Exhibit 2.5
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAMELOT CARE CORPORATION,
THE SHAREHOLDERS OF CAMELOT CARE CORPORATION,
XXXXXX X. XXXXXXXX, AS SHAREHOLDERS' REPRESENTATIVE,
CAMELOT ACQUISITION CORPORATION
AND
THE PROVIDENCE SERVICE CORPORATION
December 11, 2001
================================================================================
TABLE OF CONTENTS
-----------------
Page No.
--------
ARTICLE I THE MERGER........................................................ 2
1.1 The Merger........................................................ 2
1.2 Effective Time.................................................... 2
1.3 Certificate of Incorporation And By-laws.......................... 2
1.4 Directors......................................................... 3
1.5 Officers.......................................................... 3
1.6 Sub Common Stock.................................................. 3
1.7 The Shares........................................................ 3
1.8 Payment of Consideration; Repayment of Funded Indebtedness........ 5
1.9 Delivery of the Shares............................................ 5
1.10 W.C. Adjustment................................................... 5
1.11 Approval of Merger; Appraisal Rights.............................. 7
ARTICLE II THE CLOSING...................................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY............ 8
3.1 Organization; Good Standing; Qualification and Power.............. 8
3.2 Equity Investments................................................ 9
3.3 Capital Stock..................................................... 9
3.4 Approvals......................................................... 10
3.5 Authority; Noncontravention; Consents............................. 10
3.6 Financial Statements.............................................. 11
3.7 Absence of Undisclosed Liabilities................................ 12
3.8 Absence of Changes................................................ 12
3.9 Employment Agreements............................................. 14
3.10 Tax Matters....................................................... 14
3.11 ERISA Compliance.................................................. 17
3.12 Title to Assets, Properties and Rights and Related Matters........ 19
3.13 Real Property..................................................... 19
3.14 Intellectual Property............................................. 20
3.15 Agreements, No Defaults, Etc...................................... 21
3.16 Compliance With Laws.............................................. 22
3.17 Litigation, Etc................................................... 23
3.18 Insurance......................................................... 23
3.19 Labor Relations; Employees........................................ 24
3.20 Environmental Matters............................................. 25
3.21 Change in Control................................................. 26
3.22 State Takeover Statutes........................................... 26
3.23 Conflicts of Interest............................................. 26
3.24 Brokers........................................................... 26
3.25 Related Transactions.............................................. 27
3.26 Accounts and Notes Receivable..................................... 27
3.27 Accounts and Notes Payable........................................ 27
3.28 Regulatory Compliance............................................. 27
3.29 Customer Relations................................................ 28
3.30 Bank Accounts; Power of Attorney.................................. 28
3.31 Certain Additional Regulatory Matters............................. 28
3.32 Medicare/Medicaid Participation................................... 29
3.33 Camelot Community Care............................................ 30
3.34 RTC Liabilities................................................... 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............... 30
4.1 Title to Shares................................................... 31
4.2 Authority......................................................... 31
4.3 Noncontravention.................................................. 31
4.4 Consents.......................................................... 31
4.5 Broker's Fees..................................................... 31
4.6 Tax Matters....................................................... 32
4.7 Restricted Securities............................................. 32
4.8 Acquired for Investment........................................... 32
4.9 Accredited Investor; Knowledgeable Investor....................... 32
4.10 Information about the Parent...................................... 32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT...................... 33
5.1 Organization; Good Standing; Qualification and Power.............. 33
5.2 Equity Investments................................................ 33
5.3 Capital Stock..................................................... 33
5.4 Authority; Noncontravention; Consents............................. 34
5.5 Financial Statements.............................................. 35
5.6 Absence of Changes................................................ 35
5.7 Title to Assets, Properties and Rights and Related Matters........ 36
5.8 Agreements, No Defaults, Etc...................................... 36
5.9 Compliance With Laws.............................................. 36
5.10 Litigation, Etc................................................... 36
5.11 Brokers........................................................... 37
5.12 Financing......................................................... 37
ARTICLE VI CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL
AGREEMENTS................................................................. 37
6.1 Affirmative Covenants............................................. 37
6.2 Negative Covenants................................................ 39
6.3 Commercially Reasonable Efforts................................... 41
6.4 Representations and Warranties.................................... 41
6.5 Consents.......................................................... 41
6.6 Public Announcements.............................................. 41
6.7 Negotiation with Others........................................... 41
6.8 Notice of Prospective Breach...................................... 42
6.9 Directors and Officers............................................ 42
6.10 Parent Affirmative Covenants...................................... 43
6.11 Parent Negative Covenant.......................................... 43
ARTICLE VII CONDITIONS...................................................... 43
7.1 Conditions to Each Party's Obligations............................ 43
7.2 Conditions to Obligations of the Parent and the Sub............... 44
7.3 Conditions to Obligations of the Shareholders..................... 47
ARTICLE VIII INDEMNIFICATION................................................ 49
8.1 Indemnification Generally; Etc.................................... 49
8.2 Assertion of Claims............................................... 52
8.3 Notice and Defense of Third-party Claims.......................... 52
8.4 Survival of Representations and Warranties........................ 53
ii
8.5 No Third Party Reliance........................................... 54
8.6 General Release................................................... 54
8.7 Remedies Exclusive................................................ 55
ARTICLE IX TERMINATION; EFFECT OF TERMINATION............................... 55
9.1 Termination....................................................... 55
9.2 Effect of Termination............................................. 56
9.3 Shareholders' Representative...................................... 56
ARTICLE X MISCELLANEOUS PROVISIONS.......................................... 58
10.1 Xxxxxxx Non-compete; Non-solicitation............................. 58
10.2 Transaction Expenses.............................................. 59
10.3 Amendment......................................................... 59
10.4 Entire Agreement.................................................. 59
10.5 Severability...................................................... 59
10.6 No Third-party Beneficiaries; Successors and Assigns.............. 60
10.7 Headings.......................................................... 60
10.8 Notices........................................................... 60
10.9 Counterparts...................................................... 61
10.10 Governing Law..................................................... 62
10.11 Incorporation of Exhibits and Schedules........................... 62
10.12 Construction...................................................... 62
10.13 Non-merger of Representations and Warranties...................... 62
10.14 Remedies.......................................................... 62
10.15 Jurisdiction, Etc................................................. 62
10.16 Waiver of Jury Trial.............................................. 63
10.17 Independence of Covenants and Representations and Warranties...... 63
10.18 Termination of Shareholder Agreements and Registration Rights
Agreements........................................................ 63
iii
Exhibit 2.5
AGREEMENT AND PLAN OF MERGER (as amended,
modified or supplemented, this "Agreement"),
dated as of December 11, 2001, by and among
THE PROVIDENCE SERVICE CORPORATION, a
Delaware corporation (the "Parent"), CAMELOT
ACQUISITION CORPORATION, a Delaware
corporation (the "Sub"), CAMELOT CARE
CORPORATION, a Delaware corporation (the
"Company"), all of the shareholders of the
Company, each of whom is listed on the
signature pages hereto (collectively referred
to herein as the "Shareholders" and each
individually as a "Shareholder"), and XXXXXX
X. XXXXXXXX, an individual, as Shareholders'
Representative.
RECITALS
WHEREAS, the Company, individually and through its subsidiaries, is engaged
in the business (the "Subject Business") of providing various types of
behavioral health care services for children and adolescents, including, but not
limited to, xxxxxx care and related services for dependent children, residential
treatment services, in-home counseling interventions, and therapeutic school
programs. The subsidiaries of the Company include Camelot Care Centers, Inc., an
Illinois corporation ("Camelot Care"), Recips, Inc., a Florida corporation
("Recips"), and all other Persons in which the Company owns any capital stock or
equity securities (collectively referred to herein as the "Subsidiaries").
WHEREAS, as of the date hereof, the Shareholders are the sole shareholders
of the Company, with each Shareholder owning that number of shares of (i) common
stock, $.01 par value per share, of the Company (the "Common Stock") and/or (ii)
Series A Convertible Preferred Stock, $.01 par value per share, of the Company
(the "Preferred Stock") as is set forth opposite each such Shareholder's name on
Schedule I attached hereto.
WHEREAS, the shares of the Company's Common Stock and Preferred Stock owned
by the Shareholders are referred to herein as the "Shares".
WHEREAS, the respective boards of directors and stockholders of the Sub and
the Company have approved the merger (the "Merger") of Sub with and into the
Company on the terms and subject to the conditions set forth in this Agreement.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.
WHEREAS, capitalized terms not otherwise defined shall have the meanings
set forth in Annex I.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger.
----------
Upon the terms and subject to the conditions set forth herein, the
Certificate of Merger and the DGCL, at the Effective Time the Sub shall be
merged with and into the Company and the separate corporate existence of the Sub
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). The Merger shall have the effects set forth in Section
259 of the DGCL. At the election of the Parent, any direct or indirect
subsidiary of the Parent may be substituted for the Sub as a constituent
corporation in the Merger.
1.2 Effective Time.
--------------
On the Closing Date, the Parent, the Sub and the Company shall file with
the Secretary of State of the State of Delaware a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with such Secretary of State, or at such other time as the Parent and
the Company shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
1.3 Certificate of Incorporation and By-laws.
----------------------------------------
(a) The Certificate of Incorporation of the Company shall be
amended and restated at the Effective Time in accordance with the relevant
provisions of the DGCL to read in its entirety as set forth in Exhibit A hereto
and, as so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
(b) The By-laws of the Company as in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
2
1.4 Directors.
---------
The directors of the Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.5 Officers.
--------
The officers of the Sub immediately prior to the Effective Time shall be
the officers of the Surviving Corporation until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
1.6 Sub Common Stock.
----------------
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, each share of common stock, par value $.01 per
share, of the Sub (the "Sub Common Stock") issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and non-assessable share of Common Stock of the Surviving Corporation.
1.7 The Shares.
----------
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof:
(i) each share of Common Stock duly issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into the right to receive:
(A) an amount in cash (the "Common Stock Merger Cash
Consideration") determined pursuant to the following formula:
($6,500,000 - Funded Indebtedness then outstanding) x 43.04660%
---------------------------------------------------------------
total number of shares of Common Stock then outstanding
; plus
(B) a principal amount (the "Common Stock Merger Notes
Consideration") of the convertible promissory notes of the Parent in
the form attached hereto as Exhibit B (the "Notes") determined
pursuant to the following formula:
$3,500,000 x 43.04660%
-------------------------------------------------------
total number of shares of Common Stock then outstanding
; plus
3
(C) a number of shares (the "Common Stock Merger Shares
Consideration") of common stock, $.001 par value per share, of
the Parent (the "Parent Shares") determined pursuant to the
following formula:
1,250,000 x 43.04660%
-------------------------------------------------------
total number of shares of Common Stock then outstanding
; and
(ii) each share of Preferred Stock duly issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into the right to receive:
(A) an amount in cash (the "Preferred Stock Merger Cash
Consideration") determined pursuant to the following formula:
($6,500,000 - Funded Indebtedness then outstanding) x 56.95340%
---------------------------------------------------------------
total number of shares of Preferred Stock then outstanding
; plus
(B) a principal amount (the "Preferred Stock Merger
Notes Consideration") of Notes determined pursuant to the following
formula:
$3,500,000 x 56.95340%
-----------------------------------------------------------
total number of shares of Preferred Stock then outstanding
; plus
(C) a number of Parent Shares (the "Preferred Stock
Merger Shares Consideration") determined pursuant to the
following formula:
1,250,000 x 56.95340%
---------------------------------------------------------------
total number of shares of Preferred Stock then outstanding
(b) On the W.C. Adjustment Final Determination Date, each
Shareholder shall be entitled to receive such Shareholder's Shareholder
Percentage of the W. C. Adjustment, if any (the "W.C. Adjustment
Consideration").
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each Share held in the Company's
treasury shall be cancelled and returned without payment of any consideration
therefor.
(d) At the Effective Time, each outstanding option, warrant, call,
preemptive right, subscription or other right, agreement, arrangement or
commitment of any character
4
relating to the issued or unissued capital stock of the Company shall be
cancelled and all rights to purchase shares of capital stock of the Company
shall cease.
1.8 Payment of Consideration; Repayment of Funded Indebtedness.
----------------------------------------------------------
(a) At the Closing, the Sub shall deliver to each Shareholder (i)
by wire transfer of immediately available funds to an account designated in
writing to the Sub by such Shareholder not less than two Business Days prior to
the Closing Date the portion of the aggregate Merger Cash Consideration to which
such Shareholder is entitled as determined pursuant to Section 1.7, (ii) stock
certificates for the number of Parent Shares set forth opposite such
Shareholder's name on Schedule I hereto, and (iii) a Note in the principal
amount set forth opposite such Shareholder's name on Schedule I hereto.
(b) The Merger Consideration to be paid by the Sub to the
Shareholders pursuant to the Merger shall be deemed to be consideration for the
Shares exchanged by the Shareholders in the Merger and the representations,
warranties and covenants contained herein and in the Related Documents.
(c) At the Closing, the Shareholders or the Company shall deliver
to the holders of Funded Indebtedness designated by the Parent an amount
sufficient to repay all such Funded Indebtedness outstanding immediately prior
to the Closing, with the result that immediately following the Closing there
will be no further monetary obligations of the Company and the Subsidiaries with
respect to any such Funded Indebtedness outstanding immediately prior to the
Closing. On the Closing Date, the Shareholders shall provide the Parent with
customary pay-off-letters from all holders of such Funded Indebtedness
outstanding immediately prior to the Closing, and make arrangements satisfactory
to the Parent for such holders to provide to the Parent recordable form mortgage
and lien discharges and releases, UCC-3s and other personal property security
financing statements, canceled notes, trademark and patent relinquishments and
other documents reasonably requested by the Parent simultaneously with the
Closing to evidence the discharge and repayment of such Funded Indebtedness and
the discharge and release of all Encumbrances securing such Funded Indebtedness.
1.9 Delivery of the Shares.
----------------------
In consideration of the Sub's delivery of the Merger Consideration, each
Shareholder shall deliver to the Sub at the Closing a certificate or
certificates representing the Shares owned by such Shareholder as set forth on
Schedule I hereto, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank, sufficient in form and substance to convey to the
Parent good and marketable title to the Shares free and clear of all
Encumbrances or for cancellation by the Surviving Corporation, it being
understood that the failure of any Shareholder to comply with this Section 1.9
shall not affect in any manner any of the transactions contemplated hereby
(including the Merger).
1.10 W.C. Adjustment.
---------------
(a) As promptly as practicable following the Closing Date (but in
no event later than 180 days after the Closing Date), the Parent shall prepare a
balance sheet (the "Closing
5
Balance Sheet") of the Company reflecting the financial position of the Company
immediately prior to the Closing, and a statement (the "Final W.C. Statement")
setting forth the computation of the Final W.C. (as defined below) derived
therefrom, which statement shall be prepared in accordance with GAAP
consistently applied in accordance with the balance sheet preparation principles
and conventions set forth on Exhibit C attached hereto (the "Principles"). For
purposes of preparing the Final W.C. Statement, "Final W.C." shall mean total
consolidated current assets of the Company, other than the Excluded A.R.,
immediately prior to the Closing less total consolidated current liabilities of
the Company (including current liabilities incurred, or related to, the Asset
Disposition) immediately prior to the Closing.
(b) Upon completion of the Final W.C. Statement, the Parent shall
promptly deliver the same to the Shareholders' Representative with a notice (the
"Parent's Notice of Adjustment") setting forth its proposed W.C. Adjustment, if
any, as contemplated hereby. During the 30 days immediately following receipt of
the Parent's Notice of Adjustment by the Shareholders' Representative, the
Shareholders' Representative and its accountants shall be entitled to review the
Parent's Notice of Adjustment and any working papers, trial balances and similar
materials relating thereto prepared by the Parent or its accountants. The amount
of the W.C. Adjustment set forth in the Parent's Notice of Adjustment shall
become final and binding upon the parties on the thirty-first day following
delivery thereof unless the Shareholders' Representative gives written notice to
the Parent of its disagreement with the Parent's Notice of Adjustment (a
"Shareholders' Notice of Disagreement") prior to such date. Any Shareholders'
Notice of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted. If a timely Shareholders' Notice of Disagreement is
delivered to the Parent, then the amount of the W.C. Adjustment set forth in the
Parent's Notice of Adjustment (as revised (if at all) in accordance with clause
(x) or (y) below), shall become final and binding upon the parties on the
earlier of (x) the date the Parent and the Shareholders' Representative resolve
in writing any differences they have with respect to any matter specified in a
Shareholders' Notice of Disagreement or (y) the date any matters in dispute are
finally resolved in writing by the Accounting Firm (the date on which the amount
of the W.C. Adjustment becomes final and binding being hereinafter referred to
as the "W.C. Adjustment Final Determination Date").
(c) During the 30 days immediately following the delivery of any
Shareholders' Notice of Disagreement, the Parent and the Shareholders'
Representative shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in such Shareholders'
Notice of Disagreement. During such period, the Parent and the Shareholders'
Representative shall each have access to the other party's working papers, trial
balances and similar materials prepared in connection with the other party's
preparation of the Parent's Notice of Adjustment and the Shareholders' Notice of
Disagreement, as the case may be. At the end of such 30-day period, the
Shareholders' Representative and the Parent shall submit to the Accounting Firm
for review and resolution any and all matters which remain in dispute and which
were included in any Shareholders' Notice of Disagreement, and the Accounting
Firm shall reach a final, binding resolution of all matters which remain in
dispute, which final resolution shall be (i) in writing, (ii) furnished to the
Parent, the Sub and the Shareholders as soon as practicable after the items in
dispute have been referred to the Accounting Firm, (iii) made in accordance with
this Agreement and (iv) conclusive and binding upon the parties hereto and not
subject to collateral attack for any reason. The amount of the W.C. Adjustment,
as
6
adjusted to reflect the Accounting Firm's resolution of the matters in dispute,
shall become final and binding on the parties hereto on the date the Accounting
Firm delivers its final resolution to the parties.
(d) If the Final W.C. is determined to be greater than zero (any
amounts in excess of zero being referred to herein as the "Excess W.C."), then,
within five Business Days following the W.C. Adjustment Final Determination
Date, the Merger Cash Consideration shall be increased by the amount
of the Excess W.C. and the Parent shall pay the Excess W.C. to the Shareholders'
Representative for distribution to each Shareholder in accordance with his or
her Shareholder Percentage thereof.
(e) If the Final W.C. is determined to be less than zero (the
"Shortfall Amount"), then, within five Business Days following the W.C.
Adjustment Final Determination Date, the Merger Cash Consideration shall be
decreased by the Shortfall Amount and the Shareholders' Representative shall
collect from each Shareholder such Shareholders' Shareholder Percentage of the
Shortfall Amount (it being understood that each Shareholder shall immediately
remit such amounts to the Shareholders' Representative) and pay the Shortfall
Amount to the Parent.
(f) Any payments of Excess W.C. or the Shortfall Amounts shall be
referred to herein as the "W.C. Adjustment". If the Final W.C. is determined to
be zero, there shall be no W.C. Adjustment.
(g) The Surviving Corporation shall use its commercially reasonable
good faith efforts, in a manner consistent with the Company's past practice, to
collect the Excluded A.R.; provided, however, that the Surviving Corporation
shall have no Liability for any failure to collect any Excluded A.R. Upon the
receipt of any Excluded A.R. Net Proceeds for a period of 365 days from the
Closing Date, the Surviving Corporation shall promptly remit such Excluded A.R.
Net Proceeds to the Shareholders' Representative for distribution to each
Shareholder in accordance with his or her Shareholder Percentage. If, following
such 365-day period, any accounts receivable set forth on Schedule 1.10(g)
remain outstanding, the Surviving Corporation will use its commercially
reasonable good faith efforts to assign the rights to collect such accounts
receivable to the Shareholders' Representative on behalf of the Shareholders.
1.11 Approval of Merger; Appraisal Rights.
By its execution of this Agreement, each Shareholder consents to the terms
of the Merger and to the taking of shareholder action to approve the Merger
without a meeting, acknowledges that he, she or it is aware of his, her or its
rights under the DGCL to dissent to the Merger and demand payment for his
Shares, and waives such rights to dissent and demand payment. Notwithstanding
anything in this Agreement to the contrary, the Shares and any other shares of
capital stock of the Company ("Appraisal Shares") that are duly issued and
outstanding immediately prior to the Effective Time and that are held by any
Person who is entitled to demand and properly demands appraisal of such
Appraisal Shares pursuant to, and who complies in all respects with, Section 262
of the DGCL ("Section 262") shall not be converted into Merger Consideration as
provided in Section 1.7, but rather the holder of Appraisal Shares shall be
entitled to payment of the fair market value of such Appraisal Shares in
accordance with Section 262; provided, however, that, if any such holder shall
fail to perfect or otherwise shall waive,
7
withdraw or lose the right to appraisal under Section 262, then the right of
such holder to be paid the fair market value of such holder's Appraisal Shares
shall cease and such Appraisal Shares shall be treated as if they had been
converted as of the Effective Time into Merger Consideration as provided in
Section 1.7. The Company shall serve prompt notice to the Sub of any written
demands received by the Company for appraisal of any Shares and the Sub shall
have the right to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
the Sub, make any payment with respect to, or settle or offer to settle, any
such demands, or agree to do any of the foregoing. If, after the Closing, any
Person is determined pursuant to a final non-appealable judgment of a court of
competent jurisdiction to be the holder of any shares of capital stock of the
Company not constituting Shares and such Person is determined to be entitled to
its proportionate share of the Merger Consideration or holds Appraisal Shares,
then each Shareholder shall be obligated to pay or transfer to such Person its
pro rata share of the Merger Consideration to which such Person is entitled.
ARTICLE II
THE CLOSING
The closing of the Merger (the "Closing") shall take place (a) at the
offices of Bass, Xxxxx & Xxxx PLC, AmSouth Center, 000 Xxxxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxxxx, Xxxxxxxxx, as promptly as practicable after satisfaction or
waiver of the conditions set forth in Article VII in
accordance with this Agreement or (b) at such other place, time and date as the
Parent and the Company may agree in writing. The date and time of such Closing
are referred to herein as the "Closing Date".
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
Each of the Shareholders jointly and severally represents and warrants to
the Parent and the Sub as follows:
3.1 Organization; Good Standing; Qualification and Power.
----------------------------------------------------
(a) Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of the state, or
country of its jurisdiction of incorporation, has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, to enter into this Agreement and the Related
Documents, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby, and is duly qualified or
licensed to do business and, if applicable, is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensure necessary, except where the
failure to be so qualified or licensed or in good standing would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
The jurisdictions in which the Company and the Subsidiaries are qualified as
foreign corporations or
8
licensed or registered to carry on business are set forth in Schedule 3.1. The
Company has delivered to the Parent true and complete correct copies of its and
the Subsidiaries' articles or certificate of incorporation and bylaws (or other
corporate governance documents) in each case as amended to the date hereof.
(b) The Subsidiaries have not at any time (i) repaid, redeemed or
purchased or agreed to repay, redeem or purchase any securities or shares of any
class of its share capital or otherwise reduced or agreed to reduce its issued
share capital or any class thereof or (ii) capitalized or agreed to capitalize
in the form of shares, debentures or any other securities or in paying up any
amounts unpaid on any shares, debentures or other securities any profits or
reserves of any class or description or passed or agreed to pass any resolutions
to do so.
3.2 Equity Investments.
------------------
Except as set forth in Schedule 3.2, the Company does not currently have
any subsidiaries, nor does it currently own any capital stock or other interest,
directly or indirectly, in any Person.
3.3 Capital Stock.
-------------
(a) The authorized capital stock of the Company consists of
12,230,320 shares of Common Stock, of which, as of the date hereof and
immediately prior to the Closing, 5,000,000 shares are and will be outstanding,
with such shares of Common Stock being owned of record by the Shareholders in
the amounts set forth in Schedule I, and 6,615,320 shares of Preferred Stock, of
which, as of the date hereof and immediately prior to Closing, 6,615,320 shares
are and will be outstanding, with such shares of Preferred Stock being owned of
record by the Shareholders in the amounts set forth on Schedule I. All of such
shares are validly issued, fully paid and non-assessable and have been issued in
compliance with all applicable Laws including, without limitation, applicable
securities Laws. Except as set forth in Schedule 3.3, there are no securities of
the Company presently outstanding, and on the Closing Date there will not be any
outstanding securities of the Company, which are convertible into, exchangeable
for, or carrying the right to acquire, equity securities of the Company, or
subscriptions, warrants, options, calls, puts, convertible securities,
registration or other rights, arrangements or commitments obligating the Company
to issue, sell, register, purchase or redeem any of its equity securities or any
ownership interest or rights therein. Except as set forth in Schedule 3.3, there
are no voting trusts or other agreements or understandings to which the Company
is bound with respect to the voting of the Company's capital stock. The Company
has no stock appreciation rights, phantom stock rights or similar rights or
arrangements outstanding.
(b) The authorized capital stock of the Subsidiaries is as set
forth on Schedule 3.3. As of the date hereof and immediately prior to the
Closing, such number of shares of each Subsidiary as set forth in Schedule 3.3
are and will be outstanding, with such shares being owned of record by the
Company. All of such shares are validly issued, fully paid and non-assessable
and have been issued in compliance with all applicable Laws, including, without
limitation, applicable securities Laws. Except as set forth on Schedule 3.3,
there are no securities of the Subsidiaries presently outstanding, and on the
Closing Date there will not be any outstanding securities of the Subsidiaries,
which are convertible into, exchangeable for, or carrying the right
9
to acquire, equity securities of the Subsidiaries, or subscriptions, warrants,
options, calls, puts, convertible securities, registration or other rights,
arrangements or commitments obligating the Subsidiaries to issue, sell,
register, purchase or redeem any of its equity securities or any ownership
interest or rights therein. There are no voting trusts or other agreements or
understandings to which the Subsidiaries are bound with respect to the voting of
its capital stock. The Subsidiaries have no stock appreciation rights, phantom
stock rights or similar rights or arrangements outstanding. The shares set out
in Schedule 3.3 constitute the whole of the issued and allotted share capital of
the Subsidiaries and are fully paid or credited as fully paid and there are no
options over or other rights (whether exercisable now or in the future and
whether contingent or not) to acquire any shares or subscribe for shares in the
capital of the Subsidiaries. There is no Encumbrance on, over or affecting any
of the shares in the Subsidiaries, no agreement to create such Encumbrance has
been made and no claim has been made that any Person is entitled to any such
Encumbrance.
3.4 Approvals.
---------
(a) The Board of Directors of the Company and the stockholders of
the Company have approved the Merger, this Agreement and the Related Documents
to which the Company is a party.
(b) Except as set forth on Schedule 3.4, no other approvals are
required in order to consummate the transactions contemplated by this Agreement
or the Related Documents to which the Company or any of the Subsidiaries is a
party.
3.5 Authority; Noncontravention; Consents.
(a) The execution, delivery and performance of this Agreement and
the Related Documents to be executed by the Company and the Shareholders, as the
case may be, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of such Persons; and this Agreement has been, and the Related Documents to
be executed by the Company or the Shareholders, as the case may be, when
executed and delivered by such Persons will be, duly and validly executed and
delivered by such Persons and this Agreement is, and the Related Documents, when
executed and delivered by such Persons will be, the valid and binding
obligations of such Persons, enforceable against such Persons in accordance with
their respective terms, except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors rights generally or by general principles of equity.
(b) Except as set forth on Schedule 3.5(b), neither the execution,
delivery and performance of this Agreement and the Related Documents to be
executed by the Company and the Shareholders, as the case may be, nor the
consummation by the Company or the Subsidiaries of the transactions contemplated
hereby or thereby will (i) conflict with, or result in any violation of, or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in or the loss of any benefit under, or result in the
creation of any Encumbrance upon any of the properties or assets of the Company
or the Subsidiaries under any term, condition or provision of (x) the articles
or certificate of incorporation, bylaws or other organizational documents of the
10
Company or any of the Subsidiaries or (y) any Contract to which the Company or
the Subsidiaries is a party or by which its properties or assets are bound
(except where, solely in the case of clause (y), such conflict, violation,
default, right, loss or Encumbrance would, singly or in the aggregate, not have
a Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole), (ii) result in any investigatory, remedial or reporting obligation under
any Environmental and Safety Requirement or (iii) violate any Laws applicable to
the Company or the Subsidiaries or any of their respective properties.
(c) Each Shareholder is the lawful owner, of record and
beneficially, of each of the shares of Common Stock and/or Preferred Stock being
sold, transferred, conveyed, exchanged and assigned by him or her hereunder
pursuant to the Merger and has valid title to such Shares, free and clear of any
Encumbrances whatsoever and with no restrictions on the voting rights and other
incidents of record and beneficial ownership pertaining thereto. There are no
agreements between any Shareholder and any other Person with respect to the
voting of, or any matters pertaining to, the capital stock of the Company except
for the Related Documents.
(d) Except as set forth on Schedule 3.5(d), no consent, approval,
Order or authorization of, registration, declaration or filing with, or
notification to any Governmental Entity or any other third party is required in
connection with the execution, delivery and performance by the Company or the
Subsidiaries of this Agreement or the Related Documents or the consummation of
the transactions contemplated hereby or thereby, except where the failure to
obtain such consent, approval, Order or authorization, or make such
registration, declaration, filing or notification, would not, singly or in the
aggregate, have a Material Adverse Effect on the Company and the Subsidiaries,
taken as a whole.
3.6 Financial Statements.
--------------------
(a) Prior to the date hereof, the Company has delivered to the
Parent copies of the audited consolidated balance sheets of the Company and the
Subsidiaries as of December 31, 1998, 1999 and 2000 (the "Latest Audited Balance
Sheet" and such date, the "Latest Audited Balance Sheet Date"), and the related
audited statements of income, shareholders equity and cash flows for the fiscal
years then ended, together with the report thereon of Deloitte and Touche LLP,
and (ii) the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of September 30, 2001 ("Latest Balance Sheet" and such date
being the "Latest Balance Sheet Date"), and the related statements of income,
shareholders' equity and cash flows for the fiscal period then ended.
(b) Prior to the date hereof, the Company has delivered to the
Parent copies of the unaudited consolidated and consolidating balance sheet of
the Company and the Subsidiaries and the related unaudited income statements of
the Company and the Subsidiaries for each month during fiscal year 2001 (each a
"Company Monthly Financial Statement"). Such Company Monthly Financial
Statements shall also provide the financial information set forth therein on a
divisional basis.
(c) The financial statements referenced in this Section 3.6 and to
be delivered pursuant to Section 6.1 shall be collectively referred to in this
Agreement as the "Financial Statements". The Financial Statements (i) are, or
shall be, in accordance with the Books and
11
Records of the Company, (ii) fairly present, in all material respects, the
consolidated financial condition of the Company and the Subsidiaries as of the
respective dates indicated and the statements of income, shareholders' equity
and cash flows of the Company and the Subsidiaries for the respective periods
indicated and (iii) have been, or shall be, prepared in accordance with GAAP and
consistently applied throughout the periods covered thereby except that (i)
unaudited Financial Statements are subject to normal year-end adjustments and
the addition of footnotes and (ii) the Company Monthly Financial Statements
exclude a statement of shareholders' equity and cash flows.
3.7 Absence of Undisclosed Liabilities.
----------------------------------
Except as set forth in Schedule 3.7, neither the Company nor the
Subsidiaries have any Liability, except for (i) Liabilities reflected or
reserved against in the Latest Balance Sheet, and (ii) Liabilities that have
arisen since the date of the Latest Balance Sheet or the Latest Audited Balance
Sheet in the ordinary course of business (none of which arise from any breach of
Contract, breach of warranty, tort, infringement, violation of Law, or any
action, suit or Proceeding (including any Liability under any Environmental and
Safety Requirement)). There are no loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) that are not adequately provided for
on the Latest Balance Sheet or the Latest Audited Balance Sheet. Except as set
forth in Schedule 3.7, neither the Company nor the Subsidiaries have, either
expressly or by operation of Law, assumed or undertaken any Liability of any
other Person, including, without limitation, any obligation for corrective or
remedial action relating to Environmental and Safety Requirements. The reserves
reflected on the Latest Balance Sheet for Liabilities that were incurred but not
reported are adequate to cover such Liabilities.
3.8 Absence of Changes.
------------------
Except as set forth on Schedule 3.8 and except for changes in general
economic conditions and general changes in the industry in which the Subject
Business is conducted, since the Latest Audited Balance Sheet Date, there has
not been any Material Adverse Change affecting the Company or the Subsidiaries
and no event has occurred or circumstance exists which may result in such a
Material Adverse Change. Without limiting the generality of the foregoing, since
the Latest Audited Balance Sheet Date, except as set forth in Schedule 3.8, the
Company and the Subsidiaries have been operated in the ordinary course of
business, consistent with past practice, and there has not been:
(a) any discharge or satisfaction of any Encumbrance other than
those then required to be discharged or satisfied prior to Closing, or payment
of any obligation or Liability, other than current Liabilities shown on the
Latest Audited Balance Sheet and current Liabilities incurred in the ordinary
course of business consistent with prior practice, or any cancellation,
forgiveness or compromise by the Company or the Subsidiaries of any debts or
claims other than in the ordinary course of business or any waiver or release of
any right of substantial value to the Company and the Subsidiaries;
(b) any declaration, setting aside or payment of any dividend or
other distribution of any assets of any kind whatsoever with respect to any
shares of the capital stock of the
12
Company or the Subsidiaries, or any direct or indirect redemption, purchase or
other acquisition of any such shares of the capital stock of the Company or the
Subsidiaries;
(c) any stock split, reverse stock split, combination,
reclassification or recapitalization of any capital stock of the Company or the
Subsidiaries, or any issuance of any other security in respect of or in exchange
for, any shares of any capital stock of the Company or the Subsidiaries;
(d) any issuance by the Company or the Subsidiaries of any shares
of their capital stock or any debt security or securities, rights, options or
warrants convertible into or exercisable or exchangeable for any shares of such
capital stock or debt security;
(e) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset of the Company or the
Subsidiaries, except for inventory sold in the ordinary course of business;
(f) any termination or receipt by the Company or the Subsidiaries
of any notice of termination or non-renewal of any Contract between the Company
or the Subsidiaries and any other Person involving payments in excess of
$100,000 in the aggregate;
(g) any write-down or write-up of the value of any asset of the
Company or the Subsidiaries, or, other than in the ordinary course of business,
any write-off of any accounts receivable or notes receivable of the Company or
the Subsidiaries or any portion thereof in excess of $50,000 in the aggregate;
(h) any increase in or modification of compensation payable or to
become payable to any officer, employee, consultant or agent of the Company or
the Subsidiaries, other than any such increases in the ordinary course of
business, consistent with past practice, or the entering into of any employment
contract with any officer or employee;
(i) any increase in or modification or acceleration of any benefits
payable or to become payable under any bonus, pension, severance, insurance or
other benefit plan, payment or arrangement (including, but not limited to, the
granting of stock options, restricted stock awards or stock appreciation rights)
made to, for or with any officer, employee, consultant or agent of the Company
or the Subsidiaries;
(j) the making of any loan, advance or capital contribution to or
investment in any Person or the engagement in any transaction with any employee,
officer, director or Shareholder of the Company or the Subsidiaries, other than
advances to employees in the ordinary course of business for travel and similar
business expenses;
(k) any change in the accounting methods or practices followed by
the Company or the Subsidiaries or any change in depreciation or amortization
policies or rates theretofore adopted;
(l) any material deterioration in the aging of the Company's or the
Subsidiaries' accounts payable or material acceleration in the aging of the
Company's or the Subsidiaries'
13
accounts receivable or other change in the Company's or the Subsidiaries'
working capital management practices;
(m) any material change in the manner in which the Company or the
Subsidiaries extend discounts or credit to customers or otherwise deals with
customers;
(n) any termination of employment of any officer or key employee of
the Company or the Subsidiaries;
(o) except as contemplated hereby, any amendments or changes in the
Company's or the Subsidiaries' articles or certificate of incorporation or
bylaws (or other governing documents);
(p) any labor disputes or any union organizing campaigns;
(q) the commencement of any litigation or other action by or
against the Company or the Subsidiaries; or
(r) any agreement, understanding, or authorization, whether in
writing or otherwise, for the Company or the Subsidiaries to take any of the
actions specified in items (a) through (q) above.
3.9 Employment Agreements.
---------------------
Except as disclosed in Schedule 3.9, there exist no employment, consulting,
non-competition, severance, bonus or indemnification agreements or
understandings between the Company or the Subsidiaries and any current or former
director or officer of the Company or the Subsidiaries or any other employee or
agent. Schedule 3.9 sets forth a true, correct and complete list of all amounts
payable or that will become payable to each present or former director, officer,
consultant or employee of the Company or the Subsidiaries pursuant to any
agreement or understanding set forth in Schedule 3.9 as a result of the
execution and delivery of this Agreement and the Related Documents and/or the
consummation of the transactions contemplated hereby, which schedule shall
separately identify the Person to whom such amount is or will become payable.
3.10 Tax Matters.
-----------
(a) Except as set forth on Schedule 3.10(a): (i) the Company and
(ii) each other Person included in any consolidated or combined Tax Return and
part of an affiliated group, within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), of which the Company is or has
been a member ("Tax Affiliate"), for the years that it was a Tax Affiliate of
the Company:
(i) has timely paid or caused to be paid all Taxes required
to be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
14
(ii) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns required
to be filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and all
Tax Returns filed on behalf of the Company and each Tax Affiliate were
complete and correct in all material respects; and
(iii) has not requested or caused to be requested any extension
of time within which to file any Tax Return, which Tax Return has not since
been filed.
(b) The Company has previously made available to the Parent for
review true, correct and complete copies of all Tax Returns filed by or on
behalf of the Company through the Closing Date for the periods ending after
December 31, 1994.
(c) Except as set forth in Schedule 3.10(c):
(i) neither the Company nor any Tax Affiliate (for the years
that it was a Tax Affiliate of the Company) has been notified by the
Internal Revenue Service or any other taxing authority that any issues have
been raised (and no such issues are currently pending) by the Internal
Revenue Service or any other taxing authority in connection with any Tax
Return filed by or on behalf of the Company or any Tax Affiliate; there are
no pending Tax audits and no waivers of statutes of limitations have been
given or requested with respect to the Company or any Tax Affiliate (for
the years that it was a Tax Affiliate of the Company); no Tax Encumbrances
have been filed against the Company or any Tax Affiliate (for the years
that it was a Tax Affiliate of the Company) except for Encumbrances for
current Taxes not yet due and payable for which adequate reserves have been
provided for in the Latest Balance Sheet or the Latest Audited Balance
Sheet; no unresolved deficiencies or additions to Taxes have been proposed,
asserted, or assessed against the Company or any Tax Affiliate (for the
years that it was a Tax Affiliate of the Company);
(ii) full and adequate provision (at assumed tax rates) has
been made (A) on the Latest Balance Sheet and the Latest Audited Balance
Sheet, and the Books and Records of the Company for all deferred Taxes not
yet due and payable by the Company for all periods on or prior to the
Closing Date, and (B) on the Books and Records of the Company for all
deferred Taxes payable by the Company for all periods beginning on or after
the Latest Audited Balance Sheet Date;
(iii) neither the Company nor any Subsidiaries have incurred
any Liability for Taxes from and after the Latest Audited Balance Sheet
Date other than Taxes incurred in the ordinary course of business and
consistent with past practices;
(iv) the Company has not (A) made an election (or had an
election made on its behalf by another Person) to be treated as a
"consenting corporation" under Section 341(f) of the Code or (B) been a
"personal holding company" within the meaning of Section 542 of the Code;
15
(v) the Company and each Tax Affiliate has complied with all
applicable Laws relating to the collection or withholding of Taxes (such as
sales Taxes or withholding of Taxes from the wages of employees) in all
material respects;
(vi) neither the Company nor the Subsidiaries have any
liability in respect of any Tax sharing agreement with any Person and all
Tax sharing agreements to which either the Company or the Subsidiaries have
been bound have been terminated;
(vii) neither the Company nor the Subsidiaries have incurred
any Liability to make or possibly make any payments either alone or in
conjunction with any other payments that:
(A) shall be non-deductible under, or would otherwise
constitute a "parachute payment" within the meaning of Section
280G of the Code (or any corresponding provision of state,
local or foreign income Tax Law); or
(B) are or may be subject to the imposition of an excise
Tax under Section 4999 of the Code;
(viii) neither the Company nor the Subsidiaries have agreed to
(nor has any other Person agreed to on its behalf) and is not required to
make any adjustments or changes either on, before or after the Closing
Date, to its accounting methods pursuant to Section 481 of the Code, and
the Internal Revenue Service has not proposed any such adjustments or
changes in the accounting methods of such Persons;
(ix) no claim has been made within the last three years by any
taxing authority in a jurisdiction in which the Company and the
Subsidiaries do not file Tax Returns that the Company or the Subsidiaries
are or may be subject to taxation by that jurisdiction;
(x) the consummation of the transactions hereunder will not
trigger the realization or recognition of intercompany gain or income to
the Company or the Subsidiaries under the Federal consolidated return
regulations with respect to Federal, state, or local taxes; and
(xi) the Company is not currently, nor has it been at any time
during the previous five years, a "U.S. real property holding corporation".
(d) From the date of its incorporation, Camelot Community Care has
qualified for exemption from Federal income Tax pursuant to Section 501(c)(3) of
the Code, has not been a private foundation and has been exempt from all Taxes
and charges from which a non-profit corporation organized and conducted solely
for health care purposes and properly qualified as exempt from Federal income
tax pursuant to Section 501(c)(3) of the Code is eligible for exemption. Other
than Camelot Community Care, neither the Company nor any Subsidiary has any
management contract with any Person who is exempt from, or is intended to
qualify for exemption from, Federal income tax pursuant to Section 501(c)(3) of
the Code. Without regard to the regulatory or legal status of the Parent and any
action taken by the Parent after the Closing
16
Date, the transactions contemplated by this Agreement will not cause Camelot
Community Care to lose its qualifications for exemption from Federal income Tax,
nor cause it to be treated as a private foundation; provided, however, that no
representations are made regarding the transactions contemplated by Section 7.2
(w) hereof.
(e) Neither the Company nor any of its Affiliates has entered into
any transactions with Camelot Community Care that have resulted or may result in
the net earnings of Camelot Community Care inuring to the benefit of any private
person as is prohibited by Section 501(c)(3) of the Code or which has
constituted or may constitute an "excess benefit transaction" within the meaning
of Section 4958 of the Code or its implementing regulations at 26 C.F.R. Section
53.4958-0T through 53.4958-8T.
(f) Except as set forth on Schedule 3.10(f), the consummation of
the Asset Disposition shall not result in any Taxable income for the account of
the Company or any Subsidiary (giving effect to the usage of net operating
losses which may be used to offset such Taxable income but after taking into
account any limitations on the utilization of any such net operating losses
which may be applicable pursuant to applicable Law including, without
limitation, limitations imposed by Section 382 of the Code).
3.11 ERISA Compliance.
----------------------
(a) Set forth in Schedule 3.11(a) is a true and complete list of
all Employee Plans. All Employee Plans have been operated and administered in
all material respects in compliance with ERISA, the Code and other applicable
Laws.
(b) Except as set forth in Schedule 3.11(b):
(i) each Employee Plan, if intended to be "qualified" within
the meaning of Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified and the related trusts are
exempt from tax under Section 501(a) of the Code and nothing has occurred
that has or could reasonably be expected to affect adversely such
qualification or exemption;
(ii) neither the Company nor any of its ERISA Affiliates nor
any other "disqualified person" or "party in interest" (as such terms are
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to an Employee Plan has breached the fiduciary
rules of ERISA or engaged in a prohibited transaction that could subject
the Company or any of its ERISA Affiliates to any Tax or penalty imposed
under Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA;
(iii) all required or declared Company or Subsidiary
contributions (or premium payments) to (or in respect of) all Employee
Plans have been properly made when due, and the Company and the
Subsidiaries have deposited all amounts withheld from employees for
pension, welfare or other benefits into the appropriate trusts or accounts;
17
(iv) no Proceedings (other than routine claims for benefits)
are pending or, to the knowledge of the Company, threatened with respect to
or involving any Employee Plan;
(v) except as may be required under Laws of general
application, none of the Employee Plans obligate the Company or the
Subsidiaries to provide any employee or former employee, or their spouses,
family members or beneficiaries, any post-employment or post-retirement
health or life insurance, accident or other "welfare-type" benefits;
(vi) each Employee Plan which is subject to the requirements
of the Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA") and the
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") has been
maintained in compliance with COBRA and HIPAA, including all notice
requirements, and no tax payable on account of Section 4980B or any other
section of the Code has been or is expected to be incurred;
(vii) neither the Company nor any of its ERISA Affiliates is or
has ever maintained or been obligated to contribute to a "multiple employer
plan" (as defined in Section 413 of the Code), a "multiemployer plan" (as
defined in Section 3(37) of ERISA) or a "defined benefit pension plan" (as
defined in Section 3(35) of ERISA);
(viii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Employee Plan;
(ix) no benefit payable or which may become payable by the
Company or its ERISA Affiliates pursuant to any Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an excise
tax under Section 4999 of the Code or which would not be deductible by
reason or Section 280G of the Code;
(x) each Employee Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and each
program of benefits for which employee contributions are provided pursuant
to elections made under such Employee Plan meets the requirements of the
Code applicable thereto;
(xi) the Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments for
each Employee Plan into the appropriate trusts or accounts;
(xii) each Employee Plan that allows loans to plan participants
has been operated in accordance with its terms, the plan's written loan
policy and all applicable laws. In addition, all outstanding loans from
such Employee Plans are current as of the Closing Date, and there are no
loans in default; and
(xiii) no individual who has been classified by the Company as
a non-employee (such as an independent contractor, leased employee or
consultant) has or
18
could have a claim against the Company for eligibility to participate in
any Employee Plan, if such individual is later reclassified as an employee
of the Company, which claim has had or could have a Material Adverse Effect
on the Company or the Subsidiaries.
(c) The Company has provided the Parent with copies of all
documents pursuant to which each Employee Plan is maintained and administered,
the two most recent annual reports (including Form 5500 and attachments) and
financial statements therefor, all governmental rulings, determinations, and
opinions (and pending requests therefor), and the most recent valuation of the
present and future obligations under each such plan that provides
post-retirement or post- employment health and life insurance, accident, or
other "welfare-type" benefits.
3.12 Title to Assets, Properties and Rights and Related Matters.
----------------------------------------------------------
Each of the Company and the Subsidiaries have such rights and interests in
the Intellectual Property Rights as provided in Section 3.14 and, except as
specifically set forth in Schedule 3.12, good (and marketable in the case of any
Real Property) title to all other assets, properties and interests in
properties, real or personal, reflected on the Latest Audited Balance Sheet or
acquired after the Latest Audited Balance Sheet Date (except accounts receivable
and notes receivable paid in full and assets sold, used or disposed of in the
ordinary course of business, in each case subsequent to the Latest Audited
Balance Sheet Date), free and clear of all Encumbrances, of any kind or
character, except for those Encumbrances set forth in Schedule 3.12, Permitted
Encumbrances, mortgages or security interests shown on the Latest Audited
Balance Sheet as securing specified liabilities or obligations, and, with
respect to Real Property, (i) minor imperfections of title, if any, none of
which is substantial in amount, materially detracts from the value or impairs
the use of the property subject thereto and (ii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto. Such assets are in good operating condition and repair (normal
wear and tear excepted), are suitable for the uses for which they are used in
the Subject Business, are not subject to any condition which materially
interferes with the economic value or use thereof, and constitute all assets,
properties, interests in properties and rights necessary to permit the Company
and the Subsidiaries to carry on their business after the Closing as generally
conducted by them immediately prior thereto. Except as set forth on Schedule
3.12, with respect to any assets leased by the Company and the Subsidiaries,
such assets are in such condition as to permit surrender thereof by the Company
or the Subsidiaries to the lessors thereunder without any cost or expense for
repair or restoration as if the related leases were terminated upon the Closing
Date in the ordinary course of business. Except as set forth on Schedule 3.12,
all tangible personal property owned by the Company immediately prior to the
Closing is located on the premises of the Company.
3.13 Real Property.
-------------
(a) Schedule 3.13(a) contains a list of all leased real property,
and all commitments to lease or own real property (collectively, the "Real
Property"), as well as all buildings and other structures and material
improvements located on such Real Property and the name of the lessor. The Real
Property constitutes all real properties used or occupied by either the Company
or the Subsidiaries. Neither the Company nor the Subsidiaries own any Real
19
Property. The Company or the Subsidiaries are the owners and holders of all of
the leasehold estates purported to be granted by such lease and each lease is in
full force and effect and constitutes a valid and binding obligation of the
Company or the Subsidiaries. The Company has delivered to the Parent copies of
all leases referred to in Schedule 3.13(a).
(b) With respect to the Real Property, except as set forth in
Schedule 3.13(b):
(i) no portion thereof is subject to any pending condemnation
Proceeding by any public or quasi-public authority and, to the knowledge of
the Company or the Subsidiaries, there is no threatened condemnation
Proceeding with respect thereto;
(ii) with respect to the Real Property, the Company or the
Subsidiaries are the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of the
Company or the Subsidiaries;
(iii) except as set forth on Schedule 3.13(b)(iii), there are
no parties (other than the Company or the Subsidiaries) in possession of
the Real Property;
(iv) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment has
been received by either of the Company or the Shareholders and, to the
knowledge of the Company or the Subsidiaries, there is no threatened
increase in the assessed valuation or special assessment pertaining to any
of the Real Property;
(v) there are no leases or other agreements, written or oral,
to which either of the Company or the Shareholders is a party, granting to
any party or parties (other than the Company) the right of use or occupancy
of any portion of any parcel of Real Property;
(vi) there have been no discussions or correspondence with the
landlord thereof concerning renewal terms for those leases scheduled to
expire within six months of the date of this Agreement; and
(vii) the physical condition of the Real Property is reasonably
sufficient to permit the continued conduct of the Subject Business as
presently conducted subject to the provision of usual and customary
maintenance and repair performed in the ordinary course with respect to
similar properties of like age and construction.
3.14 Intellectual Property.
---------------------
(a) Except as set forth on Schedule 3.14(a), the Company and the
Subsidiaries have the unimpaired right to use, sell, license and dispose of, and
have the right to bring actions for the infringement of, all Intellectual
Property Rights necessary or required for the conduct of the Subject Business as
currently conducted and such rights to use, sell, license, dispose of and bring
actions are sufficient for such conduct of the Subject Business.
20
(b) Except as set forth in Schedule 3.14(b), there are no
royalties, honoraria, fees or other payments payable by the Company or the
Subsidiaries to any Person by reason of the ownership, use, license, sale or
disposition of the Intellectual Property Rights.
(c) Except as set forth in Schedule 3.14(c), no activity, service
or procedure currently conducted by the Company or the Subsidiaries violates or
will violate any Contract of such Person with any third party or infringes any
Intellectual Property Right of any other party.
(d) Except as set forth in Schedule 3.14(d), neither the Company
nor the Subsidiaries have received from any third party in the past five years
any notice, charge, claim or other assertion that the Company or the
Subsidiaries are infringing any Intellectual Property Right of any third party
or committed any acts of unfair competition, and, to the knowledge of the
Company or the Subsidiaries, no such claim is impliedly threatened.
(e) Except as set forth in Schedule 3.14(e), neither the Company
nor the Subsidiaries have sent to any third party in the past five years or
otherwise communicated to another Person any notice, charge, claim or other
assertion of infringement by or misappropriation of any Intellectual Property
Right of the Company or the Subsidiaries by such other Person or any acts of
unfair competition by such other Person, nor is any such infringement,
misappropriation or unfair competition occurring or threatened.
(f) Schedule 3.14(f) contains a true and complete list of all
patents, patent applications, copyright registrations (and applications
therefor) and trademark or service xxxx registrations (and applications
therefor) used in the conduct of the Subject Business as presently conducted
and/or owned by the Company and all material common law trademarks, trade names,
brand names, service marks, logos or other identifiers used in the conduct of
the Subject Businesses as presently conducted.
(g) Except as set forth on Schedule 3.14(g), no Person other than
the Company and the Subsidiaries have been granted any interest in a right to
use all or any portion of the Intellectual Property Rights currently owned by
the Company or the Subsidiaries.
(h) The Parent has been provided with a true and complete copy of
all material Contracts that comprise or are related to the Intellectual Property
Rights used in or required for the conduct of the Subject Business.
3.15 Agreements, No Defaults, Etc.
----------------------------
(a) Except as set forth in Schedule 3.15(a), neither the Company
nor the Subsidiaries are a party to any:
(i) Contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis;
(ii) Contract with any Affiliate;
21
(iii) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any asset or
group of assets of the Company or the Subsidiaries involving payments in
excess of $50,000 in the aggregate;
(iv) Contract relating to any guarantee of any obligation for
borrowed money or otherwise involving payments in excess of $50,000 in the
aggregate;
(v) Contract with respect to the lending or investing of
funds;
(vi) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights involving
payments in excess of $50,000 in the aggregate;
(vii) Contract or group of related Contracts with the same
party for the purchase or sale of products or services involving payments
in excess of $50,000 in the aggregate;
(viii) Contract that prohibits it or the Subsidiaries from
freely engaging in business anywhere in the world;
(ix) other Contract that is not terminable by either party
without penalty upon not more than 30 days' advance notice and involves
aggregate consideration in excess of $50,000; or
(x) Contract that involves aggregate consideration in excess
of $50,000.
(b) Except as set forth on Schedule 3.15(b)(i), there are no
vehicles, boats, aircraft, apartments or other residential or recreational
properties or facilities leased, owned or operated by the Company or the
Subsidiaries for executive, administrative or sales purposes or any social club
memberships owned or paid for by the Company or the Subsidiaries. Except as set
forth in Schedule 3.15(b)(ii), each of the Company and the Subsidiaries have
performed all the obligations required to be performed by it to date and is not
in receipt of a written notice that it is in default or alleged to be in default
in any respect under any Contract described in Section 3.15(a), and there exists
no event, condition or occurrence which, after notice or lapse of time, or both,
would constitute such a default by the Company or the Subsidiaries of any of the
foregoing. The Company has furnished to the Parent true and complete copies of
all documents listed in Schedule 3.15(a).
3.16 Compliance with Laws.
--------------------
Except as set forth on Schedule 3.16(a) hereto, the businesses of the
Company and the Subsidiaries have not been and are not being conducted in
violation of any applicable Law, including all Laws relating to wages, hours,
Employee Plans, equal employment opportunity, harassment, immigration, workers'
compensation, Environmental and Safety Requirements and the payment of social
security and other Taxes, except when such failure would not have a Material
Adverse Effect on the Company and the Subsidiaries, taken as a whole. Except as
set forth in Schedule 3.16(b) and except for routine inspections and audits in
the ordinary course of
22
business, no investigation or review by any Governmental Entity with respect to
the Company or the Subsidiaries is pending or to the knowledge of the Company or
the Subsidiaries threatened, nor has any Governmental Entity notified the
Company or the Subsidiaries of its intention to conduct the same. Schedule
3.16(c) sets forth a list of all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities (the "Permits") held by the
Company and the Subsidiaries which are material to the Company or the
Subsidiaries, including without limitation, all necessary state, county licenses
and other Permits necessary for the conduct of their respective businesses.
Except as set forth on Schedule 3.16(d), the Company or the Subsidiaries hold
all Permits necessary for the lawful conduct of their respective businesses as
presently conducted and the Company and the Subsidiaries are in compliance with
the terms of the Permits except where the failure to hold any such Permit would
not have a Material Adverse Effect on the Company or the Subsidiaries, taken as
a whole. To the knowledge of the Company and the Subsidiaries, there is no
proposed change in any applicable Law which would require the Company or the
Subsidiaries to obtain any Permits not set forth in Schedule 3.16(c) in order to
conduct their respective businesses as presently conducted. None of such Permits
shall be adversely affected as a result of the Company's execution and delivery
of, or the performance of its obligations under this Agreement, any Related
Document to which it is a party, or the consummation of the transactions
contemplated hereby or thereby. Neither the Shareholders nor the Company, after
due inquiry, are aware of any proposed Law which could prohibit or restrict the
Company or the Subsidiaries from, or otherwise affect the Company in, conducting
its business in any jurisdiction in which it is now conducting business or which
it proposes to conduct business.
3.17 Litigation, Etc.
---------------
Except as set forth in Schedule 3.17, there are no (i) Proceedings pending
or to the knowledge of the Company or the Subsidiaries threatened against the
Company or the Subsidiaries, whether at law or in equity, or before or by any
Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or
arbitrator against the Company or the Subsidiaries. The Company has delivered to
the Parent all documents and correspondence relating to such matters referred to
in Schedule 3.17, excluding documents and correspondence that are subject to
professional privilege.
3.18 Insurance.
---------
Schedule 3.18 lists and briefly describes each insurance policy maintained
by the Company and the Subsidiaries with respect to their properties, assets and
business. The Company and the Subsidiaries have maintained such insurance
coverage at all times during the course of the operation of the Subject
Business. The Company and the Subsidiaries are insured against all risks usually
insured against by Persons conducting similar businesses and operating similar
properties in the localities where the Subject Business is conducted and where
the properties and operations of the Company and the Subsidiaries are located.
The amounts of coverage under such policies of insurance are adequate to cover
the reasonably foreseeable or customary risks in the Subject Business and all
litigation, claims or other Proceedings with respect to the Subject Business.
All of such insurance policies are in full force and effect, and neither the
Company nor the Subsidiaries are in default in any respect with respect to its
23
obligations under any of such insurance policies and has not received any
notification of cancellation of any of such insurance policies and has no claim
outstanding which could be expected to cause an increase in the insurance rates
thereunder. No facts or circumstances exist that would relieve the insurer under
any such policy of its obligation to satisfy in full any claim of the Company or
the Subsidiaries thereunder. Neither the Company nor the Subsidiaries have
received any notice that (i) any of such policies has been or will be canceled
or terminated or will not be renewed on substantially the same terms as are now
in effect or (ii) the premium on any of such policies will be increased on the
renewal thereof. The Company has delivered to the Parent copies of all such
insurance policies. In the event that the Company changes or replaces any of its
insurance carriers or policies prior to the Closing, the coverages obtained
under such new policies shall not be less beneficial to the Company and the
Subsidiaries than those policies reviewed by the Parent in connection with its
due diligence investigation in connection with the transactions contemplated
hereby and under the Related Documents.
3.19 Labor Relations; Employees.
--------------------------
(a) Except as set forth in Schedule 3.19(a): (i) neither the
Company nor the Subsidiaries are delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other compensation for any
services performed by them to date or amounts required to be reimbursed to such
employees, (ii) there is no unfair labor practice complaint against the Company
or the Subsidiaries pending before the National Labor Relations Board or any
other Governmental Entity, (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the knowledge of the Company or the
Subsidiaries, threatened against or involving the Company or the Subsidiaries,
(iv) no labor union currently represents the employees of the Company or the
Subsidiaries and no labor union has taken any action within the last 10 years
with respect to organizing the employees of the Company or the Subsidiaries, (v)
no key employee has informed the Company that such employee will or may
terminate his or her employment or engagement with the Company, and (vi) all
material amounts due for all salary, wages, bonuses, commissions, vacation with
pay, pension benefits or other employee benefits have been accrued by the
Company and the Subsidiaries;
(b) Schedule 3.19(b) contains a correct and complete list of each
employee, independent contractor and consultant earning an annual base salary in
excess of $80,000 of the Company and the Subsidiaries, whether actively at work
or not, their salaries, wage rates, commissions and consulting fees, bonus
arrangements, benefits, positions, ages, status as full-time or part-time
employees and length of service. Except as set forth on Schedule 3.19(b), no
employee of the Company or the Subsidiaries has any agreement as to length of
notice or severance payment required to terminate his or her employment, other
than such as results by Law from the employment of an employee without an
agreement as to notice or severance.
(c) Except as set forth on Schedule 3.19(c), the Company's
execution and delivery of, and performance of its obligations under, this
Agreement and the Related Documents to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, will not (i) result in any
payment (including, without limitation, severance, unemployment compensation,
"golden parachute", bonus or otherwise) becoming due from the Company or the
Subsidiaries to any director, officer or employee of such Person, (ii) increase
any such benefits
24
otherwise payable, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits; and
(d) The Company and its ERISA Affiliates have complied in all
material respects with all Laws relating to the hiring and retention of all
employees, leased employees and independent contractors relating to wages,
hours, Employee Plans, equal opportunity, collective bargaining and the payment
of social security and other Taxes except where the failure to so comply has not
had and will not have a Material Adverse Effect on the Company and its
Subsidiaries.
3.20 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 3.20(a) neither the Company,
the Subsidiaries, nor any of their (or their respective predecessors') past
owned or leased real properties or operations nor any properties currently
proposed to be owned or leased in the future by the Company or the Subsidiaries
(collectively, the "Covered Properties"), are subject to or the subject of, any
Proceeding, Order, settlement, or other Contract arising under Environmental and
Safety Requirements, nor have any investigations been commenced or are any
Proceedings threatened against the Company or the Subsidiaries under the
Environmental and Safety Requirements with regard to the Subject Business or any
such Covered Properties or operations.
(b) Except as set forth in Schedule 3.20(b), no Person has received
any written notice, report or other information regarding any actual or alleged
violation of any Environmental and Safety Requirement, or any Liabilities or
potential Liabilities, including any actual or asserted investigatory, remedial
or corrective obligations, relating to the Subject Business or the Covered
Properties and arising under any Environmental and Safety Requirement.
(c) Except as set forth in Schedule 3.20(c) and except where any of
the following has not had and will not have a Material Adverse Effect on the
Company and its Subsidiaries, none of the following exists, nor has ever
existed, at any of the Covered Properties: (i) underground storage tanks, (ii)
asbestos-containing material in any form or condition, (iii) materials or
equipment containing polychlorinated biphenyls, (iv) landfills, surface
impoundment's or disposal areas or (v) high alumina cement.
(d) Neither the Company nor the Subsidiaries have treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled or
released any substance, or owned or operated any Covered Properties (and no such
Covered Properties are contaminated by any such substance) in a manner that has
given or could give rise to Liabilities pursuant to CERCLA, SWDA or any other
Environmental and Safety Requirement, including any Liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damage or attorney fees, or any investigative, corrective or remedial
obligations.
(e) No facts, events or conditions relating to the past or present
Covered Properties or operations of the Company and the Subsidiaries or the
Subject Business will prevent compliance by the Subject Business with any
Environmental and Safety Requirement, give rise to any actual or asserted
investigatory, remedial or corrective obligations pursuant to
25
any Environmental and Safety Requirement, or give rise to any other Liabilities
pursuant to any Environmental and Safety Requirement, including, without
limitation, any relating to on-site or off-site releases or threatened releases
of materials, substances or wastes, personal injury, property damage or natural
resources damage, except where such events or conditions have not had and will
not have a Material Adverse Effect on the Company and the Subsidiaries.
3.21 Change in Control.
-----------------
Except (i) as set forth in Schedule 3.21, or (ii) as would not result in a
Material Adverse Effect on the Company or the Subsidiaries, neither the Company
nor the Subsidiaries are a party to any contract which terminates, gives rise to
a right of termination, requires any payment, gives rise to any Liability,
accelerates the vesting of any rights or obligations or the maturity of any
indebtedness or otherwise adversely affects the Company or the Subsidiaries as a
result of a "change in control" or "potential change in control" of the Company.
3.22 State Takeover Statutes.
-----------------------
The Board of Directors of the Company has approved this Agreement, the
Related Documents and the transactions contemplated hereby and thereby
(including the Merger) and such approval is sufficient to render inapplicable to
such agreements and transactions the provisions of any "fair price,"
"moratorium," "control share," "interested Shareholders," "affiliated
transaction" or other anti-takeover statute or regulation and any applicable
anti-takeover or other restrictive provisions of the Company's articles or
certificate of incorporation, bylaws or other governing documents.
3.23 Conflicts of Interest.
---------------------
None of the Company, the Subsidiaries or any officer, employee, agent or
other Person acting on behalf of the Company or the Subsidiaries has, directly
or indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any Governmental Entity or other Person who was or is in a
position to help or hinder the business of the Company or the Subsidiaries (or
assist in connection with any actual or proposed transaction) that (i) might
subject the Company or the Subsidiaries to any material damage or material
penalty in any Proceeding or, investigation, (ii) if not given in the past,
could have resulted in a Material Adverse Effect on the Company or the
Subsidiaries, or (iii) if not continued in the future, could result in a
Material Adverse Change on the Company or the Subsidiaries.
3.24 Brokers.
-------
Except as set forth on Schedule 3.24, none of the Company, the Subsidiaries
or any of their respective officers, directors, Shareholders, employees or
Affiliates have employed any broker or finder or incurred any Liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
26
3.25 Related Transactions.
--------------------
Except as set forth in Schedule 3.25, and except for compensation to
regular employees of the Company or the Subsidiaries, no current or former
Affiliate of the Company, or the Subsidiaries or any associate of such Person
(as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934,
as amended) thereof, is now, or has been during the last five fiscal years, (i)
a party to any transaction or Contract with the Company or the Subsidiaries, or
(ii) the direct or indirect owner of an interest in any Person which is a
present or potential competitor, supplier or customer of the Company or the
Subsidiaries (other than non-affiliated holdings in publicly-held companies),
nor does any such Person receive income from any source other than the Company
or the Subsidiaries which should properly accrue to the Company or the
Subsidiaries. Except as set forth on Schedule 3.25, neither the Company nor the
Subsidiaries are a guarantor or otherwise liable for any actual or potential
Liability or obligation, whether direct or indirect, of any of its Affiliates.
Except as set forth on Schedule 3.25, there are no intercompany loans or open
account balances between the Company and the Subsidiaries.
3.26 Accounts and Notes Receivable.
-----------------------------
Except as set forth in Schedule 3.26(a), all the accounts receivable and
notes receivable which are not outstanding in excess of 90 days owing to the
Company or the Subsidiaries as of the date hereof constitute (in all material
respects), and as of the Closing Date will constitute (in all material
respects), legal, valid and enforceable, claims arising from bona fide
transactions in the ordinary course of business, subject to bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally, and there are no asserted claims, refusals to pay
or other rights of set-off against any thereof other than in the ordinary course
of business. Schedule 3.26(b) sets forth a complete and accurate aging of all
accounts receivable as of the Latest Balance Sheet Date.
3.27 Accounts and Notes Payable.
--------------------------
Except as set forth on Schedule 3.27, all accounts payable and notes
payable by the Company or the Subsidiaries to third parties as of the Latest
Balance Sheet Date arose, and as of the Closing will have arisen, in the
ordinary course of business, and there is no such account payable or note
payable in excess of $50,000 in the aggregate delinquent in its payment other
than accounts and notes payable being disputed in good faith.
3.28 Regulatory Compliance.
---------------------
(a) Except as set forth on Schedule 3.28(a), neither the Company
nor the Subsidiaries have become aware or otherwise been notified of (and, is
not responsible for, subject to and does not now otherwise have) any actual or
potential liability or obligation, whether direct or indirect, arising out of,
any injury to Persons or property as a result of the Subject Business which has
had or could have a Material Adverse Effect on the Company and the Subsidiaries.
(b) Except as set forth on Schedule 3.28(b), neither the Company
nor the Subsidiaries have been responsible for, subject to, become aware or
otherwise been notified of,
27
nor has any Liability (and to the best knowledge of the Company and the
Subsidiaries there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
it giving rise to any Liability) arising out of any injury to individuals,
animals or property as a result of or in connection with any of the services
performed by either the Company or the Subsidiaries which could have a Material
Adverse Effect on the Company and the Subsidiaries.
3.29 Customer Relations.
------------------
Except as set forth on Schedule 3.29, the Company has no notice that any
customer, agent, representative or supplier of the Company or the Subsidiaries
intends to discontinue, diminish or change its relationship with the Company.
3.30 Bank Accounts; Power of Attorney.
--------------------------------
Schedule 3.30 sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of the Company and the Subsidiaries and all Persons who
are signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company or the Subsidiaries and a
summary of the terms thereof (excluding ministerial powers of attorney granted
to representatives of the Company or the Subsidiaries which are terminable at
will).
3.31 Certain Additional Regulatory Matters.
-------------------------------------
(a) Except where such activities have not had and will not have a
Material Adverse Effect on the Company and the Subsidiaries, neither the
Company, the Subsidiaries, nor any officer, director or managing employee of
such Person (within the meaning of 42 U.S.C. (section 1320a-5(b)) has engaged in
any activities which constitute violations of, or are cause for imposition of
civil penalties upon the Company or the Subsidiaries or mandatory or permissive
exclusion of such Persons from Medicare or Medicaid, under sections 1320a-7,
1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code, the federal
Civilian Health and Medical Plan of the Uniformed Services statute ("CHAMPUS"),
any other state or federal health care program, or the regulations promulgated
pursuant to such statutes or regulations or related state or local statutes or
which constitute violations of or deficiencies under the standards of any
private accrediting organization from which the Company or the Subsidiaries is
accredited or seeks accreditation, including the following activities:
(i) making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment;
(ii) making or causing to be made any false statement or
representation of a material fact for use in determining rights to any
benefit or payment;
(iii) presenting or causing to be presented a claim for
reimbursement under CHAMPUS, Medicare, Medicaid or any other State Health
Care Program or Federal Health Care Program (each as defined below) that is
(A) for an item or service that the person presenting or causing to be
presented knows or should know was not provided as
28
claimed, or (B) for an item or service where the person presenting knows or
should know that the claim is false or fraudulent;
(iv) offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (A) in return for
referring, or to induce the referral of, an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by CHAMPUS, Medicare or Medicaid,
or any other State Health Care Program or any Federal Health Care Program,
or (B) in return for, or to induce, the purchase, lease, or order, or the
arranging for or recommending of the purchase, lease, or order, of any
good, facility, service, or item for which payment may be made in whole or
in part by CHAMPUS, Medicare or Medicaid or any other State Health Care
Program or any Federal Health Care Program;
(v) making or causing to be made or inducing or seeking to
induce the making of any false statement or representation (or omitting to
state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading) of a material fact with
respect to (A) the conditions or operations of a facility in order that the
facility may qualify for CHAMPUS, Medicare, Medicaid or any other State
Health Care Program certification or any Federal Health Care Program
certification, or (B) information required to be provided under section
1124(A) of the Social Security Act ("SSA") (42 U.S.C. section 1320a-3); or
(vi) failing substantially to provide medically necessary
items or services, if the failure adversely affects individuals covered by
Medicare or Medicaid.
(b) Each of the Company and the Subsidiaries has a Medicaid number
and a participating provider agreement in each state, as applicable, to which it
bills directly to such states' Medicaid agency for services provided by it.
(c) Except as set forth on Schedule 3.31(c), each of the Company
and the Subsidiaries is accredited by the Joint Commission on Accreditation of
Healthcare Organizations, or any successor thereof.
3.32 Medicare/Medicaid Participation.
-------------------------------
Neither the Company, the Subsidiaries, any officer, director, or managing
employee (as defined in SSA Section 1126(b) or any regulations promulgated
thereunder) nor any member of Camelot Community Care: (x) have had a civil
monetary penalty assessed against him, her or it under Section 1128A of the SSA
or any regulations promulgated thereunder; (y) have been excluded from
participation under the Medicare program or a state health care program as
defined in SSA Section 1128(h) or any regulations promulgated thereunder ("State
Health Care Program") or a federal health care program as defined in SSA Section
1128B(f) ("Federal Health Care Program"); or (z) have been convicted (as that
term is defined in 42 C.F.R. Section 1001.2) of any of the following categories
of offenses as described in SSA Sections 1128(a) and (b)(1), (2), (3) or any
regulations promulgated thereunder:
29
(i) criminal offenses relating to the delivery of an item or
service under Medicare or any State Health Care Program or any Federal
Health Care Program;
(ii) criminal offenses under federal or state law relating to
patient neglect or abuse in connection with the delivery of a health care
item or service;
(iii) criminal offenses under federal or state law relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by
or financed in whole or in part by any federal, state or local governmental
agency;
(iv) federal or state laws relating to the interference with
or obstruction of any investigation into any criminal offense; or
(v) criminal offenses under federal or state law relating to
the unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
3.33 Camelot Community Care.
----------------------
The Board of Directors of the Company has approved the Management
Agreement, dated as of July 1, 2000 (the "Management Agreement"), among the
Company, Camelot Care and Camelot Community Care, Inc., a Florida not for profit
corporation ("Camelot Community Care"). The Management Agreement is in full
force and effect with no defaults existing thereunder. Except as set forth in
Schedule 3.33, each of the parties to the Management Agreement has performed in
all material respects all obligations required to be performed by it under the
Management Agreement. Other than any circumstances and conditions, if any,
determined during the Parent's due diligence review of the Management Agreement
and disclosed to the Company or the Shareholders' Representative, there is no
event, circumstance, or condition that exists or may exist which could adversely
effect or jeopardize the Management Agreement, Camelot Community Care's ability
to perform its obligations thereunder or the Company's rights to obtain the full
benefits thereof.
3.34 RTC Liabilities.
----------------
Schedule 3.34 sets forth a complete and correct list of the RTC
Liabilities, including the nature and amount thereof, that were not transferred
to the RTC Purchasers in connection with the Asset Disposition.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants severally (as to himself
or herself and not as to any other Shareholder) to the Parent and the Sub as
follows:
30
4.1 Title to Shares.
---------------
Such Shareholder is the lawful owner, of record and beneficially, of the
Shares being sold, transferred, conveyed, assigned, exchanged and delivered by
him or her hereunder pursuant to the Merger and has valid title to such shares,
free and clear of any Encumbrances whatsoever and with no restrictions on the
voting rights and other incidents of record and beneficial ownership pertaining
thereto. Except as set forth on Schedule 4.1 there are no agreements between
such Shareholder and any other Person with respect to voting of, or any other
matters pertaining to, the capital stock of the Company except for the Related
Documents.
4.2 Authority.
---------
Such Shareholder has full and absolute legal right, capacity, power and
authority to enter into this Agreement and the Related Documents to which such
Shareholder is a party, and this Agreement is, and the Related Documents to
which such Shareholder is a party, when executed and delivered by such
Shareholder as contemplated hereby, will be, the valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with their
respective terms, except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors rights generally or by general principles of equity.
4.3 Noncontravention.
----------------
Neither the execution, delivery and performance of this Agreement and the
Related Documents to which he or she is a party nor the consummation of the
transactions contemplated hereby or thereby nor compliance by such Shareholder
with any of the provisions hereof or thereof will (i) conflict with, or result
in any violations of, or cause a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligations contained in or the loss of any
benefit under any term, condition or provision of any contract to which such
Shareholder is a party, or by which such Shareholder or any of his or her
properties may be bound or (ii) violate any Law applicable to such Shareholder
or any of his or her properties.
4.4 Consents.
--------
Except as specified in Schedule 4.4, no Permit, Order, authorization,
consent or approval of or by, or any notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by such Shareholder of this Agreement and the Related Documents
to which he or she is a party or the consummation by such Shareholder of the
transactions contemplated hereby or thereby.
4.5 Broker's Fees.
-------------
Except as set forth on Schedule 4.5, there is no investment banker, broker,
finder or other intermediary which has been retained by, or is authorized to act
on behalf of, such Shareholder who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
31
4.6 Tax Matters.
-----------
Such Shareholder is not a foreign Person within the meaning of
section 1.1445-2(b) of the rules and regulations promulgated under Section 1445
of the Code, and the Sub has been furnished pursuant to Section 1445 of the Code
with a true and accurate certificate of such Shareholder so stating such that
the Sub is not requested to withhold any of the Merger Consideration.
4.7 Restricted Securities.
---------------------
Each of the Shareholders acknowledges that the Parent Shares and the Notes
have not been registered under the Securities Act and, the Parent is not nor
will it be under any obligation to register the Parent Shares and the Notes
under the Securities Act, except as set forth in the Registration Rights
Agreement.
4.8 Acquired for Investment.
-----------------------
Each of the Shareholders acknowledges that the Parent Shares and the Notes
will be for the recipient's own account for investment and not for, with a view
to, or in connection with any resale or distribution thereof that would be in
violation of the registration requirements of the securities laws of the United
States of America or any state thereof.
4.9 Accredited Investor; Knowledgeable Investor.
-------------------------------------------
(a) Each of the Shareholders is an "accredited investor" within the
meaning of Rule 501 promulgated under the Securities Act.
(b) Each of the Shareholders, by reason of such Person's business
and financial experience, and the business and financial experience of those
persons retained by such Person to advise such Person in connection with the
transactions contemplated by this Agreement, has such knowledge, sophistication
and experience in business and financial matters as to be capable of evaluating
the merits and risks of the prospective investment, and is (and will be) able to
bear the economic risk of such investment and is able to afford a complete loss
of such investment.
4.10 Information about the Parent.
----------------------------
Each of the Shareholders acknowledges that he or she has been given the
opportunity to ask questions of and receive answers from the Parent concerning
the Parent, the Parent's financial condition, business, prospects and risk
factors, the Parent Shares and the Notes. Each of the Shareholders further
represents and warrants to the Parent and the Sub that such Person has been
furnished with all information such Person deems necessary or desirable to
evaluate the merits and risks of the acquisition of the Parent Shares and the
Notes and that the Parent has made available to such Person's agents all
documents and information relating to an investment in the Parent Shares and the
Notes requested by or on behalf of such Person. In evaluating the suitability of
an investment in the Parent Shares and the Notes, such Person has not relied
upon any other representations or other information (other than as set forth
herein, the schedules and exhibits hereto and the Related Documents), whether
oral or written, made by or on behalf of the Parent and the Sub. Each such
Person acknowledges that certain information provided by the
32
Parent and the Sub to such parties contains forward-looking information,
including financial projections, which are subject to numerous risks and
uncertainties, and that there are no representations by the Parent and the Sub
or other assurances that such forward-looking information will occur.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Shareholders as follows:
5.1 Organization; Good Standing; Qualification and Power.
----------------------------------------------------
Each of the Parent and the Parent Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of the state or
country of its jurisdiction of incorporation, has the corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, to enter into this Agreement and the Related Documents,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, and is duly qualified or licensed
to do business and, if applicable, is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification or licensure necessary, except where the failure to be
so qualified or licensed or in good standing would not have a Material Adverse
Effect on the Parent and its Parent Subsidiaries, taken as a whole. Prior to the
Closing, the Parent has delivered to the Company copies of its certificate of
incorporation and bylaws as amended to the date hereof.
5.2 Equity Investments.
------------------
Except as set forth in Schedule 5.2, the Parent does not currently have any
subsidiaries, nor does it currently own any capital stock or other interest,
directly or indirectly, in any Person.
5.3 Capital Stock.
-------------
The authorized capital stock of the Parent immediately prior to the
Effective Time consists of 35,370,372 shares of capital stock, consisting of (a)
25,185,186 shares of common stock, $0.001 par value per share (the "Parent
Common Stock"), (i) 22,592,593 shares of which are designated Class A Common
Stock (the "Class A Common Stock"), of which, as of immediately prior to the
Effective Time, 4,880,750 shares are issued and outstanding, with such shares of
Class A Common Stock being owned of record by the shareholders in the amounts
set forth in Schedule 5.3, and (ii) 2,592,593 shares of which are designated
Class B Common Stock (the "Class B Common Stock"), of which, as of immediately
prior to the Effective Time, no shares of Class B Common Stock are issued and
outstanding, and (b) 10,185,186 shares of preferred stock, $0.001 par value per
share (the "Parent Preferred Stock"), (i) 3,750,000 shares of which are
designated Series A Preferred Stock (the "Series A Preferred Stock"), of which,
as of immediately prior to the Effective Time, 3,750,000 shares are issued and
outstanding, with such shares of Series A Preferred Stock being owned of record
by the shareholders in the amounts set forth on Schedule 5.3, (ii) 1,250,000
shares of which are designated Series B Preferred Stock
33
(the "Series B Preferred Stock"), of which, as of immediately prior to the
Effective Time, 662,500 shares are issued and outstanding, with such shares of
Series B Preferred Stock being owned of record by the shareholders in the
amounts set forth on Schedule 5.3, (iii) 2,592,593 shares of which are
designated Series C Preferred Stock (the "Series C Preferred Stock"), of which,
as of immediately prior to the Effective Time, no shares of Series C Preferred
Stock are issued and outstanding, and (iv) 2,592,593 shares of which are
designated Series D Preferred Stock (the "Series D Preferred Stock"), of which,
as of immediately prior to the Effective Time, 962,964 shares are issued and
outstanding, with such shares of Series D Preferred Stock being owned of record
by the shareholders in the amounts set forth on Schedule 5.3. All of such shares
are validly issued, fully paid and non-assessable and have been issued in
compliance with all applicable Laws including, without limitation, applicable
securities Laws. Except as set forth in Schedule 5.3, there are no securities of
the Parent presently outstanding, and on the Closing Date there will not be any
outstanding securities of the Parent, which are convertible into, exchangeable
for, or carrying the right to acquire, equity securities of the Parent, or
subscriptions, warrants, options, calls, puts, convertible securities,
registration or other rights, arrangements or commitments obligating the Parent
to issue, sell, register, purchase or redeem any of its equity securities or any
ownership interest or rights therein. Except as set forth in Schedule 5.3 and
the Shareholders Agreement, there are no voting trusts or other agreements or
understandings to which the Parent is bound with respect to the voting of the
Parent's capital stock. There are no stock appreciation rights, phantom stock
rights or similar rights or arrangements outstanding of the Parent.
Notwithstanding the foregoing, no issuance or sale of securities permitted by
Section 6.11. shall result in a breach of this Section 5.3 and Schedule 5.3
shall be deemed to be automatically amended to reflect any such issuance or sale
of securities upon the consummation thereof. The Parent Shares, when issued
pursuant to the terms hereof, will be validly issued, fully-paid and
nonassessable.
5.4 Authority; Noncontravention; Consents.
-------------------------------------
(a) The execution, delivery and performance of this Agreement and
the Related Documents to be executed by the Parent and the Sub and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary action on the part of the Parent and the
Sub; and this Agreement has been, and the Related Documents to be executed by
the Parent and the Sub, when executed and delivered by the Parent and the Sub
will be, duly and validly executed and delivered by the Parent and the Sub and
this Agreement is, and the Related Documents to be executed by the Parent and
the Sub, when executed and delivered by the Parent and the Sub will be, the
valid and binding obligations of the Parent and the Sub, enforceable against the
Parent and the Sub in accordance with their respective terms, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights generally or
by general principles of equity.
(b) Except as set forth on Schedule 5.4(b), neither the execution,
delivery and performance of this Agreement and the Related Documents to be
executed by the Parent and the Sub, nor the consummation by the Parent or the
Parent Subsidiaries of the transactions contemplated hereby or thereby will (i)
conflict with, or result in any violation of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of an obligation contained
in or the loss of
34
any benefit under, or result in the creation of any Encumbrance upon any of the
properties or assets of the Parent or the Parent Subsidiaries under any term,
condition or provision of (x) the articles or certificate of incorporation,
bylaws or other organizational documents of the Parent or any of the Parent
Subsidiaries or (y) any Contract to which the Parent or the Parent Subsidiaries
is a party or by which its properties or assets are bound (except where, solely
in the case of clause (y), such conflict, violation, default, right, loss or
Encumbrance would, singly or in the aggregate, not have a Material Adverse
Effect on the Parent and the Parent Subsidiaries, taken as a whole), (ii) result
in any investigatory, remedial or reporting obligation under any Environmental
and Safety Requirement, or (iii) violate any Laws applicable to the Parent or
the Parent Subsidiaries or any of their respective properties.
(c) Except as set forth on Schedule 5.4(c), no consent, approval,
Order or authorization of, registration, declaration or filing with, or
notification to any Governmental Entity or any other third party is required in
connection with the execution, delivery and performance by the Parent or the
Parent Subsidiaries of this Agreement or the Related Documents or the
consummation of the transactions contemplated hereby or thereby, except where
the failure to obtain such consent, approval, Order or authorization, or make
such registration, declaration, filing or notification, would not, singly or in
the aggregate, have a Material Adverse Effect on the Parent and the Parent
Subsidiaries, taken as a whole.
5.5 Financial Statements.
---------------------
(a) The Parent has delivered to the Company (i) the audited
consolidated balance sheets of the Parent and the Parent Subsidiaries as of June
30, 1999, 2000 and 2001 and the related audited statements of income,
shareholders equity and cash flows for the fiscal years then ended, together
with the report thereon of Ernst & Young LLP and (ii) the unaudited consolidated
balance sheet of the Parent as of September 30, 2001, (the "Latest Parent
Balance Sheet" and such date being the "Latest Parent Balance Sheet Date"), and
the related statements of income, shareholders equity and cash flows for the
fiscal period then ended (the "Parent Unaudited 2001 Financial Statements").
(b) The financial statements referenced in this Section 5.5 shall
be referred to in this Agreement as the "Parent Financial Statements". The
Parent Financial Statements (i) are, or shall be, in accordance with the Books
and Records of the Parent, (ii) fairly present, in all material respects, the
consolidated financial condition of the Parent and the Parent Subsidiaries as at
the respective dates indicated and the statements of income, shareholders'
equity and cash flows of the Parent and the Parent Subsidiaries for the
respective periods indicated, except that the Parent Unaudited 2001 Financial
Statements are subject to normal year-end adjustments and the addition of
footnotes and (iii) have been prepared in accordance with GAAP.
5.6 Absence of Changes.
------------------
Except as set forth on Schedule 5.6 and except for changes in general
economic conditions and general changes in the industry in which the Parent and
the Parent Subsidiaries conduct business, since the Latest Parent Balance Sheet
Date, there has not been any Material Adverse Change affecting the Parent or the
Parent Subsidiaries and no event has occurred or circumstance exists which may
result in such a Material Adverse Change.
35
5.7 Title to Assets, Properties and Rights and Related Matters.
----------------------------------------------------------
Except as set forth on Schedule 5.7, each of the Parent and the Parent
Subsidiaries have good (and marketable in the case of any Real Property) title
to all assets, properties and interests in properties, real or personal,
reflected on the Latest Parent Balance Sheet or acquired after the Latest Parent
Balance Sheet Date (except accounts receivable and notes receivable paid in full
subsequent to the Latest Parent Balance Sheet Date), free and clear of all
Encumbrances, of any kind or character, except for Permitted Encumbrances,
mortgages or security interests shown on the Latest Parent Balance Sheet as
securing specified liabilities or obligations, and, with respect to Real
Property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto and (ii) zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
5.8 Agreements, No Defaults, Etc.
----------------------------
Except as set forth in Schedule 5.8, each of the Parent and the Parent
Subsidiaries have performed all the obligations required to be performed by it
to date and is not in receipt of a written notice that it is in default or
alleged to be in default in any respect under any Contract involving payments in
excess of $50,000 in the aggregate, and there exists no event, condition or
occurrence which, after notice or lapse of time, or both, would constitute such
a default by the Parent and the Parent Subsidiaries of any of the foregoing.
5.9 Compliance with Laws.
--------------------
Except as set forth on Schedule 5.9 hereto, the businesses of the Parent
and the Parent Subsidiaries have not been and are not being conducted in
violation of any applicable Law, including all Laws relating to wages, hours,
equal employment opportunity, harassment, immigration, workers' compensation,
Environmental and Safety Requirements and the payment of social security except
when such failure would not have a Material Adverse Effect on the Parent and the
Parent Subsidiaries, taken as a whole. Except as set forth in Schedule 5.9, and
except for routine inspections and audits in the ordinary course of business, no
investigation or review by any Governmental Entity with respect to the Parent or
the Parent Subsidiaries is pending or to the knowledge of the Parent or the
Parent Subsidiaries threatened, nor has any Governmental Entity notified the
Parent or the Parent Subsidiaries of its intention to conduct the same. Except
as set forth on Schedule 5.9, the Parent and the Parent Subsidiaries hold all
Permits necessary for the lawful conduct of their respective businesses as
presently conducted and the Parent and the Parent Subsidiaries are in compliance
with the terms of the Permits except where the failure to hold any such Permit
would not have a Material Adverse Effect on the Parent and the Parent
Subsidiaries, taken as a whole. The Parent is accredited by the Joint Commission
on Accreditation of Healthcare Organizations, or any successor thereof, in such
jurisdictions where the Parent is required to be so accredited.
5.10 Litigation, Etc.
---------------
Except as set forth in Schedule 5.10, there are no (i) Proceedings pending
or to the knowledge of the Parent or the Parent
36
Subsidiaries threatened against the Parent or the Parent Subsidiaries, whether
at law or in equity, or before or by any Governmental Entity or arbitrator or
(ii) Orders of any Governmental Entity or arbitrator against the Parent or the
Parent Subsidiaries. Prior to the Closing, the Parent has delivered to the
Company all documents and correspondence relating to such matters referred to in
Schedule 5.10 excluding documents and correspondence which may be subject to
professional privilege.
5.11 Brokers.
-------
There is no investment banker, broker, finder or other intermediary which
has been retained by, or is authorized to act on behalf of, the Parent who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement for which any Shareholder would have Liability.
5.12 Financing.
---------
Attached hereto as Exhibit D is a copy of the commitment letter dated May
29, 2001 provided by Petra Mezzanine Fund to the Parent.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL AGREEMENTS
6.1 Affirmative Covenants.
---------------------
(a) From and after the date of this Agreement until the Closing or
the earlier termination of this Agreement pursuant to Article IX (the
"Transition Period"), except as otherwise consented to in writing by the Parent
or otherwise expressly contemplated by this Agreement, the Shareholders shall
cause the Company and each of the Subsidiaries to:
(i) conduct its operations according to the ordinary and
usual course of business substantially consistent with past custom and
practice (including the collection of receivables, the payment of payables
and the maintenance of supplies) and use commercially reasonable efforts to
preserve intact its business organization, keep available the services of
officers and employees, and maintain satisfactory relationships with
suppliers, customers and others having business relationships with it;
(ii) maintain its assets in customary repair, order and
condition, maintain the same levels of insurance as that in effect on the
Latest Audited Balance Sheet Date, replace in accordance with past practice
inoperable, worn out or obsolete assets with modern assets of comparable
quality and, in the event of a casualty, loss or damage to any of such
assets or properties prior to the Closing Date for which the Company or the
Subsidiaries are insured or the condemnation of any assets or properties,
either repair or replace such assets or property in a manner agreed to by
the Parent or, if the Parent shall direct, retain such insurance or
condemnation proceeds;
37
(iii) cooperate fully, as and to the extent reasonably
requested by the Parent, to preserve the status of Camelot Community Care
as an entity exempt from Federal income taxation within the meaning of Code
section 501(c)(3) or to treat the gross receipts earned from the operation
of Camelot Community Care's business as properly earned by Camelot
Community Care in the event either is challenged by the Internal Revenue
Service or comparable state or local authority. Such cooperation will
include the retention and (upon the Parent's request) the provision of
records and information which are reasonably relevant to any audit,
litigation, or other proceeding, and making employees available on a
mutually convenient basis to provide additional information and explanation
of any material provided; the Shareholders shall cause the Company (i) to
retain all books and records with respect to such matters, and (ii) to give
the Parent reasonable written notice prior to transferring, destroying, or
discarding any such books and records;
(iv) permit representatives of the Parent to have full access
during normal business hours to the Company's Books and Records,
properties, facilities, customers, suppliers, representatives, consultants,
employees and independent accountants in connection with the Parent's due
diligence review of the Company (it being understood that such
investigation shall in no way affect or otherwise obviate or diminish any
representations or warranties of the Company or the Shareholders, or
conditions to the obligations of the Parent, in each case as set forth
herein);
(v) provide Company Monthly Financial Statements at least 30
days after the last calendar day of each month; and
(vi) if requested by the Parent, arrange for a lease or
sublease of a portion of the Nashville Office by the Company on terms
satisfactory to the Parent.
(b) At the Closing, each Shareholder shall execute and deliver the
Shareholders Agreement and Registration Rights Agreement substantially in the
forms attached as Exhibits E and F, respectively, as the same may be modified
prior to the Closing as required by any lenders providing the financing
necessary to consummate the transactions contemplated hereby; provided that any
such modification that materially and adversely affects the rights of the
Shareholders thereunder shall require the prior consent of the Shareholders'
Representative.
(c) The Shareholders shall use commercially reasonable efforts to
cause the Company to consummate the Asset Disposition prior to the Closing Date.
(d) Each Shareholder shall promptly pay to the Shareholders'
Representative, and the Shareholders' Representative shall collect from each
Shareholder and promptly pay to the Surviving Corporation, such Shareholder's
Shareholder Percentage of any costs, expenses or Liabilities incurred by the
Surviving Corporation or the Subsidiaries after the Closing in connection with
their compliance with any covenants or other obligations under the Asset
Purchase Agreement or any documents executed in connection therewith, unless
such costs, expenses or Liabilities have been adequately reserved against on the
Closing Balance Sheet.
38
(e) For a period of 30 days after the date hereof, the Company
shall use its best efforts to ensure that the Company's relationship with the
State of Illinois Department of Children and Family Services is appropriate,
legal, valid and not subject to any adverse condition or circumstances as of the
Closing Date.
(f) The Company shall submit Schedule 3.3 to the Asset Purchase
Agreement to the Parent for its review and reasonable approval prior to its
finalization. Neither the Shareholders nor the Company shall make any election
pursuant to Section 3.3 of the Asset Purchase Agreement without first obtaining
the reasonable approval of the Parent.
6.2 Negative Covenants.
------------------
During the Transition Period, without the prior written consent of the
Parent, except as expressly contemplated by this Agreement or any Related
Document, the Shareholders shall cause the Company and each of the Subsidiaries
not to:
(a) sell, lease, transfer or assign any of its assets (tangible or
intangible), except as contemplated by Section 7.2 and except for (i) inventory
sold in the ordinary course of business and (ii) the Asset Disposition;
(b) enter into or modify any Contract (or series of related
Contracts) that requires expenditures or generates revenues in excess of
$25,000;
(c) permit its capital expenditures and commitments therefor to
exceed or be less than the amounts budgeted in the current capital expenditure
budget, a true and complete copy of which has been delivered to the Parent on or
prior to the date hereof;
(d) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(e) enter into any employment contract or collective bargaining
agreement, written or oral, or modify the terms of any such existing Contract or
agreement;
(f) grant any increase in the base compensation of any of its
officers or employees other than in the ordinary course of business, consistent
with past practices;
(g) adopt, amend, modify or terminate any Employee Plans, bonus,
incentive, severance or other plan, Contract or commitment for the benefit of
any of its officers or employees;
(h) enter into any transaction with any of its officers, employees
or Affiliates (or any directors, officers or employees of such Affiliate), other
than ordinary course employment arrangements entered into in accordance with
past custom or practice;
(i) in any manner take or cause to be taken any action which is
designed, intended or might reasonably be anticipated to have the effect of
discouraging customers,
39
employees, suppliers, lessors, and other associates of the Company or the
Subsidiaries from maintaining the same business relationships with the Company
or the Subsidiaries after the date of this Agreement as were maintained prior to
the date of this Agreement;
(j) intentionally take any action which would require disclosure
under Section 6.1(a)(iii);
(k) issue or sell any equity interests or issue or sell any
securities convertible into, exercisable or exchangeable for or options or
warrants to purchase or rights to subscribe for, any equity interests in the
Company or the Subsidiaries;
(l) declare or pay a distribution on any equity interests, change
the number of authorized shares of its equity interests or reclassify, combine,
split, subdivide or redeem or otherwise repurchase any of its equity interests,
or issue, deliver, pledge or encumber any additional equity interests or other
securities equivalent to, or exchangeable for, equity interests or enter into
any Contract to do any of the foregoing;
(m) incur any Funded Indebtedness or issue any securities
evidencing any Funded Indebtedness;
(n) create or suffer to exist any Encumbrance on any of its assets
or properties other than Permitted Encumbrances;
(o) change its accounting principles or policies;
(p) make any material Tax election or compromise any Tax Liability;
(q) amend any of its articles or certificate of incorporation,
bylaws or other governing documents;
(r) take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the Related
Documents being untrue on the Closing Date;
(s) engage in or allow any action that would result in the
revocation of the status of Camelot Community Care as an entity exempt from
Federal income taxation within the meaning of Code section 501(c)(3);
(t) create any subsidiary or joint venture;
(u) amend, modify or terminate any of the legal documentation
relating to the Asset Disposition; and
(v) agree or otherwise commit to take any of the actions set forth
above.
40
6.3 Commercially Reasonable Efforts.
-------------------------------
The Company, the Shareholders, the Sub and the Parent shall: (i) promptly
make their respective filings and thereafter make any other submissions required
under all applicable Laws with respect to the Merger and the other transactions
contemplated hereby and by the Related Documents and (ii) use their respective
commercially reasonable efforts to promptly take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
appropriate to consummate, satisfy all conditions precedent to, and make
effective the transactions contemplated by, this Agreement and the Related
Documents.
6.4 Representations and Warranties.
------------------------------
Neither the Parent, the Sub, the Company nor the Shareholders will take
any action (without the prior written consent of the other party hereto) that
would cause any of the representations and warranties made by any such Persons
set forth in Article III, Article IV, and Article V, as the case may be, not to
be true and correct at and as of the Closing Date.
6.5 Consents.
--------
Each party shall use its commercially reasonable efforts, and the other
parties shall cooperate with such efforts, to obtain or cause to be obtained any
consents and approvals of, or effect the notification of or filing with, each
Person or authority, whether private or governmental, whose consent or approval
is required in order to permit the consummation of the transactions contemplated
hereby.
6.6 Public Announcements.
--------------------
Each party agrees that, except (i) as otherwise required by Law (including
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976) and (ii) for
disclosure to its respective directors, officers, employees, partners, financial
advisors, potential financing sources, legal counsel, independent certified
public accountants, payors or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement, the Related Documents or the transactions contemplated hereby or
thereby, without the prior written consent of the Parent or the Company, as the
case may be, which consent shall not unreasonably be withheld or delayed.
Notwithstanding the foregoing, nothing in this Section 6.6 shall prohibit EOS
Partners SBIC, L.P. or any of its Affiliates from reporting any aspect of the
transactions contemplated hereby to its partners.
6.7 Negotiation with Others.
-----------------------
During the Transition Period (the "Exclusive Period"), the Shareholders
and the Company shall deal exclusively with the Parent and the Sub regarding the
acquisition of or investment in the Company and/or any of the Subsidiaries,
whether by way of merger, purchase of capital stock, purchase of assets or
otherwise (a "Potential Transaction") and, without the prior written consent of
the Parent, the Shareholders and the Company shall not directly or indirectly,
(i) solicit, initiate discussions with or engage in negotiations with any
Person, other than the
41
Parent relating to a Potential Transaction, (ii) provide information or
documentation with respect to the Company or the Subject Business relating to a
Potential Transaction to any Person, other than the Parent and the Sub or (iii)
enter into an agreement with any Person, other than the Parent and the Sub,
providing for any Potential Transaction. If the Shareholders, the Company or any
of the Subsidiaries receives an unsolicited inquiry, offer or proposal relating
to any of the above, the Shareholders' Representative or the Company shall
immediately notify the Parent thereof. The Shareholders and the Company
represent to the Parent and the Sub that neither the Shareholders, the Company
nor any of the Subsidiaries is bound to negotiate a Potential Transaction with
any other Person and that their execution of this Agreement and the Related
Documents does not violate any agreement. The Shareholders shall cause the
Company and the Subsidiaries to comply with all of the terms of this Section
6.7; provided, however, this Section 6.7 shall not prohibit any solicitations,
discussions or negotiations with or the provision of any information or
documentation to a potential purchaser in connection with, or the consummation
of, the Asset Disposition.
6.8 Notice of Prospective Breach.
----------------------------
Each party shall promptly notify the other parties in writing upon the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur could be reasonably likely to cause (i) any representation or warranty of
such party contained in this Agreement or any Related Document to be untrue or
inaccurate in any material respect at any time during the Transition Period or
(ii) any failure of any party hereto or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or any Related Document.
6.9 Directors and Officers.
----------------------
(a) The Parent hereby agrees after the Closing Date, and so long as
a majority of the Surviving Corporation's voting securities are owned by the
Parent, that the provisions regarding immunities and indemnification that are
set forth in the Surviving Corporation's and the Subsidiaries' articles or
certificates of incorporation, and bylaws, in effect immediately prior to the
Effective Time shall not be amended or repealed by the Parent for a period of 4
years from the Closing Date in any manner that would materially and adversely
affect the rights thereunder of individuals who on the Closing Date were
directors or officers of the Company or the Subsidiaries in respect of actions
taken prior to the Closing Date in their capacities as directors or officers.
(b) To the extent maintained by the Company prior to Closing, and
so long as a majority of the Surviving Corporation's voting securities are owned
by the Parent, for a period of 4 years after the Closing Date, the Parent shall
maintain in effect directors and officers liability insurance policies with
reasonably similar coverage levels to the levels maintained immediately prior to
the Closing.
42
6.10 Parent Affirmative Covenants.
----------------------------
During the Transition Period, except as otherwise consented to in
writing by the Shareholders' Representative or otherwise expressly contemplated
by this Agreement, the Parent shall:
(a) conduct its operations according to the ordinary and usual
course of business substantially consistent with past custom and practice
(including the collection of receivables, the payment of payables and the
maintenance of supplies) and use commercially reasonable efforts to preserve
intact its business organization, and maintain reasonably satisfactory
relationships with supplies, customers and others having business relationships
with it; and
(b) permit representatives of the Shareholders (through the
Shareholders' Representative) to have full access during normal business hours
to the Parent's Books and Records, properties, facilities, customers, suppliers,
representatives, consultants, employees and independent accountants, provided
that any contact or meetings with such Persons be in the presence of Xxxxxxxx
XxXxxxxx or his designee (it being understood that such investigation shall in
no way affect or otherwise obviate or diminish any representations or warranties
of the Parent, or conditions to the obligations of the Company and the
Shareholders, in each case as set forth herein).
6.11 Parent Negative Covenant.
------------------------
During the Transition Period, without the prior written consent of the
Shareholders' Representative, except as expressly contemplated by this Agreement
or any Related Document, the Parent shall not issue or sell any equity interests
or issue or sell any securities convertible into, exercisable or exchangeable
for or options or warrants to purchase or rights to subscribe for, any equity
interests of the Parent (the "Parent Equity Securities") except (i) pursuant to
agreements in effect on the date hereof which require or contemplate such
transactions, (ii) pursuant to stock option or stock compensation plans in
effect on the date hereof, (iii) Parent Equity Securities not to exceed 10% of
the fully diluted equity capitalization of the Parent as of the date hereof and
(iv) Parent Equity Securities issued in connection with any financings for the
transactions contemplated hereby.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligations.
--------------------------------------
The obligation of the parties hereto to consummate the transactions
contemplated by this Agreement (including the Merger) are subject to the
fulfillment at or prior to the Closing Date of the following conditions, any or
all of which may be waived in whole or in part by the Shareholders'
Representative and the Parent to the extent permitted by Law:
(a) Approvals. All authorizations, consents, Orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any Governmental
43
Entity necessary for the consummation of the transactions contemplated hereby
shall have been obtained or made.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) Statutes. No action shall have been taken or threatened, and no
statute, rule, regulation or Order shall have been enacted, promulgated or
issued or deemed applicable to the transactions contemplated hereby or by the
Related Documents by any Governmental Entity that would (i) make the
consummation of the transactions contemplated hereby illegal or substantially
delay the consummation of any aspect of the transactions contemplated hereby,
(ii) affect the right of the Parent to exercise its rights as a shareholder of
the Surviving Corporation, or (iii) render the Shareholders, the Sub or the
Parent unable to consummate the transactions contemplated hereby.
7.2 Conditions to Obligations of the Parent and the Sub.
---------------------------------------------------
The obligations of the Parent and the Sub to consummate the transactions
contemplated by this Agreement (including the Merger) are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Parent and the Sub:
(a) Representations and Warranties. The representations and
warranties of the Shareholders and the Company (i) set forth in this Agreement
(other than Section 3.34) and the Related Documents shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, knowledge or "Material
Adverse Effect", which representations and warranties as so qualified shall be
true and correct in all respects) and (ii) set forth in Section 3.34 shall be
true and correct in all respects, in each case of clauses (i) and (ii) as of the
Closing Date, as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties, and the Parent shall
have received a certificate signed by the Chief Executive Officer of the Company
to such effect.
(b) Performance of Obligations of the Company and the Shareholders.
The Company, the Shareholders' Representative and the Shareholders shall have
performed in all material respects all obligations and covenants required to be
performed by such Persons under this Agreement and the Related Documents as of
the Closing Date, and the Parent shall have received a certificate signed by the
Chief Executive Officer of the Company to such effect.
(c) Authorization. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents by the
Company, the Shareholders' Representative, and the Shareholders and the
consummation of the transactions contemplated hereby and thereby, shall have
been duly and validly taken by the Company, the Shareholders' Representative and
the Shareholders, and the Company, the Shareholders' Representative, and
44
the Shareholders shall have full power and right to consummate the transactions
contemplated hereby on the terms provided herein and therein.
(d) Ancillary Agreements. Each Shareholder shall have entered into
(i) the Amended and Restated Shareholders Agreement of the Parent, substantially
in the form of Exhibit E hereto (as amended, modified or supplemented on the
Closing Date or otherwise, the "Shareholders Agreement"), and (ii) the Amended
and Restated Registration Rights Agreement of the Parent, substantially in the
form of Exhibit F hereto (as amended, modified or supplemented on the Closing
Date or otherwise, the "Registration Rights Agreement"). The Shareholders shall
have terminated any other shareholders or registration rights agreements of the
Company.
(e) Opinion of Counsel. The Parent shall have received a legal
opinion, dated the Closing Date, of Bass, Xxxxx & Xxxx PLC, counsel to the
Company and the Shareholders, in form and substance reasonably satisfactory to
the Parent.
(f) Consents and Approvals. The Parent shall have received duly
executed copies of all consents and approvals, in form and substance
satisfactory to the Parent, that are (i) required to be given by the Company,
the Shareholders' Representative or the Shareholders for consummation of the
transactions contemplated hereby and under the Related Documents and (ii)
required in order to prevent a breach of or a default under or a termination of
any Contract set forth in Schedule 3.15.
(g) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery by the Company, the Shareholders' Representative and the
Shareholders of this Agreement and the Related Documents and the consummation by
the Company, the Shareholders' Representative, and the Shareholders of the
transactions contemplated hereby and thereby shall have been obtained or made.
(h) Corporate Resolutions. The Parent shall have received certified
copies of the resolutions of the Company's board of directors and stockholders
approving this Agreement, the Related Documents, all other agreements and
documents contemplated hereby and thereby and the consummation of the
transactions contemplated hereby and thereby.
(i) Absence of Material Adverse Change. Since the date hereof,
there shall have been no Material Adverse Change with respect to the Company or
the Subsidiaries.
(j) Officer's Certificate. The Company shall have delivered an
officer's certificate dated as of the Closing Date to the Parent certifying (i)
that attached thereto are true and complete copies of the articles or
certificates of incorporation and all amendments thereto as in effect on such
date of the Company and the Subsidiaries; (ii) that attached thereto are true
and complete copies of the bylaws as in effect on such date of the Company and
the Subsidiaries; (iii) as to the incumbency and genuineness of the signature of
each officer of the Company executing this Agreement, the Related Documents or
any of the other documents contemplated hereby; (iv) as to the principal amount
of the Funded Indebtedness outstanding as of the Closing
45
Date; and (v) that the Company is not, as of the Closing Date, nor has it ever
been, a "U.S. real property holding corporation".
(k) Financing. The Parent shall have obtained (i) the consent of
Xxxxxx Healthcare Finance, Inc. ("Xxxxxx") under the Loan and Security Agreement
between Xxxxxx and the Parent, dated as of December 4, 2000, as amended, to the
transactions contemplated hereby, on terms and conditions reasonably
satisfactory to the Parent and (ii) all of the financing necessary to consummate
the transactions contemplated hereby, on terms and conditions reasonably
satisfactory to the Parent.
(l) Amendment of Parent Charter. The Parent shall have amended its
certificate of incorporation in a manner satisfactory to it and its lenders.
(m) Release Documents. The Company shall have delivered the pay-off
letters, mortgage and lien releases and other documents specified in Section
1.8(c) hereof.
(n) Stock Certificates. Each Shareholder shall have delivered the
stock certificates for the Shares and the related stock powers specified in
Section 1.9 hereof.
(o) Charter Documents. The Shareholders' Representative or the
Company shall have delivered a long form good standing certificate (or the
equivalent) as to the Company and the Subsidiaries, issued as of a recent date
by the Secretary of State of the States of Delaware and Illinois and each
jurisdiction where such Person is organized or qualified to do business.
(p) Resignation of Directors and Officers. Camelot Community Care
and the Company and its Subsidiaries shall have delivered to the Parent evidence
of the resignations of, in the case of Camelot Community Care, Xxxxx Xxxxxxx and
Xxxxxx Xxxxx and, in the case of the Company and the Subsidiaries, all Persons,
from their respective boards of directors, in form and substance satisfactory to
the Parent. Camelot Community Care and the Company and its Subsidiaries shall
have delivered to the Parent evidence of the resignations of all officers
thereof, in form and substance satisfactory to the Parent.
(q) Recips, Inc. The Shareholders shall have caused the Company to
effect the dissolution of Recips, in form and substance satisfactory to the
Parent.
(r) Illinois. On or prior to 30 days after the date hereof, the
Parent shall have been satisfied, in its reasonable discretion, that the
Company's relationship with the State of Illinois Department of Children and
Family Services is appropriate, legal, valid and not subject to any adverse
condition or circumstances; provided that the Parent has obtained access to the
Persons and information reasonably sufficient to make an appropriate
determination thereof.
(s) Company Headquarters. The Shareholders shall have caused the
Company to assign to Qualifacts all of its obligations and Liabilities in
respect of its facility at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxx 00000 (the "Nashville Office") including, without limitation, all
obligations and Liabilities in respect of all real property and other leases and
all labor and employment liabilities relating to employees to be terminated by
the Company prior to the Closing (such employees to be designated by the Parent)
(including
46
severance, accrued vacation and related matters) on terms and conditions (and
pursuant to documentation) satisfactory to the Parent with no obligation or
Liability to the Company or any Subsidiary or the Parent. The Shareholders shall
cause the Company to obtain a release of liability and waiver from all
terminated employees on terms satisfactory to the Parent.
(t) Qualifacts. The Shareholders shall have caused the Company to
amend and restate its contract with Qualifacts, in form and substance
satisfactory to the Parent.
(u) Asset Disposition. The Shareholders shall have caused the
Company to cause Camelot Care to effect the sale or transfer of its residential
treatment and education assets and all Liabilities related thereto (the "Asset
Disposition"), in form and substance reasonably satisfactory to the Parent and
the Parent shall be satisfied with all aspects of the Asset Disposition,
including all legal documentation related thereto.
(v) Company Stock Option Plans. The Shareholders shall have caused
the Company to effect the termination of the Company's stock option plans and
the cancellation of all options outstanding thereunder, on terms satisfactory to
the Parent.
(w) Camelot Community Care. The Shareholders shall cause the
Company to, and the Company shall, perform in all respects all actions requested
to be performed by the Company in the letter dated the date hereof (the "Side
Letter") from the Parent to the Company, and the actions requested to be
performed by the Company and Camelot Community Care in such Side Letter shall
have been performed on terms satisfactory to the Parent.
(x) The Parent shall have received all of the documents referenced
in Section 4.6 hereof and Section 6.1 hereof.
(y) The Parent shall have received a copy of Schedule 1.10(a)
certified by the Chief Financial Officer of the Company to be correct and
complete.
7.3 Conditions to Obligations of the Shareholders.
---------------------------------------------
The obligation of the Shareholders to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by the
Shareholders' Representative:
(a) Representations and Warranties. The representations and
warranties of the Parent set forth in Article V of this Agreement and the
Related Documents to which it is a party shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, knowledge or "Material
Adverse Effect", which representations and warranties as so qualified shall be
true and correct in all respects) in all material respects as of the Closing
Date, as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Shareholders'
Representative shall have received a certificate signed by an authorized officer
of the Parent to such effect.
47
(b) Performance of Obligations of the Parent and the Sub. Each of
the Parent and the Sub shall have performed in all material respects its
obligations and covenants required to be performed by it under this Agreement
and the Related Documents to which it is a party as of the Closing Date, and the
Shareholders' Representative shall have received a certificate signed by an
authorized officer of each of the Parent and the Sub to such effect.
(c) Authorization. All action necessary to authorize the execution,
delivery and performance of this Agreement and the Related Documents to which
the Parent and the Sub are a party and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the
Parent and the Sub.
(d) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Parent and the
Sub and the consummation by the Parent and the Sub of the transactions
contemplated hereby or thereby shall have been obtained or made.
(e) Consents and Approvals. The Shareholders' Representative shall
have received duly executed copies of all consents and approvals, in form and
substance reasonably satisfactory to it, that are required of the Parent and the
Sub, for consummation of the transactions contemplated hereby.
(f) Corporate Resolutions. The Shareholders' Representative shall
have received certified copies of the resolutions of the Parent's and the Sub's
boards of directors approving this Agreement, the Related Documents to which
they are a party, all other agreements and documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby.
(g) Officer's Certificate. The Parent shall have delivered an
officer's certificate dated as of the Closing Date to the Shareholders'
Representative certifying (i) that attached thereto are true and complete copies
of the articles or certificates of incorporation and all amendments thereto as
in effect on such date of the Parent and the Sub; (ii) that attached thereto are
true and complete copies of the bylaws as in effect on such date of the Parent
and the Sub; and (iii) as to the incumbency and genuineness of the signature of
each officer of the Parent and the Sub executing this Agreement, the Related
Documents or any of the other documents contemplated hereby.
(h) Board Representation. Xxxxxx Xxxxxxxx shall have been duly
elected and appointed to the Board of Directors of the Parent in accordance with
the Shareholders Agreement.
48
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification Generally; Etc.
------------------------------
From and after the Closing Date:
(a) By the Shareholders. Each of the Shareholders hereby agrees to
indemnify and hold harmless the Parent, its Affiliates and their respective
successors, assigns, officers, directors, shareholders, partners, and employees
(collectively, the "Parent Group") against any and all Losses they may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any representation
or warranty of any Shareholder or the Company contained in this Agreement
(other than Article IV), any Related Document, any schedule, exhibit or
attachment hereto or thereto or any certificate delivered in connection
therewith at or before the Closing;
(ii) the breach of any agreement or covenant of any
Shareholder or the Company contained in this Agreement or any Related
Document (it being understood, for purposes of clarification, that none of
the representations and warranties set forth in Article III or Article IV
hereof shall be deemed to be a covenant or agreement for the purposes of
this Section 8.1 (a)(ii));
(iii) any Liability asserted against the Company or the Parent
Group in respect of the Asset Disposition (including, without limitation,
any Liability to be assumed by the purchaser thereunder, and any cost,
expense or loss related thereto);
(iv) any portion of the W.C. Adjustment which shall not be
satisfied pursuant to Section 1.10(e) hereof;
(v) any allocation of the Merger Consideration among the
Shareholders in accordance with Section 1.7 hereof;
(vi) Pre-Closing Taxes; and
(vii) any agreement or understanding that the Company or any of
the Subsidiaries had or has with SunTrust Equitable Securities or ING
Barings or any of their respective Affiliates.
Subject to the limitations set forth herein, the Shareholders shall be jointly
and severally liable pursuant to the foregoing provisions of this paragraph (a)
to the extent that, as of any date of determination, the Losses for which the
Parent Group is entitled to be indemnified do not exceed $3,500,000 and, to the
extent that the Losses for which the Parent Group is entitled to be indemnified
exceed $3,500,000, each of the Shareholders shall be liable severally in
accordance with such Shareholders' Shareholder Percentage.
49
(aa) From and after the Closing Date, each Shareholder hereby agrees
to indemnify and hold harmless the Parent Group severally in accordance with his
or her Shareholder Percentage (and not jointly and severally) against any and
all Losses it may suffer, sustain or incur as a result of the untruth,
inaccuracy or breach of any representation or warranty of such Shareholder
contained in Article IV of this Agreement or any certificate delivered by such
Shareholder in connection therewith at or before the Closing.
(b) By the Parent in Favor of the Shareholders. The Parent hereby
agrees to indemnify and hold harmless the Shareholders, each in accordance with
their respective Shareholder Percentages, for any and all Losses they may
suffer, sustain or incur as a result of (i) the untruth, inaccuracy or breach of
any representation or warranty of the Parent contained in Article V and (ii) the
breach of any agreement or covenant of the Parent or the Sub contained in this
Agreement or any Related Document to which it is a party.
(c) Indemnity Baskets/Limitations for the Shareholders. The Parent
Group shall not have the right to be indemnified pursuant to Section
8.1(a)(i)(other than for breaches of Section 3.1, Section 3.2, Section 3.3,
Section 3.4(a) , Section 3.5(a), Section 3.12 and Section 3.24 (collectively,
the "Shareholder Excluded Representations and Warranties") and Section 3.10)
unless and until the Parent Group shall have incurred on a cumulative basis
since the Closing Date aggregate Losses (without giving effect, in determining
whether and to what extent representations and warranties were breached or
Losses were incurred, to qualifications therein relating to materiality,
knowledge or "Material Adverse Effect") in an amount exceeding $100,000, and
then only to the extent of such excess. The sum of all Losses (without giving
effect, in determining whether and to what extent representations and warranties
were breached or Losses were incurred, to qualifications therein relating to
materiality, knowledge or "Material Adverse Effect") pursuant to which
indemnification is payable by the Shareholders shall be subject to the following
limitations:
(i) the Parent Group shall not be entitled to be indemnified
for any Losses indemnifiable pursuant to Section 8.1(a)(i)(other than
Shareholder Excluded Representations and Warranties), Section 8.1(a)(iii)
and Section 8.1(a)(vi) in excess of $3,500,000 in the aggregate; provided,
however, that, if any such Losses are indemnifiable pursuant to Section
8.1(a)(iii), then such maximum amount shall not apply to the extent that
the exercise of the forfeiture right of the Parent Group in respect of
Parent Common Stock or other equity securities pursuant to Section 8.1(d)
would permit recovery of Losses in excess of such amount;
(ii) the Parent Group shall not be entitled to be indemnified
for any Losses indemnifiable pursuant to Section 8.1(a)(iv) in excess of
$3,500,000 in the aggregate; and
(iii) the Parent Group shall not be entitled to be indemnified
for any Losses indemnifiable pursuant to Section 8.1(a)(ii), Section
8.1(aa) or as a result of the untruth, inaccuracy or breach of any
Shareholder Excluded Representations and Warranties in excess of
$10,000,000 in the aggregate.
(d) Form of Satisfaction of Certain Shareholder Indemnity
Obligations. The indemnification obligations of the Shareholders related to
Losses for which the Parent Group is
50
entitled to be indemnified hereunder pursuant to Section 8.1(a)(i)
(other than the Shareholder Excluded Representations and Warranties), Section
8.1(a)(iii) and Section 8.1(a)(vi) which do not exceed the limitations set forth
in Section 8.1(c)(i)shall be satisfied solely by set off by the Parent against
any obligations under the Notes (on a joint and several basis among the
Shareholders, in a manner which is consistent with Section 8.1(a)). Any Losses
for which the Parent Group is entitled to be indemnified pursuant to Section
8.1(a)(i) in respect of a breach of Section 3.10 or pursuant to Section
8.1(a)(vi) shall not be limited to satisfaction by set off against the Notes to
the extent that the obligation to indemnify the Parent Group for such Losses
arises after the Notes have been paid (either partially or in full). The
indemnification obligations of the Shareholders for excess Losses for which the
Parent Group is entitled to be indemnified hereunder pursuant to the proviso in
Section 8.1(c)(i) may be satisfied solely by the forfeiture in accordance with
Section 8.1(e) to the Parent of the appropriate number of shares of Parent
Common Stock (and other equity securities of the Parent Group held by the
Shareholders) based upon the Fair Value Per Share (in each case, on a several
(and not a joint and several) basis by the Shareholders, in a manner that is
consistent with Section 8.1(a)) (provided that, in no event shall the Fair Value
Per Share solely in such case be deemed to be less than $2.00).
(e) Forfeiture of Parent Common Stock. In order to comply with the
obligations of the Shareholders in respect of the forfeiture rights under
Section 8.1(d) and in order to secure all other obligations of the Shareholders
hereunder, each of the Shareholders hereby grants an option to the Parent to
purchase shares of Parent Common Stock (and all other equity securities of the
Parent Group held by him or her) for an aggregate purchase price of $1.00, such
option to be exercisable solely in connection with the satisfaction of the
Shareholders' obligations hereunder. Such forfeiture right shall be exercisable
by the Parent upon three days written notice to the Shareholders'
Representative. Upon payment of $1.00 by the Parent, the Shareholders shall
deliver to the Parent certificates, duly endorsed for transfer, representing the
number of shares of Parent Common Stock (and/or other equity securities of the
Parent Group) being forfeited. Such Parent Common Stock (and/or other equity
securities of the Parent Group) shall automatically, without any action on the
part of the Shareholders or the Parent, be cancelled and shall cease to be
outstanding upon delivery by the Parent of such $1.00, whether or not such
certificates are delivered or endorsed for transfer. No Shareholder shall sell,
transfer, xxxxx x xxxx in or otherwise dispose of any shares of Parent Common
Stock, any such other equity securities or Notes unless the transferee agrees in
writing to be subject to the agreements set forth in this Agreement.
(f) Indemnity Baskets/Limitations for the Parent. The Shareholders
shall not have the right to be indemnified pursuant to Section 8.1(b) (other
than for breaches of Section 5.1, Section 5.2, Section 5.3, Section 5.4(a),
Section 5.7, and Section 5.11 (collectively, the "Parent Excluded
Representations and Warranties")) unless and until the Shareholders shall have
incurred on a cumulative basis since the Closing Date aggregate Losses otherwise
entitled to indemnification hereunder in an amount exceeding $100,000 and then
only to the extent of such excess. The sum of all Losses pursuant to which
indemnification is payable by the Parent (i) pursuant to Section 8.1(b)(other
than Parent Excluded Representations and Warranties), shall not exceed
$1,000,000 in the aggregate and (ii) for breaches of Parent Excluded
Representations and Warranties shall not exceed $3,500,000 in the aggregate. At
the election of the Parent, the indemnification obligations of the Parent
related to Losses for which the Shareholders are
51
entitled to be indemnified hereunder may be satisfied by any
combination of cash, Notes and/or Parent Common Stock. The principal amount of
any Notes issued in satisfaction of any such obligation shall be equal to the
amount of the Losses to be satisfied by the issuance of such Notes. The number
of shares of Parent Common Stock issued in satisfaction of any such obligation
shall be an appropriate number of shares of Parent Common Stock based on the
Fair Value Per Share and the amount of the Losses to be satisfied by the
issuance of such shares of Parent Common Stock.
(g) In the case of any Taxes that are payable for a Straddle Tax
Period, the portions of such Taxes that are Pre-Closing Taxes shall be deemed to
be:
(i) in the case of any Tax not measured by income, receipts,
gains or similar amounts, the amount of such Tax for the Straddle Tax
Period multiplied by a fraction the numerator of which is the number of
days in the Straddle Tax Period on or prior to the Closing Date and the
denominator of which is the number of days in the entire Straddle Tax
Period; and
(ii) in the case of any Tax not described in (i) above, the
amount that would be payable if the relevant Tax period ended as of the end
of the Closing Date.
8.2 Assertion of Claims.
-------------------
No claim shall be brought under Section 8.1 unless the Indemnified
Persons, or any of them, at any time prior to the applicable Survival Date, give
the Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to Section 8.3 of any Third-Party
Claim, the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal Proceedings subsequent to the Survival
Date for the enforcement of their rights under Section 8.1.
8.3 Notice and Defense of Third-Party Claims.
----------------------------------------
The obligations and Liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of Liability by third parties (each, a
"Third-Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third-Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such
Third-Party Claim and the amount thereof to the extent known; provided, however,
that no delay on the part of the Indemnified Person in notifying any
Indemnifying Person shall relieve the Indemnifying Person from any Liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Person thereby is materially prejudiced by the delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such
Third-Party Claim, including, but not limited to, any summons, complaint or
other pleading which may have been served, any written demand or any other
document or instrument.
52
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third-Party Claim, then the Indemnifying Persons shall have
the right to assume the defense of any Third-Party Claim at their own expense
and by their own counsel, which counsel shall be reasonably satisfactory to the
Indemnified Persons; provided, however, that the Indemnifying Persons shall not
have the right to assume the defense of any Third-Party Claim, notwithstanding
the giving of such written acknowledgment, if (i) the Indemnified Persons shall
have one or more legal or equitable defenses available to them which are
different from or in addition to those available to the Indemnifying Persons,
and, in the opinion of the Indemnified Persons, counsel for the Indemnifying
Persons could not adequately represent the interests of the Indemnified Persons
because such interests could be in conflict with those of the Indemnifying
Persons, (ii) such action or Proceeding is reasonably likely to have an effect
on any other matter beyond the scope of the indemnification obligation of the
Indemnifying Persons or (iii) the Indemnifying Persons shall not have assumed
the defense of the Third-Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a
Third-Party Claim (under circumstances in which the proviso to Section 8.3(b) is
not applicable), the Indemnifying Persons shall not be responsible for any legal
or other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third-Party Claim by giving the written
acknowledgement referred to in Section 8.3(b), or are otherwise restricted from
so assuming by the proviso to Section 8.3(b), the Indemnifying Persons shall
nevertheless be entitled to participate in such defense with their own counsel
and at their own expense; and in any such case, the Indemnified Persons may
assume the defense of the Third-Party Claim, with counsel which shall be
satisfactory to the Indemnifying Persons, and shall act reasonably and in
accordance with their good faith business judgment and shall not effect any
settlement without the consent of the Indemnifying Persons, which consent shall
not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third-Party Claim, they shall not make any settlement of any claims
without obtaining in connection therewith a full release of the Indemnified
Persons, in form and substance satisfactory to the Indemnified Persons.
(e) If an Indemnified Person has a claim against a third party in
respect of a Loss which is subject to indemnification hereunder, such
Indemnified Person shall transfer, assign and convey such claim to the
Indemnifying Persons to the extent of any payment in respect of such Loss by the
Indemnifying Persons after the Indemnifying Persons shall have fully satisfied
any and all of their obligations hereunder in respect of such Loss.
8.4 Survival of Representations and Warranties.
------------------------------------------
Subject to the further provisions of this Section 8.4, the representations
and warranties of the Shareholders contained in this Agreement and the Related
Documents and the representations and warranties of the Parent contained in this
Agreement shall survive the Closing until the first
53
anniversary of the Closing Date; provided, however, that (i) the
representations and warranties set forth in Section 3.20 and the right of the
Parent Group to be indemnified pursuant to Section 8.1(a)(iii) shall survive the
Closing until the third anniversary of the Closing Date, (ii) the
representations and warranties set forth in Section 3.10 (other than Section
3.10(d)) and Section 3.11 and the right of the Parent Group to be indemnified
pursuant to Section 8.1(a)(v) and Section 8.1(a)(vi) shall survive the Closing
until the expiration of all applicable statutes of limitations, and (iii) the
Shareholders Excluded Representations and Warranties, the Parent Excluded
Representations and Warranties and the right of the Parent Group to be
indemnified pursuant to Section 8.1(a)(ii), Section 8.1(a)(iv), Section
8.1(a)(vii) and Section 8.1(aa) shall survive the Closing and remain in full
force and effect indefinitely without time limit. The covenants and other
agreements of the parties contained in this Agreement and the Related Documents
shall survive the Closing until they are otherwise terminated, whether pursuant
to their terms or pursuant to applicable Law.
8.5 No Third Party Reliance.
-----------------------
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Shareholders contained in this Agreement
and the Related Documents are being given as an inducement to the Parent to
enter into this Agreement and the Related Documents to which the Parent is a
party (and the Shareholders acknowledge that the Parent has expressly relied
thereon) and the representations and warranties of the Parent contained in this
Agreement and the Related Documents are being given as an inducement to the
Shareholders to enter into this Agreement and the Related Documents to which the
Shareholders are a party (and the Parent acknowledges that the Shareholders have
relied thereon).
8.6 General Release.
---------------
(a) Each of the Shareholders does hereby release forever and
discharge the Company and the Subsidiaries, each of their respective Affiliates,
officers, managers, directors, members and employees of and from any and all
claims, demands, causes of action, damages or liabilities of any kind or nature
whatsoever which relate to or arise out of any dealings, relationships or
transactions by and between him or her and the Company, the Subsidiaries, any of
its Affiliates or any of their respective officers, directors, managers and
employees, in law or equity which against the Company, any of its subsidiaries,
any of its other Affiliates or any of their respective officers, directors,
managers and employees he or she ever had, now has or which he, she or it
hereafter can, shall or may have, whether or not now known, from the beginning
of the world to the Closing Date. Each of the Shareholders understands and
agrees that he or she is expressly waiving all claims, even those he or she may
not know or suspect to exist, which if known may have materially affected the
decision to provide this release, and such Shareholder waives any rights under
applicable Law that provide to the contrary.
(b) The release set forth in the immediately preceding paragraph
shall not apply to any rights such Shareholder has pursuant to (i) this
Agreement or any Related Documents, (ii) any immunities and indemnification
under the Company's or the Subsidiaries' articles or certificate of
incorporation, bylaws or contractual arrangements, including, without
limitation, the Management Agreement and (iii) any directors' and officers'
liability insurance policies, if
54
any, maintained by or on behalf of the Company or the Subsidiaries. In
addition, notwithstanding the release set forth in the immediately preceding
paragraph, the Shareholders of the Company who are or were also officers or
employees of the Company or the Subsidiaries shall be entitled to reimbursement
from the Company for all out-of-pocket business expenses incurred in the
ordinary course of business prior to the Closing.
8.7 Remedies Exclusive.
------------------
The remedies provided for in this Article VIII shall be the exclusive
remedies (other than under Section 10.14) of the Indemnified Persons in
connection with any claim, demand, loss, Liability or obligation arising under
this Agreement or in connection with the transactions contemplated hereby;
provided, however, that nothing in this Section 8.7 shall be construed to limit
in any way the rights and benefits of, or the remedies available to, any party
to this Agreement or the Related Documents under or in respect of any other
instrument or agreement to which such Person may be a party or for fraud.
ARTICLE IX
TERMINATION; EFFECT OF TERMINATION
9.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to the
Closing by:
(i) the mutual consent of the Parent and the Shareholders'
Representative; or
(ii) either the Parent or the Shareholders' Representative if
the Closing shall not have been consummated by December 31, 2001 without
liability to the terminating party on account of such termination; provided
that the right to terminate this Agreement under this Section 9.1(a)(ii)
shall not be available to a party whose breach or violation of any
representation, warranty or covenant under this Agreement has been a cause
of or has resulted in the failure of the Closing to occur on or before such
date; and provided further that, such date shall be automatically extended
to January 21, 2002 if the failure to consummate the Closing by December
31, 2001 is due to the failure of any party to satisfy a condition
precedent (x) hereto or (y) to the Asset Purchase Agreement, in either case
where such condition precedent requires the consent of any third party,
which third party consent is outside the control of such party hereto or
thereto; or
(iii) the Parent if there has been a material breach by the
Shareholders of any representation, warranty, covenant or agreement set
forth in this Agreement or any Related Document and which the Shareholders
fail to cure within 10 Business Days after written notice thereof is given
by the Parent (except no cure period shall be provided for a breach by the
Shareholders which by its nature cannot be cured); or
(iv) the Shareholders' Representative, if there has been a
material breach of any representation, warranty, covenant or agreement set
forth in this Agreement or any
55
Related Document on the part of the Parent which is material and which the
Parent fails to cure within 10 Business Days after written notice thereof
is given by the Shareholders' Representative (except no cure period shall
be provided for a breach by the Parent which by its nature cannot be
cured); or
(v) either the Shareholders' Representative or the Parent, if
any permanent injunction or other Order of a court or other competent
authority preventing the Closing shall have become final and nonappealable;
provided, however, that neither the Shareholders' Representative nor the
Parent shall be entitled to terminate this Agreement if such party's breach
of this Agreement or any Related Document has prevented the satisfaction of
a condition.
(b) Any termination pursuant to Section 9.1(a)(i) shall be effected
by a written instrument signed by the Parent and the Shareholders'
Representative, and any termination pursuant to this Section 9.1 (other than a
termination pursuant to Section 9.1(a)(i)) shall be effected by written notice
from the party or parties so terminating to the other parties hereto, which
notice shall specify the Section hereof pursuant to which this Agreement is
being terminated.
9.2 Effect of Termination.
---------------------
In the event of the termination of this Agreement as provided in Section
9.1, this Agreement shall be of no further force or effect, except for this
Section 9.2 and Article X, each of which shall survive the termination of this
Agreement; provided, however, that the Liability of any party for any breach by
such party of the representations, warranties, covenants or agreements of such
party set forth in this Agreement occurring prior to the termination of this
Agreement shall survive the termination of this Agreement and, in addition, in
the event of any action for breach of contract in the event of a termination of
this Agreement, the prevailing party shall be reimbursed by the other party to
the action for reasonable attorneys' fees and expenses relating to such action.
9.3 Shareholders' Representative.
----------------------------
The Shareholders agree among themselves as follows:
(a) Appointment. The Shareholders, for themselves and their
personal representatives and other successors, hereby constitute and appoint
Xxxxxx X. Xxxxxxxx, as their agent (the "Shareholders' Representative"), with
full power and authority, in the name of and for and on behalf of the
Shareholders, to take all action required or permitted under this Agreement by
the Shareholders (including, without limitation, the giving and receiving of all
accountings, reports, notices, waivers and consents, amendments, and related
matters or determinations). In the event of the death, physical or mental
incapacity or resignation of Xxxxxx X. Xxxxxxxx or any successor Shareholders'
Representative, the Shareholders shall promptly appoint a substitute or
substitutes and shall advise the other parties hereto. The authority conferred
under this Section 9.3(a) is an agency coupled with an interest and all
authority conferred hereby is irrevocable and not subject to termination by the
Shareholders or by operation of Law, whether by the death or incapacity of any
Shareholder, the termination of any trust or estate or the occurrence of any
56
other event. If any Shareholder should die or become incapacitated, if
any trust or estate should terminate or if any other such event should occur,
any action taken by the Shareholders' Representative pursuant to this Section
9.3(a) shall be as valid as if such death or incapacity, termination or other
event had not occurred, regardless of whether or not any Person shall have
received notice of such death, incapacity, termination or other event.
(b) The Shareholders' Representative shall be entitled to rely, and
shall be fully protected in relying, upon any statements furnished to him by any
Person or any other evidence deemed by the Shareholders' Representative to be
reasonably reliable, and the Shareholders' Representative shall be entitled to
act on the advice of counsel selected by him. The Shareholders' Representative
shall be fully justified in failing or refusing to take any action under this
Agreement unless he shall have received such advice or concurrence of the
Shareholders as he deems appropriate or he shall have been expressly indemnified
to his satisfaction by the Shareholders severally according to their respective
Shareholder Percentages against any and all Liability and expense that the
Shareholders' Representative may incur by reason of taking or continuing to take
any such action. The Shareholders' Representative shall in all cases be fully
protected in acting, or refraining from acting, under this Agreement in
accordance with a request of Shareholders whose aggregate Shareholder
Percentages equal or exceed 51%, and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all of the Shareholders.
(c) The Shareholders' Representative shall be entitled to retain
counsel and to incur such expenses (including litigation expenses) as the
Shareholders' Representative deems to be necessary or appropriate in connection
with his performance of his obligations under this Agreement. All such fees and
expenses (including reasonable attorneys' fees) incurred by the Shareholders'
Representative prior to the Closing shall be borne by the Shareholders according
to their respective Shareholder Percentages.
(d) The Shareholders hereby agree severally to indemnify the
Shareholders' Representative (in his capacity as such) ratably according to
their respective Shareholder Percentages against, and to hold the Shareholders'
Representative (in his capacity as such) harmless from, any and all Liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of whatever kind which may at any time be imposed
upon, incurred by or asserted against the Shareholders' Representative in such
capacity in any way relating to or arising out of his action or failure to take
action pursuant to this Agreement or in connection herewith or therewith in such
capacity; provided, however, that no Shareholder shall be liable for the payment
of any portion of such Liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Shareholders'
Representative as determined by a final decision of a court of competent
jurisdiction no longer subject to appeal. The agreements in this paragraph shall
survive the termination of this Agreement.
(e) Except for liability to the Shareholders resulting solely from
his gross negligence or willful misconduct as determined by a final decision of
a court of competent jurisdiction no longer subject to appeal, the Shareholders'
Representative shall have no liability to any Person as a result of his status
as the Shareholders' Representative.
57
(f) The Parent shall be entitled to rely on the fact that any
action taken, document executed or determination made by the Shareholders'
Representative on behalf of the Shareholders under this Agreement shall have
been fully authorized by the Shareholders and shall be valid, binding and
enforceable against all of the Shareholders. No Shareholder shall be entitled to
contest or challenge any such action taken, document executed or determination
made by the Shareholders' Representative on behalf of the Shareholders.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Xxxxxxx Non-Compete; Non-Solicitation.
-------------------------------------
(a) Subject to the further provisions of this Section 10.1, during
the period commencing on the Closing Date and ending on the date which is six
months following the Closing Date (the "Non-Compete Period)", Xxxxx X. Xxxxxxx
("Xxxxxxx") covenants and agrees that he will not, directly or indirectly, enter
into, engage in, assist, give or lend funds to or otherwise finance, be employed
by or consult with, or have a financial or other interest in, any business which
engages in or otherwise competes with the same or similar businesses as Camelot
Care Corporation, Camelot Care Centers, Inc. or Camelot Community Care
(collectively, the "Camelot Companies"), within the Territory, whether for or by
himself or as an independent contractor, agent, stockholder, partner or joint
venturer for any other Person. The "Territory" shall be comprised of those
geographic locations and populations in which the Camelot Companies conduct such
business during the Non-Compete Period. To the extent that the covenant provided
for in this Section 10.1(a) may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any particular activity
or geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced.
(b) During the period commencing on the Closing Date and ending on
the first anniversary of the Closing Date, Xxxxxxx covenants and agrees that he
will not, directly or indirectly, either for himself or for any other Person (A)
solicit any employee of the Camelot Companies to terminate his or her employment
with the Camelot Companies or employ any such individual during his or her
employment with the Camelot Companies and for a period of one year after such
individual terminates his or her employment with the Camelot Companies, (B)
solicit any customer of the Camelot Companies to purchase or distribute
information or services of or on behalf of him or any other Person, or (c) take
any action that may cause injury to the relationships between the Camelot
Companies and any of their employees and any lessor, lessee, vendor, supplier,
customer, employee, consultant or other business associate of the Camelot
Companies.
(c) Notwithstanding the foregoing, and as specific exceptions to
the foregoing, Xxxxxxx shall be permitted to:
(i) provide legal services of any kind or nature, whether on
a contract basis or in an employment relationship;
58
(ii) provide computer based management systems to any entity,
including services provided by Qualifacts;
(iii) provide services of any kind with respect to therapeutic
schools, residential treatment programs, acute care psychiatric facilities,
or mental retardation/development delayed populations; and
(iv) own not more than ten percent (10%) (on a fully diluted
basis) of the outstanding securities of any Person.
(d) Xxxxxxx understands that the foregoing restrictions may limit
his ability to earn a livelihood but he nevertheless believes that he has
received sufficient consideration and other benefits provided hereunder to
clearly justify such restrictions which, in any event (given his education,
skills and ability), he does not believe would prevent him from otherwise
earning a living.
10.2 Transaction Expenses.
--------------------
(a) The Shareholders shall pay all of their expenses incurred in
connection with the transactions contemplated hereby.
(b) The Parent shall pay all of its expenses incurred in connection
with the transactions contemplated hereby.
(c) The Shareholders shall pay all transfer, stamp (including
documentary stamp taxes, if any) and other similar Taxes with respect to the
transactions contemplated hereby.
10.3 Amendment.
---------
This Agreement may not be amended except by an instrument in writing
signed by the Parent and the Shareholders' Representative.
10.4 Entire Agreement.
----------------
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Schedules and the Exhibits (in their
executed form) attached hereto) contain all of the agreements among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements or understandings among the parties with respect thereto
(including, but not limited to, the letter of intent dated as of February 2,
2001, as amended).
10.5 Severability.
------------
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining
59
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
10.6 No Third-Party Beneficiaries; Successors and Assigns.
----------------------------------------------------
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns and the Company. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, representatives, heirs and estates,
as the case may be. This Agreement shall not be assignable by any party hereto
without the consent of the other parties hereto; provided, however, that
anything contained herein to the contrary notwithstanding, the Parent may
collaterally assign this Agreement, without the prior consent of any other
party, to any direct or indirect subsidiary of the Parent referenced in
Section 1.1 or to a financial or lending institution providing financing to the
Parent.
10.7 Headings.
--------
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
10.8 Notices.
-------
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to any Shareholder or Guarantor, to such Shareholder at such
Shareholder's address set forth on Schedule I hereto or to such
Guarantor at such Guarantor's address set forth under its
signature hereto;
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000; and
60
(b) if to the Company, to:
Camelot Care Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000;
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000; and
(c) if to Parent or the Sub, to:
The Providence Service Corporation
000 Xxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopier: (000) 000-0000;
with a copy to:
X'Xxxxxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Nissan, Esq.
Telecopier: (000) 000-0000.
All such notices and other communications shall be deemed to have been given and
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of delivery by telecopy, on the date of such delivery, (c) in the
case of delivery by nationally-recognized overnight courier, on the Business Day
following dispatch, and (d) in the case of mailing, on the third following such
mailing.
10.9 Counterparts.
------------
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
61
10.10 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
Laws of the State of Arizona without giving effect to any choice or conflict of
law provision or rule (whether of the State of Arizona or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of Arizona.
10.11 Incorporation of Exhibits and Schedules.
---------------------------------------
The Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
10.12 Construction.
------------
Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which it
relates. The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
10.13 Non-Merger of Representations and Warranties.
--------------------------------------------
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive the Closing
in accordance with the express terms of this Agreement, notwithstanding the
Closing or any investigation made by or on behalf of any party, and shall
continue in full force and effect. The Closing shall not prejudice any right of
one party against any other party in respect of anything done or omitted under
this Agreement or in respect of any right to damages or other remedies.
10.14 Remedies.
--------
Subject to the provisions of Section 8.7, the parties shall each have and
retain all other rights and remedies existing in their favor at Law or equity,
including, without limitation, any actions for specific performance and/or
injunctive or other equitable relief (including, without limitation, the remedy
of rescission) to enforce or prevent any violations of the provisions of this
Agreement.
10.15 Jurisdiction, Etc.
-----------------
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Arizona State court or federal court of the United States of
America sitting in the State of Arizona, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
Arizona State court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding
62
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by Law.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any Arizona
State or federal court. Each of the parties hereto irrevocably waives, to the
fullest extent permitted by Law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
10.16 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
10.17 Independence of Covenants and Representations and Warranties.
------------------------------------------------------------
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder.
10.18 Termination of Shareholder Agreements and Registration Rights Agreements.
------------------------------------------------------------------------
The Stockholders and the Company hereby agree that, as of the Effective
Time, all existing agreements, arrangements and understandings (including,
without limitation, the Registration Rights and Shareholders Agreement, dated
October 15, 1996, by and among the Company and the Shareholders party thereto,
as amended), between the Company, any of its Subsidiaries and the Shareholders
and/or among all or any of the Shareholders, shall automatically be terminated
and of no further force or effect.
* * *
63
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement and Plan of Merger as of the date first written above.
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx XxXxxxxx
---------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT ACQUISITION CORPORATION
By: /s/ Xxxxxxxx XxXxxxxx
---------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chairman /Chief Executive
Officer
CAMELOT CARE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
XXXXXX X. XXXXXXXX, as
Shareholders' Representative
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxxx and
Xxxxxx Xxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx and
Xxxxxx Xxxxx, JTWROS
/s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx
Agreement and Plan of Merger S-1
XXXXXXXX FAMILY TRUST
u/a June 26, 1996
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Trustee
/s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxxx
---------------------------------
Xxxx X. Xxxxxxxx
XXXXX XXXXXXX FAMILY TRUST
Dated November 17, 1995
/s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
Title: Trustee
XXXXX X. XXXXXX FAMILY TRUST
Dated November 23, 1987, as amended
/s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Trustee
XXXXXXX X. XXXXXX FAMILY TRUST
Dated November 23, 1987, as amended
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Trustee
Agreement and Plan of Merger S-2
/s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
----------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx XxxXxxxxxx
----------------------------------
Xxxx XxxXxxxxxx
/s/ Xxxxxxx X. XxXxxxxxxx
----------------------------------
Xxxxxxx X. XxXxxxxxxx
FOR PURPOSES OF SECTION 10.1:
/s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
Agreement and Plan of Merger S-3
Each of the undersigned hereby guarantees the due performance and payment
of all of the obligations of each Shareholder referenced above the undersigned's
signature, such guarantee to constitute a guaranty of payment and not
collection:
XXXXXXXX FAMILY TRUST
u/a June 26, 1996
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Guarantor's Name: Xxxxxx X. Xxxxxxxx
Address: 0000 X. Xxx Xxx Xxxxx
Xxxxxxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
XXXXX XXXXXXX FAMILY TRUST
Dated November 17, 1995
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Guarantor's Name: Xxxxx Xxxxxxx
Address: 0000 Xxxxxxxxxxx Xxxx. #0
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
XXXXX X. XXXXXX FAMILY TRUST
Dated November 23, 1987, as amended
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Guarantor's Name: Xxxxx X. Xxxxxx
Address: 00000 Xxxx Xxxx.
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Agreement and Plan of Merger S-4
XXXXXXX X. XXXXXX FAMILY TRUST
Dated November 23, 1987, as amended
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Guarantor's Name: Xxxxxxx X. Xxxxxx
Address: 00000 Xxxx Xxxx.
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Agreement and Plan of Merger S-5
Annex I
-------
DEFINITIONS
-----------
The following terms used in the Agreement and Plan of Merger shall have the
following respective meanings:
"Accounting Firm" means Ernst & Young, or if such firm is unable or
unwilling to act, such other independent "Big 5" public accounting firm as shall
be agreed upon by the Parent and Shareholders in writing or, if such parties
cannot so agree within the 30-calendar day period referred to in Section
1.10(b), by lot from among the remaining independent "Big 5" public accounting
firms willing to act.
"Affiliate" means, with respect to any Person, (i) a director, officer or
shareholder of such Person, (ii) a spouse, parent, sibling or descendant of such
Person (or spouse, parent, sibling or descendant of any director or executive
officer of such Person), or (iii) any other Person that, directly or indirectly
through one or more intermediaries, controls, or is Controlled by, or is under
common Control with, such Person.
"Agreement" has the meaning set forth in the caption.
"Appraisal Shares" has the meaning set forth in Section 1.11.
"Asset Disposition" has the meaning set forth in Section 7.2(u).
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated as of
the date hereof, by and between Camelot Care Centers, Inc. and the RTC
Purchasers, as the same may be amended from time to time.
"Books and Records" means all books of account, tax records, sales and
purchase records, customer and supplier lists, computer software, formulae,
business reports, plans and projections and all other documents, files,
correspondence and other information of the Company and the Subsidiaries
(whether in written, printed, electronic or computer printout form).
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Camelot Care" has the meaning set forth in the preamble.
"Camelot Community Care" has the meaning set forth in Section 3.33.
"Camelot Companies" has the meaning set forth in Section 10.1(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act.
"Certificate of Merger" has the meaning set forth in Section 1.2.
A-1 -
"CHAMPUS" has the meaning set forth in Section 3.31(a).
"Closing" has the meaning set forth in Article II.
"Closing Balance Sheet" has the meaning set forth in Section 1.10(a).
"Closing Date" has the meaning set forth in Article II.
"COBRA" has the meaning set forth in Section 3.11(b).
"Code" has the meaning set forth in Section 3.10(a).
"Common Stock" has the meaning set forth in the preamble.
"Common Stock Merger Cash Consideration" has the meaning set forth in
Section 1.7(a).
"Common Stock Merger Notes Consideration" has the meaning set forth in
Section 1.7(a).
"Common Stock Merger Shares Consideration" has the meaning set forth in
Section 1.7(a).
"Company" has the meaning set forth in the caption.
"Company Monthly Financial Statement" has the meaning set forth in Section
3.6(b).
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, instrument,
permit, concession, franchise or license.
"Control" means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Covered Properties" has the meaning set forth in Section 3.20(a).
"Determination" has the meaning set forth in the definition for Fair Value
Per Share.
"Determination Notice" has the meaning set forth in the definition for Fair
Value Per Share.
"DGCL" means the Delaware General Corporation Law, as in effect from time
to time.
"Effective Time" has the meaning set forth in Section 1.2.
A-2 -
"Employee Plan" means any "employee benefit plan" (as defined in Section
3(3) of ERISA) as well as any other plan, program or arrangement involving
direct and indirect compensation, under which the Company or any ERISA Affiliate
of the Company has any present or future obligations or liability on behalf of
its employees or former employees, contractual employees or their dependents or
beneficiaries.
"Encumbrances" means and includes security interests, mortgages, liens,
pledges, charges, easements, reservations, restrictions, clouds, equities,
rights of way, options, rights of first refusal and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Environmental and Safety Requirements" means all Laws, Orders, contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including,
without limitation, all of the foregoing relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, including, but not limited to, the Solid Waste
Disposal Act, as amended, 42 U.S.C.Sections6901, et seq., the Clean Air Act, as
amended, 42 U.S.C.Sections7401 et seq., the Federal Water Pollution Control
Act, as amended, 33 U.S.C.Sections1251 et seq., the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C.Sections11001 et seq., CERCLA, the
Hazardous Materials Transportation Uniform Safety Act, as amended, 49
U.S.C.Section 1804 et seq., the Occupational Safety and Health Act of 1970, and
the regulations promulgated hereunder and the Occupational Health and Safety
Act, R.S.O. 1990, c.O.1, as amended, and the regulations promulgated under the
foregoing.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any Person, any entity that is a
member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"Excess W.C." has the meaning set forth in Section 1.10(d).
"Excluded A.R." means all accounts receivable and other obligations owed
to, or held by, the Company or any Subsidiary that directly arise from services
rendered during the fourth month prior to the Closing Date and all months prior
thereto, each of which is set forth on Schedule 1.10(a). A third party
independent accountant located in Nashville, Tennessee, selected by the
Shareholders' Representative, subject to the approval by the Parent, which
approval shall not be unreasonably withheld, shall have full access to the books
and records of the Company relating to the Excluded A.R. during the normal
business hours of the Company to monitor the collection and the distribution of
the Excluded A.R. Net Proceeds. The cost of such
A-3 -
independent accountant shall be borne equally by the Parent and the Shareholders
(each in accordance with his or her Shareholder Percentage).
"Excluded A.R. Net Proceeds" means any gross cash proceeds received by the
Company or and Subsidiary in respect of Excluded A.R. net of any collection
expenses or fees incurred and net of a collection and processing fee of 7% of
the amount such gross cash proceeds.
"Exclusive Period" has the meaning set forth in Section 6.7.
"Fair Value Per Share" shall mean, as of any date of determination, the
fair value of each share of Parent Common Stock (or, with respect to a warrant
or option, or similar right, the fair value of each such share obtainable upon
exercise thereof net of the exercise price), determined as follows: At any time
that the Fair Value Per Share shall be required to be determined hereunder, the
board of directors of the Parent (excluding the Shareholder whose Parent Common
Stock may be the subject thereof, if any) shall make a good faith determination
(the "Determination") of the fair value of each such share, and shall provide to
the Shareholder with respect to whose shares such determination is being made a
written notice thereof which notice shall set forth supporting data in respect
of such calculation (the "Determination Notice"). The Shareholder shall have 10
days following receipt of the Determination Notice within which to deliver to
the Parent, a written notice of an objection, if any, to the Determination,
which notice shall set forth the Shareholder's good faith determination (the
"Shareholder's Determination") of the fair value of each share of Parent Common
Stock. The failure by the Shareholder to deliver such notice within such 10-day
period shall constitute the Shareholder's acceptance of the Determination as
conclusive. In the event of the timely delivery of such notice, the Parent and
the Shareholder shall attempt in good faith to arrive at an agreement with
respect to the Fair Value Per Share, which agreement shall be set forth in
writing within 15 days following delivery of such notice. If such Persons are
unable to reach an agreement within such 15-day period, the matter shall be
promptly referred for determination to a regionally or nationally recognized
investment banking or valuation firm (the "Valuer") reasonably acceptable to
such Persons. Such Persons will cooperate with each other in good faith to
select such Valuer. The Valuer may select the Determination or the Shareholder's
Determination as the Fair Value Per Share or may select any other number or
value. The Valuer's selection will be furnished to such Persons in writing and
be conclusive and binding upon such Persons and shall not be subject to
collateral attack. The fees and expenses of the Valuer shall be borne equally by
the Parent, on the one hand and the Shareholder on the other hand with respect
to whose shares such determination relates, unless the Valuer's determination of
Fair Value Per Share is within (i) 10% of the Determination, in which case all
of the Valuer's fees and expenses shall be borne by such Shareholder or (ii) 10%
of the Shareholders' Determination, in which case all of the Valuer's fees and
expenses shall borne by the Parent.
"Final W.C." has the meaning set forth Section 1.10(a).
"Final W.C. Statement" has the meaning set forth in Section 1.10(a).
"Financial Statements" has the meaning set forth in Section 3.6(c).
A-4 -
"Funded Indebtedness" means, without duplication, the aggregate amount
(including the current portions thereof) of all (i) indebtedness for money
borrowed from others and purchase money indebtedness (other than accounts
payable in the ordinary course) of the Company and the Subsidiaries; (ii)
indebtedness of the type described in clause (i) above guaranteed, directly or
indirectly, in any manner by the Company and the Subsidiaries, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the relevant debtor, or to purchase indebtedness, or to purchase and
pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling such debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss (any such
arrangement being hereinafter referred to as a "Guaranty"), but excluding
endorsements of checks and other instruments in the ordinary course; (iii)
indebtedness of the type described in clause (i) above secured by any
Encumbrances upon property owned by the Company or the Subsidiaries, even though
such Person has not in any manner become liable for the payment of such
indebtedness; (iv) interest expense accrued but unpaid, and all prepayment
premiums, on or relating to any of such indebtedness; and (v) all obligations
under leases of the Company or the Subsidiaries which are required to be
reflected as liabilities on the balance sheet of such Person by GAAP. The term
Funded Indebtedness shall specifically exclude any indebtedness incurred in
connection with the financing for the transactions contemplated hereunder.
"GAAP" means generally accepted accounting principles in the United States
of America applied on a basis which is consistent with the Latest Audited
Balance Sheet.
"Governmental Entity" means any court, administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
Federal, state, provincial or local.
"Guaranty" has the meaning set forth in the definition for Funded
Indebtedness.
"Xxxxxx" has the meaning set forth in Section 7.2(k).
"HIPAA" has the meaning set forth in Section 3.11(b).
"Indemnified Persons" means the Persons entitled to indemnification under
Article VIII.
"Indemnifying Persons" means the Persons obligated to indemnify an
Indemnified Person under Article VIII.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service xxxx applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"Latest Audited Balance Sheet" has the meaning set forth in Section 3.6(a).
A-5 -
"Latest Audited Balance Sheet Date" has the meaning set forth in Section
3.6(a).
"Latest Balance Sheet" has the meaning set forth in Section 3.6(a).
"Latest Balance Sheet Date" has the meaning set forth in Section 3.6(a).
"Latest Parent Balance Sheet" has the meaning set forth in Section 5.5(a).
"Latest Parent Balance Sheet Closing Date" has the meaning set forth in
Section 5.5(a).
"Law" means all international, European Union, national, federal, state or
local laws (both common and statute law and civil and criminal law) and all
legislation and regulatory codes of practice (including without limitation,
statutory instruments, guidance notes, circulars, directives, decisions, rules,
regulations, treaties and conventions) or Orders of any Governmental Entity.
"Liability" means any liability or obligation (including as related to
Taxes), whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated and whether due or
to become due, regardless of when asserted.
"Losses" means any and all losses, claims, costs, shortages, damages,
Liabilities (including non-cash losses or reductions in value or Liabilities
arising as a result of a breach of any representation or warranty hereunder or
under the Related Documents), expenses (including attorneys' and accountants'
and other professionals' fees), assessments, Tax deficiencies and Taxes
(including interest or penalties thereon) arising from or in connection with any
such matter that is the subject of indemnification under Article VIII, in each
case, (i) net of any cash insurance benefits actually received and (ii) net of
any Tax benefits realized in respect of the Losses for which the indemnification
payments are being made. For purposes of this definition, Tax benefits realized
shall mean the sum of all reductions in federal, state and local Taxes payable
by the Indemnified Person solely as a result of the Losses for which the
indemnification payments are being made. All calculations shall be made using
reasonable assumptions agreed upon by the parties hereto including the timing of
the utilization of any such Tax benefits, and any such Tax benefits shall be
assumed to be utilized in a given Tax year only after all other Tax benefits
available in such year have first been taken into account. Future Tax benefits,
if any, shall be discounted to present value using a discount rate of 10%. If a
Tax benefit that has been taken into account for purposes of calculating Losses
hereunder is wholly or partially disallowed by a taxing authority, the
Indemnifying Person shall pay the Indemnified Person the amount that would have
been paid originally with respect to such Losses had such disallowed Tax benefit
not been taken into account.
"Management Agreement" has the meaning set forth in Section 3.33.
"Material Adverse Change" means, with respect to any Person, any material
adverse change in the business, operations, assets (including levels of working
capital and components thereof), condition (financial or otherwise), operating
results, liabilities, employee
A-6 -
relations or prospects of such Person or any material casualty loss or damage to
the assets of such Person, whether or not covered by insurance.
"Material Adverse Effect" on any Person means a material adverse effect on
the business, operations, assets (including levels of working capital and
components thereof), condition (financial or otherwise), operating results,
liabilities, employee relations or prospects of such Person.
"Merger" has the meaning set forth in the preamble.
"Merger Cash Consideration" means the aggregate Common Stock Merger Cash
Consideration and the aggregate Preferred Stock Merger Cash Consideration.
"Merger Consideration" means the Merger Cash Consideration, the Merger
Notes Consideration, the Merger Shares Consideration and the W.C. Adjustment
Consideration.
"Merger Notes Consideration" means the aggregate Common Stock Merger Notes
Consideration and the aggregate Preferred Stock Merger Notes Consideration.
"Merger Shares Consideration" means the aggregate Common Stock Merger
Shares Consideration and the aggregate Preferred Stock Merger Shares
Consideration.
"Nashville Office" has the meaning set forth in Section 7.2(s).
"Non-Compete Period" has the meaning set forth in Section 10.1(a).
"Note" has the meaning set forth in Section 1.7(a).
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Parent" has the meaning set forth in the caption.
"Parent Common Stock" means the Class A Common Stock, $.001 par value per
share, and Class B Common Stock, $0.001 par value per share, of the Parent.
"Parent Excluded Representations and Warranties" has the meaning set forth
in Section 8.1(f).
"Parent Equity Securities" has the meaning set forth in Section 6.11.
"Parent Financial Statements" has the meaning set forth in Section 5.5(b).
"Parent Group" has the meaning set forth in Section 8.1(a).
"Parent's Notice of Adjustment" has the meaning set forth in Section
1.10(b).
A-7 -
"Parent Preferred Stock" means the Series A Preferred Stock, $0.001 par
value per share, the Series B Preferred Stock, $0.001 par value per share, the
Series C Preferred Stock, $0.001 par value per share, and the Series D Preferred
Stock, $0.001 par value per share, of the Parent.
"Parent Shares" has the meaning set forth in Section 1.7(a).
"Parent Subsidiaries" means Camelot Acquisition Corporation, Providence of
Arizona, Inc., Family Preservation Services, Inc., Providence Service
Corporation of Texas, Providence Service Corporation of Oklahoma, Family
Preservation Services of Florida, Inc., Family Preservation Services of North
Carolina, Inc., Providence Service Corporation of Maine, Inc., The Behavioral
Assessment Center, Inc., Family Preservation Services of West Virginia, Inc.,
Providence Service Corporation of Nevada, People of Color Network, Inc. and Rio
Grande Management Company, L.L.C.
"Parent Unaudited 2001 Financial Statements" has the meaning set forth in
Section 5.5(a).
"Permits" has the meaning set forth in Section 3.16.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due and
payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; (iii) mechanic's,
materialman's, supplier's, vendor's or similar liens arising in the ordinary
course of business securing amounts that are not delinquent and (iv) in the case
of the Parent, any Encumbrances pursuant to its senior or senior subordinated
loan facilities and any Encumbrances permitted to be outstanding thereunder.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
governmental entity (or any department, agency or political subdivision
thereof).
"Potential Transaction" has the meaning set forth in Section 6.7.
"Preferred Stock" has the meaning set forth in the preamble.
"Preferred Stock Merger Cash Consideration" has the meaning set forth in
Section 1.7(a).
"Preferred Stock Merger Notes Consideration" has the meaning set forth in
Section 1.7(a).
"Preferred Stock Merger Shares Consideration" has the meaning set forth in
Section 1.7(a).
A-8 -
"Pre-Closing Taxes" means (i) any Taxes for a tax period (or portion
thereof) that ends on or before the end of the Closing Date and (ii) for any Tax
period that includes but does not end on the Closing Date (a "Straddle Tax
Period"), Taxes relating to the portion of such period before the Closing Date
determined pursuant to Section 8.1(e).
"Principles" has the meaning set forth in Section 1.10(a).
"Proceedings" means actions, suits, claims, investigations or legal or
administrative or arbitration proceedings.
"Real Property" has the meaning set forth in Section 3.13(a).
"Recips" has the meaning set forth in the preamble.
"Registration Rights Agreement" has the meaning set forth in Section
7.2(d).
"Related Documents" means the Notes, the Shareholders Agreement, the
Registration Rights Agreement, the Side Letter and any other documents,
agreements or instruments executed and delivered by the Company and/or the
Shareholders in connection with the transactions contemplated hereunder.
"RTC Liabilities" means all of liabilities relating to the residential
treatment and education assets of the Company and the businesses related
thereto.
"RTC Purchasers" means Xxxx X. Xxxxxxxx, Xx. and Xxxxxxx Xxxxxx, MD, and
their successors and permitted assigns.
"Section 262" has the meaning set forth in Section 1.11.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder's Determination" has the meaning set forth in the definition
for Fair Value Per Share.
"Shareholder Excluded Representations and Warranties" has the meaning set
forth in Section 8.1(c).
"Shareholder Percentage" means, for each Shareholder, the percentage
specified on Schedule I hereto.
"Shareholders" has the meaning set forth in the caption.
"Shareholders Agreement" has the meaning set forth in Section 7.2(d).
"Shareholders' Notice of Disagreement" has the meaning set forth in Section
1.10(b).
"Shareholders' Representative" has the meaning set forth in Section 9.3(a).
A-9 -
"Shares" has the meaning set forth in the preamble.
"Shortfall Amount" has the meaning set forth in Section 1.10(e).
"Side Letter" has the meaning set forth in Section 7.2(w).
"SSA" has the meaning set forth in Section 3.31(a).
"Straddle Tax Period" has the meaning set forth in the definition of
"Pre-Closing Taxes".
"Sub" has the meaning set forth in the caption.
"Sub Common Stock" has the meaning set forth in Section 1.6.
"Subsidiaries" has the meaning set forth in the preamble.
"Subject Business" has the meaning set forth in the preamble.
"Survival Date" means the date, if any, upon which any representation,
warranty, covenant or other agreement contained herein shall terminate in
accordance with the terms hereof.
"Surviving Corporation" has the meaning set forth in Section 1.1.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax" means any of the Taxes.
"Tax Affiliate" has the meaning set forth in Section 3.10(a).
"Tax Returns" means Federal, state, provincial, local and foreign tax
returns, reports, statements, declarations of elections, notices, filings and
information return in respect of Taxes.
"Taxes" means, with respect to any Person, (i) all income taxes (including
any tax on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings or profits) and all
gross receipts, sales, use, ad valorem, capital and transfer, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, alternative or add-on
minimum taxes, customs duties and other taxes, fees, assessments or charges of
any kind whatsoever, together with all interest and penalties, additions to tax,
surtaxes and other additional amounts imposed by any taxing authority (domestic
or foreign) on such entity (if any) and (ii) any liability for the payment of
any amount of the type described in the immediately preceding clause (A) as a
result of being a "transferee" (within the meaning of Section 6901 of the Code
or any other applicable Law) of another entity or a member of an affiliated or
combined group.
"Territory" has the meaning set forth in Section 10.1(a).
A-10 -
"Third-Party Claim" has the meaning set forth in Section 8.3.
"Transition Period" has the meaning set forth in Section 6.1(a).
"Valuer" has the meaning set forth in the definition for Fair Value Per
Share.
"W.C. Adjustment" has the meaning set forth in Section 1.10(f).
"W.C. Adjustment Consideration" has the meaning set forth in Section
1.7(a).
"W.C. Adjustment Final Determination Date" has the meaning set forth in
Section 1.10(b).
A-11 -
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Agreement and Plan of Merger (this
"Amendment") is made and entered into as of December 28, 2001, by and among THE
PROVIDENCE SERVICE CORPORATION, a Delaware corporation (the "Parent"), CAMELOT
ACQUISITION CORPORATION, a Delaware corporation (the "Sub"), CAMELOT CARE
CORPORATION, a Delaware corporation (the "Company"), and XXXXXX X. XXXXXXXX, an
individual, as Shareholders' Representative on behalf of all of the shareholders
of the Company (collectively referred to herein as the "Shareholders" and each
individually as a "Shareholder").
WHEREAS, Parent, Sub, Company, Xx. Xxxxxxxx and the Shareholders have
heretofore entered into an Agreement and Plan of Merger dated as of December 11,
2001 (the "Merger Agreement"); and
WHEREAS, Parent, Sub, Company and Xx. Xxxxxxxx, on behalf of the
Shareholders as Shareholders' Representative pursuant to the Merger Agreement,
wish to amend the Merger Agreement in certain respects as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual
promises of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, do hereby agree as follows:
1. Except as otherwise provided herein, capitalized terms used in this
Amendment shall have the same meanings ascribed to them in the Merger Agreement.
2. Effective as of the date hereof, the first sentence of subsection
9.1(a)(ii) of the Merger Agreement is amended and restated to read in full as
follows:
"either the Parent or the Shareholders' Representative if the Closing shall
not have been consummated by January 31, 2002 without liability to the
terminating party on account of such termination; provided that the right
to terminate this Agreement under this Section 9.1(a)(ii) shall not be
available to a party whose breach or violation of any representation,
warranty or covenant under this Agreement has been a cause of, or has
resulted in, the failure of the Closing to occur on or before such date;
and provided further that, either Parent or the Shareholders'
Representative may elect to automatically extend such date to February 15,
2002 by providing the other with written notice of such election; or"
3. Except as expressly provided herein, the Merger Agreement shall remain
in full force and effect.
4. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Amendment, and all of
which, when taken together, shall be deemed to constitute but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Amendment as of the date first written above.
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT ACQUISITION CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT CARE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
XXXXXX X. XXXXXXXX, as
Shareholders' Representative
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
2
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 to Agreement and Plan of Merger (this
"Amendment") is made and entered into as of February 15, 2002, by and among THE
PROVIDENCE SERVICE CORPORATION, a Delaware corporation (the "Parent"), CAMELOT
ACQUISITION CORPORATION, a Delaware corporation (the "Sub"), CAMELOT CARE
CORPORATION, a Delaware corporation (the "Company"), and XXXXXX X. XXXXXXXX, an
individual, as Shareholders' Representative on behalf of all of the shareholders
of the Company (collectively referred to herein as the "Shareholders" and each
individually as a "Shareholder").
WHEREAS, Parent, Sub, Company, Xx. Xxxxxxxx and the Shareholders have
heretofore entered into an Agreement and Plan of Merger dated as of December 11,
2001 and amended as of December 28, 2001 (the "Merger Agreement"); and
WHEREAS, Parent, Sub, Company and Xx. Xxxxxxxx, on behalf of the
Shareholders as Shareholders' Representative pursuant to the Merger Agreement,
wish to amend the Merger Agreement in certain respects as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual
promises of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, do hereby agree as follows:
1. Except as otherwise provided herein, capitalized terms used in this
Amendment shall have the same meanings ascribed to them in the Merger Agreement.
2. Effective as of the date hereof, the first sentence of subsection
9.1(a)(ii) of the Merger Agreement is amended and restated to read in full as
follows:
"either the Parent or the Shareholders' Representative if the Closing shall
not have been consummated by February 22, 2002 without liability to the
terminating party on account of such termination; provided that the right
to terminate this Agreement under this Section 9.l(a)(ii) shall not be
available to a party whose breach or violation of any representation,
warranty or covenant under this Agreement has been a cause of, or has
resulted in, the failure of the Closing to occur on or before such date."
3. Except as expressly provided herein, the Merger Agreement shall remain
in full force and effect.
4. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Amendment, and all of
which, when taken together, shall be deemed to constitute but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Amendment as of the date first written above.
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT ACQUISITION CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT CARE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
XXXXXX X. XXXXXXXX, as
Shareholders' Representative
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
FOR PURPOSES OF SECTION 10.1
/s/ Xxxxx X. Xxxxxxx
----------------------------------
Xxxxx X. Xxxxxxx
2
AMENDMENT NO. 3
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 3 to Agreement and Plan of Merger (this "Amendment") is
made and entered into as of February 22, 2002, by and among THE PROVIDENCE
SERVICE CORPORATION, a Delaware corporation (the "Parent"), CAMELOT ACQUISITION
CORPORATION, a Delaware corporation (the "Sub"), CAMELOT CARE CORPORATION, a
Delaware corporation (the "Company"), and XXXXXX X. XXXXXXXX, an individual, as
Shareholders' Representative on behalf of all of the shareholders of the Company
(collectively referred to herein as the "Shareholders" and each individually as
a "Shareholder").
WHEREAS, Parent, Sub, Company, Xx. Xxxxxxxx and the Shareholders have
heretofore entered into an Agreement and Plan of Merger dated as of December 11,
2001 and amended as of December 28, 2001 and February 15, 2002 (the "Merger
Agreement"); and
WHEREAS, Parent, Sub, Company and Xx. Xxxxxxxx, on behalf of the
Shareholders as Shareholders' Representative pursuant to the Merger Agreement,
wish to amend the Merger Agreement in certain respects as set forth below.
NOW THEREFORE, in consideration of the premises and the mutual promises of
the parties herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, do hereby agree as follows:
1. Except as otherwise provided herein, capitalized terms used in this
Amendment shall have the same meanings ascribed to them in the Merger Agreement.
2. Effective as of the date hereof, the reference in Section 1.9 to
Schedule I shall be deleted and replaced with "Schedule I(a)," a copy of which
is attached hereto.
3. Effective as of the date hereof, the attached Schedule I(a) shall
become Schedule I(a) to the Merger Agreement.
4. Effective as of the date hereof, subsection 9.1 (a)(ii) of the Merger
Agreement is amended and restated to read in full as follows:
"either the Parent or the Shareholders' Representative if the Closing shall
not have been consummated by February 28, 2002 without liability to the
terminating party on account of such termination; provided that the right
to terminate this Agreement under this Section 9.1(a)(ii) shall not be
available to a party whose breach or violation of any representation,
warranty or covenant under this Agreement has been a cause of, or has
resulted in, the failure of the Closing to occur on or before such date."
5. Effective as of the date hereof, the definition of "Excluded A.R." in
Annex 1 to the Agreement is amended and restated to read in full as follows:
"'Excluded A.R.' means all accounts receivable and other obligations owed
to, or held by, the Company or any Subsidiary that directly arise from
services rendered on the 91st day prior to the Closing Date and all days
prior thereto. A third party independent accountant located in Nashville,
Tennessee, selected by the Shareholders' Representative, subject to the
approval by the Parent, which approval shall not be unreasonably withheld,
shall have full access to the books and records of the Company relating to
the Excluded A.R. during the normal business hours of the Company to
monitor the collection and the distribution of the Excluded A.R. Net
Proceeds. The cost of such independent accountant shall be borne equally by
the Parent and the Shareholders (each in accordance with his or her
Shareholder Percentage)."
6. Except as expressly provided herein, the Merger Agreement shall remain
in full force and effect.
7. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original copy of this Amendment, and all of
which, when taken together, shall be deemed to constitute but one and the same
instrument.
[Remainder of Page Left Blank Intentionally]
2
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Amendment as of the date first written above.
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT ACQUISITION CORPORATION
By: /s/ Xxxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxxx X. XxXxxxxx
Title: Chief Executive Officer
CAMELOT CARE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
XXXXXX X. XXXXXXXX, as
Shareholders' Representative
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
3
SCHEDULE 1(a)
Shareholder Number of Shares
---------------------------------------- -----------------------
Xxxxxx X. Xxxxxxxx and Xxxxxx Xxxxx, 4,247,709 Preferred
JTWROS
Xxxxx X. Xxxxxxx 68,224 Preferred
422,352 Common
Xxxxxxxx Family Trust u/a June 26, 306,606 Preferred
1996
Xxxxx X. Xxxxxxx 34,112 Preferred
Xxxx X. Xxxxxxxx 153,863 Common
Xxxxx Xxxxxxx Family Trust Dated 153,863 Common
November 17, 1995
Xxxxx X. Xxxxxx Family Trust Dated 924,133 Common
November 23, 1987, as amended
Xxxxxxx X. Xxxxxx Family Trust Dated 924,133 Common
November 23, 1987, as amended
Xxxx X. Xxxxxxx 153,863 Common
Xxxxx X. Xxxxxxx 422,352 Common
Xxxx XxxXxxxxxx 153,863 Common
Xxxxxxx X. XxXxxxxxxx 211,176 Common
4