EXHIBIT 4.4
PREFERRED STOCK PURCHASE AGREEMENT
This is a PREFERRED STOCK PURCHASE AGREEMENT, dated as of March 10,
2004 (as the same may be amended, supplemented or modified in accordance with
the terms hereof, this "Agreement"), by and between Res-Care, Inc., a Kentucky
corporation (the "Company") and Onex Partners LP, a Delaware limited liability
company, Onex American Holdings III, LLC, a Delaware limited liability company,
Onex U.S. Principals LP, a Delaware limited liability, Res-Care Executive
Investo LLC, a Delaware limited liability company (collectively, the
"Purchaser").
RECITALS
A. The Company proposes to issue and sell to the Purchaser, and
the Purchaser proposes to buy, for an aggregate purchase price of
$50,500,000.00, an aggregate of 48,095 shares of Series A Convertible Preferred
Stock, without par value (the "Series A Preferred Stock").
B. A condition to the Purchaser's obligation to close the
transactions contemplated by this Agreement is the closing of the acquisition by
the Purchaser of not less than 3,700,000 shares of Company Common Stock pursuant
to certain Shareholder Stock Purchase Agreements (as defined below).
THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms shall have the meanings set
forth below:
"Acquisition Proposal" has the meaning assigned to such term in Section
5.1.
"Actions" means actions, causes of action, suits, claims, complaints,
demands, litigations or legal, administrative or arbitral proceedings.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and, for purposes of Section 3.21 only, with
respect to any individual, the spouse, parent, sibling, child, step-child,
grandchild, niece or nephew of such individual or the spouse thereof and any
trust for the benefit of such Stockholder or any of the foregoing. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
whether through the ownership of Voting Securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" has the meaning assigned to such term in the Preamble.
"Alternative Transaction Notice" has the meaning assigned to such term
in Section 10.1(a)(v).
"Approved Budget" shall mean the budget approved by the Company's Board
of Directors during a January 14 & 15, 2004 meeting.
"Articles of Amendment" means the articles of amendment setting forth
the designation, powers and preferences of the Series A Preferred Stock,
substantially in the form attached hereto as Exhibit A.
"Articles of Incorporation" means the articles of incorporation of the
Company, as the same may have been amended and in effect as of the Closing Date.
"associate" has the meaning assigned in Rule 12b-2 promulgated by the
Commission under the Exchange Act.
"beneficially own" with respect to any securities means having
"beneficial ownership" of such securities as determined pursuant to Rule 13d-3
under the Exchange Act, as in effect on the date hereof.
"Benefit Plans and Arrangements" means all employee benefit plans
providing benefits to any current or former employee or director of the Company
or any of its Subsidiaries or any beneficiary or dependent thereof that are
sponsored or maintained by the Company or any of its Subsidiaries or ERISA
Affiliates or to which the Company or any of its Subsidiaries or ERISA
Affiliates contributes or is obligated to contribute, including without
limitation all employee welfare benefit plans within the meaning of Section 3(1)
of ERISA, all employee pension benefit plans within the meaning of Section 3(2)
of ERISA, and all bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, restricted stock, severance, termination pay and fringe
benefit plans, except for Company Options listed in Schedule 3.6.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee thereof.
"Board Recommendation" has the meaning assigned to such term in Section
6.1(b).
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York City are authorized or
obligated by law or executive order to remain closed.
"Bylaws" means the bylaws of the Company, as the same may have been
amended and in effect as of the Closing Date.
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"Change in the Board Recommendation" has the meaning assigned to such
term in Section 6.1(b).
"Claims" means losses, claims, damages or liabilities, joint or
several, Actions or proceedings (whether commenced or threatened).
"Closing" has the meaning assigned to such term in Section 2.3.
"Closing Date" has the meaning assigned to such term in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" has the meaning assigned to such term in the Preamble.
"Company Agreements" has the meaning assigned to such term in Section
3.1.
"Company Options" has the meaning assigned to such term in Section 3.6.
"Contemplated Transactions" means the transactions contemplated by this
Agreement and the exhibits hereto, including without limitation the issuance,
purchase and sale of the Series A Preferred Stock and the adoption of the
Articles of Amendment.
"Contractual Obligation" means, as to any Person, any agreement,
undertaking, contract, indenture, mortgage, deed of trust, credit agreement,
note, evidence of indebtedness or other instrument, written or otherwise, to
which such Person is a party or by which it or any of its property is bound.
"Conversion Shares" has the meaning assigned to such term in Section
4.5(c).
"Decrees" has the meaning assigned to such term in Section 3.10(a).
"Employment Agreement" means a contract, offer letter or agreement of
the Company or any of its Subsidiaries with or addressed to any individual who
is rendering or has rendered services thereto as an employee or consultant,
pursuant to which the Company or any of its Subsidiaries has any actual or
contingent liability or obligation in excess of $200,000 to provide compensation
and/or benefits in consideration for past, present or future services.
"Environmental Claim" means any claim, action, cause of action,
investigation of which the Company or any of its Subsidiaries has knowledge, or
written notice by any Person to the Company or any of its Subsidiaries alleging
potential liability (including, without limitation,
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potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the presence, or
release into the environment, of any Material of Environmental Concern at any
location, or (b) circumstances forming the basis of any violation or liability,
or alleged violation or liability, of any Environmental Law.
"Environmental Laws" means all Federal, state, local, and foreign
statute, law, regulation, ordinance, rule, common law, judgment, order, decree
or other governmental requirement or restriction relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata and
natural resources), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; provided that Environmental Laws does not include the
Occupational Safety and Health Act or any other similar Requirement of Law
governing worker safety or workplace conditions.
"Equitable Principles" means applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, regardless of whether in a proceeding at equity or at law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder from time
to time.
"ERISA Affiliate" means each entity which is a member of a "controlled
group of corporations," under "common control" or an "affiliated service group"
with the Company or its Subsidiaries within the meaning of Sections 414(b), (c)
or (m) of the Code, or required to be aggregated with the Company or its
Subsidiaries under Section 414(o) of the Code, or is under "common control" with
the Company or its Subsidiaries, within the meaning of Section 4001(a)(14) of
ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder by the Commission from time
to time.
"Existing Plans" has the meaning assigned to such term in Section 3.6.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision of any thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government or any international regulatory body or
self regulatory organization having or asserting jurisdiction over a Person, its
business or its properties.
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder by the
Federal Trade Commission from time to time.
"Intellectual Property" has the meaning assigned to such term in
Section 3.20.
"KBCA" means the Kentucky Business Corporation Act, KRS Chapter 271B.
"knowledge of the Company" means the actual knowledge of the chairman
or any executive officer of the Company or any of its Subsidiaries.
"Leases" has the meaning assigned to such term in Section 3.15.
"Licenses" has the meaning assigned to such term in Section 3.10(b).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), voting or other restriction,
preemptive right or other security interest of any kind or nature whatsoever.
"Material Adverse Effect" means any material adverse change in or
affecting (i) the business, properties, assets, liabilities, operations, results
of operations (financial or otherwise), or condition of the Company and its
Subsidiaries taken as a whole (ii) the ability of the Company to substantially
accomplish its budget for 2004 (as approved by the Board of Directors on January
14 & 15, 2004) or (iii) the ability of the Company or any of the Company's
Subsidiaries to consummate the Contemplated Transactions; provided, however,
that none of the following shall be deemed in themselves, either alone or in
combination, to constitute, and none of the following shall be taken into
account in determining whether there has been, a Material Adverse Effect: (A)
any change in the market price or trading volume of the capital stock of the
Company after the date hereof, (B) any changes, events or occurrences in the
United States securities markets which are not specific to the Company, (C) any
changes, events, developments or effects resulting from general economic
conditions, which are not specific to the Company or its Subsidiaries and which
do not affect the Company or its Subsidiaries in a materially disproportionate
manner, (D) any changes resulting from the execution or announcement of this
Agreement and the Contemplated Transactions, or (E) any changes, events or
occurrences arising out of acts of God, force majeure, terrorist attacks or acts
of war, other than, with respect to the exceptions set forth in (A) through (E)
above act of God, force majeure, terrorist attacks or acts of war which are
directed at the Company or cause the US financial markets to close for two
consecutive trading days.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, lead or lead-based paints or
materials, PCBs, or radon, or any other materials that are regulated by, or may
form the basis of liability under, any Environmental Law.
"NASD" means the National Association of Securities Dealers, Inc.
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"NASDAQ" means The Nasdaq Stock Market Inc.'s National Market System.
"NYSE" means the New York Stock Exchange.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, company,
limited liability company, trust, unincorporated association, Governmental
Authority, or any other entity of whatever nature.
"Preferred Stock" has the meaning assigned to such term in Section 3.6.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to such prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Proxy Statement" has the meaning assigned to such term in Section
6.1(a).
"Purchase Price" has the meaning assigned to such term in Section 2.1.
Purchaser" has the meaning assigned to such term in the Preamble.
Qualified Acquisition Proposal" has the meaning assigned to such term
in Section 5.2.
Registrable Securities" means the Series A Preferred Stock, the Common
Stock and other securities, if any, issuable upon conversion of the Series A
Preferred Stock, any securities issued pursuant to Purchaser's rights under
Section 9.3, and any other securities included in the term Registrable
Securities in the Registration Rights Agreement, in each case, until any such
security is effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, or is distributed to the
public by the holder thereof pursuant to Rule 144.
"Registration Rights Agreement" shall have the meaning assigned to such
term in Section 9.1.
"Registration Statement" means any registration statement of the
Company under the Securities Act that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the related Prospectus,
all amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
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"Required Vote" has the meaning assigned to such term in Section
3.24(c).
"Requirement of Law" means, as to any Person, the articles of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law (including, without limitation, laws related to Taxes and
Environmental Laws), treaty, rule, regulation, ordinance, qualification,
standard, license or franchise or determination of an arbitrator or a court or
other Governmental Authority, including the NYSE or NASD or any national
securities exchange or automated quotation system on which the Common Stock is
listed or admitted to trading, in each case applicable to, or binding upon, such
Person or any of its property or to which such Person or any of its property is
subject or pertaining to any or all of the transactions contemplated hereby.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.
"Xxxxxxxx-Xxxxx Act" has the meaning assigned to such term in Section
3.7(a)
"SEC Reports" means each registration statement, report, proxy
statement or information statement (other than preliminary materials) or other
documents filed by the Company or any of its Subsidiaries with the Commission
pursuant to the Securities Act or the Exchange Act or the rules and regulations
thereunder since December 31, 1998, each in the form (including exhibits and any
amendments) filed with the Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder by the Commission from time to
time.
"Senior Credit Facility" means the Company's $135,000,000 senior credit
facility syndicated by Bank One Capital Markets.
"Series A Preferred Stock" has the meaning assigned to such term in the
Recitals hereto.
"Shareholder Stock Purchase Agreements" mean the agreements attached as
Exhibit D to this Agreement, relating to the purchase by the Purchaser of
3,700,000 shares in the aggregate of the Company's Common Stock.
"Stockholders Meeting" has the meaning assigned to such term in Section
6.1(b).
"Subsidiary" of any specified Person means any other Person more than
50% of the outstanding voting securities of which is owned or controlled,
directly or indirectly, by such specified Person or by one or more other
Subsidiaries of such specified Person, or by such specified Person and one or
more other Subsidiaries of such specified Person. For the purposes of this
definition, "voting securities" means securities which ordinarily have voting
power for the election of directors (or other Persons having similar functions),
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency, or other ownership interests
ordinarily constituting a majority voting interest.
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"Superior Proposal" has the meaning assigned to such term in Section
6.1(b).
"Tax" or "Taxes" means any taxes, assessment, duties, fees, levies,
imposts, deductions, or withholdings, including income, gross receipts, ad
valorem, value added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise taxes, estimated
taxes, withholding, employment, social security, workers' compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, or other governmental charges of any nature
whatsoever, imposed by any taxing authority of any government or country or
political subdivision of any country, and any liabilities with respect thereto,
including any penalties, additions to tax, fines or interest thereon and
includes any liability for Taxes of another Person by contract, as a transferee
or successor, under Treasury Regulation 1.1502-6 or analogous state, local or
foreign Requirement of Law provision or otherwise.
"Transaction Expenses" has the meaning assigned to such term in Section
12.2(b).
"Voting Agreement" means the agreement between the Purchaser and Xxxxxx
X. Xxxxx, in the form of the agreement attached hereto as Exhibit B.
"Voting Securities" mean any class or classes of stock of the Company
pursuant to which the holders thereof have the general power under ordinary
circumstances to vote with respect to any matter presented to vote by the
shareholders.
ARTICLE 2
PURCHASE AND SALE OF SERIES A PREFERRED STOCK
2.1 Purchase and Sale of Series A Preferred Stock. Subject to the
terms set forth herein and in reliance upon the representations set forth below,
the Company shall issue and sell to the Purchaser and the Purchaser shall
purchase from the Company 48,095 shares of Series A Preferred Stock, for an
aggregate purchase price of $50,500,000.00 (the "Purchase Price").
2.2 Articles of Amendment. The Series A Preferred Stock shall have
the powers, rights and other terms set forth in the form of Articles of
Amendment attached hereto as Exhibit A.
2.3 Closing. The issuance, sale and purchase of the Series A
Preferred Stock shall take place at a closing (the "Closing") to be held at the
offices of Xxxxx Xxxxx Xxxx LLC, 000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx,
Xxxxxxxx, at 10:00 A.M., local time, on the Closing Date. On the first Business
Day after the conditions set forth in Sections 7.1 and 8.1 (other than those to
be satisfied on the Closing Date, which shall be satisfied or waived on such
date) have been satisfied or waived by the party entitled to waive such
conditions or such later date and time as the parties may agree in writing (the
"Closing Date"), (A) the Purchaser shall (w) deliver to the Company by wire
transfer in immediately available funds to an account or accounts designated in
writing by the Company to the Purchaser on the Closing Date, funds in an amount
equal to the Purchase Price and (x) make or cause to be made the deliveries set
forth in Section 8.1 and (B) the Company shall (y) issue and deliver to the
Purchaser all of the shares of the
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Series A Preferred Stock registered in the name of the Purchaser, and (z) make
or cause to be made the deliveries set forth in Section 7.1.
2.4 Transaction Fee. At the Closing, the Company shall pay to Onex
Partners Manager LP a $500,000.00 transaction fee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as of the
date of this Agreement as follows:
3.1 Corporate Existence and Power. The Company (a) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Kentucky; (b) has all requisite corporate power and
authority to own and operate its properties, to lease the properties it operates
as lessee and to carry on its business as currently conducted and currently
contemplated to be conducted; and (c) has (or will have, as applicable) all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Registration Rights Agreement, and the
Articles of Amendment (collectively, the "Company Agreements"). The Company is
duly qualified to do business as a foreign corporation in, and is in good
standing under the laws of, each jurisdiction in which the conduct of its
business or the nature of the property owned requires such qualification except
where the failure to be so qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect.
3.2 Subsidiaries. Except as set forth in the SEC Reports filed
with the Commission prior to the date hereof or as set forth on Schedule 3.2,
the Company has no Subsidiaries and no interest or investments in any
corporation, partnership, limited liability company, trust or other entity or
organization. Each Subsidiary listed on Schedule 3.2 or the SEC Reports has been
duly organized, is validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite corporate (or, in the case
of an entity other than a corporation, other) power and authority to own and
operate its properties, to lease the properties it operates as lessee and to
carry on its business as currently conducted and currently contemplated to be
conducted, and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or the nature of its
properties requires such qualification except where the failure to be so
qualified or in good standing, individually or in the aggregate, has not had and
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth in the SEC Reports filed with the Commission prior to the date hereof
or as set forth on Schedule 3.2 or in connection with the pledge of assets to
the Company's senior lender, all of the issued and outstanding stock (or
equivalent interests) of each Subsidiary set forth on Schedule 3.2 or the SEC
Reports has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company free and clear of any Liens and there
are no rights, options or warrants outstanding or other agreements to acquire
shares of stock (or equivalent interests) of such Subsidiary. Schedule 3.2 or
the SEC Reports sets forth the capitalization of
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each of the Subsidiaries, including the amount and kind of equity interests held
by the Company in the Subsidiary and the percentage interest represented
thereby.
3.3 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of each Company Agreement and the
consummation of the Contemplated Transactions, (a) subject to the satisfaction
of the matters described in Section 3.24(c), have been duly authorized by all
necessary corporate action of the Company; (b) do not contravene the terms of
the Articles of Incorporation or Bylaws or the organizational documents of its
Subsidiaries; (c) do not entitle any Person to exercise any statutory or
contractual preemptive rights to purchase shares of capital stock or any equity
interest in the Company and (d) subject to receipt or satisfaction of the
approvals, consents, exemptions, authorizations or other actions, notices or
filings set forth on Schedule 3.4 or the SEC Reports, and except as may result
from any facts or circumstances relating solely to the Purchaser or its
Affiliates, do not violate or result in any breach or contravention of, a
default under, or an acceleration of any obligation under or the creation (with
or without notice, lapse of time or both) of any Lien under, result in the
termination or loss of any right or the imposition of any penalty under any
Contractual Obligation of the Company or its Subsidiaries or by which their
respective assets or properties are bound or any Requirement of Law applicable
to the Company or its Subsidiaries or by which their respective assets or
properties are bound except for any of the foregoing that, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.3, no event
has occurred and no condition exists which (upon notice or the passage of time
or both) would constitute, or give rise to: (i) any breach, violation, default,
change of control or right to cause the Company to repurchase or redeem under,
(ii) any Lien on the assets of the Company or any of its Subsidiaries under,
(iii) any termination right of any party, or any loss of any right or imposition
of any penalty, under or (iv) any change or acceleration in the rights or
obligations of any party under, any material Contractual Obligation of the
Company or its Subsidiaries (or by which their respective assets or properties
are bound) or the Articles of Incorporation or Bylaws or the organizational
documents of the Company's Subsidiaries except for any of the foregoing that,
individually or in the aggregate, would not be material to the Company and its
Subsidiaries taken as a whole.
3.4 Governmental Authorization; Third Party Consents. Except for
approval under the HSR Act, as set forth in the SEC Reports filed with the
Commission prior to the date hereof, the obtaining of the required Company
shareholder approvals, or as set forth on Schedule 3.4, no approval, consent,
qualification, order, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority, or any other Person in respect of
any Requirement of Law, Contractual Obligation or otherwise, and no lapse of a
waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the issuance, sale and delivery of the Series A Preferred Stock) by
the Company, or enforcement against the Company, of the Company Agreements or
the consummation of the Contemplated Transactions except for any of the
foregoing that, if not obtained, given or made, would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
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3.5 Binding Effect. Each of the Company Agreements has been (or
will, as of the Closing, be, as applicable) duly authorized, executed and
delivered by the Company and, subject to Equitable Principles, constitutes (or
will, as of the Closing, constitute, as applicable) the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
3.6 Capitalization of the Company and its Subsidiaries. The
authorized stock of the Company consists of (i) 40,000,000 shares of Common
Stock, no par value and (ii) 1,000,000 shares of preferred stock, no par value
(the "Preferred Stock"). Schedule 3.6 or the SEC Reports sets forth a true and
correct list of all outstanding rights, options or warrants to purchase shares
of any class or series of stock of the Company (collectively, the "Company
Options"), a true and correct list of each of the Company's stock option,
incentive, purchase or other plans pursuant to which options or warrants to
purchase stock of the Company may be issued (collectively, the "Existing
Plans"), and the Company's issued and outstanding Common Stock and Common Stock
reserved or subject to issuance upon the exercise of outstanding Company Option.
As of the date hereof, no shares of Preferred Stock are issued or outstanding.
Except (1) as set forth in subsection (d) in the first sentence of this Section
3.6, (2) for shares of Common Stock issued pursuant to the exercise of
outstanding Company Options, and (3) for shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, on the Closing Date there will be no
shares of Common Stock or any other equity security of the Company issued or
outstanding and no shares of Common Stock or any other equity security of the
Company or any of its Subsidiaries issuable upon conversion or exchange of any
security of the Company or any of its Subsidiaries nor will there be any rights,
options or warrants outstanding or other agreements to acquire shares of stock
of the Company or any of its Subsidiaries nor will the Company or any of its
Subsidiaries be contractually obligated to issue any shares of stock or to
purchase, redeem or otherwise acquire any of its outstanding shares of stock.
Neither the Company nor any of its Subsidiaries has created any "phantom stock,"
stock appreciation rights or other similar rights the value of which is related
to or based upon the price or value of the Common Stock. Neither the Company nor
any of its Subsidiaries has outstanding debt or debt instruments providing for
voting rights with respect to the Company or such Subsidiary to the holders
thereof. No stockholder of the Company or any of its Subsidiaries or other
Person is entitled to any preemptive or similar rights to subscribe for shares
of stock of the Company or any of its Subsidiaries. All of the issued and
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid, and nonassessable. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.6, neither the
Company nor any of its Subsidiaries has granted to any Person the right to
demand or request that the Company or such Subsidiary effect a registration
under the Securities Act of any securities held by such Person or to include any
securities of such Person in any such registration by the Company or such
Subsidiary.
3.7 SEC Documents; Xxxxxxxx-Xxxxx Compliance.
(a) The Company has made available to the Purchaser the
SEC Reports filed with the Commission prior to the date hereof. The Company and
each of its Subsidiaries have timely filed each registration statement, report,
proxy statement or information statement (other than preliminary materials) or
other documents required to be filed by it with the Commission
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pursuant to the Securities Act or the Exchange Act or the rules and regulations
thereunder since December 31, 2001. As of their respective dates, the SEC
Reports (i) were prepared in all material respects in accordance with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder and complied in all material respects with the then
applicable accounting requirements, (ii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except for those
statements, if any, as have been modified by subsequent filings with the
Commission prior to the date hereof, and (iii) with respect to SEC Reports filed
after July 30, 2002, at the time filed included or were accompanied by the
certifications required by the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated thereunder (the "Xxxxxxxx-Xxxxx Act") to be filed or
submitted by the Company's principal executive officer and principal financial
officer (each of which certification was true and correct and complied with the
Xxxxxxxx-Xxxxx Act) and otherwise complied in all material respects with the
applicable requirements of the Xxxxxxxx-Xxxxx Act. The financial statements and
other financial information included in each of the SEC Reports fairly present,
in all material respects, the financial condition, results of operations and
cash flows of the Company and its Subsidiaries as of, and for the periods
presented in, the applicable SEC Reports. Except as set forth in the SEC Reports
filed with the Commission prior to the date hereof or as set forth on Schedule
3.7, each of the consolidated balance sheets of the Company and its Subsidiaries
included in or incorporated by reference into the SEC Reports (including the
related notes and schedules) present fairly, in all material respects, the
financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of operations, cash flows and shareholders'
equity of the Company and its Subsidiaries included in or incorporated by
reference into the SEC Reports (including any related notes and schedules)
present fairly, in all material respects, the results of operations and cash
flows of the Company and its Subsidiaries for the periods set forth, in each
case in conformity with GAAP consistently applied during the periods involved,
except as may be noted (subject, in the case of unaudited statements, to those
exceptions as may be permitted by Form 10-Q of the Commission and to normal
year-end audit adjustments).
(b) The management of the Company has (i) designed
disclosure controls and procedures to ensure that material information relating
to the Company, including its consolidated Subsidiaries, is made known to the
management of the Company by others within those entities, and (ii) has
disclosed to the Company's outside auditors and the audit committee of the Board
of Directors (A) any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for the
Company's outside auditors any material weaknesses in internal controls and (B)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal controls. A summary of any
of those disclosures made by management to the Company's auditors and audit
committee has been furnished to Purchaser. The Company and each of its
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded
12
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(c) Since December 31, 1998, except as described in the
SEC Reports filed with the Commission prior to the date hereof, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
director, officer, employee, auditor, accountant or representative of the
Company or any of its Subsidiaries has received or otherwise had or obtained
knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of the Company or any of its Subsidiaries or their respective
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company or any of its Subsidiaries has engaged in questionable
accounting or auditing practices, except for any of the foregoing that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No attorney representing the Company or any of its Subsidiaries,
whether or not employed by the Company or any of its Subsidiaries, has reported
evidence of a material violation of securities laws, breach of fiduciary duty or
similar violation by the Company or any of its officers, directors, employees or
agents to the Board of Directors or any committee thereof or to any director or
officer of the Company.
(d) Except as described in the SEC Reports filed with the
Commission prior to the date of this Agreement, to the knowledge of the Company,
no employee of the Company or any of its Subsidiaries has provided or is
providing information to any law enforcement agency regarding the commission or
possible commission of any crime or the violation or possible violation of any
law, rule, regulation, order, decree or injunction, except for any of the
foregoing that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.8 Absence of Certain Developments. Since December 31, 2003,
except as set forth on Schedule 3.8 and except as described in the SEC Reports
filed with the Commission prior to the date hereof (a) each of the Company and
its Subsidiaries has operated in the ordinary course, and (b) there has occurred
no fact, event, circumstance or development that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect.
3.9 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any material liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, except (a) liabilities or obligations
disclosed or reserved against in the SEC Reports filed with the Commission prior
to the date hereof, (b) liabilities or obligations which arose after the last
date of any such SEC Report, in the ordinary course of business consistent with
past practice that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect and (c) liabilities
incurred in connection with the Contemplated Transactions that are not in breach
of this Agreement.
3.10 Compliance with Laws.
(a) Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.10, neither
the Company nor any of its Subsidiaries
13
in the conduct of its business, is, or since December 31, 1998, has been, in
violation of any Requirement of Law, or any judgments, orders, rulings,
injunctions or decrees of a Governmental Authority (collectively, "Decrees"),
applicable thereto or to the employees conducting such business, except for
violations that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
(b) The Company and its Subsidiaries as applicable, have
obtained or made, as the case may be, all permits, licenses, authorizations,
orders and approvals, and all filings, applications and registrations with, all
Governmental Authorities ("Licenses"), that are required to conduct the
businesses of the Company and its Subsidiaries in the manner and to the full
extent as currently conducted or currently contemplated to be conducted except
where such failure to obtain or make, individually or in the aggregate, has not
had and would not reasonably be expected to have a Material Adverse Effect. None
of such Licenses is subject to any restriction or condition that limits or would
reasonably be expected to limit in any material way the full operation of the
Company or its Subsidiaries as currently conducted or currently contemplated to
be conducted. Each of the Licenses has been duly obtained, is valid and in full
force and effect, and is not subject to any pending or threatened proceeding to
limit, condition, suspend, cancel, suspend, or declare such License invalid.
Neither the Company nor any of its Subsidiaries is in default in any material
respect with respect to any of the Licenses, and to the knowledge of the Company
no event has occurred which constitutes, or with due notice or lapse of time or
both may constitute, a default by the Company or any such Subsidiary under any
License.
3.11 Litigation. Except as set forth in the SEC Reports filed with
the Commission prior to the date hereof or as set forth on Schedule 3.11, there
is no legal action, suit, arbitration, proceeding or, to the knowledge of the
Company, other legal, administrative or other governmental investigation or
inquiry pending or claims asserted (or, to the knowledge of the Company, any
threat thereof) to which the Company or any of its Subsidiaries or relating to
any of the Company Agreements or the Contemplated Transactions or against any
officer, director or employee of the Company in connection with such Person's
relationship with or actions taken on behalf of the Company that, individually
or in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect or would reasonably be expected to prohibit or materially delay
the Closing. The Company is not subject to any Decree that, individually or in
the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect.
3.12 Material Contracts. To the knowledge of the Company, all
Contractual Obligations of the Company are valid, binding and in full force and
effect in all material respects and enforceable by the Company in accordance
with their respective terms in all material respects, subject to Equitable
Principles, excluding any Contractual Obligations the invalidity or
unenforceability of which would not reasonably individually or in the aggregate
be expected to have a Material Adverse Effect. The Company is not in material
default or breach under any of its Contractual Obligations or organizational
documents and, to the knowledge of the Company, no other party to any of its
Contractual Obligations is in material default or breach thereunder (and no
event has occurred which with the passage of time or the giving of notice or
both would result in a material default or breach by the Company or, to the
knowledge of the Company, by any other party thereunder), excluding any
Contractual Obligations with respect to which a
14
default individually or in the aggregate would not be reasonably expected to
have a Material Adverse Effect.
3.13 Environmental. Except as set forth in the SEC Reports filed
with the Commission prior to the date hereof or as set forth on Schedule 3.13,
the Company and its Subsidiaries are, and have been, in compliance with all
Environmental Laws, except where such non-compliance, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received any
written notice that alleges that the Company or its Subsidiaries is not in
compliance with any Environmental Laws, and to the knowledge of the Company,
there are no circumstances that could reasonably be expected to prevent or
interfere with such compliance in the future. There is no Environmental Claim
pending, or to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries with respect to the operations or business of the
Company or its Subsidiaries, or against any Person whose liability for any
Environmental Claim the Company or its Subsidiaries has retained or assumed
either contractually or by operation of law. Except as, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect, there has been no release at any time of any Materials of
Environmental Concern at, on, about, under or within any real property
currently, or to the knowledge of the Company, formerly owned, leased, operated
or controlled by the Company or any of its Subsidiaries or any of their
predecessors.
3.14 Taxes. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.14 hereto, all
Returns required to be filed by the Company and each of its Subsidiaries have
been timely filed (after giving effect to any valid extensions of time in which
to make such filings) and all such Returns are true, complete, and correct in
all material respects. All Taxes that are due or claimed to be due from the
Company and each of its Subsidiaries have been timely paid, other than those (i)
currently payable without penalty or interest or (ii) being contested in good
faith and by appropriate proceedings and for which, in the case of both clauses
(i) and (ii), adequate reserves have been established on the books and records
of the Company and its Subsidiaries in accordance with GAAP. There are no
proposed, asserted, ongoing or to the knowledge of the Company, threatened,
assessments, examinations, claims, deficiencies, Liens or other litigation with
regard to any Taxes or Returns of the Company or any of its Subsidiaries. To the
knowledge of the Company, the accruals and reserves on the books and records of
the Company and its Subsidiaries in respect of any Tax liability for any taxable
period not finally determined are adequate to meet any assessments of Tax for
any such period. The Company is not a United States real property holding
corporation as defined in Section 897(c)(2) of the Code. All material amounts
required to be collected or withheld by the Company or any of its Subsidiaries
have been collected or withheld and any such amounts that are required to be
remitted to any taxing authority have been duly and timely remitted. Neither the
Company nor any of its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. No taxing authority in a jurisdiction where the
Company or its Subsidiaries do not file Tax Returns has made a written claim or
assertion that the Company or its Subsidiaries are or may be subject to taxation
by such jurisdiction. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.14, the
Company and each of its Subsidiaries is not a party to or bound by any Tax
sharing or Tax allocation or similar
15
Contractual Obligation. True and complete copies of all federal income Tax
Returns that have been filed by the Company or any of its Subsidiaries for Tax
periods after December 31, 2000 have been delivered or made available to the
Purchaser. The Company and each of its Subsidiaries (A) has not been a member of
an affiliated group filing a consolidated federal income Tax Return (other than
a group of which the Company was the common parent) or (B) does not have any
liability for the Taxes of any Person (other than the Company) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign Requirement of Law), as a transferee or successor, by contract, or
otherwise.
3.15 Title to Property and Assets; Leases. Except as set forth in
the SEC Reports filed with the Commission prior to the date hereof or as set
forth on Schedule 3.15, each of the Company and its Subsidiaries has good and
marketable title, free and clear of all Liens to all of its assets, including
all real property and interests in real property owned in fee simple by the
Company and its Subsidiaries and all real property leased, subleased or
otherwise occupied by the Company and its Subsidiaries and any assets and
properties which it purports to own, except (i) Liens for taxes not yet due and
payable and (ii) Liens that do not interfere with the use, utility or value of
such assets in any material respect. All leases to which the Company or any of
its Subsidiaries is a party (collectively, the "Leases") are valid and binding
and in full force and effect in accordance with their respective terms on the
Company and its Subsidiaries and, to the knowledge of the Company, with respect
to each other party to any such Leases, except, in each case, subject to
Equitable Principles, excluding any Leases the invalidity or unenforceability of
which would not reasonably individually or in the aggregate be expected to have
a Material Adverse Effect. No material default (or event which, with the giving
of notice or passage of time, or both, would constitute a material default) by
the Company or any of its Subsidiaries, or to the knowledge of the Company by
any other party thereto, has occurred and is continuing under the Leases,
excluding any Contractual Obligations with respect to which a default
individually or in the aggregate would not be reasonably expected to have a
Material Adverse Effect. The Company and its Subsidiaries enjoy a peaceful and
undisturbed possession under all such Leases to which any of them is a party as
lessee. As used herein, the term "Lease" shall also include subleases or other
occupancy agreements (and any amendments thereto) and the term "lessee" shall
also include any sublessee or other occupant.
3.16 Compliance with ERISA. Except as set forth in the SEC Reports
filed with the Commission prior to the date hereof or as set forth on Schedule
3.16, the Company has made available to the Purchaser true and complete copies
of each Employment Agreement and each material Benefit Plan and Arrangement, as
well as certain related documents, including, but not limited to, (a) the most
recent determination letter from the IRS (if applicable) for such Benefit Plan
and Arrangement, (b) the two most recent annual reports (Series 5500 and related
schedules) required under ERISA (if any), (c) the most recent summary plan
descriptions (with all material modifications) and (d) all material
communications to any current or former employees of the Company relating to any
material Benefit Plan and Arrangement. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect: (A)
each of the Benefit Plan and Arrangements has been operated and administered in
all material respects in compliance with its terms and all applicable laws; (B)
each of the Benefit Plan and Arrangements intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified; and (C) there are no
pending, or to the knowledge of Company, threatened
16
claims (other than routine claims for benefits) by, on behalf of or against any
of the Benefit Plan and Arrangements or any trusts related thereto or pursuant
to any Employment Agreement. Except as set forth in the SEC Reports filed with
the Commission prior to the date hereof or as set forth on Schedule 3.16,
neither the Company nor any ERISA Affiliate currently sponsors, maintains or
contributes to, and is not required to contribute to, nor has it in the past
three years sponsored, maintained or contributed to, and been required to
contribute to, or incurred any liability with respect to any "employee benefit
plan" (within the meaning of Section 3(3) of ERISA) that is subject to Section
302 of the Code or Title IV of ERISA. Except as set forth in the SEC Reports
filed with the Commission prior to the date hereof or as set forth on Schedule
3.16 neither the Company nor any ERISA Affiliate has ever contributed to a
"Multi-employer Plan" as defined in Section 4001(a)(3) or 3(37) of ERISA. No
non-exempt "prohibited transaction," within the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred with respect to any Benefit Plan and
Arrangement which could, individually or in the aggregate, reasonably be
expected to result in a material liability to the Company. No material liability
under any Benefit Plan and Arrangement has been funded by nor has any such
obligation been satisfied with the purchase of a contract from an insurance
company as to which the Company has received notice that such insurance company
is insolvent or is in rehabilitation or any similar proceeding. Except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, no Benefit Plan and Arrangement is under audit or, to the
knowledge of the Company, investigation by, or is the subject of a proceeding
with respect to, the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation, and, to the knowledge of the Company, no such audit,
investigation or proceeding is threatened. Except as set forth in the SEC
Reports filed with the Commission prior to the date hereof or as set forth on
Schedule 3.16, with respect to each Benefit Plan and Arrangement which provides
medical benefits, short-term disability benefits or long-term disability
benefits (other than any "pension plan" within the meaning of Section 3(2) of
ERISA), all claims incurred by the Company under such Benefit Plan and
Arrangement are either insured pursuant to a contract of insurance whereby the
insurance company bears any risk of loss with respect to such claims or covered
under a contract with a health maintenance organization pursuant to which such
health maintenance organization bears the liability for such claims. Except as
set forth in the SEC Reports filed with the Commission prior to the date hereof
or as set forth on Schedule 3.16 hereto or disclosed in the SEC Reports filed
with the Commission prior to the date hereof, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (either alone or in conjunction with any other event such as termination of
employment) (i) result in, or cause any increase, acceleration or vesting of,
any payment, benefit or award under any Benefit Plan and Arrangement or
Employment Agreement to any director or employee of Company or any of its
Subsidiaries, (ii) give rise to any obligation to fund for any such payments,
awards or benefits, (iii) give rise to any limitation on the ability of the
Company or any of its Subsidiaries to amend or terminate any Benefit Plan and
Arrangement, or (iv) result in any payment or benefit that will or may be made
by the Company or any of its Subsidiaries or affiliates that will be
characterized as an "excess parachute payment," within the meaning of Section
280G of the Code. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.16, neither
the Company nor any of its Subsidiaries or ERISA Affiliates has any liability to
provide any post-retirement or post-termination life, health, medical or other
welfare benefits to any current or former employees or beneficiaries or
dependents thereof which, individually or in the aggregate, is
17
material, except for health continuation coverage as required by Section 4980B
of the Code or Part 6 of Title I of ERISA or applicable state healthcare
continuation coverage laws. With respect to each Benefit Plan and Arrangement,
there are no understandings, agreements or undertakings that would prevent the
Company from amending or terminating such Benefit Plan and Arrangement at any
time without incurring material liability thereunder other than in respect of
accrued obligations and medical or welfare claims incurred prior to such
amendment or termination.
3.17 Labor Relations.
(a) Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.17, neither
the Company nor any of its Subsidiaries is party to a collective bargaining
agreement, and neither the Company nor any of its Subsidiaries is the subject of
a preceding seeking to compel it to bargain with any labor organization as to
wages and conditions of employment.
(b) Except as set fort in the SEC Reports filed with the
Commission prior to the date here or as set forth on Schedule 3.17, neither the
Company nor any of its Subsidiaries has violated any provision of federal or
state law or any governmental rule or regulation, or any order, decree,
judgment, arbitration award, of any court, arbitrator or government agency
regarding the terms and conditions of employment of employees, former employees,
or prospective employees or other labor related matters, including without
limitation, laws, rules, regulations, orders, rulings, decrees, judgements and
awards relating to discrimination, fair labor standards and occupational health
and safety, wrongful discharge or violation of the personal rights of employees,
former employees or prospective employees, in each case, the violation of which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect.
3.18 Certain Payments. Neither the Company nor any Subsidiary nor,
to the knowledge of the Company, any director, officer, agent, employee, or
other Person associated with or acting on behalf of any of them, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Subsidiary or any Affiliate of
the Company or any Subsidiary, or (iv) in violation of any Requirement of Law,
or (b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
3.19 Insurance. The Company and its Subsidiaries maintain, with
financially sound and reputable insurers, insurance in such amounts, including
deductible arrangements, and of such a character as are reasonable in the
business judgment of the Board of Directors. The Company maintains adequate
insurance reserves and its insurance is subject to deductibles and
self-insurance reserves which are consistent with sound business practices. All
policies of title, fire, liability, casualty, business interruption, workers'
compensation and other forms of insurance including, but not limited to,
directors and officers insurance, held by the Company
18
and its Subsidiaries, are in full force and effect in accordance with their
terms. Neither the Company nor any of its Subsidiaries is in default in any
material respect under any provisions of any such policy of insurance that has
not been remedied and no such Person has received notice of cancellation of any
such insurance. The Company has not been denied any requested insurance coverage
during the past three years. The Company has disclosed to the Purchaser or its
representatives all material policies of insurance.
3.20 Intellectual Property. The Company and its Subsidiaries own
the entire and unencumbered right, title and interest in and to, or possess
adequate licenses or other rights to use, all intellectual property, including
but not limited to, patents, trademarks, service marks, trade names, trade
secrets, copyrights, domain names, computer software (excluding certain code)
and know-how used in, or necessary to, the business as currently conducted or
currently contemplated to be conducted by the Company or any of its Subsidiaries
(the "Intellectual Property") except where such failure to so own or possess,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. The Company and each of its
Subsidiaries have performed all commercially reasonable acts to protect and
maintain its material Intellectual Property, including but not limited to paying
all required fees and Taxes to maintain all registrations and applications of
such Intellectual Property in full force and effect. Except as set forth in the
SEC Reports filed with the Commission prior to the date hereof or as set forth
on Schedule 3.20, none of the Company or any of its Subsidiaries has received
any written notice of infringement of or conflict with (or knows of such
infringement of or conflict with) asserted rights of others with respect to the
use of Intellectual Property. To the knowledge of the Company, the Company and
its Subsidiaries do not in the conduct of their business infringe or conflict
with any right of any third party. Except as set forth in the SEC Reports filed
with the Commission prior to the date hereof or as set forth on Schedule 3.20,
neither the Company nor any of its Subsidiaries have asserted within two years
of the date hereof, any claim against any third party that such party has
violated, infringed, misappropriated or misused, in any material respect, any
Intellectual Property. The Company and its Subsidiaries have taken commercially
reasonable precautions to preserve and protect the availability,
confidentiality, security and integrity of data held or transmitted by or
through the Company and its Subsidiaries' computer networks, software, hardware,
and other systems.
3.21 Affiliate Transactions.
(a) Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.21, (i)(w) no
current officer, director or employee of the Company or any of its Subsidiaries,
(x) to the knowledge of the Company, no former officer, director or employee of
the Company or any of its Subsidiaries, (y) to the knowledge of the Company, no
Affiliate or associate of any current officer, director or employee of the
Company or any of its Subsidiaries and (z) to the knowledge of the Company, no
Affiliate or associate of any former officer, director or employee of the
Company or any of its Subsidiaries has, directly or indirectly, any interest in
any contract, arrangement or property (real or personal, tangible or intangible)
used by the Company or any such Subsidiary or in their respective businesses, or
in any supplier, distributor or customer of the Company or any such Subsidiary
(other than indirectly through such Person's ownership of the securities of a
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one
19
percent (1%) of the stock of such corporation is beneficially owned by such
Person) and (ii) neither the Company nor any of its Subsidiaries shares any
assets, rights or services with any entity that is controlled by any current
officer, director or employee of the Company or any of its Subsidiaries or, to
the knowledge of the Company, by any former officer, director or employee of the
Company or any of its Subsidiaries.
(b) Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as set forth on Schedule 3.21, each
ongoing intercompany transaction set forth on Schedule 3.21 or in the SEC
Reports is on terms that are (i) consistent with the past practice of the
Company and (ii) at least as favorable in the aggregate for such transaction to
the Company as would be available with independent third parties dealing at
arms' length.
3.22 Investment Company Act. Neither the Company nor any of its
Subsidiaries is, and, after giving effect to consummation of the transactions
contemplated hereby and by the other Company Agreements, will be, an "investment
company" or an entity "controlled by" an "investment company" (as such terms are
defined in the Investment Company Act of 1940, as amended).
3.23 Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection with
the offer or sale of the Series A Preferred Stock. No registration of the Series
A Preferred Stock pursuant to the provisions of the Securities Act will be
required by the offer, sale, or issuance of the Series A Preferred Stock
pursuant to this Agreement and no registration of the Conversion Stock upon
conversion of the Series A Preferred Stock in accordance with the Articles of
Amendment will be required, assuming the accuracy of the Purchaser's
representations contained in Section 4.5.
3.24 Board Approval; Stockholder Approval.
(a) The Board of Directors at a meeting duly called and
held has unanimously determined the Contemplated Transactions to be in the best
interests of the Company and its stockholders and has approved the Contemplated
Transactions. The Board of Directors of the Company has received the opinion of
its financial advisor, Xxxxx Xxxxxxx & Co., to the effect that, as of the date
of such opinion, the issuance of the Series A Preferred Stock is fair from a
financial point of view to the Company.
(b) As of the Closing Date, the Board of Directors has
taken all action possible under applicable Kentucky law in order to (i) exempt
the Purchaser, in respect to its purchase and conversion of the Series A
Preferred Stock and any other securities of the Company acquired pursuant to the
Contemplated Transactions and any transaction permitted under Section 9.5 from
Sections 12-210 through 12-230 of the KBCA and (ii) exempt the Contemplated
Transactions from the requirements of, and from triggering any provisions under,
any "moratorium," "control share," "fair price," "interested stockholder,"
"affiliate transaction," "business combination" or other anti-takeover laws and
regulations of any Governmental Authority.
20
(c) The affirmative vote of the holders of a majority of
the total votes cast in person or by proxy at the Stockholders Meeting required
to approve the Contemplated Transactions is the "Required Vote". Except for the
Required Vote, no approval of the Company Agreements or of the Contemplated
Transactions by the holders of any shares of stock of the Company is required in
connection with the execution or delivery of the Company Agreements or the
consummation of the Contemplated Transactions, whether pursuant to the KBCA, the
Articles of Incorporation or Bylaws, the rules and regulations of the NASD,
NASDAQ or otherwise.
3.25 Series A Preferred Stock.
(a) All shares of the Series A Preferred Stock, when
issued and delivered in accordance with the terms of this Agreement, the
Articles of Amendment and the other Company Agreements, will be duly and validly
issued and outstanding, entitled to the benefits contemplated by the Articles of
Amendment, fully paid and nonassessable and free and clear of any Liens (other
than any Liens granted by the Purchaser), not subject to preemptive or other
similar rights, and constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms.
(b) All shares of the Common Stock issued and delivered
upon conversion of the Series A Preferred Stock, in accordance with the terms of
the Articles of Amendment, will, when so issued and delivered, be duly and
validly issued and outstanding, fully paid and nonassessable and free and clear
of any Liens (other than any Liens granted by the Purchaser) and not subject to
preemptive or other similar rights.
3.26 No Brokers or Finders. Except for Xxxxx Xxxxxxx & Co., no
agent, broker, finder, or investment or commercial banker or other Person (if
any) engaged by or acting on behalf of the Company or any Subsidiary or
Affiliate is or will be entitled to any brokerage or finder's or similar fee or
other commission as a result of the Company Agreements or the Contemplated
Transactions.
3.27 Disclosure. Neither this Agreement nor the SEC Reports
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein in
light of the circumstances under which they were made not misleading.
3.28 Suitability. Neither the Company nor any of its directors,
officers, Subsidiaries or, to the knowledge of the Company, other Affiliates (a)
has ever been convicted of or, to the knowledge of the Company, indicted for any
felony or any crime involving fraud, misrepresentation or moral turpitude, (b)
is subject to any Decree barring, suspending or otherwise limiting the right of
the Company or such Person to engage in any activity or (c) has ever been denied
any License affecting the Company's or such Person's ability to conduct any
activity currently conducted or currently contemplated to be conducted by the
Company, nor, to the knowledge of the Company, is there any basis upon which
such License may be denied.
21
3.29 Off Balance Sheet Arrangements. Except as disclosed in
Management's Discussion and Analysis of Financial Conditions and Results of
Operations in the Company's Form 10-K for the fiscal year ending December 31,
2003, which will be filed with the Commission no later than March 15, 2004, a
copy of which in draft form has been previously provided to Purchaser, neither
the Company nor any of its Subsidiaries has or is subject to any "Off-Balance
Sheet Arrangement" (as defined in Item 303(a)(4)(ii) of Regulation S-K
promulgated under the Exchange Act).
3.30 Regulatory Compliance.
(a) The Company and each of its Subsidiaries are in
material compliance with (i) to the extent applicable, all rules and regulations
of the Medicaid program, including any guidance interpreting such rules and
regulations; (ii) all federal laws, rules, regulations and applicable guidance
relating to health care fraud and abuse, including, without limitation: (A) the
Anti-Kickback Law, 42 U.S.C. Section 1320a-7b, 42 C.F.R. Section 1001.952, (B)
the federal false coding statute, 42 U.S.C. Section 1320a-7a, (C) the federal
physician self-referral prohibition, 42 U.S.C. Section 1395nn, 42 C.F.R. Section
411.351 et seq., and (D) the false claims act, 31 U.S.C. Section 3729 et seq.;
(iii) any and all state laws relating to health care fraud and abuse; (iv) state
laws relating to Medicaid or any other state health care or health insurance
programs; (v) federal or state laws relating to billing or claims for
reimbursement submitted to any third party payor; and (vi) any other federal or
state laws relating to fraudulent, abusive or unlawful practices connected in
any way with the provision of health care items or services, or the billing for
or claims for reimbursement for such items or services provided to a beneficiary
of any state, federal or other governmental health care or health insurance
program or any private payor.
(b) Since December 31, 1999, neither the Company, any
Subsidiary of the Company, nor any director, officer, or, to the knowledge of
the Company, any employee or agent, of the Company or any Subsidiary of the
Company, with respect to actions taken on behalf of the Company or a Subsidiary
of the Company, (i) has been assessed a civil money penalty under Section 1128A
of the Social Security Act or any regulations promulgated thereunder, (ii) has
been excluded from participation in any federal health care program or state
health care program (as such terms are defined by the Social Security Act),
(iii) has been convicted of any criminal offense relating to the delivery of any
item or service under a federal health care program relating to the unlawful
manufacture, distribution, prescription, or dispensing of a prescription drug or
a controlled substance or (iv) is a party to or subject to any action or
proceeding concerning any of the matters described above in clauses (i) through
(iii).
(c) The Company and each of its Subsidiaries are in
compliance in all material respects with all Requirements of Law with respect to
matters relating to patient or individual healthcare information, including,
without limitation, the Health Insurance Portability and Accountability Act of
1996, Pub. L. No. 104-191, as amended, and any rules or regulations promulgated
thereunder (collectively, the "Healthcare Information Laws"). The Company and
each of its Subsidiaries (i) have undertaken all necessary surveys, audits,
inventories, reviews, analyses, or assessments (including any necessary risk
assessments) on all areas required for material compliance under all Healthcare
Information Laws, (ii) have developed a plan and time line for coming into
material compliance with all Healthcare Information Laws (the "Compliance
22
Plan") and (iii) have implemented those provisions of the Compliance Plan to
ensure that such entity is and will remain in material compliance with all
Healthcare Information Laws.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as of the
date of this Agreement as follows:
4.1 Existence and Power. The Purchaser (a) is duly organized and
validly existing under the laws of the jurisdiction of its formation and (b) has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement.
4.2 Authorization; No Contravention. The execution, delivery and
performance by the Purchaser of each Company Agreement to which it is a party
and the Contemplated Transactions (a) have been duly authorized by all necessary
company or other action, (b) do not contravene the terms of the Purchaser's
organizational documents, and (c) do not violate, conflict with or result in any
breach or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Purchaser or any Requirement of Law applicable to the
Purchaser, except for such violations, conflicts, breaches or Liens which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a material adverse effect on the Purchaser's ability to
consummate the Contemplated Transactions.
4.3 Governmental Authorization; Third Party Consents. To the
Purchaser's knowledge, except for approval under the HSR Act, no approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by the Purchaser, or enforcement against the Purchaser, of this
Agreement or the consummation of the Contemplated Transactions.
4.4 Binding Effect. This Agreement has been duly executed and
delivered by the Purchaser and, subject to Equitable Principles, constitutes the
legal, valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms.
4.5 Purchase for Own Account, Etc.
(a) Purchase for Own Account. The shares of Series A
Preferred Stock are being acquired by the Purchaser for its own account and with
no current intention of distributing or reselling such shares of Series A
Preferred Stock or any part thereof in any transaction that would be in
violation of the securities laws of the United States of America or any state,
without prejudice, however, to the rights of the Purchaser at all times to sell
or otherwise dispose of all or any part of the Series A Preferred Stock under an
effective Registration Statement under the Securities Act or under an exemption
from said registration available under the Securities Act.
23
The Purchaser understands and agrees that if the Purchaser should in the future
decide to dispose of any Series A Preferred Stock, it may do so only in
compliance with the Securities Act and applicable state securities laws, as then
in effect. The Purchaser agrees to the imprinting, so long as required by law,
of a legend on all certificates representing shares of Series A Preferred Stock.
(b) Purchaser Status. The Purchaser is an "Accredited
Investor" (as defined in Rule 501(a)) under the Securities Act.
(c) Restricted Shares. The Purchaser understands (i) that
the shares of the Series A Preferred Stock have not been, and the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock (the
"Conversion Shares") will not (subject to Section 9.1) be registered under the
Securities Act or any state securities laws, by reason of their issuance by the
Company in a transaction exempt from the registration requirements thereof and
(ii) the shares of the Series A Preferred Stock and the Conversion Shares may
not be sold unless such disposition is registered under the Securities Act and
applicable state securities laws or is exempt from registration thereunder.
4.6 Receipt of Information. The Purchaser represents that it has
had an opportunity to ask questions and receive answers and documents from the
Company regarding the business, properties, prospects and financial condition of
the Company and concerning the terms and conditions of the offering of the
Series A Preferred Stock and to obtain additional information necessary to
verify the accuracy of any information furnished to the Purchaser or to which
the Purchaser had access.
4.7 No Brokers or Finders. Except as contemplated by this
Agreement, no agent, broker, finder, or investment or commercial banker or other
Person (if any) engaged by or acting on behalf of the Purchaser or any of its
Affiliates is or will be entitled to any brokerage or finder's or similar fee or
other commission as a result of this Agreement or the Contemplated Transactions.
4.8 Sufficient Funds. The Purchaser will have at the Closing funds
sufficient to perform its obligations under this Agreement and to consummate the
Contemplated Transactions.
4.9 Litigation. There is no legal action, suit, arbitration or
other legal, administrative or other governmental investigation, inquiry or
proceeding pending or, to the knowledge of the Purchaser, threatened against or
affecting the Purchaser or relating to any of the Company Agreements or the
Contemplated Transactions which, if determined adversely to the Purchaser,
individually or in the aggregate, has had or would reasonably be expected to
have a material adverse effect on the Purchaser's ability to consummate the
Contemplated Transactions. The Purchaser is not subject to any Decree that,
individually or in the aggregate, has had or would reasonably be expected to
have a material adverse effect on the Purchaser's ability to consummate the
Contemplated Transactions.
4.10 Purchaser's Knowledge. As of the date of this Agreement, the
Purchaser is not aware of any facts or circumstances which would result in any
of the Company's representations or warranties in Article 3 containing an untrue
statement of a material fact or omitting to state a
24
material fact necessary in order to make the statements contained therein in
light of the circumstances under which they were made not misleading.
4.11 Medicare and Medicaid Programs. Neither the Purchaser, nor to
the Purchaser's knowledge, any of its Affiliates, Subsidiaries, directors,
officers or employees has been excluded from participation in any Medicare or
Medicaid program.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1 No Solicitation. Without limiting the Company's other
obligations under this Agreement, the Company agrees that, from the date hereof
until the Closing, neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, and that it shall use
its reasonable best efforts to cause its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, (i)
initiate, solicit, encourage or knowingly facilitate (including by way of
furnishing information) any inquiries or the making of any proposal or offer
with respect to, or a transaction to effect, a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving it or any of its Subsidiaries, or
any purchase or sale of a substantial portion of the consolidated assets
(including without limitation stock of its Subsidiaries) of it and its
Subsidiaries, taken as a whole, or any purchase or sale of, or tender or
exchange offer for, the equity securities of the Company that, if consummated,
would result in any Person (or the stockholders of such Person) beneficially
owning securities representing a substantial portion of the total voting power
of the Company (or of the surviving parent entity in such transaction) or any of
its Subsidiaries (any such proposal, offer or transaction, including any single
or multi-step transaction or series of related transactions (other than a
proposal or offer made by the Purchaser or any of its Affiliates) being
hereinafter referred to as an "Acquisition Proposal"), (ii) have any discussion
with or provide any confidential information or data to any Person relating to
an Acquisition Proposal, or engage in any negotiations concerning an Acquisition
Proposal, or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal, (iii) approve or recommend, or propose publicly to approve
or recommend, any Acquisition Proposal or (iv) approve or recommend, or propose
to approve or recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any of
the foregoing related to any Acquisition Proposal; provided, however, that the
foregoing shall not prohibit the Company, (A) from complying with Rule 14e-2 and
Rule 14d-9 under the Exchange Act with regard to a bona fide tender offer or
exchange offer, or (B) from participating in negotiations or discussions with or
furnishing information to any Person in connection with an unsolicited bona fide
Acquisition Proposal which is submitted in writing by such Person to the Board
of Directors of the Company after the date hereof; provided further, however,
that prior to participating in any such discussions or negotiations or
furnishing any information, (i) the Company receives from such Person an
executed confidentiality agreement on terms no less favorable to the Company
than the Confidentiality Agreement, a copy of which shall be provided only for
informational
25
purposes to the Purchaser, and (ii) the Board of Directors of the Company shall
have concluded in good faith, after consulting with its outside financial
advisors and counsel, that such Acquisition Proposal is reasonably likely to be
or to result in a Superior Proposal (as defined in Section 6.1(b) hereto) (an
Acquisition Proposal which meets all of the conditions set forth in this clause
(B), including the Board of Directors of the Company having reached the
conclusion set forth in clause (B)(ii), being herein referred to as a "Qualified
Acquisition Proposal"), or (C) after the Board of Directors of the Company has
received a Qualified Acquisition Proposal, from engaging in negotiations and
discussions with the Company's stockholders with respect to such Qualified
Acquisition Proposal. If the Board of Directors of the Company receives an
Acquisition Proposal, the Company shall promptly inform the Purchaser in writing
of the terms and conditions of such proposal and the identity of the Person
making it, and will keep the Purchaser informed, on a current basis, of the
status and terms of any such proposals or offers by any Person (whether written
or oral). The Company will, and will cause its Affiliates to, immediately cease
and cause to be terminated any activities, discussions or negotiations existing
as of the date hereof with any Persons (other than the Purchaser and its
Affiliates) conducted heretofore with respect to any Acquisition Proposal, and
request the return or destruction of all non-public information furnished in
connection therewith. The Company shall not release any third party from, or
waive any provisions of, any confidentiality or standstill agreement to which
such party or its Subsidiaries is a party; provided, however, that the Company
may waive any provisions of a standstill agreement so long as (A) the Company
promptly informs the Purchaser in writing of such waiver and the identity of the
Person requesting such waiver (and the Company hereby agrees that it will keep
the Purchaser informed, on a current basis, of the status and terms of any
proposal made by the Person requesting such waiver), (B) such waiver is limited
to allowing the party subject to the standstill agreement (x) to submit to the
Board of Directors of the Company, on a confidential basis, a written
Acquisition Proposal and (y) if such Acquisition Proposal is a Qualified
Acquisition Proposal, to pursue discussions and negotiations with respect to
such Qualified Acquisition Proposal with the Company, and (C) the Company
otherwise observes the terms of this Section 5.1 with respect to such
Acquisition Proposal.
5.2 Regulatory Approval; Litigation.
(a) Each of the Purchaser and the Company agrees that it
will use its reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, and to assist and cooperate with the other party in
doing all things, which may be required to obtain all necessary actions or
non-actions, waivers, consents and approval from Governmental Authorities,
including without limitation, (x)(i) preparing and filing, or causing to be
prepared and filed, with the appropriate Governmental Authorities, the requisite
notification with respect to the Contemplated Transactions pursuant to the HSR
Act, (ii) promptly supplying all information requested by Governmental
Authorities in connection with the HSR Act notification and cooperating with
each other in responding to any such request, (iii) using all reasonable efforts
to cause the applicable HSR Act waiting periods to be terminated early or to
expire without further inquiry or extension of time by any Governmental
Authority and (iv) otherwise causing the HSR Requirements to be satisfied,
including by supplying all information requested by Governmental Authorities in
connection therewith and (y) obtaining the consent of the NASDAQ for the listing
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, subject only to official notice of issuance; provided, however, that, in
26
connection with obtaining any such action, non-action, waiver, consent or
approval, the Purchaser shall not be required to agree, and the Company, without
the consent of the Purchaser shall not agree, to any condition or action that
the Purchaser reasonably believes would, individually or in the aggregate,
adversely affect Purchaser's ability to obtain the benefits (financial or
otherwise) from the Contemplated Transactions (including benefits set forth in
the Company Agreements).
(b) The Purchaser and the Company agree that if any
Action is brought seeking to restrain or prohibit or otherwise relates to
consummation of the Contemplated Transactions, the parties shall use all
commercially reasonable efforts to defend such Action, whether judicial or
administrative, and to seek to have any stay or temporary restraining order
entered by any court or Governmental Authority reversed or vacated.
5.3 Board of Directors.
(a) The Company will take all action necessary (including
without limitation using its reasonable best efforts to cause the resignation of
certain current members of the Company's Board of Directors (and committees
thereof)) so that, effective as of the Closing Date: (i) the Company's Board of
Directors shall consist of nine members; and (ii) four individuals designated by
the Purchaser shall be appointed to the Board, including two directors to be
elected exclusively by holders of the Series A Preferred Stock. The Purchaser
agrees that only two out of the four individuals designated by the Purchaser
will be affiliated with the Purchaser or a Purchaser Affiliate. The Purchaser
further acknowledges that except for the two individuals elected by the holders
of the Series A Preferred Stock, directors will be nominated and elected to fill
Board seats through the Company's Nominating Committee and shareholder election
process. Any individual designated by the Purchaser and serving on the Board of
Directors will be eligible to receive the Company's customary directors fees.
(b) Effective as of the Closing Date, the Company shall
cause one of the directors designated by the Purchaser who qualifies as an
"Independent Director" under the Corporate Governance Rules of The Nasdaq Stock
Market, Inc. to be appointed to the Governance and Nominating Committee of the
Board of Directors and shall make such revisions to the Charter of the
Governance and Nominating Committee as necessary to provide: (i) the Committee
will be authorized to recommend to the full Board of Directors candidates for
nomination for election to the Board; and (ii) all decisions by the Committee
regarding the recommendation of candidates for nomination shall be unanimous. To
the Company's knowledge based on information provided by the Purchaser, the
individuals designated by the Purchaser will qualify as Independent Directors.
5.4 Access.
(a) From the date hereof until the Closing, upon
reasonable notice, the Company shall (and shall cause its Subsidiaries to)
afford to the officers, employees, accountants, counsel, financial advisors and
other representatives of the Purchaser reasonable access during normal business
hours, during the period prior to the Closing, to all its books, records,
properties, plants and personnel and, during such period, the Company shall (and
shall
27
cause its Subsidiaries to) furnish promptly to the Purchaser (i) a copy of each
report, schedule, registration statement and other document filed, published,
announced or received by it during such period pursuant to the requirements of
Federal or state laws, as applicable, and (ii) all other information concerning
it and its business, properties and personnel as the Purchaser may reasonably
request. The Purchaser will hold any information obtained pursuant to this
Section 5.4 in confidence in accordance with, and will otherwise be subject to,
the provisions of the Confidentiality Agreement. Any investigation by the
Purchaser shall not affect the representations and warranties of the Company or
the conditions to its obligations to consummate the transactions contemplated by
this Agreement.
(b) From the date hereof until the Closing, the Company
shall promptly keep the Purchaser and its representatives informed of any
material development in the business of the Company or its Subsidiaries provided
that the unintentional failure to keep the Purchaser and its representatives
informed shall not give rise to a claim for damages by any Purchaser. Without
limiting the foregoing, from the date hereof until the Closing, the Company
shall cause its officers to consult and cooperate with representatives of the
Purchaser in order to facilitate a smooth transition as of the Closing. Nothing
in this Section 5.4 shall give the Purchaser or its Affiliates any approval
rights over the day-to-day activities of the Company.
(c) During the period through the Closing Date, the
Company will promptly provide the Purchaser with copies of the Company's monthly
interim financial reports.
5.5 Consents. The Company shall (and shall cause its applicable
Subsidiary to), on or prior to the Closing, obtain all consents listed or
required to be listed on Schedule 3.4 hereto.
5.6 Legends. Any legends placed on the Series A Preferred Stock or
the Common Stock or other securities issuable, if any, pursuant to the
Contemplated Transactions shall be removed by the Company upon delivery of an
opinion of counsel reasonably acceptable to the Company stating that such legend
is no longer necessary.
ARTICLE 6
STOCKHOLDERS MEETING
6.1 Preparation of Proxy Statement; Stockholders Meeting.
(a) The covenants of the Company in this Article 6 are
subject to the determination by the Company with the advice of counsel on the
issue of whether shareholder approval is required for the transactions
contemplated by this Agreement. The Company will seek shareholder approval only
if such approval is determined to be necessary or desirable under applicable
NASDAQ rules. As promptly as reasonably practicable following the date hereof,
the Company shall prepare and file with the Commission a proxy statement (such
proxy statement and any amendments or supplements thereto, the "Proxy
Statement") with respect to the Contemplated Transactions. The Proxy Statement
shall seek approval of the matters to be submitted for approval at the
Stockholders Meeting as provided below. The Company shall use
28
reasonable best efforts to have the Proxy Statement cleared by the Commission as
promptly as reasonably practicable after filing with the Commission. The Company
shall, as promptly as practicable after receipt thereof, provide the Purchaser
copies of any written comments and advise the Purchaser of any oral comments,
with respect to the Proxy Statement received from the Commission. The Company
shall provide the Purchaser with a reasonable opportunity to review and comment
on the Proxy Statement and any amendment or supplement thereto prior to filing
such with the Commission, and with a copy of all such filings made with the
Commission. Notwithstanding any other provision herein to the contrary, neither
the Proxy Statement nor any amendment or supplement thereto shall be filed or
made without the approval of the Purchaser (which approval shall not be
unreasonably withheld or delayed). The Company will use reasonable best efforts
to cause the Proxy Statement to be mailed to its stockholders as promptly as
practicable. If at any time any information should be discovered by the Company
which should be set forth in an amendment or supplement to the Proxy Statement
so that it would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the Company shall
promptly notify the Purchaser and, to the extent required by applicable law, an
appropriate amendment or supplement describing such information shall be
promptly filed with the Commission and disseminated to the stockholders of the
Company.
(b) The Company shall duly take all lawful action to
call, give notice of, convene and hold a meeting of its stockholders as promptly
as practicable after the date hereof for the purpose of obtaining the Required
Vote, and any other action that may be required with respect to any of the
transactions contemplated by this Agreement) (the "Stockholders Meeting") and
shall take all lawful action to solicit the approval of all such matters by the
Company's stockholders. The Company shall include in the Proxy Statement the
recommendation of the Board of Directors in favor of approval of all such
matters (the "Board Recommendation") and the written opinion of Xxxxx Xxxxxxx &
Co., dated the date hereof, to the effect that, as of the date hereof, the
issuance of the Series A Preferred Stock is fair, from a financial point of
view, to the Company; provided, that, the Company shall not be required to
include the Board Recommendation in the Proxy Statement if, at the time of the
mailing of the Proxy Statement, the Board of Directors of the Company would be
permitted to make a Change in the Board Recommendation pursuant to the next
sentence of this Section 6.1(b). The Board of Directors of the Company shall not
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in any
manner adverse to the Purchaser such recommendation (a "Change in the Board
Recommendation"); provided, however, that the Board of Directors of the Company
may make a Change in the Board Recommendation in connection with an unsolicited
bona fide Acquisition Proposal which is submitted in writing to the Board of
Directors of the Company after the date hereof if the Company shall have
complied in all respects with the requirements of Section 5.1 with respect to
such Acquisition Proposal; provided that the Board of Directors of the Company
shall have concluded in good faith, after consulting with its outside financial
advisors and counsel that such Acquisition Proposal is financially superior to
the holders of the Common Stock than the Contemplated Transactions, taking into
account all relevant factors (including financing, required approvals and the
timing and likelihood of consummation and the post-closing prospects for the
Company) (a "Superior Proposal") and that the failure to take such action would
reasonably be likely to violate the obligations of the directors under Kentucky
law. Unless this Agreement shall have been terminated in accordance with its
terms, the Company
29
shall comply with all of its obligations under this Agreement, including calling
and holding a Stockholders Meeting under this Section 6.1(b) and submitting the
matters set forth in Section 3.24(c) to a vote of the stockholders of the
Company, even if the Board of Directors of the Company determines at any time
after the date hereof to make a Change in the Board Recommendation.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
CLOSE
7.1 Conditions to Closing. The obligation of the Purchaser to
enter into and complete the Closing are subject to the fulfillment on or prior
to the Closing Date of the following conditions, any one or more of which may be
waived by the Purchaser:
(a) Representations and Covenants. The representations
and warranties of the Company contained in this Agreement shall be true and
correct in all material respects (other than those which are qualified as to
materiality, Material Adverse Effect or other similar term, which shall be true
and correct in all respects) on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date (except that
representations and warranties made as of a specific date shall be true and
correct in all material respects (except as aforesaid) on such date); the
Company shall have in all material respects performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by the Company on or prior to the Closing Date; and the Company shall have
delivered to the Purchaser a certificate, dated the date of the Closing Date and
signed by an executive officer of the Company, to the foregoing effect.
(b) Opinion of Counsel to the Company. The Purchaser
shall have received the legal opinion of Xxxxx Xxxxx Xxxx LLC, counsel to the
Company, dated the Closing Date, addressed to the Purchaser, in form and content
customary for transactions of the nature described in this Agreement and
reasonably satisfactory to the Purchaser. The Purchaser acknowledges that Xxxxx
Xxxxx Xxxx LLC is not the Company's regulatory counsel and the opinion letter
will exclude from the scope of the opinion regulatory matters.
(c) No Actions.
(i) No Action shall be pending or overtly
threatened by any Governmental Authority or any other party against the Company
or any of its directors or the Purchaser, which Action is reasonably likely to
(x) restrain or prohibit the consummation of any of the Contemplated
Transactions, or (y) result in damages that alone or together with the costs and
expenses of defending such Action are material in relation to the Company and
its Subsidiaries, taken as a whole.
30
(ii) No law, order, decree, rule or injunction
shall have been enacted, entered, promulgated or enforced by any Governmental
Authority that prohibits or makes illegal the consummation of any of the
Contemplated Transactions.
(d) Stockholder Approval. The Required Vote shall have
been obtained and shall be in full force and effect.
(e) No Material Adverse Effect. Since the date hereof, no
event or development shall have occurred (or failed to occur) and there shall be
no circumstance (and the Purchaser shall not have become aware of any previously
existing circumstance) that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect.
(f) Shareholder Stock Purchase Agreements. The
consummation of the acquisition by the Purchaser of at least 3,700,000 shares of
Common Stock pursuant to the Shareholder Stock Purchase Agreements.
(g) Consents. Any and all consents, approvals, orders,
Licenses and other actions (i) necessary to be obtained from Governmental
Authorities in order to consummate the Contemplated Transactions and for the
Company to operate its business as currently conducted and as currently
contemplated to be conducted following the Closing shall have been obtained and
delivered to Purchaser without any limitation, restriction or requirement that
would adversely affect the ability of the Purchaser to obtain the benefits
(financial or otherwise) from the Contemplated Transactions, and any applicable
waiting periods (and any extensions thereof) shall have been terminated or shall
have expired, and (ii) necessary to be obtained from parties other than
Governmental Authorities in order to consummate the Contemplated Transactions
and for the Company to operate its business as currently conducted and as
currently contemplated to be conducted following the Closing (except for those
consents, approvals, orders, Licenses and other actions, the failure of which to
obtain, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect) shall have been obtained and delivered to
Purchaser without any material adverse change in the terms or conditions of any
Contractual Obligation, and all such consents, approvals, orders, Licenses and
other actions shall be in full force and effect.
(h) NASDAQ Listing. The shares of Common Stock issuable
upon conversion of the Series A Preferred Stock shall have been approved for
listing on NASDAQ, subject only to official notice of issuance.
(i) Company Agreements. The Company shall have entered
into the Registration Rights Agreement. The Articles of Amendment in the form
attached hereto as Exhibit A shall have been filed with and accepted for record
by the Secretary of Commonwealth of Kentucky in accordance with the KBCA.
(j) Voting Agreement. The Purchaser and Xxxxxx X. Xxxxx
shall have entered into the Voting Agreement.
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(k) Waiver of Senior Credit Facility Covenant. Bank One
shall have waived the covenant in Section 2.2(c) of the Senior Credit Facility
loan agreement regarding the use of equity investment proceeds to pay down the
Senior Credit Facility.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE
8.1 Conditions to Closing. The obligation of the Company to enter
into and complete the Closing are subject to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
by the Company:
(a) Representations and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date (except that
representations and warranties made as of a specific date shall be true and
correct in all material respects on such date); the Purchaser shall have in all
material respects performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date; and the Purchaser shall have delivered to the Company a
certificate, dated the date of the Closing Date and signed by the Purchaser, to
the foregoing effect.
(b) No Actions.
(i) No Action shall be pending or overtly
threatened by any Governmental Authority or any other party against the Company
or any of its directors or the Purchaser, which Action is reasonably likely to
(x) restrain or prohibit the consummation of any of the Contemplated
Transactions, or (y) result in damages that alone or together with the costs and
expenses of defending such Action are material in relation to the Company and
its Subsidiaries, taken as a whole.
(ii) No law, order, decree, rule or injunction
shall have been enacted, entered, promulgated or enforced by any Governmental
Authority that prohibits or makes illegal or otherwise relates to the
consummation of any of the Contemplated Transactions.
(c) Stockholder Approval. The Required Vote shall have
been obtained and shall be in full force and effect.
(d) Consents. Any and all consents, approvals, orders,
Licenses and other actions necessary to be obtained (i) from Governmental
Authorities in order to consummate the Contemplated Transactions and for the
Company to operate its business as currently conducted and as currently
contemplated to be conducted following the Closing and (ii) from parties other
than Governmental Authorities in order to consummate the Contemplated
Transactions shall have been obtained (except for those consents, approvals,
orders, Licenses and other actions, the failure of which to obtain, individually
or in the aggregate, would not reasonably be expected to
32
have a Material Adverse Effect), and any applicable waiting periods (and any
extensions thereof) shall have been terminated or shall have expired.
ARTICLE 9
REGISTRATION RIGHTS;
OTHER AGREEMENTS OF THE COMPANY AND THE PURCHASER
9.1 Registration Rights. On or prior to the Closing Date, the
Company shall enter into a Registration Rights Agreement (the "Registration
Rights Agreement") with respect to the Registrable Securities having the terms
set forth in Exhibit C hereto.
9.2 Other Registration Rights. The Company shall not grant any
right of registration under the Securities Act relating to any of its securities
to any Person other than the Purchaser if such rights would or could reasonably
be expected to frustrate, impede or limit the Purchaser's rights pursuant to the
Registration Rights Agreement.
9.3 Rule 144. The Company shall file all reports required to be
filed by it under the Securities Act and the Exchange Act and shall take such
further action as the Purchaser may reasonably request, all to the extent
required to enable the Purchaser to sell the Series A Preferred Stock or the
Common Stock into which the Series A Preferred Stock may be converted pursuant
to and in accordance with Rule 144. Such action shall include, but not be
limited to, making available adequate current public information meeting the
requirements of paragraph (c) of Rule 144.
9.4 Availability of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued Common Stock, for
the purpose of effecting the conversion of the Series A Preferred Stock, at
least the full number of shares of Common Stock then issuable upon the
conversion of such securities. The Company will, from time to time, in
accordance with the laws of the Commonwealth of Kentucky, increase the
authorized amount of Common Stock if at any time the number of shares of Common
Stock remaining unissued and available for issuance shall be insufficient to
permit conversion of the Series A Preferred Stock.
9.5 Additional Purchaser Covenants. For the period commencing with
the date of this Agreement and terminating on the date six months after the
Closing Date, the Purchaser agrees:
(a) not to make a tender offer for additional shares of
the Common Stock of the Company or propose any other transaction with respect to
the Common Stock of the Company that would constitute a "Rule 13e-3 Transaction"
(or "going private transaction") within the meaning of Rule 13e-3 under the
Exchange Act, unless a third party unrelated to the Purchaser or any Purchaser
Subsidiary or Affiliate makes a tender offer, whereupon the Purchaser shall have
a right to make a tender offer;
33
(b) not to support any proposal by the Company to make a
self-tender offer for its Common Stock or other proposed transaction by the
Company that would constitute a "Rule 13e-3 Transaction" (or "going private
transaction") within the meaning of Rule 13e-3 under the Exchange Act, unless
the proposed transaction is approved by a majority of the current directors of
the Company who continue to serve as directors after the Closing; and
(c) not to purchase any shares of Company Common Stock in
open market purchases or otherwise.
9.6 Management Services Arrangement. The Company and the Purchaser
contemplate entering into a management services arrangement, effective as of the
date of the Closing, pursuant to which the Company shall pay to the Purchaser a
$350,000.00 annual fee in consideration of the performance of certain mutually
agreed upon management services. The management services arrangement will
terminate when the Purchaser no longer holds at least 26,452 shares of Series A
Preferred Stock (shares converted into Company Common Stock shall not be
considered to be shares of Series A Preferred Stock held by the Purchaser for
purposes of this Section 9.6).
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination.
(a) This Agreement may be terminated prior to the Closing
as follows:
(i) by either the Purchaser or the Company if
(A) the Closing shall not have occurred before August 31, 2004 (except that this
date shall be extended until September 30, 2004 if the only remaining condition
to the parties' obligations to close is the obtaining of regulatory approvals),
or (B) the approval of the Company's stockholders, as set forth in Section
6.1(b) hereof, shall not have been obtained by reason of the failure to obtain
the Required Vote at a duly held meeting of stockholders or any adjournment
thereof;
(ii) at the election of the Purchaser, if (A)
prior to the Closing Date there shall have been a breach of any of the Company's
representations, warranties, covenants or agreements, which breach would result
in the failure to satisfy any of the conditions set forth in Section 7.1, and
such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the Company, (B) the Board of Directors shall have (x) failed
to make the Board Recommendation, (y) withdrawn the Board Recommendation or (z)
modified or qualified, in any manner adverse to the Purchaser, the Board
Recommendation (or resolved or proposed to take any such action referred to in
clause (x), (y) or (z)), in each case whether or not permitted by the terms
hereof, or (C) the Company shall have breached its obligations under this
Agreement by reason of either a breach of Section 5.1, a failure to call and
hold the Stockholders Meeting in accordance with Section 6.1(b), a failure to
prepare and mail to its stockholders the Proxy Statement in
34
accordance with Section 6.1(a), unless such failure was caused by the actions or
inactions of the Purchaser (or its representatives) in violation in any material
respect of their obligations under this Agreement;
(iii) at the election of the Company, if prior to
the Closing Date there shall have been a breach of any of the Purchaser's
representations, warranties, covenants or agreements, which breach would result
in the failure to satisfy any of the conditions set forth in Section 8.1, and
such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the Purchaser;
(iv) at the election of the Company or the
Purchaser, if any Governmental Authority has taken any Action, which Action is
final and not subject to appeal, seeking to prevent the consummation of the
Closing or any other Contemplated Transaction and the Company or the Purchaser,
as the case may be, reasonably and in good xxxxx xxxx it impracticable or
inadvisable to proceed in view of such Action; provided, however, that the party
terminating this Agreement pursuant to this Section 10.1(iv) shall have used all
best efforts to have such Action vacated;
(v) at the election of the Company, if (A) the
Company is not in breach in any material respect of any of the terms of this
Agreement, (B) the Board of Directors of the Company shall have made a Change in
the Board Recommendation in accordance with Section 6.1 and authorizes the
Company, subject to complying with the terms of this Agreement, to enter into a
binding written agreement concerning a transaction that constitutes a Superior
Proposal and the Company notifies the Purchaser in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice (the "Alternative Transaction Notice"), (C) the
Purchaser does not make, prior to 10 Business Days after receipt of the
Alternative Transaction Notice, an offer that the Board of Directors of the
Company determines, in good faith after consultation with its financial
advisors, is at least as favorable as the Superior Proposal taking into account
all relevant factors (including financing, required approvals, the timing and
likelihood of consummation and the post-closing prospects for the Company) and
(D) the Company prior to such termination pays to the Purchaser in immediately
available funds the fees and expenses required to be paid pursuant to Section
10.3 and Section 12.2(b); or
(vi) at any time on or prior to the Closing Date,
by mutual written consent of the Company and the Purchaser.
(b) If this Agreement so terminates, it shall become null
and void and have no further force or effect, except as provided in Sections
10.2 and 10.3.
10.2 Survival after Termination. If this Agreement terminates
pursuant to Section 10.1 and the Contemplated Transactions are not consummated,
this Agreement shall become null and void and have no further force or effect,
except that any such termination shall be without prejudice to the rights of any
party on account of the non-satisfaction of the conditions set forth in Articles
7 and 8 or on account of the termination of this Agreement, each resulting from
the
35
intentional or willful breach or violation of the representations, warranties,
covenants or agreements of another party under this Agreement. Notwithstanding
anything in this Agreement to the contrary, the provisions of Sections 3.26 and
4.7, this Section 10.2, Sections 10.3, 11.1 and 11.2 and Article 12 shall
survive any termination of this Agreement.
10.3 Termination Payment. If this Agreement is terminated pursuant
to Section 10.2, and
(a) (i) the Company is not in default under this
Agreement, (ii) the Company has satisfied the requirements of Sections 6.1 and
there has not been a Change in the Board Recommendation, (iii) the Purchaser is
not in default under this Agreement, and (iv) the Required Vote is not obtained,
then the sole remedy of the Purchaser upon termination of this Agreement shall
be the payment of $250,000.00 in Transaction Expenses, and neither party shall
have any further right to consideration or damages from against the other party
arising out of the failure to close the transactions contemplated by this
Agreement;
(b) the Purchaser is in default under this Agreement,
then (i) the Company shall have the right to pursue all remedies available to it
in law and equity for a breach of this Agreement by the Purchaser, and (ii) the
Purchaser shall have no right to any termination payment, payment of Transaction
Expenses or other consideration or damages from the Company;
(c) (i) the Company is in default under this Agreement
(except for a failure to satisfy the requirements of Section 6.1 which failure
falls within the scope of Section 10.3(d)) , and (ii) the Purchaser is not in
default under this Agreement, then the Company shall pay Onex Partners Manager
LP a termination payment equal to three percent of the sum of (i) $50,000,000.00
plus (ii) the aggregate purchase price payable pursuant to the Shareholder Stock
Purchase Agreement, along with any Transaction Expenses, and upon payment of
such termination payment and Transaction Expenses, the Purchaser shall have no
right to any other consideration or damages from the Company;
(d) (i) the Purchaser is not in default under this
Agreement, (ii) the Company fails to satisfy the requirements of Section 6.1 and
the Company is not otherwise in default under the Agreement, and (iii) the
Company receives prior to termination of this Agreement an Acquisition Proposal
and the Board approves such Acquisition Proposal within 12 months after the date
of termination of this Agreement, then the Company shall pay Onex Partners
Manager LP a termination payment equal to three percent of $50,000,000.00, along
with any Transaction Expenses payable pursuant to Section 12.1, and upon payment
of such termination payment and Transaction Expenses, the Purchaser shall have
no further right to any other consideration or damages from the Company.
If the Purchaser is not entitled to a termination fee pursuant to
Sections 10.3(a), (c) or (d), then the Purchaser shall have no right to any
consideration, damages from the Company arising out of the termination of this
Agreement.
36
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification.
(a) The Company hereby agrees to indemnify, defend and
hold harmless the Purchaser, its Affiliates and its directors, managers,
officers, agents, advisors, representatives, employees, successors and assigns
(each, a "Purchaser Indemnitee") from and against all Claims, including without
limitation, interest, penalties and attorneys' fees and expenses, asserted
against, resulting to, or imposed upon or incurred by such Purchaser Indemnitee
by a third party and arising out of or resulting from any allegation or Claim in
respect of (i) any wrongful action or inaction by the Company in connection with
the authorization, execution, delivery and performance of this Agreement or the
Company Agreements, or (ii) breach of any of the Company's representations,
warranties or obligations under this Agreement, except to the extent that the
Purchaser Indemnitee has committed a material breach of its representations,
warranties or obligations under this Agreement, which breach is the cause of the
Company's wrongful action or inaction. If the Closing occurs, any payment by the
Company to any Purchaser Indemnitee pursuant to Section 11.1 shall be treated
for all income tax purposes as an adjustment to the price paid by the Purchaser
for the Series A Preferred Stock pursuant to this Agreement.
(b) The Purchaser hereby agrees to indemnify, defend and
hold harmless the Company, its Affiliates and its directors, managers, officers,
agents, advisors, representatives, employees, successors and assigns (each, a
"Company Indemnitee") from and against all Claims, including without limitation,
interest, penalties and attorneys' fees and expenses, asserted against,
resulting to, or imposed upon or incurred by such Company Indemnitee by a third
party and arising out of or resulting from any allegation or Claim in respect of
(i) any wrongful action or inaction by the Purchaser in connection with the
authorization, execution, delivery and performance of this Agreement, or (ii)
breach of the Purchaser's representations, warranties and obligations under this
Agreement, except to the extent that the Company Indemnitee has committed a
material breach of its representations, warranties or obligations under this
Agreement, which breach is the cause of the Purchaser's wrongful action or
inaction. If the Closing occurs, any payment by the Purchaser to any Company
Indemnitee pursuant to Section 11.1 shall be treated for all income tax purposes
as an adjustment to the price paid by the Purchaser for the Series A Preferred
Stock pursuant to this Agreement.
11.2 Terms of Indemnification. The obligations and liabilities of
the Company or Purchaser with respect to Claims by third parties will be subject
to the following terms and conditions: (a) a Purchaser or Company Indemnitee
("Indemnitee"), as applicable, will give the other party prompt notice of any
Claims asserted against, resulting to, imposed upon or incurred by such
Indemnitee, directly or indirectly, and the party subject to the Section 11.1
indemnification obligation ("Indemnifying Party") will undertake the defense
thereof by representatives of their own choosing which are reasonably
satisfactory to such Indemnitee; provided that the failure of any Indemnitee to
give notice as provided in this Section 11.2 shall not relieve the Indemnifying
Party of its obligations under this Article 11, except to the extent
37
that such failure has materially and adversely affected the rights of the
Indemnifying Party; (b) if within a reasonable time after notice of any Claim,
the Indemnifying Party fails to defend, such Indemnitee will have the right to
undertake the defense, compromise or settlement of such Claims on behalf of and
for the account and at the risk of the Indemnifying Party, subject to the right
of the Indemnifying Party to assume the defense of such Claim at any time prior
to settlement, compromise or final determination thereof; (c) if there is a
reasonable probability that a Claim may materially and adversely affect an
Indemnitee other than as a result of money damages or other money payments, such
Indemnitee will have the right at its own expense to defend, or co-defend, such
Claim; (d) neither the Indemnifying Party nor the Indemnitee will, without the
prior written consent of the other, settle or compromise any Claim or consent to
entry of any judgment relating to any such Claim; (e) with respect to any Claims
asserted against a Indemnitee, such Indemnitee will have the right to employ one
counsel of its choice in each applicable jurisdiction (if more than one
jurisdiction is involved) to represent such Indemnitee if, in such Indemnitee's
reasonable judgment, a conflict of interest between such Indemnitee and the
Indemnifying Party exists in respect of such Claims, and in that event the fees
and expenses of such separate counsel shall be paid by the Company; and (f) the
Indemnifying Party will provide each Indemnitee reasonable access to all records
and documents of the Company relating to any Claim.
11.3 Limitations on Indemnification.
(a) No party shall be entitled to indemnification with
respect to any breach of a representation or warranty if such party (including
such party's financial and professional advisors) has knowledge of such breach
prior to the Closing.
(b) No party shall be entitled to indemnification with
respect to any breach of a representation or warranty until the aggregate amount
of the other party's indemnification obligations under this Section 11 exceeds
$2,000,000.00, whereupon, the indemnifying party shall be obligated to pay the
full amount of the indemnification obligation beginning with the first dollar.
(c) The indemnification obligation of the Company under
this Agreement shall not exceed $50,000,000.00 in the aggregate.
(d) No party shall be entitled to special or
consequential damages. The indemnification rights under this Section 11 shall be
the sole remedy of a party for Claims arising out of the transactions
contemplated by this Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Survival. Subject to the limitations on survival set forth in
this Section 12.1, all representations and warranties, covenants and agreements
of the Company and the Purchaser
38
contained in this Agreement shall survive the Closing. Representations and
warranties of the Company and the Purchaser shall survive the Closing for a
period of 15 months. Each party's indemnification obligation under Article 11
shall survive for a period of 15 months after the Closing Date, except for
claims made prior to such date.
12.2 Fees and Expenses.
(a) The Company shall pay its own expenses incurred in
connection with the negotiation, execution, delivery, performance and
consummation of this Agreement and the Contemplated Transactions (including
without limitations expenses incurred in connection with the filing, printing
and mailing of the Proxy Statement).
(b) If the Agreement is terminated and the Purchaser is
entitled to a termination fee pursuant to Sections 10.3(a), (c) or (d), then the
Company shall reimburse the Purchaser for the reasonable, documented
out-of-pocket expenses of the Purchaser or any of their Affiliates (whether or
not incurred prior to the date hereof) not to exceed $500,000 in the aggregate,
including, without limitation, the fees, disbursements and other reasonable
expenses of attorneys, accountants and any other advisors thereto, arising out
of or relating to the negotiation, execution, delivery, performance and
consummation of this Agreement and the Contemplated Transactions and all filing
fees and expenses incurred by the Purchaser in connection with any filing by the
Purchaser under the HSR Act ("Transaction Expenses"). Such reimbursement shall
be made from time to time not later than the third Business Day following the
date on which the Purchaser provides a written documented statement of their
theretofore unreimbursed expenses to the Company.
(c) The Company acknowledges that the Purchaser will not
be responsible for Xxxxx Xxxxxxx & Co.'s fees and expenses arising out of the
transactions contemplated by this Agreement.
12.3 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given if delivered personally or telecopied, on
the date of such delivery, or if sent by reputable overnight courier, on the
first Business Day following the date of such mailing, as follows:
(a) if to the Company:
Res-Care, Inc.
00000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Chairman, President and CEO
Telecopy: (000) 000-0000
with a copy to:
Xxxxx Xxxxx Xxxx LLC
39
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: C. Xxxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
(b) if to any of the Purchasers:
c/o Onex Partners LP
c/o Onex Partners GP LP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. XxXxxxx, Managing Director
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxxx PLLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
Any party may by notice given in accordance with this Section 12.3
designate another address or Person for receipt of notices hereunder.
12.4 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Other than the parties hereto and their successors and permitted
assigns, and except as set forth in Article 11, no Person is intended to be a
beneficiary of this Agreement. No party hereto may assign its rights under this
Agreement without the prior written consent of the other party hereto; provided,
however, that, without the prior written consent of the Company, (x) prior to
the Closing the Purchaser may assign all or any portion of its rights hereunder
(along with the corresponding obligations) to any Affiliate of the Purchaser and
(y) after the Closing the Purchaser may assign all or any portion of its rights
hereunder (along with the corresponding obligations) to any purchaser or
transferee of shares of the Series A Preferred Stock. Any assignee of any
Purchaser pursuant to the proviso of the foregoing sentence shall be deemed to
be a "Purchaser" for all purposes of this Agreement.
12.5 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the
Purchaser in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchaser at law, in equity or otherwise.
40
(b) Any amendment, supplement or modification of or to
any provision of this Agreement and any waiver of any provision of this
Agreement shall be effective only if it is made or given in writing and signed
by the Company (in the case of any amendment, supplement, modification or waiver
after the Closing, with the approval of not less than a majority of the
directors not appointed by the Purchaser) and the Purchaser.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, all of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
12.7 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
12.8 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in accordance with the
Requirements of Law of the Commonwealth of Kentucky without giving effect to the
principles of conflict of laws. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the Commonwealth of Kentucky and of the United States of America, in
each case located in the County of Jefferson, for any Action arising out of or
relating to this Agreement and the Contemplated Transactions (and agrees not to
commence any Action relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to its respective address set forth in this Agreement, or such other address as
may be given by one or more parties to the other parties in accordance with the
notice provisions of Section 12.3, shall be effective service of process for any
action, suit or proceeding brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the courts of the State of
Jefferson or the United States of America, in each case located in the County of
Jefferson, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such Action brought in any such
court has been brought in an inconvenient forum. Each of the parties irrevocably
and unconditionally waives, to the fullest extent permitted by applicable
Requirements of Law, any and all rights to trial by jury in connection with any
action, suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
12.9 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
12.10 Entire Agreement. This Agreement, together with the schedules
and exhibits hereto, and the Company Agreements referred to herein or delivered
pursuant hereto, are intended by the parties as a final expression of their
agreement and intended to be a complete and
41
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the schedules
and exhibits hereto, and the Company Agreements referred to herein or delivered
pursuant hereto, supersede all prior agreements and understandings between the
parties with respect to such subject matter.
12.11 Further Assurances. Subject to the terms and conditions of
this Agreement, from time to time after the Closing, the Company and the
Purchaser agree to cooperate with each other, and at the request of the other
party, to execute and deliver any further instruments or documents and take all
such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the Contemplated Transactions and to
otherwise carry out the intent of the parties hereunder. In furtherance and not
in limitation of the foregoing, the Company agrees to all actions necessary to
give effect to the voting rights of the Series A Preferred Stock in accordance
with the terms thereof.
12.12 Public Announcements. Except as required by any Requirement of
Law, none of the parties hereto will issue or make any reports, statements or
releases to the public with respect to this Agreement or the Contemplated
Transactions without consulting the other parties, and, during the period from
the date hereof until thirty (30) days after the Closing Date, without the
approval of the other parties (such approval not to be unreasonably withheld or
delayed).
12.13 Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief or any requirement for a bond.
12.14 Subsidiaries. Whenever this Agreement provides that a
Subsidiary of the Company is obligated to take or refrain from taking any
action, the Company shall cause such Subsidiary to take or refrain from taking
such action.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first above written.
RES-CARE, INC.
By /s/ Xxxxxx X. Xxxxx
----------------------------------------
Title: President
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ONEX PARTNERS LP
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Xxxxxx X. Xx Xxxxx, Managing Director,
Onex Partners GP LP
ONEX AMERICAN HOLDINGS II, LLC
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Title: Managing Director
ONEX U.S. PRINCIPALS LP
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Title: Managing Director
RES-CARE EXECUTIVE INVESTO LLC
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Title: Managing Director
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Guarantees
The undersigned hereby guarantees the performance by each of Onex
American Holdings II, LLC, Onex U.S. Principals LP, Res-Care Executive Investo
LLC of their respective obligations under this Agreement.
ONEX PARTNERS LP
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Xxxxxx X. Xx Xxxxx, Managing Director,
Onex Partners GP LP
The undersigned hereby guarantees the performance by Onex Partners LP
of its obligations under this Agreement and the guarantee by Onex Partners LP of
the obligations of Onex American Holdings II, LLC, Onex U.S. Principals LP,
Res-Care Executive Investo LLC under this Agreement.
ONEX CORPORATION
By /s/ Xxxxxx X. Xx Xxxxx
----------------------------------------
Title: Managing Director
44
EXHIBITS
Exhibit A Articles of Amendment
Exhibit B Voting Agreement
Exhibit C Registration Rights Agreement
Exhibit D Shareholder Stock Purchase Agreements
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SCHEDULES
Schedule 3.2 - Subsidiaries
Schedule 3.3 - Corporate Authorization; No Contravention
Schedule 3.4 - Governmental Authorization; Third Party Consent
Schedule 3.6 - Capitalization of the Company and its Subsidiaries
Schedule 3.7 - SEC Documents; Xxxxxxxx-Xxxxx Compliance
Schedule 3.8 - Absence of Certain Developments
Schedule 3.10 - Compliance with Laws
Schedule 3.11 - Litigation
Schedule 3.13 - Environmental
Schedule 3.14 - Taxes
Schedule 3.15 - Title to Property and Assets; Leases
Schedule 3.16 - Compliance with ERISA
Schedule 3.17 - Labor Relations
Schedule 3.20 - Intellectual Property
Schedule 3.21 - Affiliate Transactions
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