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AGREEMENT AND PLAN OF MERGER
AMONG
VENTURES HEALTHCARE OF GAINESVILLE, INC.,
A FLORIDA CORPORATION
"VENTURES",
XXXXXXX X. XXXXXXX, XX., PH.D.
S. XXXX XXXXXXX
XXXX X. XXXXXX
"SHAREHOLDERS",
AND
CHILDREN'S COMPREHENSIVE SERVICES OF GAINESVILLE, INC.,
A TENNESSEE CORPORATION,
"MERGER SUBSIDIARY",
AND
CHILDREN'S COMPREHENSIVE SERVICES, INC.,
A TENNESSEE CORPORATION,
"PARENT"
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TABLE OF CONTENTS
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ARTICLE I.
THE MERGER......................................................................................................1
1.1 Effect of the Merger...................................................................................1
1.2 Assets of Ventures at Closing; Properties Acquired in Merger...........................................2
1.3 Further Assurances.....................................................................................3
ARTICLE II.
CONVERSION AND EXCHANGE OF SHARES...............................................................................4
2.1 Conversion of Shares...................................................................................4
2.2 Shares Owned by Ventures...............................................................................4
2.3 Fractional Shares......................................................................................4
2.4 Exchange of Shares; Escrow of Shares...................................................................4
ARTICLE III.
MERGER CONSIDERATION............................................................................................5
3.1 Merger Consideration...................................................................................5
3.2 Adjustments to Merger Consideration....................................................................5
ARTICLE IV.
CERTIFICATE OF INCORPORATION; OFFICERS AND DIRECTORS............................................................6
ARTICLE V.
EFFECTIVE DATE OF MERGER; FILING OF MERGER DOCUMENTS............................................................6
5.1 Effective Date.........................................................................................6
5.2 Filing of Certificate of Merger........................................................................6
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS..................................................................6
6.1 Organization, Qualification and Authority..............................................................6
6.2 Capitalization and Stock Ownership.....................................................................7
6.3 Investments............................................................................................7
6.4 Absence of Default.....................................................................................7
6.5 Financial Statements...................................................................................8
6.6 Operations since October 31, 1997......................................................................8
6.7 Litigation.............................................................................................9
6.8 Licenses..............................................................................................10
6.9 Medicare and Medicaid Matters.........................................................................10
6.10 Title to and Condition of Assets......................................................................10
6.11 Contracts.............................................................................................11
6.12 Environmental Matters.................................................................................12
6.13 Ventures Employees. .................................................................................14
6.14 Employee Benefit Plans................................................................................14
6.15 Insurance.............................................................................................15
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6.16 Conflicts of Interest.................................................................................15
6.17 Compliance with Laws..................................................................................15
6.18 WARN Act..............................................................................................15
6.19 Tax Returns; Taxes....................................................................................16
6.20 No Omissions or Misstatements.........................................................................16
6.21 Accredited Investor...................................................................................16
6.22 Purchase for Investment; Restrictions on Transfer.....................................................16
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF
MERGER SUBSIDIARY AND PARENT...................................................................................17
7.1 Organization, Qualification and Authority.............................................................17
7.2 Absence of Default....................................................................................17
7.3 SEC Reports...........................................................................................18
7.4 Shares to be Issued...................................................................................18
7.5 Capitalization of Merger Subsidiary; Continuation of Ventures Business................................18
7.6 Securities Law Compliance.............................................................................18
ARTICLE VIII.
COVENANTS OF PARTIES...........................................................................................19
8.1 Certificate of Incorporation and Bylaws of Ventures; Capitalization...................................19
8.2 Approval by Shareholders..............................................................................19
8.3 Preservation of Business and Assets...................................................................19
8.4 Books and Records.....................................................................................19
8.5 Preserve Accuracy of Representations and Warranties...................................................20
8.6 Broker's or Finder's Fee..............................................................................20
8.7 Indebtedness; Liens...................................................................................20
8.8 Compliance with Laws and Regulatory Consents..........................................................21
8.9 Maintain Insurance Coverage...........................................................................21
ARTICLE IX.
VENTURES' AND SHAREHOLDERS' CONDITIONS TO CLOSE................................................................21
9.1 Representations and Warranties True at Closing; Compliance with Agreement.............................21
9.2 No Action/Proceeding..................................................................................21
9.3 Order Prohibiting Transaction.........................................................................22
9.4 Opinion of Parent's Counsel...........................................................................22
ARTICLE X.
PARENT'S AND MERGER SUBSIDIARY'S CONDITIONS TO CLOSE...........................................................22
10.1 Representations and Warranties True at Closing; Compliance with Agreement.............................22
10.2 No Action/Proceeding..................................................................................22
10.3 Due Diligence; Inspection of Assets; U.C.C. Searches, etc.............................................22
10.4 Absence of Adverse Change.............................................................................22
10.5 Order Prohibiting Transaction.........................................................................23
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10.6 Noncompetition Agreements.............................................................................23
10.7 Licenses and Permits..................................................................................23
10.8 Consents..............................................................................................23
10.9 Opinion of Ventures' Counsel..........................................................................23
ARTICLE XI.
OBLIGATIONS OF VENTURES AND SHAREHOLDERS AT CLOSING............................................................24
11.1 Documents Effecting Closing...........................................................................24
11.2 Possession............................................................................................24
11.3 Opinion of Counsel....................................................................................24
11.4 Corporate Good Standing and Corporate Resolution......................................................24
11.5 Closing Certificate...................................................................................24
11.6 Third Party Consents..................................................................................24
11.7 Noncompetition Agreements.............................................................................25
11.8 Preliminary Closing Statement.........................................................................25
11.9 Additionally Requested Documents; Post-Closing Assistance.............................................25
ARTICLE XII.
OBLIGATIONS OF MERGER SUBSIDIARY AT CLOSING....................................................................25
12.1 Merger Consideration..................................................................................25
12.2 Corporate Good Standing and Certified Board Resolutions...............................................25
12.3 Closing Certificate...................................................................................25
12.4 Opinion of Merger Subsidiary's Counsel................................................................25
ARTICLE XIII.
TERMINATION....................................................................................................26
13.1 Circumstances of Termination..........................................................................26
13.2 Effect of Termination.................................................................................26
ARTICLE XIV.
SURVIVAL OF PROVISIONS AND INDEMNIFICATION.....................................................................26
14.1 Survival..............................................................................................26
14.2 Indemnification by Shareholders.......................................................................27
14.3 Indemnification by Merger Subsidiary and Parent.......................................................27
14.4 Rules Regarding Indemnification.......................................................................27
14.5 Exclusivity...........................................................................................28
ARTICLE XV.
MISCELLANEOUS..................................................................................................29
15.1 Assignment............................................................................................29
15.2 Other Expenses........................................................................................29
15.3 Notices...............................................................................................29
15.4 Confidentiality.......................................................................................30
15.5 Partial Invalidity; Waiver............................................................................30
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15.6 Interpretation........................................................................................31
15.7 Entire Agreement; Counterparts........................................................................31
15.8 Further Assurance of Shareholders after Closing.......................................................31
15.9 Legal Fees and Costs..................................................................................31
15.10 Controlling Law.......................................................................................31
15.11 Parent Guarantee......................................................................................31
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EXHIBIT INDEX
EXHIBIT DESCRIPTION RESPONSIBLE PARTY
------- ----------- -----------------
A Description of the Business Ventures
1.2(1) List and Description of Owned or Ventures
Leased Real Estate
1.2(2) Equipment & Furnishings Ventures
1.2(5) Bank Accounts and Related Information Ventures
1.2(9) Contract Rights; including Consultation Service Ventures
Agreements and Management Service Agreements
2.4 Form of Post Closing Escrow Agreement Ventures
3.1 Form of Pro Forma Balance Sheet Ventures
3.2 Form of Preliminary Closing Statement Ventures and
Merger Sub.
6.1 States of Foreign Qualification Ventures
6.2 Agreements Restricting Transferability Ventures
of Shares
6.3 Investments Ventures
6.5(1) Financial Statements; Contingent Liabilities Ventures
6.5(3) EBITDA by Location and Projected EBITDA Ventures
6.6 Operations since October 31, 1997 Ventures
6.7 Litigation Ventures
6.8 Copies of Licenses Ventures
6.10(5) Intellectual Property Ventures
6.11(1) Contracts; Consents required under Contracts Ventures
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EXHIBIT DESCRIPTION RESPONSIBLE PARTY
------- ----------- -----------------
6.11(4) Repair and Maintenance Obligations Ventures
6.13(1) Employees and Related Information Ventures
6.13(2) Employee Litigation Ventures
6.14 Employee Benefit Plans Ventures
6.15 Summary of Insurance Coverage Ventures
6.16 Conflicts of Interest Ventures
6.19 Pending Tax Audits and Investigations Ventures
8.3 Description of Payment Arrangements with CIC Ventures
10.6 Form of Noncompetition Agreement Ventures
10.8 Consents Ventures
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into on
January 19th, 1998 by and among VENTURES HEALTHCARE OF GAINESVILLE, INC., a
Florida corporation (referred to herein as "Ventures"), XXXXXXX X. XXXXXXX, XX.,
PH.D., S. XXXX XXXXXXX and XXXX X. XXXXXX (individually a "Shareholder" and
collectively, the "Shareholders"), CHILDREN'S COMPREHENSIVE SERVICES OF
GAINESVILLE, INC., a Tennessee corporation ("Merger Subsidiary") (the Merger
Subsidiary and Ventures sometimes collectively herein referred to as the
"Constituent Corporations"), and CHILDREN'S COMPREHENSIVE SERVICES, INC., a
Tennessee corporation ("Parent").
R E C I T A L S:
WHEREAS, Ventures owns and operates a business providing consultation
and management services to behavioral healthcare providers who operate partial
psychiatric programs, all as more particularly described on Exhibit "A" hereto
(the "Business"); and
WHEREAS, Shareholders own all of the issued and outstanding capital
stock of Ventures (the "Ventures Stock"); and
WHEREAS, Shareholders desire to transfer the Ventures Stock and Parent
desires to acquire the same from Shareholders in a reorganization under Section
368(a)(2)(D) of the Internal Revenue Code, subject to the terms and conditions
set forth in this Agreement; and
WHEREAS, Parent desires to guarantee performance by the Merger
Subsidiary under this Agreement of all of the representations, warranties,
covenants, conditions and agreements to be performed and observed by Merger
Subsidiary.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree that Ventures shall be merged (herein the
"Merger") into the Merger Subsidiary in accordance with the terms of this
Agreement.
ARTICLE I.
THE MERGER
1.1 EFFECT OF THE MERGER. On the Effective Date of the Merger (as such
date is defined in Section 5.1), Ventures shall be merged into Merger
Subsidiary, the separate legal existence of Ventures shall cease, and Merger
Subsidiary, as the surviving corporation, shall continue its corporate existence
under the laws of the State of Tennessee under the name of Ventures Healthcare
of Gainesville, Inc. (or
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such other name as Parent may subsequently elect). Subsequent to the Merger, the
Merger Subsidiary shall possess all the rights, privileges, powers, and
franchises of a public as well as of a private nature and be subject to all the
restrictions, disabilities, and duties of Ventures. All rights, privileges,
powers, and franchises of Ventures and all property, real, personal, and mixed,
belonging to Ventures shall be vested in Merger Subsidiary and all property,
rights, privileges, powers, and franchises and every other interest shall be
thereafter as effectually the property of Merger Subsidiary as they were of
Ventures. The title to real estate, if any, vested by deed or otherwise in
Ventures, shall not revert or be in any way impaired by reason of this Merger,
provided that all rights of creditors and all liens upon any property of
Ventures shall be preserved unimpaired and all debts, liabilities, and duties of
Ventures shall thenceforth attach to the Merger Subsidiary and may be enforced
against Merger Subsidiary to the same extent as if said debts, liabilities, and
duties had been incurred or contracted by Merger Subsidiary.
1.2 ASSETS OF VENTURES AT CLOSING; PROPERTIES ACQUIRED IN MERGER. At
the closing of the Merger (the "Closing"), Ventures will own or lease, as
applicable, all assets, tangible and intangible, real and personal, that are
currently used to operate the Business (the "Assets"), free and clear of all
encumbrances, mortgages, pledges, liens, and security interests, other than
Permitted Encumbrances. Permitted Encumbrances are defined as (i) mechanics,
materialmen's and similar liens with respect to any amounts not yet due and
payable or which are being contested in good faith through appropriate
proceedings, (ii) liens for taxes not yet due and payable or which are being
contested in good faith through appropriate proceedings, (iii) liens securing
rental payments under capital lease agreements and (iv) encumbrances and
restrictions on any real property owned or leased by Ventures (including
easements, covenants, rights of way and similar restrictions of record) that do
not materially interfere with the present uses of such real property. The Assets
will include, without limitation, the following:
(1) All right, title and interest in and to all of the real
property owned or leased by Ventures and used in connection with the Business,
if any, including, without limitation, the real property listed and described on
Exhibit 1.2.(1) attached hereto, and in and to all structures, improvements,
fixed assets and fixtures including fixed machinery and fixed equipment owned or
leased by Ventures and situated thereon or forming a part thereof and all
appurtenances, easements and rights-of-way related thereto (collectively, the
"Real Estate");
(2) All equipment, machinery, data processing hardware and
software, furniture, furnishings, appliances, vehicles and other tangible
personal property and all replacement parts therefor used in connection with the
Business including, without limitation, the equipment listed on Exhibit 1.2(2)
attached hereto (collectively, the "Equipment and Furnishings");
(3) All inventory of goods and supplies used or maintained in
connection with the Business reflected on the Financial Statements
(collectively, the "Inventory");
(4) Subject to the provisions of the agreement referenced in
Section 8.3, all accounts and notes receivables (the "Receivables") of Ventures
(it being understood by the parties that the Receivables shall not include
individual patient accounts collectible by Ventures, but not carried on the
books of Ventures as its own receivables, on behalf of owners of inpatient
psychiatric units managed by Ventures pursuant to management contracts);
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(5) All cash, including funds on hand, bank accounts
including, without limitation, those accounts listed by name and address of
banking institution, account name and account and routing numbers on Exhibit
1.2(5) attached hereto, money market accounts, other accounts, certificates of
deposit and other investments of Ventures (the "Cash and Cash Equivalents"), and
all prepaid expenses, any and all tax attributes and assets of Ventures as of
Closing, including without limitation, all net operating loss carryforwards;
(6) All personnel, corporate and other records related to the
Business, including both hard and microfiche copies, and all manuals, books and
records used in operating the Business, including, without limitation, personnel
policies and files and manuals, accounting records, and computer software;
(7) To the full extent not legally required to be reissued or
independently transferred as a consequence of the Merger, all federal, state and
local licenses, permits, registrations, certificates, consents, accreditations,
approvals and franchises, if any, held by Ventures in connection with the
Business as currently conducted (collectively, the "Licenses");
(8) All goodwill, and, to the extent assignable by Ventures,
all warranties express or implied and rights and claims related to the Assets or
the operation of the Business;
(9) Contract rights and interests held by Ventures arising out
of or related to the Business, including but not limited to those certain
consultation service agreements, management service agreements and other similar
contracts identified on Exhibit 1.2(9) hereto;
(10) All intangible or intellectual property owned, leased,
licensed or possessed by Ventures or any Shareholder and utilized in connection
with the Business, including without limitation, the name "Ventures Healthcare"
and all variations and derivations thereof, to the extent Ventures or any
Shareholder has rights in or to each such name;
(11) All of Ventures' right, title and interest in any
partnerships, joint ventures or similar arrangements.
1.3 FURTHER ASSURANCES. From time to time as and when requested by
Merger Subsidiary or its successors or assigns, the officers, directors and
shareholders of Ventures last in office shall execute and deliver such deeds and
other instruments and shall take or cause to be taken such other actions as
shall be necessary to vest or perfect in or to confirm of record or otherwise
Merger Subsidiary's title to, and possession of, all the property, interests,
assets, rights, privileges, immunities, powers, franchises, and authority of the
Ventures, and otherwise to carry out the purposes of this Agreement.
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ARTICLE II.
CONVERSION AND EXCHANGE OF SHARES
2.1 CONVERSION OF SHARES. The manner of converting or exchanging the
shares of each of the Constituent Corporations shall be as follows:
(1) The Merger shall effect no change in any of the shares of
Merger Subsidiary stock, and none of its shares shall be converted as a result
of the Merger.
(2) Each share of Ventures Stock issued and outstanding on the
Effective Date of the Merger (except shares of Ventures Stock issued and held in
the treasury of the Ventures) shall, by virtue of the Merger and on the
Effective Date of the Merger, be converted into and become, without action on
the part of the holder thereof, shares of fully paid and nonassessable Parent
Common Stock in an amount sufficient to comprise the Merger Consideration as set
forth in Article III below.
2.2 SHARES OWNED BY VENTURES. Each share of Ventures Stock issued and
held in the treasury of Ventures shall be canceled and retired, and no shares of
stock or other securities of Parent shall be issuable, and no cash shall be
exchangeable, with respect thereto.
2.3 FRACTIONAL SHARES. No fractional shares of Parent Common Stock
shall be issued pursuant to Section 2.1(2), but in lieu thereof, cash shall be
paid to the holder thereof in an amount based on the closing price of Parent
Common Stock on the NASDAQ Stock Market's NASDAQ National Market on the
Effective Date of the Merger, or if such shares were not traded on such date,
based on the closing price thereof on the next preceding day on which such
shares were traded.
2.4 EXCHANGE OF SHARES; ESCROW OF SHARES. Subject to the escrow
provisions set forth below, on and after the Effective Date of the Merger, each
holder of Ventures Stock shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of Parent Common
Stock to which he is entitled as provided in Section 2.1(2), and any cash to
which he maybe entitled on account of fractional shares (without interest
thereon) as provided in Section 2.3. Until so presented and surrendered in
exchange for a certificate representing Parent Common Stock, each certificate
which represented issued and outstanding shares of Ventures Stock on the
Effective Date of the Merger shall be deemed for all purposes to evidence
ownership of the number of shares of Parent Common Stock into which such shares
of Ventures Stock have been converted pursuant to the Merger. Until surrender of
such certificates in exchange for certificates representing Parent Common Stock,
the holder thereof shall not be entitled to vote at any meeting of Parent
stockholders or to receive any dividend or other distribution payable to holders
of shares of Parent Common Stock; provided, however, that upon surrender of such
certificates representing Ventures Stock in exchange for certificates
representing Parent Common Stock, there shall be paid to the record holder of
the certificate representing Parent Common Stock issued upon such surrender the
amount of dividends or other distributions (without interest) that theretofore
became payable with respect to the number of shares of Parent Common Stock
represented by the certificate issued upon such surrender.
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The parties acknowledge and agree that one-half (1/2) of the
Parent Common Stock to which each Shareholder shall be entitled to receive shall
be issued and held in escrow pursuant to the provisions of a Post Closing Escrow
Agreement of substantially the same form as Exhibit 2.4 hereto.
ARTICLE III.
MERGER CONSIDERATION
3.1 MERGER CONSIDERATION.
(1) The Parent Common Stock to be issued as merger
consideration ("Merger Consideration") shall have a value of Two Million Seven
Hundred Thousand and No/100 Dollars ($2,700,000.00), subject to adjustment as
set forth in this Article III. The Merger Consideration will be subject to
adjustment as follows: (i) the Merger Consideration shall be increased or
decreased, as appropriate, for additions or deletions of property, plant,
equipment or other non-current assets, if any, purchased or sold between June
30, 1997 and the Closing; (ii) the Merger Consideration shall also be adjusted
for any Seller employee benefits which are not accrued and reflected in net
working capital at Closing to the extent it causes a breach of (iii); and (iii)
Merger Consideration shall be adjusted to the extent that the working capital of
Ventures is less than Fifty Thousand and No/100 Dollars ($50,000.00) as of
Closing. Shareholders' equity of Ventures at Closing shall not be less than
Fifty Thousand and No/100 Dollars ($50,000.00). The Balance Sheet of Ventures as
of January 1, 1998 shall be substantially the same as the pro forma Balance
Sheet shown on Exhibit 3.1 hereto.
(2) The Merger Consideration will be One Hundred Forty-Six
Thousand Five Hundred Eighty (146,580) shares of Parent Common Stock which is
based upon a price of $18.42 per share. The Parent Common Stock will constitute
restricted securities the resale of which shall be subject to the requirements
of Rule 144. All aspects of the proposed transaction shall be subject to
applicable state and federal securities laws.
3.2 ADJUSTMENTS TO MERGER CONSIDERATION. The adjustments to the Merger
Consideration specified in Section 3.1(1) shall be estimated by the parties
hereto in good faith at the Closing to the extent reasonably possible based on
the most current interim financial statements with provisional adjustments as
shall be mutually agreed at Closing which shall be called the "Preliminary
Closing Statement". Attached as Exhibit 3.2 is the format of the Preliminary
Closing Statement. No later than sixty-five (65) days after the Closing, the
parties hereto shall prepare the "Final Closing Statement" reflecting the items
listed above prepared consistent with the past preparation of the internal
financial statements of Ventures on an accrual basis applied consistently with
prior periods. Adjustments made after the Closing based on the Final Closing
Statement shall be payable in cash not more than one (1) year after Closing,
with interest on any adjustments at an annual interest rate of eight and
one-half percent (8.5%) commencing at Closing. If Merger Subsidiary and
Shareholders are unable to agree on the Final Closing Statement within
sixty-five (65) days after delivery of the Final Closing Statement, they shall
appoint a firm of independent certified public accountants of recognized
national standing (excluding any firm regularly engaged by either party) (the
"Accountants") to make such determination which determination, shall be final
and binding on the parties hereto for the purpose of this Agreement, and Merger
Subsidiary and Shareholder shall each pay one-half (1/2) the cost of the
Accountants.
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ARTICLE IV.
CERTIFICATE OF INCORPORATION; OFFICERS AND DIRECTORS
The Certificate of Incorporation of Merger Subsidiary shall be amended,
effective on the Effective Date of the Merger, by changing Article I thereof so
as to read in its entirety as follows: "The name of the corporation is Ventures
Healthcare of Gainesville, Inc."
On the Effective Date of the Merger, the Certificate of Incorporation
of Merger Subsidiary, as amended above, shall be the Certificate of
Incorporation of the surviving corporation.
The officers and directors of the Merger Subsidiary on the Effective
Date shall from and after the Effective Date be the initial officers and
directors of the Merger Subsidiary after the Merger until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and Bylaws of the Merger Subsidiary.
ARTICLE V.
EFFECTIVE DATE OF MERGER; FILING OF MERGER DOCUMENTS
5.1 EFFECTIVE DATE. The Merger shall become effective on the filing of
this Agreement (or appropriate Certificate of Merger or Articles of Merger, as
applicable) (such documentation herein the "Certificate of Merger") in the
manner required by applicable law (the date of such filing being herein called
the "Effective Date of the Merger").
5.2 FILING OF CERTIFICATE OF MERGER. Unless this Agreement shall have
been terminated prior thereto under the provisions of Article XIII hereof, the
Certificate of Merger shall be so filed and recorded as promptly as possible
after Closing which shall occur upon satisfaction of the conditions precedent to
Closing and in no event later than the end of the next business day following
Closing.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As a material inducement to Parent and Merger Subsidiary to enter into
this Agreement and to consummate the Merger, Shareholders hereby jointly and
severally represent and warrant to Buyer, which representations and warranties
will be true and correct on the date of Closing, as follows:
6.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Ventures is a
corporation duly organized and validly existing under the laws of the State of
Florida and is in good standing and duly qualified to do business as a foreign
corporation in all states required by its Business as set forth on Exhibit 6.1,
except where the failure to be so qualified would not have a material adverse
effect on the business or results of operations of Ventures. Ventures has full
corporate power and authority to own, lease and operate its facilities and
assets as presently owned, leased and operated, and to carry on its business as
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it is now being conducted. Ventures and Shareholders each have the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements executed and delivered in connection
with this Agreement, to consummate the Merger and other transactions
contemplated on the part of each such party hereby, and to take all actions
necessary, in their respective capacities, to permit or approve the actions of
each of Ventures and Shareholders. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by each of Ventures and Shareholders, have been duly authorized by all
necessary action on the part of such parties. No other action, consent or
approval on the part of any of Ventures, Shareholders or any other person or
entity is necessary to authorize due and valid execution, delivery and
consummation, of this Agreement and all other agreements and documents executed
in connection herewith. This Agreement and all other agreements executed in
connection herewith by Ventures and/or Shareholders, upon due execution and
delivery thereof, will constitute the valid and binding obligations of Ventures
and/or Shareholders, as the case may be, enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
6.2 CAPITALIZATION AND STOCK OWNERSHIP. Except for Shareholders, no
other person or entity owns or holds, has any interest in, whether legal,
equitable or beneficial, or has the right to purchase, any capital stock or
other security of Ventures. The Ventures Stock, being Two Hundred Twenty Five
(225) shares, $1.00 par value, of common stock, constitutes all of the issued
and outstanding securities of Ventures, is duly authorized, validly issued,
fully paid and nonassessable, and is owned free and clear of any liens, charges,
security interests, pledges or other encumbrances. At Closing, Ventures will not
have any outstanding subscriptions, options, warrants, calls, contracts,
convertible securities or other instruments, agreements or arrangements of any
nature whatsoever under which Ventures is or may be obligated or compelled to
issue any capital stock, security or interest of any kind, or to transfer or
modify any right with respect to any capital stock, security or other interest,
and, as of the Closing, no one will have any preemptive rights, right of first
refusal or similar rights with respect to the Ventures Stock or any equity
interest in Ventures. Except as set forth on Exhibit 6.2, neither Ventures nor
any of the Shareholders is a party to any, and there exist no, voting trusts,
stockholder agreements, pledge agreements or other agreements relating to or
restricting the transferability of any shares of the Ventures Stock or equity
interests of Ventures and any such agreements listed on Exhibit 6.2, if any,
shall not preclude the Merger or other transactions contemplated by this
Agreement.
6.3 INVESTMENTS. Except as set forth on Exhibit 6.3, Ventures owns no
capital stock, securities, interest or other right or any option or warrant
convertible into the same, of any corporation, partnership, limited liability
company, joint venture or other business enterprise.
6.4 ABSENCE OF DEFAULT. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by Ventures and Shareholders will not constitute a violation of, or be
in conflict with, and will not, with or without the giving of notice or the
passage of time, or both, result in a breach of, constitute a default under,
create or cause the acceleration of the maturity of, any debt, indenture,
obligation or liability affecting either Ventures, the Shareholders, the
Business or Assets or rights in the Ventures Stock, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of the Ventures Stock
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or the Assets under: (a) any term or provision of the Charter or Bylaws of
Ventures; (b) any contract, lease, purchase order, agreement, document,
instrument, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Ventures and/or any Shareholder is a party or by
which either Ventures, any Shareholder, the Ventures Stock or the Assets are
bound; (c) any judgment, decree, order, regulation or rule of any court or
regulatory authority; or (d) any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority or
arbitration tribunal to which Ventures, any Shareholder, the Ventures Stock
and/or the Assets are subject.
6.5 FINANCIAL STATEMENTS.
(1) Attached hereto as Exhibit 6.5(1) are true and correct
copies of Ventures' unaudited balance sheets and income statements for the year
ended December 31, 1996 (the "Fiscal Year Financial Statements"), and the
interim unaudited balance sheet and income statement of Ventures for the eleven
(11) month period ended November 30, 1997 (the "Interim Financial Statements,"
which, with the Fiscal Year Financial Statements, will be referred to as the
"Financial Statements"). The Financial Statements are based on the books and
records of Ventures and present fairly, in compliance with generally accepted
accounting principles applied on a consistent basis, the financial position of
Ventures as of, and the results of its operations for, the periods specified,
except, in the case of the Interim Financial Statements, for year end
adjustments and accruals for income taxes. Except as set forth in the Interim
Financial Statements or on Exhibit 6.5(1), Ventures has, and as of the Closing
will have, no contingent liabilities or obligations.
(2) The books and records of Ventures are in such order and
completeness so that an unqualified audit may be performed for any period prior
to Closing not already audited. The Shareholders will cooperate in all
reasonable respects with the Merger Subsidiary in attempting to perform an audit
of Ventures for any period prior to Closing not already audited at Merger
Subsidiary's expense.
(3) Attached as Exhibit 6.5(3) is a schedule setting forth
EBITDA derived by Ventures from each of its various managements or similar
contracts on a location-by-location basis and a schedule setting forth the
projected annual EBITDA of new management contracts, if any, expected to be
added on or after January 1, 1998, it being understood that the Shareholders are
making no representations or warranties regarding such projections
6.6 OPERATIONS SINCE OCTOBER 31, 1997. Except as set forth in Exhibit
6.6, since November 30, 1997 there has been no:
(1) change in the condition of Ventures, financial or
otherwise, which has, or could reasonably be expected to have, a material
adverse effect on any of the Assets, the Business or on the results of the
operations of Ventures as a whole, including any circumstance or event which the
Shareholders reasonably believe may lead to a termination, cancellation or
non-renewal of Ventures' existing contracts;
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(2) material loss, damage or destruction of or to any of the
Assets, whether or not covered by insurance;
(3) sale, lease, transfer or other disposition by Ventures of,
or mortgages or pledges of or the imposition of any lien, charge or encumbrance
on, any portion of the Assets, except inventory and equipment held for use in
the ordinary course of business;
(4) increase in the compensation payable by Ventures to any of
the Shareholders, officers, directors or any other employees, independent
contractors or agents, or increase in, or institution of, any bonus, insurance,
pension, profit-sharing or other employee benefit plan or arrangements made to,
for or with the employees, independent contractors or agents of Ventures outside
the ordinary course of business;
(5) subject to the provisions of the agreement referenced in
Section 8.3, adjustment or write-off of Receivables or reduction in reserves for
Receivables outside of the ordinary course of business, or change in the
accounting methods or practices employed by Ventures or change in adopted
depreciation or amortization policies;
(6) issuance or sale by Ventures, or contract or other
commitment entered into by Ventures or any Shareholder for the issuance or sale,
of any shares of capital stock or securities convertible into or exchangeable
for capital stock of Ventures;
(7) payment by Ventures of any dividend, distribution or
extraordinary or unusual disbursement or expenditure or intercompany payable,
except for the settlement of Ventures' obligations to Capital Investment Corp.
pursuant to the agreement referenced in Section 8.3;
(8) merger, consolidation or similar transaction; or
solicitation therefor;
(9) security interest, guarantee or other encumbrance, other
than in the ordinary course of business, obligation or liability, in each case
whether absolute, accrued, contingent or otherwise, or whether due or to become
due, incurred or paid by Ventures to any person or entity; or the making by
Ventures of any loan or advance to, or an investment in, any person or entity;
(10) federal, state, or local statute, rule, regulation, or
order adopted, promulgated or decided that, to the knowledge of Ventures or any
of the Shareholders, materially and adversely affects Ventures, the Ventures
Stock, the Business or the Assets;
(11) strike, work stoppage or other labor dispute adversely
affecting the Business; or
(12) termination, waiver or cancellation of any material
rights or claims of Ventures, under any contract of Ventures or otherwise.
6.7 LITIGATION. Except as disclosed in Exhibit 6.7, no person or party
including, without limitation, any governmental agency has asserted, or, to the
knowledge of Ventures or any of the Shareholders, has threatened to assert, any
claim for any action or proceeding, against Ventures (or any
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officer, director, employee, agent or Shareholder of Ventures) arising out of
any statute, ordinance or regulation relating to wages, collective bargaining,
discrimination in employment or employment practices or occupational safety and
health standards (including, without limitation, the Fair Labor Standards Act,
Title VII of the Civil Rights Act of 1964, as amended, the Occupational Safety
and Health Act, the Age Discrimination in Employment Act of 1967, or the
Americans With Disabilities Act or the Family Medical Leave Act of 1993).
Neither Ventures nor any of the Shareholders has received notice of any
violation of any law, rule, regulation, ordinance or order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, legislation
and regulations applicable to environmental protection, civil rights, public
health and safety and occupational health). Except as set forth in Exhibit 6.6,
there are no lawsuits, proceedings, actions, arbitrations, governmental
investigations, claims, inquiries or proceedings pending or threatened involving
Ventures, any of the Shareholders, the Ventures Stock, any of the Assets or the
Business.
6.8 LICENSES. Ventures has all Licenses necessary for Ventures to
operate and conduct the Business, and there does not exist any waivers or
exemptions relating thereto, except where the failure to hold such licenses
would not have a material adverse effect. There is no material default on the
part of Ventures or any other party under any of the Licenses. There exists no
grounds for revocation, suspension or limitation of any of the Licenses. Copies
of each of the Licenses are attached hereto and are listed on Exhibit 6.8. No
notices have been received by Ventures or any of the Shareholders with respect
to any threatened, pending, or possible revocation, termination, suspension or
limitation of the Licenses.
6.9 MEDICARE AND MEDICAID MATTERS. To the extent applicable to
Ventures, Ventures has complied, and, to Ventures' knowledge, each of the
providers with which Ventures contracts (herein a "Ventures Provider") has
complied with all laws, rules and regulations of the Medicare, Medicaid and
other governmental healthcare programs, and has filed all claims, invoices,
returns, cost reports and other forms in the manner prescribed. All cost
reports, claims, invoices, filings and other forms made or filed by Ventures, if
applicable, and, to Ventures' knowledge, made or filed by each Ventures Provider
with Medicare, Medicaid or any other governmental health or welfare related
entity or any third party payor since the inception of the Business, are in all
material respects true, complete, correct and accurate and do not claim
reimbursement for any expenses which are not properly reimbursable. No
deficiency, either individually or in the aggregate, in any such cost reports,
claims, invoices and other filings, including claims for over-payments or
deficiencies for late filings, has been asserted or threatened by any federal or
state agency or instrumentality or other provider reimbursement entities
relating to Medicare or Medicaid claims or any other third party payor, and
there is no basis for any claims or requests for reimbursement. Neither Ventures
nor, to its knowledge, any Ventures Provider has been subject to any audit
relating to fraudulent procedures or practices. To the best of Shareholders'
knowledge, there is no basis for any claim or request for recoupment or
reimbursement from Ventures or, to its knowledge, from any Ventures Provider, of
any federal or state agency or instrumentality or other provider reimbursement
entities.
6.10 TITLE TO AND CONDITION OF ASSETS.
(1) Ventures is the sole legal and beneficial owner of the
personal property included in the Assets, free and clear of all mortgages,
security interests, liens, leases, covenants, assessments,
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easements, options, rights of refusal, restrictions, reservations, defects in
the title, encroachments, and other encumbrances, except for Permitted
Encumbrances. Subject to the provisions of the agreement referenced in Section
8.3, the Assets are all the assets set forth on the Interim Financial Statements
or currently used in the operation of the Business.
(2) The descriptions of the Real Estate, if any, contained in
Exhibit 1.3(1) are accurate and include all real property leased by Ventures and
used in connection with the Business or set forth on the Interim Financial
Statements. Ventures is in lawful possession of all of the Real Estate, if any,
that is owned or leased including, without limitation, the buildings, structures
and improvements situated thereon and appurtenances thereto, in each case free
and clear of all mortgages, liens and other encumbrances or restrictions, except
for Permitted Encumbrances.
(3) The Equipment and Furnishings are all of the "Equipment"
reflected on the Interim Financial Statements, other than those items sold and
replaced in the ordinary course of business. All components of all of the
Equipment and Furnishings in all material respects (a) operate in accordance
with their respective specifications, (b) perform the functions they are
supposed to perform, (c) are free of structural, installation, engineering, or
mechanical defects or problems, and (d) are otherwise in good working order,
subject, in each case above, to reasonable wear and tear. Ventures has received
no written recommendation from any insurer to repair or replace any of the
material Assets with which Ventures has not complied.
(4) All motor vehicles used in the Business, whether owned or
leased, are listed in Exhibit 1.3(2) attached hereto, are properly licensed and
are registered in accordance with applicable law. If such vehicles are leased,
the leases are in full force and effect, and Ventures has complied with all
terms of such leases.
(5) All trademarks, service marks, trade names, patents,
inventions, processes, copyrights and applications therefor, whether registered
or at common law (collectively, the "Intellectual Property"), owned or used by
Ventures are listed and described in Exhibit 6.10(5) attached hereto. No
proceedings have been instituted or are pending or, to the knowledge of Ventures
or any of the Shareholders, threatened that challenge the validity of the
ownership by Ventures of any such Intellectual Property. Ventures has licensed
no one to use any such Intellectual Property, and neither Ventures nor any of
the Shareholders has any knowledge of the use or the infringement of any of such
Intellectual Property by any other person. Ventures owns or possesses adequate
and enforceable licenses or other rights to use all Intellectual Property now
used in the conduct of the Business.
6.11 CONTRACTS.
(1) Exhibit 6.11(1) sets forth a complete and accurate list of
all consultation services agreements, management service agreements or other
similar agreements comprising the Business, together with all contracts, leases,
subleases, options and commitments, oral or written, and all assignments and
amendments thereof, affecting or relating to the Business, the Ventures Stock or
any Asset or any interest therein, to which either Ventures and/or any of the
Shareholders is a party or by which Ventures, the Assets or the Business is
bound (collectively, the "Contracts"). Exhibit 6.11(1), but not the definition
of Contracts, may exclude Contracts involving annual amounts of $5,000.00 or
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less. Accurate, complete and unredacted copies of all written Contracts have
been supplied, or will be prior to the Closing to Merger Subsidiary. Exhibit
6.11(1) includes written summaries of key terms of all oral Contracts including
any oral agreements with X.X. Investments, Inc. ("JDI"). The employee leasing
arrangement covered by the Client Service Agreement between Xxxxxxx Staff
Leasing, Inc. and JDI and the oral agreements between JDI and Ventures are all
cancelable by Ventures at will or with thirty (30) days prior notice without any
penalty, premium or other charge or expense to Ventures. The Shareholders know
of no reason that the persons subject to the employee leasing arrangement may
not be hired by the Merger Subsidiary immediately following Closing.
(2) Except as reflected in Exhibit 6.11(1), and except for
consents required as a result of the Merger and other transactions contemplated
herein, a list of which consents is included in Exhibit 6.11(1), none of the
Contracts has been modified, amended, assigned or transferred and, to the best
of Shareholders' knowledge, each is in full force and effect and is valid,
binding and enforceable in accordance with its respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
To the best of Shareholders' knowledge, no event or condition has happened or
presently exists which constitutes a default or breach or, after notice or lapse
of time or both, would constitute a default or breach by any party under any of
the Contracts. To the knowledge of Shareholders, there are no counterclaims or
offsets under any of the Contracts.
(3) There does not exist any security interest, lien,
encumbrance or claim of others created or suffered to exist on any interest
created under any of the Contracts. No purchase commitment by Ventures is in
excess of Ventures' ordinary business requirements.
(4) Exhibit 6.11(4) lists every repair and maintenance
obligation of Ventures pursuant to the Contracts over $10,000.00 required to be
performed on or before the Closing but which will remain unperformed at the
Closing.
6.12 ENVIRONMENTAL MATTERS.
(1) Hazardous Substances. As used in this Section 6.12(1), the
term "Hazardous Substances" means any hazardous or toxic substances, materials
or wastes, including but not limited to those substances, materials, and wastes
defined in Paragraph 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed in the
United States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances pursuant to 40 CFR Part
302, or which are regulated under any other Environmental Law (as such term is
defined herein), and any of the following: hydrocarbons, petroleum and petroleum
products (except as they exist in the ordinary course of business and in
material compliance with Environmental Law, asbestos, polychlorinated biphenyls,
formaldehyde, radioactive substances (other than naturally occurring materials
in place), flammables and explosives.
(2) Compliance with Laws and Regulations. All operations or
activities on, and any use or occupancy of any property owned leased or managed
by Ventures, any Affiliates of Ventures (wherein the term "Affiliates" will mean
any person or entity controlling, controlled by or under common control at any
time with Ventures, and the term "control" will mean the power, directly or
indirectly to direct the management or policies of such person or entity), and
any agent, contractor or employee of any agent or contractor of Ventures or its
Affiliates ("Agents"), or to the knowledge of any
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of the Shareholders (including any tenant or subtenant of Ventures) is and has
been in compliance with any and all laws, regulations, orders, codes, judicial
decisions, decrees, licenses, permits and other applicable requirements of
governmental authorities with respect to Hazardous Substances, pollution or
protection of human health and safety (collectively, "Environmental Laws"),
including but not limited to the release, emission, discharge, storage and
removal of Hazardous Substances. Ventures, Affiliates and Agents have kept the
property owned or managed by Ventures free of any lien imposed pursuant to
Environmental Laws. To the knowledge of Ventures and each of the Shareholders,
all prior owners, operators, managers and other occupants of such premises have
complied with Environmental Law. Except for uses and storage or presence of
Hazardous Substances reasonably necessary or incidental to the customary
operation of a business similar to the Business, as appropriate which, if
required, was stored or present in material compliance with Environmental Law:
(a) Neither Ventures nor any Affiliates or Agents
have used, generated, treated, handled, manufactured, voluntary transmitted or
stored any Hazardous Substances, nor, to the knowledge of Ventures or any of the
Shareholders, has any premises owned, leased or managed by Ventures ever been
used for any of the foregoing.
(b) Neither Ventures nor any Affiliates or Agents
have installed on any premises owned, leased or managed by Ventures friable
asbestos or any substance containing asbestos in condition or amount deemed
hazardous by Environmental Law.
(c) Ventures has not at any time engaged in any
dumping, discharge, disposal, spillage or leakage (whether legal or illegal,
accidental or intentional) of such Hazardous Substances that would subject
Ventures, any of the Shareholders or Merger Subsidiary to clean-up obligations
imposed by governmental authorities.
(d) To the knowledge of Shareholders, neither
Ventures nor the owners (present or former) of any premises owned, leased or
managed by Ventures (i) has either received or been issued a notice, demand,
request for information, citations, summons or complaint regarding an alleged
failure to comply with Environmental Law, or (ii) is subject to any existing,
pending, or, to the knowledge of Ventures or any of the Shareholders, threatened
investigation or inquiry by any governmental authority for noncompliance with,
or any remedial obligations under Environmental Law, and there are no
circumstances known to Ventures or any Shareholders which would likely serve as
a basis therefor. Ventures has not assumed any liability of a third party for
clean-up under or noncompliance with Environmental Law.
(e) Ventures, their Affiliates or Agents have not
transported or arranged for the transportation of any Hazardous Substances to
any location which is listed or, to the knowledge of Ventures and any of the
Shareholders, proposed for listing under Environmental Law or is the subject of
any enforcement action, investigation or other inquiry under Environmental Law.
(3) Other Environmental Matters. Ventures has furnished to
Merger Subsidiary a copy of any environmental audit, study, report or other
analysis which such Ventures or its Affiliates obtained or were furnished.
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(4) Disclaimer. Notwithstanding the foregoing, neither
Ventures nor the Shareholders make any representation or warranty regarding the
compliance with Environmental Laws at the medical facilities in which Ventures
conducts business, except for matters within Ventures' control or matters about
which they have actual knowledge.
6.13 VENTURES EMPLOYEES.
(1) Exhibit 6.13(1) attached hereto sets forth: (a) a complete
list of all of Ventures' employees, (b) their respective rates of pay, (c) the
employment dates and job titles of each such person, (d) categorization of each
such person as a full-time or part-time employee of Ventures, (e) the amount of
accrued vacation with respect to such person, and (f) the amount of accrued sick
pay with respect to such person. For purposes of this paragraph, "part-time
employee" means an employee who is employed for an average of fewer than twenty
(20) hours per week or who has been employed for fewer than six (6) of the
twelve (12) months preceding the date on which notice is required pursuant to
the "Worker Adjustment and Retraining Notification Act" ("WARN"), 29 U.S.C.
ss.2102, et seq. Except as provided in Exhibit 6.11(1), Ventures has no
employment agreements with its employees and all such employees are employed on
an "at will" basis. Exhibit 6.13(1) also (a) lists, and has attached copies of
all employee fringe benefits and personnel policies, and (b) lists all
ex-employees of Ventures utilizing or eligible to utilize COBRA. Ventures will
have adequately accrued and included in the Final Closing Statement, all
salaries and wages, related payroll taxes and all sick leave, holiday, vacation
benefits, retirement and other fringe benefits that will have accrued to
Ventures' employees through the Closing Date, including related payroll taxes.
(2) Ventures is not a party to any labor contract, collective
bargaining agreement, contract, letter of understanding, or any other
arrangement, formal or informal, with any labor union or organization that
obligates Ventures to compensate employees at prevailing rates or union scale,
nor are any of its employees represented by any labor union or organization.
There is no pending or, to the knowledge of Ventures or any of the Shareholders,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Ventures and any
present or former employee(s) of Ventures. Except as provided in Exhibit
6.13(2), there is no pending or, to the knowledge of Ventures and any of the
Shareholders, threatened suit, action, investigation or claim between Ventures
and any present or former employee(s) of Ventures. To the knowledge of
Shareholders, there has not been any labor union organizing activity with
respect to Ventures' employees.
6.14 EMPLOYEE BENEFIT PLANS.
(1) Exhibit 6.14 attached hereto contains a true, accurate and
complete list of each (a) "employee welfare benefit plan" (as defined in
Paragraph 3(1) of the Employee Retirement Income Security Act of 1974 as amended
("ERISA")) maintained by Ventures or to which Ventures contributes or is
required to contribute, and (b) "employee pension benefit plan" (as defined in
Paragraph 3(2) of ERISA) maintained by Ventures, to which Ventures contributes
or is required to contribute, or which covers employees of Ventures during the
period of their employment with any predecessor of Ventures, including any
multi-employer pension plan as defined under Internal Revenue Code of 1986,
Paragraph 414(f) (such employee welfare benefit plans and pension benefit plans
being hereinafter collectively
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referred to as the "Benefit Plans"). Copies of all Benefit Plans have previously
been provided to Merger Subsidiary.
(2) Liabilities. There are no unfunded liabilities under any
Benefit Plan.
(3) Termination of Participation. Shareholders will, at their
cost, take all necessary action so that Ventures, by Closing, will cease to be a
participating employer under all Benefit Plans, provided that the Merger
Subsidiary will provide coverage for employees of Ventures under the benefit
plans provided to similar employees of Parent and will waive waiting periods,
pre-existing conditions and similar restrictions on coverage.
6.15 INSURANCE. Ventures has in effect and has for at least five (5)
years continuously maintained insurance coverage for all of its operations,
personnel and assets, and for the Assets and the Business. A complete and
accurate list of all current insurance policies is included in Exhibit 6.11(1).
Exhibit 6.15 attached hereto sets forth a summary of Ventures' current insurance
coverage (listing type, carrier and limits), includes a list of any pending
insurance claims relating to Ventures or the Business, and includes a recent
three (3)-year claims history relating to Ventures and the Business as prepared
by the applicable insurance carrier(s). Ventures is not in default or breach
with respect to any provision contained in any such insurance policies, nor has
Ventures failed to give any notice or to present any claim thereunder in due and
timely fashion.
6.16 CONFLICTS OF INTEREST. Except as set forth on Exhibit 6.16, none
of the following is either a supplier of goods or services to Ventures, or
directly or indirectly controls or is a director, officer, employee or agent of
any corporation, firm, association, partnership or other business entity that is
a supplier of goods or services to Ventures: (a) any Shareholder, (b) any
director or officer of Ventures, or (c) any entity under common control with
Ventures or controlled by or related to any of the Shareholders.
6.17 COMPLIANCE WITH LAWS. Neither Ventures nor any of the Shareholders
have made any kickback or bribe to any person or entity, directly or indirectly,
for referring, recommending or arranging business with, to or for Ventures.
Neither WARN nor any similar state law applies to such transactions, and such
transactions comply with applicable state antitrust and similar laws. Ventures
is in compliance (without obtaining waivers, variances or extensions) with all
federal, state and local laws, rules and regulations that relate to the
operations of the Business, except where the failure to be in compliance would
not have a material adverse effect on the Business. All tax and other returns,
reports, plans and filings of any nature required to be or otherwise filed by
Ventures or any of the Shareholders with any governmental authorities have been
properly completed, except where the failure to be so completed or filed could
not have a material adverse effect on the Business, and timely filed in
compliance with all applicable requirements. Each return, report, plan and
filing contains no materially untrue or misleading statements and does not omit
anything which would cause it to be misleading or inaccurate in any material
respect.
6.18 WARN ACT. Since ninety (90) days prior to Effective Date, Ventures
has not temporarily or permanently closed or shut down any single site of
employment or any facility or any
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operating unit, department or service within a single site of employment, as
such terms are used in WARN.
6.19 TAX RETURNS; TAXES. Ventures and each of Shareholders have filed
all federal, state and local tax returns and tax reports required by such
authorities to be filed as of the time of Closing. Ventures and each of the
Shareholders, as applicable, have paid all taxes, assessments, governmental
charges, penalties, interest and fines due as of the time of Closing (including,
without limitation, taxes on properties, income, franchises, licenses, sales and
payrolls) by any governmental authority. Additionally, the reserves for taxes,
if any, shown in the Final Closing Statement are and will be adequate to
accurately reflect all tax liabilities accrued or owing as of the Closing.
Except as set forth on Exhibit 6.19, there is no pending tax examination or
audit of, nor any action, suit, investigation or claim asserted or, to the
knowledge of Ventures and each of the Shareholders, threatened against Ventures
or any of the Shareholders by any governmental authority; and neither Ventures
nor any of the Shareholders has been granted any extension of the limitation
period applicable to any tax claims.
6.20 NO OMISSIONS OR MISSTATEMENTS. No representation or warranty or
statement contained in this Agreement or any certificate furnished in connection
with this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make any of the statements herein
or therein not misleading in light of the circumstances in which they were made.
6.21 ACCREDITED INVESTOR. Each of the Shareholders hereby represents
and warrants to the Parent and Merger Subsidiary that he is an "Accredited
Investor" as such term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933. Each such Shareholder represents that he has
the requisite experience, knowledge and sophistication necessary to evaluate and
make an informed decision about the investment being made by such Shareholder in
the Merger by virtue of the receipt of the Parent Common Stock. Each Shareholder
acknowledges he has been given the opportunity to have complete access to all
records of the Parent, as well as its properties and executive employees. In
addition to the information and disclosures of the SEC Reports (as defined in
Section 7.3), each Shareholder acknowledges that he has had the opportunity to
ask questions and receive answers from executive employees of the Parent about
the Parent, its business and his investment in the Parent Common Stock.
6.22 PURCHASE FOR INVESTMENT; RESTRICTIONS ON TRANSFER. Each of the
Shareholders acknowledges that he is acquiring the Parent Common Stock for his
own account and not with a view to or present intention of distribution thereof
in violation of the Securities Act of 1933, as amended, or any state securities
or blue sky laws. The Parent Common Stock will not be disposed of in
contravention of any such laws. Each of the Shareholders also acknowledges that,
although there exists a public market for registered shares of the Parent Common
Stock, the Parent Common Stock being received by such Shareholders as Merger
Consideration has not been registered under any securities laws and, therefore,
cannot be sold and must be held indefinitely, unless subsequently registered
under applicable securities laws or unless an exemption from such registration
is available. The Shareholders acknowledge and agree that certificates
representing the Parent Common Stock issued as Merger Consideration will contain
a legend substantially similar to the following:
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The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities
laws. The securities have been acquired without a view to distribution
and may not be offered, sold, transferred, pledged or hypothecated,
whether or not for consideration, in the absence of registration under
the Securities Act of 1933, as amended, and applicable state securities
laws or written opinion of counsel reasonably satisfactory to
Children's Comprehensive Services, Inc. that registration is not
required.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF
MERGER SUBSIDIARY AND PARENT
As an inducement to Shareholders and Ventures to enter into this
Agreement and to consummate the transactions contemplated hereunder, Merger
Subsidiary and Parent hereby represent and warrant to Shareholders and Ventures,
which representations and warranties will be true and correct on the date of
Closing, as follows:
7.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Merger Subsidiary and
Parent are corporations duly organized, validly existing and in good standing
under the laws of the State of Tennessee. Merger Subsidiary has the full
corporate power and authority to own, lease and operate its properties and
assets as presently owned, leased and operated and to carry on its business as
it is now being conducted. Merger Subsidiary and Parent have the full right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the Merger and other transactions
contemplated on the part of Merger Subsidiary and Parent hereunder. The
execution, delivery and consummation of this Agreement and all other agreements
and documents executed in connection herewith by Merger Subsidiary and Parent
have been duly authorized by all necessary corporate action on the part of
Merger Subsidiary and Parent. No other action on the part of Merger Subsidiary
or Parent or any other person or entity is necessary to authorize the execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith. This Agreement, and all other
agreements and documents executed in connection herewith by Merger Subsidiary
and Parent, upon due execution and delivery thereof, will constitute the valid
and binding obligations of Merger Subsidiary and Parent, enforceable in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general principles of equity.
7.2 ABSENCE OF DEFAULT. The execution, delivery and consummation of
this Agreement and all other agreements and documents executed in connection
herewith by Merger Subsidiary and Parent will not constitute a violation of, be
in conflict with, or, with or without the giving of notice or the passage of
time, or both, result in a breach of, constitute a default under, or cause the
acceleration of the maturity of, any debt, indenture, obligation or liability
affecting Merger Subsidiary or Parent or result in the creation or imposition of
any security interest, lien, charge or other encumbrance upon any of the Assets
(except in the ordinary course pursuant to the credit agreement, if any, of the
Parent) under: (a) any term or provision of the Charter or Bylaws of Merger
Subsidiary or Parent; (b) any
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contract, lease, agreement, indenture, mortgage, pledge, assignment, permit,
license, approval or other commitment to which Merger Subsidiary or Parent is a
party or by which Merger Subsidiary or Parent is bound; (c) any judgment,
decree, order, regulation or rule of any court or regulatory authority, or (d)
any law, statute, rule, regulation, order, writ, injunction, judgment or decree
of any court or governmental authority or arbitration tribunal to which Merger
Subsidiary or Parent is subject.
7.3 SEC REPORTS. The Merger Subsidiary has furnished to the
Shareholders true and complete copies of Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, its Quarterly Reports on Form 10-Q for
each of the fiscal quarters ended March 31, 1997, June 30, 1997 and September
30, 1997 and its proxy materials for the most recently held annual meeting of
shareholders (collectively, the "SEC Reports") as such reports were filed with
the Securities and Exchange Commission. The SEC Reports, at the time they were
filed, did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and since then, Parent and its affiliates have not suffered any
material adverse change in their business.
7.4 SHARES TO BE ISSUED. The Shares of Parent Common Stock to be issued
and delivered pursuant to this Agreement will be duly and validly issued, fully
paid and non-assessable.
7.5 CAPITALIZATION OF MERGER SUBSIDIARY; CONTINUATION OF VENTURES
BUSINESS. Prior to the transaction, Parent will be in control of Merger
Subsidiary within the meaning of Section 368(c)(1) of the Code. Following the
transaction, Merger Subsidiary will not issue additional shares of its stock
that would result in Parent losing control of Merger Subsidiary within the
meaning of Section 368(c)(1) of the Code. Parent has no plan or intention to
reacquire any of its stock issued in the transaction. Parent has no plan or
intention to liquidate Merger Subsidiary; to merge Merger Subsidiary with and
into another corporation; to sell or otherwise dispose of the stock of Merger
Subsidiary; or to cause Merger Subsidiary to sell or otherwise dispose of any of
the assets of Ventures acquired in the transaction, except for dispositions made
in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code. Following the transaction, Merger Subsidiary will
continue the historic business of Ventures or use a significant portion of
Ventures' business assets in the business.
7.6 SECURITIES LAW COMPLIANCE. For a period of at least two (2) years
after Closing, Parent will timely file periodic reports and other documents
required under the Securities Act of 1933 and the Securities Exchange Act of
1934 so that the Shareholders will have access to public information about the
Parent to comply with informational requirements relating to sale of the Parent
Common Stock received in the Merger under Rule 144 promulgated under the
Securities Act of 1933.
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ARTICLE VIII.
COVENANTS OF PARTIES
8.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF VENTURES;
CAPITALIZATION. From the date of this Agreement until Closing, the Certificate
of Incorporation and Bylaws of Ventures shall not be changed. Ventures shall not
change its authorized or issued capital stock, declare or pay any dividend, or
issue, encumber, purchase, or otherwise acquire, any of its capital stock.
8.2 APPROVAL BY SHAREHOLDERS. Ventures will submit this Agreement for
approval by its shareholders with a favorable recommendation by its board of
directors and will use its best efforts to obtain requisite shareholder
approval.
8.3 PRESERVATION OF BUSINESS AND ASSETS. From the date of this
Agreement until Closing, Ventures and each of the Shareholders will use their
best efforts and will do or cause to be done all such acts and things as may be
reasonably necessary to preserve, protect and maintain intact the operation of
the Business and Assets as a going concern consistent with prior practice and
not other than in the ordinary course of business, to preserve, protect and
maintain for Merger Subsidiary the goodwill of the suppliers, employees,
clientele and others having business relations with Ventures or the Business.
Ventures will use its reasonable commercial efforts to retain its employees in
their current positions up to Closing. Except as provided herein, until
termination of this Agreement, neither Ventures nor any of the Shareholders will
sell, transfer or pledge, or negotiate the sale, transfer or pledge of, either
any of the Assets or Ventures Stock or other security of Ventures, nor merge or
consolidate with any other entity; neither Ventures nor any of the Shareholders
will solicit any inquiries, proposals or offers relating to any such
transactions; and such parties will promptly notify Merger Subsidiary orally,
and confirm in writing, of all relevant details relating to inquiries, proposals
or offers that any may receive relating to any such matters. Ventures will pay
no dividend, and will make no distribution or extraordinary payment to
Shareholders or any third party or pay any intercompany payable and, other than
in the ordinary course of business, Ventures will not sell, discard or dispose
of any of the Assets, except as set forth in that certain agreement settling
Ventures' obligation to Capital Investment Corp. of Panama City, Florida, a copy
of which is attached as Exhibit 8.3. None of the Contracts will be amended in
any material respect, other than to obtain consents to the exchange of the
Ventures Stock contemplated in the Merger between the date hereof and Closing
without the prior written consent of Merger Subsidiary, and Ventures will not
enter into any new material contract, commitment or other transaction with
respect to the Business or the Assets without the prior written consent of
Merger Subsidiary. From the Effective Date until Closing, Ventures will maintain
and keep the Assets in a well-maintained condition and in good order and repair.
8.4 BOOKS AND RECORDS.
(1) From the date hereof until the Closing, Ventures will
maintain its books of account in the usual, regular and ordinary manner on a
basis consistent with prior years and will make no change in its accounting
methods or practices.
(2) Subject to the terms of the Letter of Intent dated
December 1, 1997 and the confidentiality provisions in that certain letter dated
August 4, 1997 from Xx X. Xxxxx to Xxxxxxx
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Xxxxxxx, Ph.D. until Closing, Ventures and each of the Shareholders will give to
Merger Subsidiary full access to all of Ventures' offices, properties, books,
contracts, commitments, records and affairs relating to the Ventures Stock,
Assets or the Business so that Merger Subsidiary or Parent may inspect and audit
them and will furnish to Merger Subsidiary a copy of all documents and
information concerning the properties and affairs of Ventures, the Business, the
Ventures Stock or the Assets as Merger Subsidiary may request. If any such
books, records and materials are in the custody of third parties, Ventures and
each of the Shareholders will direct such third parties to promptly provide them
to Merger Subsidiary.
(3) Following the Closing, Parent will permit Shareholders,
during normal business hours, to have reasonable access to, and examine and make
copies of, all books and records of the Business that relate to transactions or
events occurring prior to the Closing. All out-of-pocket costs associated with
the delivery of the requested documents will be paid by Shareholders.
(4) The Shareholders will use reasonable efforts to cause
Ventures' accounting firm to consent to the inclusion of the Financial
Statements in any registration statements, private placement memoranda, and
periodic reports, if any, necessary or appropriate in order to enable Parent or
its affiliates to comply with any applicable registration or reporting
requirements of federal or state securities laws.
8.5 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Shareholders
and Ventures will refrain from taking any action which would render any
representation and warranty contained in this Agreement untrue, inaccurate or
misleading in any material respect as of Closing. Each Shareholder and Ventures
will promptly notify Merger Subsidiary of any lawsuit, claim, audit,
investigation, administrative action or other proceeding asserted or commenced
against Ventures or its directors, officers, or any of the Shareholders, that
may involve or relate in any way to Ventures, the Assets, the Ventures Stock,
any of the Shareholders or the operation of the Business. Each Shareholder and
Ventures will promptly notify Merger Subsidiary of any facts or circumstances
that come to his, her or its attention and that cause, or through the passage of
time may cause, any of Shareholders' or Ventures' representations, warranties or
covenants to be untrue or misleading in any material respect at any time from
the date hereof through Closing.
8.6 BROKER'S OR FINDER'S FEE. None of Parent, Merger Subsidiary,
Ventures or any Shareholder has employed or is liable for the payment of any fee
to any finder, broker, government official or similar person in connection with
the transactions contemplated under this Agreement.
8.7 INDEBTEDNESS; LIENS. Other than in the ordinary course of business,
from the date of this Agreement through Closing, Ventures will not create,
incur, assume, guarantee or otherwise become liable or obligated with respect to
any indebtedness for borrowed money, nor make any loan or advance to, or any
investment in, any person or entity, nor create any lien, security interest,
mortgage, right or other encumbrance in any of the Assets, without Merger
Subsidiary's prior written approval. At Closing, the Assets will be free and
clear of all mortgages, security interests, liens, leases, covenants,
assessments, easements, options, rights of first refusal, restrictions,
reservations, defects in title, encroachments or other encumbrances, except for
Permitted Encumbrances, and Shareholders will
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deliver to Merger Subsidiary such pay-off letters, releases, U.C.C. termination
statements and other documents as Merger Subsidiary may reasonably request to
evidence the same.
8.8 COMPLIANCE WITH LAWS AND REGULATORY CONSENTS. From the date hereof
through Closing, (a) Ventures will comply with all applicable statutes, laws,
ordinances and regulations, where the failure to comply would likely have a
material adverse effect upon Ventures, (b) Ventures will keep, hold and maintain
all material Licenses necessary for the Business and operation of the Assets,
(c) the Shareholders and Ventures will use their reasonable efforts to obtain
all consents, approvals, exemptions and authorizations of third parties, whether
governmental or private, necessary to consummate the transactions contemplated
by this Agreement, and (d) the Shareholders and Ventures and Merger Subsidiary
will make and cause to be made all filings and give and cause to be given all
notices which may be necessary on their parts, respectively, under all
applicable laws and under their respective contracts, agreements and commitments
in order to consummate the transactions contemplated under this Agreement.
8.9 MAINTAIN INSURANCE COVERAGE. From the date hereof through Closing,
Shareholders will cause Ventures to maintain in full force and effect the
existing insurance on the Assets and the operations of the Business and will
provide at Closing written evidence satisfactory to Merger Subsidiary that such
insurance continues to be in effect, that all premiums due have been paid, and
that Merger Subsidiary has been named additional insured since the Effective
Date. Shareholders will cancel Ventures' worker's compensation policy effective
as of the date of Closing, and Merger Subsidiary will obtain worker's
compensation for Ventures beginning as of the Closing.
ARTICLE IX.
VENTURES' AND SHAREHOLDERS' CONDITIONS TO CLOSE
The obligations of Ventures and Shareholders under this Agreement are
subject to the satisfaction on or prior to Closing, of the following conditions
(which may be waived in writing by Ventures or Shareholders, in whole or in
part):
9.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
AGREEMENT. The representations and warranties of Merger Subsidiary and Parent
contained in this Agreement and in any certificate or document delivered
pursuant hereto will be deemed to have been made again at the Closing and will
then be true in all material respects. Merger Subsidiary and Parent will have
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at Closing.
9.2 NO ACTION/PROCEEDING. No action or proceeding before a court or any
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Ventures, any of the Shareholders or Merger Subsidiary as a
result of which Ventures or the Shareholders reasonably and in good xxxxx xxxx
that to proceed with the transactions hereunder may constitute a violation of
law.
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9.3 ORDER PROHIBITING TRANSACTION. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There will have been no United States federal or state statute,
rule or regulations enacted or promulgated after the date of this Agreement that
would reasonably, directly or indirectly, result in any of the consequences
referred to in this Section 9.3.
9.4 OPINION OF PARENT'S COUNSEL. The Shareholders shall have received
an opinion dated as of the Closing from counsel for the Parent in form and
substance satisfactory to the Shareholders and their counsel covering those
matters described in Section 12.4 as Shareholders may reasonably request.
ARTICLE X.
PARENT'S AND MERGER SUBSIDIARY'S CONDITIONS TO CLOSE
The obligations of Parent and Merger Subsidiary under this Agreement
are subject to the satisfaction, on or prior to Closing, of the following
conditions (which may be waived in writing by Parent and/or Merger Subsidiary,
as applicable, in whole or in part):
10.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
AGREEMENT. The representations and warranties of each of Shareholders and
Ventures contained in this Agreement (including the Exhibits hereto) and in any
certificate or document delivered pursuant hereto will be deemed to have been
made again at the Closing and will then be true in all material respects.
Ventures and each of the Shareholders will have performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at Closing.
10.2 NO ACTION/PROCEEDING. No action or proceeding before a court or
any other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Ventures, any of the Shareholders or Merger Subsidiary as a
result of which Merger Subsidiary reasonably and in good xxxxx xxxxx that to
proceed with the transactions hereunder may constitute a violation of law.
10.3 DUE DILIGENCE; INSPECTION OF ASSETS; U.C.C. SEARCHES, ETC. Merger
Subsidiary and its representatives will have had and continue to have reasonable
rights of inspection of the Business in connection with Merger Subsidiary's due
diligence review as provided herein. Merger Subsidiary shall have received all
U.C.C. financing statement, local and central, and federal and state pending
litigation, tax lien and judgment searches, with respect to Ventures, including
all "DBA's," tradenames and fictitious names of Ventures, with the results
disclosing no material liens except Permitted Encumbrances and those that are
released as of the Closing.
10.4 ABSENCE OF ADVERSE CHANGE. The Merger Subsidiary shall have
verified the absence of the material adverse change in the Business and Assets
of Ventures, and Ventures shall not have
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entered into any significant contracts or transactions prior to Closing without
the prior written approval of the Merger Subsidiary.
10.5 ORDER PROHIBITING TRANSACTION. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There will have been no federal or state statute, rule or
regulations enacted or promulgated after the date of this Agreement that would
reasonably result, directly or indirectly, in any of the consequences referred
to in this Section 10.5.
10.6 NONCOMPETITION AGREEMENTS. Each of the Shareholders will have
entered into a noncompetition agreement in the form attached hereto as Exhibit
10.6 in which each such Shareholder shall agree not to compete with the Merger
Subsidiary for a period of five (5) years from the date of Closing.
10.7 LICENSES AND PERMITS. The Merger Subsidiary shall have obtained
all necessary health care or other licenses, permits and approvals, if any,
necessary for the continued operation of the Business of Ventures as operated
prior to Closing or shall have otherwise procured assurances acceptable to the
Merger Subsidiary that such licenses and permits will be issued in due course
following Closing.
10.8 CONSENTS. Prior to Closing, Shareholders shall have obtained the
consents required to consummate the Merger and the other transactions
contemplated herein and involving the agreements listed on Exhibit 6.11(1);
provided, however, that the Parent and the Merger Subsidiary shall waive any
consent required for the transfer of Ventures' agreements with Bridgewater
Center in Ft. Xxxxxx, Florida.
10.9 OPINION OF VENTURES' COUNSEL. Parent and Merger Subsidiary shall
have received a favorable opinion, dated as of the Closing, of counsel for
Ventures, in form and substance satisfactory to Parent and its counsel, to the
effect that:
(1) All proceedings, other than the filing and recording of
this Agreement (or a Certificate of Merger) in the States of Florida and
Tennessee, necessary to effectuate the merger of Ventures into Merger Subsidiary
have been duly taken by Ventures in accordance with law, and, upon such filing
and recording of this Agreement (or the Certificate of Merger), Ventures will be
duly merged with and into Merger Subsidiary;
(2) The shares of Common Stock of Ventures outstanding
immediately prior to the Closing of the Merger are validly authorized and issued
and duly paid and non-assessable; and
(3) Neither the execution and delivery of this Agreement, nor
performance hereunder, will conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, Ventures'
Certificate of Incorporation or Bylaws or any agreement, instrument, judgment,
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decree, regulation or other restriction known to such counsel to which Ventures
is a party or by which it is bound.
ARTICLE XI.
OBLIGATIONS OF VENTURES AND SHAREHOLDERS AT CLOSING
At Closing, Ventures and the Shareholders will deliver or cause to be
delivered to Merger Subsidiary the following in form and substance reasonably
satisfactory to Merger Subsidiary:
11.1 DOCUMENTS EFFECTING CLOSING. The Shareholders will execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Merger Subsidiary resignations of each member of the Board of Directors and each
officer of Ventures effective as of the Closing together with any and all other
documents, certificates or other instruments necessary or desirable to effect
Closing.
11.2 POSSESSION. Ventures will deliver to Merger Subsidiary full
possession and control Business and Assets.
11.3 OPINION OF COUNSEL. The Shareholders will cause to be delivered to
Merger Subsidiary an opinion of counsel, dated as of Closing, in the form
described in Section 10.9 hereof.
11.4 CORPORATE GOOD STANDING AND CORPORATE RESOLUTION. Shareholders
will deliver to Merger Subsidiary certificates of good standing from the
Secretary of State of Florida, and from each jurisdiction in which Ventures is
qualified to do business, certified copies of the Bylaws and Charter of
Ventures, and a certified copy of the resolutions of the Board of Directors and
Shareholders of Ventures authorizing the execution, delivery and consummation of
this Agreement and the execution, delivery and consummation of all other
agreements and documents executed in connection herewith by them, sufficient in
form and content to meet the requirements of the law of the State of Florida
relevant to such transactions and certified by officers of Ventures to be
validly adopted and in full force and effect and unamended as of Closing.
11.5 CLOSING CERTIFICATE. Ventures will deliver to Merger Subsidiary a
certificate of an officer of Ventures and of the Shareholders, dated as of
Closing, certifying that (a) each covenant and obligation of Ventures and the
Shareholders has been complied with and (b) each representation and warranty of
Ventures and the Shareholders is true and correct in all material respects at
the Closing as if made on and as of the Closing.
11.6 THIRD PARTY CONSENTS. The Shareholders will deliver to Merger
Subsidiary by Closing all consents, including those listed on Exhibit 6.11(1),
as provided in Section 10.8, estoppels, approvals, releases, pay-off letters,
U.C.C. termination statements and other filings, and authorizations of third
parties that are required for the legal and proper execution, delivery and
consummation of this Agreement, and the transactions contemplated hereunder,
including but not limited to releases of all mortgages, security interests,
liens, pledges, restrictions or other encumbrances on or applicable to the Stock
or Assets.
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11.7 NONCOMPETITION AGREEMENTS. The Shareholders will deliver to Merger
Subsidiary each of the agreements described in Section 10.6.
11.8 PRELIMINARY CLOSING STATEMENT. The Shareholders and Ventures will,
along with Merger Subsidiary, execute a Preliminary Closing Statement setting
forth the Merger Consideration and various adjustments thereto.
11.9 ADDITIONALLY REQUESTED DOCUMENTS; POST-CLOSING ASSISTANCE. At the
reasonable request of Merger Subsidiary at Closing, and at any time or from time
to time thereafter, Shareholders will (a) cooperate with Merger Subsidiary to
put Merger Subsidiary in actual possession and operating control of the Business
and Assets, (b) execute and deliver such further instruments of sale,
conveyance, transfer and assignment effectively to sell, convey, transfer and
assign the same to Merger Subsidiary, and (c) execute and deliver such further
instruments and to cooperate with Merger Subsidiary as Merger Subsidiary may
reasonably request or to enable Merger Subsidiary and Ventures to obtain all
necessary regulatory certifications, approvals, consents and licenses,
accreditation or permits.
ARTICLE XII.
OBLIGATIONS OF MERGER SUBSIDIARY AT CLOSING
At Closing, the Merger Subsidiary will deliver or cause to be delivered
to Shareholders the following in a form and substance reasonably satisfactory to
Shareholders:
12.1 MERGER CONSIDERATION. The Merger Subsidiary will deliver to
Shareholders the Merger Consideration upon the terms specified in this
Agreement.
12.2 CORPORATE GOOD STANDING AND CERTIFIED BOARD RESOLUTIONS. The
Merger Subsidiary will deliver to Shareholders a certificate of existence from
the Secretary of State of Tennessee, dated the most recent practical date prior
to Closing, together with a certified copy of the resolutions of the Board of
Directors of each of the Merger Subsidiary and Parent authorizing the execution,
delivery and consummation of this Agreement and the consummation of the
transactions contemplated hereunder.
12.3 CLOSING CERTIFICATE. The Merger Subsidiary and Parent will deliver
to Shareholders a certificate of officers of each of the Merger Subsidiary and
Parent, dated as of Closing, certifying that (a) each covenant and obligation of
Merger Subsidiary and Parent has been complied with, and (b) each representation
and warranty of Merger Subsidiary and Parent is true and correct at the Closing
as if made on and as of the Closing.
12.4 OPINION OF MERGER SUBSIDIARY'S COUNSEL. The Merger Subsidiary will
deliver to Shareholders an opinion of Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
dated the date of the Closing to the effect that:
(1) All proceedings, other than the filing and recording of
the Agreement (or an appropriate Certificate of Merger) in the States of
Tennessee and Florida necessary to effectuate the Merger of Ventures into the
Merger Subsidiary have been duly taken by Parent and Merger Subsidiary
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in accordance with applicable law and upon such filing and recording of said
Agreement, Ventures will be duly merged with and into Merger Subsidiary;
(2) The shares of Parent Common Stock that are to be issued
and delivered to the stockholders of Ventures upon consummation of the Merger
are validly authorized and, when so issued, will be validly issued, fully paid
and non-assessable; and
(3) Neither the execution and delivery of this Agreement nor
performance hereunder will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under Articles of
Incorporation or Bylaws of either the Parent or the Merger Subsidiary or any
judgment, decree, regulation or similar restriction of which such counsel has
knowledge and to which Parent or Merger Subsidiary is a party or by which either
is bound.
ARTICLE XIII.
TERMINATION
13.1 CIRCUMSTANCES OF TERMINATION. This Agreement may be terminated as
follows:
(1) By the mutual consent in writing of the boards of
directors of Ventures and Parent.
(2) By the board of directors of Ventures if any condition
provided in Article IX hereof has not been satisfied of waived on or before the
Effective Date.
(3) By the board of directors of Parent if any condition
provided in Article X hereof has not been satisfied or waived on or before the
Effective Date.
(4) By the board of directors of either Ventures or Parent if
the Effective Date has not occurred by January 31, 1998.
13.2 EFFECT OF TERMINATION. In the event of a termination of this
Agreement pursuant to Section 13.1 hereof, each party shall pay the costs and
expenses incurred by it in connection with this Agreement and no party (or any
of its officers, directors and shareholders) shall be liable to any other party
for any costs, expenses, damage, or loss of anticipated profits hereunder.
ARTICLE XIV.
SURVIVAL OF PROVISIONS AND INDEMNIFICATION
14.1 SURVIVAL. The representations and warranties of Merger Subsidiary,
Parent, Ventures and each of the Shareholders contained in this Agreement, or in
any certificate or document delivered pursuant to this Agreement, will survive
the date of Closing for a period of thirty-six (36) months. The obligations of
Shareholders, on the one hand, or Merger Subsidiary and Parent, on the other
hand, under this Article XIV will not begin until the indemnified party incurs
one or more claims that equal,
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in the aggregate, Fifty Thousand and No/100 Dollars ($50,000.00) (the "Basket")
in which case the indemnified party shall be indemnified for all such claims.
The parties acknowledge and agree that any information discovered by Merger
Subsidiary or Parent that is not otherwise disclosed herein or in writing by
Ventures or the Shareholders will provide no limitation on obligations of an
indemnifying party. All claims sought by any party hereunder shall be net of any
insurance proceeds received by such party with respect to such claim. In no
event shall the aggregate liability of each Shareholder exceed one-half (1/2)
the lesser of Purchase Price received by such Shareholder or the fair market
value of the Parent Common Stock received by him in the Merger valued at the
average closing price of such stock on the National Association of Securities
Dealers' Automated Quotation System National Market System for the twenty (20)
trading days immediately preceding the date of satisfaction of a particular
claim for indemnification.
14.2 INDEMNIFICATION BY SHAREHOLDERS. Subject to the provisions of
Section 14.1, Shareholders will, jointly and severally, promptly indemnify,
defend, and hold harmless Merger Subsidiary and its directors, officers,
stockholders, employees and agents against any and all losses, costs, and
expenses (including reasonable cost of investigation, court costs and legal fees
actually incurred) and other damages resulting from (i) any breach by Ventures
or the Shareholders of any of the covenants, obligations, representations or
warranties of this Agreement or any certificate or document of Ventures and/or
Shareholders delivered pursuant to this Agreement, and (ii) any claim (whether
or not disclosed herein) that is brought or asserted by any third party(ies)
against Merger Subsidiary or Ventures arising out of the ownership, licensing,
operation or conduct of the Business or Assets or related to the Ventures Stock
or the conduct of any of Ventures' employees, agents or independent contractors,
relating to all periods of time prior to the Closing, except to the extent
disclosed in the Final Closing Statement.
14.3 INDEMNIFICATION BY MERGER SUBSIDIARY AND PARENT. Subject to the
provisions of Section 14.3, Merger Subsidiary and Parent will promptly
indemnify, defend, and hold Shareholders harmless against any and all losses,
costs, and expenses (including reasonable cost of investigation, court costs and
legal fees) and other damages resulting from (i) any breach by Merger Subsidiary
and Parent of any of its covenants, obligations, representations or warranties
contained in this Agreement or any certificate or document of Merger Subsidiary
delivered pursuant to this Agreement and (ii) any claim that is brought or
asserted by any third party(ies) against Shareholders arising out of the
ownership, licensing, operation or conduct of the Business or the conduct of
Ventures' employees, agents or independent contractors, relating to periods of
time subsequent to the Closing.
14.4 RULES REGARDING INDEMNIFICATION. The obligations and liabilities
of each party that may be subject to indemnification liability hereunder (such
claims the "Indemnified Claims") (such party the "Indemnifying Party") to the
other party (the "Indemnified Party") will be subject to the following terms and
conditions:
(1) Claims by Non-Parties. The Indemnified Party will give
written notice to the Indemnifying Party, within such time as not to prejudice
unduly the Indemnifying Party's ability to defend against the underlying claim,
of any written claim by a third party which is likely to give rise to a claim by
the Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in this Article XIV, stating the nature of said claim and
the amount thereof, to the extent
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known. The Indemnified Party will give notice to the Indemnifying Party that
pursuant to the indemnity, the Indemnified Party is asserting against the
Indemnifying Party a claim with respect to a potential loss from the third party
claim, and such notice will constitute the assertion of a claim for indemnity by
the Indemnified Party. If, within thirty (30) days after receiving such notice,
the Indemnifying Party advises the Indemnified Party that it will provide
indemnification and assume the defense at its expense, then so long as such
defense is being conducted, the Indemnified Party will not settle or admit
liability with respect to the claim and will afford to the Indemnifying Party
and defending counsel reasonable assistance in defending against the claim. If
the Indemnifying Party assumes the defense, counsel will be selected by such
party and if the Indemnified Party then retains its own counsel, it will do so
at its own expense. If the Indemnified Party does not receive a written
objection to the notice from the Indemnifying Party within ten (10) days after
the Indemnifying Party's receipt of such notice, the claim for indemnity will be
conclusively presumed to have been assented to and approved, and in such case
the Indemnified Party may control the defense of the matter or case and, at its
sole discretion, settle or admit liability. If within the aforesaid ten (10) day
period the Indemnified Party will have received written objection to a claim
(which written objection will briefly describe the basis of the objection to the
claim or the amount thereof, all in good faith), then for a period of sixty (60)
days after receipt of such objection the parties will attempt to settle the
dispute as between the indemnified and indemnifying parties. If they are unable
to settle the dispute, the unresolved issue or issues will be settled by
arbitration in a location mutually acceptable to each party, in accordance with
the rules and procedures of the American Arbitration Association; and
(2) Claims by a Party. The determination of a claim asserted
by a party hereunder (other than as set forth in subparagraph 14.4(1) above)
pursuant to this Article XIV will be made as follows: The Indemnified Party will
give written notice to the Indemnifying Party, within such time as not to
prejudice unduly the Indemnifying Party's ability to defend against the
underlying claim, of any claim by the Indemnified Party which has not been made
pursuant to subparagraph (1) above, stating the nature and basis of such claim
and the amount thereof, to the extent known. The claim will be deemed to have
resulted in a determination in favor of the Indemnified Party and to have
resulted in a liability of the Indemnifying Party in an amount equal to the
amount of such claim estimated pursuant to this paragraph if within thirty (30)
days after the Indemnifying Party's receipt of the claim the Indemnified Party
will not have received written objection to the claim. In such event, the claim
will be conclusively presumed to have been assented to and approved. If within
the aforesaid thirty (30) day period the Indemnified Party will have received
written objection to a claim (which written objection will briefly describe the
basis of the objection to the claim or the amount thereof, all in good faith),
then for a period of sixty (60) days after receipt of such objection the parties
will attempt to settle the disputed claim as between the indemnified and
indemnifying parties. If they are unable to settle the disputed claim, the
unresolved issue or issues will be settled by arbitration in a location mutually
acceptable to each party, in accordance with the rules and procedures of the
American Arbitration Association.
14.5 EXCLUSIVITY. Each of the parties to this Agreement acknowledges
and agrees that its sole and exclusive remedy subsequent to Closing with respect
to any and all claims for all losses, costs, and expenses covered by the
indemnification provisions in Sections 14.2 and 14.3, as the case may be, shall
be pursuant to the indemnification provisions set forth in this Article XIV.
Each of the parties also to this Agreement also acknowledges and agrees that
Parent may satisfy any claim against Shareholders
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by resort to shares of Parent Common Stock held in that certain Post Closing
Escrow establish pursuant to Section 2.4; provided, however, that Parent shall
be free to pursue its indemnification rights against Shareholders to the extent
the escrow is exhausted. Subject to Section 14.1, in furtherance of the
foregoing, each of the Shareholders, Ventures, the Merger Subsidiary and Parent
hereby waive, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of actions it or any of its respective subsidiaries or
its affiliates may have against the other party or such other party's
subsidiaries or its affiliates, as the case may be, arising under or based upon
any federal, state or local statute, law, ordinance, rule, regulation or common
law or at equity but only to the extent they relate to the matters described in
the immediately proceeding sentence.
ARTICLE XV.
MISCELLANEOUS
15.1 ASSIGNMENT. Following Closing, Merger Subsidiary may assign any or
all of its respective rights or delegate any or all of its respective
obligations under this Agreement with the express written consent of
Shareholders, which consent shall not be unreasonably withheld. No Shareholder
or Ventures may assign any rights or delegate any obligations under this
Agreement without the prior written consent of Merger Subsidiary, and any
prohibited assignment or delegation will be null and void. Subject to the
foregoing, this Agreement will be binding upon and inure to the exclusive
benefit of the parties hereto and their respective heirs, legal representatives,
successors and assigns. This Agreement is not intended to nor will it, create
any rights in any other party.
15.2 OTHER EXPENSES. Except as otherwise provided in this Agreement,
Shareholders will jointly and severally pay all of their and Ventures' expenses
in connection with the negotiation, execution, and implementation of the
transactions contemplated under this Agreement and Merger Subsidiary will pay
all of its expenses in connection with the negotiation, execution, and
implementation of the transactions contemplated under this Agreement. All sales
and use taxes, recording fees and transfer fees and taxes incurred in connection
under the transactions contemplated within this Agreement will be jointly and
severally borne by Shareholders and paid at Closing.
15.3 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given: (a) if delivered personally
or sent by facsimile, on the date received, (b) if delivered by overnight
courier, on the day after mailing, and (c) if mailed, five days after mailing
with postage prepaid. Any such notice will be sent as follows:
To Shareholders and, prior to Closing, Ventures:
c/o Ventures Healthcare of Gainesville, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx, Loop & Xxxxxxxx, LLP
North Courthouse Square
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
To Merger Subsidiary, Parent and, after Closing, to Ventures:
H. Xxxx Xxxxxxxx
Children's Comprehensive Services, Inc.
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxx Xxxxx Xxxxxxx, Esq.
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
1800 First American Center
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
15.4 CONFIDENTIALITY. Except for press releases issued by Merger
Subsidiary or Parent in the ordinary course following the execution of this
Agreement, the content of which press releases shall be agreed upon by Parent
and Shareholders, all parties agree to maintain the confidentiality of the
existence of this Agreement and the transactions contemplated hereunder, unless
disclosure is required by law.
15.5 PARTIAL INVALIDITY; WAIVER. The invalidity or unenforceability of
any particular provision of this Agreement will not affect the other provisions
hereof, and this Agreement will be construed in all respects as if such invalid
or unenforceable provisions were omitted. Further, there will be automatically
substituted for such invalid or unenforceable provision a provision as similar
as possible which is valid and enforceable. Neither the failure nor any delay on
the part of any party hereto in exercising any rights, power or remedy hereunder
will operate as a waiver thereof, or of any other right, power or remedy; nor
will any single or partial exercise of any right, power or remedy preclude any
further or other exercise thereof, or the exercise of any other right, power or
remedy. No waiver of any of the provisions of this Agreement will be valid,
unless it is in writing and signed by the party against which it is sought to be
enforced.
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15.6 INTERPRETATION. All pronouns and any variation thereof will be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or entity, or the context, may require. Further, it is
acknowledged by the parties that this Agreement has undergone several drafts
with the negotiated suggestions of both; and, therefore, no presumptions will
arise favoring either party by virtue of the authorship of any of its provisions
or the changes made through revisions. Any table of contents and paragraph
headings in this Agreement are for convenience of reference only and will not be
considered or referred to in resolving questions of interpretation.
15.7 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, including the
Exhibits and any other attachments hereto, constitutes the entire agreement
between the parties hereto with regard to the matters contained herein and it is
understood and agreed that all previous undertakings, negotiations, letter of
intent and agreements between the parties are merged herein. This Agreement may
not be modified orally, but only by an agreement in writing signed by Merger
Subsidiary, Ventures and the Shareholders. This Agreement may be executed
simultaneously in two or more counterparts each of which will be deemed an
original and all of which together will constitute but one and the same
instrument.
15.8 FURTHER ASSURANCE OF SHAREHOLDERS AFTER CLOSING. Subsequent to the
Closing, Shareholders will, from time to time, at Merger Subsidiary's reasonable
request, execute and deliver such other instruments of conveyance and transfer,
and take such other action as Merger Subsidiary may reasonably request, in order
to sell, transfer, assign and deliver and vest in Merger Subsidiary the benefits
of, title to and possession of the Stock and Assets.
15.9 LEGAL FEES AND COSTS. In the event any party hereto incurs legal
expenses to enforce or interpret any provision of this Agreement, the prevailing
party will be entitled to recover such legal expenses, including, without
limitation, attorney's fees, costs and disbursements, in addition to any other
relief to which such party will be entitled.
15.10 CONTROLLING LAW. This Agreement will be construed, interpreted
and enforced in accordance with the substantive laws of the State of Tennessee,
without giving effect to its conflicts of laws provisions.
15.11 PARENT GUARANTEE. Parent agrees that it is executing this
Agreement to guarantee the obligation of Merger Subsidiary to pay the Merger
Consideration on the terms and conditions provided herein and to guarantee the
indemnification obligations of the Merger Subsidiary as set forth in Section
14.3 of this Agreement. Parent waives any right to require Shareholders to
proceed against Merger Subsidiary or pursue any other right or remedy available
to the Shareholders. Parent consents and agrees that the Shareholders, without
prejudice to any claim they may have against Parent, may extend or change any of
the obligations hereby guaranteed and settle or compromise any obligation hereby
guaranteed. Parent hereby waives all suretyship or other similar defenses.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"VENTURES":
VENTURES HEALTHCARE OF
GAINESVILLE, INC.
By: Xxxxxxx X. Xxxxxxx
---------------------------------------
Title: President
------------------------------------
"SHAREHOLDERS":
/s/ Xxxxxxx X. Xxxxxxx, Xx.
-------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx., Ph.D.
/s/ S. Xxxx XxXxxxx
-------------------------------------------
S. Xxxx XxXxxxx
/s/ Xxxx X. Xxxxxx
-------------------------------------------
Xxxx X. Xxxxxx
"MERGER SUBSIDIARY":
CHILDREN'S COMPREHENSIVE SERVICES OF
GAINESVILLE, INC.
By: /s/ H. Xxxx Xxxxxxxx
---------------------------------------
Title: President
------------------------------------
"PARENT":
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By: /s/ H. Xxxx Xxxxxxxx
---------------------------------------
Title: Executive Vice President
------------------------------------
