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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CHILDREN'S COMPREHENSIVE SERVICES MANAGEMENT COMPANY
AND
XXXX YOUTH ENHANCEMENT CENTER, INC.
AND
CLG MANAGEMENT COMPANY, LLC
FEBRUARY 12, 1998
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Table of Contents
ARTICLE I.
MERGER OF CONSTITUENT CORPORATIONS............................................................2
1.1 Effect of the Merger.................................................................2
1.2 Assets of XXXX at Closing; Properties Acquired in the Merger.........................2
1.3 Further Assurances...................................................................4
1.4 Additional Parent Company Obligations................................................4
1.5 Additional Governing Provisions......................................................4
ARTICLE II.
CONVERSION AND EXCHANGE OF SHARES.............................................................5
2.1 Conversion of Shares.................................................................5
2.2 Shares Owned by XXXX.................................................................5
2.3 Fractional Shares....................................................................5
2.4 Exchange of Shares...................................................................5
ARTICLE III.
MERGER CONSIDERATION..........................................................................6
3.1 Merger Consideration.................................................................6
3.2 Closing Statements...................................................................7
ARTICLE IV.
CERTIFICATE OF INCORPORATION; OFFICERS AND
DIRECTORS FOLLOWING MERGER....................................................................8
ARTICLE V.
EFFECTIVE DATE OF MERGER; FILING OF MERGER DOCUMENTS..........................................8
5.1 Effective Date.......................................................................8
5.2 Filing of Certificate of Merger......................................................8
ARTICLE VI.
ASSET ACQUISITION OF REAL ESTATE ASSETS OF CLG................................................9
6.1 Real Estate Assets of CLG; Sale of Real Estate Assets to Merger Sub..................9
6.2 Retention of Irrevocable, Permanent Easement Rights..................................9
6.3 Consideration for Real Estate Assets and Easements...................................9
6.4 Conveyance of Real Estate Assets: Status of Title....................................9
6.5 Excluded Items......................................................................10
6.6 Restrictive Covenants...............................................................10
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ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND CLG............................................10
7.1 Organization, Qualification and Authority...........................................10
7.2 Capitalization and Stock Ownership; Membership Interest in CLG......................11
7.3 Investments.........................................................................12
7.4 Absence of Default..................................................................12
7.5 Financial Statements................................................................12
7.6 Operations since September 30, 1997.................................................13
7.7 Litigation..........................................................................14
7.8 Licenses............................................................................14
7.9 Medicare and Medicaid Matters.......................................................15
7.10 Title to and Condition of XXXX Assets...............................................15
7.11 Contracts...........................................................................16
7.12 Environmental Matters...............................................................17
7.13 XXXX Employees. ...................................................................19
7.14 Employee Benefit Plans..............................................................19
7.15 Insurance...........................................................................20
7.16 Conflicts of Interest...............................................................20
7.17 Compliance with Laws................................................................20
7.18 WARN................................................................................21
7.19 Tax Returns; Taxes..................................................................21
7.20 Accredited Investor.................................................................21
7.21 Purchase for Investment; Restrictions on Transfer...................................21
7.22 Solvency............................................................................22
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT......................................22
8.1 Organization, Qualification and Authority...........................................22
8.2 Absence of Default..................................................................23
8.3 SEC Reports.........................................................................23
8.4 Shares to be Issued.................................................................23
8.5 WARN................................................................................23
8.6 Solvency............................................................................23
8.7 Nature of Merger Transaction; Control of Merger Sub; Consideration for Merger.......24
ARTICLE IX.
COVENANTS OF PARTIES.........................................................................24
9.1 Certificate of Incorporation and Bylaws of XXXX; Capitalization.....................24
9.2 Approval by Shareholder.............................................................24
9.3 Approval by Members.................................................................24
9.4 Preservation of Business and XXXX Assets............................................24
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9.5 Books and Records...................................................................25
9.6 Preserve Accuracy of Representations and Warranties.................................25
9.7 Broker's or Finder's Fee............................................................26
9.8 Indebtedness; Liens.................................................................26
9.9 Compliance with Laws and Regulatory Consents........................................26
9.10 Maintain Insurance Coverage.........................................................26
ARTICLE X.
CHAD'S AND SELLERS' CONDITIONS TO CLOSE......................................................27
10.1 Representations and Warranties True at Closing; Compliance with Agreement...........27
10.2 No Action/Proceeding................................................................27
10.3 Order Prohibiting Transaction.......................................................27
10.4 Employment Agreement................................................................27
10.5 Other Matters, Etc..................................................................27
ARTICLE XI.
CCSI COMPANIES' CONDITIONS TO CLOSE..........................................................28
11.1 Representations and Warranties True at Closing; Compliance with Agreement...........28
11.2 No Action/Proceeding................................................................28
11.3 Order Prohibiting Transaction.......................................................28
11.4 Other Matters, Etc..................................................................28
11.5 Due Diligence; Inspection of XXXX Assets; U.C.C. Searches, Etc......................28
11.6 Noncompetition Agreements...........................................................29
11.7 Licenses and Permits................................................................29
11.8 Consents............................................................................29
11.9 Opinion of CHAD's Counsel; Opinion of CLG's Counsel.................................29
ARTICLE XII.
OBLIGATIONS OF XXXX, CLG AND SHAREHOLDER AT CLOSING..........................................30
12.1 Documents Effecting Closing.........................................................30
12.2 Opinion of Counsel..................................................................30
12.3 Corporate Good Standing and Corporate Resolution....................................30
12.4 Closing Certificate.................................................................30
12.5 Third Party Consents................................................................30
12.6 Evidence of Repayment of the Peoples Bank Debt......................................30
12.7 XXXX Closing Statement..............................................................30
12.8 CLG Closing Statement...............................................................31
12.9 Additionally Requested Documents; Post-Closing Assistance...........................31
ARTICLE XIII.
OBLIGATIONS OF MERGER SUB AT CLOSING.........................................................31
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13.1 Merger Consideration................................................................31
13.2 Real Estate Assets Consideration....................................................31
13.3 Corporate Good Standing and Certified Board Resolutions.............................31
13.4 Closing Certificate.................................................................31
13.5 Opinion of Merger Sub's Counsel.....................................................31
13.6 XXXX Closing Statement..............................................................32
13.7 CLG Closing Statement...............................................................32
ARTICLE XIV.
TERMINATION..................................................................................32
14.1 Circumstances of Termination........................................................32
14.2 Effect of Termination...............................................................33
ARTICLE XV.
SURVIVAL OF PROVISIONS, INDEMNIFICATION, AND DISPUTE RESOLUTION..............................33
15.1 Survival............................................................................33
15.2 Indemnification by Shareholder......................................................33
15.3 Indemnification by Merger Sub and Parent............................................33
15.4 Rules Regarding Indemnification.....................................................34
15.5 Exclusivity.........................................................................35
15.6 Mandatory Binding Arbitration.......................................................35
ARTICLE XVI.
MISCELLANEOUS................................................................................37
16.1 Assignment..........................................................................37
16.2 Other Expenses......................................................................37
16.3 Notices.............................................................................37
16.4 Confidentiality: Prohibition on Trading.............................................39
16.5 Confidential Information............................................................39
16.6 Partial Invalidity; Waiver..........................................................39
16.7 Interpretation; Knowledge...........................................................40
16.8 Limitation of Actions...............................................................40
16.9 Legal Fees and Costs................................................................40
16.10 Controlling Law.....................................................................40
16.11 Representatives.....................................................................40
16.12 Parent Guarantee....................................................................40
16.13 Entire Agreement; Counterparts......................................................40
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into on
February 12, 1998 by and among XXXX YOUTH ENHANCEMENT CENTER, INC., a Tennessee
corporation ("XXXX"), CLG MANAGEMENT, LLC, a Tennessee limited liability company
("CLG"), XXXXXX XXXXXXX XXXXXXX, Psy.D. ("Shareholder"), XXXXXX XXXX XXXXXXX
("Member") (the Shareholder and the Member are referred to herein collectively
as the "Sellers" or the "Members"), CHILDREN'S COMPREHENSIVE SERVICES MANAGEMENT
COMPANY, a Tennessee corporation ("Merger Sub") (the Merger Subsidiary and XXXX
sometimes collectively herein referred to as the "Constituent Corporations"),
and CHILDREN'S COMPREHENSIVE SERVICES, INC., a Tennessee corporation ("Parent").
RECITALS:
WHEREAS, XXXX owns and operates a residential treatment center (the
"Facility") providing behavioral health care services to children and
adolescents (the "Business"); and
WHEREAS, the land, buildings and improvements comprising the Facility
and containing approximately twenty (20) acres (herein the "Real Estate Assets")
are owned by CLG and leased to XXXX; and
WHEREAS, Shareholder owns all of the issued and outstanding capital
stock of XXXX (the "XXXX Stock") and the Shareholder and the Member are the sole
members of CLG; and
WHEREAS, the Shareholder desires to transfer the XXXX Stock and Parent
desires to acquire the same from the Shareholder in a stock-for-stock
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, Parent through the Merger Sub also desires to acquire and CLG
desires to sell the Real Estate Assets to the Merger Sub, subject to the terms
and conditions set forth in this Agreement; and
WHEREAS, Parent desires to guarantee performance by the Merger Sub
under this Agreement of all of the representations, warranties, covenants,
conditions and agreements to be performed and observed by each of them.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements and 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 (a) that
XXXX shall be merged (herein the "Merger") into the Merger Sub,
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and (b) Merger Sub shall acquire the Real Estate Assets contemporaneously with
the Merger, all in accordance with the terms of this Agreement.
ARTICLE I.
MERGER OF CONSTITUENT CORPORATIONS
1.1 EFFECT OF THE MERGER. On the Effective Date of the Merger (as such
date is defined in Section 5.1), XXXX shall be merged into Merger Sub, the
separate legal existence of XXXX shall cease, and Merger Sub, as the surviving
corporation, shall continue its corporate existence under the laws of the State
of Tennessee under the name of XXXX Youth Enhancement Center, Inc. (or such
other name as Parent may subsequently elect). Subsequent to the Merger, the
Merger Sub 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 XXXX. All rights, privileges, powers, and franchises
of XXXX and all property, real, personal, and mixed, belonging to XXXX shall be
vested in Merger Sub and all property, rights, privileges, powers, and
franchises and every other interest shall be thereafter as effectually the
property of Merger Sub as they were of XXXX. The title to real estate, if any,
vested by deed or otherwise in XXXX, 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 XXXX shall be preserved unimpaired and all debts,
liabilities, and duties of XXXX shall thenceforth attach to the Merger Sub and
may be enforced against the Merger Sub to the same extent as if said debts,
liabilities, and duties had been incurred or contracted by the Merger Sub.
1.2 ASSETS OF XXXX AT CLOSING; PROPERTIES ACQUIRED IN THE MERGER. At
the closing of the Merger (the "Closing"), XXXX will own or lease, as
applicable, all assets, tangible and intangible, real and personal, that are
currently used to operate the Business (the "XXXX Assets"), free and clear of
all encumbrances, mortgages, pledges, liens, and security interests, other than
Permitted Encumbrances as herein defined. "Permitted Encumbrances" are defined
as (a) mechanic's, materialmen's and similar liens with respect to any amounts
not yet due and payable which are being contested in good faith through
appropriate proceedings, (b) liens for taxes not yet due and payable or for
taxes which are being contested in good faith through appropriate proceedings,
(c) liens securing rental payments under capital lease agreements, if any, (d)
the Easement described in Section 6.2, (e) to the extent constituting a lien or
claim on assets, current liabilities of XXXX as reflected on the Balance Sheet
(as defined herein) that is contained in Exhibit 7.5(1) ("Current Liabilities")
and (f) encumbrances and restrictions on any real property owned or leased by
XXXX (including easements, covenants, rights of way and similar restrictions of
record) which are reflected in the Title Commitment (as defined herein) and
approved by the Parent in accordance with the provisions of this Agreement and
which do not materially interfere with the present uses of such real property.
The XXXX Assets will include, without limitation, the following:
(1) All right, title and interest of XXXX as lessee in and to all of
the real property leased by XXXX from CLG and used in connection with the
Business, if any, including, without
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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 leased by XXXX and situated
thereon or forming a part thereof and all appurtenances, easements and
rights-of-way related thereto (collectively, the "Leased Real Estate");
(2) All equipment, machinery (including the copier leased by XXXX),
data processing hardware and software, furniture, furnishings, appliances,
vehicles (including the pick-up truck or van owned by XXXX) 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) All accounts and notes receivables (the "Receivables") of XXXX;
(5) Subject to the provisions of Section 3.1 relative to payment of
CHAD's obligations to the Peoples Bank, Dickson, Tennessee ("Peoples Bank") 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 XXXX
(the "Cash and Cash Equivalents"), and all prepaid expenses, all prepaid taxes,
any and all tax attributes (as the term "tax attributes" is defined in Section
381 of the Code) and XXXX Assets as of Closing, including without limitation,
and all net operating loss carry forwards (if any, to the extent permitted by
Section 382 of the Code); [provided, that, all actual cash on hand at Closing
shall be deemed included in any computation of net working capital for the
purposes of this Agreement and all financial statements prepared in connection
herewith or referred to herein];
(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
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 XXXX in connection with the Business
as currently conducted (collectively, the "Licenses");
(8) All goodwill, and, to the extent assignable by XXXX, all warranties
express or implied and rights and claims related to the XXXX Assets or the
operation of the Business;
(9) Contract rights and interests held by XXXX 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;
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(10) All intangible or intellectual property owned, leased, licensed or
possessed by XXXX or the Shareholder and utilized in connection with the
Business, including without limitation, the name "XXXX Youth Enhancement Center,
Inc." and all variations and derivations thereof, to the extent XXXX or the
Shareholder has rights in or to each such name; and
(11) All of CHAD's right, title and interest in any partnerships, joint
ventures or similar arrangements (if any, but only to the extent transferable as
of right by XXXX).
1.3 FURTHER ASSURANCES. From time to time as and when requested in
writing by the Merger Sub or any other Parent Company Affiliate (as defined
herein), and at the expense of the requesting party, the officers, the directors
and the Shareholder of XXXX 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
the Merger Sub's title to, and possession of, all the property, interests,
assets, rights, privileges, immunities, powers, franchises, and authority of
XXXX described in Section 1.2, and otherwise necessary to carry out the purposes
of this Agreement.
1.4 ADDITIONAL PARENT COMPANY OBLIGATIONS. Parent Company shall do or
cause to be done all of the following:
(1) Obtain the release of Shareholder's obligations from all Contracts
(as defined herein) listed on Exhibit 1.4(1), but only to the extent such
obligations relate to or arise from periods after Closing or otherwise
constitute a current liability being assumed by Merger Sub as a consequence of
the Merger. In the event that Parent elects not to obtain the release of the
Shareholder, or is unable to obtain any one or more releases, then such
obligation shall be deemed to be covered by the indemnification obligations of
the Parent set forth in this Agreement;
(2) For at least three (3) from the Effective Date (as defined herein)
the Parent Company shall remain at all times current in its public reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and maintain its registration under the Exchange Act. For at
least three (3) years from the Effective Date, the Parent Company also shall
continuously, without interruption, maintain its listing on the New York Stock
Exchange, the American Stock Exchange, or the National Association of Securities
Dealers, Inc. Automated Quotation System or other recognized securities exchange
(collectively, the "Stock Exchanges") reasonably acceptable to Shareholder.
(3) Provide to the person(s) receiving the Parent Company Shares as the
Merger Consideration the incidental ("piggy-back") registration rights specified
in Exhibit 1.4(3) and shall perform the obligations therein specified; and
(4) As to the copier and van acquired pursuant to Section 1.2(2), the
Merger Sub shall assume the related obligations, whether classified as a
long-term or short-term liability.
1.5 ADDITIONAL GOVERNING PROVISIONS. It is understood by the parties
hereto that the Real Estate Assets and the XXXX Assets are presently encumbered
by liens that secure certain
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obligations owed to Peoples Bank. The existence of such liens shall not
constitute violations of this Agreement so long as the Sellers arrange, prior to
or contemporaneously with the Closing hereof for the repayment in full of such
obligations to Peoples Bank and such liens are actually released by Peoples
Bank. The other terms of this Agreement shall be read in connection with this
Section 1.5.
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 the
Merger Sub stock, and none of its shares shall be converted as a result of the
Merger.
(2) Each share of XXXX Stock issued and outstanding on the Effective
Date of the Merger (except shares of XXXX Stock issued and held in the treasury
of XXXX) 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 (as defined herein)
in an amount sufficient to comprise the Merger Consideration as set forth in
Article III below.
2.2 SHARES OWNED BY XXXX. Each share of XXXX Stock issued and held in
the treasury of XXXX (if any) 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. Such amounts shall be paid within ten (10) days after the
Closing. No interest shall be payable thereon.
2.4 EXCHANGE OF SHARES. On and after the Effective Date of the Merger,
the Shareholder shall be entitled to receive in exchange for his shares of XXXX
Stock a certificate or certificates representing the number of shares of Parent
Common Stock (as defined herein) 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
as provided in Section 2.3. The Shareholder may elect to have the shares of
Parent Common Stock issued to the Sellers as joint tenants with a right of
survivorship. Until so presented and surrendered in exchange for a certificate
representing Parent Common Stock, each certificate which represented issued and
outstanding shares of XXXX Stock on the Effective Date of the Merger shall be
deemed for all purposes to evidence ownership of the
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number of shares of Parent Common Stock into which such shares of XXXX 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 XXXX 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. Each of the parties obligated to deliver shares of
stock under this Agreement shall deliver such certificates, duly executed and/or
endorsed, as the case may be, at the Closing.
ARTICLE III.
MERGER CONSIDERATION
3.1 MERGER CONSIDERATION.
(1) The merger consideration ("Merger Consideration") shall be Fifty
Eight Thousand (58,000) shares of the common voting stock, $0.01 par value, of
the Parent (the "Parent Common Stock"), subject to adjustment as set forth in
this Article III. The Merger Consideration will be subject to adjustment as
follows:
(a) subject to the provisions of this Section 3.1 relative to
repaying Peoples Bank, the Merger Consideration shall be increased or decreased,
as appropriate, for any change in net working capital of XXXX between the amount
shown on the Balance Sheet of XXXX as of September 30, 1997 and the amount of
net working capital shown on the Balance Sheet of XXXX as of January 31, 1998;
(b) the Merger Consideration shall be increased or decreased,
as appropriate, to account for additions or deletions of property, plant,
equipment or other non-current assets, if any, purchased or sold between
September 30, 1997 and January 31, 1998, subject, however, to the prior written
consent of the Merger Sub for material (individually or in the aggregate)
transactions, which consent will not be unreasonably withheld;
(c) the Merger Consideration shall also be increased or
decreased, as appropriate, to account for any other Adjustments which are not
otherwise included in net working capital at Closing as of January 31, 1998; and
(d) the Merger Consideration shall be adjusted as necessary to
take into account the effects of any stock splits or stock dividends, or
comparable actions by either Parent or XXXX, prior to Closing. For purposes of
the preceding sentence, the term "Adjustment" shall mean financial statement
entries relative to salaries and wages, related payroll taxes, sick leave,
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holiday, vacation benefits, retirement and any other fringe benefits that will
have accrued or should be accrued to CHAD's employees through January 31, 1998.
In making the various adjustments called for in Section 3.1(1), the
parties acknowledge and agree that it is their mutual intention to make the
transaction have the same economic effect as if the Closing had actually
occurred on January 31, 1998 even though the Merger will not be legally
effective until the Effective Time (as herein defined). The parties agree that
the same kinds of Adjustments made to the January 31, 1998 financial statements
shall also be made to the September 30, 1997 financial statements.
Notwithstanding the provisions of Subsection 3.1(1)(a) above, XXXX is
specifically authorized to repay the existing term loan liability owed to
Peoples Bank as to which XXXX is an obligor in an amount not to exceed Three
Hundred Twenty Thousand and No/100 Dollars ($320,000.00) without causing a
reduction in the number of shares payable to the Shareholder as Merger
Consideration.
(2) The Parent Common Stock will constitute restricted securities the
resale of which shall be subject to the requirements of Rule 144 or any similar
exemption under federal or state securities laws in effect from time to time.
All aspects of the proposed transaction shall be subject to applicable state and
federal securities laws. Parent acknowledges and agrees that the Sellers are not
now and will not become, as a result of the transactions contemplated by this
Agreement, "affiliates," "controlling persons," or "principal shareholders" of
Parent within the meaning of the Securities Act of 1933, as amended, the
Exchange Act, or any applicable provision of the Tennessee Securities Act, as
amended.
3.2 CLOSING STATEMENTS. 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; and provisional adjustments as shall be mutually
agreed at Closing shall be reflected in one certain "Preliminary Closing
Statement". Attached as Exhibit 3.2(1) 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 XXXX 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 by the Parent or, if to be paid by the Shareholder, in the
discretion of the Shareholder, in cash or by a combination of cash and shares of
Parent Common Stock received as Merger Consideration, on or before the tenth day
following the day the Final Closing Statement is agreed upon by the parties. If
Merger Sub and the Sellers 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 upon which the
parties mutually and in good faith agree (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 Sub and Shareholder shall
each pay one-half the cost of the Accountants. The format of the Final Closing
Statement is attached hereto as Exhibit 3.2(2).
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ARTICLE IV.
CERTIFICATE OF INCORPORATION; OFFICERS AND
DIRECTORS FOLLOWING MERGER
The Certificate of Incorporation of Merger Sub is hereby 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 "XXXX Youth Enhancement Center, Inc."
On the Effective Date of the Merger, the Certificate of Incorporation
of Merger Sub, as hereby amended, shall be the Certificate of Incorporation of
the surviving corporation.
The officers and directors of the Merger Sub on the Effective Date
shall, from and after the Effective Time (as defined herein), be the initial
officers and directors of the Merger Sub 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 Sub.
Neither XXXX, CLG nor either of the Sellers, officers, directors or
employees thereof immediately prior to the Effective Time of the Merger shall be
responsible for accomplishing such filing(s).
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(s) of Merger) (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"
and the time of the filing thereof with the Tennessee Secretary of State shall
be called the "Effective Time of the Merger").
5.2 FILING OF CERTIFICATE OF MERGER. Unless this Agreement shall have
been terminated prior thereto under the provisions of Article XIV 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.
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ARTICLE VI.
ASSET ACQUISITION OF REAL ESTATE ASSETS OF CLG
6.1 REAL ESTATE ASSETS OF CLG; SALE OF REAL ESTATE ASSETS TO MERGER
SUB. Simultaneously with closing of the Merger, the Merger Sub shall also
acquire, and CLG shall sell, transfer, convey and deliver to the Merger Sub all
of CLG's right, title and interest in fee to all of the Real Estate Assets. The
Real Estate Assets include all of the approximately twenty (20) acres of real
property, other than the Retained Real Estate, as shown on the survey (the
"Survey") dated January 21, 1998 and attached hereto as Exhibit 6.1(a). The Real
Estate Assets shall include CLG's right, title and interest in fee in and to all
structures, improvements, fixed assets, fixtures (including fixed machinery and
fixed equipment) owned in fee by CLG and situated at, on, or under the Real
Estate Assets, together with all existing appurtenances, easements and
rights-of-way related thereto. CLG shall provide a title insurance commitment
(the "Title Commitment") prior to Closing, and a title insurance policy (the
"Title Policy") consistent therewith promptly after Closing from a title issuer
reasonably acceptable to Merger Sub, and all of CLG's liability to any of the
CCSI Companies for representations and warranties concerning matters of title to
the Real Estate Assets herein and in the Deed shall be deemed to be limited to
the coverage of such Title Policy. The Title Commitment and the Title Policy
shall not contain any exceptions other than the Permitted Exceptions and other
exceptions (if any) agreed upon by the Parent or the Merger Sub in their sole
discretion at or before Closing as disclosed in the Title Commitment. The Title
Commitment shall become a part of this Agreement as Exhibit 6.1(b) and the Title
Policy shall become a part of this Agreement as Exhibit 6.1(c).
6.2 RETENTION OF IRREVOCABLE, PERMANENT EASEMENT RIGHTS. The Merger Sub
shall acquire all non-public roads located contiguous to the Real Estate Assets
that are owned by CLG from CLG. The Merger Sub agrees that CLG shall retain an
irrevocable, insurable, mortgageable easement (the "Easement") in respect of
such roads, which Easement shall entitle CLG to reasonable ingress and egress to
and from the Real Estate Assets on existing roads, to perpetual use of the
existing roads to and from the Facility, and to provide current and future
utility access mutually and reasonably acceptable to both parties to the
Retained Real Estate.
6.3 CONSIDERATION FOR REAL ESTATE ASSETS AND EASEMENTS. As
consideration for the conveyance by CLG of the Real Estate Assets, the Merger
Sub shall pay to CLG at Closing the sum of One Million Two Hundred Thousand and
No/100 Dollars (US$1,200,000.00) in cash in immediately available funds (the
"Cash Consideration"). The Cash Consideration shall be subject, however, to
adjustment at Closing for 1998 real estate taxes, which shall be pro-rated
between CLG and the Merger Sub through Closing.
6.4 CONVEYANCE OF REAL ESTATE ASSETS: STATUS OF TITLE. CLG shall convey
the Real Estate Assets and retain the Easement by execution and delivery of a
Special Warranty Deed (the "Deed") in the usual and customary form appropriate
for recording with the applicable Register of Deeds for the county in which the
Real Estate Assets are located. The Deed shall convey good and marketable title
to the Real Estate Assets to the Merger Sub free and clear of all encumbrances,
mortgage pledges, liens and security interests other than Permitted Encumbrances
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as defined in Section 1.3 hereof and as set forth in Section 6.1 hereof. The
form of the Deed is attached hereto as Exhibit 6.4. The Deed shall recite that
CLG retains the Easement for the benefit of CLG, Xxxxxx XxXxxxx Xxxxxxx, and all
of CLG's successors in title forever.
6.5 EXCLUDED ITEMS. Notwithstanding any other provision contained in
this Agreement to the contrary, CLG shall not sell, transfer, convey or deliver
to the Merger Sub, and the Merger Sub shall not acquire any interest in the real
estate and other property rights described in the Survey (Exhibit 6.1(a)) other
than that marked as part of the approximately twenty (20) acres used for the
Facility as described on the Survey and in the Deed. CLG is retaining all such
property (the "Retained Real Estate").
6.6 RESTRICTIVE COVENANTS. At Closing, the parties shall execute mutual
restrictive covenants that shall run with the land and be binding on their
respective successors until January 31, 2018 in the form of Exhibit 6.6. CLG
agrees that it shall not, as of the Closing or at any time thereafter, permit
the Retained Real Estate to be used for any Competitive Business (as defined
herein). Parent and Merger Sub agree that they shall not, as of the Closing or
at any time thereafter, permit the Real Estate Assets to be used for any purpose
that is toxic or hazardous to the use of the Retained Real Estate for
residential, commercial, or office purposes. "Competitive Business" means any
commercial or not-for-profit enterprise involving the use of the Retained Real
Estate as a group residential facility of any type including by way of example
and not by way of limitation a treatment center for delivery of behavioral
health services or a nursing home.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND CLG
As a material inducement to Parent and Merger Sub to enter into this
Agreement, to consummate the Merger and to acquire the Real Estate Assets, CLG
and the Shareholder each hereby jointly and severally represent and warrant to
Parent and Merger Sub, which representations and warranties will be true and
correct on the date of Closing the matters set forth in this Article VII. In
addition, Xxxxxx Xxxx Xxxxxxx, individually, acknowledges and agrees that she
has read and carefully reviewed all of the representations and warranties set
forth in this Article VII, and, to her knowledge, such representations and
warranties are true, correct and accurate.
7.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. XXXX is a corporation
duly organized and validly existing under the laws of the State of Tennessee 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 7.1, except where
the failure to be so qualified would not have a material adverse effect on the
Business or results of operations of XXXX. XXXX 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 it is now being
conducted. XXXX and Sellers 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
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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 XXXX and Sellers. The
execution, delivery and consummation of this Agreement, and all other agreements
and documents executed in connection herewith by each of XXXX and Sellers, 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 XXXX, Sellers 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 XXXX and/or Sellers, upon due
execution and delivery thereof, will constitute the valid and binding
obligations of XXXX and/or Sellers, 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.
CLG is a limited liability company duly organized and validly
existing under the laws of the State of Tennessee and is in good standing in the
State of Tennessee. CLG conducts no operations and has no property outside the
State of Tennessee. CLG has full authority and power to own, lease and operate
its facilities and assets as presently owned, leased and operated and to carry
on its Business as it is now being conducted. CLG has 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 sale of the Real Estate Assets contemplated herein
and to take all action necessary to effectuate the consummation of the sale of
the Real Estate Assets. The execution, delivery and consummation of this
Agreement, and all other agreements and documents executed in connection
herewith by CLG and/or its Members have been, or by the date of Closing, will
have been duly authorized by all necessary action on the part of such parties.
No other action, consent or approval on the part of CLG, its Members, or any
other person is necessary to authorize due and valid execution, delivery and
consummation, of this Agreement and all other agreements and documents executed
in connection with the sale of the Real Estate Assets to the Merger Sub. This
Agreement and all other agreements executed in connection herewith by CLG and/or
its Members, upon due execution and delivery thereof, will constitute the valid
and binding obligations of CLG 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. A copy of each of the Articles of Organization and
the Certificate of Existence of CLG are attached to the opinion of counsel to be
supplied by the Sellers pursuant to Section 11.9.
7.2 CAPITALIZATION AND STOCK OWNERSHIP; MEMBERSHIP INTEREST IN CLG.
Except for the Shareholder, 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 XXXX. XXXX has issued and
outstanding One Thousand (1,000) shares of its par value common stock which
constitute all the issued and outstanding securities of XXXX (the "XXXX Stock").
The XXXX Stock 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 other than the lien to Peoples Bank. At Closing, XXXX will
not have any outstanding subscriptions, options,
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warrants, calls, contracts, convertible securities or other instruments,
agreements or arrangements of any nature whatsoever under which XXXX 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
XXXX Stock or, other than the Shareholder, any equity interest in XXXX. Neither
XXXX nor Shareholder 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 XXXX Stock or equity
interests of XXXX.
The Members are also the sole members of CLG.
7.3 INVESTMENTS. XXXX 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.
7.4 ABSENCE OF DEFAULT. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by XXXX, CLG and Sellers will not constitute a violation of, or be in
conflict with, 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 XXXX, CLG, the Sellers, the Business, XXXX Assets or Real
Estate Assets or rights in the XXXX Stock, result in the creation or imposition
of any security interest, lien, charge or other encumbrance upon any of the XXXX
Stock, the XXXX Assets or the Real Estate Assets under: (a) any term or
provision of the Charter or Bylaws of XXXX or the Operating Agreement of CLG;
(b) any contract, lease, purchase order, agreement, document, instrument,
indenture, mortgage, pledge, assignment, permit, license, approval or other
commitment to which XXXX, CLG and/or any Seller is a party or by which either
XXXX, CLG, any Seller, the XXXX Stock, the XXXX Assets and/or the Real Estate
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 XXXX, CLG, any Seller, the XXXX Stock, the XXXX
Assets and/or the Real Estate Assets are subject.
7.5 FINANCIAL STATEMENTS.
(1) Attached hereto as Exhibit 7.5(1) are true and correct
copies of CHAD's compiled balance sheets and income statements for the year
ended September 30, 1997 (the "Fiscal Year Financial Statements"), and the
interim unaudited balance sheets and income statements of XXXX for the one (1)
month period ended October 31, 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
XXXX. Except as set forth in the Interim Financial Statements or on Exhibit
7.5(1), XXXX has, and as of the Closing will have, no material contingent
liabilities or obligations, except for such liabilities
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and obligations (none of which individually or in the aggregate shall be
material) which are incurred in the ordinary course of business.
(2) To the best knowledge of XXXX and the Sellers, the books
and records of XXXX are in such order and completeness so that an unqualified
audit may be performed for any period prior to Closing not already audited. The
Sellers will cooperate in all reasonable respects with the Merger Sub in
attempting to perform an audit of XXXX for any period prior to Closing not
already audited at Merger Sub's expense.
7.6 OPERATIONS SINCE SEPTEMBER 30, 1997. Except as set forth in Exhibit
7.6, since September 30, 1997 there has been no:
(1) change in the condition of XXXX, financial or otherwise,
which has, or could reasonably be expected to have, a material adverse effect on
any of the XXXX Assets, the Real Estate Assets, the Business or on the results
of the operations of XXXX as a whole;
(2) material loss, damage or destruction of or to any of the
XXXX Assets or the Real Estate Assets, whether or not covered by insurance;
(3) sale, lease, transfer or other disposition by XXXX or CLG
of, or mortgages or pledges of, or the imposition of any lien, charge or
encumbrance (other than taxes and fees imposed by the governmental authorities
none of which are delinquent) on, any portion of the XXXX Assets or the Real
Estate Assets, except inventory and equipment held for use in the ordinary
course of business and the disposal of obsolete assets in non-material amounts
in the ordinary course of business;
(4) increase in the compensation payable by XXXX, the Shareholder,
officers of directors or any increase in the compensation payable to XXXX to 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 XXXX outside the ordinary course of business. A list of
employees and their compensation as of February 10, 1998 is attached hereto as
Exhibit 7.6(4);
(5) 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 XXXX or change in adopted
depreciation or amortization policies;
(6) issuance or sale by XXXX, or contract or other commitment
entered into by XXXX or any Seller for the issuance or sale, of any shares of
capital stock or securities convertible into or exchangeable for capital stock
of XXXX;
(7) payment by XXXX of any dividend, distribution or
extraordinary or unusual disbursement or expenditure or intercompany payable
other than lease payments to CLG under the CLG Lease (as defined herein) and the
conveyance of a garage to the Shareholder as additional compensation to the
Shareholder;
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(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 XXXX to any person or entity; or the making by XXXX of
any loan or advance to, or an investment in, any person or entity other than
prepayments for goods and services actually used in the Business in non-material
amounts made in the ordinary course of business;
(10) federal, state, or local statute, rule, regulation, order
or case adopted, promulgated or decided that, to the knowledge of XXXX or the
Sellers, materially and adversely affects XXXX, the XXXX Stock, the Business,
the XXXX Assets or the Real Estate 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 XXXX, under any contract of XXXX or otherwise.
7.7 LITIGATION. Except as disclosed in Exhibit 7.7, no person or party
including, without limitation, any governmental agency has asserted, or, to the
knowledge of XXXX or CLG or Sellers, has threatened to assert, any claim for any
action or proceeding, against XXXX or CLG (or any officer, director, employee,
agent or Shareholder of XXXX or CLG) 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 XXXX nor CLG
nor Sellers have 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 7.7, there are no lawsuits,
proceedings, actions, arbitrations, governmental investigations, claims,
inquiries or proceedings pending or threatened involving XXXX, CLG, the Sellers,
the XXXX Stock, any of the XXXX Assets, the Real Estate Assets or the Business
Disclosure of such matters on Exhibit 7.7 shall not limit or vitiate the
indemnity for such pre-Closing claims provided in Article XV.
7.8 LICENSES. XXXX has all Licenses necessary for XXXX 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 XXXX or
any other party under any of the Licenses. To the best knowledge of XXXX and the
Shareholder, there exists no grounds for revocation, suspension or limitation of
any of the Licenses, except to the extent the Merger may have such effect.
Copies of each of the Licenses are attached hereto and are listed on Exhibit
7.8. No notices have been received by
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XXXX or either of the Sellers with respect to any threatened, pending, or
possible revocation, termination, suspension or limitation of the Licenses.
7.9 MEDICARE AND MEDICAID MATTERS. To the extent applicable to XXXX,
XXXX has complied, and, to CHAD's best knowledge, as it might relate to XXXX or
the Business, each of the providers, if any, with which XXXX contracts (herein a
"XXXX Provider") has complied in all material respects with all laws, rules and
regulations of the Medicare, Medicaid and other governmental health care
programs, and has filed all claims, invoices, returns, cost reports and other
forms substantially in the manner prescribed. All cost reports, claims,
invoices, filings and other forms made or filed by XXXX, if applicable, and, to
CHAD's best knowledge, made or filed by each XXXX 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 respects true,
complete, correct and accurate in all material respects. To the best of CHAD's
knowledge, 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 or 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 reasonable basis known to XXXX or the Sellers
for any claims or requests for reimbursement. Neither XXXX nor, to the best of
its knowledge, any XXXX Provider has been subject to any audit relating to
fraudulent procedures or practices. To the best of CHAD's knowledge, there is no
basis for any claim or request for recoupment or reimbursement from XXXX or, to
the best of its knowledge, any XXXX Provider, of any federal or state agency or
instrumentality or other provider reimbursement entities.
7.10 TITLE TO AND CONDITION OF XXXX ASSETS.
(1) XXXX is the sole legal and beneficial owner of the personal
property included in the XXXX Assets, free and clear of all mortgages, security
interests, liens, leases, covenants, assessments, easements, options, rights of
refusal, restrictions, reservations, defects in title, encroachments, and other
encumbrances, except for Permitted Encumbrances. The XXXX Assets are all the
assets set forth on the Interim Financial Statements or currently used in the
operation of the Business. The description of the Real Estate Assets and
retained Easement contained in Exhibit 6.1(a) is based on the Survey and
includes all real property leased from CLG pursuant to the CLG lease attached
hereto as Exhibit 7.10(1) (the "CLG Lease"). Subject to the CLG Lease, CLG is in
lawful possession of the Real Estate Assets including without limitation the
buildings, structures and improvements situated thereon and appurtenances
thereto, free of all mortgages, liens, and other encumbrances and restrictions
except for Permitted Encumbrances.
(2) XXXX is in lawful possession of all the Real Estate Assets
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 and the CLG Lease.
(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 of the Equipment and
Furnishings in all material respects (a) operate in accordance
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with their intended use, (b) perform the functions they are used for by XXXX,
(c) are free of known structural, installation, engineering, or mechanical
defects or problems, and (d) are otherwise in good working order. Neither XXXX
nor CLG has received any written recommendation from any insurer to repair or
replace any of the material XXXX Assets or Real Estate Assets with which XXXX
has not complied to the best of its understanding of each such recommendation.
(4) All motor vehicles used in the Business, whether owned or
leased, are listed in Exhibit 1.2(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 XXXX has complied with all terms of
such leases in all material respects.
(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
XXXX are listed and described in Exhibit 7.10(5) attached hereto. No proceedings
have been instituted or are pending that have been served on the Sellers or XXXX
or as to which any of them has actual notice or, to the knowledge of XXXX or
either of the Sellers, threatened that challenge the validity of the ownership
by XXXX of any such Intellectual Property. XXXX has licensed no one to use any
such Intellectual Property, and neither XXXX nor the Sellers has any knowledge
of the use or the infringement of any of such Intellectual Property by any other
person. XXXX owns or possesses adequate and enforceable licenses or other rights
to use all Intellectual Property now used in the conduct of the Business, except
as enforcement may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and by general principles of
equity.
7.11 CONTRACTS.
(1) Exhibit 7.11(1) sets forth a complete and accurate list of
all material provider agreements, 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 XXXX Stock or any XXXX Asset or any
interest therein, to which XXXX, CLG and/or either of the Sellers is a party or
by which XXXX, the XXXX Assets, the Real Estate Assets or the Business is bound
or affected (collectively, the "Contracts"). Exhibit 7.11(1), as well as the
term "contracts", may exclude Contracts involving annual amounts of $5,000.00 or
less. Accurate, complete and unredacted copies of all written Contracts will be
made a part of Exhibit 7.11(1) which also includes written summaries of key
terms of all oral Contracts.
(2) Except as reflected in Exhibit 7.11(2), 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 7.11(2), none of the
Contracts has been modified, amended, assigned or transferred and 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. No event or condition has happened or
presently exists which constitutes a default or
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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 best knowledge of the
Sellers, there are no counterclaims or offsets under any of the Contracts.
(3) Except as therein stated, 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 XXXX
is in excess of CHAD's ordinary and/or reasonably anticipated business
requirements.
(4) Exhibit 7.11(4) lists every repair and maintenance obligation
of XXXX or CLG pursuant to the Contracts over $10,000.00 required to be
performed on or before the Closing, if any, but which will remain unperformed at
the Closing.
7.12 ENVIRONMENTAL MATTERS.
(1) Hazardous Substances. As used in this Section 7.12(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 XXXX or CLG, any Affiliates of XXXX or CLG (wherein the term "Affiliates"
will mean any person or entity controlling, controlled by or under common
control at any time with XXXX or CLG, 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 XXXX or CLG or their respective Affiliates ("Agents"), or to the
knowledge of either of the Sellers (including any tenant or subtenant of XXXX or
CLG) 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. XXXX or CLG, Affiliates and Agents have
kept the property owned, leased or managed by XXXX or CLG free of any lien
imposed pursuant to Environmental Laws. To the knowledge of XXXX, CLG and each
of the Sellers, 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
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similar to the Business, as appropriate which, if required, was stored or
present in material compliance with Environmental Law:
(a) XXXX utilizes commercially available cleaning and waxing
materials, gasoline, diesel fuel, and sewage treatment chemicals in the
operation of the Business. Other than these materials, which are transported,
stored, utilized and disposed of in the ordinary course of Business in
compliance with Environmental Law and, except as reflected in the Environmental
Reports (as defined herein), neither XXXX, CLG nor the Sellers nor any employees
or persons hired by any of the foregoing have used, generated, treated, handled,
manufactured, voluntarily transmitted or stored any Hazardous Substances on any
property owned or leased by XXXX, including the Real Estate Assets, or in
connection with the Business, nor, to the knowledge of XXXX, CLG or either of
the Sellers, has any premises owned, leased or managed by XXXX or CLG ever been
used for any of the foregoing; and
(b) Neither XXXX nor CLG nor any Affiliates or Agents have
installed on any premises owned, leased or managed by XXXX or CLG friable
asbestos or any substance containing asbestos in condition or amount deemed
hazardous by Environmental Law; and
(c) Neither XXXX nor CLG has 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 XXXX,
CLG, either of the Sellers or Merger Sub to clean-up obligations imposed by
governmental authorities; and
(d) To the knowledge of the Sellers, neither XXXX nor CLG nor
the prior owners of any premises owned, leased or managed by XXXX or CLG (i)
have 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 XXXX, CLG or either of the Sellers, 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
XXXX, CLG or either of the Sellers which could serve as a basis therefor.
Neither XXXX nor CLG has assumed any liability of a third party for clean-up
under or noncompliance with Environmental Law; and
(e) XXXX or CLG or their respective 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 XXXX, CLG or either of
the Sellers, 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. XXXX has furnished or caused
to be furnished to counsel to the Merger Sub the environmental report that CLG
obtained prior to the acquisition of the Real Estate Assets, and XXXX has
cooperated with the Parent and its agents in the engineering and environmental
audit conducted by them in connection with the transaction and the acquisition
of the Real Estate Assets by the Merger Sub. The environmental report
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obtained by XXXX and the environmental report obtained by Merger Sub constitute
the "Environmental Reports."
(4) Environmental Reports. Notwithstanding anything contained
in this Section 7.12, XXXX shall not be liable to the Merger Sub or to the
Parent for any matters disclosed in the Environmental Reports.
7.13 XXXX EMPLOYEES.
(1) Exhibit 7.13(1)(a) attached hereto sets forth: (i) a
complete list of all of CHAD's employees, (ii) their respective rates of pay,
(iii) the employment dates and job titles of each such person, (iv)
categorization of each such person as a full-time or part-time employee of XXXX,
(v) the amount of accrued vacation with respect to such person, and (vi) 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 7.13(1)(a), XXXX has no
employment agreements with its employees and all such employees are employed on
an "at will" basis. Exhibit 7.13(1)(b) (i) contains a list and copies of all
employee fringe benefits and personnel policies, and (ii) lists all ex-employees
of XXXX utilizing or eligible to utilize COBRA. XXXX has or prior to Closing
will have adequately accrued and included in the Financial Statements, all
salaries and wages, related payroll taxes and all sick leave, holiday, vacation
benefits, retirement and other fringe benefits that will have accrued to CHAD's
employees through the Closing Date, including related payroll taxes.
(2) XXXX 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 XXXX 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 XXXX or either of the Sellers, threatened
labor dispute, work stoppage, unfair labor practice complaint, strike,
administrative or court proceeding or order between XXXX and any present or
former employee(s) of XXXX. Except as provided in Exhibit 7.13(2), there is no
pending or, to the knowledge of XXXX or either of the Sellers, threatened suit,
action, investigation or claim between XXXX and any present or former
employee(s) of XXXX, other than unemployment claims filed and/or pending from
time to time in the ordinary course of business. To the best knowledge of either
of the Sellers, there has not been any labor union organizing activity with
respect to CHAD's employees.
7.14 EMPLOYEE BENEFIT PLANS.
(1) Benefit Plans. Except for health and life insurance plans
offered in the ordinary course of Business (if and to the extent such plans may
be considered, for any purpose, to be an "employee welfare benefit plan"), XXXX
has not instituted any (a) "employee welfare benefit plan" (as defined in
Paragraph 3(1) of the Employee Retirement Income Security Act of
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1974 as amended ("ERISA")) maintained by XXXX or to which XXXX contributes or is
required to contribute, and (b) "employee pension benefit plan" (as defined in
Paragraph 3(2) of ERISA) maintained by XXXX, to which XXXX contributes or is
required to contribute, or which covers employees of such XXXX during the period
of their employment with any predecessor of XXXX, including any multi-employer
pension plan as defined under The Code, Paragraph 414(f) (such employee welfare
benefit plans and pension benefit plans being hereinafter collectively referred
to as the "Benefit Plans"). Copies of all Benefit Plans and health and life
insurance plans have previously been provided to Merger Sub.
(2) Liabilities. There are no unfunded liabilities under any
Benefit Plan.
7.15 INSURANCE. XXXX has in effect and has for at least five (5) years
or the period of its existence, whichever is less, continuously maintained
insurance coverage for all of its operations, personnel and assets, and for the
XXXX Assets and the Business. A complete and accurate list of all current
insurance policies is included in Exhibit 7.11(1). Exhibit 7.15 attached hereto
sets forth a summary of CHAD's current insurance coverage (listing type, carrier
and limits), includes a list of any pending insurance claims relating to XXXX or
the Business, and includes a recent three (3)-year claims history relating to
XXXX and the Business as prepared by the applicable insurance carrier(s). To the
best of its knowledge, XXXX is not in default or breach with respect to any
provision contained in any such insurance policies, nor has XXXX failed to give
any notice or to present any claim thereunder in due and timely fashion.
7.16 CONFLICTS OF INTEREST. Except as set forth on Exhibit 7.16, none
of the following is either a supplier of goods or services to XXXX, 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 XXXX: (a) either of the Sellers, (b) any
director or officer of XXXX, or (c) any entity under common control with XXXX or
controlled by or related to either of the Sellers.
7.17 COMPLIANCE WITH LAWS. Neither XXXX nor either of the Sellers has
made any kickback or bribe to any person or entity, directly or indirectly, for
referring, recommending or arranging business with, to or for XXXX. XXXX is in
material 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
XXXX or either of the Sellers 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. The final tax return for XXXX shall be prepared and timely filed by the
Merger Sub with such assistance from the Shareholder's and CHAD's respective
accountants as Merger Sub may require at Merger Sub's reasonable expense as to
the accountants and such taxes shall be paid by Merger Sub with any excess or
shortfall to be adjusted on the Final Closing Statement.
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7.18 WARN. Since ninety (90) days prior to Effective Date, XXXX has not
temporarily or permanently closed or shut down any single site of employment or
any facility or any operating unit, department or service within a single site
of employment, as such terms are used in WARN.
7.19 TAX RETURNS; TAXES. XXXX and each of Sellers 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. XXXX and each of the Sellers,
as applicable, have paid or accrued for all material 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 material tax liabilities accrued or owing as
of the Closing. Except as set forth on Exhibit 7.19, there is no pending tax
examination or audit of, nor any action, suit, investigation or claim asserted
or, to the knowledge of XXXX or either of the Sellers, threatened against XXXX
or either of the Sellers by any governmental authority; and neither XXXX nor
either of the Sellers has been granted any extension of the limitation period
applicable to any tax claims.
7.20 ACCREDITED INVESTOR. Shareholder hereby represents and warrants to
the Parent and Merger Sub 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. 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 him in the Merger by virtue of the receipt of the
Parent Common Stock. Shareholder acknowledges he has been provided complete
access to all records of the Parent which it has requested, as well as to its
properties and executive employees as Shareholder may have requested. In
addition to the information and disclosures of the SEC Reports (as defined in
Section 8.3), the 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.
7.21 PURCHASE FOR INVESTMENT; RESTRICTIONS ON TRANSFER. The Shareholder
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. The Shareholder also acknowledges that, although there exists a
public market for registered shares of the Parent Common Stock, the Parent
Common Stock being received by him 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 Shareholder
acknowledges and agrees that certificate(s) representing the Parent Common Stock
issued as Merger Consideration will contain the following legend:
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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 in customary form addressed to
Children's Comprehensive Services, Inc. that registration is not
required.
Notwithstanding the foregoing requirements concerning registration or
an opinion of counsel, no such registration or opinion of counsel shall be
required in the event that the Shareholder returns shares of Parent Common Stock
to Merger Sub or Parent pursuant to Section 3.2 of this Agreement.
7.22 SOLVENCY. None of XXXX, CLG or the Shareholder are insolvent nor
will any such party be rendered insolvent by the execution delivery or
performance of this Agreement.
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT
As an inducement to each of the Members, XXXX and CLG to enter into
this Agreement and to consummate the transactions contemplated hereunder, Merger
Sub and Parent each hereby represent and warrant to each of the Members, to XXXX
and to CLG, which representations and warranties will be true and correct on the
date of Closing, as follows:
8.1 ORGANIZATION, QUALIFICATION AND AUTHORITY. Merger Sub and Parent
are corporations duly organized, validly existing and in good standing under the
laws of the State of Tennessee (the "CCSI Companies"). Each of the CCSI
Companies 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. The CCSI Companies have the full
right, power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements relating to this Agreement and to
consummate the Merger and other transactions contemplated on the part of Merger
Sub and Parent hereunder. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by the CCSI Companies have been duly authorized by all necessary corporate
action and shareholder action on the part of each and all of the respective CCSI
Companies. No other action on the part of any CCSI Companies or any other person
or entity is necessary to authorize the execution, delivery, consummation and/or
performance 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 the CCSI Companies, upon due execution and
delivery thereof, will constitute the valid and binding obligations of the
respective CCSI Companies, enforceable in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or similar
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laws affecting creditors' rights generally and by general principles of equity.
Copies of the Certificates of Existence of each of the CCSI Companies are
attached to the opinion of counsel to be supplied by such companies pursuant to
Section 13.5.
8.2 ABSENCE OF DEFAULT. The execution, delivery and consummation of
this Agreement and all other agreements and documents executed in connection
herewith by the CCSI Companies 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) or create any debt, indenture, obligation or
liability affecting any CCSI Companies or result in the creation or imposition
of any security interest, lien, charge or other encumbrance upon any of the
assets of any thereof (except in the ordinary course of Parent's business
pursuant to the credit agreement, if any, of the Parent) under: (a) any term or
provision of the Charter or Bylaws of any of the CCSI Companies; (b) any
contract, lease, agreement, indenture, mortgage, pledge, assignment, permit,
license, approval or other commitment to which any of the CCSI Companies is a
party or by which any of them (or any of their respective properties) 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 any of the CCSI Companies is subject.
8.3 SEC REPORTS. The Merger Sub has furnished to the Shareholder true
and complete copies of Parent's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997, its Quarterly Reports on form 10-Q for the fiscal quarter
ended September 30, 1997 and its proxy materials for the most recently held
annual meeting of shareholders (the "SEC Reports") as such reports were filed
with the Securities and Exchange Commission (the "SEC"). The SEC Reports, at the
time such SEC Reports 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. The
Parent has timely filed all reports and other matters required to be filed by it
with the SEC and all Stock Exchanges. Insofar as the Parent is concerned, Rule
144 is available to its shareholders who qualify to use such safe harbor and
will be available to the Shareholder after the Merger.
8.4 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.
8.5 WARN. It is the present intention of the Parent to continue
employment of employees of XXXX under current arrangements, subject, however, to
the Merger Sub's rights to hire and discharge employees from time to time in the
ordinary course of business.
8.6 SOLVENCY. Neither the Parent nor the Merger Sub is insolvent nor
will either be rendered insolvent by the execution, delivery, consummation or
performance of this Agreement.
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8.7 NATURE OF MERGER TRANSACTION; CONTROL OF MERGER SUB; CONSIDERATION
FOR MERGER. Prior to the Merger, Parent will own all of the issued and
outstanding capital stock of Merger Sub and will be in control of the Merger Sub
within the meaning of Section 368(c)(1) of the Code. Following the Merger,
Merger Sub will not issue additional shares of its stock that would result in
Parent losing control of the Merger Sub within the meaning of Section 368(c)(1)
of the Code. The Merger is being consummated pursuant to the plan of
reorganization reflected in this Agreement (or a summary form of such agreement
approved by XXXX) and no Merger Sub stock is being issued as part of the Merger
Consideration.
ARTICLE IX.
COVENANTS OF PARTIES
9.1 CERTIFICATE OF INCORPORATION AND BYLAWS OF XXXX; CAPITALIZATION.
From the date of this Agreement until Closing, the Certificate of Incorporation
and Bylaws of XXXX shall not be changed. XXXX 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.
9.2 APPROVAL BY SHAREHOLDER. XXXX will submit this Agreement for
approval by the Shareholder with a favorable recommendation by its board of
directors and will use its best efforts to obtain requisite shareholder
approval.
9.3 APPROVAL BY MEMBERS. The Members of CLG shall take such action as
necessary under the CLG Operating Agreement to approve of this Agreement.
9.4 PRESERVATION OF BUSINESS AND XXXX ASSETS. From the date of this
Agreement until Closing, XXXX and the Shareholder 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 XXXX 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 Sub the goodwill of the suppliers, employees, clientele and others having
business relations with XXXX or the Business. XXXX will use its reasonable
commercial efforts to retain its employees in their current positions up to
Closing. Until termination of this Agreement, neither XXXX nor the Shareholder
will sell, transfer or pledge, or negotiate the sale, transfer or pledge of,
either any of the XXXX Assets or XXXX Stock or other security of XXXX, nor merge
or consolidate with any other entity; neither XXXX nor the Shareholder will
solicit any inquiries, proposals or offers relating to any such transactions;
and such parties will promptly notify Merger Sub orally, and confirm in writing,
of all relevant details relating to inquiries, proposals or offers that any may
receive relating to any such matters. XXXX will pay no dividend, and will make
no distribution or extraordinary payment to Shareholder or any third party or
pay any intercompany payable and, other than in the ordinary course of business.
XXXX will not sell, discard or dispose of any of the XXXX Assets except in the
ordinary course of business consistent with past practice or as may be required
by law. None of the Contracts will be amended in any material respect, other
than to obtain any needed consents to the exchange of the XXXX Stock
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contemplated in the Merger between the date hereof and Closing without the prior
written consent of Merger Sub or Parent, and XXXX will not enter into any new
material contract, commitment or other transaction with respect to the Business
or the XXXX Assets without the prior written consent of Merger Sub. From the
Effective Date until Closing, XXXX will maintain and keep the XXXX Assets in a
well-maintained condition and in good order and repair in accordance with past
practices.
9.5 BOOKS AND RECORDS.
(1) From the date hereof until the Closing, XXXX 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) Until Closing, XXXX and the Shareholder will give to Merger Sub
full access to all of CHAD's offices, properties, books, contracts, commitments,
records and affairs relating to the XXXX Stock, XXXX Assets or the Business so
that Merger Sub or Parent may inspect and audit them and will furnish to Merger
Sub a copy of all documents and information concerning the properties and
affairs of XXXX, the Business, the XXXX Stock or the XXXX Assets as Merger Sub
may reasonably request. If any such books, records and materials are in the
custody of third parties, XXXX and the Shareholder will direct such third
parties to promptly provide them to Merger Sub. No costs attributable to
complying with requests or directives hereunder from any of the CCSI Companies
shall cause a reduction in the Merger Consideration.
(3) Following the Closing, Parent will permit the Shareholder, 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
copying of the requested documents will be paid by the Shareholder. No costs
attributable to complying with requests or directives hereunder from any of the
CCSI Companies shall cause a reduction in the Merger Consideration.
(4) The Shareholder will use reasonable efforts to cause CHAD's
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 any Parent Affiliates
to comply with any applicable registration or reporting requirements of federal
or state securities laws.
9.6 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. The Members,
XXXX and CLG will each refrain from knowingly 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 Member,
XXXX and CLG will promptly notify Merger Sub of any lawsuit, claim, audit,
investigation, administrative action or other proceeding asserted or commenced
against XXXX or its directors, officers, or shareholder, or against CLG or its
Members, that may involve or relate in any way to XXXX, CLG, the XXXX Assets,
the Real Estate Assets, the XXXX Stock, or the operation of the Business
promptly upon receiving actual notice thereof. Each Member, XXXX and CLG will
promptly notify Merger Sub of any facts or
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circumstances that come to his, her or its actual attention and that cause, or
through the passage of time may cause, any of Shareholder's, CHAD's or CLG's
representations, warranties or covenants to be untrue or misleading in any
material respect at any time from the date hereof through Closing.
9.7 BROKER'S OR FINDER'S FEE. No party has retained, utilized, or
received the services, 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.
9.8 INDEBTEDNESS; LIENS. Other than in the ordinary course of business,
from the date of this Agreement through Closing, neither XXXX nor CLG will
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 XXXX Assets,
without Parent's or Merger Sub's prior written approval. At Closing, subject
only to the Peoples Bank debt and liens, which are to be paid pursuant to the
consummation of the purchase of the Real Estate Assets as described in this
Agreement, the XXXX 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 Shareholder will
deliver to Merger Sub such pay-off letters, releases, U.C.C. termination
statements and other documents as Merger Sub may reasonably request to evidence
the same.
9.9 COMPLIANCE WITH LAWS AND REGULATORY CONSENTS. From the date hereof
through Closing, (a) XXXX and CLG will each comply with all applicable statutes,
laws, ordinances and regulations in all material respects, (b) XXXX will keep,
hold and maintain all Licenses necessary for the Business and operation of the
XXXX Assets, (c) upon request, the Shareholder, XXXX and CLG will use their
respective reasonable efforts (at Parent's expense) 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 Shareholder, XXXX, CLG, and each of the CCSI Companies
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.
9.10 MAINTAIN INSURANCE COVERAGE. From the date hereof through Closing,
XXXX will maintain in full force and effect the existing insurance on the XXXX
Assets and the operations of the Business and will provide at Closing written
evidence reasonably satisfactory to Merger Sub that such insurance continues to
be in effect, that all premiums due have been paid.
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ARTICLE X.
CHAD'S AND SELLERS' CONDITIONS TO CLOSE
The respective obligations of XXXX, CLG and the Sellers under this
Agreement are subject to the satisfaction on or prior to Closing, of the
following conditions (which may be waived in writing by XXXX, CLG or either of
the Sellers (individually, collectively, or in any capacity whatsoever), in
whole or in part):
10.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
AGREEMENT. The representations and warranties of the CCSI Companies 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. Each of the CCSI Companies 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 and both the Merger
Consideration and the Cash Consideration shall have been paid.
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 XXXX, CLG, any of the Members or any the CCSI Companies as a
result of which XXXX, CLG or any of the Members reasonably and in good xxxxx
xxxx that to proceed with the transactions hereunder may constitute a violation
of law, rule, or regulation, or any judicial, administrative or regulatory
order.
10.3 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 violative of such order, or (b) otherwise preventing
consummation of the Merger or the sale of the Real Estate Assets. 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 or could reasonably
be expected, directly or indirectly, result in any of the consequences referred
to in this Section 10.3.
10.4 EMPLOYMENT AGREEMENT. The Shareholder and the Parent have executed
the employment contract (the "Employment Contract") attached hereto as Exhibit
10.4 and the same has become effective (or specified to become effective as of
the Closing).
10.5 OTHER MATTERS, ETC. None of the CCSI Companies shall be in
material breach of this Agreement and all of the CCSI Companies shall have fully
performed under, and paid all of the consideration specified in, this Agreement.
XXXX, CLG, and each of the Members shall have received the opinion of counsel to
the CCSI Companies specified in Section 13.5.
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ARTICLE XI.
CCSI COMPANIES' CONDITIONS TO CLOSE
The obligations of the CCSI Companies under this Agreement are subject
to the satisfaction, on or prior to Closing, of the following conditions (which
may be waived in writing by the respective the CCSI Companies, as applicable, in
whole or in part):
11.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE WITH
AGREEMENT. The representations and warranties of XXXX, CLG, and the Members
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. Each
of XXXX, CLG and the Members will have performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by such person or entity prior to or at Closing.
11.2 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 XXXX, CLG, any of the Members or any of the CCSI Companies
as a result of which the Parent reasonably and in good xxxxx xxxxx that to
proceed with the transactions hereunder may constitute a violation of law, rule,
or regulation, or any judicial, administrative or regulatory order.
11.3 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 violative of such order, or (b) otherwise preventing
consummation of the Merger or the sale of the Real Estate Assets. 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 or could reasonably
be expected, directly or indirectly, result in any of the consequences referred
to in this Section 11.3.
11.4 OTHER MATTERS, ETC. None of XXXX, CLG, or the Members shall be in
material breach of this Agreement and all of them shall have fully performed
those parts of this Agreement specified in this Agreement for their performance
at or prior to Closing.
11.5 DUE DILIGENCE; INSPECTION OF XXXX ASSETS; U.C.C. SEARCHES, ETC.
Merger Sub and its representatives will have had and continue to have reasonable
rights of inspection of the Business in connection with Merger Sub's due
diligence review as provided herein. Merger Sub shall have received the
cooperation of XXXX, CLG, and the Members in obtaining all information that it
reasonably desired to obtain in order to effectively evaluate XXXX, the
Business, the XXXX Assets and the Real Estate Assets.
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11.6 NONCOMPETITION AGREEMENTS. The Shareholder will have executed the
Employment Contract specified in Section 10.4, which contract provides that the
Shareholder shall not compete with the Merger Sub for a period of five (5) years
from the date of Closing in the Geographic Area. As used herein, the term
"Geographic Area" means the states in which the CCSI Companies are doing
business as of the date of this Agreement which states are Montana, Michigan,
Utah, California, Texas, Florida, Louisiana, Arkansas, Alabama and Tennessee.
11.7 LICENSES AND PERMITS. The Merger Sub shall have obtained, after
reasonable efforts, all necessary health care or other licenses, permits and
approvals, if any, necessary for the continued operation of the Business of XXXX
as operated prior to Closing or shall have otherwise procured assurances
acceptable to the Merger Sub that such licenses and permits will be issued in
due course following Closing.
11.8 CONSENTS. Prior to Closing, Shareholder shall have obtained the
consents required to consummate the Merger, the sale of the Real Estate Assets
to the Merger Sub and other transactions contemplated herein and involving the
agreements listed on Exhibit 7.11(2).
11.9 OPINION OF CHAD'S COUNSEL; OPINION OF CLG'S COUNSEL. Parent and
Merger Sub shall have received a favorable opinion, dated as of the Closing, of
counsel for XXXX, the Members and for CLG, in the form of the attached Exhibit
11.9 to the effect that:
(1) This Agreement has been duly authorized, executed and delivered by
each of XXXX, CLG and each of the Members and (assuming that it is enforceable
against the CCSI Companies) constitutes the legal, valid and binding obligation
of each such party enforceable against each of them in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
general principles of equity;
(2) The Board of Directors of XXXX has duly and lawfully approved the
Merger;
(3) The shares of Common Stock of XXXX outstanding immediately prior to
the Closing of the Merger are validly authorized and issued and duly paid and
non-assessable; and
(4) 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, CHAD's Certificate
of Incorporation or Bylaws or any agreement, instrument, judgment, decree,
regulation or other restriction known to such counsel to which XXXX is a party
or by which it is bound.
(5) Neither the execution and delivery of this Agreement nor
performance hereunder will conflict with or result in a breach of the terms,
conditions, provisions of or constitute a default under, CLG's Articles of
Organization or Operating Agreement or any agreement, instrument, judgment,
decree, regulation or other restriction known to such counsel to which CLG is a
party or by which it is bound.
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ARTICLE XII.
OBLIGATIONS OF XXXX, CLG AND SHAREHOLDER AT CLOSING
At Closing, XXXX and the Shareholder will deliver or cause to be
delivered to Merger Sub the following in form and substance reasonably
satisfactory to Merger Sub:
12.1 DOCUMENTS EFFECTING CLOSING. XXXX, CLG and the Members will
execute, acknowledge, deliver and cause to be executed, acknowledged and
delivered to Merger Sub all documents reasonably requested by the Parent as
being necessary to effect the Merger including resignations of each member of
the Board of Directors and each officer of XXXX effective as of the Closing,
together with the other documents and instruments specified in this Agreement.
12.2 OPINION OF COUNSEL. The Shareholder will cause to be delivered to
Merger Sub an opinion of counsel, dated as of Closing, in the form specified in
Section 11.8 hereof.
12.3 CORPORATE GOOD STANDING AND CORPORATE RESOLUTION. XXXX and CLG
will, respectively, deliver all certificates of public officials (exclusive of
any approval of licensing authorities), resolutions and consents reasonably
required of them to evidence the lawful approval by them, respectively, of the
Merger and the sale of the Real Estate Assets.
12.4 CLOSING CERTIFICATE. XXXX, CLG and the Shareholder will each
deliver to Merger Sub a certificate or certificates of an officer of XXXX, of
the members of CLG the Shareholder, dated as of Closing, certifying that (a)
each covenant and obligation of XXXX, CLG and the Members have been complied
with in all material respects and (b) each representation and warranty contained
therein of XXXX, CLG and the Members, respectively, is true and correct in all
material respects at the Closing as if made on and as of the Closing.
12.5 THIRD PARTY CONSENTS. The Shareholder and CLG, as applicable, will
deliver to Merger Sub by Closing all consents, including those listed on Exhibit
7.11(2), as provided in Section 11.8, estoppels, approvals, releases, pay-off
letters (including a payoff letter from Peoples Bank in form attached hereto as
Exhibit 12.5 such that, upon payment of the amounts specified therein, Peoples
Bank shall have been fully paid and shall be required to release all of its
liens on the XXXX Assets and the Real Estate Assets and other filings and
authorizations of third parties that are required for the legal and proper
execution delivery of this Agreement and the transactions contemplated thereby.
12.6 EVIDENCE OF REPAYMENT OF THE PEOPLES BANK DEBT. XXXX and CLG shall
deliver to the Parent a payoff letter from Peoples Bank in customary form such
that, upon payment of the amounts specified therein, Peoples Bank shall have
been fully paid and shall be required to release all of its liens on the XXXX
Assets and the Real Estate Assets. A payoff letter from Peoples Bank is attached
hereto as Exhibit 12.5.
12.7 XXXX CLOSING STATEMENT. The Shareholder and XXXX will execute the
Preliminary Closing Statement in respect of the Merger specified in this
Agreement.
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12.8 CLG CLOSING STATEMENT. CLG will execute a Closing Statement in
respect of the sale by CLG, and the purchase by the Merger Sub, of the Real
Estate Assets in the form of the attached Exhibit 12.7.
12.9 ADDITIONALLY REQUESTED DOCUMENTS; POST-CLOSING ASSISTANCE. Each
party to this Agreement shall cooperate with the other party in executing such
documents and instruments, and in taking such actions at the other party's
expense, as shall be reasonably necessary to accomplish the purposes of this
Agreement as applicable to such party, all at the expense of the requesting
party.
ARTICLE XIII.
OBLIGATIONS OF MERGER SUB AT CLOSING
At Closing, the Merger Sub will deliver or cause to be delivered to the
Shareholder or CLG, as applicable, the following in a form and substance
reasonably satisfactory to the CLG and the Shareholder:
13.1 MERGER CONSIDERATION. The Merger Sub will deliver to the
Shareholder the Merger Consideration upon the terms specified in this Agreement.
13.2 REAL ESTATE ASSETS CONSIDERATION. The Merger Sub shall deliver to
CLG the Cash Consideration in payment for the Real Estate Assets.
13.3 CORPORATE GOOD STANDING AND CERTIFIED BOARD RESOLUTIONS. The CCSI
Companies will each deliver to the Sellers certificates 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 each of the Board
of Directors of each of the Merger Sub and the Parent authorizing the execution,
delivery and consummation of this Agreement and the consummation of the
transactions contemplated hereunder.
13.4 CLOSING CERTIFICATE. The Merger Sub and Parent will deliver to the
Members, individually and in their capacities as Shareholder and/or Members, a
certificate of officers of each dated as of Closing, certifying that (a) each
covenant and obligation of Merger Sub and Parent has been complied with in all
material respects, and (b) each representation and warranty of Merger Sub and
Parent is true and correct in all material respects at the Closing as if made on
and as of the Closing.
13.5 OPINION OF MERGER SUB'S COUNSEL. The CCSI Companies will deliver
to Sellers a favorable opinion of Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C., in
the form of Exhibit 13.5, dated the date of the Closing and addressed to CLG and
to the Sellers to the effect that:
(1) All proceedings, other than the filing and recording of the
Certificate(s) of Merger in the State of Tennessee necessary to effectuate the
Merger of XXXX into the Merger Sub have
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been duly taken by Parent and Merger Sub in accordance with applicable law and
upon such filing and recording of said Agreement, XXXX will be duly merged with
and into Merger Sub;
(2) The Board of Directors and of each of the respective CCSI Companies
have duly and lawfully approved the Merger and all other transactions described
in this Agreement and no approval by Parent's shareholders is required;
(3) This Agreement has been duly authorized, executed and delivered by
each of the CCSI Companies and (assuming that it is enforceable against XXXX,
CLG, and the Sellers) constitutes the legal, valid and binding obligation of
each such party enforceable against each of them in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by general principles
of equity;
(4) The shares of Parent Common Stock that are to be issued and
delivered to the stockholders of XXXX upon consummation of the Merger are
validly authorized and, when so issued, will be validly issued, fully paid and
non-assessable; and
(5) 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, the Parent or the Merger Sub or any judgment, decree,
regulation or similar restriction of which such counsel has knowledge and to
which Parent, the Merger Sub or Merger Sub is a party or by which either is
bound.
13.6 XXXX CLOSING STATEMENT. The Parent and the Merger Sub will execute
the Preliminary Closing Statement in respect of the Merger specified in this
Agreement.
13.7 CLG CLOSING STATEMENT. The Parent and the Merger Sub will execute
a Closing Statement in respect of the sale by CLG, and the purchase by the
Merger Sub, of the Real Estate Assets in the form of the attached Exhibit 12.7.
ARTICLE XIV.
TERMINATION
14.1 CIRCUMSTANCES OF TERMINATION. This Agreement may be terminated as
follows:
(1) By the mutual consent in writing of the boards of directors of XXXX
and Parent.
(2) By the board of directors of XXXX if any condition provided in
Article X 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 XI hereof has not been satisfied or waived on or before the Effective
Date.
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(4) By the board of directors of either XXXX or Parent if the Effective
Date has not occurred on or before February 15, 1998.
14.2 EFFECT OF TERMINATION. In the event of a termination of this
Agreement pursuant to Section 14.1 hereof, except as specified in Section 16.2
of this Agreement, 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 XV.
SURVIVAL OF PROVISIONS, INDEMNIFICATION, AND DISPUTE RESOLUTION
15.1 SURVIVAL. The representations and warranties of Merger Sub,
Parent, XXXX, CLG, and the Shareholder 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 CLG
and the Sellers, on the one hand, or Merger Sub and Parent, on the other hand,
under this Article XV will not begin until the indemnified party incurs one or
more claims that equal, 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. All claims sought by any party hereunder shall
be net of any insurance proceeds received by such party with respect to such
claim and each party agrees to diligently pursue any potential claims under such
policies to minimize the size of claims for which indemnification is applicable.
In no event shall the aggregate liability of Shareholder exceed the value of the
shares issued as Merger Consideration as of the Closing.
15.2 INDEMNIFICATION BY SHAREHOLDER. Subject to the provisions of
Section 11.4, the Shareholder and CLG will, jointly and severally, promptly
indemnify, defend, and hold harmless Merger Sub and the Parent 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 (a) any
breach by XXXX or the Shareholder of any of the covenants, obligations,
representations or warranties or any certificate or document of XXXX and/or
Shareholder delivered pursuant to this Agreement, and (b) any claim not
disclosed herein that is brought or asserted by any third party(ies) against
Merger Sub or XXXX arising out of the ownership, licensing, operation or conduct
of the Business or XXXX Assets, the Real Estate Assets or related to the XXXX
Stock or the conduct of any of CHAD's employees, agents or independent
contractors, relating to all periods of time prior to the Closing.
15.3 INDEMNIFICATION BY MERGER SUB AND PARENT. Merger Sub and Parent
will promptly indemnify, defend, and hold CLG and the Sellers harmless against
any and all losses, costs, and expenses (including reasonable cost of
investigation, court costs and legal fees) and other damages resulting from (a)
any breach by Merger Sub and Parent of any of its covenants, obligations,
representations or warranties contained in this Agreement or any certificate or
document of Parent or Merger Sub delivered pursuant to this Agreement and (b)
any claim that
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is brought or asserted by any third party(ies) against CLG and/or any one or
more of the Sellers arising out of and/or in connection with (a) the ownership,
licensing, operation or conduct of the Business or the conduct of CHAD's
employees, agents or independent contractors, relating to periods of time
subsequent to the Closing and/or (b) as to the Xxxxxxx, XXXX, and/or CLG, the
execution, consummation or performance of this Agreement relating to periods of
time prior to the Closing to the extent that it is asserted that the
transactions described in this Agreement were unauthorized or unlawful as to any
of the CCSI Companies.
15.4 RULES REGARDING INDEMNIFICATION. The obligations and liabilities
of each party that may be subject to indemnification liability hereunder (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 XV, stating the nature of said claim and
the amount thereof, to the extent 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 Nashville, Tennessee, 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 subsection 15.4(1) above) pursuant to this
Article XV 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 subsection
15.4(1) above, stating the nature and basis of such claim and the amount
thereof, to the extent
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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 accordance with the provisions of Section 15.6 below.
15.5 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 15.2 and 15.3, as the case may be, shall
be pursuant to the indemnification provisions set forth in this Article XV.
Subject to Section 15.1, in furtherance of the foregoing, each of the
Shareholder, XXXX, the Merger Sub 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.
15.6 MANDATORY BINDING ARBITRATION. All claims, disputes, and demands
for indemnification shall be arbitrated and not litigated as set forth in this
part of Article XV.
(1) Exclusive Procedure. Except for actions for extraordinary relief,
which shall be permitted only to preserve the rights of the parties pending the
issuance of the arbitrator's award, and to enforce an arbitrator's decision
hereunder, all disputes, controversies, and claims arising out of the terms,
operation, or interpretation of this Agreement shall be initiated by a written
demand for resolution, documented in writing, and escalated through the
appropriate levels of management of each party, up to and including a corporate
officer responsible for this Agreement, until resolution of the issue is
achieved within the time permitted by this Section.
(2) If the dispute cannot be resolved by the parties by negotiation
within thirty (30) days from the date of the written demand for resolution, the
dispute shall be resolved by binding arbitration under the Federal Arbitration
Act, 9 U.S.C. Section 1, et seq. and, to the extent not inconsistent therewith,
under the Commercial Arbitration Rules (the "CAR") of the American Arbitration
Association ("AAA") then in effect. The proceedings shall be held in Nashville,
Tennessee under the auspices of the AAA. As a minimum set of rules in the
proceeding, the parties agree that the terms of this Section shall be deemed to
supplement and/or amend, as necessary, the CAR.
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(3) The arbitration proceeding shall be conducted by (a) a single
arbitrator if the amount(s) in dispute do not exceed Fifty Thousand and No/100
Dollars ($50,000.00) and (b) a panel of three (3) arbitrators for any dispute
above that amount. The parties shall mutually agree on the identity of all
arbitrators but, if the parties cannot agree on the arbitrator or panel of
arbitrators within fifteen (15) days after the date written demand for the
appointment of an arbitrator or panel is made, each party shall identify one
independent individual, and these individuals shall then meet to appoint the
arbitrator or panel of arbitrators. If an arbitrator or panel still cannot be
agreed upon within an additional thirty (30) days, the arbitrator or panel shall
be appointed by the AAA. If a single arbitrator serves, such arbitrator shall be
a licensed Tennessee attorney reasonably experienced in both arbitration and
mergers and acquisitions. If there is a panel of attorneys, at least one
arbitrator shall be familiar with the operations of facilities comparable to the
Facility and at least one arbitrator shall be a licensed Tennessee attorney
reasonably experienced in both arbitration and mergers and acquisitions.
(4) Hereinafter, reference to "arbitrator" shall be deemed in each case
to include references to a panel of arbitrators. The decision by a majority of
any arbitration panel shall be deemed the decision of the panel.
(5) The parties shall equally bear the costs and fees of the
arbitration proceeding.
(6) Any arbitration proceeding hereunder shall be conducted on a
confidential basis.
(7) Any question of whether a dispute should be settled by arbitration
under this Section shall also be arbitrated as provided in this Section.
(8) The arbitrator shall specify the basis of his/her decision and the
basis for any damages awarded. The decision of the arbitrator shall be
considered as a final and binding resolution of the dispute, and may be entered
as judgment in any court of competent jurisdiction in the United States. Each
party agrees to submit to the jurisdiction of any such court for purposes of the
enforcement of any such decision, award, order, or judgment.
(9) The parties shall agree upon what, if any, discovery will be made
available. If the parties cannot agree on the form of discovery within fifteen
(15) days of the written demand for the appointment of the arbitrator, there
shall be only non-abusive, clearly relevant discovery in the form of
depositions, document production, and inspections of items and things. The
arbitrator shall have the power to issue subpoenas. In no event, however, shall
any such discovery take more than one hundred twenty (120) days. The arbitrator
shall be authorized to terminate or refuse any discovery sought outside the
bounds of the foregoing sentence.
(10) The arbitrator's award shall be issued not later than one hundred
twenty (120) days from the date that the AAA notifies the other party of a
demand for arbitration.
(11) Neither party shall xxx the other where the basis of the suit is a
disagreement arising directly under the express terms of this Agreement except
for (a) extraordinary relief described in
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this Section or (b) enforcement of any written decision or order of the
arbitrator, including any award, in the event the other party is not performing
in accordance with the arbitrator's decision.
ARTICLE XVI.
MISCELLANEOUS
16.1 ASSIGNMENT. No party may assign its rights or delegate its
responsibilities without the express written consents of the other parties,
which consents may be granted or withheld in the sole discretion of each of such
other parties. Any assignment or delegation without such consent 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.
16.2 OTHER EXPENSES. Each party will pay all of its, his, her or their
respective expenses in connection with the negotiation, execution, and
implementation of the transactions contemplated under this Agreement. Merger Sub
will pay all expenses in connection with the implementation of the Merger
contemplated under this Agreement. XXXX and Merger Sub will split equally all
expenses for the sale of the Real Estate Assets to Merger Sub, including not
limited to recording fees and expenses, conveyance taxes, survey costs, title
insurance premiums and the like. It is agreed, however, that Parent will pay the
professional fees and expenses incurred by XXXX, the Members and CLG up to
Twenty-Five Thousand and No/100 Dollars ($25,000.00) in the event that the CCSI
Companies fail or refuse to close the transactions described in this Agreement
for any reason other than a material adverse change in the balance sheet or
operations of XXXX since September 30, 1997, or the inability of CLG to convey
good title to the Real Estate Assets, or inability of XXXX to consummate the
Merger. All parties will pay their own taxes to be paid subsequent to the
Closing.
16.3 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:
(1) if delivered personally to the addressee, on the date actually
received by the addressee;
(2) if sent by facsimile, on the date actually received by the
addressee; or
(3) if sent by an overnight courier of national standing (such as
FedEx), and sent for next business day delivery to the address specified below
(and any subsequent change of address), with charges prepaid by the sender, on
the day specified by such courier as the date of delivery.
(4) if sent by certified mail, return receipt requested, on the date of
receipt as shown on the return receipt notice.
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To Members, CLG and, prior to Closing, XXXX:
c/o XXXX Youth Enhancement Center, Inc.
0000 Xxx Xxxxxx Xxxx
Xxxxxxx Xxxx, Xxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
To Sellers and CLG after the Closing:
0000 Xxx Xxxxxx Xxxx
Xxxxxxx Xxxx, Xxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (NONE)
with a copy of any notice to XXXX, CLG or either of the Sellers to:
Xxxxxx X. Small, Esq.
Small & Xxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Post Office Box 190608
Nashville, Tennessee 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
To Merger Sub and Parent and, after Closing, to XXXX:
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
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Any party may change her, his or its address, telephone or facsimile numbers by
sending notice of such change in accordance with this Section of such new
address or telephone or facsimile number.
16.4 CONFIDENTIALITY: PROHIBITION ON TRADING. Except for press releases
issued by Merger Sub or Parent in the ordinary course following the execution of
this Agreement, all parties agree to maintain the confidentiality of the
existence of this Agreement and the transactions contemplated hereunder, unless
(a) disclosure is required by law, (b) except to the extent that disclosure has
been made, or is made, in connection with the CCSI Companies' due diligence
efforts and the obtaining of consents or giving of notices made in connection
with this Agreement, or (c) except disclosures made as a result of transactions
contemplated in this Agreement. The Shareholder, XXXX and their respective
affiliates agree not to trade in the securities of Parent or its affiliates
based upon any material nonpublic information prior to the public announcement
of the Merger. Parent agrees that it will promptly announce the Merger and the
acquisition of the Real Estate Assets within thirty (30) days after the Merger.
16.5 CONFIDENTIAL INFORMATION. The parties acknowledge and agree that
during the course of the negotiations of this Agreement and the transactions
contemplated by this Agreement, each may make available to the other certain
confidential or secret information that is of value to the party disclosing the
information ("Confidential Information"). The parties agree (a) to maintain the
confidentiality of the Confidential Information of the other party and not to
disclose or disseminate such Confidential Information and (b) not to use the
Confidential Information or any ideas, concepts and/or techniques contained in
such Confidential Information for any purpose whatsoever other than in
evaluation of the business opportunity contemplated by the letter of intent
executed by the parties and the negotiation, execution, and consummation of this
Agreement. The party receiving Confidential Information agrees to use the same
standard of care in maintaining the confidentiality of the Confidential
Information as it uses to avoid disclosure of its most sensitive confidential
information. For purposes of this paragraph, Confidential Information shall not
include any information which was not received from the other party.
The parties also agree to return the other party's
Confidential Information or that part of any other information incorporating
such Confidential Information at the request of the party disclosing
Confidential Information to the extent that the disclosure thereof is required
by law in the event that the Merger and the purchase of the Real Estate Assets
by the Merger Sub are not consummated.
16.6 PARTIAL INVALIDITY; WAIVER. The invalidity or unenforceability of
any particular provision of this Agreement will not affect the other provisions
hereof, and (subject to the application of the following sentence) 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 that
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
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to be enforced. However, the last two sentences of this Section shall be subject
to the limitation provision set forth in this Agreement.
16.7 INTERPRETATION; KNOWLEDGE. 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.
When used in this Agreement to qualify a representation or warranty made by a
party hereto, the terms "knowledge", "best knowledge", and the like shall be
deemed to refer to an awareness on the part of such party after reasonable
inquiry about such matter.
16.8 LIMITATION OF ACTIONS. No claims shall be brought by any party for
a breach of or indemnity under this Agreement (a) more than one year after
discovery of the existence of the claim or (b) regardless of the date of
discovery, more than three years after the Effective Date.
16.9 LEGAL FEES AND COSTS. In the event any party hereto incurs legal
expenses to enforce, defend 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.
16.10 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.
16.11 REPRESENTATIVES. The parties agree that the CCSI Companies may
rely on the signature and representations of Xxxxxx XxXxxxx Xxxxxxx (the
Shareholder) and that the Sellers, CLG and XXXX xxx rely on the signature and
representations of H. Xxxx Xxxxxxxx, President of Parent.
16.12 PARENT GUARANTEE. Parent agrees that it is executing this
Agreement to guarantee the obligation of Merger Sub to pay the Merger
Consideration on the terms and conditions provided herein and to guarantee the
indemnification obligations of the Merger Sub as set forth in Section 15.3 of
this Agreement.
16.13 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
Sub, XXXX and the Shareholder. 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.
40
46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"XXXX":
XXXX YOUTH ENHANCEMENT CENTER, INC.
By: Xxxxxx XxXxxxx Xxxxxxx
-----------------------------
Title: President
---------------------------
"CLG":
CLG MANAGEMENT COMPANY, LLC
By: Xxxxxx XxXxxxx Xxxxxxx
------------------------------
Title: Chief Manager
---------------------------
"MEMBERS" / "SELLERS":
Xxxxxx XxXxxxx Xxxxxxx
--------------------------------------------
Xxxxxx XxXxxxx Xxxxxxx, Psy.D., Individually
Xxxxxx Xxxx Xxxxxxx
--------------------------------------------
Xxxxxx Xxxx Xxxxxxx, Individually
41
47
"MERGER SUB":
CHILDREN'S COMPREHENSIVE SERVICES
MANAGEMENT COMPANY
By: /s/ H. Xxxx Xxxxxxxx
------------------------------
Title: President
--------------------------
"PARENT":
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By: /s/ H. Xxxx Xxxxxxxx
--------------------------------
Title: Executive Vice President
----------------------------
42
48
COMPROMISE AND SETTLEMENT AGREEMENT
This COMPROMISE AND SETTLEMENT AGREEMENT ("Agreement") is made and
entered into the 14th day of August, 1998 by and between CHILDREN'S
COMPREHENSIVE SERVICES MANAGEMENT COMPANY ("CCS") and XXXXXX XXXXXXX XXXXXXX,
Psy.D. ("Xx. Xxxxxxx") on the following terms and conditions.
R E C I T A L S:
WHEREAS, on or about February 11, 1998 CCS and The Xxxx Youth
Enhancement Center, Inc. ("XXXX") entered into an Agreement and Plan of Merger;
and
WHEREAS, Xx. Xxxxxxx was the controlling interest in XXXX; and
WHEREAS, in connection with the transaction the parties understood
there would be an adjustment to the purchase price reflected on the Preliminary
Closing Statement as "PURCHASE PRICE ADJUSTMENT INCREASE (DECREASE)" (the
"Purchase Price Adjustment"); and
WHEREAS, the parties have disputed the calculation of the adjustment
amount and wish to finally settle their dispute as to the amount of the Purchase
Price Adjustment.
NOW, THEREFORE, in consideration of the promises contained herein and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties covenant and agree as follows:
1. The parties agree to compromise and settle this dispute and agree
that the amount of the PURCHASE PRICE ADJUSTMENT INCREASE will be the amount of
Forty Two Thousand Six Hundred Three and 50/100 Dollars ($42,603.50). CCS will
remit this amount to Xx. Xxxxxxx upon the execution of this Agreement.
2. Xx. Xxxxxxx for himself and any other former shareholders of XXXX
hereby releases CCS and its shareholders, directors, successors and assigns from
any and all further claims to additional funds related in any way to the
PURCHASE PRICE ADJUSTMENT INCREASE amount and accepts the settlement amount in
full satisfaction of the Purchase Price Adjustment.
3. This Agreement only compromises and settles the claim with respect
to the PURCHASE PRICE ADJUSTMENT INCREASE and does not operate to release or
compromise any other undertakings or obligations of the parties as contained in
the transaction documents.
49
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
CCS:
CHILDREN'S COMPREHENSIVE SERVICES
MANAGEMENT COMPANY
By: H. Xxxx Xxxxxxxx
---------------------------------------
Title: President
-----------------------------------
XX. XXXXXXX:
Xxxxxx Xxxxxxx Xxxxxxx
-------------------------------------------
XXXXXX XXXXXXX XXXXXXX, Psy.D.
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