FOURTH AMENDMENT
FOURTH AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of December
20, 2005 ("Fourth Amendment"), by and among Pearl Senior Care, Inc., a Delaware
corporation ("PSC"), PSC Sub, Inc., a Delaware corporation and wholly-owned
direct Subsidiary of PSC ("PSC Sub"), Xxxxxxx Enterprises, Inc., a Delaware
corporation (the "Company") and, solely for purposes of Article 9 of the Merger
Agreement (as hereinafter defined) and Article 4 of this Fourth Amendment, Xxxxx
Property Holdings LLC, a Delaware limited liability company ("GPH").
WHEREAS, PSC, PSC Sub, the Company and GPH are parties to an Agreement
and Plan of Merger dated as of August 16, 2005, as amended by the First
Amendment thereto, dated as of August 23, 2005, the Second Amendment thereto,
dated as of September 22, 2005, and the Third Amendment, dated as of November
20, 2005 (as so amended, the "Merger Agreement") (capitalized terms used but not
defined herein shall have the definitions given to them in the Merger
Agreement);
WHEREAS, the parties to the Merger Agreement desire to amend the Merger
Agreement, as set forth herein;
WHEREAS, the respective Boards of Directors of PSC, PSC Sub and the
Company have approved and declared advisable the Merger upon the terms and
subject to the conditions of the Merger Agreement as amended hereby and in
accordance with the DGCL;
WHEREAS, the parties to the Merger Agreement have agreed that under
Section 280G of the Code and published guidance issued thereunder, liability
under Sections 280G and 4999 of the Code may be reduced or eliminated by
accelerating payment of amounts
otherwise due upon or after the Closing to a date during the calendar year
before the calendar year in which the Closing occurs; and
WHEREAS, the respective Boards of Directors of PSC, PSC Sub and the
Company have determined that the Merger as so amended (as amended, the "Merger")
is in furtherance of, and consistent with, their respective business strategies
and is in the best interest of their respective stockholders.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Fourth
Amendment and intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES
Section 1.1 The Company represents and warrants to PSC and PSC Sub as
follows:
(a) the Company has all necessary corporate power and authority to
execute and deliver this Fourth Amendment, to perform its obligations hereunder
and to consummate the transactions contemplated by the Merger Agreement as
amended by this Fourth Amendment;
(b) the execution and delivery of this Fourth Amendment by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company and no stockholder votes are
necessary to authorize this Fourth
Amendment or to consummate the transactions contemplated hereby other than, with
respect to the Merger, the Stockholder Approval; and
(c) this Fourth Amendment has been duly authorized and validly executed
and delivered by the Company and, assuming this Fourth Amendment and the Merger
Agreement are valid and binding obligations of PSC and PSC Sub, the Merger
Agreement as amended by this Fourth Amendment constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to the Bankruptcy and Equity Exception.
Section 1.2 (a) PSC and PSC Sub jointly and severally represent and
warrant to the Company as follows:
(i) each of PSC and PSC Sub has all necessary corporate power and
authority to execute and deliver this Fourth Amendment, to perform its
obligations hereunder and to consummate the transactions contemplated by the
Merger Agreement as amended by this Fourth Amendment;
(ii) the execution and delivery of this Fourth Amendment by PSC and PSC
Sub and the consummation by PSC and PSC Sub of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of PSC and PSC Sub and no
stockholder votes are necessary to authorize this Fourth Amendment or to
consummate the transactions contemplated hereby; and
(b) this Fourth Amendment has been duly authorized and validly executed
and delivered by the PSC and PSC Sub and, assuming this Fourth Amendment and
the Merger
Agreement are valid and binding obligations of the Company, the Merger
Agreement as amended by this Fourth Amendment constitutes a legal, valid and
binding obligation of PSC and PSC Sub, enforceable against each of them in
accordance with its terms, subject to the Bankruptcy and Equity Exception.
ARTICLE 2
AMENDMENTS TO MERGER AGREEMENT
Section 2.1 Section 6.8.5 of the Merger Agreement is replaced in its
entirety with the following:
At least fifteen (15) days prior to the Company Stockholders'
Meeting, Parent shall expressly identify to the Company in writing any
employee of the Company or any Company Subsidiary at the level of pay
band "B" or above as to whom Parent currently intends as of the Closing
or within twelve (12) months following the Effective Time to either (i)
not retain by reason of the consummation of the Merger or (ii)(a)
materially reduce or diminish the duties, responsibilities or authority
of such employee subsequent to the Merger, (b) reduce the employee's
compensation or benefits, or (c) require as a condition to continued
employment with the Surviving Corporation that the employee's
employment be based at a location other than its location at the
Effective Time. At least five (5) days prior to the Company
Stockholders' Meeting, the Company shall use its commercially
reasonable efforts to cause any employee who is party to any change in
control, severance, retention and/or employment agreements with the
Company and who is legally entitled (as determined in the reasonable
judgment of the board of directors of the Company after receiving
written advice of its outside legal counsel and consultation with the
Purchaser) pursuant to the terms of such individual agreement to
terminate his or her employment for "Good Reason" (as defined in an
applicable individual agreement) immediately following the consummation
of the Merger, pursuant to a right to so terminate expressly set forth
in such agreement, to notify the Company of the employee's intention to
so terminate his or her employment in writing. Any employee who is: (A)
identified in (i) above as being not intended by Parent to be retained
as of the Closing, or (B) who notifies the Company as set forth above
that the employee intends to terminate his or her employment for "Good
Reason" immediately following the consummation of this Merger (and who
has, by reason of the consummation of the Merger and/or the
restructuring transactions undertaken concurrent with the closing
thereof, the valid right to do so as consequence of the consummation of
the Merger and/or such restructuring transactions, as determined in the
reasonable judgment of the board of directors of the Company after
receiving written advice of its outside legal counsel and
consultation with the Purchaser), shall receive, at the Effective Time,
all payments to which such employee is entitled pursuant to the terms
of any written change of control, severance, retention and/or
employment agreements or arrangements with the Company or any Company
Subsidiary and which are set forth in Section 6.8.5 of the Company
Disclosure Schedule. Notwithstanding the foregoing, from and after the
Effective Time, Parent shall cause Surviving Corporation and its
Subsidiaries to honor, in accordance with their terms, all change in
control, severance, retention and employment agreements or arrangements
(including an employee's right to terminate employment for "Good
Reason"), in each case with the current and former employees of the
Company and the Company Subsidiaries as set forth in Section 6.8.5 of
the Company Disclosure Schedule. On or before December 31, 2005, the
Company shall pay each Disqualified Individual in cash or stock, as may
be applicable under the Company's existing benefit plans and agreements
(or shall be deemed to have paid by reason of the removal of vesting
requirements or other restrictions) ("Accelerated Compensation"), an
amount of Accelerated Compensation equal to the Minimum Required
Amount. Each Disqualified Individual's Accelerated Compensation may
include, without limitation, (i) 2003 Cash Bonus Awards under the 2003
Long-Term Program and vesting of restricted stock awarded under such
program; (ii) 1997 LTIP Performance Awards payable in cash and in stock
in or on account of 2004 and 2005; (iii) the vesting of restricted
stock awarded under the 1997 Long-Term Incentive Plan in or on account
of 2004 and 2005; (iv) benefits under the Enhanced Supplemental
Executive Retirement Plan; (v) benefits under the Supplemental
Executive Retirement Plan; (vi) benefits under the Executive Deferred
Compensation Plan (including the Retirement Enhancement Program); and
(vii) advance benefits under change in control, severance or employment
agreements notwithstanding that a severance event has not occurred.
Upon request, PSC and PSC Sub shall be entitled to review all
calculations and copies of all work papers related thereto regarding
Accelerated Compensation and shall be provided with reasonably
satisfactory evidence that the Minimum Required Amount was paid.
In consideration of the foregoing, PSC and PSC Sub have
provided the Company with a letter of credit in the form attached as
Annex A hereto (the "Additional LC") entitling the Company to make
draws thereunder as specified therein only in the event that the
Company has paid the Minimum Required Amount and
(a) the Company terminates this Agreement pursuant to Section
8.1(b)(ii), and on the date of such termination the conditions set
forth in Sections 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or,
in the case of any such conditions required to be satisfied on the
Closing Date or as of the Effective Time, would be reasonably capable
of being satisfied on the date of such termination; or
(b) the Company terminates this Agreement pursuant to Section
8.1(c)(i), and on the date of such termination the conditions set forth
in Sections, 7.1.2, 7.1.4, 7.2.1 and 7.2.2 have been satisfied or, in
the case of any such conditions required to
be satisfied on the Closing Date or as of the Effective Time, would be
reasonably capable of being satisfied on the date of termination.
In the event the Additional LC or any substitute therefor is
scheduled to terminate within ten (10) Business Days and Parent has not
provided the Company with a substitute Additional LC with a term of at
least 90 additional days, the Company shall have the right to draw the
full amount of the Additional LC and hold such funds in escrow until
such time as a substitute Additional LC is delivered or the Merger
Agreement has been terminated under circumstances in which the Company
is not entitled to draw upon the Additional LC, at which time such
funds shall be returned to Parent, and if the Merger Agreement is
terminated under circumstances in which the Company is entitled to draw
upon the Additional LC, the Company shall be entitled to retain such
funds in lieu of drawing upon the Additional LC.
As used in this Section 6.8.5 and in Section 8.1(d)(i):
"Compensation Plan" means any agreement between such
Disqualified Individual and the Company or under any plan or policy of
the Company pursuant to which compensation for services rendered,
including deferred compensation, insurance, relocation benefits and
severance, is payable.
"Disqualified Individual" has the meaning set forth in Section
280G(c) of the Code and United States Department of the Treasury
Regulations ("Treasury Reg.") promulgated under Section 280G of the
Code.
"Minimum Required Amount" means such amount, but not in excess
of the total compensation payable to any Disqualified Individual under
the Compensation Plans, so that the Three-Times-Base-Amount Test under
Treasury Reg. Section 1.280G-1, Q&A 30, calculated with respect to each
Disqualified Individual following such payment is greater than the
amount of such person's aggregate Potential Parachute Payment. For this
purpose, Minimum Required Amount shall be calculated based on the
assumption that, for purposes of calculating liability under Section
280G of the Code, a Disqualified Individual's "base amount" (within the
meaning of Section 280G of the Code) includes the Accelerated
Compensation (including, but not limited to, the accelerated severance
payments).
"Potential Parachute Payment" means the aggregate amount of
compensation payable or deemed payable to each Disqualified Individual,
under any Compensation Plans in cash, stock or other form, including
without limitation any amounts payable upon the termination of the
Disqualified Individual's employment or any amount deemed paid for
federal income tax purposes as a result of the removal of any vesting
requirements or other transfer restrictions imposed on shares of
Company stock already issued to such person, which could be treated as
a parachute payment within the meaning of Treasury Reg. Section
1.280G-1, Q&A-2.
Section 2.2 Section 6.8 of the Merger Agreement is amended by adding
the following at the end thereof:
Section 6.8.6 Delegation. Without by implication limiting the
other provisions of this Agreement, where a provision of Section 6.8 of
this Agreement requires the Parent, the Surviving Corporation or a
Subsidiary to take an action or provide a benefit (including ones
required to be provided under Surviving Corporation Benefit Plans), to
the extent that a third party (or its benefit plan) takes such action
or provides such benefit, the obligations under Section 6.8 shall be
deemed fulfilled.
Section 2.3 The reference in Section 8.1(b)(ii) of the Merger Agreement
to "March 1, 2006" shall be changed to "March 31, 2006".
Section 2.4 Section 8.1(d)(i) of the Merger Agreement is amended in its
entirety to read as follows:
(x) if the Company shall have breached any of the covenants or
agreements contained in the provisions in Section 6.8.5 starting with
"On or before December 31, 2005" until the end of Section 6.8.5 and
such breach results, or would be reasonably likely to result, in
liability (including without limitation any liability resulting from
any gross-up payments due to any Disqualified Individuals and/or any
compensation to Disqualified Individuals that is non-deductible as a
result of Section 280G of the Code) to PSC, PSC Sub and/or the
Surviving Corporation in excess of $5,000,000, (y) if the Company shall
have breached any of the covenants or agreements contained in this
Agreement to be complied with by the Company (other than those in
Section 6.8.5 starting with "On or before December 31, 2005" until the
end of Section 6.8.5) such that the closing condition set forth in
Section 7.2.2 would not be satisfied or (z) there exists a breach of
any representation or warranty of the Company contained in this
Agreement such that the closing condition set forth in Section 7.2.1
would not be satisfied, and, in the case of either (y) or (z), such
breach is incapable of being cured by the Termination Date or is not
cured by the Company within twenty (20) Business Days after the Company
receives written notice of such breach from Parent or Merger Sub;
Section 2.5 Section 8.2 of the Merger Agreement is amended by (i)
deleting the reference to "as contemplated by Section 9.11 hereof" therein and
(ii) replacing the phrase "the Business Interruption Fee shall be the exclusive
remedy of the Company under circumstances where the Business Interruption Fee is
payable by Parent" with the phrase
"the Business Interruption and the Company's drawing on the Additional LC shall
be the exclusive remedy of the Company under circumstances where the Business
Interruption Fee is payable by Parent and/or the Additional LC may be drawn upon
by the Company".
Section 2.6 The references in the first and fifth sentences of Section
8.4.1 of the Merger Agreement to "$30,000,000" shall be changed to
"$20,000,000".
Section 2.7 The first sentence of Section 9.6 of the Merger Agreement
is amended in its entirety to read as follows:
This Agreement, as amended by that certain First Amendment dated as of
August 23, 2005 by and among Parent, Merger Sub, the Company and,
solely for purposes of Article 3 thereof, SBEV (the "First Amendment"),
that certain Second Amendment dated as of September 22, 2005 by and
among Parent, Merger Sub, the Company and, solely for purposes of
Article 3 thereof, SBEV (the "Second Amendment"), that certain Third
Amendment dated as of November 20, 2005 by and among Parent, Merger
Sub, the Company, North American Senior Care, Inc., a Delaware
corporation, NASC Acquisition Corp., a Delaware corporation, and solely
for purposes of Articles 1, 4 and 5 thereof, SBEV Property Holdings
LLC, and GPH (the "Third Amendment"), and that certain Fourth Amendment
dated as of December 16, 2005 by and among Parent, Merger Sub, the
Company, and, solely for purposes of Article 4 thereof, GPH (the
"Fourth Amendment" and together with the First Amendment, the Second
Amendment, and the Third Amendment, the "Amendments") (together with
the Exhibits, Parent Disclosure Schedule, Company Disclosure Schedule
and the other documents delivered pursuant hereto), the Commitments and
the Confidentiality Agreement constitute the entire agreement of the
Parties and supersede all prior agreements and undertakings, both
written and oral, between the Parties, or any of them, with respect to
the subject matter hereof and thereof and, except as otherwise
expressly provided herein, are not (other than in the case of Sections
3.5, 6.8, 6.9 and 6.13) intended to confer upon any other Person any
rights or remedies hereunder.
Section 2.8 The reference in Section 9.6 of the Merger Agreement to
"6.8," is deleted, and there is inserted in lieu thereof the following
references "6.8.1, 6.8.2, 6.8.3, 6.8.4".
ARTICLE 3
OTHER AGREEMENTS
Each of PSC , PSC Sub and GPH and their affiliates and successors, and
each of their officers, directors, employees, managers, shareholders, members,
representatives and agents (collectively, the "PSC Releasing Parties") hereby
releases and discharges the Company and its affiliates and successors, and each
of its officers, directors, employees, managers, shareholders, members,
representatives and agents (collectively, the "Seller Releasing Parties") from
any and all claims, demands, proceedings, causes of action and liabilities
whatsoever, whether known or unknown, which any of the PSC Releasing Parties has
or may have against the Seller Releasing Parties arising out of matters
occurring prior to the date hereof and relating to the Company's compliance with
the last two sentences of Section 6.8.5 of the Merger Agreement as in effect
prior to this Fourth Amendment or the accuracy or completeness of the
information provided by the Seller Releasing Parties with respect to the
compensatory payments used to calculate potential liabilities under Section 280G
of the Code (other than any such information included in the Merger Agreement or
the Disclosure Schedule).
ARTICLE 4
GENERAL PROVISIONS
Section 4.1 Except as expressly amended hereby, the Merger Agreement
shall remain in full force and effect.
Section 4.2 The provisions of Article 9 of the Merger Agreement shall
apply to this Fourth Amendment as if set forth herein in their entirety.
IN WITNESS WHEREOF, the undersigned have caused this Fourth Amendment
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
PEARL SENIOR CARE, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Authorized Signatory
PSC SUB, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Authorized Signatory
XXXXX PROPERTY HOLDINGS LLC
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Signatory
XXXXXXX ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman, President and Chief Executive Officer
