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Exhibit 10.2
FIRST AMENDMENT TO INVESTMENT AGREEMENT
This Amendment is made and entered into as of this 17th day of
December, 1996 by and between Brim, Inc. (the "Company") and Golder, Thoma,
Xxxxxxx, Xxxxxx Fund IV, L.P., a Delaware limited partnership ("Purchaser") and
Principal Hospital Company, a Delaware corporation ("Principal").
RECITALS
A. The Company, Purchaser and Principal are parties to that Investment
Agreement dated November 21, 1996 (the "Investment Agreement").
B. After execution of the Investment Agreement, the Company, Purchaser
and Principal agreed to amend the indemnity provisions thereof.
C. The Investment Agreement provides that it may be amended by written
instrument signed by the Company, Purchaser and Principal.
D. The Company, Purchaser and Principal are interested in documenting
the terms and conditions on which the indemnity provisions shall be amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
1. Section 1.04(b) is hereby deleted in its entirety and the following
inserted instead:
(b) On the Closing Date, subject to the terms and conditions set forth
herein, the Company shall issue (i) to Purchaser's designees and the
Purchaser's designees shall purchase from the Company 20,000 shares of
the Senior Preferred Stock, for an aggregate purchase price of $20
million, and (ii) to Purchaser and/or its designees and the Purchaser
and/or its designees shall purchase from the Company such number of
shares of the Junior Preferred Stock and shares of Common Stock as
shall be necessary to ensure that there are sufficient funds available
at Closing to consummate the redemption of the Redeemable Junior
Preferred and the GECC Preferred in accordance with the terms hereof,
which funds are currently anticipated to be approximately $10,000,000.
The aggregate purchase price for the New Preferred Stock and the common
stock to be purchased by Purchaser and its designees is estimated to be
approximately $30,000,000, and is referred to herein as the "Investment
Proceeds." On the Closing Date, the Investment Proceeds and the First
Union Loan Proceeds shall be payable to the Company as follows:
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(i) Sixty Nine Million Eight Hundred Thousand and no/100
Dollars ($69,800,000) shall be paid in immediately available
funds by wire transfer to the Company.
(ii) Four Million and no/100 Dollars ($4,000,000) shall be
paid in immediately available funds to an interest bearing
escrow account established by the Escrow Agent and designated
as the "Brim/Principal Escrow Account" to be held by the
Escrow Agent.
(iii) Fifty Six Thousand Six Hundred Sixty Eight and 81/100
Dollars ($56,668.81) shall be paid in immediately available
funds to an account designated by Purchaser for the benefit of
the Company in payment of the remaining balance of the
intercompany loans described in 5.0l(a)(ii)(E).
(iv) One Hundred Forty Three Thousand Three Hundred Thirty One
and 19/100 Dollars ($143,331.19) shall be paid in immediately
available funds to the Agent/Legal Fees Expense Account to be
used by Xxx Xxxxxx, as the agent for the benefit of the former
holders of the Redeemed Preferred Stock and of the GECC
Preferred Stock (the "Agent") to pay any costs and expenses
incurred by the Agent in connection with any claims made under
the indemnity provisions hereof and/or under the indemnity
provisions of the Senior Living Escrow Agreement. The funds in
the Brim/Principal Escrow Account shall be disbursed in
accordance with the provisions of Article IX hereof and/or any
Escrow Agreement which may be executed pursuant thereto.
2. The table set forth in Section 1.07 and Section 1.08 are
hereby amended to reflect that pursuant to the last sentence of Section
1.08 the Company and Purchaser have reviewed the Estimated Senior
Living Tax Liability reflected in the Investment Agreement and have
agreed that the amount of the Estimated Senior Living Tax Liability
shall, for all purposes of the Investment Agreement, be $2,834,464.
3. Section 2.03 is hereby amended to provide that the Outside
Closing Date shall be December 18, 1996. The Company and Purchaser
acknowledge and agree that certain documents executed in connection
with the Transactions will be dated December 17, 1996. Nothing therein
shall be construed as inferring in any manner that the Closing
occurred, or that Purchaser or its designees were shareholders of the
Company, either prior to December 18, 1996 or prior to the consummation
of the Divestitures.
4. Section 9.03 is hereby deleted in its entirety and the
following inserted instead:
9.03. Indemnification. Provided that this Agreement has not
been terminated pursuant to Paragraph 9.01, from and after the
Closing Date, the Company shall indemnify the Purchaser, its
partners and affiliates, Purchaser's designees and their
respective partners, officers, directors, employees and
affiliates from and against any and all claims, damages,
losses, expenses, costs (including reasonable attorneys fees),
deficiencies, penalties,
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interest, fines, obligations or liabilities of any kind and
claims brought by third parties (collectively "Losses")
suffered or incurred by the Purchaser its partners and
affiliates, Purchaser's designees and their respective
partners, officers, directors, employees and affiliates or by
the Company or its officers, directors, employees or
affiliates in the event:
(a) Of a breach by the Company of its
representations, warranties or covenants set forth in this
Agreement; provided, however, that the Purchaser's recourse
for any and all such Losses shall be limited to the funds on
deposit in the Escrow Account (excluding the funds in the
Agent/Legal Fees Expense Account) described in Paragraph 1.04
hereof and shall be further limited by the provisions of
Paragraph 9.06 below; provided, further, that the Purchaser's
recourse for any and all Losses arising from a breach of the
covenants set forth in Paragraphs 5.0l(a)(ii)(C) and (E) shall
be subject to the Limitation Period set forth in Paragraph
9.06(a), but shall not be subject to the Loss Threshold set
forth in Paragraph 9.06(a).
(b) A request for a Supplementary Advance
Reimbursement is made by Brim, Inc. after Closing under the
terms of the BSL Merger Agreement and either (i) the parties
agree, after the audit thereof by Encore pursuant to the
rights granted to it under the BSL Merger Agreement, or (ii) a
determination is made pursuant to the arbitration provisions
set forth in the BSL Merger Agreement, that, in either case,
the amount was advanced in respect of the Development Projects
(as that term is defined in the BSL Merger Agreement) but was
not expended in accordance with the requirements of the BSL
Merger Agreement (the "Advance Reimbursement Indemnity");
provided, however, that the Purchaser's recourse for amounts
which are the subject of the Advance Reimbursement Indemnity
shall be limited to the funds on deposit in the Escrow Account
(excluding the funds in the Agent/Legal Fees Expense Account)
described in Paragraph 1.04 hereof shall be subject to the
Limitation Period set forth in Paragraph 9.06(a) but shall not
be subject to the Loss Threshold set forth in Paragraph
9.06(a).
(c) Any and all costs and expenses associated with
the Senior Living Transaction or the Excluded Assets
Transaction in excess of $1,000,000, for which the Redemption
Price was to be adjusted pursuant to Section 1.07 but which,
as a result of differences between the estimated Purchase
Price Adjustments used in calculating the Net Redemption Price
and the actual costs to the Company, were not fully accounted
for in calculating the Net Redemption Price paid at Closing
(the "Transaction Costs Indemnity"); provided, however, that
the Purchaser's recourse for amounts which are the subject of
the Transaction Costs Indemnity shall be limited to the funds
on deposit in the Escrow Account (excluding the funds in the
Agent/Legal Fees Expense Account) described in Paragraph 1.04
hereof shall be subject to the Limitation Period set forth in
Paragraph 9.06(a) but shall not be subject to the Loss
Threshold set forth in Paragraph 9.06(a).
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5. Section 9.06(a) is hereby deleted in its entirety and the following
inserted instead:
Except as otherwise specifically provided in Paragraph 9.03(a) with
respect to a breach of the covenants set forth in Paragraphs
5.0l(a)(ii)(C) and (E) and in Paragraph 9.03(b) with respect to the
Advance Reimbursement Indemnity and, Purchaser shall have no right to
recover with respect to any Losses until the amount of all such Losses
is equal to or greater than Five Hundred Thousand and no/100 Dollars
($500,000) individually or in the aggregate (the "Loss Threshold") and
thereafter Purchaser shall only be entitled to recover Losses suffered
or incurred by it or the Company in excess of the Loss Threshold. In
addition and subject to the further limitation set forth in Paragraph
9.06(c), any and all claims for the recovery of Losses must be brought
by Purchaser within eighteen (18) months after the Closing Date (the
"Limitation Period") with the exception of claims for the recovery of
Losses arising from a breach by the Company of its representation and
warranties set forth in Paragraph 3.11 which must be brought within
thirty one (31) months after the Closing Date (the "Tax Limitation
Period").
6. Section 9.06(b) is hereby deleted in its entirety and the following
inserted instead:
(i) Except as otherwise specifically provided in Paragraphs 9.06(b)(ii)
and (iii), any and all funds remaining in the Escrow Account at the end
of the Limitation Period (the "Remaining Escrowed Funds"), along with
the accrued interest thereon, shall be released by the Escrow Agent to
the former holders of the Redeemed Preferred Stock, the former holders
of the Accelerated Options and/or the Purchased Options, the former
holder of the GECC Preferred Stock and to the Carryover Shareholders
(collectively, the "Former Holders") as follows: (i) 64.15% of the
Remaining Escrowed Funds, along with 64.15% of the accrued interest
thereon, shall be disbursed to the Former Holders based on the
percentage of the Company's fully diluted common stock owned by each
such stockholder or option holder on November 6, 1996, as set forth in
Exhibit O hereto and (ii) 35.85% of the Remaining Escrowed Funds, along
with 35.85% of the accrued interest thereon, shall be disbursed to the
former holder of the GECC Preferred Stock.
(ii) Notwithstanding the foregoing, as to any Loss Notices submitted
prior to the expiration of the Limitation Period in excess of the Loss
Threshold which do not involve a Third Party Claim and which remain
unresolved at the end of the Limitation Period, sufficient funds to
cover the Losses which are the subject thereof shall be retained by
Escrow Agent in the Escrow Account until the final resolution thereof
between the Agent, on the one hand, and the Company or the Purchaser,
as applicable, on the other hand, in accordance with the arbitration
procedures set forth in Paragraph 9.05 or, in the event of a Loss
Notice which relates to a Third Party Claim which is admitted by the
Agent to be, or is determined by the arbitrator to, represent a breach
of a representation, warranty or covenant of the Company hereunder,
until the final resolution of such Third Party Claim however effected
including by the decision of a court of competent jurisdiction, by
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decision made upon administrative or other non-judicial proceeding or
by agreement of the parties thereto, at which time the funds which are
the subject of any such Loss Notice(s) shall be disbursed in accordance
with the order of the arbitrator, such court of competent jurisdiction
or such settlement agreement, as applicable, and, in the event any
portion thereof is to be disbursed to the Former Holders, such sum
shall be disbursed in accordance with the percentages reflected in
Paragraph 9.06(b)(i).
(iii) Notwithstanding the foregoing, the sum of Two Hundred Thousand
and no/100 Dollars or the Remaining Escrowed Funds, whichever is less
(the "Tax Escrow Funds") shall remain in escrow until the end of the
later of (A) the Tax Limitation Period or (B) the final resolution of
any Losses as to which a Loss Notice is pending at the end of the Tax
Limitation Period however such resolution is effected including by the
decision of a court of competent jurisdiction, by decision made upon
administrative or other nonjudicial proceeding or by agreement of the
parties thereto, at which time the Tax Escrow Funds shall be disbursed
either (X) to the Former Holders if no such Loss Notices are pending at
the end of the Tax Limitation Period or (Y) in accordance with the
order of the arbitrator, such court of competent jurisdiction or such
settlement agreement, as applicable, if such Loss Notices are pending
at the end of the Tax Limitation Period, and in either event any
portion of the Tax Escrow Funds which is to be disbursed to the Former
Holders shall be disbursed in accordance with the percentages reflected
in Paragraph 9.06(b)(i).
7. The following is inserted as Paragraph 9.13:
9. 13. Income Taxes. The Company and the Purchaser acknowledge and
agree that the funds in the Escrow Account described in Paragraph 1.04
shall, except as otherwise provided herein, be deemed for purposes of
the tax laws to be the property of the Former Holders and accordingly
that the Former Holders shall be required to pay income taxes on any
interest earned thereon. Notwithstanding the foregoing, if and to the
extent, pursuant to Paragraph 9.07, the Purchaser utilizes the interest
earned on the funds in the Escrow Account to pay its portion of the
fees or expenses charged by the Escrow Agent or receives a disbursement
for taxes as set forth below, such interest income shall be deemed for
purposes of the tax laws to be the property of the Purchaser and
accordingly the Purchaser shall be required to pay income taxes on the
amount of interest earnings so utilized by it. The Company and the
Purchaser further acknowledge and agree that each of the Former Holders
and the Purchaser shall have the right to withdraw from interest earned
on the funds in the Escrow Account sufficient funds to paid said income
taxes on the foregoing amounts at an assumed tax rate of 45% in the
case of the Former Holders and 42% in the case of the Purchaser and
that any interest on the Escrow Account available for disbursement
pursuant to the terms hereof shall be reduced by such amount.
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8. Except as specifically set forth herein, the Investment Agreement
shall remain in full force and effect as originally executed.
SIGNATURES ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties hereby execute this Agreement
as of the day and year first set forth therein:
BRIM, INC.
By: /s/ X. X. Xxxx
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Its: President
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GOLDER, THOMA, XXXXXXX, XXXXXX FUND IV, L.P.
By: /s/ Xxxxx Xxxxxx
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Its: Principal
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ACKNOWLEDGEMENT OF PRINCIPAL AND AGENT
The undersigned, being parties to the Investment Agreement do
hereby acknowledge the amendments to the Investment Agreement provided for above
and do hereby reaffirm their obligations under the Investment Agreement
notwithstanding the amendments provided for above.
PRINCIPAL HOSPITAL COMPANY
By: /s/ Xxxxxx X. Xxxx
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Its: CEO
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/s/ Xxx Xxxxxx
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XXX XXXXXX, AGENT
