretion with respect to the investment strategy of such fund, (iii) performing any services for Parent, Purchaser, the Company Entities or any of their respective Subsidiaries, or (iv) performing services that neither relate to nor assist a Restricted Business in any respect.
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Section 3.4 Non-Disparagement. Stockholder agrees that, following the Closing through the Restricted Period, Stockholder will not, and will cause its controlled Affiliates not to, directly or indirectly, disparage or criticize Purchaser, Parent, any of its Affiliates (including the Company Entities), or any of their respective management, businesses, products or services, or otherwise do or say anything that would reasonably be expected to materially harm the interests or reputation of Purchaser or any of its Affiliates (including the Company Entities). This Section 3.4 does not, in any way, restrict or impede Stockholder from complying with any applicable Law or regulations or a valid order of a court of competent jurisdiction or an authorized Governmental Entity; provided that such compliance does not exceed that required by applicable Law.
Section 3.5 Confidentiality.
(a) Stockholder agrees that, following the Closing, it will not, and will cause its controlled Affiliates not to, directly or indirectly, use Confidential Information or disclose Confidential Information to any Person, except as may be permitted pursuant to Section 3.5(b). The obligations of Stockholder under this Section 3.5 shall continue, with respect to any Confidential Information that constitutes a trade secret under applicable Law, for so long as such information remains a trade secret, and, with respect to all other Confidential Information, during the Restricted Period (as defined below).
(b) Notwithstanding the foregoing, nothing in this Agreement prevents at any time (i) the furnishing of any information to any Governmental Entity, as required by Law, in which circumstance the disclosing party will consult with Purchaser in advance to the extent practicable and in any event will, to the extent permitted by Law, notify Purchaser as soon as practicable; (ii) in the case of a Stockholder that is a corporation, limited partnership, limited liability company, investment fund, venture capital fund or other entity, the furnishing of information relating to the terms and conditions of the Merger Agreement and Transactions to any current or former stockholders, partners, investors, directors, managers, members, agents, advisors, consultants or representatives that have an economic interest in Stockholder, current or prospective partner of any partnership or any subsequent partnership under common investment management, or any limited partner, general partner, member, management company, stockholder, or parent or sister company of Stockholder (or any employee, advisor, consultant or representative of any of the foregoing), in each case solely to the extent necessary to comply with any fiduciary or reporting obligations or under Stockholder’s customary investor communications practices to such persons; provided that any recipient of information pursuant to this clause (ii) is bound by a duty of confidentiality towards Stockholder with respect to such information; (iii) disclosing information or terms of this Agreement, the Merger Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby as reasonably necessary to enforce or defend against any claim under this Agreement, the Merger Agreement, the other Transaction Documents, or any other instruments, certificates and other agreements to which Stockholder is a party; (iv) the furnishing of information to attorneys and other professional advisors, including tax advisors, or representatives for Stockholder (including the Securityholders’ Representative) or any managers, directors, officers or employees of such Stockholder or such Stockholder’s controlled Affiliates, in each case that need to know such information in connection with Stockholder’s financial or tax reporting obligations or the enforcement of Stockholder’s rights under this Agreement, the Merger Agreement or any other Transaction Document (as applicable); provided that any recipient of information pursuant to this clause (iv) is bound by a duty of confidentiality towards Stockholder with respect to such information; (v) the disclosure of any information that is or becomes generally available to the public other than as a result of an act or omission by Stockholder (or an act or omission of a third party at the request of or on behalf of Stockholder); (vi) disclosure of information that is reasonably necessary in connection with the performance of Stockholder’s duties as an employee of Purchaser or any of its Affiliates and is not otherwise restricted by any other obligation of confidentiality Stockholder has as such employee; and (vii) the disclosure of information if such disclosure is consented to in writing by Purchaser prior to such disclosure.
(c) Stockholder acknowledges and agrees that Purchaser would be damaged irreparably if any provision of this Section 3.5 were breached by Stockholder. Accordingly, Stockholder agrees that, in addition to any other remedy available at law or in equity, Purchaser will be entitled to an injunction to prevent breaches, and to enforce specifically the provisions, of this Section 3.5.
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Section 3.6 Acknowledgement of Reasonableness. Stockholder hereby acknowledges and agrees that (a) the restrictions set forth in this Article III are reasonable and necessary to protect the legitimate business interests of Purchaser, the Company, and their respective Affiliates, including the goodwill and Confidential Information of the Company and its Affiliates; (b) Stockholder has received, or will receive, adequate and valuable consideration for the obligations contained in this Article III in the form of the Per Share Merger Consideration payable to Stockholder pursuant to the Merger Agreement; (c) the restrictions set forth in this Article III are reasonable in time, scope, and geographic area and do not impose a greater restraint on Stockholder than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of Purchaser, the Company, and their respective Affiliates; and (d) Stockholder has had the opportunity to consult with legal counsel regarding the terms and conditions of this Article III.
Article IV
RELEASE
Section 4.1 Stockholder Release. Effective immediately following the Effective Time and subject to Stockholder’s receipt of the applicable Per Share Merger Consideration payable to him, her, or it pursuant to the Merger Agreement, for itself and its controlled Affiliates and each such Person’s respective successors, assigns, executors, heirs, officers, directors, managers, partners, employees, agents and legal representatives (collectively, the “Releasors”), hereby irrevocably, knowingly and voluntarily releases, discharges and forever waives and relinquishes all claims, demands, obligations, preemptive rights, stockholder rights, liabilities, defenses, affirmative defenses, setoffs, counterclaims, Actions and causes of action of whatever kind or nature, whether known or unknown, which any of the Releasors has, might have or might assert now or in the future, against that Stockholder has or may have against the Company, its Subsidiaries or the Managed Entities, any present or former director, officer, employee, stockholder, partner, member, or agent of the Company, its Subsidiaries or the Managed Entities, and any affiliate of or successor to the Company (including Second Surviving Company) (collectively, the “Releasees”), arising out of, based upon or resulting from any Contract, transaction, event, circumstance, action, failure to act or occurrence of any sort or type, whether known or unknown, and that occurred, existed or was taken or permitted at or prior to the Closing, in each case to the extent arising or resulting from or relating, directly or indirectly, to the conduct, management or operation of the business and affairs of the Company, or any act, omission, event, or occurrence prior to the Closing relating to (x) the Company, (y) any Company Securities held by Stockholder, or (z) any rights or interests in any other securities of the Company (including any Company Options and Company Warrants) including, without limitation, a breach of fiduciary duty in connection with the approval of the Merger Agreement that the Releasors may have against the Releasees. Notwithstanding the foregoing, nothing in this Section 4.1 shall release, waive, discharge, relinquish or otherwise affect (a) the rights or obligations of the Releasor to the extent arising out of this Agreement or the other Transaction Documents; (b) if the Releasor was an employee, officer, consultant, director or other service provider of the Company, any of its Subsidiaries, or any of the Managed Entities, (i) any rights with respect to salaries, bonuses, expenses, and other compensation that accrued prior to the Closing in the ordinary course of business, including, but not limited to, accrued vacation time and sick time, accrued but unpaid compensation and reimbursement of business related expenses, and (ii) any rights under any Benefit Plan accruing prior to the Effective Time; (c) rights that may not be released as a matter of law; (d) any rights pursuant to any employment agreement (including any Employment Agreement contemplated by the Merger Agreement) or offer letter entered into with Purchaser or its Affiliates in connection with the Merger Agreement; (e) any rights to indemnification or advancement of expenses such Releasor may have as a current or former director, officer, or employee of the Company, but only to the extent such claim for indemnification or advancement is covered under the Company’s certificate of incorporation or the bylaws of the Company in effect immediately prior to the Effective Time or any insurance policy maintained by the Company and in existence following the Effective Time; or (f) any defenses, affirmative defenses, rights of setoff, counterclaims or similar rights that a Releasor may assert in response to any Action initiated or claim asserted against such Releasor by any Releasee. It is the intention of Stockholder in executing this release, and in giving and receiving the consideration called for in the Merger Agreement, that the release contained in this Section 4.1 shall be effective as a full and final accord and satisfaction and general release of and from all matters released hereunder and the final resolution by Stockholder and the Releasees of all such matters. Stockholder hereby represents to the Releasees that neither Stockholder, nor its controlled Affiliates or trustees have voluntarily or involuntarily assigned or transferred or purported to assign or transfer to any Person any matter released hereunder and that no Person other than Stockholder or its controlled Affiliates has any interest in any such matter by law or Contract by virtue of any action or inaction by Stockholder or any of its controlled Affiliates. It is expressly agreed that the Releasees to whom this Section 4.1 applies shall be third-party beneficiaries of this Section 4.1 from and after the Effective Time and shall be entitled to enforce the releases and covenants contained herein.
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Section 4.2 Section 1542 of the Civil Code of the State of California. Stockholder acknowledges that it has been informed of, and that Stockholder is familiar with, Section 1542 of the Civil Code of the State of California. Stockholder hereby waives and relinquishes (a) all rights and benefits Stockholder has or may have under Section 1542 of the Civil Code of the State of California, to the full extent that Stockholder may lawfully waive all such rights and benefits pertaining to the subject matters of this Agreement, and (b) any similar or comparable protections afforded by any case law or statutes of similar import, whether such laws are in the United States or elsewhere in the world. Section 1542 of the Civil Code of the State of California provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
Article V
REMEDIES
Section 5.1 Specific Performance. Stockholder agrees that irreparable damage would occur in the event that the provisions of this Agreement (including, without limitation, the restrictive covenants set forth in Article III) are not performed by Stockholder in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Purchaser shall be entitled to an injunction or injunctions to prevent breaches of this Agreement by Stockholder and to enforce specifically the terms and provisions of this Agreement. The foregoing rights are in addition to and without limitation of any other remedy to which Purchaser may be entitled at law or in equity. Stockholder further agrees not to assert that a remedy of specific performance is unenforceable, invalid, contrary to law or inequitable for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy. Stockholder hereby waives (a) any defenses in any action for specific performance, including the defense that a remedy at law would be adequate, and (b) any requirement under any Law to post a bond or other security as a prerequisite to obtaining equitable relief. Stockholder further agrees that, by seeking the remedies provided for in this Section 5.1, Purchaser shall not in any respect waive its right to seek at any time any other form of relief that may be available to it under this Agreement, the Merger Agreement, or any other Transaction Document (including monetary damages), in the event that the remedies provided for in this Section 5.1 are not available or otherwise are not granted.
Section 5.2 Judicial Modification. If any court of competent jurisdiction shall at any time determine that any of the covenants contained in Article III or elsewhere in this Agreement exceed the time, geographic area, or scope of activity limitations permitted by applicable Law, then the court may reduce such limitations to those that such court deems reasonable and enforceable under the circumstances then existing, and the covenants shall be reformed to cover the maximum time period, geographic area, and scope of activity that may be enforceable under applicable Law. The parties hereto expressly agree that it is their intention that the covenants set forth in this Agreement be enforced to the fullest extent permitted by applicable Law, and that the court shall reform, rather than void, any covenant that is found to be overly broad or otherwise unenforceable. Each covenant set forth in Article III shall be deemed to be a series of separate covenants, one for each applicable jurisdiction, county, city, state, or other political subdivision in the Restricted Area.
Section 5.3 Third-Party Beneficiary Enforcement Rights. Purchaser’s Affiliates are intended third-party beneficiaries of this Agreement and shall have the right to enforce the provisions hereof directly against Stockholder. Stockholder’s obligations under this Agreement shall not be excused, reduced, or otherwise limited by reason of any claimed breach by Purchaser, the Company, or any of their respective Affiliates of any obligation to Stockholder under this Agreement, the Merger Agreement, or otherwise. Stockholder shall not circumvent or attempt to circumvent the obligations set forth in this Agreement by taking actions through any new entity, Affiliate, or other Person that Stockholder would be prohibited from taking directly.
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Article VI
GENERAL PROVISIONS
Section 6.1 Termination.
(a) Support Provisions. The provisions of Article II (Support Agreement Provisions) shall terminate and be of no further force or effect in the event that the Merger Agreement is validly terminated prior to the Closing. Termination of Article II shall not relieve any party of liability for any breach of Article II occurring prior to such termination.
(b) Restrictive Covenants and Other Provisions. The provisions of Article III (Restrictive Covenant Provisions) and all other provisions hereof (other than Article V (Remedies), and Article VI (General Provisions)) shall automatically terminate and be of no force or effect in the event that the Merger Agreement is validly terminated prior to the Closing. If the Closing occurs, (i) the provisions of Article III shall survive the Closing and remain in full force and effect for the duration of the Restricted Period and the Non-Solicit Restricted Period, as applicable, and (ii) the provisions of Section 2.5 (Lock-Up) shall survive the Closing and remain in full force and effect until the expiration of the last of the periods set forth therein.
(c) Surviving Provisions. Notwithstanding anything to the contrary herein, Article V (Remedies), and Article VI (General Provisions) shall survive any termination of this Agreement. The confidentiality obligations set forth in Section 2.4 shall survive termination of this Agreement for a period of two (2) years from the date of such termination.
Section 6.2 Further Assurances. Stockholder shall, as reasonably requested by Purchaser or the Company, promptly execute and deliver such additional documents and instruments and take all such further action as may be reasonably necessary to consummate and make effective the Merger Agreement, the other Transaction Documents, and the Transactions.
Section 6.3 Assignability. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned, in whole or in part, by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of Purchaser, except that Purchaser may assign, in its sole discretion and without the consent of any other party, any or all of the rights, interests, and obligations under this Agreement to one or more direct or indirect wholly-owned Subsidiaries of Purchaser or to any successor in interest in connection with a merger, consolidation, or sale of all or substantially all of the assets of Purchaser or the Company. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
Section 6.4 Severability. Should any provision of this Agreement or the application of any provision of this Agreement to any Person or circumstance be held invalid, illegal or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability, illegality or prohibition and shall be enforced to the greatest extent permitted by Law, (b) such unenforceability, illegality or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability, illegality or prohibition shall not affect or invalidate any other provision of this Agreement.
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Section 6.5 Governing Law. This Agreement and all claims, causes of action (whether in contract, tort, statute, or otherwise) or other matters that may result from, arise out of, be in connection with or relating to this Agreement, or the negotiation, administration, performance or enforcement of this Agreement, including any claim or cause of action resulting from, arising out of, in connection with, or relating to any representation, warranty, covenant, or agreement made in or in connection with this Agreement, shall be governed in all respects, including validity, interpretation, and effect, by the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof.
Section 6.6 Notices. All notices, requests, demands, claims and other communications required or permitted to be delivered, given or otherwise provided under this Agreement must be delivered in accordance with Section 10.5 of the Merger Agreement, in accordance with (a) in the case of Purchaser, the contact information set forth in such Section for Purchaser, and (b) in the case of Stockholder, the contact information set forth on the signature page hereto.
Section 6.7 Counterparts. This Agreement may be executed (a) in two or more partially or fully executed counterparts, each of which will be deemed an original and will bind the signatory, but all of which together will constitute the same instrument, and (b) by electronic means, PDF, or facsimile. The execution and delivery of a signature page in the form annexed to this Agreement, by any party hereto who will have been furnished the final form of this Agreement, will constitute the execution and delivery of this Agreement by such party.
Section 6.8 Miscellaneous. This Agreement, the Merger Agreement, and the other documents specifically referred to herein or therein or delivered pursuant hereto or thereto, constitute the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement is not intended to confer upon any other Person any rights or remedies hereunder (except as otherwise expressly provided in this Agreement, including the Releasees, each of which are express third-party beneficiaries hereof).
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.
PURCHASER:
RADNET MANAGEMENT, INC.
By: _________________________________
Name: _______________________________
Title:: _______________________________
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.
STOCKHOLDER (ENTITY):
____________________________________
(Name of entity)
By: ________________________________
Name: ______________________________
Title: _______________________________
Address: ____________________________
Email: _______________________________
STOCKHOLDER (INDIVIDUAL):
____________________________________
(Signature)
Print Name: ___________________________
Address: ____________________________
Email: _______________________________
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Schedule A
COMPANY SECURITIES
[Omitted]
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Exhibit 99.1
FOR IMMEDIATE RELEASE
RadNet, Inc. Announces Agreement to Acquire ONRAD, Inc.
| · | Adds a radiology professional services platform offering teleradiology and in-hospital staffing for hospitals and health systems | |
| · | Enables RadNet to seamlessly combine radiology professional services, AI-powered technology solutions and outpatient imaging operations into an integrated offering, transforming radiology workflows and ultimately improving patient care | |
| · | Uniquely positions RadNet with an expanded offering to address the full range of care settings where imaging is performed inside and outside of hospitals | |
| · | Acquisition adds to RadNet a capital-light, high-margin management services platform supporting more than 225 hospital facilities across 26 states with more than 130 contracted radiologists | |
| · | ONRAD is expected to add $190 million to $200 million of Revenue and $60 million to $65 million of Adjusted EBITDA(1) to RadNet in its first year of operation after closing | |
| · | RadNet and ONRAD management will host a conference call and webcast to discuss the transaction in more detail on Tuesday, October 27 |
LOS ANGELES, October 26, 2026 — RadNet, Inc. (NASDAQ: RDNT) (“RadNet” or the “Company”), a national leader in providing high-quality, cost-effective outpatient diagnostic imaging services and a global developer of digital health solutions, today announced that it has entered into a definitive agreement to acquire ONRAD, Inc. (ONRAD). ONRAD, through its more than 130 contracted radiologists, is a provider of teleradiology and in-hospital professional radiology staffing services for hospitals, health systems and other diagnostic imaging sites of care. The transaction is expected to close in early 2027 and is subject to customary regulatory review and closing conditions. Upon closing, ONRAD shareholders will receive a cash payment of $350 million and 5 million shares of RadNet, Inc. common stock, subject to customary adjustments. In addition, an earnout of up to $210 million in value will be payable upon achievement of target EBITDA for 2027. The earnout is payable in cash, RadNet common stock, or a combination thereof, at RadNet’s election.
“This is the next step in building an imaging company with comprehensive solutions that brings technology, radiology professional services and imaging operations together to address some of healthcare’s most pressing challenges and needs,” said Dr. Howard Berger, President and CEO of RadNet. “Connecting RadNet’s established AI-enabled digital health technology and imaging center operational expertise with ONRAD’s teleradiology and professional staffing solutions unites the capabilities needed to address the entire continuum of diagnostic imaging under one company. The acquisition will enhance RadNet’s portfolio of solutions for hospitals and health systems, outpatient freestanding centers, urgent care facilities, freestanding emergency departments and physician offices.”
Dr. Berger continued, “I welcome ONRAD’s executive team, its contracted radiologists and all other ONRAD team members into the RadNet family. This transaction is a significant additional step in leading our industry forward and demonstrating the impact that a transformation to workflow solutions in diagnostic imaging can have in advancing early detection, population health and improved patient outcomes.”
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Through its contracted radiologists, ONRAD provides remote teleradiology final-read interpretations across many healthcare settings and in-hospital professional radiology staffing services, including interventional radiology, for hospitals and health systems. Upon closing, ONRAD will become the foundation for RadNet’s third reportable operating segment, Radiology Professional Services. With the addition of this third operating segment, RadNet becomes a comprehensive radiology services and solutions provider, addressing the imaging continuum across the full range of care settings, including hospitals, freestanding ambulatory outpatient centers, primary and specialty care physician offices and standalone urgent care and emergency department facilities.
Strategic Rationale
| · | Connects three complementary businesses to provide comprehensive imaging solutions. Combining RadNet outpatient imaging operations and DeepHealth AI-enabled digital health solutions with the ONRAD radiology professional services platform will bring together comprehensive expertise in the diagnostic imaging industry within one company. Integrating these capabilities for customers and partners across all diagnostic imaging settings is expected to create efficiencies, improve patient care and lower costs in an unequaled approach. | |
| · | Expands RadNet into hospital-based radiology. Hospitals and health systems account for more than 50% of U.S. diagnostic imaging volume.(2) ONRAD will provide RadNet with an established platform to support in-hospital and remote professional radiology interpretation services while also expanding the RadNet offerings to its existing joint venture partners. | |
| · | Addresses growing market demand. U.S. imaging demand growth is outpacing the supply of trained radiologists. With ONRAD, RadNet will be positioned to further help address this gap by integrating AI-enabled technology with teleradiology and professional staffing services, creating opportunities to transform workflows, support case prioritization and better match interpretation capacity to demand. | |
| · | Adds a fast-growing, high-margin capital-light business. ONRAD has demonstrated consistent annual revenue growth between 10% and 20% over the last several years with Adjusted EBITDA(1) margins exceeding 30%. RadNet believes ONRAD will require very little capital to maintain and grow organically. |
“For 20 years, ONRAD has built long-standing relationships with hospitals and health systems delivering reliable, high-quality radiology coverage,” said Dave Engert, President and CEO of ONRAD. “Joining RadNet not only gives us the scale, resources and technology to meet the growing needs of our current and prospective customers, but it also enables us to offer a unique imaging model that addresses the full continuum of care from outpatient imaging centers to the acute care environment. The potential to further meet the ever-increasing demand for imaging services along with improving patient outcomes is what excites me most about our future together.”
Conference Call and Webcast
RadNet will host a conference call and webcast at 8:00 a.m. Eastern Time on Tuesday, October 27, 2026 to discuss the transaction in further detail. To join by phone, dial 1-844-744-1280 for the U.S. and Canada and 1-412-564-6465 for international callers. A live webcast will be available at https://viavid.webcasts.com/starthere.jsp?ei=1780997&tp_key=417a069370.
Robert W. Baird & Co. is serving as exclusive financial advisor to ONRAD, which is a portfolio company of Housatonic Partners.
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About RadNet, Inc.
RadNet, Inc. is a leading national provider of freestanding, fixed-site diagnostic imaging services in the United States based on the number of locations and annual imaging revenue. RadNet has a network of owned and/or operated outpatient imaging centers. RadNet’s imaging center markets include Arizona, California, Delaware, Florida, Idaho, Indiana, Maryland, New Jersey, New York, Texas and Virginia. In addition, RadNet provides radiology information technology and artificial intelligence solutions marketed under the DeepHealth brand, teleradiology professional services and other related products and services to customers in the diagnostic imaging industry globally. Together with contracted radiologists, and inclusive of full-time and per diem employees and technologists, RadNet has over 12,000 team members. Learn more at radnet.com.
About ONRAD, Inc.
ONRAD, Inc. is a leading radiology services company, delivering remote teleradiology final-read impressions and full-service radiology solutions for hospitals, radiology practices, outpatient clinics and imaging centers. Its spectrum of services includes reading remote and onsite diagnostic studies, interventional radiology, medical directorship, analytics, peer review, billing and quality oversight — all on the industry’s most advanced, integrated, AI-powered technology platform. ONRAD reads all modalities and has been Joint Commission accredited since its inception.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that RadNet expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the transaction discussed herein, the expected timing and completion of such transaction, the anticipated benefits of such transaction, the potential earnout amount, the expected financial impact of the transaction on RadNet and other statements that are not historical facts. Forward-looking statements are based on current plans, estimates, expectations and assumptions as of the time they are made, are not guarantees of future performance and should not be relied on as predictions of future events, and there can be no assurance that such estimates, assumptions and expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties, many of which are difficult to predict and are generally outside RadNet’s control, and other factors that could cause RadNet’s actual results or financial condition to differ materially from those expressed or implied by forward-looking statements, including (i) the risk that the conditions to the closing of the transaction, including required regulatory approvals, are not satisfied or waived on a timely basis or at all, and the risk that the transaction may not be completed on the anticipated terms, in the anticipated timeframe or at all, (ii) the occurrence of any event that could give rise to the termination of the definitive agreement for the transaction, (iii) the risks and costs associated with the transaction and integrating ONRAD and achieving the anticipated benefits of the transaction, (iv) potential disruption to the businesses of RadNet and ONRAD, including the ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners, as well as diversion of management’s time and attention from ordinary course business operations to completion of the transaction and integration matters, (v) potential litigation or regulatory action relating to the transaction, (vi) the effect of the transaction on RadNet’s indebtedness and leverage, credit ratings and liquidity, (vii) legislative, regulatory and economic developments, including in the healthcare industry, (viii) the effect of the announcement, pendency or completion of the transaction on the market price of RadNet’s common stock, and (ix) the other risks described under “Risk Factors” in RadNet’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. There may be additional risks, uncertainties and factors that we do not currently view as material or that are not necessarily known. Please read the Company’s filings with the SEC, which are available on the SEC’s website at https://www.sec.gov, for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements in this press release are qualified in their entirety by these cautionary statements. Except as required by law, RadNet undertakes no obligation and does not intend to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
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No Offer or Solicitation
This press release is for informational purposes only and shall not constitute or form part of, an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities, in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
References
(1)The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and adjusted for losses or gains on the sale of equipment, other income or loss, debt extinguishments and non-cash equity compensation. Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taken place during the period.
Adjusted EBITDA is a non-GAAP financial measure used as analytical indicator by RadNet management and the healthcare industry to assess business performance, and is a measure of leverage capacity and ability to service debt. Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. As Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.
The Company’s guidance or target for ONRAD’s addition to Adjusted EBITDA is also a non-GAAP financial measure that excludes or otherwise has been adjusted for non-GAAP adjustment items from the Company’s GAAP financial statements. When the Company provides guidance or its target for ONRAD’s addition to Adjusted EBITDA, it does not provide a reconciliation of the GAAP measure as it is unable to predict with a reasonable degree of certainty the actual impact of the non-GAAP adjustment items. By their very nature, non-GAAP adjustment items are difficult to anticipate with precision because they are generally associated with unexpected and unplanned events that impact the Company and its financial results. Therefore, the Company is unable to provide a reconciliation of these measures without unreasonable efforts.
(2)Based on a Signify analysis.
RadNet
Media Contacts
Jane Mazur
Senior Vice President, Corporate Communications
+1 585-355-5978
jane.mazur@radnet.com
Mark Stolper
Executive Vice President and Chief Financial Officer
+1 310-445-2800
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