Exhibit 10.51
SECOND AMENDMENT
TO
STOCK PURCHASE
AGREEMENT
This Second Amendment to Stock
Purchase Agreement (the “ Second Amendment ”),
dated as of August 1, 2008, by and among Prospect Medical Group,
Inc., a California professional corporation (
“Group” ) and Prospect Medical Holdings, Inc., a
Delaware corporation, and an affiliate of Group (
“Holdings” ) (Group and Holdings are
collectively referred to herein as the “Prospect
Parties” ), Greater Midwest, a Nevada corporation (
“Greater Midwest” ), Sierra Medical Group
Holding Company, Inc., a California professional corporation (
“Heritage PC” ), and Richard Merkin, M.D. (
“Shareholder” ) (Greater Midwest, Heritage PC
and the Shareholder are collectively referred to herein as the
“Heritage Parties” ) amends that certain Stock
Purchase Agreement dated as of April 23, 2008, as amended by that
First Amendment to Stock Purchase Agreement dated as of July 2,
2008 by and among the Prospect Parties and the Heritage Parties (as
amended by the First Amendment, the “Agreement”
). Capitalized terms used herein without definition shall
have the meanings defined for such terms in the
Agreement.
AGREEMENT
The parties hereto agree as
follows:
1.
Modification of
Section 1.6(a) . The title to
Section 1.6(a) shall be amended and restated as
follows:
“(a)
Hard Money Amount; Release of
Funds From Escrow On or Prior to Closing Date
.”
2.
New Subsection
1.6(a)(v) is hereby added to the Agreement as
follows:
“(v) The Prospect
Parties and the Heritage Parties hereby agree that the Heritage
Parties may, by written notice to the Escrow Agent and the Prospect
Parties on or after the Closing Date, direct that One Million Five
Hundred Thousand Dollars ($1,500,000) of the Balance Sheet
Adjustment Amount paid into Escrow Fund on the Closing Date be
advanced to the Heritage Parties for use solely in the operation of
the AV Entities in the ordinary course of business in accordance
with past custom and practice (the “ Business Operations
Escrow Advance ”).
3.
Modification of Subsections
1.6(c)(ii) and (iii) . Subsections 1.6(c)(ii) and (iii)
shall be amended and restated as follows:
“(ii)
If the Closing Date Balance Sheet
Reconciliation results in a Downward Balance Sheet Adjustment, the
Heritage Parties and the Prospect Parties shall, without regard to
whether the Enrollment Reconciliation has been determined, give the
Escrow Agent instructions to promptly disburse to the
1
Heritage Parties an amount (which
shall be calculated by the Heritage Parties and the Prospect
Parties) equal to: (i) the amount of such Downward Balance Sheet
Adjustment, less (ii) the amount of the Business Operations Escrow
Advance; which amount shall be paid to Greater Midwest as soon as
practicable following Escrow Agent’s receipt of such
notice. (If such Downward Balance Sheet Adjustment is less
than One Million Five Hundred Thousand Dollars ($1,500,000), the
portion of the Business Operations Escrow Advance not offset by the
Downward Balance Sheet Adjustment shall be referred to herein as
the “ Net Remaining Business Operations Escrow Advance
.”) If the Closing Date Balance Sheet Reconciliation
results in an Upward Balance Sheet Adjustment, the Escrow Agent
shall continue to hold such amount until resolution of the
Enrollment Reconciliation. Upon the subsequent resolution of
the Enrollment Reconciliation which results in a payment to the
Heritage Parties, the Heritage Parties and the Prospect Parties
shall give the Escrow Agent instructions to promptly disburse to
the Heritage Parties an amount (which shall be calculated by the
Heritage Parties and the Prospect Parties) equal to (x) the amount
of any Enrollment Reconciliation payment due the Heritage Parties,
less (y) the Net Remaining Business Operations Escrow Advance, if
any, and less (z); the amount of any Upward Balance Sheet
Adjustment due the Prospect Parties, if any, which amount shall be
paid to Greater Midwest as soon as practicable following Escrow
Agent’s receipt of such notice, and shall pay any balance
remaining in the Escrow after payment of all amounts due the
Heritage Parties to the Prospect Parties.
“(iii)
Notwithstanding anything set forth
herein to the contrary, the payments due following the Closing Date
Balance Sheet Reconciliation and the Enrollment Reconciliation
shall not be limited to the remaining Balance Sheet Adjustment
Amount then held by the Escrow Agent. If the aggregate net
payment due either the Heritage Parties or the Prospect Parties
exceeds the remaining Balance Sheet Adjustment Amount then held by
the Escrow Agent, the parties owing such excess amount shall pay
the other parties any excess amount not more than ten (10) business
days after completion of the last to occur of the Closing Date
Balance Sheet Reconciliation and the Enrollment
Reconciliation.”
4.
Modification of Section
4.7 .
Section 4.7 shall be amended and restated as
follows:
“4.7
Employees . The Prospect Parties have entered into
employment agreements (“ Employment Agreements
”) dated as of April 1, 2008, with four (4) non-physician
senior employees to induce such employees to continue their
employment through and after the Closing (the “ Contracted
Employees ”). The Prospect Parties have further
entered into a severance agreement (“ Severance
Agreement ”) dated as of April 1, 2008, with Jay
Jayakumar, a senior non-physician employee to induce him to
continue his employment through the Closing Date. The
Employment Agreements provide for payment of a severance payment if
the Contracted Employee’s employment is terminated prior to
the end of the initial term of the Employment Agreement. The
Severance Agreement provides for payment of $172,492.00 to
Mr. Jayakumar if there is a change of ownership of SMM and he
either resigns voluntarily or is terminated involuntarily (“
Jayakumar Severance Amount ”). The
Severance Agreement also restricts the
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employment of Mr. Jayakumar by the Heritage
Parties for one year following the date of his resignation or
termination.
(a) With respect to the Employment
Agreements, the Prospect Parties and the Heritage Parties agree
that: (a) the Heritage Parties shall retain at least 2 of the
Contracted E
