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EXHIBIT 10.110
AMENDMENT NO. 3 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 3 TO ASSET PURCHASE AGREEMENT (this
"Amendment") is dated as of August 17, 2001 and entered into by and among IVonyx
Group Services, Inc., a Delaware corporation ("IVonyx"), IVonyx, Inc., a
California corporation and a wholly-owned subsidiary of IVonyx ("IVonyx Sub"),
drkoop LifeCare, Inc. (formerly known as Infusion Acquisition Sub, Inc.), a
Delaware corporation ("Acquisition Sub"), and xxxxxx.xxx, Inc., a Delaware
corporation ("Parent" and, together with Acquisition Sub, the "Koop Parties").
IVonyx and IVonyx Sub are collectively referred to herein as the "IVonyx
Parties" or individually as an "IVonyx Party."
R E C I T A L S
WHEREAS, on April 13, 2001, IVonyx, IVonyx Sub, Acquisition
Sub and Parent entered into the Asset Purchase Agreement, as amended by
Amendment No. 1 thereto dated as of July 30, 2001 and Amendment No. 2 thereto
dated as of August 8, 2001 (as amended, the "Purchase Agreement"); and
WHEREAS, pursuant to Section 12.6 of the Purchase Agreement,
IVonyx, IVonyx Sub, Acquisition Sub and Parent now desire to amend the Purchase
Agreement as hereinafter provided.
A M E N D M E N T
NOW, THEREFORE, the Parties agree as follows:
1. All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings assigned thereto in the Purchase Agreement.
2. Article X is hereby amended by adding the following Section
10.14:
"10.14 Post-Closing Payments and Other Actions. From the
Closing Date until the date that all of the obligations of any
IVonyx Party to DVI Business Credit Corporation, DVI Capital,
AmeriSource and any of their respective affiliates have been
repaid in full (the "Pay-off Date"), the IVonyx Parties shall
pay the United States of America, acting through the United
States Attorney for the District of Puerto Rico and the Office
of Inspector General of the United States Department of Health
and Human Services or the designee thereof (collectively, the
"United States") $70,000 per month in accordance with the
terms of that certain Settlement Agreement between the United
States and IVonyx Sub and the related Promissory Note in favor
of the Treasurer of the United States c/o the United States
Attorney for the District of Puerto Rico (the "Settlement
Agreement
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Obligations"), it being understood that the first three such
payments shall come from the DOJ Escrow Amount referenced in
Section 10.15 below. After the Pay-off Date, all cash and
other assets generated (net of collection costs) from accounts
receivable of the IVonyx Parties (or any successors thereto)
or otherwise shall be immediately applied as follows and shall
not be used for any other purpose:
(a) first, a monthly payment in the amount of $70,000
to the United States pursuant to the Settlement Agreement;
(b) second, to the extent cash and other assets
generated (net of collection costs) exceed the amount
specified in clause (a) above in any given month, such cash
and other assets shall be applied on a pari passu and pro rata
basis to pay (i) Xxxxx Xxxxxx $125,000 with respect to his
bonus from IVonyx accrued prior to the Closing Date (and Xxxxx
Xxxxxx shall be a third party beneficiary of this Agreement
for purposes of this clause (b)(i) only) and (ii) the Koop
Parties any unpaid portion of the drkoop Recoupment Amount;
and
(c) third, to repay the Settlement Agreement
Obligations until the Settlement Agreement Obligations have
been repaid in full.
Until the date that the drkoop Recoupment Amount and the
Settlement Agreement Obligations have been paid in full, the
IVonyx Parties agree not to transfer, sell, dispose of, or
otherwise assign or encumber any assets (including accounts
receivable) of the IVonyx Parties. In addition, the IVonyx
Parties agree to use their best efforts to cause AmeriSource
to release any liens it may have on any of the Assets on the
Closing Date or as promptly thereafter as possible."
3. Article X is hereby amended by adding the following
Section 10.15:
"10.15 (a) Post-Closing Escrow; Recoupment Amounts. In order
to ensure that (i) the Settlement Agreement Obligations for
the first three months following the Closing are paid using
the Purchase Price proceeds, (ii) any tax liabilities of any
IVonyx Party with respect to periods prior to the Closing Date
are satisfied in full by the IVonyx Parties using the Purchase
Price proceeds, (iii) that certain Internal Revenue Service
tax lien in the amount of $21,000 for 1990 Federal
Unemployment taxes (the "Federal Tax Lien") is terminated and
(iv) that payments for accrued vacation are made to employees
employed by either of the IVonyx Parties prior to the Closing
Date, the Koop Parties are requiring that $644,000 (the "Tax
Escrow Amount"), $210,000 (the "DOJ Escrow Amount"), $21,000
(the "Federal Tax Lien Escrow Amount") and $217,000 (the
"Accrued Vacation Escrow Amount") of the purchase price
proceeds (i.e., a total of $1,092,000) be deposited in an
account (Account #401-12470-14) established at Xxxxxxx Xxxxx
Barney (the "Escrow Account"). The Parties hereby agree that
any withdrawal or distribution from the Escrow Account will be
in accordance with Section 10.15(b) below and will require the
signature of each of the
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authorized representatives of the IVonyx Parties, on the one
hand, and the Koop Parties, on the other hand, as designated
in Section 10.15(c) below.
(b) Release. The representatives will instruct
Xxxxxxx Xxxxx Xxxxxx to release funds from the Escrow Account
as follows:
(1) Upon delivery by the IVonyx Parties
to the Koop Parties of a tax
clearance certificate from the State
of Michigan or other similar
documentation satisfactory to the
Koop Parties demonstrating that the
Koop Parties will have no Michigan
state tax liability with respect to
periods prior to the Closing Date,
the IVonyx Parties and the Koop
Parties will cause their respective
representatives to instruct Xxxxxxx
Xxxxx Xxxxxx to release to the
IVonyx Parties the full Tax Escrow
Amount (plus any accrued interest
earned thereon), subject to
satisfaction of the recoupment right
of the Koop Parties pursuant to
Section 10.15(d) below.
(2) Upon the determination of the IVonyx
Parties that a portion or all of the
Tax Escrow Amount will be required
to satisfy tax liabilities owed by
the IVonyx Parties to the State of
Michigan with respect to periods
prior to the Closing Date, the
IVonyx Parties and the Koop Parties
will cause their respective
representatives to instruct Xxxxxxx
Xxxxx Xxxxxx to release from the
Escrow Account to the applicable
taxing authority of the State of
Michigan, the aggregate amount of
the tax liabilities owed to such
taxing authority of the State of
Michigan with respect to periods
prior to the Closing Date, up to the
Tax Escrow Amount. In the event such
amount of tax liabilities is less
than the Tax Escrow Amount (plus any
accrued interest earned thereon),
the remainder of the Tax Escrow
Amount will remain in the Escrow
Account pending release in
accordance with Section 10.15(b)(1)
above. In addition, in the event any
taxing authority attempts to collect
from either of the Koop Parties any
tax liabilities of the IVonyx
Parties, the Parties will cause
their respective representatives to
instruct Xxxxxxx Xxxxx Xxxxxx to
release to the Koop Parties from the
Tax Escrow Amount the aggregate
amount of the tax liabilities owed
to such taxing authority for payment
of such tax liabilities.
(3) In accordance with Section 10.14
above, the IVonyx Parties and the
Koop Parties will cause their
respective representatives to
instruct Xxxxxxx Xxxxx Xxxxxx to
release $70,000 per month from the
DOJ Escrow Amount to the
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United States in satisfaction of the
first four Settlement Agreement
Obligation payments.
(4) Upon delivery by the IVonyx Parties
to the Koop Parties of documentation
satisfactory to the Koop Parties
demonstrating the termination of the
Federal Tax Lien, the IVonyx Parties
and the Koop Parties will cause
their respective representatives to
instruct Xxxxxxx Xxxxx Xxxxxx to
release to the IVonyx Parties the
full Federal Tax Lien Escrow Amount
(plus any accrued interest earned
thereon), subject to satisfaction of
the recoupment right of Koop Parties
pursuant to Section 10.15(d) below.
In the event the Federal Tax Lien
has not been terminated within
thirty days of the Closing Date, the
Parties will cause their respective
representatives to instruct Xxxxxxx
Xxxxx Xxxxxx to release the full
Federal Tax Lien Escrow Amount (plus
any accrued interest earned thereon)
in accordance with instructions of
the Koop Parties to effectuate the
release and termination of the
Federal Tax Lien. In addition, in
the event any taxing authority
attempts to collect from either of
the Koop Parties tax liabilities of
the IVonyx Parties relating to the
Federal Tax Lien, the Parties will
cause their respective
representatives to instruct Xxxxxxx
Xxxxx Xxxxxx to release to the Koop
Parties from the Federal Tax Lien
Escrow Amount the aggregate amount
of the tax liabilities owed to such
taxing authority for payment of such
tax liabilities.
(5) Without limiting the IVonyx Parties'
obligation to pay their employees
with respect to vacation accrued
prior to the Closing Date, the Koop
Parties and IVonyx Parties will
cooperate to ensure that an
aggregate amount equal to the
Accrued Vacation Escrow Amount is
used to compensate employees of
either of the IVonyx Parties with
respect to vacation accrued prior to
the Closing Date and will cause
their respective representatives to
instruct Xxxxxxx Xxxxx Xxxxxx to
release from time to time funds from
the Escrow Account to such employees
equal in the aggregate to the
Accrued Vacation Escrow Amount.
Without limiting the generality of
the foregoing, the Parties will
cause their respective
representatives to instruct Xxxxxxx
Xxxxx Barney to release funds from
the Escrow Account (up to the
Accrued Vacation Escrow Amount) to
pay for the salaries of employees of
the Koop Parties during the period
that such employees are on vacation
(to the extent such employees have
accrued vacation with respect to
their employment with the IVonyx
Parties prior to the Closing
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Date). Any amounts in addition to
funds drawn from the Escrow Account
necessary to pay for vacation
accrued prior to the Closing Date
will be paid by the IVonyx Parties.
The IVonyx Parties will cooperate
with the Koop Parties with respect
to the timing and amounts of such
additional payments. If the IVonyx
Parties fail to pay for such accrued
vacation and a Koop Party, in its
discretion, elects to pay the
applicable employees for such
vacation, then the drkoop Recoupment
Amount (as defined below) shall be
increased by the amount(s) paid to
such employees by such Koop Party.
(c) Authorized Representatives. Each of the IVonyx
Parties, on the one hand, and the Koop Parties, on the other
hand, hereby designates and authorizes Xxxxxx Xxxxx and
Xxxxxxx Xxxxxxx, respectively, to act as their respective
representatives in connection with any withdrawal or
distribution from the Escrow Account as set forth in Section
10.15(b) above. Each of Xxxxxx Xxxxx and Xxxxxxx Xxxxxxx, as
the authorized representatives of the IVonyx Parties and the
Koop Parties, respectively, may designate another
representative upon written notice to Xxxxxxx Xxxxx Xxxxxx.
(d) drkoop Recoupment Amount. If the drkoop
Recoupment Amount (as defined below) has not been paid in full
prior to the date that any funds are to be released from the
Escrow Account to any IVonyx Party pursuant to Section
10.15(b)(1) or Section 10.15(b)(4) above, then the Parties
shall cause their respective representatives to instruct
Xxxxxxx Xxxxx Barney to release any such funds to the Koop
Parties instead of the IVonyx Parties until the drkoop
Recoupment Amount has been paid in full. Notwithstanding
anything to the contrary herein, the IVonyx Parties shall pay
the Koop Parties $190,000 (as such amount may be increased
pursuant to the following sentence and/or pursuant to Section
10.15(b)(5) above, the "drkoop Recoupment Amount") on or
before January 31, 2002 and, after the Pay-Off Date, all cash
or other assets (net of collection costs) generated from
accounts receivables of the IVonyx Parties (or any successors
thereto) shall immediately be applied as set forth in Section
10.14(a), Section 10.14(b) and Section 10.14(c) before they
are used for any other purpose (it being understood that if
the drkoop Recoupment Amount is increased pursuant to the
following sentence or pursuant to Section 10.15(b)(5)
subsequent to the date it or any portion thereof has been
paid, the unpaid portion of the drkoop Recoupment Amount (as
so increased) shall be due and payable immediately). In the
event the Koop Parties, in their sole discretion, elect to
advance any amounts (in addition to the $80,000 previously
advanced by the Koop Parties) to PricewaterhouseCoopers
("PwC") to pay for any obligations of the IVonyx Parties to
PwC with respect to services relating to the audit, review
and/or preparation of IVonyx financial statements prior to the
Closing Date, the drkoop Recoupment Amount will be increased
by the amount so advanced by the Koop Parties. Without
limiting the right of offset of the Koop Indemnified Parties
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in Section 10.13 of the Agreement, the Parties acknowledge and
agree that the Koop Parties shall have the right to reduce the
amount of any Earnout Payment (if any) payable pursuant to
Section 2.5 by an amount equal to any unpaid portion of the
drkoop Recoupment Amount.
(e) Security Interest. As security for the payment of
the drkoop Recoupment Amount by the IVonyx Parties to the Koop
Parties, each of the IVonyx Parties hereby grants to each of
the Koop Parties a security interest in, upon, and to (the
"Xxxx Xxxx") all of the accounts receivable, contract rights,
deposit accounts and other assets of any of the IVonyx
Parties, whether now owned or hereafter acquired, and all
proceeds and products of any of the foregoing (the "Koop
Collateral"). The Koop Parties acknowledge and agree that the
Xxxx Xxxx shall be junior to the existing liens on assets of
the IVonyx Parties in favor of DVI Business Credit
Corporation, DVI Capital and Amerisource. The IVonyx Parties
hereby authorize the Koop Parties to file one or more
financing statements and amendments thereto describing the
Koop Collateral as may be necessary to evidence, perfect or
protect the Xxxx Xxxx and to deliver any such other documents
as may be reasonably requested to evidence, perfect or protect
the Xxxx Xxxx."
4. The Parties agree that the cash component of the Purchase Price
required to be paid by the Koop Parties to the IVonyx Parties at the Closing
(i.e., $2.0 million) will be deposited into the Escrow Account, retained by the
Koop Parties or paid to the person or entity specified on Annex I, as the case
may be, as set forth in more detail on Annex I hereto. The Parties agree that
application of the cash component of the Purchase Price required to be paid by
the Koop Parties to the IVonyx Parties at the Closing as set forth on Annex I
shall constitute satisfaction in full of the Koop Parties' obligation to pay the
cash portion of the Purchase Price pursuant to Section 2.3(a) of the Purchase
Agreement.
5. Section 12.1(a)(ii) is hereby amended by deleting the words "August
17, 2001" and replacing them with the words "August 20, 2001". In addition, the
Parties acknowledge and agree that the Closing shall take place on Monday August
20, 2001, effective 9:00 AM Pacific time.
6. Notwithstanding the terms of the Equipment Sublease being entered
into on the Closing Date among Acquisition Sub and the IVonyx Parties (the
"Equipment Sublease"), the Parties agree that once the obligations to DVI
Capital under the applicable Capital Lease(s) to which DVI Capital is a party
have been repaid in full, Acquisition Sub shall continue to have the right to
lease (or sublease, as the case may be) from the IVonyx Parties the equipment
covered by the Capital Lease(s) between IVonyx and DVI Capital for the duration
of the original term of such Capital Lease(s) as if the underlying Capital
Lease(s) (and the Equipment Sublease) were still in effect with respect to the
Excluded Equipment covered by such Capital Lease(s), and IVonyx shall transfer
all right, title and interest in and to the Excluded Equipment that was the
subject of such Capital Lease(s) to Acquisition Sub at the expiration of the
original term of the applicable Capital Lease provided Acquisition Sub has
continued to make the payments to IVonyx through such expiration date. In
addition, once the obligations to DVI Capital under the applicable Capital
Lease(s) have been repaid in full, Acquisition Sub shall have the right to
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purchase the Excluded Equipment that was the subject of the DVI Capital Capital
Lease for a purchase price equal to the present discounted value of any
remaining lease payments that would be due if such payments had been made
through the expiration of the term of such Capital Lease. Nothing in this
paragraph 6 shall limit the right of Acquisition Sub to cease leasing (or
subleasing) such Excluded Equipment in accordance with the terms of the
Equipment Sublease.
7. Unless otherwise indicated, all references in this Amendment to
designated "sections" are to the designated Sections of the Purchase Agreement.
8. Except as modified by the foregoing, the terms and conditions of the
Purchase Agreement shall remain in full force and effect.
9. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10. This Amendment shall be construed, interpreted and the rights of
the Parties determined in accordance with the laws of the State of California
(without giving effect to its conflicts of law principles).
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
IVONYX:
IVONYX GROUP SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Chairman
IVONYX SUB:
IVONYX, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Chairman
ACQUISITION SUB:
DRKOOP LIFECARE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
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Title: Chief Executive Officer
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PARENT:
XXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
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Title: Chief Executive Officer
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