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EXHIBIT 2.1
FIRST AMENDMENT
TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT To Asset Purchase Agreement (this "First
Amendment") is made by and among HEALTHCARE RECOVERIES, INC., a Delaware
corporation ("Purchaser" or "Company"), MEDCAP MEDICAL COST MANAGEMENT, INC., a
California corporation ("Seller") and XXXXXX DEUTSCH, a resident of the State of
California and the sole shareholder of Seller (the "Shareholder"), as of the 8th
day of December, 1999.
W I T N E S S E T H;
WHEREAS, Seller sold to Purchaser and Purchaser purchased from Seller
substantially all of the assets and properties of the Business, and Purchaser
assumed certain of the liabilities of the Business on February 15, 1999, all in
accordance with the terms and conditions of an Asset Purchase Agreement by
and among Purchaser, Seller, and Shareholder, dated as of December 4, 1998 (the
"Asset Purchase Agreement");
WHEREAS, the Asset Purchase Agreement provides that the Purchase Price
for the Assets shall include an Initial Installment Payment and a Final
Installment Payment; and
WHEREAS, Seller and Shareholder propose to amend the Employment
Agreement by and between the Company and Shareholder dated as of February 15,
1999 (the "Employment Agreement").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Capitalized terms used and not otherwise defined
herein shall have the same meaning as ascribed to them in the Asset
Purchase Agreement.
2. Section 1.5 of the Asset Purchase Agreement is
deleted in its entirety and the following shall be substituted in lieu
thereof:
"Section 1.5. The Purchase Price. The purchase price for the
assets shall be an amount equal to (i) Ten Million Dollars
($10,000,000), plus (ii) the Final Installment Payment (as hereinafter
defined), plus (iii) the Negotiated Settlement Revenue (as hereinafter
defined) for the Applicable Prior Period (as hereinafter defined)
(collectively, the "Purchase Price"); provided, however, that the
amount of the Purchase Price shall be subject to adjustment pursuant to
Section 1.6 hereof based upon the Final Closing Date Balance Sheet (as
hereinafter defined)."
3. Section 1.6 of the Asset Purchase Agreement is
deleted in its entirety and the following shall be substituted in lieu
thereof:
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"Section 1.6 Preliminary Closing Payment; Net Working Capital
Adjustment Final Installment Payment; Negotiated Settlement
Revenue.
(a) On the Closing Date, Purchaser shall deliver
to Seller an amount equal to the sum of Ten Million Dollars
($10,000,000) and the Preliminary Working Capital Amount (as
hereinafter defined); which sum shall be referred to as the
"Preliminary Closing Payment."
(b) On the Working Capital Settlement Date (as
hereinafter defined), Purchaser shall deliver to Seller an
amount equal to any Positive Working Capital Balance (as
hereinafter defined) or Seller shall deliver to Purchaser an
amount equal to any Negative Working Capital Balance (as
hereinafter defined), as the case may be.
(c) On the Final Installment Date (as
hereinafter defined), Purchaser shall deliver to Seller an
amount equal to the Final Installment Payment.
(d) On or prior to the fifteenth day of each
calendar month commencing with the first full calendar month
following the calendar month in which the Final Installment
Date occurs and continuing for each calendar month thereafter
through January 15, 2001 (each, a "Negotiated Settlement
Payment Date"), Purchaser shall deliver to Seller an amount
equal to the Negotiated Settlement Revenue for the Applicable
Prior Period, together with a schedule which sets forth in
reasonable detail how such Negotiated Settlement Revenue for
the Applicable Prior Period was calculated and the relevant
components thereof (the "Negotiated Revenue Schedule").
(e) On or prior to the Closing Date, Seller
shall prepare and deliver to Purchaser a balance sheet of the
Business as of the Closing Date (or as close thereto as is
reasonably practicable), which balance sheet shall be prepared
in accordance with Generally Accepted Accounting Principles
("GAAP") consistently applied (the "Preliminary Closing Date
Balance Sheet"), together with a certificate executed by
Shareholder attesting that the Preliminary Closing Date
Balance Sheet has been prepared in accordance with the
requirements of this Section 1.6(e).
(f) On the Closing Date, Purchaser and Seller
shall instruct the Independent Accountants (as hereinafter
defined) to audit the Preliminary Closing Date Balance Sheet
and deliver to Purchaser and Seller not later than forty-five
(45) days following the Closing Date a preliminary draft of
such audited balance sheet of the Business as of the Closing
Date, which preliminary draft shall be prepared in accordance
with GAAP consistently applied. Purchaser and Seller shall
have fifteen (15) days following receipt of such preliminary
draft of the audited balance sheet of the Business to provide
the Independent Accountants with any comments, input and
supporting documentation they may consider relevant with
respect to the preparation of such preliminary draft of the
audited
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balance sheet of the Business. In order to facilitate such
review, Purchaser and Seller shall have access to all work
papers and calculations the Independent Accountants used in
preparing the preliminary draft of the audited balance sheet
of the Business. The Independent Accountants thereafter shall
finalize such preliminary draft of the audited balance sheet
of the Business no later than sixty five (65) days from the
Closing Date and shall deliver the same to Purchaser and
Seller (the "Final Closing Date Balance Sheet"). Purchaser and
Seller agree to reasonably cooperate with the Independent
Accountants and each other to facilitate the preparation of
the Final Closing Date Balance Sheet. As used herein, the term
"Independent Accountants" shall mean the Louisville, Kentucky
office of PricewaterhouseCoopers, LLP or such other nationally
recognized accounting firm as Purchaser and Seller shall
mutually agree to designate as such for purposes of this
Section 1.6.
(g) For purposes hereof, the (i) "Preliminary Working
Capital Amount" shall mean an amount equal to the difference
between the current assets and the current liabilities of the
Business as of the Closing Date, each as set forth on the
Preliminary Closing Date Balance Sheet; (ii) "Positive Working
Capital Balance" shall mean the amount, if any, by which the
Final Working Capital Amount (as hereinafter defined) shall
exceed the Preliminary Working Capital Amount; (iii) "Negative
Working Capital Balance" shall mean the amount, if any, by
which the Preliminary Working Capital Amount shall exceed the
Final Working Capital Amount; (iv) "Final Working Capital
Amount" shall mean an amount equal to the difference between
the current assets and the current liabilities of the Business
as of the Closing Date, each as set forth on the Final Closing
Date Balance Sheet; (v) "Working Capital Settlement Date"
shall mean the fifth (5th) business day following the date of
receipt by Purchaser and Seller of the Final Closing Date
Balance Sheet; (vi) "Final Installment Date" shall mean
February 15, 2000, provided, however, that upon consummation
of a Change in Control Event (as hereinafter defined) prior to
February 10, 2000, the Final Installment Date shall be the
fifth business day after the effective date of such Change in
Control Event (but in no event later than February 15, 2000);
(vii) "Final Installment Payment" shall mean an amount equal
to the sum of Four Million Five Hundred Seventeen Thousand
Dollars ($4,517,000.00) and the Negotiated Settlement Revenue
for the Applicable Prior Period, if any; provided, however,
that in the event the Final Installment Date takes place prior
to February 15, 2000 due to a Change in Control Event, then
the amount of Four Million Five Hundred Seventeen Thousand
Dollars ($4,517,000.000) shall be reduced by an amount equal
to the Discount Factor Amount (as hereinafter defined); (viii)
"Negotiated Settlement Revenue" shall mean fifty percent (50%)
of the fees actually received by the Business under the
contracts listed on Exhibit 1.6(g)(viii)(1) hereto with
respect to the claims identified on Exhibit 1.6(g)(viii)(2)
hereto during the Applicable Prior Period less fifty percent
(50%) of the costs and expenses incurred by the Business in
collecting such fees, limited to, any auditor or prepper fees,
hospital audit fees, medical record pull fees or travel
expense reimbursement directly associated with the collection
of such fees ("Collection Costs"); (ix) "Change in Control
Event" shall mean
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acquisition by a person or entity or "group" of related
persons (as defined in Rule 13(d) of the Securities Exchange
Act of 1934, as amended), of greater than fifty-one percent
(51%) of the capital stock of the Company, a merger in which
the shareholders of the Company prior to the merger do not own
fifty-one percent (51%) or more of the capital stock of the
surviving corporation to the merger or the sale of all or
substantially all of the assets of the Company; (x)
"Applicable Prior Period" shall mean the period from November
15, 1999 through the day immediately preceding the Final
Installment Date with respect to the calculations of the
Negotiated Settlement Revenue, if any, due Seller on the Final
Installment Date, shall mean the period from the Final
Installment Date through the end of the calendar month in
which the Final Installment Date occurs with respect to the
first Negotiated Settlement Payment Date following the Final
Installment Date and shall mean the immediately preceding full
calendar month with respect to each subsequent Negotiated
Settlement Payment Date up to and ending on January 15, 2001
as the case may be; (xi) "Discount Factor Amount" shall mean
an amount equal to the product obtained by multiplying the
Final Installment Payment calculated without application of
the proviso set forth in Section 1.6(g)(vii) hereof by the
Applicable Discount Factor (as hereinafter defined); (xii)
"Applicable Discount Factor" shall mean the product obtained
by multiplying .075 by the quotient obtained by dividing the
number of days that the Final Installment Date precedes
February 15, 2000 by 365.
(h) All amounts to be delivered to a party
pursuant to this Section 1.6 hereof shall be delivered by wire
transfer of immediately available funds in accordance with
written wire transfer instructions to be provided by the party
entitled to such payment.
(i) All fees and expenses of the Independent
Accountants incurred in connection with the preparation of the
Final Closing Date Balance Sheet shall be paid by the
Purchaser.
(j) Seller shall have ten (10) business days
from receipt of a Negotiated Revenue Schedule to object to the
calculation of the Negotiated Settlement Revenue set forth
therein, and if Seller fails to provide Purchaser with written
notice of such objection in accordance with Section 9.1 of
this Agreement within such ten (10) business day period,
Seller will be deemed to have accepted such calculation for
all purposes hereof. Any such written notice of objection to
the calculation of the Negotiated Settlement Revenue shall
state in reasonable detail the basis and grounds for such
objection. In the case of an objection, the parties agree to
negotiate in good faith to resolve the disputed matter for a
period of twenty (20) business days from the date of receipt
by Purchaser of the notice of objection. If the parties fail
to resolve the disputed matter in the 20 business day time
period set forth above, the parties agree to mutually
designate, within seven (7) days following the end of such
time period, a nationally recognized accounting firm, other
than PricewaterhouseCoopers LLP, to resolve such dispute and
such firm shall finally and conclusively resolve such dispute.
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Notwithstanding any provision herein to the contrary, the costs and
expenses of the services of such nationally recognized accounting firm
shall be paid by the non-prevailing party. The nationally recognized
accounting firm shall determine whether the Purchaser, on the one hand,
or the Seller and Shareholder, on the other hand, is the non-prevailing
party or parties for purposes of paying costs and expenses. Each of the
parties hereto agrees to execute such documents requested by such
nationally recognized accounting firm relating to such firm's
resolution of the dispute.
4. Upon written request of the Seller at any time
prior to September 30, 2000, the Company and Seller shall immediately
execute and deliver the Escrow Agreement to National City Bank of
Kentucky ("Escrow Holder") pursuant to which the Company shall deposit,
within five (5) business days, Seven Hundred Fifty Thousand Dollars
($750,000.00) into an escrow account (the "Escrow Account") with Escrow
Holder. Immediately upon the Company or its Stockholders entering into
an agreement which will result in a Change of Control Event, the
Company shall give Seller written notice of such event. The Escrow
Account is to be established for the purpose of satisfying the
Company's obligations to make Negotiated Settlement Revenue payments to
Seller, under Section 1.6(g) of the Asset Purchase Agreement as amended
hereby. The Escrow Agreement shall be in form and substance mutually
agreed upon by the Company, Seller and Escrow Holder and shall provide,
among other things, that the Company shall be entitled to all interest
paid with respect to the Escrow Account, the Company shall pay all fees
payable to Escrow Holder with respect to the Escrow Account and the
funds in the Escrow Account shall be released to the Company on January
15, 2001. The Company and Seller agree to execute the Escrow Agreement
and attach such form hereto as Exhibit 4 within seven (7) days from the
date hereof. As an inducement for the Company to agree to establish the
Escrow Account, Seller agrees that during the term of the Escrow
Agreement it shall pay to the Company on a quarterly basis, an amount
equal to the amount, if any by which the average interest rate earned
on the monies in the Escrow Account during the immediately preceding
calendar quarter is less than the average interest rate the Company
pays on the line of credit; applied to the average outstanding balance
in the Escrow Account for the immediately preceding quarter.
5. Exhibit 1.7 to the Asset Purchase Agreement is
deleted in its entirety and the Exhibit 1.7 attached hereto shall be
substituted in lieu thereof.
6. From the date hereof through December 31, 2000,
Purchaser will provide Shareholder with access to and the right to use
the reports, software, and computers of Purchaser to the extent
reasonably necessary and only to enable Shareholder to negotiate
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settlements of the claims listed on Exhibit 1.6(g)(viii)(2)
(collectively, the "Claims") and to collect negotiated settlement
amounts of the Claims. Purchaser will provide Shareholder with
documentation authorizing her to negotiate with respect to the Claims
on behalf of Purchaser, provided, however, in order for the revenues
from the settlement of a Claim to be included in the calculation of
Negotiated Settlement Revenue, such settlement of Claim must be
approved in advance and in writing by a member of the Purchaser
Management Group listed on Exhibit 6 or by any other person identified
by Purchaser as having the authority to approve settlements of Claims
and whose name is provided to Shareholder in accordance with the
provisions of Section 9.1 of the Asset Purchase Agreement.
7. Throughout the period commencing with the date hereof
and having a duration of one hundred twenty (120) days, Shareholder
agrees to assist Purchaser with transitioning the Business
relationships with current Business customers to a person or persons
designated by Purchaser. Shareholder further agrees: (i) to use her
reasonable best efforts to maximize Negotiated Settlement Revenue; (ii)
to honor her representations, undertakings, covenants, and agreements
under Sections 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of the Employment
Agreement, and (iii) not to make a claim after the Final Installment
Date for any wages, back pay, severance pay, vacation and/or accrued
sick leave days, incentive or any other benefits, notwithstanding the
representation contained in Section 3 of the agreement of even date,
herewith between Shareholder and Purchaser.
8. Except as expressly set forth herein, all of the
provisions of the Asset Purchase Agreement shall remain in full force
and effect.
9. Amendment. The provisions of the First Amendment may
be waived, altered, amended or repealed, in whole or in part,
only upon the prior written consent of Company, Seller and
Xxxxxx Deutsch.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
reference to the choice of law principles thereof.
11. Counterparts. This First Amendment may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
Attest: HEALTHCARE RECOVERIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: Xxxxxx X. Xxxxx, Xx.
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Title: Executive Vice President Title: Executive Vice President
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and CFO
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Attest: MEDCAP MEDICAL COST
MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxx By: Xxxxxx Deutsch
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Title: Executive Vice Title: President
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President and CFO
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SHAREHOLDER
/S/ Xxxxxx Deutsch
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Xxxxxx Deutsch
