AMENDMENT TO MERGER AGREEMENT
This Amendment (this "Amendment Agreement"), dated as of September 9, 1996,
is by and among Integrated Health Services, Inc. ("IHS" or "Buyer"), IHS
Acquisition XIV, Inc. ("Newco"), First American Health Care of Georgia, Inc.
("First American" or the "Company"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇. ▇▇▇▇▇") and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ ("▇. ▇▇▇▇▇", and together with ▇. ▇▇▇▇▇, the "Principal Shareholders").
WITNESSETH THAT:
WHEREAS, the parties hereto are parties to a Merger Agreement (the "Merger
Agreement"), dated as of February 21, 1996; and
WHEREAS, First American and its subsidiaries (the "Debtors") filed a
petition for relief under Chapter 11 of the United States Bankruptcy Code, 11
U.S.C. ▇▇.▇▇. 101-1330, in the United States Bankruptcy Court for the Southern
District of Georgia, Brunswick (the "Bankruptcy Court"), on February 21, 1996;
and
WHEREAS, the Debtors have filed an Amended and Restated Plan of
Reorganization (the "Plan") and an Amended and Restated Disclosure Statement
(the "Disclosure Statement") with the Bankruptcy Court on or about August 21,
1996; and
WHEREAS, it is a condition to the Closing (as defined in Section 3.1
hereof) under the Merger Agreement that IHS (including its subsidiaries) receive
executed agreements from the United States Office of the Inspector General (the
"OIG") and the U.S. Department of Health and Human Services through the Health
Care Financing Administration ("HCFA") reasonably acceptable to IHS, providing,
among other things, that IHS, First American, and its subsidiaries shall not be
held liable (including, without limitation, by way of making offsets) or
responsible for any Medicare or Medicaid liability for periods prior to the
Closing (except for First American's payment of the amount required to obtain
the Settlement Releases, as contemplated by Section 2.2(a)(i) of the Merger
Agreement), and which provide for the withdrawal of any pending or threatened
legal proceedings by OIG or HCFA that propose to exclude the Company from
Medicare or Medicaid programs; and
WHEREAS, IHS, First American and the subsidiaries of First American have
entered into a term sheet (the "Term Sheet") with respect to a Settlement
Agreement (the "Settlement Agreement") with HCFA and the U.S. Department of
Justice (the "DOJ") with respect to the settlement of various claims among the
parties thereto; and
WHEREAS, the Term Sheet and the Plan and the Disclosure Statement
contemplate that the Merger Agreement be amended in certain respects; and
WHEREAS, the parties hereto desire to amend the Merger Agreement as
provided herein;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Article II of the Merger Agreement is hereby amended to read in its entirety
as follows:
"ARTICLE II: CONVERSION AND
TERMINATION OF ALLOWED INTERESTS
2.1 Certain Definitions.
(a) References to this "Agreement" shall mean the Merger Agreement, as
amended with the written consent of each party thereto.
(b) Capitalized terms used herein, and not otherwise defined, shall have
the meanings ascribed thereto in the Merger Agreement. To the extent not covered
by the preceding sentence, capitalized terms used herein and not otherwise
described herein shall have the meanings ascribed thereto in the Plan as filed
on or about August 21, 1996; provided that if any such definition shall be
amended pursuant to an amendment to the Plan, which amended definition is
approved in writing by each party hereto, such amended definition shall apply.
(c) "Merger Consideration" shall mean the ▇▇▇▇▇ Merger Consideration and
the Non-▇▇▇▇▇ Merger Consideration.
(d) "▇▇▇▇▇ Merger Consideration" shall mean the amounts payable to the
▇▇▇▇▇ Holders in accordance with Section 2.3(a)(i) and 2.3(b) below.
(e) "Non-▇▇▇▇▇ Merger Consideration" shall mean the amounts payable to the
Non-▇▇▇▇▇ Option Holders in accordance with Section 2.3(a)(ii) below.
(f) "Non-▇▇▇▇▇ Option Holders" means the holders of Allowed Options other
than the Principal Shareholders, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇▇ Family") and other than any person who has acquired
(except for transfer(s) to J. ▇▇▇▇ ▇▇▇▇▇ prior to the date hereof) any Allowed
Options from any member of the ▇▇▇▇▇ Family (collectively, the ▇▇▇▇▇ Family and
such transferees being referred to herein as the "▇▇▇▇▇ Holders").
2
(g) "Pro Rata" means, with respect to any Non-▇▇▇▇▇ Option Holder,
proportionately so that the ratio of the amount of funds distributed to any
Non-▇▇▇▇▇ Option Holder (on account of Allowed Option(s)) to the amount of all
funds distributed to Non-▇▇▇▇▇ Option Holders on account of Allowed Options is
the same as the ratio of the Individual Equity Holding of such holder to the
Total Equity Holdings of the Non-▇▇▇▇▇ Option Holders; provided, however, that
H. ▇▇▇▇▇ ▇▇▇▇▇▇ will receive no more than $20 per Allowed Option out of the
Non-▇▇▇▇▇ Merger Consideration.
2.2 Conversion and Cancellation of Allowed Interests.
(a) At the Effective Time of Merger (as defined in Section 3.3 of this
Agreement), each share of Allowed Common Stock shall, without any action by the
holder thereof, be converted into the right to receive the portion of the ▇▇▇▇▇
Merger Consideration allocable to such share in accordance with Schedule 2.1(g)
and the Plan as the same may be amended with the written consent of each party
hereto.
(b) At or prior to the Effective Time of Merger, each Allowed Option shall
have been canceled and terminated and converted, in accordance with the Plan as
the same may be amended with the written consent of each party hereto and the
Stock Option Plan of the Company, into the right to receive the portion of the
▇▇▇▇▇ Merger Consideration in accordance with Schedule 2.1(g) and the Plan as
the same may be amended with the written consent of each party hereto, in the
case of ▇▇▇▇▇ Holders, or in the case of Non-▇▇▇▇▇ Option Holders, the Pro Rata
distribution of the Non-▇▇▇▇▇ Merger Consideration, in each case, allocable to
such Allowed Option in accordance with the Plan as the same may be amended with
the written consent of each party hereto, without any action by the holder
thereof.
(c) Each share of Newco common stock outstanding immediately prior to the
Effective Time of Merger shall be converted into one share of common stock of
the Company.
(d) Buyer agrees that, prior to the Closing, the Company may, in accordance
with all applicable laws, rules and regulations, cancel each of the three (3)
awards of 25,000 shares of the Company's Class B Stock the Company granted to
individuals (themselves not being Principal Shareholders) for services as
directors. The consideration for any such cancellation shall be the agreement by
the Company to pay to the holder of such canceled shares any amount that would
have been payable to him or her had the shares not been canceled prior to
consummation of the Merger on the dates and in the manner otherwise provided by
this Agreement (including Schedule 2.1(g)). Such amounts payable to such holders
shall be deemed part of the ▇▇▇▇▇ Merger Consideration for all purposes of this
Agreement and the holders thereof shall be holders of Allowed Interests to the
extent provided in the Plan. The Company shall not cancel any such award unless
the holder thereof shall have executed and delivered to the Company a
transmittal letter in the form and substance required pursuant to Section 2.3(c)
below.
3
2.3 Manner of Exchange and Payment; Estate Representative.
(a) At the Closing, Buyer shall pay to the Estate Representative, by wire
transfer to the Bank Account (as such term is hereinafter defined), as payment
of the cash portion of: (i) the ▇▇▇▇▇ Merger Consideration payable at Closing,
an amount equal to Thirty Million Two Hundred and Thirty Thousand Dollars
($30,230,000), less (A) any amount by which the ▇▇▇▇▇ Merger Consideration shall
be reduced in accordance with Section 11.6 of this Agreement, and (B) any other
indemnification amounts to which Buyer may then be entitled in accordance with
Article XI hereof; and (ii) the Non-▇▇▇▇▇ Merger Consideration payable at
Closing, an amount equal to Eight Million Eight Hundred and Fifty-Four Thousand
Dollars ($8,854,000), less (A) any amount by which the Non-▇▇▇▇▇ Merger
Consideration shall be reduced in accordance with Section 11.6 of this
Agreement, and (B) any other indemnification amounts to which Buyer may then be
entitled in accordance with Article XI hereof. Such payment(s) shall be further
reduced by applicable federal, state and local tax withholdings as provided in
instructions Buyer furnishes to the Company.
(b) On such dates as shall be required in accordance with Section 2.4 of
this Agreement, Buyer shall pay to the Estate Representative the amount of the
Contingent Payments then due in accordance with Section 2.4 of this Agreement,
less (i) any amount by which the ▇▇▇▇▇ Merger Consideration shall be reduced in
accordance with Section 11.6 of this Agreement, and (ii) any other
indemnification amounts to which Buyer may then be entitled in accordance with
Article XI hereof. Such payment(s) shall be further reduced by applicable
federal, state and local tax withholdings as provided in instructions Buyer
furnishes to the Company.
(c) The Plan shall require the Estate Representative to distribute the
Merger Consideration to any holder of any Allowed Interest only after such
holder executes and delivers to the Estate Representative and Buyer a
transmittal letter, accompanied (in the case of issued and outstanding stock) by
the instrument, if any, evidencing such holder's Allowed Interest (or a lost
certificate affidavit and indemnity, with such other assurance as Buyer may
reasonably require), such transmittal letter to include: (i) representations and
warranties to the effect that: (A) such holder owns the applicable Allowed
Interests free and clear of all liens, claims, restrictions on transfer,
security interests, pledges and encumbrances (collectively "adverse claims") of
any kind or nature whatsoever other than adverse claims described in subsection
(d) hereof that are fully discharged upon payment of the Merger Consideration
pursuant to subsection (d), (B) such holder has the authority and capacity to
execute and deliver such transmittal letter, to surrender such Allowed Interest
(as applicable) and to receive the Merger Consideration with respect thereto,
and to accept and perform any other provisions of the transmittal letter which
the holder is specified therein to perform; (ii) acknowledgment that such
holder's rights to receive Merger Consideration are governed by the provisions
of the Plan, including, without limitation, the right of Buyer to make offsets
in accordance with Section 11.6 of this Agreement; (iii) acknowledgment that the
Company or its designee (including Buyer, as applicable) may withhold or receive
applicable Federal, state and local taxes out of the distribution of any Merger
Consideration to such holder; (iv) an undertaking of the holder to give effect
to the terms of appointment of the Estate
4
Representative in accordance with Annex A of this Agreement; (v) agreement that
such holder waives, releases and agrees not to assert, any claims against the
Company, any of its Subsidiaries, the Buyer, Newco or any ▇▇▇▇▇ Holder, or any
of their respective shareholders, officers, directors, agents, attorneys or
other advisers, or any other person or persons any of them designates, arising
out of any action, omission, matter, event or occurrence on or prior to the
Closing, except for specific enumerated exceptions with respect to the Company
or Buyer that are acceptable to the Company and Buyer; (vi) agreement that upon
payment of any amount to the Estate Representative, none of Buyer, Newco, the
Company or any of its Subsidiaries shall have any liability with respect to any
such payment or the Bank Account (as defined in subsection (g) below); and (vii)
an undertaking to indemnify and hold Buyer, Newco and the Estate Representative
harmless from any loss, damage, liability, cost and expense (including, without
limitation, attorneys' fees) arising out of any breach by said holder of any
representation, warranty, covenant or undertaking he or she makes in such
transmittal letter. If such a transmittal letter cannot be obtained, Buyer
and/or the Estate Representative may seek approval from the Bankruptcy Court for
release of the affected funds subject to legal safeguards the Bankruptcy Court
may provide in lieu of the provisions of the transmittal letter.
(d) Each Principal Shareholder hereby authorizes and directs Buyer and/or
the Estate Representative to pay, out of the ▇▇▇▇▇ Merger Consideration payable
to such Principal Shareholder, to The Coastal Bank of Georgia, the DOJ and, with
the agreement of such Principal Shareholder, any other holder of an adverse
claim which Buyer and/or the Estate Representative may deem necessary, such
amount as shall be necessary to discharge adverse claims such persons or
entities hold against the Principal Shareholders or the Allowed Interests they
hold and otherwise to give effect to the Principal Shareholders' agreements with
such holders, as made known to Buyer and/or the Estate Representative prior to
Closing.
(e) At any time after the Effective Time of Merger, IHS of Brunswick, Inc.,
a wholly-owned subsidiary of Buyer and the sole shareholder of Newco, upon
surrender of the stock certificate evidencing all outstanding shares of Newco,
shall be entitled to receive in exchange therefor a certificate representing
shares of stock of the Company, calculated on a one-to-one basis. Until so
surrendered, each such certificate that, prior to the Effective Time of Merger,
represented the outstanding shares of Newco stock will be deemed to evidence
such shares of the stock of the Company. Upon the surrender of such certificate
evidencing Newco stock, they shall be duly canceled.
(f) Subject to and upon the terms and conditions of this Agreement, at the
Effective Time of Merger, Newco shall be merged with and into the Company. Each
party hereto shall execute, deliver and file, or shall cause to be executed,
delivered and filed, all such instruments, certificates of merger and other
certificates and documents as shall be necessary to effectuate the Merger under
corporate and bankruptcy laws, and in accordance with the Plan (as the same may
be amended with the written consent of each party hereto), on the Closing Date
(as hereinafter defined).
5
(g) The "Bank Account" shall mean the bank account established for the
Estate Representative in accordance with the Plan or such other depository or
means of safeholding as the Bankruptcy Court may approve. The Principal
Shareholders agree that upon payment of any amount to the Estate Representative,
subject to applicable withholdings and payments to holders of adverse claims to
the extent required above, none of Buyer, Newco, the Company or any other Debtor
shall have any liability with respect to such Bank Account or any such payment
regardless of whether the Bank Account is opened in the name of any of them and
regardless of any investment decisions made with respect to such funds after
such payment by Buyer and regardless of to whom the Estate Representative makes
any payment. The Principal Shareholders shall indemnify and hold harmless the
Buyer and the Company from and against any and all Loss (as such term is
hereinafter defined) arising out of any action or omission by the Estate
Representative with respect to any funds Buyer or the Company paid to or at the
instruction of the Estate Representative.
2.4 Contingent Payments.
(a) The ▇▇▇▇▇ Merger Consideration shall include the following amounts
payable on the following dates, subject to the contingencies set forth below and
Buyer's rights under Section 11.6 of this Agreement (the "Contingent Payments"):
(i) On or before February 15, 2001, a sum shall be paid to the Estate
Representative in respect of the year 2000 equal to Five Million Dollars
($5,000,000);
(ii) On or before February 15, 2002, a sum shall be paid to the Estate
Representative in respect of the year 2001 equal to Six Million Dollars
($6,000,000) plus the amount, if any, of the Contingent Payment in respect
of the year 2000 that shall not have been paid by reason of the occurrence
of the contingency set forth below in any such prior year provided in
subsection (b) hereof;
(iii) On or before February 15, 2003, a sum shall be paid to the
Estate Representative in respect of the year 2002 equal to Four Million
Dollars ($4,000,000) plus the amount, if any, of the Contingent Payments in
respect of the years 2000 and 2001 that shall not have been paid by reason
of the occurrence of the contingency set forth below in any such prior year
as provided in subsection (b) hereof; and
(iv) On or before February 15, 2004, a sum shall be paid to the Estate
Representative equal to any amount of the Contingent Payments in respect of
the years 2000, 2001 and 2002 that shall not have been paid by reason of
the occurrence of the contingency set forth below in any such prior year as
provided in subsection (b) hereof.
(b) No Contingent Payment shall be payable following an applicable year (a
"Subject Year") if the year-to-year percentage increase from December of the
year preceding the Subject Year in the seasonally unadjusted Consumer Price
Index for all urban consumers (CPI-U)
6
for the Medical Care expenditure category (as reported in table 1 of the CPI
Detailed Report, prepared by the Bureau of Labor Statistics in the U.S.
Department of Labor) ("CPI") exceeds eight percent (8%). Thus, for example, if
the CPI determined for the period of December 1999 to December 2000 exceeds
eight percent (8%), the Contingent Payment of Five Million Dollars ($5,000,000)
otherwise accruing in the year 2000 and due to be paid on or before February 15,
2001, would not be paid; then, if the CPI determined for the period of December
2000 to December 2001 does not exceed eight percent (8%), the Contingent Payment
of Six Million Dollars ($6,000,000) otherwise accruing in the year 2001, plus
the Contingent Payment of Five Million Dollars ($5,000,000) in respect of the
year 2000 would be due and payable on or before February 15, 2002.
Notwithstanding the foregoing, if legislation is enacted that changes the
Medicare reimbursement methodology for home health services to a prospectively
determined rate methodology, in whole or in part, the foregoing contingency
shall terminate thereupon and all Contingent Payments shall be made then and
thereafter, including payment in full of Contingent Payments from prior years
that have not yet been paid, as if no contingency thereafter applies. In the
event that the CPI, as defined above, is not regularly maintained and published
by the Bureau of Labor Statistics in the U.S. Department of Labor, or a
successor agency, any affected party may petition the Bankruptcy Court for use
of a comparable reference considered appropriate.
(c) Buyer shall cause the Company or its successors to make payment, and
Buyer agrees to provide HHS and DOJ with a guarantee, to HHS and DOJ as provided
in the Settlement Agreement.
2.5 Working Capital Adjustments to the Merger Consideration.
(a) Buyer shall be entitled to be indemnified in accordance with Article XI
of this Agreement on a dollar-for-dollar basis (subject to application of the
Reserve (as defined in, and in accordance with, Section 11.4 below), for the
amount of the Company's Negative Working Capital (as defined below) as at the
Closing Date that exceeds Thirty-Four Million Dollars ($34,000,000). 1 For
purposes of this Agreement, the Company's "Negative Working Capital" shall be
the amount by which the consolidated current liabilities of the Company and its
--------
1 By way of example only, assuming that Negative Working Capital was
$50,000,000, and Buyer had no indemnification claims under Sections
11.2(a)(i) through and including Section 11.2(a)(v), and had no
indemnification claims under Sections 11.2(a)(vii) and 11.2(a)(viii), then
Buyer would have an indemnification claim for $16,000,000 pursuant to Section
11.2(a)(vi). Pursuant to Section 11.4, $16,000,000 of the Reserve would be
applied against such $16,000,000 claim, and accordingly no amount would be
payable in respect of such $16,000,000 claim, and the amount of the remaining
Reserve available for application against any future indemnification claims
would be reduced by such $16,000,000, from $17,000,000 to $1,000,000.
On the other hand, assuming Buyer were entitled to indemnification for a Loss
in the amount of $1,500,000 pursuant to Section 11.2(a)(i) for a breach of a
representation and that such Loss could not be included as a current
liability or current asset reduction in the calculation of Negative Working
Capital, and further assuming that Negative Working Capital was $50,000,000,
then Buyer would have aggregate indemnification claims for $17,500,000 (i.e.,
$1,500,000 for the breach of representation pursuant to Section 11.2(a)(i)
plus $16,000,000 for the amount by which Negative Working Capital exceeded
$34,000,000 pursuant to Section 11.2(a)(vi)). Pursuant to Section 11.4, the
entire $17,000,000 Reserve would be applied against $17,000,000 of such
indemnification aggregate $17,500,000 claims, and the balance of $500,000
would be payable by the Principal Shareholders to Buyer.
7
Subsidiaries as at the Closing Date shall exceed the consolidated current assets
of the Company as at the Closing Date. For the purposes of calculating the
Negative Working Capital, current assets and current liabilities shall be
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied ("GAAP"); provided that
notwithstanding GAAP requirements or past practices, (i) current liabilities
will be accrued for the Allowed Claim of Buyer for $18 million, plus accrued
interest, due to it in connection with the Reimbursement Agreement, dated as of
December 29, 1995, among the Company, its Subsidiaries and Buyer, and for fees
and expenses of KPMG Peat Marwick which the Company has agreed to reimburse to
Buyer under Section 8.10 of this Agreement, but no other reimbursements in
connection with Buyer's participation in the Bankruptcy proceedings or in
connection with Buyer's acquisition of the Company shall be included as current
liabilities for this purpose; (ii) periodic interim payments hereafter received
and/or due from Medicare for service periods ending on or before the Closing
Date shall be treated as current assets at the Closing, without deduction for
overpayment, disallowance of charges, or any other reduction, for such purpose,
and no other periodic interim payments received and/or due from Medicare on or
after the Closing Date shall be treated as current assets of the Closing for
such purpose; (iii) severance/separation payments payable to ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇ as provided in this Agreement shall not be
treated as current liabilities at the Closing for such purpose; (iv) liabilities
for overpayments or prior reserves that have been discharged pursuant to the
Settlement Agreement shall not be treated as current liabilities at the Closing
for such purpose; (v) settlement obligations of the Company with HCFA and DOJ
pursuant to the Settlement Agreement shall not be treated as current liabilities
at the Closing for such purpose and, except as otherwise expressly provided in
Section 11.7(c) of this Agreement, the tax benefits associated with the payment
of such obligations shall not be treated as current assets for such purpose;
(vi) the credit of $2,900,000 that HCFA has agreed to accept for payment of the
fine the Company incurred, as provided in the Settlement Agreement, will be
treated as a reduction in the current liability for such fine at Closing for
such purpose and the balance of the fines shall be treated as a current
liability for such purpose; (vii) the Company and Buyer will agree (after
consultation with the Principal Shareholders or their representatives), prior to
Closing, on reasonable reserves for pending or threatened claims and proceedings
and other contingencies resulting from pre- closing events or circumstances for
such purpose, and all of such reserves shall be treated as current liabilities
for this purpose; and (viii) the costs and savings arising out of restructuring
and cost reduction measures heretofore or hereafter incurred will be excluded
from the calculation of Negative Working Capital for this purpose to the extent
Buyer and Company hereafter jointly confirm in writing that such restructuring
or cost reduction measures were undertaken after consultation with Buyer
primarily to provide operational benefits after the Closing (which restructuring
and cost reduction measures may include sale or disposition of facilities;
cancellation of leases; and termination or reassignment of personnel).
(b) By September 15, 1996 (or such later date as Buyer may accept), the
Company shall deliver to Buyer the projected balance sheet, as at the Closing
Date, of the Company and the Subsidiaries on a consolidated basis (the
"Company's Projected Closing Date Balance Sheet") and of the amount of Negative
Working Capital, if any, that the Company has
8
certified to be its best good faith estimate of the foregoing prepared in
accordance with GAAP subject to the adjustments described in subsection (a)
above, and except that footnote information and effects of adjusting, closing or
correcting entries that can only be ascertained through year-end audit
procedures may, as necessary, be omitted. As soon as practicable after receipt
by Buyer of the Company's Projected Closing Date Balance Sheet, and in any event
within ten (10) days after such receipt, Buyer shall complete and deliver to the
Company a review ("Buyer's Review") of the Company's Projected Closing Date
Balance Sheet and the projected Negative Working Capital. If such review shall
reveal that Buyer has any disputes with respect to the Company's Projected
Closing Date Balance Sheet or the projected Negative Working Capital, then
representatives of Buyer, the Company and the Principal Shareholders shall
promptly meet and shall attempt in good faith to resolve any such disputes:
(i) If there are no such disputes or if all of such disputes are
resolved within ten (10) days after the Company's receipt of Buyer's
Review, then the projected balance sheet, as at the Closing Date, of the
Company and the Subsidiaries on a consolidated basis as agreed to between
Buyer and the Company, including the determination of the projected
Negative Working Capital, if any, shall be set forth as an attachment to
this Agreement (the "Projected Closing Date Balance Sheet"), and the amount
of the Merger Consideration payable at Closing shall be reduced by the
amount, if any, to which Buyer shall be entitled to indemnification in
accordance with Section 11.2(a)(vi) (the "Negative Working Capital
Indemnification Amount") in accordance with Section 11.6 of this Agreement.
If the projected Negative Working Capital Indemnification Amount, if any,
set forth in the Projected Closing Date Balance Sheet shall be in excess of
the amount of the Merger Consideration payable at the Closing in accordance
with Section 2.3(a) hereof, then Buyer, in its sole discretion, shall be
entitled to terminate this Agreement in accordance with Article XII hereof,
or to proceed with the closing of the transactions contemplated by this
Agreement, in which case, it shall be entitled to offset the amount of the
projected Negative Working Capital that exceeds the Merger Consideration
payable at Closing against payment of the Contingent Payments in accordance
with Section 11.6 of this Agreement and/or to proceed with any other
indemnification or other rights it may have.
(ii) If the parties are unable to resolve all of such disputes within
such time period, then the Closing may be delayed for up to thirty (30)
days following Confirmation of the Plan unless Buyer elects to close
notwithstanding such disputes, in which case Buyer shall deposit the
disputed amount of any Negative Working Capital Indemnification Amount
under escrow arrangements acceptable to the Company, Buyer and the
Principal Shareholders (or, as applicable, as the Bankruptcy Court
prescribes) pending resolution of such disputes. If the representatives of
Company, Buyer and the Principal Shareholders are unable to resolve all of
such disputes within thirty (30) days following Confirmation of the Plan,
and if Buyer does not elect to close as aforesaid notwithstanding such
disputes, then either the Company or Buyer shall be entitled to terminate
this Agreement in accordance with Article XII hereof.
9
(c) On or prior to the first anniversary of the Closing Date, Buyer shall,
at Buyer's expense, review the Projected Closing Date Balance Sheet and the
related consolidated statements of operations, stockholders equity and cash
flows for the period from January 1, 1996 through the Closing Date, to verify
the Company's Negative Working Capital as of the Closing Date, and shall deliver
to the Estate Representative its written report (the "Negative Working Capital
Report") setting forth the amount of such Negative Working Capital. Buyer will
consult with the Estate Representative from time to time during such review. If
the Estate Representative disputes the Negative Working Capital Report, the
parties agree to utilize the following procedure to resolve such dispute:
(i) After delivery to the Estate Representative of the Negative
Working Capital Report, the Estate Representative may deliver to Buyer a
written report (the "Estate Representative's Report") advising Buyer either
(A) that the Estate Representative agrees with the Negative Working Capital
Report, or (B) that one or more adjustments are required. If the Estate
Representative fails to deliver an Estate Representative Report ten (10)
days after Buyer has notified the Estate Representative that ninety (90)
days have elapsed since the date of delivery of the Negative Working
Capital Report to the Estate Representative, and that a response is
required if it is intended to be given, the Estate Representative shall be
deemed to have consented to the calculation of Negative Working Capital as
set forth on the Negative Working Capital Report, which calculation shall
thereupon become final and shall not be subject to further review,
challenge or adjustment, absent fraud, but subject to item (iii) below. If
Buyer concurs with the adjustments the Estate Representative proposes, or
if Buyer does not object thereto in a writing that it delivers to the
Estate Representative within (30) days after Buyer's receipt of an Estate
Representative's Report, the calculation of Negative Working Capital (as so
adjusted in such Estate Representative's Report) shall become final and
shall not be subject to further review, challenge or adjustment, absent
fraud, but subject to clause (iii) below. The Company shall make available
to the Estate Representative such books and records of the Company and its
Subsidiaries as shall be reasonably necessary for the Estate Representative
to prepare the Estate Representative's Report.
(ii) In the event that the Estate Representative submits the Estate
Representative's Report, and Buyer and the Estate Representative are unable
to resolve with Buyer the disagreements set forth in such report within
thirty (30) days after the date of Estate Representative's Report, then
such disagreements shall be referred to a recognized firm of independent
certified public accountants experienced in auditing home health companies
that the Estate Representative and Buyer mutually select (or if they cannot
agree on such selection, then a "big six" accounting firm selected by lot,
other than any such accounting firm for the Company or Buyer during the
two-year period then ended, or if there shall be no such accounting firm,
then any nationally recognized accounting firm the Bankruptcy Court
selects) (the "Settlement Accountants"), and the determination of the
Settlement Accountants shall be final and shall not be subject to further
review, challenge or adjustment, absent fraud. The Settlement Accountants
shall
10
use their best efforts to reach a determination not more than forty-five
(45) days after such referral. Buyer shall pay the cost and expenses of the
services of the Settlement Accountants; however, if it is determined that
there will not be any adjustment to the Negative Working Capital Audit in
favor of the Estate Representative, Buyer shall be entitled to offset the
amount of such costs and expenses of the Settlement Accountants against the
Contingent Payment next coming due.
(iii) If any contingent liability for which a reserve is included in
the calculation of Negative Working Capital is finally determined to be
liquidated and undisputed, such liquidated and undisputed amount shall be
used in lieu of the reserve for purposes of calculating Negative Working
Capital.
(d) If the actual Negative Working Capital as finally determined in
accordance with subsections (c) (i), (ii) and (iii) above shall be greater than
the last applicable determination of Negative Working Capital in accordance with
this Agreement, then the amount, if any, for which Buyer shall be entitled to
indemnification in accordance with Article XI of this Agreement (including,
without limitation, Section 11.4 thereof relating to application of the Reserve)
shall be redetermined based on such excess. If the Negative Working Capital as
finally determined in accordance with subsection (c)(i), (ii) and (iii) above
shall be less than the last applicable determination of Negative Working Capital
in accordance with this Agreement, then Buyer shall, subject to its offset
rights for other indemnification claims pursuant to Section 11.6 hereof, return,
upon demand, to the Estate Representative the amount of any excess
indemnification amount it receives in accordance with Article XI of this
Agreement by reason of such higher Negative Working Capital set forth in the
last applicable determination of Negative Working Capital in accordance with
this Agreement, such amount to be distributed to the holders of the Allowed
Interests in accordance with the Plan. 2
(e) In connection with this Section 2.5, Buyer and the Company agree to
notify each other prior to Confirmation of the Plan of any findings or
anticipated disputes that its respective senior management believes will have a
significant impact on the calculation of the Negative Working Capital. Failure
to comply with the foregoing obligation shall not be deemed a waiver of the
right to assert such fact after the Closing with respect to the calculation of
Negative Working Capital or otherwise."
--------
2 By way of example only, assuming that Negative Working Capital was determined
on the Closing Date to be $52,000,000, and Buyer had no indemnification
claims under Sections 11.2(a)(i) through and including Section 11.2(a)(v),
and had no indemnification claims under Sections 11.2(a)(vii) and
11.2(a)(viii), then Buyer would have an indemnification claim for $18,000,000
pursuant to Section 11.2(a)(vi). Pursuant to Section 11.4, $17,000,000 of the
Reserve would be applied against such $18,000,000 claim, and accordingly the
balance of $1,000,000 would be offset against the Merger Consideration
payable at the Closing. If six months later, a matter is liquidated for
$2,500,000 and the amount of the reserve for such matter on the Projected
Closing Date Balance Sheet was $2,000,000, then the amount of Negative
Working Capital would be redetermined by substituting the $2,500,000
liquidated amount for the $2,000,000 reserve. Accordingly, the amount of
Buyer's indemnification claim under Section 11.2(a)(vi) would be redetermined
to be $18,500,000 instead of $18,000,000. Pursuant to Section 11.4,
$17,000,000 of the Reserve would be applied against such $18,500,000 claim,
and accordingly Buyer would be entitled to receive $1,500,000. Because
$1,000,000 was previously offset against the Merger Consideration payable at
the Closing, the remaining $500,000 would be offset against the Contingent
Payments.
11
2. Section 3.1 of the Merger Agreement is hereby amended to read in its entirety
as follows:
"3.1 Time and Place of Closing. The closing of the transactions that this
Agreement contemplates (the "Closing") shall take place at the offices of the
Company's counsel ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ in Atlanta, Georgia, after
the satisfaction or waiver of all the conditions precedent set forth in this
Agreement on such date as Buyer shall select upon giving the Company and the
Principal Shareholders at least three (3) business days prior written notice,
which date shall not be fewer than three (3) business days after such conditions
have been satisfied or more than fifteen (15) business days after such
conditions have been satisfied, or at such other time and place upon which the
parties may agree. The date on which the Closing is held is hereinafter called
the "Closing Date"."
3. Article IV of the Merger Agreement is hereby amended as follows:
(a) The last sentence of Section 4.3 of the Agreement is hereby amended to
read in its entirety as follows:
"Subject to obtaining a Final Order confirming the Plan, this Agreement
and, when executed and delivered, each other Transaction Document will be the
legal, valid and binding obligations of the Company (insofar as the Company is a
party thereto or otherwise bound by its terms) enforceable against it in
accordance with their terms. For purposes of this Agreement, the Transaction
Documents shall include this Agreement, the certificates of merger, and the
closing certificate contemplated by Section 9.3 hereof."
(b) Buyer agrees that the following matters shall not constitute breaches
of representations or warranties or covenants: (i) any disallowance of charges
or business activities to the extent they are sought (it being understood that
the foregoing shall not apply to items as to which the parties to the Term Sheet
agreed merely to cooperate) or considered to be settled pursuant to the Term
Sheet; (ii) the existence of the claims set forth in the Claims Registry with
the Bankruptcy Court, but only to the extent described therein and included as
current liabilities in the determination of Negative Working Capital; (iii)
restructuring and cost reduction measures heretofore, or hereafter incurred to
the extent Buyer and Company hereafter jointly confirm in writing that such
restructuring or cost reduction measures were undertaken after consultation with
Buyer primarily to provide operational benefits after the Closing (which
restructuring or cost reduction measures may include sale or disposition of
facilities, cancellation of leases, and termination or reassignment of
personnel) (iv) changes in the ordinary course of business consistent with past
practices in the physical condition of, the property, plant and equipment of the
Company and its Subsidiaries, (v) adjustments to the financial statements of the
Company and its Subsidiaries for the 1993, 1994 and 1995 fiscal years made on
the recommendation of KPMG Peat Marwick pursuant to the written reports
heretofore delivered to Buyer, (vi) any changes in Allowed Interests that are
otherwise fully addressed in the Plan, and (vii) any other event, act or
occurrence insofar as and to the extent that the resulting Loss can be, and
therefore is, included as a current liability in the Negative Working Capital
determination.
12
4. Article VIII of the Merger Agreement is amended by adding the following:
"8.12 Best Efforts. Buyer, the Principal Shareholders and, subject to
approval of this Agreement by the Bankruptcy Court, the Company shall use their
best efforts to cause the conditions set forth in Articles IX and X of this
Agreement to be satisfied.
8.13 The Plan. The Principal Shareholders agree to vote in favor of the
Plan, as the same may be amended with their consent or as the Company shall
recommend to conform to this Agreement and as shall not adversely affect such
Principal Shareholders.
8.14 Consulting. On and after September 9, 1996, Buyer may consult with the
Company, and the parties shall cooperate with each other to make plans and
provide preparation, to the extent consistent with the dictates of the
Bankruptcy Court, for an efficient and orderly transition in the management and
control of the Company and its Subsidiaries to Buyer after the Closing. In
furtherance of the foregoing, a limited number of Buyer's representatives shall
be entitled to visit the Company for this purpose at reasonable times during
business hours upon giving the Company at least two (2) business days prior
notice of such visit; provided that all such visits shall be made under the
supervision of the senior management of the Company and shall not interfere with
the operations of the business of the Company and its Subsidiaries. In no event
shall the foregoing be deemed to limit the authority of senior management to
direct the business and affairs of the Company in accordance with their rights
and obligations as senior management.
5. Article IX of the Merger Agreement is hereby amended as follows:
(a) With respect to the condition set forth in Section 9.4 of the Merger
Agreement, the forms of legal opinions of counsel to the Company and of counsel
to the Principal Shareholders which, if delivered at the Closing, will satisfy
the condition set forth in Section 9.4 are attached hereto as Exhibits 9.4-1 and
9.4-2.
(b) The conditions set forth in Section 9.10 may be deemed satisfied if the
consents referred to therein shall not be required by reason of actions taken in
accordance with the Plan. Buyer acknowledges that the conditions set forth in
Section 9.11 to 9.15 have been satisfied or waived.
(c) Section 9.17 is hereby amended to read in its entirety as follows:
"9.17 Settlement Releases. The Settlement Agreement, consistent with the
Term Sheet shall have been executed and delivered and all of the conditions set
forth therein shall have been satisfied."
(d) Section 9.23 is hereby amended to read in its entirety as follows:
"9.23 Resignations. Buyer shall have received the resignations of all of
the directors of each of the Company and the Subsidiaries. Effective as of the
Closing Date, each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have provided
their written resignations as officers and from all other authority on behalf of
the Company and the Subsidiaries and their engagement shall have been terminated
with no further liability for compensation payable for services rendered after
the Closing Date, except that Buyer agrees to pay compensation and reimburse
expenses on the basis provided in their engagement agreement with the Company as
disclosed to Buyer for services requested by Buyer or the Company (with Buyer's
knowledge) through completion of
13
Closing and thereafter to wind up their responsibilities or for other services
in the Bankruptcy Case, in each case such services to be provided after Closing
to be coordinated in advance with the General Counsel of Buyer as he requests,
and provided Buyer agrees to continue to give effect to the indemnification
provision included in their written terms of engagement as disclosed to Buyer.
All costs and expenses payable to or on behalf of Messrs. ▇▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
for services described above shall be treated as current liabilities or
reductions in current assets for purposes of determining Negative Working
Capital."
(a) Sections 9.30, 9.31, 9.32 and 9.33 are hereby deemed to have been
waived or satisfied.
(b) Section 9.34 is hereby amended to read in its entirety as follows:
"9.34 Confirmation Period. The Bankruptcy Court shall have issued an order
confirming the Plan, and such order shall not be subject to any appeal which is
unacceptable to Buyer or its senior secured lenders."
(c) Section 9.35 shall be amended to read in its entirety as follows:
"9.35 Consummation. The Plan shall have been consummated on or before
November 15, 1996."
(d) Two new conditions are added to the end of Article IX as follows:
"9.38 Consent of Secured Lenders.
(a) The senior secured lenders of Buyer shall have approved this Agreement,
as amended, the Plan, as amended, and the transactions contemplated by this
Agreement and the Plan, as amended.
(b) All of the conditions to the foregoing consent and Buyer's receipt of
its financing from its senior secured lenders with respect to the transactions
contemplated by this Agreement shall have been satisfied.
9.39 Omnibus Agreement. An Omnibus Agreement (the "Omnibus Agreement")
providing for the final resolution of financial claims and interests (in
addition to the matters provided for therein) of each Principal Shareholder
shall have been executed and delivered by each Principal Shareholder and the
Company and shall be reasonably acceptable to Buyer."
9.40 Indemnification Obligations. The aggregate amount to which Buyer shall
be entitled to indemnification pursuant to Article XI of this Agreement (subject
to Section 11.4 thereof relating to the Reserve) shall not exceed the amount of
cash Merger Consideration otherwise payable at Closing.
14
ARTICLE X OF THE MERGER AGREEMENT IS HEREBY AMENDED AS FOLLOWS:
(a) The following provision is added as Section 10.8:
10.8 Bankruptcy. The Bankruptcy Court will approve this Agreement, all
conditions to Confirmation provided in the Plan as amended to conform with this
Agreement or as shall not adversely affect any Principal Shareholder or as to
which said Principal Shareholder shall agree will be substantially satisfied,
and the Bankruptcy Court will confirm the Plan, as so amended.
5. Article XI of the Merger Agreement is hereby amended as follows:
(a) Section 11.2 of the Merger Agreement is hereby amended in its entirety
to read as follows:
"11.2 Indemnification of Buyer.
(a) Subject to Section 11.4 below (which provides for application of the
Reserve), each of the Principal Shareholders, and, to the extent set forth
below, the Company, shall indemnify and defend Buyer and hold it harmless
against any and all damage, loss, liability, cost and expense (including,
without limitation, reasonable attorney's fee's and expenses) the Buyer (or any
of its subsidiaries), the Company or its Subsidiaries incur (all of the
foregoing hereinafter collectively referred to as "Loss") resulting from:
(i) any inaccuracy in any representation, or any breach of any
warranty, that the Company or any Principal Shareholder made in this
Agreement or any Transaction Document; or
(ii) the breach by the Company or any Principal Shareholder of any
covenant in this Agreement or any Transaction Document; or
(iii) any liability of the Company or any Subsidiary to the Medicare
or Medicaid programs, or to any other third party payor, for the recoupment
of reimbursement the Company or any Subsidiary received prior to the
Effective Time of Merger, except to the extent paid or otherwise discharged
pursuant to the releases provided pursuant to the Settlement Agreement or
discharged pursuant to the payment of the criminal fine by any Principal
Shareholder or by Buyer, the Company or its Subsidiaries pursuant to the
Settlement Agreement; or
15
(iv) the claims for options, and any related employment agreement
claims, described on Schedule 4.12 except to the extent included in the
Merger Consideration or included as a current liability or asset reduction
in the calculation of Negative Working Capital; or
(v) any action or omission of any Principal Shareholder, or any other
officer, director or employee of the Company or any Subsidiary occurring
before the filing of bankruptcy by the Company that constituted a crime,
fraud or pertained to any personal benefit he or she improperly received
(exclusive of matters paid or otherwise discharged pursuant to the releases
provided pursuant to the Settlement Agreement or the payment of the
criminal fine by any Principal Shareholder or by the payments to be made by
Buyer, the Company or any of its Subsidiaries pursuant to the Settlement
Agreement), any indemnification or contribution claims by any of the
foregoing in connection with any such action (or any action from which the
Buyer, the Company or any of its Subsidiaries is discharged pursuant to the
Settlement Agreement), and any amounts due to any Principal Shareholder by
the Company or any Subsidiary, except as expressly provided in this
Agreement or the Omnibus Agreement; or
(vi) the amount by which Negative Working Capital exceeds $34,000,000
as determined in accordance with Section 2.5;
(vii) any pension, retirement or profit sharing plan, arrangement or
fund (including obligations mandated by foreign or local law), or any other
employee benefit plan as defined in Section 3(e) of the Employee Retirement
Income Security Act of 1934, as amended ("ERISA"), including, without
limitation, the failure to comply with any provisions thereof or any laws,
rules, regulations, orders or guidelines applicable thereto, including,
without limitation, any "prohibited transaction", as such term is defined
in the Internal Revenue Code of 1986, as amended (the "IRC") Section 4975
and Title I of ERISA, any accumulated funding deficiency (as defined in IRC
Section 412(a)) or any "reportable event" (as defined under any applicable
provision of the IRC or ERISA) or liabilities arising from disallowance of
tax deduction taken by the Company or any Subsidiary on or prior to the
Closing; or
(viii) the investigation, defense or reasonable settlement (in
accordance with Section 11.5 hereof) after the Closing, of any of the
foregoing or the enforcement of this indemnity obligation; provided that
with respect to clause (vi) above, expenses of normal investigation
(including audit expenses and fees) and analysis and resolution of
liabilities arising in the ordinary course of business will not be the
basis for a Loss.
(b) The Company's indemnification obligations under this Section 11.2 shall
terminate and be of no further force or effect upon the Closing, and no
Principal Shareholder shall have any right to claim indemnification or
contribution against the Company or any of its Subsidiaries, or their respective
successors and assigns, or right to claim reduction or pro ration of his or her
own indemnification obligations, based on the applicability or non-applicability
of such indemnification obligations of the Company.
16
(b) Section 11.3(a) of the Merger Agreement is hereby amended by deleting
all words after the words "Transaction Document" and before the word "or".
(c) Sections 11.4, 11.5 and 11.6 of the Merger Agreement are hereby amended
to read in their entirety as follows:
"11.4 Indemnification Period and Reserve. Any claim for indemnification
pursuant to Sections 11.2 or 11.3 must be asserted by written notice to the
party from whom indemnification is sought by no later than the date on which the
first Contingent Payment shall become due and payable, provided that no such
time limitation shall be applicable to claims that Buyer asserts with respect to
any indemnification claim pursuant to Section 11.2(a)(iii) above or with respect
to any breach of the representations or the warranties contained in Sections
4.15 or 4.21 or the indemnification set forth in Section 11.2(a)(vii) above.
Such written notice shall contain a detailed description of the nature of the
claim and the basis therefor. No Principal Shareholder shall be entitled to
indemnification hereunder unless and until the aggregate amount for all claims
for which such party may be entitled to indemnification hereunder equals or
exceeds One Hundred Fifty Thousand Dollars ($150,000). Upon Closing, Buyer shall
not be entitled to indemnification or any other recovery for breach of this
Agreement or the other Transaction Documents for claims asserted unless and
until and to the extent the aggregate amount of all such claims equals or
exceeds Seventeen Million Dollars ($17,000,000) (the "Reserve"), except that the
Reserve shall not limit claims based on any defect in title or ownership of any
Allowed Interest of the Principal Shareholders, or adverse claims pertaining
thereto, shall not limit operation of the Plan in accordance with its terms or
remedies generally available from the Bankruptcy Court, and shall not apply to
claims against the Principal Shareholders under Section 11.2(a)(v).
11.5 Control of Defense of Indemnifible Claims. A party seeking
indemnification under Section 11.2 or 11.3 shall give the other party prompt
written notice of the claim for which it seeks indemnification. Failure of the
party seeking indemnification to give such prompt notice shall not relieve the
other party of its indemnification obligation, provided that such
indemnification obligation shall be reduced by any damages such other party
suffered that results from a failure to give prompt notice hereunder. Buyer
shall be entitled to manage and control the defense, reasonable settlement or
other disposition, payment or discharge of all matters for which indemnification
is available, provided it acts in good faith in a manner reasonably expected to
minimize the applicable Loss. Buyer shall give notice to the Principal
Shareholders a reasonable period of time prior to its settlement of any matter
covered by Section 11.2 of this Agreement (other than any matter for which it
shall seek indemnification under Section 11.2(a)(vi) of this Agreement).
11.6 Offsets. Buyer shall be entitled to offset any amounts due to it by
reason of any indemnification claim under this Agreement against any amount
which may then or thereafter become due to any holder of an Allowed Interest
(regardless of whether the holder of such Allowed Interest shall have an
indemnification obligation). Buyer acknowledges that any such offset shall be
applied proportionately to the Allowed Interests by the Estate Representative
based
17
on the ratio that the amount of the Merger Consideration payable to a holder
bears to the total amount of the Merger Consideration. If Buyer shall be
entitled to indemnification under Section 11.2(a)(vi) above, it shall offset
such indemnification claims against any payments of Merger Consideration as the
same become due prior to proceeding with other indemnification rights.
(b) A new Section 11.7 is hereby added at the end of Article XI as follows:
"11.7 Interest; Net Losses; Other Matters. (a) All liabilities for which
any party is entitled to indemnification under this Agreement shall accrue
interest at the rate of interest Buyer's senior secured lenders charge from time
to time under its revolving credit facility from the date such liability was
paid until the date that recovery of such indemnification amount shall occur.
(b) The amount of any Loss shall be reduced by the amount of any net tax
benefits (after taking into account the amount of recovery received) arising out
of the Loss for which indemnification is sought, the net insurance proceeds the
party being indemnified receives that arise out of the Loss for which
indemnification is sought, and the amount of any recovery for such Loss which,
considered in light of normal practice and in compliance with applicable laws
and regulations, is obtained from Medicare, Medicaid or third party payors with
respect to any period after January 1, 1997.
(c) Insofar as the Losses are for additional taxes due for periods prior to
Closing in respect of the proof of claim the Internal Revenue Service filed for
potential claims of up to approximately $8,100,000, the amount of carryback
permitted (for purposes of calculating such Losses) based on net operating
losses incurred by virtue of the Settlement Agreement or based on post-Closing
periods shall be limited to $3,000,000 in the aggregate.
(d) Buyer agrees that it shall not be entitled to indemnification (other
than pursuant to Section 11.2(a)(vi)) for any Loss to the extent the amount of
such Loss can be, and therefor is, included as a current liability or current
asset reduction in the calculation of Negative Working Capital as determined in
accordance with this Agreement.
(e) Buyer acknowledges (without becoming responsible therefor) that the
Plan provides that if Buyer makes any recovery for contractual claims, including
indemnification, asserted directly against the Principal Shareholders, with the
exception of claims based on any defect in title or ownership of the Allowed
Interests of the Principal Shareholders or adverse claims pertaining thereto, or
claims against the Principal Shareholders under Section 11.2(a)(v) hereof, then
the Principal Shareholders will be entitled to receive from the Estate
Representative reallocation of the Merger Consideration payable at Closing
otherwise payable to the holders of Allowed Interest sufficient to make the
Principal Shareholders whole for the pro rata portion of the recovery Buyer
obtained for which other holders of Allowed Interest would have borne financial
responsibility if the recovery had instead been out of such Contingent Payments.
18
(c) A new Section 11.11 is added as follows:
11.11 Compliance with Plan. Upon Closing and subject to the terms and
conditions of this Agreement, Buyer undertakes to perform the obligations of
Buyer set forth in the Plan and to cause the Company and the Subsidiaries to
perform the obligations of the Company and its Subsidiaries as set forth in the
Plan.
7. Section 12.1 of the Merger Agreement is hereby amended in its entirety to
read as follows:
"12.1 Termination. The parties obligations to close the transactions
contemplated by this Agreement may be terminated at any time at or prior to the
Closing by:
(a) Buyer, if any condition precedent to Buyer's obligations under
this Agreement has not been satisfied by the Closing Date, or by Buyer as
otherwise provided in this Agreement; or
(b) the Principal Shareholders, if any condition precedent to the
Principal Shareholders' obligations under this Agreement has not been
satisfied by the Closing Date, or by the Principal Shareholders as
otherwise provided in this Agreement; or
(c) the mutual consent of Buyer and the Principal Shareholders; or
(d) Buyer or the Principal Shareholders, if the Closing shall not have
occurred by November 30, 1996.
8. Article XIII is hereby amended by deleting Section 13.2 and deleting all
references to the "Consulting Agreement" in such Article.
9. Article XIV of the Merger Agreement is hereby amended as follows:
(a) Section 14.1 of the Merger Agreement is hereby amended (i) to
acknowledge Buyer's consent to the Company's reimbursement of a portion of the
Principal Shareholders' legal expenses as limited by the Omnibus Agreement, and
(ii) to acknowledge Buyer's consent to payment by the Company in full of the
Company's professional advisors, subject to approval of Company management after
consulting with Buyer's General Counsel (after giving due consideration to his
recommendations) before Closing and subject to approval of the Bankruptcy Court.
(b) Section 14.3 of the Merger Agreement is hereby amended to provide that
the rights and obligations of the Company under this Agreement may, at the
request and with the consent of Buyer, be assigned to, and assumed by, the New
Parent. The rights and obligations of Buyer may not be assigned to, or assumed
by, any other entity unless Buyer provides its irrevocable, unconditional
guaranty to the Estate Representative for payment of the obligations of Buyer
and the Company hereunder, in accordance with and subject to the terms and
conditions of this Agreement.
19
(c) Section 14.6 is hereby amended to set forth that all notices and
demands with respect to the Estate Representative shall be delivered to it at
the address provided in the Plan.
(d) A new Section 14.6 is hereby added to the end of Article XIV as
follows:
14.6 Power of Attorney. If a person acting under a power of attorney for a
Principal Shareholder executes and delivers this Agreement on behalf of such
Principal Shareholder, then such Principal Shareholder covenants that, upon
request of Buyer, he or she shall personally execute a copy of this Agreement
and deliver it to Buyer. This covenant shall be deemed to be a material covenant
for purposes of Section 9.2 of this Agreement.
10. Each party hereto represents and warrants to the others that this Amendment
Agreement has been duly authorized and executed by such party as its, his or her
own free act and not under duress of any type, and constitutes the legal, valid
and binding obligation of such party, except to the extent that enforcement may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally, or (b) general
principles of equity.
11. Except as expressly provided in this Amendment Agreement, all other terms,
conditions, provisions, representations, warranties, covenants and obligations
under the Merger Agreement shall remain in full force and effect.
[SIGNATURES ON THE FOLLOWING PAGE]
20
IN WITNESS WHEREOF, each of the parties hereto has executed, or caused its
duly authorized representative to execute, this Amendment Agreement as of the
date first above written.
PRINCIPAL SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
COMPANY:
FIRST AMERICAN HEALTH CARE OF GEORGIA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
NEWCO:
IHS ACQUISITION XIV, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
21
