APOLLO MEDICAL HOLDINGS, INC. (OTCMKTS:AMEH) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry Into a Material Definitive Agreement.
On December 31, 2019, Universal Care Acquisition Partners, LLC, a Delaware limited liability company (“UCAP”), entered into a Stock Purchase Agreement (the “SPA”) among UCAP, Bright Health Company of California, Inc., a California corporation (“Bright”), Bright Health, Inc., a Delaware corporation (solely for purposes of section 13.22 thereto), Universal Care, Inc., a California corporation doing business as Brand New Day (“Universal”), Howard E. And Elaine H. Davis Family Trust, Howard E. And Elaine H. Davis Grandchildren’s Trust, Jeffrey V. Davis, Jay B. Davis, Laura Davis-Loschiavo, Marc M. Davis, Peter And Helen Lee Family Trust, and, in their respective capacities as seller representatives, Kenneth Sim, M.D., Thomas Lam, M.D., Jay Davis and Jeffrey Davis.
to the SPA, UCAP and all of the other shareholders of Universal agreed to sell to Bright all of their respective shares of capital stock in Universal (collectively, the “Shares”). Universal is a private full-service health plan.
UCAP has a 48.9% ownership interest in Universal (the “Percentage Interest”). UCAP is a wholly-owned subsidiary of Allied Physicians of California, a Professional Medical Corporation dba Allied Pacific of California IPA (“APC”), and both are consolidated variable interest entities of Apollo Medical Holdings, Inc. (the “Company”). As set forth in the Company’s definitive proxy statement filed with the Securities and Exchange Commission (the “SEC”) on July 31, 2019 (the “Proxy Statement”), the Percentage Interest is an “Excluded Asset” that remains solely for the benefit of APC and its shareholders. As such, any proceeds or gain on the sale of APC’s indirect ownership interest in Universal will have no impact on the Series A Dividend payable by APC to AP-AMH Medical Corporation as described in the Proxy Statement and consequently the sale will not affect net income attributable to the Company.
The aggregate purchase price for the Shares is $200 million in cash plus non-cash consideration consisting of shares of Bright Health, Inc.’s preferred stock having a stipulated value of $80 million, subject to certain adjustments for: (i) indebtedness of Universal existing as of the closing of the transaction (including, to the extent not otherwise repaid by Universal prior to the closing, indebtedness owed to shareholders of Universal of which $16.5 million is allocable as owing to UCAP); (ii) maintenance of stipulated tangible net equity, and (iii) customary transaction expenses. In addition, an aggregate of $44 million will be deducted from the purchase price and held in escrow: (A) for reconciliation of purchase price adjustments (the “Adjustment Escrow”), and (B) for seller indemnification obligations and achievement by Universal of certain target gross margins for the calendar year ending December 31, 2020 (the “Indemnity Escrow”). Any amounts remaining in the Adjustment Escrow that have not been offset or reserved for claims are to be released to a purchase price reconciliation process commencing 12 months after the closing. Amounts remaining in the Indemnity Escrow that have not been offset or reserved for claims are to be released in a process with defined amounts and timing concluding 24 months after the closing. APC will receive UCAP’s Percentage Interest of the aggregate purchase price and escrowed amounts to be released.
The completion of the transaction is subject to certain closing conditions, including but not limited to, certain regulatory or governmental filings and approvals having been made or obtained, and receipt of various third party consents. The SPA includes customary representations, warranties, covenants and termination provisions for each of the parties. UCAP has also agreed to indemnify Bright, to the extent of its Percentage Interest, for covered losses arising from liabilities incurred from breaches of UCAP’s and/or Universal’s respective representations, warranties and covenants.
The SPA also contains a non-compete provision which restricts UCAP and its affiliates, for a period of two years following the closing, from competing with Bright as a licensed full service health care service plan in certain designated California counties, but expressly permits UCAP and its affiliates to engage in any other form of managed care services business, including owning and operating one or more restricted health care service plans, accountable care organizations, medical groups, independent physician practice associations, hospitals and/or other healthcare providers.
The parties may terminate the SPA if the transaction is not consummated on or prior to December 31, 2020 through no fault of the parties. If the closing fails to occur by December 31, 2020 due to Bright’s insufficient financing to consummate the transaction or failure to obtain a required regulatory or governmental approval due to a final, non-appealable determination that Bright or its affiliates is insufficiently capitalized, Bright will then be obligated to pay Universal a $15 million termination fee.
About APOLLO MEDICAL HOLDINGS, INC. (OTCMKTS:AMEH)
Apollo Medical Holdings, Inc. is a patient-centered, physician-centric integrated population health management company working to provide coordinated, outcomes-based medical care. The Company operates in healthcare delivery segment. Its operations include Hospitalists, which include its contracted physicians focusing on the delivery of medical care to hospitalized patients; an accountable care organization (ACO), which focuses on providing care to Medicare fee-for-service patients; an independent practice association (IPA), which contracts with physicians and provides care to Medicare, Medicaid, commercial and dual-eligible patients on a risk- and value-based fee basis; approximately three clinics, which it owns or operates, and which provide specialty care in the greater Los Angeles area, and Palliative care, home health and hospice services, which include its at-home and end-of-life services.