SECURITIES PURCHASE AGREEMENT Among TANDEM HEALTH CARE, INC., BEHRMAN CAPITAL II L.P., STRATEGIC ENTREPRENEUR FUND II, L.P. and ROBERT W. GLUSKIN Dated as of April 26, 2005
Exhibit 10.4
Among
XXXXXXX CAPITAL II L.P.,
STRATEGIC ENTREPRENEUR FUND II, L.P.
and
XXXXXX X. XXXXXXX
Dated as of April 26, 2005
SECURITIES PURCHASE AGREEMENT, dated as of April 26, 2005, among TANDEM HEALTH CARE, INC., a
Pennsylvania corporation (the “Company”), XXXXXXX CAPITAL II L.P., a Delaware limited
partnership (“Xxxxxxx Capital II”), STRATEGIC ENTREPRENEUR FUND II, L.P., a Delaware
limited partnership (“SEFII”) and Xxxxxx X. Xxxxxxx, an individual residing in the State of
Texas (Gluskin, Xxxxxxx Capital II and SEFII being hereinafter referred to individually as a
“Purchaser” and collectively as the “Purchasers”).
WHEREAS, the Company is in the business of providing post-acute care services and acquiring or
developing additional skilled nursing facilities and other businesses related to the provision of
post-acute care services (collectively, the “Business”); and
WHEREAS, on the Closing Date, the Company wishes to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, wish to purchase on the terms and subject to the conditions
hereinafter set forth, an aggregate of 3,497,023 shares of Series G Convertible Preferred Stock,
par value $0.01 per share, (the “Convertible Preferred Shares”), and an aggregate of
2,098,215 shares of Series H Redeemable Preferred Stock (the “Redeemable Preferred
Shares”), in the amounts set forth opposite the name of each such Purchaser in Schedule
I attached hereto under the headings “Convertible Preferred Shares” and “Redeemable Preferred
Shares” as the case may be, for acquisitions, to finance working capital and for general corporate
purposes.
NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
Section 1.01 Issuance, Sale and Delivery of Convertible Preferred Shares and Redeemable
Preferred Shares on the Closing Date.
(a) Subject to the terms and conditions set forth herein, on the Closing Date, the Company
shall issue, sell and deliver to each Purchaser, and each Purchaser shall purchase from the
Company, (i) the number of Convertible Preferred Shares set forth opposite the name of such
Purchaser in Schedule I hereto under the heading “Convertible Preferred Shares,” at a
purchase price of $2.52 per Convertible Preferred Share, and (ii) the number of Redeemable
Preferred Shares set forth opposite the name of such Purchaser in Schedule I hereto under
the heading “Redeemable Preferred Shares,” at a purchase price of $2.52 per Redeemable Preferred
Share (collectively referred to herein as the “Preferred Stock”). On the Closing Date, the
Company shall issue certificates in definitive form, registered in the name of each Purchaser,
evidencing the Convertible Preferred Shares and Redeemable Preferred Shares being purchased by each
such Purchaser hereunder.
(b) Subject to the terms and conditions set forth herein, on the Closing Date, each Purchaser
shall deliver to the Company, as payment in full for the Convertible Preferred Shares and the
Redeemable Preferred Shares being purchased by each such Purchaser hereunder, an amount set forth
opposite the name of such Purchaser on Schedule I hereto under the heading “Aggregate
Purchase Price,” in immediately available United States funds.
Section 1.02 Closing Date. The closing of the sale and purchase of the Convertible
Preferred Shares and Redeemable Preferred Shares shall take place at the offices of Xxxxxxxx
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Ingersoll PC, One Oxford Centre, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxx, 00000-0000, at 10:00 a.m., Eastern Time, on April 26, 2005, or at such other date and
time as may be mutually agreed upon among the Purchasers and the Company (such closing being herein
called the “Closing” and such date and time being herein called the “Closing
Date”).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
Section 2.01 Organization, Qualification and Corporate Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Except as set forth in Schedule 2.01 hereto, neither the
nature of the business transacted by the Company nor the character of the properties owned or held
by it makes licensing or qualification as a foreign corporation in any other jurisdiction
necessary, except where the failure to be so licensed or qualified would not have a material
adverse effect on the properties, assets, condition (financial or other), prospects, operating
results or business of the Company or any of its subsidiaries (a “Material Adverse
Effect”). The Company has the corporate power and authority to own and hold its properties and
to carry on its business as currently conducted and to execute, deliver and perform this Agreement
and to issue its Preferred Stock as provided for herein.
Section 2.02 Authorization of Agreement, etc. (a) Each of (i) the execution and
delivery by the Company of this Agreement and (ii) the performance by the Company of its
obligations hereunder has been duly authorized by all requisite corporate action and will not (x)
violate any provision of law, any order of any court or other agency of government, the Articles of
Incorporation or By-laws of the Company, or any provision of any indenture, agreement or
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other instrument to which the Company or any of its subsidiaries is a party or by which it or
any of its properties or assets is bound or affected, (y) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or (z) result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the properties or assets of the Company or any of its
subsidiaries.
(b) The issuance and delivery of the Preferred Stock has been duly authorized by the Company,
and, when issued and delivered, such Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable shares of the Company’s capital stock. The issuance and delivery of the
Preferred Stock is not subject to any preemptive rights of shareholders of the Company or any
subsidiary, or to any right of first refusal or other similar right in favor of any person, that
has not been waived in writing.
Section 2.03 Validity. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms.
Section 2.04 Governmental Approvals. No registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and performance of this Agreement by the
Company or any of its subsidiaries, or the issuance and delivery by the Company of the Preferred
Stock.
Section 2.05 Absence of Adverse Changes. No material adverse change in the business,
results of operations or financial condition of the Company and its subsidiaries, taken as a whole,
has occurred since December 31, 2004.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and warrants to the Company as follows:
Section 3.01 Authorization of Agreement, etc. The execution and delivery by such
Purchaser of this Agreement has been duly authorized by all requisite action on the part of such
Purchaser and will not violate any provision of law, any order of any court or other agency of
government, and to the extent such Purchaser is an entity, the charter or other governing documents
of such Purchaser, or any provision of any indenture, agreement or other instrument by which such
Purchaser or any of such Purchaser’s properties or assets are bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in any claim upon any of the properties or
assets of such Purchaser.
Section 3.02 Validity. This Agreement has been duly executed and delivered by such
Purchaser and constitutes the legal, valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.
Section 3.03 Investment Representations. (a) Such Purchaser is acquiring the
Preferred Stock being purchased by such Purchaser hereunder for such Purchaser’s own account, for
investment, and not with a view toward the resale or distribution thereof.
(b) Such Purchaser understands that he or it must bear the economic risk of such Purchaser’s
investment for an indefinite period of time, because the Preferred Stock is not registered under
the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state
securities laws and may not be resold unless subsequently registered under the Securities Act and
such other laws or unless an exemption from such registration is available. Such
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Purchaser also understands that it is not contemplated that any registration will be made
under the Securities Act or that the Company will take steps that will make the provisions of Rule
144 or Rule 144A under the Securities Act available to permit resale of the Preferred Stock. Such
Purchaser agrees not to pledge, transfer, convey or otherwise dispose of any of the Preferred
Stock, except in a transaction that is the subject of either (i) an effective registration
statement under the Securities Act and any applicable state securities laws, or (ii) an opinion of
counsel to the effect that such registration is not required (which opinion and counsel shall be
reasonably satisfactory to the Company, and may be relied on by the Company in making such
determination).
(c) Such Purchaser is able to fend for himself or itself in the transactions contemplated by
this Agreement and has the ability to bear the economic risks of the investment in the Preferred
Stock being purchased by him or it hereunder for an indefinite period of time.
(d) Xxxxxxx Capital II and SEFII each represents that it has been organized and is existing as
a limited partnership under the laws of the State of Delaware.
(e) Gluskin represents that he is an individual residing in the State of Texas.
Section 3.04. Governmental Approvals. No registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental agency or instrumentality
is or will be necessary by such Purchaser for the valid execution, delivery and performance of this
Agreement.
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ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.01. Conditions of Company. The obligations of each Purchaser to carry out
its obligations under this Agreement are, at its option, subject to the satisfaction, on or before
the Closing Date, of the following conditions:
(a) The representations and warranties of the Company contained in this Agreement shall be
true and correct in all material respects on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of such date.
(b) The Company shall have performed and complied with all agreements and conditions contained
herein required to be performed or complied with by it prior to or on the Closing Date.
(c) All corporate and other proceedings to be taken by the Company and all waivers and
consents to be obtained by the Company and its subsidiaries in connection with the transactions
contemplated hereby shall have been taken or obtained by the Company and all documents incident
thereto shall be satisfactory in form and substance to the Purchasers and their counsel.
(d) No legal action or proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.
(e) The Company shall have obtained all consents required to be obtained pursuant to Section
5.04 hereof.
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(f) On or prior to the Closing Date, the shareholders of the Company shall have approved the
Company’s Fifth Amended and Restated Articles of Incorporation as attached hereto as Exhibit
Y.
Section 4.02. Conditions of Purchasers. The obligations of the Company to carry out
its obligations under this Agreement, are, at its option, subject to the satisfaction, on or before
the Closing Date, of the following conditions:
(a) The representations and warranties of the Purchasers contained in this Agreement shall be
true and correct in all material respects on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of such date.
(b) The Purchasers have performed and complied with all agreements and conditions contained
herein required to be performed or complied with by them prior to or on the Closing Date.
(c) All corporate and other proceedings to be taken by the Purchasers and all waivers and
consents to be obtained by the Purchasers and their subsidiaries in connection with the
transactions contemplated hereby shall have been taken or obtained by the Purchasers and all
documents incident thereto shall be satisfactory in form and substance to the Company and its
counsel.
(d) No legal action or proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.
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ARTICLE V
COVENANTS
Section 5.01 Financial Statements, Reports, etc. So long as any Purchaser or any
transferee thereof shall hold any of the Preferred Stock purchased by it pursuant to this
Agreement, the Company shall furnish to each such Purchaser and to each such subsequent holder:
(a) within 120 days after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and each of its subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations and retained earnings, changes in stockholders’ equity and
cash flows of the Company and each of its subsidiaries for the fiscal year then ended, together
with supporting notes thereto, certified in accordance with generally accepted accounting
principles, without qualification as to scope of audit, by a firm of independent public accountants
of recognized national standing selected by the Company and reasonably acceptable to the
Purchasers;
(b) within 45 days after the end of each fiscal quarter in each fiscal year (other than the
last fiscal quarter in each fiscal year), a consolidated balance sheet of the Company and each of
its subsidiaries and the related consolidated statements of operations and retained earnings and
cash flows of the Company and each of its subsidiaries, unaudited but certified by the principal
financial officer of the Company and each such subsidiary, respectively, such balance sheet to be
as of the end of such fiscal quarter and such statements of operations and retained earnings and
cash flows to be for such fiscal quarter, for the corresponding fiscal quarter of the immediately
preceding fiscal year, for the period from the beginning of the fiscal year to the end of such
fiscal quarter and for the period from the beginning of the immediately preceding fiscal year to
the end
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of the corresponding fiscal quarter in such fiscal year, in each case subject to normal
year-end adjustments;
(c) within 45 days after the end of each month in each fiscal year (other than the last month
in each fiscal quarter), a consolidated balance sheet of the Company and each of its subsidiaries
and the related consolidated statement of operations and retained earnings, unaudited but certified
by the principal financial officer of the Company and each of its subsidiaries, such balance sheets
to be as of the end of such month and such statements of operations and retained earnings to be for
such month and for the period from the beginning of the fiscal year to the end of such month, in
each case subject to normal year-end adjustments;
(d) prior to the beginning of each fiscal year of the Company (and with respect to any
revision thereof, promptly after such revision has been prepared), a proposed annual operating
budget for the Company and each of its subsidiaries, including projected monthly income statements,
cash flow statements during such fiscal year and a projected consolidated balance sheet as of the
end of such fiscal year, and each monthly financial statement furnished pursuant to (c) above shall
reflect variances from such operating budget, as the same may from time to time be revised;
(e) promptly upon filing, copies of all registration statements, prospectuses, periodic
reports and other documents filed by the Company or any of its subsidiaries with the Securities and
Exchange Commission; and
(f) promptly, from time to time, such other information regarding the operations, business,
affairs and financial condition of the Company or any subsidiary as any Purchaser may reasonably
request.
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The obligations of the Company under paragraphs (c), (d) and (e) above shall cease at such
time as the Company shall have effected an initial public offering of its equity securities
registered under the Securities Act.
Section 5.02 Rights of Inspection. The Company shall, and shall cause its
subsidiaries, officers, directors, employees, representatives, advisors and agents to, afford, from
the date hereof, the representatives, advisors and agents of Xxxxxxx Capital II complete access at
all reasonable times during normal business hours to its officers, employees, agents, properties,
books, records and work papers, and shall furnish Xxxxxxx Capital II all financial, operating and
other information and data that Xxxxxxx Capital II may reasonably request through such
representatives, advisors or agents. The Company shall promptly furnish to Xxxxxxx Capital II a
copy of all material written correspondence, filings, communications (or memoranda setting forth
the substance thereof) between the Company or any of its officers, employees, representatives,
advisors or agents and any governmental entity with respect to the obtaining of any waivers,
consents or approvals and the making of any registrations or filings that are necessary to the
transactions contemplated by this Agreement. Xxxxxxx Capital II agrees to keep confidential any
confidential business information that may be provided to it by the Company pursuant to this
Agreement, unless disclosure is required by law as advised by counsel.
Section 5.03 Notice of Certain Events. The Company shall give the Purchasers prompt
notice of (i) the occurrence, or failure to occur, of any event that such party believes would be
likely to cause (x) any of the representations or warranties of the Company contained in this
Agreement to be untrue or inaccurate in any material respect at any time from the date hereof or
(y) any covenant, condition or agreement contained in this Agreement not to be complied with or
satisfied in any material respect; (ii) any failure of the Company, or any officer, director,
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employee or agent thereof, to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by it hereunder;
(iii) any event of default under any agreement with respect to indebtedness for borrowed money or a
purchase money obligation, and any event which, upon notice or lapse of time or both, would
constitute such an event of default, that would permit the holder of such indebtedness or
obligation to accelerate the maturity thereof; (iv) any material default under any agreement with
Health Care REIT, Inc. or any agreement with a similar entity engaged in the financing of
post-acute care facilities; and (v) any action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or agency which, if adversely determined, would materially
impair the right of the Company to carry on its business substantially as now or then conducted,
and which, in the case of each of the items set forth in clauses (i) through (v) above, would be
likely to have a Material Adverse Effect.
Section 5.04 Consents and Approval. Prior to the Closing Date, the Company shall
promptly apply for or otherwise seek and use its best efforts to obtain all authorizations,
consents, waivers and approvals (whether by or from any person, entity, court or governmental
agency or authority) as may be required in connection with the consummation of this Agreement and
the transactions contemplated hereby.
Section 5.05 Compliance with Laws. The Company shall comply, and shall cause each of
its subsidiaries to comply, with all applicable laws, rules, regulations and orders, the
noncompliance with which could have a Material Adverse Effect.
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ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. Any notice or other communications required or permitted
hereunder shall be deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by national overnight courier service or first class certified mail, postage prepaid,
or by telecopy addressed to such party at the address or telecopy number set forth below:
| (1 | ) | if to the Company, to it at: | ||||
| Tandem Health Care, Inc. | ||||||
| 000 Xxxxxxxxx Xxxxxxx Xxxxx | ||||||
| Xxxxx 000 | ||||||
| Xxxxxxxx, XX 00000 | ||||||
| Attention: Xxxxxxxx X. Xxxxxxx | ||||||
| Facsimile: (000) 000-0000 | ||||||
| With a copy to: | ||||||
| Tandem Health Care, Inc. | ||||||
| Xxx Xxxxxx Xxxxxx | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxxxxxx, XX 00000 | ||||||
| Attention: Xxxxxxxx X. Xxxxxxxx, Esq. | ||||||
| Facsimile: (000) 000-0000 | ||||||
| (2 | ) | if to Xxxxxxx Capital II or SEF II, to it at: | ||||
| 000 Xxxx 00xx Xxxxxx | ||||||
| Xxx Xxxx, XX 00000 | ||||||
| Attention: Xxxx X. Xxxxxx | ||||||
| Facsimile: (000) 000-0000 | ||||||
| (3 | ) | if to Xxxxxx X. Xxxxxxx, to him at: | ||||
| 000 Xxxxxxxx Xxxx Xxxxxxx | ||||||
| Xxxxxxx, XX 00000 | ||||||
| Facsimile: (000) 000-0000 |
or, in any case, at such other address or addresses as shall have been furnished in writing by such
party to the other parties hereto. All such notices and other communications shall be deemed to
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have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the
case of national overnight courier service, on the first business day following delivery to such
service, (c) in the case of mailing, on the fifth business day following the date of such mailing
and (d) in the case of facsimile, when received.
Section 6.02 Brokerage. Each party hereto will indemnify and hold harmless the others
against and in respect of any claim for brokerage or other commissions relative to this Agreement
or to the transactions contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third party.
Section 6.03 Parties in Interest. All covenants and agreements contained in this
Agreement by or on behalf of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or not.
Section 6.04 Entire Agreement; Assignment. This Agreement (together with its
Schedules, Exhibits and Annexes) constitutes the entire agreement of the parties with respect to
the subject matter hereof and may not be amended or modified nor any provisions waived except in a
writing signed by the parties hereto. This Agreement may not be assigned by any party without the
prior written consent of the others.
Section 6.05 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts shall constitute but one agreement.
Section 6.06 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first above written.
| TANDEM HEALTH CARE, INC. | ||||||
| By: | /s/ Xxxxxxxx X. Xxxxxxx | |||||
| Chairman and Chief Executive Officer | ||||||
| XXXXXXX CAPITAL II L.P. | ||||||
| By: | Xxxxxxx Brothers LLC, | |||||
| its General Partner | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||||
| Managing Member | ||||||
| STRATEGIC ENTREPRENEUR FUND II, L.P. | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||||
| General Partner | ||||||
| /s/ Xxxxxx X. Xxxxxxx | ||||||
| Xxxxxx X. Xxxxxxx | ||||||
Schedule I
Purchasers
| Name and Address of Purchaser | Convertible | Redeemable | Aggregate | |||||||||
| Preferred | Preferred | Purchase Price | ||||||||||
| Shares | Shares | |||||||||||
Xxxxxxx Capital II L.P. |
3,425,773 | 2,055,464 | $ | 13,812,717.24 | ||||||||
Strategic Entrepreneur
Fund II, L.P. |
46,449 | 27,870 | $ | 187,283.88 | ||||||||
Xxxxxx X. Xxxxxxx |
24,801 | 14,881 | $ | 99,998.64 | ||||||||
Total |
3,497,023 | 2,098,215 | $ | 14,099,999.76 | ||||||||
