Exhibit 2.6
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of the
3rd day of January, 2003, by and among THE PROVIDENCE SERVICE CORPORATION, a
Delaware corporation ("Buyer"), and XXX XXXXXXX ("Xxxxxxx" or "Seller")
regarding Buyer's purchase of the stock of Cypress Management Services, Inc.
("Cypress").
WITNESSETH:
Seller is the record and beneficial owner of shares of stock of Cypress
(the "Cypress Shares"), constituting all of the issued and outstanding shares of
stock of Cypress.
Buyer desires to purchase, and Seller desires to sell to Buyer, all of the
legal and beneficial right, title and interest in the Cypress Shares, in
exchange for: (1) 600,000 shares of Buyer's Class A common stock, $.001 par
value (the "Buyer Shares"), (2) the sum of $1,500,000 cash and (3) a promissory
note in the principal amount of $1,000,000.00 (the "Note").
Buyer has entered into a Stockholders' Agreement (the "Amended and Restated
Stockholders' Agreement") as part of financing transactions. As a condition of
the financing and the Amended and Restated Stockholders' Agreement, Xxxxxxx is
required to join and become a party to the Amended and Restated Stockholders'
Agreement by executing a Stockholder Joinder (the "Stockholder Joinder").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and undertakings hereinafter made, it is agreed as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. In reliance upon the representations,
warranties, covenants and agreements of the parties set forth herein, for the
consideration set forth in Section 1.2 hereof and upon and subject to the terms
and provisions of this Agreement, Buyer hereby purchases from Seller and Seller
hereby sells, transfers, assigns and delivers to Buyer the Cypress Shares, free
and clear of all liens, claims, charges, limitations, agreements and
restrictions whatsoever.
1.2 Purchase Price.
(a) At Closing. As consideration for the sale and transfer of
the Cypress Shares, Buyer agrees to provide the following consideration to
Seller consisting of the Buyer Shares, cash and the Note:
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PRINCIPAL AMOUNT OF
BUYER SHARES CASH PROMISSORY NOTES
---------------- ------------ -------------------
600,000 $ 1,500,000 $ 1,000,000
The Note shall be in the form of Exhibit "A" attached hereto and
incorporated herein by reference. The Note shall bear interest at the rate
of EIGHT percent (8%) per annum and shall mature on the third anniversary
of the Closing, as defined in Section 1.4 hereof. Principal and interest
shall be payable at maturity in accordance with the terms thereof.
(b) Conditions Precedent. The following shall be conditions
precedent to this agreement:
(i) The parties agree that Buyer's purchase hereunder
shall be subject to Buyer's right to declare the
purchase null and void if Buyer determines, in
Buyer's sole discretion, that the EBITDA of Cypress
is currently less than the rate of $705,000, per
annum; as a condition of the purchase hereunder,
Buyer shall, prior to the Closing hereunder: i)
issue a written determination that said minimum
EBITDA is met or ii) waive the condition.
(ii) Buyer shall have obtained funding under a loan
commitment from Health Care Business Credit
Corporation in the amount of $21,000,000.00.
1.3 Additional Stock Issuance. The parties further acknowledge that
additional stock issuances may be made by Buyer in the future, including the
possible issuances to private investors and the possible Initial Public Offering
of as-yet undetermined amounts; provided that the foregoing acknowledgment shall
not be construed in any way to obligate Buyer to issue any of its stock in any
amounts or for any purposes whatsoever (including, without limitation, the
purposes set forth above), nor shall the foregoing acknowledgment be construed
to limit Buyer's power, authority or right to issue its stock in any amounts
whatsoever for purposes other than those set forth above. For purposes of this
Agreement, "Initial Public Offering" is defined as the offering by Buyer of
Buyer's shares to the public pursuant to a registration statement filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
1.4 Closing. Closing of the transactions contemplated hereby (the
"Closing") shall occur on or before January 10, 2003.
(a) At Closing, Seller shall deliver to Buyer the following:
(i) Certificates evidencing the number of Cypress Shares
which Seller owns as described in the recitals, above, all of which
have been duly endorsed in proper form for transfer to Buyer;
(ii) A fully executed Stockholder Joinder in the form
attached hereto as Exhibit "B", by which Seller will join in and
become a party to the Amended and Restated Stockholders' Agreement;
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(iii) Seller shall execute a Confidentiality, Proprietary
Rights, Nonsolicitation and Noncompetition Agreement (the
"Noncompetition Agreement") in the form attached hereto as Exhibit "C"
with Buyer which shall provide that Seller shall be prohibited from
engaging in or associating with any mental health business in the
State of Florida during his employment with Buyer and for two years
following termination of such employment, provided that said
Noncompetition Agreement shall be deemed canceled if Buyer is in
default under the Note and remains in default after thirty days
written notice of default from Seller, and provided that said
Noncompetition Agreement shall not prohibit the conducting of training
seminars pertaining to the mental health business by Seller;
(iv) A certificate of good standing issued by the Florida
Secretary of State for Cypress;
(v) An opinion dated as of the date hereof of Seller's
counsel with respect to the matters set forth in the form attached
hereto as Exhibit "D" and in form and substance reasonably
satisfactory to Buyer;
(vi) a new Management Agreement in the form attached
hereto as Exhibit "E" approved by Intervention Services, Inc.
("Intervention") subject to the closing of Buyer's purchase hereunder
providing for continuation of the provision of management services to
Intervention by Cypress;
(vii) Evidence of the following, satisfactory to Buyer:
Intervention and Cypress shall have delivered to the Buyer evidence of
the resignations of, in the case of Intervention, all but two
directors, with the remaining two directors being individuals who are
not employees of Intervention or Cypress, and, in the case of Cypress,
all persons from the board of directors, in form and substance
satisfactory to the Buyer. Intervention and Cypress shall have
delivered to Buyer evidence of the resignations of all officers
thereof, in form and substance satisfactory to Buyer. The remaining
two Intervention directors shall have elected Xxxxxxxx XxXxxxxx,
Xxxxxxx Xxxxxx and Xxxxxx Xxxxx to serve as directors of Intervention,
effective on the closing hereunder.
(viii) A copy of the most recent audit of Intervention
approved by Buyer.
(b) At Closing, Buyer shall deliver to Seller the following:
(i) A certificate, issued in the name of Seller,
evidencing the number of Buyer Shares that Seller is entitled to
receive in accordance with Section 1.2; and
(ii) Cash or immediately available funds in the name of
Seller in the dollar amount that such Seller is entitled to receive in
accordance with Section 1.2; and
(iii) The Note, made payable to Seller in accordance with
Section 1.2.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer the following:
2.1 Organization. Cypress is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Florida, with all
requisite power to own, lease and/or operate all of its property and assets and
to carry on its business as it is now being conducted. This Agreement and all
related agreements, documents and instruments are and will be valid and binding
obligations of Seller enforceable against Seller in accordance with the terms
hereof and thereof.
2.2 Conflicting Agreements and Instruments.
(a) To the best of Seller's knowledge, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby in accordance with the terms hereof by Seller will not:
(i) violate any existing provision of any law or violate any existing
decree applicable to Seller or Cypress, (ii) conflict with or result in a
breach of organizational documents of Cypress, any of the Obligations (as
defined in Section 2.8) or any other material agreement or instrument to
which Seller or Cypress is a party or by which Seller or Cypress or the
Assets (as defined in Section 2.7) are bound or subject, (iii) constitute a
breach or default of or an acceleration under, or an event that with the
passing of time or giving of notice or both would constitute a breach or
default of or acceleration under, any of the items described in (ii) above;
or (iv) result in the creation or imposition of any lien, charge, security
interest, encumbrance or claim upon or in any of the Assets.
(b) Seller does not represent or warrant that any of the
parties with whom Cypress has a current contract or agreement will not
exercise a right of cancellation or termination such party may have under
such contract or agreement (other than as a result of any matter, event or
circumstance which could constitute the breach of a representation or
warranty hereunder, including under Section 2.2(a) hereunder); provided,
however, Seller warrants that he is not aware that any such party intends
to exercise or would consider exercising such right of cancellation or
termination as a result of the transactions contemplated by this Agreement
or for any other reason.
2.3 Filings, Consents and Approvals. Except as set forth on Schedule
2.3, the execution, performance and delivery by Seller of this Agreement and the
related agreements, instruments and documents referred to herein, and the
consummation of the transactions contemplated by the foregoing, do not require
the consent, approval or action of, or any filing with, or notice to, any
corporation or any person, firm or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
Seller covenants and agrees that, with respect to this Section 2.3, he will use
his best efforts to secure the necessary consents and/or approvals for those
items listed on Schedule 2.3.
2.4 Financial Statements; Absence of Undisclosed Liabilities. The
financial statements of Cypress as and for the years ended December 31, 2001,
and the period ended April 30, 2002 (collectively, the "Financial Statements"),
delivered to Buyer: (a) are true and accurate in all
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material respects, and (b) fairly present in all material respects the financial
position of Cypress as of the respective dates thereof and the results of
operations for each such year or period. The Buyer understands that the
financial statements provided by the Seller are produced "in-house" and that no
audit of Seller under Generally Accepted Accounting Principles has been
conducted.
2.5 Absence of Certain Changes. Except as set forth on Schedule 2.5,
since April 30, 2002, there has not been: (a) any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting the
business or properties of Cypress; (b) any material increase in the compensation
payable or to become payable by Cypress to any of its employees or agents, or
any bonus payment or material arrangement made to or with any of them; (c) any
mortgage, pledge or subjection to any lien, charge, or encumbrance of any kind
of any of the assets of Cypress, tangible or intangible; (d) any sale or
transfer of any of the Assets; (e) any sale, assignment, license or transfer by
Cypress of any patents, trademarks, trade names, copyrights, licenses, computer
software programs, or other intangible assets used in the operation of its
business; (f) any amendment or termination of any material contract, agreement
or license relating to its business to which Cypress is a party, other than in
the ordinary course of business; (g) any payment or distribution made or
dividend paid to any stockholder of Cypress; or (h) any commitment to do or take
any of the actions contemplated by paragraphs (b), (c), (d), (e), (f) or (g) of
this Section 2.5.
2.6 Litigation. Except as set forth on Schedule 2.6, Cypress and
Seller is not bound by any order, judgment, stipulation or consent decree of any
court or other governmental authority, and there is not pending or threatened
any suit, action, employee controversy, or legal, administrative, arbitration,
or other proceeding or investigation, which would affect the Assets, operations
of the business as presently conducted, or the transactions contemplated by this
Agreement, nor, to the knowledge of Cypress or Sellers, is there any basis
therefor.
2.7 Assets. The Asset Schedule attached hereto as Schedule 2.7
contains a complete and correct list or description of the assets of Cypress as
of the date of Closing, and includes, without limitation, the following
(collectively, the "Assets"): (a) all items of tangible personal property and
fixtures of whatever kind or nature which are owned by Cypress, used in the
operation of its business in the ordinary course and which have a value in
excess of $1,000.00 (collectively, the "Personal Property"); (b) a description
of all contracts, leases, licenses, memberships, agencies, permits and
agreements to which Cypress is a party or an assignee of a party (collectively,
the "Contracts"); (c) a list of all copyrights, trademarks, trade names, patents
and other similar rights, including applications and registrations therefor,
owned or used by Cypress in the operation of its business (collectively, the
"Intellectual Property"); (d) the amount of cash, stock and other securities;
(e) a description of any tax claims and tax refunds; (f) the dollar value of
management fees earned but not yet received, which shall be paid to Seller as
set forth in Section 4.3 below; and (g) a description of all employee benefit
programs and plans as defined in Section 2.12.
2.8 Liabilities. The Liability Schedule attached hereto as Schedule
2.8 contains the following as of the date of Closing hereunder (collectively,
the "Obligations"): (a) the dollar value of the accounts payable of Cypress to
be paid at Closing; (b) a description of any outstanding loans to Cypress; and
(c) a description of any other known liabilities and obligations of Cypress of
any nature, past, present, future, fixed or contingent. "Obligations" includes
all liabilities and obligations of Cypress under the Contracts. Accounts payable
incurred prior to Closing, but not paid at Closing, shall be paid as set forth
in Section 4.3 below.
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2.9 Title to and Condition of Property. Except as set forth on
Schedule 2.9:
(a) Title. Cypress has good, marketable and exclusive title to
and undisputed possession of all of its tangible personal property and
improvements included among the Assets, free and clear of all liens,
encumbrances, mortgages, claims, charges or demands of any nature.
(b) Condition. All of the tangible personal property and
improvements included among the Assets are in good condition, ordinary wear
and tear excepted, are not obsolete, are suitable for use in the ordinary
course of business and are otherwise in such condition and repair so that
the business can operate in compliance with all applicable federal and
state laws.
(c) Insurance. The tangible personal property and improvements
included among the Assets and any real property and improvements therein
which are leased are insured in amounts adequate to replace or repair any
loss or damage to any of the Assets, leased property or improvements,
pursuant to a casualty insurance policy of a type reasonable and customary
in the industry.
(d) Removal of Assets. No material item of equipment or other
tangible asset is used in the operation of the business, at any time within
the past twelve months, has been removed from the business except in the
ordinary course of business.
2.10 Contracts and Commitments. Schedule 2.10 lists all material
written and oral contracts, leases, agreements and other commitments relating to
the business of Cypress to which Cypress is a party, including the contracts,
leases, agreements and commitments that constitute or evidence the Obligations
(together, the "Contracts"). The Contracts listed on Schedule 2.10 are not
subject to any oral agreements, modifications, addenda or other understandings
of any kind or nature. As of Closing, Cypress will not be in default under, and
will not have committed any act that, with the passing of time or the giving of
notice, would constitute a default under, any of the Contracts, and the
Contracts will be in full force and effect in accordance with their terms.
2.11 Licenses, Permits. Cypress and Seller represent that, to the
best knowledge of each of them, Intervention, the operations of which are
managed by Cypress, has all licenses and permits (as the case may be) necessary
to operate its business and to conduct all related business in the ordinary
course, and such licenses and permits are in full force and effect. Such
licenses and permits are listed on Schedule 2.11. No material violation is
outstanding with respect to any such license or permit, and there is pending no
proceeding to revoke or limit any of them. Cypress and Seller represent that, to
the best knowledge of each of them, Intervention is in compliance in all
material respects with the applicable laws and regulations governing its
operations and its Assets.
2.12 Employee Benefits. Schedule 2.12 identifies all employee benefit
programs and plans maintained with respect to employees of Cypress, including,
but not limited to, group health and accident coverage and vacation and sick pay
policies, and all contracts and understandings with employees, and all such
programs, plans, contracts and understandings are in full force and effect
without default. There are no oral agreements with any employees relating to
term of employment,
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termination benefits, stock ownership, stock options, or other employee benefits
or perquisites. Cypress does not currently maintain a pension or profit sharing
plan, except a set forth in Schedule 2.12, and Cypress has never maintained a
pension or profit sharing plan for which any remaining liability or obligation
exists. Cypress and Seller represent that, to the best knowledge of each of
them, Cypress is in full compliance with the federal Employees' Retirement
Income Security Act ("ERISA") and no investigation has ever been commenced by a
government agency relative to compliance with ERISA by Cypress.
2.13 Unions. Cypress is not a party to any contract with a labor
union and no election or proceeding relating to labor relations is pending or
threatened.
2.14 Taxes. Except as set forth on Schedule 2.14, all federal, state,
county and local income, gross receipts, excise, property, franchise, license,
sales, transaction privilege, withholding, and other taxes have been timely paid
and appropriate returns have been timely filed. There are no tax liens on any of
the Assets and there are not pending, asserted or threatened against Cypress any
tax examination or audit or tax claims.
Cypress (and any predecessor of Cypress) has been a validly electing S
corporation within the meaning of Internal Revenue Code Sections 1361 and 1362
at all times during its existence, and Cypress will be an S corporation up to
and including the Closing Date.
Neither Cypress nor any qualified Subchapter S subsidiary of Cypress
has, in the past ten years: (a) acquired any asset from another corporation in a
transaction in which the tax basis of Cypress or the acquiring subsidiary of
Cypress with respect to the acquired asset was or will be determined, in whole
or in part, by reference to the tax basis of the acquired assets (or any other
property) in the hands of the transferor, or (b) acquired the stock of any
corporation which is a qualified Subchapter S subsidiary.
Cypress and Seller will not revoke Cypress' election to be taxed as an
S corporation within the meaning of Internal Revenue Code Sections 1361 and
1362. Cypress and Seller will not take or allow any action other than the sale
of Cypress stock pursuant to this Agreement that would result in the termination
of Cypress' status as a validly electing S corporation within the meaning of
Internal Revenue Code Sections 1361 and 1362.
Cypress has made full and adequate provision on its April 30, 2002
balance sheet for all material taxes payable by it for all periods prior to the
date of such balance sheet and Xxxxxxx shall be responsible for preparation and
timely filing of all tax returns for fiscal years ending before the Closing
hereunder.
2.15 Copyrights, Etc. Cypress holds no copyrights, call signs,
trademarks, trade names, patents, and other similar rights.
2.16 Capitalization. Cypress has an authorized capitalization
consisting solely of 1,000 shares of common stock having par value of $1,000.00,
of which 100 are issued and outstanding on the date hereof (the "Cypress Shares"
as defined above). The Cypress Shares have been validly issued and are fully
paid and nonassessable, and no other stock or securities of Cypress other than
the Cypress Shares are issued or outstanding. None of Cypress' Shares are held
by it as treasury stock.
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Cypress has not taken and no stockholder has taken any action that may result in
the granting to any party of any options, warrants or other rights to purchase
or subscribe for or otherwise obtain (or any commitment or obligation of any
kind to issue) any shares of Cypress stock or any other security of Cypress.
2.17 Corporate Documents. Cypress has heretofore delivered to Buyer
each of the following documents, which are, on and as of the date of execution
of this Agreement, true, correct and complete: (a) Certificate of Incorporation
of Cypress and all amendments thereto; (b) Bylaws of Cypress and all amendments
thereto; (c) minutes of all meetings of the stockholders of Cypress; (d) minutes
of all meetings of the Board of Directors of Cypress; and (e) list of all
current officers and directors of Cypress.
2.18 Review of Documents, Access to Information. Seller acknowledges
that: (a) he has received and carefully reviewed a copy of the Certificate of
Incorporation and Bylaws of Buyer; (b) he has received and carefully reviewed a
copy of the financial statements as of June 30, 2001, of Buyer; (c) he has
received all information concerning Buyer Shares that they have requested; (d)
as a result of his relationship with Cypress, his review of the aforementioned
documents and his prior overall experience in financial matters, he is properly
able to evaluate the capital structure of Buyer, the business of Buyer and the
risks inherent therein; (e) he has been given the opportunity to obtain any
additional information or documents from, and to ask questions and receive
answers of, the officers and representatives of Buyer to the extent necessary to
evaluate the merits and risks related to their investment; and (f) his
acquisition of securities of Buyer is consistent, in both nature and amount,
with his overall investment program and financial obligations.
2.19 Investment. Buyer Shares and the Note acquired by Seller are
being acquired by Seller for his account for investment, and Seller will not
sell or otherwise dispose of Buyer Shares or the Note except in compliance with
the Securities Act of 1933, as amended (the "1933 Act"), the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, applicable "blue sky" laws, and the terms of this Agreement.
Prior to making any disposition of Buyer Shares or the Note, Seller
will give written notice to Buyer describing the manner of such proposed
disposition. Seller will not effect such proposed disposition until either: (a)
Buyer has notified him that, in the opinion of Buyer's counsel, no registration
of Buyer Shares or, if applicable, the Note under the 1933 Act or registration
or qualification under the securities or "blue sky" laws of any state is
required in connection with such proposed disposition, or (b) a registration
statement under the 1933 Act covering such proposed disposition has been filed
by Buyer with the Commission and has become effective under the 1933 Act and
compliance with applicable state securities or "blue sky" laws has been
effected.
Seller is familiar with Rule 144, as amended, under the 1933 Act, and
he has been advised that Rule 144 is not currently and may not in the future
become available to permit resales by him of Buyer Shares or the Note. Seller
understands that, to the extent that Rule 144 is not available, he will be
unable to sell Buyer Shares or the Note without either registration under the
1933 Act or the existence of another exemption from such registration
requirement. Seller acknowledges that Buyer has no obligation to Seller to
register Buyer Shares or the Note.
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2.20 Authority. Seller has full right, power and authority to enter
into this Agreement.
2.21 Related Party Transactions. Except as set forth on Schedule 2.21
and except for compensation to regular employees of Cypress, no current or
former affiliate of Cypress, any of its subsidiaries or any associate thereof,
is now, or has been during the last five fiscal years: (a) a party to any
transaction or contract with Cypress; (b) indebted to Cypress, or (c) the direct
or indirect owner of an interest in any entity which is a present or potential
competitor, supplier or customer of Cypress (other than non-affiliated holdings
in publicly-held companies), nor does any such person receive income from any
source other than Cypress which should properly accrue to Cypress. Except as set
forth on Schedule 2.21, no current or former affiliate of Cypress, no subsidiary
of Cypress, and no associate thereof or of Cypress is a guarantor or otherwise
liable for any liability (including indebtedness) of Cypress.
2.22 Intervention Services, Inc. From the date of its incorporation,
Intervention Services, Inc. has qualified for exemption from Federal income Tax
pursuant to Section 501(c)(3) of the Code, has not been a private foundation and
has been exempt from all taxes and charges from which a non-profit corporation
organized and conducted solely for health care purposes and properly qualified
as exempt from Federal income tax pursuant to Section 501(c)(3) of the Code is
eligible for exemption. Other than Intervention Services, Inc., Cypress has no
management contract with any tax-exempt entity. The transactions contemplated by
this Agreement will not cause Intervention Services, Inc. to lose its
qualifications for exemption from Federal income Tax, nor cause it to be treated
as a private foundation. Cypress has entered into no transaction with
Intervention Services, Inc. that has resulted or may result in the net earnings
of Intervention Services, Inc. inuring to the benefit of any private person as
is prohibited by Section 501(c)(3) of the Code or which has constituted or may
constitute an "excess benefit transaction" within the meaning of Section 4958 of
the Code or its implementing regulations at 26 C.F.R. Section 53.4958-0T through
53.4958-8T.
2.23 Advisors. Seller acknowledges and warrants to Buyer that he has
received independent legal and tax advice with respect to this Agreement and the
transactions contemplated hereby and all other documents in connection herewith,
including the Amended and Restated Stockholders' Agreement. Seller has obtained
such advice to the extent he deems it appropriate and has otherwise had a full
an fair opportunity to consult with such legal and tax advisors and obtain from
Buyer such information as he has deemed appropriate to consider the advisability
of entering into the foregoing agreements.
2.24 Disclosure. No representation or warranty of Seller in this
Agreement contains any untrue statement of a material fact, or fails to state a
known material fact necessary to make the statements contained herein not
misleading as of the date of the representation or warranty.
Neither this Agreement, any of the Schedules or Exhibits, nor any
other written material, when viewed separately or together, delivered to Buyer
or any of its respective directors, officers, partners, employees,
representatives or agents contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein, in
light of the circumstances in which they were made, not misleading as of the
date hereof.
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2.25 Seller assistance in transition after Closing. Seller agrees
that, for a period of six (6) months after the Closing hereunder, Seller shall,
without compensation, be available during normal business hours at the request
of Buyer or Buyer's employees or representatives (a) to make Buyer's employees
and representatives familiar with the operations of Cypress, (2) to assist
Buyer's employees and representatives in conducting the operations of Cypress
and (3) to introduce Buyer's employees and representatives to vendors and other
business contacts of Cypress. During said six-month period, Seller shall make
all reasonable efforts to promote continuity in the operations of Cypress and
Seller shall use Seller's best efforts to advise Buyer's employees and
representatives accordingly regarding matters pertaining to the operations of
Cypress.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
3.1 Organization; Power and Authority of Buyer. Buyer is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, with all requisite power to own all of its
property and assets and to carry on its business as it is now being conducted,
and to execute, perform and deliver this Agreement and related agreements,
documents and instruments referred to herein, and to consummate the transactions
contemplated by the foregoing. The execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary action on the part of the Buyer, all
requisite consents and approvals have been obtained by Buyer to the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, and this Agreement and such related agreements, documents
and instruments are and will be valid and binding obligations of Buyer,
enforceable against Buyer in accordance with the terms thereof.
3.2 Conflicting Agreements and Instruments. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby in accordance with the terms hereof by Buyer will not, as of the Closing:
(a) violate any existing provision of any law or violate any existing decree
applicable to Buyer; (b) conflict with or result in a breach of Buyer's
organizational documents or any other material agreement or instrument to which
Buyer is a party or by which Buyer is bound or subject; (c) constitute a breach
or default of or an acceleration under, or an event that with the passing of
time or giving of notice or both would constitute a breach or default of or
acceleration under, any of the items described in (b) above; or (d) result in
the creation or imposition of any lien, charge, security interest, encumbrance
or claim upon or in any of Buyer's assets.
3.3 Filings, Consents and Approvals. Except as set forth on Schedule
3.3, the execution, performance and delivery by Buyer of this Agreement and the
related agreements, instruments and documents referred to herein, and the
consummation of the transactions contemplated by the foregoing, do not require
the consent, approval or action of, or any filing with, or notice to, any
corporation or any person or firm or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
3.4 Litigation. Except as set forth on Schedule 3.4, Buyer is not
bound by any order, judgment, stipulation or consent degree of any court or
other governmental authority, and there is not
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pending or threatened any suit, action, employee controversy, or legal,
administrative, arbitration, or other proceeding or governmental investigation
which would affect the transactions contemplated by this Agreement, nor, to the
knowledge of Buyer, is there any basis therefor.
3.5 Contracts and Commitments. Buyer has provided access to Seller
to complete and accurate copies of all written contracts, leases, agreements and
other commitments to which Buyer is a party and all other documents it may
request to deliver. As of Closing, Buyer will not be in default under, and will
not have committed any act that, with the passage of time or the giving of
notice or both, would constitute a default under, any of such agreements, and
will be in full force and effect in accordance with their terms.
3.6 Copyrights, Etc. All copyrights, trademarks, trade names,
patents and other similar rights used by Buyer are valid, in good standing and
uncontested. Buyer will, upon consummation of this Agreement, possess adequate
rights, licenses and other authority to use all the copyrights, trademarks,
trade names, patents and other similar rights necessary to conduct its
operations as now conducted.
3.7 Capitalization of the Buyer. Immediately prior to consummation
of the Closing, the authorized capital stock of the Buyer shall consist of the
following:
SEE STOCK LEDGER: SCHEDULE 3.7, HERETO
3.8 Licenses, Permits. Buyer has all licenses and permits (as the
case may be) necessary to operate its business and to conduct all related
business in the ordinary course, and such licenses and permits are in full force
and effect. No material violations are outstanding in respect of such licenses
or permits, or any of them, and there is pending no proceeding to revoke or
limit any of them. Buyer is in compliance in all material respects with the
applicable laws and regulations governing the operation of its business and the
assets owned by it.
3.9 Unions. Buyer is not a party to any contract with a labor union
and no election or proceeding relating to labor relations is pending or
threatened.
3.10 Taxes. All federal, state, county and local income, gross
receipts, excise, property, franchise, license, sales, transaction privilege,
withholding and other taxes have been timely paid and appropriate returns have
been timely filed. There are no tax liens on any of Buyer's assets and there are
not pending, asserted or threatened against Buyer any tax examination or audit
or tax claims.
3.11 Accuracy of Representations. No representation or warranty of
Buyer in this Agreement contains any untrue statement of a known material fact,
or fails to state a known material fact necessary to make the statements
contained herein or therein not misleading as of the date of representation or
warranty.
Neither this Agreement, any of the Schedules or Exhibits, nor any
other written material, when viewed separately or together, delivered to Seller
contains any statement of a material fact known by Buyer to be untrue or omits a
known material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading
as of the date hereof.
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3.12 Buyer's Due Diligence. Buyer represents and warrants that Buyer
has, with due diligence, conducted a full and complete investigation of Cypress
and Seller has received all information regarding Cypress that has been
requested by Buyer. As of the date of Closing, Buyer requires no further
information or documents, financial or otherwise, to complete its investigation
of Cypress.
ARTICLE IV
MUTUAL COVENANTS AND WARRANTIES
4.1 Broker. The parties hereto hereby represent and warrant to the
other that no person has provided services as a broker, agent or finder in this
transaction, except as set forth in Exhibit "F" hereto. The parties shall each
indemnify and hold harmless the other from and against any and all other claims
or expenses, including attorneys' fees, asserted by any other person purporting
to act on behalf of the respective indemnitor as a broker, agent or finder in
connection with this transaction.
4.2 Further Assurances. The parties agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents, and to do such other acts and things, all as the other party
may reasonably request, for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
4.3 Payment of Management Fees Earned Prior to Closing; Payment of
Accounts Payable Incurred Prior to Closing. The parties agree that management
fees earned prior to Closing and paid to Cypress after Closing shall be
deposited by Cypress into an interest-bearing account. Accounts payable of
Cypress incurred prior to Closing shall be paid from said account. The balance
remaining in said account 90 days after Closing shall be paid to Seller. After
said 90-day period, any management fees earned prior to closing, but received by
Cypress after closing shall be remitted directly to Seller by Cypress. After
said 90-day period, any billing statements received by Cypress pertaining to
accounts payable prior to Closing shall be sent to Seller and Seller shall
promptly pay all charges reflected therein.
ARTICLE V
INDEMNIFICATION AND RELATED MATTERS
5.1 Indemnification by Seller. Seller agrees to indemnify and hold
harmless Buyer, and its directors, officers and employees against and in respect
of any and all loss, liability, obligation, damage, deficiency or expense
resulting from: (a) any misrepresentation, breach of any warranty or
non-fulfillment of any agreement of Seller under the terms of this Agreement or
in any agreement or certification furnished pursuant hereto; and (b) any
actions, suits, proceedings, demands, judgments, costs and reasonable legal,
investigatory and other expenses incident to any of the foregoing (regardless of
whether, in the case of third party actions, suits or proceedings, Seller may
have a meritorious defense). Seller's obligation under this Section 5.1 shall
not exceed repayment to Buyer of all consideration paid by Buyer to Seller
hereunder.
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5.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Seller against and in respect of any and all loss, liability,
obligation, damage, deficiency or expense resulting from: (a) any
misrepresentation, breach of any warranty or non-fulfillment of any agreement of
Buyer under the terms of this Agreement or in any statement or certification
furnished pursuant hereto; and (b) any actions, suits, proceedings, demands,
judgments, costs and reasonable legal, investigatory and other expenses incident
to any of the foregoing (regardless of whether, in the case of third party
actions, suits or proceedings, Buyer may have a meritorious defense). Buyer's
obligation under this Section 5.2 shall not exceed payment to Seller of sums
equal, in the aggregate, to the purchase price hereunder.
5.3 Procedure. Promptly after receipt, by any person or persons (as
the case may be) that is or are entitled to indemnification under this Article V
(each, an "Indemnified Party"), of notice of the commencement of any action in
respect of which the Indemnified Party will seek indemnification hereunder, the
Indemnified Party shall notify the person obligated to provide such
indemnification (the "Indemnifying Party") thereof in writing, but any failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability that it may have to the Indemnified Party under this Article
V, except to the extent that the Indemnifying Party is prejudiced by the failure
to give such notice. The Indemnifying Party shall be entitled to participate in
the defense of such action and to assume control of such defense with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that:
(a) The Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to
assist in the handling of such claim;
(b) The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement of
such claim or ceasing to defense against such claim, if, pursuant to or as
a result of such settlement or cessation, injunctive or other equitable
relief would be imposed against the Indemnified Party or the Indemnified
Party would be adversely affected thereby;
(c) The Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of such claim;
and
(d) The Indemnifying Party shall not be entitled to control the
defense of any claim unless, within 15 days after receipt of such written
notice from the Indemnified Party, the Indemnifying Party confirms in
writing its responsibility for such defense.
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After written notice by the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of any such action in
accordance with the foregoing: (1) the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, and (ii) as long as
the Indemnifying Party is reasonably contesting such action in good faith, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge the claim underlying such action without the
Indemnifying Party's prior written consent. If the Indemnifying Party elects to
so participate in or assume the defense of any such action, the Indemnified
Party shall cooperate with the Indemnifying Party in connection with the
defense. If the Indemnifying Party does not assume control of the defense of
such claim as provided in this Article V, the Indemnified Party shall have the
right to defend and/or settle such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Article V. The reimbursement of fees, costs and expenses
required by this Article V shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received or expenses
incurred.
5.4 Related Matters; Subrogation; Form of Satisfaction of Indemnity
Obligations of Seller. In the event that an Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article V, an
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the claims to which such
indemnification relates. In the event that an Indemnified Party becomes entitled
to any indemnification from an Indemnifying Party, such indemnification shall be
made in cash upon demand. The indemnification obligations of the Seller may, at
Buyer's election, be satisfied by set off by Buyer against Seller's obligations
under the Note or by the forfeiture to Buyer of the appropriate number of Buyer
Shares based upon a value of $2.00 per share. In order to comply with the
obligations of the Seller with respect to the forfeiture rights hereunder, and
in order to secure all other obligations of the Seller hereunder, Seller hereby
grants an option to Buyer to purchase Buyer Shares held by Seller for an
aggregate purchase price of $1.00, such option to be exercisable solely in
connection with the satisfaction of the Seller's obligations hereunder. Such
forfeiture right shall be exercisable by Buyer upon ten days written notice to
the Seller. Upon payment of $1.00 by Buyer, the Seller shall deliver to Buyer a
certificate, duly endorsed for transfer, representing the number of Buyer Shares
being forfeited. Such Buyer Shares shall automatically, without any action on
the part of the Seller or Buyer, be cancelled and shall cease to be outstanding
upon delivery by the Buyer of such $1.00, whether or not such certificates are
delivered or endorsed for transfer. Neither the Note nor any Buyer Shares may be
transferred or encumbered unless the transferee agrees in writing to be subject
to the provisions set forth in this Agreement.
5.5 Survival of Representations Warranties. The representations and
warranties of Seller and Buyer contained in this Agreement shall survive the
Closing until the third anniversary of the Closing date; provided, however, that
(a) the representations and warranties set forth in Sections 2.1, 2.2, 2.3 and
in Sections 3.1, 3.2 and 3.3 shall survive the Closing and remain in full force
and effect indefinitely without time limits, and (b) the representations and
warranties set forth in Section 2.14 shall survive the Closing and remain in
full force and effect until the expiration of all applicable statutes of
limitations.
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ARTICLE VI
GENERAL PROVISIONS
6.1 Headings, Construction. The headings in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Article", "Section" or "Sections" refer to
the corresponding Article, Section or Sections of this Agreement. All words used
in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
6.2 Entire Agreement. This Agreement constitutes the sole and entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior arrangements or understandings with respect thereto; and
there are no express or implied restrictions, agreements, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth herein.
6.3 Schedules, Exhibits. All schedules and exhibits attached hereto
are hereby incorporated herein by this reference.
6.4 Amendment. This Agreement may be amended or modified and any of
the terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed on behalf of the parties hereto
or, in the case of waiver, by the party waiving compliance.
6.5 Waiver. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right to enforce that provision or any other provision hereof at any time
thereafter.
6.6 Expenses. The parties hereto shall bear their respective costs
and expenses incurred in connection with the negotiation, execution and
performance of this Agreement without obligation to pay or contribute to the
expenses incurred by any other party.
6.7 Notices. Except as otherwise provided herein, all notices and
other communications required under the terms and provisions of this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
by hand or received by overnight courier, telex, telecopier, telegram or
registered mail, return receipt requested, addressed as follows:
If to Buyer: The Providence Service Corporation
000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Attn.: Xxxxxxxx XxXxxxxx
Fax: (000) 000-0000
with copy to: Xxxxx & Xxxx, P.C.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attn.: Xxxxxxx X. Xxxx
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Fax: (000) 000-0000
If to Seller: XXX X. XXXXXXX
000 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx
Fax: (000) 000-0000
with copy to: Xxxxxxxx, Xxxxxxxx and Xxxxxx, P.A.
000 Xxxxxxxx Xxxxxx, X.X.
X.X. Xxx 0000
Xxxxxx Xxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx
Fax: 000-000-0000
If to any of the foregoing parties, at such other address as such
party shall from time to time designate in writing to the other parties hereto.
In the event any notice shall be given by telex, telecopier or
telegram, the party giving such notice shall confirm such notice by writing
delivered by hand or overnight courier, provided, however, that for all purposes
hereunder notice shall be deemed effective at the time given by telex,
telecopier or telegram.
6.8 Assignments, Heirs, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer and to any lender with
which Buyer has entered into a Loan and Security Agreement and to any successor
or assignee of such a lender. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors, heirs and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person other than
the parties to this Agreement any present legal or equitable rights, remedy or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their
successors, heirs and assigns.
6.9 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
6.10 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
6.11 Attorneys' Fees. In the event of any action arising out of this,
Agreement, the prevailing party shall be entitled to recover its costs, expenses
and reasonable attorneys' fees incurred in connection with the dispute from the
other party.
6.12 Governing Law. This Agreement will be governed by the laws of
the State of Arizona without regard to its conflicts of laws principles.
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6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer:
-----
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx XxXxxxxx
----------------------------------------
Its Chairman and Chief Executive Officer
Seller:
------
/s/ Xxx Xxxxxxx
----------------------------------------
XXX XXXXXXX
CYPRESS MANAGEMENT, INC.
By: /s/ Xxx Xxxxxxx
----------------------------------------
Its President
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