1
Exhibit 2.1
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT ("Agreement") is dated February 4, 1998,
by and among (i) RES-CARE, INC., a Kentucky corporation ("Purchaser"); (ii)
NORMAL LIFE, INC., a Kentucky corporation ("Company"); (iii) (A) J. XXXXXX
XXXXXX ("Xxxxxx"), (B) XXXXXXX X. XXXXXX ("Xxxxxx"), and (C) XXXXXXXX X. XXXXX
(each a "Majority Shareholder" and collectively, the "Majority Shareholders");
and (iv) THE INDIVIDUALS LISTED ON EXHIBIT A ATTACHED HERETO (each, a "Minority
Shareholder" and collectively, the "Minority Shareholders"). The Majority
Shareholders and the Minority Shareholders are sometimes individually referred
to as a "Shareholder" and collectively as the "Shareholders").
R E C I T A L S :
-----------------
A. The Shareholders own all of the outstanding capital stock of
Company and certain of the Shareholders own a majority of the equity interests
of the Related Lessors (as defined below) which lease certain real property to
Company and its subsidiaries.
B. Company and its subsidiaries are engaged in the business of
providing services to persons with mental retardation and developmental
disabilities, including persons who are dually diagnosed ("MR/DD"), throughout
the United States.
C. The parties desire for Purchaser to acquire all of the issued and
outstanding shares of capital stock of Company, and to amend and restate the
leases between the Related Lessors and Company and its subsidiaries, on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements,
representations, and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. For purposes of this Agreement and the Exhibits and
Schedules attached hereto, and in addition to any and all definitions and
interpretations otherwise provided throughout this Agreement, the following
words and phrases shall have the meaning set forth below:
"Agencies" means all applicable governmental agencies or other entities
which govern, control or otherwise have any authority over the Purchaser and/or
the Company Operations, as the context requires.
2
"Amended Facility Leases" means the leases to be executed between the
respective Target Entity, as lessee, and the respective Related Lessor, as
lessor, and Purchaser, as guarantor, as provided in Section 3.8 hereof.
"Ancillary Agreements" means the Amended Facility Leases, the
Debentures, the Debenture Statement, the Escrow Agreement, the Noncompetition
Agreements, the certificates and stock powers described in Section 2.2 and the
Mutual Releases.
"Client Trust Accounts" means all of Target Entities' right, title and
interest in and to the client trust funds held by the Target Entities on behalf
of the clients served by the Company Operations.
"Closing" and "Closing Date" shall be as defined in Section 2.4 hereof.
"Company Operations" means the provision of services by the Target
Entities to persons with MR/DD.
"Company Shares" means all of the issued and outstanding capital stock
of Company.
"Company Subsidiaries" means all of the corporations and the general
partnership described on Schedule 1.1(a) attached hereto.
"Contract" means any lease, maintenance contract, service contract,
employment agreement, supply agreement or other agreement relating to the
Company Operations (other than the Program Agreements and the Facility Leases).
"Controlling Group" means collectively the Shareholders, the respective
family members of any Shareholder, the Related Lessors and any entity
controlling, controlled by or under common control with any of such individuals
or entities.
"Conversion Price" means 1.2501 times the lower of (i) $31.00, or (ii)
the average closing sale price as reported on the NASDAQ National Market System
for the Purchaser Common Stock for all of the trading days commencing on the
date hereof and ending on the second trading day prior to the Closing Date.
"Debenture Statement" shall mean that certain Statement of Additional
Terms and Conditions delivered by Purchaser to the Shareholders in accordance
with Section 3.11 hereof at the Closing in the form attached hereto as Exhibit
B.
"Debentures" means those certain "5.90% Convertible Subordinated Notes
due 2005" of Purchaser in the aggregate principal balance of $22,000,000,
bearing interest at the rate of five and nine-tenths percent (5.9%) per annum,
with interest payable semi-annually, which shall be convertible into Purchaser
Common Stock at a price per share of Purchaser Common Stock equal
2
3
to the Conversion Price, which Debentures shall have a final maturity date on
the seventh (7th) anniversary of the Closing Date, and which shall be issued in
the form attached hereto as Exhibit C.
"Effective Time" shall be as defined in Section 2.4 hereof.
"Escrow Agent" shall mean PNC Bank, N.A., Louisville, Kentucky.
"Escrow Agreement" shall mean that certain Indemnity and Escrow
Agreement executed among Purchaser, the Escrow Agent and the Shareholders in the
form attached as Exhibit D.
"Escrowed A/R Debentures" shall mean the Debentures deposited with the
Escrow Agent as described in Section 2.3(d) hereof.
"Escrowed Debentures" shall mean the Escrowed General Debentures and
the Escrowed A/R Debentures.
"Escrowed General Debentures" shall mean the Debentures deposited with
the Escrow Agent as described in Section 2.3(e) hereof.
"Facilities" means the real properties described on Schedule 1.1(b)
attached hereto, together with the buildings, fixtures and improvements located
thereon.
"Facility Leases" means each of the existing lease agreements relating
to the Facilities described on Schedule 1.1(b) attached hereto.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indefeasible Title" means good and indefeasible title, free and clear
of all leases, contracts, liens, claims and encumbrances, other than the lien of
ad valorem taxes not yet due and owing; PROVIDED, HOWEVER, that in the case of
the Facility Leases, the Amended Facility Leases, leases related to the
improvements at the Sheridan Indiana Facility or any leases of vehicles,
furniture or office equipment, Indefeasible Title shall mean a valid and
unencumbered leasehold interest.
"Knowledge" means (a) as applicable to the Target Entities or the
Shareholders, the knowledge of the Majority Shareholders and (b) as applicable
to Purchaser, the knowledge of Xxxxxx X. Xxxxx, X. Xxxxxx Xxxxxxxx and Xxxx X.
Xxxx, and (c) in each case shall mean (i) the actual knowledge of the respective
individuals and (ii) such facts or circumstances the respective individuals
reasonably should have known given his or her involvement in the respective
businesses of the Target Entities and Purchaser and the information available to
such individual.
"Licenses" means all licenses, contracts, certifications,
qualifications, permits and other authorities from all Agencies, necessary for
the Target Entities to conduct the Company Operations and to receive
reimbursement therefor.
3
4
"Material Adverse Effect" on a party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on the financial position, business or
results of operations of such party and its subsidiaries, taken as a whole.
"Material Breach" shall mean, for purposes of Section 8.1(g) and 8.2(e)
hereof, any breach or untrue representation or warranty of the Shareholders or
Purchaser, respectively (each a "Breaching Party"), which considered
individually or collectively with all other breached or untrue representations
or warranties of such Breaching Party, reduces the value of the transactions
contemplated herein by at least $7,300,000.
"Noncompetition Agreements" means the noncompetition, nonsolicitation
and confidentiality agreements executed by the Majority Shareholders pursuant to
Section 3.9 hereof in the forms attached hereto as Exhibits F-1 through F-3.
"Occupancy Standard" shall mean the requirement that the aggregate
number of clients receiving MR/DD services from the Target Entities shall be not
less than one thousand one hundred and two (1,102). A client shall be taken into
account for purposes of such Occupancy Standard only to the extent (x) such
client is fully qualified or capable of being fully qualified for funding by the
Agencies, (y) subject to Purchaser receiving all required Licenses and Program
Agreements and each client's right to choice in programs where right of choice
applies, the respective Target Entity will be entitled to continue to provide
such services in the same manner and on the same conditions as previously
provided by such Target Entity and (z) subject to Purchaser receiving all
required Licenses and Program Agreements and each client's right to choice in
programs where right of choice applies, the Target Entities will be entitled to
continue to receive all of such funding after the Effective Time. A client shall
not be taken into account for purposes of such Occupancy Standard if any of the
Target Entities or Purchaser shall have received notice (verbally or in writing)
that such client intends to terminate any agreement or contract for such
services, or any of the Agencies intend that any such new agreement or contract
be issued to the respective Target Entity after the consummation of the
transaction herein under materially less favorable terms and conditions as the
relevant current agreement or contract provides. Any client of the Target
Entities which elects to be served by Purchaser or any of its subsidiaries or
affiliates prior to the Closing Date shall be considered a client receiving
MR/DD services from the Target Entities for purposes of the first sentence of
this paragraph.
"Personal Property" means all personal property owned or leased by the
Target Entities or required to be so used in order to permit the respective
Company Operations to provide MR/DD services consistent with customary practice
and as required by applicable law and regulations. Personal Property shall
include, but shall not be limited to, the following items: beds, nursing
equipment, therapy equipment, vehicles, food service preparation and
distribution equipment, housekeeping equipment, vocational and educational
equipment and materials, maintenance equipment, furniture and furnishings,
activities and entertainment equipment and other equipment
4
5
located in and upon any Facility or at any location where MR/DD services are
furnished by the Target Entities.
"Program Agreements" means the agreements or arrangements under which
the Target Entities provide services to persons with MR/DD, under the MR/DD
programs and provider numbers described on Schedule 1.1(b) attached hereto.
"Purchaser Common Stock" shall mean the Purchaser's common stock, of no
par value per share.
"Purchaser Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Purchaser as
filed in Purchaser's Form 10-Q for the quarter ended September 30, 1997 and the
Registration Statement on Form S-3 (File #333-44029), and the related statements
of earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) and (ii) the consolidated balance sheets of
Purchaser (including related notes and schedules, if any) and related statements
of earnings, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in Purchaser SEC Reports filed with
respect to periods ended subsequent to September 10, 1997.
"Purchaser SEC Reports" shall mean the reports and statements Purchaser
is required to file with the SEC, including, but not limited to, Forms 10-K,
Forms 10-Q, Forms 8-K and proxy statements.
"Related Lessors" means the entities described on Schedule 1.1(e)
attached hereto, each of which are owned or controlled by certain of the
Shareholders.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Supplies" means all of the Target Entities' right, title and interest
in and to any and all drugs, medicines, foods, linens, vocational or educational
materials and other supplies owned by any Target Entity and used in connection
with any of the Company Operations.
"Target Entities" means Company and the Company Subsidiaries.
5
6
ARTICLE II
PURCHASE AND SALE OF COMPANY SHARES;
PURCHASE PRICE; CLOSING
-----------------------
2.1 SALE AND TRANSFER OF COMPANY SHARES. Subject to the terms and
conditions set forth herein, at the Closing the Shareholders shall sell to
Purchaser and Purchaser shall purchase from the Shareholders all of the Company
Shares.
2.2 DELIVERY OF CERTIFICATES. At the Closing, the Shareholders shall
deliver to Purchaser certificates in definitive form, registered in the name of
the Shareholders, evidencing all of the Company Shares, duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed in blank, with
all requisite stock transfer taxes paid and stamps affixed, if any.
2.3 PURCHASE PRICE; PAYMENT.
(a) The aggregate purchase price for the Company Shares and
the other covenants of the Shareholders contained herein (the "Purchase
Price") shall be an amount equal to $73,000,000.
(b) $50,500,000 of the Purchase Price shall be paid by
Purchaser's delivery at the Closing of a wire transfer of immediately
available federal funds in such amount to an account designated by the
Shareholders.
(c) $18,547,000 of the Purchase Price shall be paid by
Purchaser's delivery to the Shareholders at the Closing of Debentures
having a principal balance of $18,547,000, apportioned among and
payable to the Shareholders in the amounts set forth on Schedule 2.3(c)
hereof.
(d) $453,000 of the Purchase Price shall be paid by
Purchaser's delivery at the Closing to the Escrow Agent of Debentures
having an aggregate principal balance of $453,000, payable to the
Escrow Agent, which Debentures shall be held pursuant to the Escrow
Agreement.
(e) $3,000,000 of the Purchase Price shall be paid by
Purchaser's delivery to the Escrow Agent at the Closing of Debentures
having an aggregate principal balance of $3,000,000, payable to the
Escrow Agent, which Debentures shall be held pursuant to the Escrow
Agreement.
(f) $500,000 of the Purchase Price shall be paid by
Purchaser's delivery to the Shareholders at the Closing of a wire
transfer of immediately available federal funds in such amount to an
account designated by Xxxxxx, to be used for the Shareholders' closing
costs, funding of gratuities to certain employees of the Target
Entities and equalization of proceeds
6
7
to Shareholders. In connection therewith, the Shareholders shall hold
Purchaser and the Target Entities harmless from any liability for
withholding of federal, state or local taxes attributable to any such
payment to such employees.
2.4 CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on March 12, 1998, or such earlier
date as the parties may designate, at the offices of Xxxx Xxxxxxxx Xxxxxx Xxx &
Vice, at 9:00 a.m. EST, or such later date as shall be reasonably necessary to
obtain any necessary consents to the consummation of the transactions
contemplated herein (the "Closing Date"). The Closing shall be effective as of
12:01 a.m. EST on the first day of the month in which the Closing Date occurs
(the "Effective Time"), provided, however, the Effective Time shall not be
earlier than the date the parties receive approval (or early termination of the
waiting period) under the HSR Act.
ARTICLE III
ADDITIONAL AGREEMENTS RELATING TO THE ACQUIRED OPERATIONS
---------------------------------------------------------
3.1 REASONABLE BUSINESS EFFORTS. All of the Shareholders shall use
their reasonable business efforts to satisfy any conditions to transferring
Indefeasible Title to the Shares, to assist Purchaser in causing all necessary
approvals of or consents to the transactions contemplated herein to be obtained,
and to execute any documents or other instruments requested to assist Purchaser
in obtaining any such approvals or consents, in a timely manner. Purchaser shall
use its reasonable business efforts to obtain such approvals and consents
applicable to the Company Operations in a timely manner.
3.2 RESIGNATIONS; TERMINATION OF EMPLOYMENT; EMPLOYMENT AGREEMENTS. At
the Closing, the Shareholders shall cause each individual who is a director or
officer of any of the Target Entities to resign as a director and/or officer of
the Target Entities. Neither the Shareholders nor any member of their families
shall make any claim for compensation or benefits for any period after the
Closing Date or severance pay (except in connection with employment after the
Closing Date as contemplated in this Section 3.2) or unemployment compensation
relating to their employment (if any) by any Target Entity. Any employment
agreements between any of the Majority Shareholders and any of the Target
Entities shall be terminated at or prior to the Closing without any severance
payment by or liability to any of the Target Entities. At or prior to the
Closing, Purchaser shall offer each of the individuals listed on Schedule 3.2(a)
attached hereto (the "Key Employees") employment agreements containing customary
noncompetition, nonsolicitation and confidentiality covenants and other terms of
employment, including compensation and benefits, which are comparable to
employees of Purchaser with similar responsibilities, which employment
agreements would supersede the existing employment agreements between each Key
Employee and the Target Entities. If any new employment agreement is not
executed, Purchaser will cause the Target Entities either (i) to honor such
existing employment agreement, or (ii) terminate such existing employment
agreement and pay the severance obligations applicable thereto. For a period of
at least six (6) months after the Effective Time, Purchaser shall cause the
Company to continue to employ all of the
7
8
employees listed on Schedule 3.2(b) attached hereto on the same terms and
conditions currently applicable thereto. Purchaser acknowledges that the
employment obligations of the Target Entities shall be unaffected by the
provisions of Section 2.4 hereof.
3.3 TERMINATION OF MANAGEMENT AGREEMENTS. Except as provided in
Schedule 3.3 attached hereto, at the Closing Date, any management agreements
pursuant to which any person or entity provides management services to the
Company Operations shall be terminated.
3.4 CONVEYANCE OF COLLATERAL ASSETS; CONFIDENTIALITY AND
NONCOMPETITION COVENANTS. At the Closing, each of the Shareholders shall
convey, or cause to be conveyed, all collateral assets, Licenses (to the extent
transferable) and/or rights owned or controlled by any of the Shareholders
which relate to the providing of services as a part of the Company Operations
(other than the real properties which are leased to the Target Entities by the
Related Lessors). After the Closing, without limitation as to time, each of the
Minority Shareholders agrees that it, he or she will not (and will cause its,
his or her agents, accountants, attorneys and employees not to) divulge,
furnish or make accessible to anyone any trade secrets, lists of current or
prospective clients of the Company Operations, computer programs or
confidential information of any kind with respect to the Company Operations,
including, but not limited to, the names and addresses of any current or
prospective clients of the Company Operations (collectively, hereinafter
"Confidential Information"), except as required by applicable law or unless
such information is already or becomes generally available to the public other
than as a result of a disclosure in violation of any obligation of
confidentiality, including this Section 3.4. For a period of two (2) years
after the Effective Time, each of the Minority Shareholders whose proportionate
share of the Purchase Price is $250,000 or more shall not, directly or
indirectly, (a) other than by reason of their ownership of a Debenture or any
other security issued by Purchaser, own, manage, operate, join, have an
interest in, control or participate in the ownership, management, operation or
control of, act as a consultant to, or otherwise be connected in any manner
with, or have any direct or indirect financial interest, including, without
limitation, an interest as a creditor, in any form of business of providing
services in the United States of America to persons with MR/DD or acquired or
traumatic brain injury, (b) hire or promote to others the hiring of any of the
employees of any of Purchaser or its subsidiaries or affiliates, including but
not limited to Company and the Company Subsidiaries (collectively, the
"Res-Care Companies") during and for a period of one (1) year following the
termination of the respective employees with any of the Res-Care Companies, or
(c) solicit or promote to others the solicitation of individuals with MR/DD or
acquired or traumatic brain injury provided services by any of the Res-Care
Companies. The restrictions in the preceding sentence shall not apply to (I)
the leasing of the Facilities to the Target Entities by the Related Lessors
pursuant to the Amended Facility Leases, (II) the extension of credit in
connection with sales of tangible personal property on usual and customary
terms in connection with the Minority Shareholders' regular trade or business,
or (III) the ownership, directly or indirectly, solely as an investment, of
securities of any entity engaged in the business described in clause (a) above
which securities are traded on any national securities exchange or the NASDAQ
National Market System if (i) such Minority Shareholder is not a controlling
person of, or a member of a group which controls, such entity, (ii) such
Minority Shareholder does not, directly or indirectly, own one percent (1%) or
more of (A) the voting power,
8
9
(B) equity or (C) any class of securities of such entity, and (iii) the
Shareholders do not, directly or indirectly, collectively own more than four
percent (4%) of (A) the voting power, (B) equity or (C) any class of securities
of such entity.
3.5 CONFIDENTIALITY OBLIGATIONS OF PURCHASER. Purchaser, Company and
certain other parties have previously executed that certain Confidentiality,
Waiver and Consent Agreement dated as of October 15, 1997 (the "Confidentiality
Agreement"). Purchaser acknowledges and has advised Purchaser's Evaluation Group
(as defined in the Confidentiality Agreement) that the information and records
furnished to it in connection with its due diligence and the consummation of the
transactions contemplated herein shall be subject to their obligations in the
Confidentiality Agreement. The obligations or agreements of the parties under
the Confidentiality Agreement (other than Section 7 thereof) shall terminate
upon consummation of the transactions contemplated herein.
3.6 PUBLICITY. The Shareholders and the Company acknowledge that the
transactions contemplated herein may be material, non-public information and
accordingly, no public announcement or disclosure of this Agreement, the
transactions contemplated herein or the terms thereof shall be made without the
prior written consent of Purchaser, except that disclosure of the Agreement and
the transactions contemplated herein may be made by the Shareholders and the
Company as reasonably necessary to secure any consents or approvals to the
transactions as described herein and to communicate with the Target Entities'
employees and clients. Each party shall furnish to the other a draft of any
press release or announcement related to this transaction prior to its release.
Nothing contained herein shall prevent any party from at any time furnishing any
information required by any governmental authority or by law, or prevent
Purchaser from disclosing the terms of the transactions contemplated herein to
its principal lending institutions, regulatory authorities, securities analysts
or as required by the applicable securities laws or regulations.
3.7 ESCROW AGREEMENT. At the Closing, each of Purchaser, the Escrow
Agent and the Shareholders shall execute and deliver the Escrow Agreement.
3.8 AMENDED FACILITY LEASES; TERMINATION OF CERTAIN FACILITY LEASES.
At the Closing, each of the Facility Leases with the Related Lessors will be
terminated, and the respective Target Entities, as lessee, the respective
Related Lessors, as lessor, and Purchaser, as guarantor, will enter into and
execute the Amended Facility Leases for the Facilities (other than (i) the
Facilities described on Schedule 5.11 hereto, (ii) the Louisville, Kentucky
corporate office building, (iii) the Facilities in Greencastle and
Crawfordsville, Indiana and (iv) the Facilities leased from parties other than
the Related Lessors) in the form attached hereto as Exhibit E. The Shareholders
shall cause the Facility Lease for the Louisville, Kentucky corporate office of
the Company to be terminated effective three (3) months after the Closing Date
and shall cause each of the other Facility Leases with Related Lessors to be
terminated as of the Closing, in each case without any payment to the
respective Related Lessors (other than rental or other amounts due for the
period prior to the effective date of termination and the payment described in
this Section 3.8) or any continuing liability under such Facility Leases with
the Related Lessors. As additional consideration for the execution by the
Related Lessors of the Amended Facility Leases and the termination of the
Facility
9
10
Leases as described in this Section 3.8, at the Closing, Purchaser shall pay to
the Related Lessors an aggregate amount of $150,000 by wire transfer of
immediately available federal funds to an account designated by the Related
Lessors.
3.9 NONCOMPETITION AGREEMENTS. At the Closing, Purchaser, on the one
hand, and each of the Majority Shareholders, on the other hand, shall execute
and deliver the noncompetition, confidentiality and nonsolicitation agreements
in the form attached hereto as Exhibit F-1 through F-3.
3.10 RELEASE OF LIABILITIES. Except for the Company guaranty of the
indebtedness of RF Holdings, LLC to Xxxx Xxxxx in the approximate amount of
$1,500,000, with respect to which Shareholders shall cause all the Related
Lessors to hold the Company harmless, at or prior to the Closing, each of the
Target Entities shall be released from any and all liability or obligation with
respect to the Facilities owned by the Related Lessors and any other property
owned by the Related Lessors and any liability as a co-maker or guarantor, other
than its respective obligations under the Amended Facility Leases, and shall be
released from any liability or obligation, whether contingent or otherwise, on
any indebtedness or obligation of any of the Controlling Group. Purchaser shall
either (i) cause the Shareholders to be released from any liability as a
co-maker or guarantor on any indebtedness of the Target Entities (other than the
liabilities or obligations described in the preceding sentence or any
liabilities or obligations under this Agreement, the Noncompetition Agreements
or the Amended Facility Leases), or (ii) indemnify the Shareholders from the
same. At the Closing, the Target Entities, on the one hand, and the Shareholders
and the Related Lessors, on the other hand, shall execute and deliver the mutual
releases in the form attached hereto as Exhibit G.
3.11 DELIVERY OF DEBENTURE STATEMENT. At the Closing, Purchaser shall
execute and deliver to the Shareholders the Statement of Additional Terms and
Conditions in the form attached hereto as Exhibit B.
3.12 NOTICE OF DEVELOPMENTS; UPDATING SCHEDULES.
(a) Each party will give prompt written notice to the other of
any development affecting the ability or obligation of the parties to
consummate the transactions contemplated by this Agreement or any of
the Ancillary Agreements. Except as provided in Section 3.12(b) hereof,
no such written notice of a development will be deemed to have amended
the Schedules attached hereto, to have qualified the representations
and warranties contained herein or to have cured any misrepresentation
or breach of warranty that otherwise might have existed hereunder by
reason of such development.
(b) The Shareholders will deliver to the Purchaser at least
three (3) business days prior to the Closing Date a written update or
supplement to the Schedules attached to this Agreement (the "Update")
reflecting events occurring and contracts and agreements entered into
in the operation of the Target Entities from the date of this Agreement
through the date of the Update which, had such events occurred or had
such contracts existed on the date
10
11
hereof, would have been required to be disclosed on the Schedules. All
changes from the Schedules attached to this Agreement will be marked
clearly on such Update. To the extent that such Update (i) reflects
matters or events which have occurred after the date of this Agreement
in the ordinary course of the Target Entities' conduct of their
respective businesses, (ii) do not constitute a violation of any of the
Shareholders' covenants set forth in Section 7.1 hereof and (iii) do
not, alone or in the aggregate, represent a Material Breach of the
representations and warranties of such party (determined prior to any
such Update), then the Schedules shall be deemed to be amended as of
the Closing Date to include the information set forth on such Update.
If such Update reflects matters or events which do not satisfy the
requirements of the preceding sentence, then (i) the parties will
negotiate in good faith during the seven-day period immediately after
delivery of the Update to determine the consequences of such
disclosures, and (ii) the Schedules attached to this Agreement will be
amended only to the extent that the parties mutually agree as a result
of such negotiation.
ARTICLE IV
CLOSING COSTS
-------------
4.1 CLOSING COSTS. In connection with the transactions described
herein, (a) the Related Lessors and the Shareholders shall pay: (i) any fees or
costs due to any lender of any of the Related Lessors, the Target Entities, or
the Shareholders, if any, in order to secure any necessary consents or releases,
and (ii) their own attorneys' and other professionals' fees; and (b) Purchaser
shall pay: (i) any licensure or other fees due from Purchaser under applicable
law to any Agency in connection with the issuance of any approvals or consents
to the consummation of the transactions contemplated herein, (ii) the costs of
any due diligence Purchaser desires to conduct, including without limitation,
any inspections of the Company Operations which Purchaser elects to conduct
prior to the Effective Time, (iii) the filing fee under the HSR Act, and (iv)
its own attorneys' and other professionals' fees.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
----------------
Each of the Shareholders, jointly and severally, represent and warrant
to Purchaser as follows:
5.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE AND OTHER POWER;
SUBSIDIARIES.
(a) Company is a corporation duly incorporated and validly
existing under the laws of the Commonwealth of Kentucky. All of the
issued and outstanding Company Shares are owned by the Shareholders.
Company has the corporate power and authority, and the legal right, to
own and operate its properties and to carry on its business as
currently conducted. Other than the Company Subsidiaries, Company does
not have any subsidiaries,
11
12
own any shares of stock or any equity interest in any corporation or
own any interest in any partnership, limited liability company or other
entity.
(b) Each of the Company Subsidiaries which are corporations
are duly incorporated and validly existing and, where applicable, in
good standing under the laws of the States as described on Schedule
1.1(a) hereto. None of the Company Subsidiaries are qualified as a
foreign corporation in any other jurisdiction and the nature of the
business transacted by them does not make such qualification necessary.
Each of the Company Subsidiaries has the corporate power and authority,
and the legal right, to own and operate its properties and to carry on
its business as currently conducted. Except for Normal Life of Central
Indiana, Inc. and Normal Life of Southern Indiana, Inc., which are the
general partners of Normal Life of Indiana, an Indiana general
partnership (the "Indiana Partnership"), none of the Company
Subsidiaries have any subsidiaries, own any shares of stock or any
equity interest in any corporation or own any interest in any
partnership, limited liability company or other entity.
(c) The Shareholders which are trusts are identified on
Exhibit A hereto. Each of the trusts are in full force and effect and
has not been terminated. The trustee executing this Agreement on behalf
of each of such trusts is the sole trustee thereof and such trustee has
not resigned or been removed. Each of such trustees is authorized by
the respective trust agreement applicable thereto to execute and
consummate the transactions contemplated in this Agreement.
(d) The Shareholders which are partnerships are duly organized
and validly existing, and, where applicable, in good standing under the
laws of the States of their organization. Each partner executing this
Agreement on behalf of each of such partnerships is authorized by the
respective partnership agreement applicable thereto to execute and
consummate the transactions contemplated in this Agreement.
5.2 AUTHORIZATION OF AGREEMENTS, ETC. Subject only to any necessary
approval by the Agencies of the transactions contemplated herein or the
expiration of the waiting period under the HSR Act (or the early termination
thereof) and the satisfaction of the Target Entities' indebtedness to Bank One,
Kentucky, NA described on Schedule 5.2 attached hereto (the "Company Credit
Facility") and the release of certain of the Shares as security thereunder, each
of the Shareholders has full legal capacity and unrestricted power, corporate,
trust or otherwise, to execute and deliver this Agreement and any Ancillary
Agreement executed hereunder to which she, he or it is a party and to perform
her, his or its obligations hereunder and thereunder. The Company has the power
and authority to execute, deliver and perform its obligations under this
Agreement and the execution, delivery and performance by the Company of this
Agreement have been duly authorized by all necessary corporate action. Except
for the Company Credit Facility, the execution, delivery and performance by the
Company and each Shareholder of this Agreement and the other instruments and
agreements to be executed by the respective Shareholder, and the consummation of
the transactions contemplated under this Agreement will not violate any
provision of law, any order of any court or
12
13
other agency of government, the Articles or Certificate of Incorporation or
Bylaws of any of the Target Entities, any judgment, award or decree or any
provision of any indenture, agreement or other instrument, to which any
Shareholder, either any of the Target Entities or any of the Related Lessors is
a party, or by which any Shareholder, any of the Target Entities or any of the
Related Lessors, or any of her, his or its, as the case may be, properties or
assets is bound or affected, or, 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 the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
any of the Target Entities, or result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any License other than such events which by law
occur solely by reason of a change in ownership.
5.3 VALIDITY. This Agreement has been duly executed and delivered by
the Company and each of the Shareholders, and, subject to due execution by
Purchaser, constitutes, and the Ancillary Agreements to be executed hereunder to
which she, he or it, as the case may be, when executed and delivered by the
Shareholders as contemplated hereby, subject to due execution by Purchaser, will
constitute, the legal, valid and binding obligations of the Shareholders,
enforceable against them in accordance with their respective terms, subject to
applicable reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and general equitable
remedies.
5.4 TITLE TO SHARES. Except for the pledge of the Shares of Xxxxxx and
Xxxxxx pursuant to the Company Credit Facility, the Shareholders are the lawful
owners of record of all of the Company Shares as set forth on Schedule 2.3(c)
attached hereto, in each case free and clear of any and all pledges, security
interests, liens, charges or other encumbrances of any nature whatsoever. Except
for pledges pursuant to the Company Credit Facility, Company is the lawful
holder of record and beneficial owner of the number of shares of capital stock
of the Company Subsidiaries set forth on Schedule 1.1(a) attached hereto, in
each case free and clear of any and all pledges, security interests, liens,
charges or other encumbrances of any nature whatsoever. The delivery by the
Shareholders of certificates evidencing the Company Shares, in each case duly
endorsed for transfer or accompanied by stock transfer powers duly endorsed in
blank, to Purchaser pursuant to Section 2.2 above, against payment therefor
pursuant to Section 2.3 above, will transfer valid title and beneficial
ownership to all of the Company Shares to Purchaser, free and clear of any and
all pledges, security interests, liens, charges or other encumbrances of any
nature whatsoever.
5.5 CAPITALIZATION. The authorized and issued and outstanding capital
stock of each of the Target Entities is set forth in Schedule 5.5 attached
hereto. Each of such shares of capital stock is validly issued and outstanding
and, except as disclosed on Schedule 5.5, fully paid and nonassessable. Except
as set forth on Schedule 5.5 attached hereto, none of such shares is subject to
any right of first refusal or other similar right in favor of any person or
entity. Except for the obligations of the Shareholders to Purchaser under this
Agreement, (i) no subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any shares of any class of
capital stock of any of the Target Entities is authorized or outstanding, (ii)
there is not any commitment of any of the Target Entities to issue any shares,
warrants, options or other such
13
14
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets, and (iii) none of the Target Entities has
any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of the capital stock of any of the Target Entities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
5.6 FINANCIAL STATEMENTS. The Shareholders have previously delivered
to Purchaser (a) the consolidated balance sheet of the Target Entities as of
December 31, 1996, and the related consolidated statements of income, cash
flows and stockholders' equity for the year then ended (collectively, the
"Historical Financial Statements"), audited by Xxxxx & Xxxxxxx, the Target
Entities' certified public accountants ("Company CPA"); (b) the unaudited
consolidated balance sheet of the Target Entities as of December 31, 1997 (the
"Acquisition Balance Sheet") and the related unaudited consolidated statements
of income for the year-to-date period then ending, prepared by Company
(together with the Acquisition Balance Sheet, the "Closing Financial
Statements"). The Historical Financial Statements and the Closing Financial
Statements (x) were prepared from the books and records of the Target Entities
and (y) present fairly in all respects the consolidated financial position of
the Target Entities as of the date specified therein, and the consolidated
income, cash flows and stockholders' equity for the respective periods then
ended, all in conformity with generally accepted accounting principles applied
on a consistent basis ("GAAP"), except in the case of the Closing Financial
Statements, the absence of footnotes.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
(i) reflected in the Acquisition Balance Sheet or (ii) incurred since December
31, 1997 in the ordinary course of business, or (iii) set forth in Schedule
5.7(a) hereto, none of the Target Entities have any liabilities or obligations
of any kind or nature in respect of which in the aggregate appropriate accruals
or reserves (as detailed on Schedule 5.7(b)) have not been maintained as
reflected on the Acquisition Balance Sheet (whether secured or unsecured,
absolute, accrued, contingent or otherwise and whether due or to become due,
including but not limited to any obligation to repay any amount previously
received for services rendered or any accrued and unused vacation pay of the
employees of any of the Target Entities (whether or not earned)), for any
period ending on or before the date thereof, which liabilities or obligations
would be required to be reflected on a consolidated balance sheet of the Target
Entities prepared in accordance with GAAP, except for the absence of footnotes.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997
except (i) as otherwise set forth in Schedule 5.8 hereto or (ii) as otherwise
expressly referred to in this Agreement, none of the Target Entities have:
(a) incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred in
the ordinary course of business;
(b) mortgaged, pledged or subjected to any lien, security
interest, charge or other encumbrance any of their assets or
properties;
14
15
(c) transferred, leased or otherwise disposed of any of their
assets or properties having a value of $10,000 or more or purchased any
assets or properties having a value in the aggregate exceeding $250,000
or individually exceeding $50,000;
(d) changed or amended its Articles of Incorporations or
Bylaws;
(e) canceled or compromised any debt or claim (other than the
retirement of trade accounts payable in the ordinary course of
business);
(f) waived, released, transferred or granted any rights or
permitted any License to lapse;
(g) discharged or satisfied any lien, security interest,
charge or other encumbrance or paid any obligation or liability (fixed
or contingent), other than in the ordinary course of business;
(h) declared, set aside or paid any distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or redeemed or otherwise acquired any of its capital
stock or split, combined or otherwise similarly changed its capital
stock or authorized the creation or issuance of or issued or sold any
capital stock or any securities or obligations convertible into or
exchangeable therefor, or granted to any person or entity any right to
acquire any capital stock or other interest from such entity, or agreed
to take any such action;
(i) made any investment of a capital nature, whether by
purchase of stock or securities, contributions to capital, property
transfers or otherwise, in any partnership, corporation, limited
liability company or other entity;
(j) other than in the ordinary course of business consistent
with past practices, made or granted any wage or salary increase
applicable to any employee, any group or classification of employees
generally, entered into any employment contract with, or made any loan
to, or entered into any transaction of any other nature with, any
officer or employee of such entity;
(k) hired or engaged any family member of the Shareholders as
an employee or independent contractor;
(l) entered into any agreement, letter of intent, or
understanding to acquire any business or the capital interests of any
third party or to dispose of any of the Company Operations or the
equity of any of the Target Entities; or
(m) suffered any material casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance).
15
16
5.9 GOVERNMENTAL APPROVALS. Except as set forth on Schedule 5.9
hereto, to the Knowledge of the Shareholders, assuming appropriate and timely
applications by Purchaser, nothing relating to the Company Operations prior to
the Closing will cause the Purchaser to not be granted all orders,
authorizations, approvals or consents from all Agencies which are required to
ensure the enforceability of this Agreement or any of such Ancillary Agreements
to which any of the Related Lessors or the Shareholders is a party, or is
necessary for the Company Operations to continue to be conducted by the Target
Entities immediately following the Closing substantially in the same manner and
providing for substantially the same reimbursement levels and requirements of
operation as heretofore conducted by such entities.
5.10 INDEFEASIBLE TITLE; CONDITION OF ASSETS. Except as provided on
Schedule 5.10 attached hereto, each of the Target Entities has Indefeasible
Title to all assets and properties used by it. At or prior to the Closing, other
than the Company Credit Facility, all of such liens, encumbrances or security
interests described on such Schedule 5.10 shall be fully released of record. All
of the Facilities and the Personal Property owned or used by the Target Entities
in conducting the Company Operations are in that condition and level of repair
necessary to utilize the respective asset in the Company Operations under the
Licenses and under any applicable standards of the Agencies. All of the Personal
Property, and all of the Supplies are in a sufficient quantity and adequate
quality to operate the Facilities or to conduct operations under the Program
Agreements lawfully and consistent with the respective Target Entity's customary
practice, in accordance with applicable rules and regulations and the provisions
of the Program Agreements. All utilities, including, without limitation, gas
(where applicable), electricity, telephone, sewer (or other approved system) and
water, have been installed to and in the Facilities and all such utilities are
currently in service and adequate for the operation of the Facilities in
accordance with the requirements of the Agencies and the Program Agreements.
Other than the Facilities described on Schedule 5.10, none of the Target
Entities has any interest of any nature in any real property.
5.11 ZONING. The Facilities described in Schedule 5.11, which are all
of the Facilities owned by the Target Entities, substantially conform with all
current applicable zoning laws and building codes, statutes, rules, regulations
and restrictions, the failure to conform with which would have an adverse effect
on the ability of the Target Entities to provide MR/DD services at such
Facilities or which would have an adverse effect on the value of such Facility.
Except as disclosed on Schedule 5.11 attached hereto and except for minor
encroachments, all buildings and improvements which comprise such Facilities are
located entirely within the boundary lines of the appropriate parcel thereof.
The provision of MR/DD services at such Facilities does not violate any federal,
state or local governmental building, zoning, health, safety or other laws,
ordinances or regulations, or any applicable and legally enforceable private
restrictions, and such use is presently a permitted use under applicable
ordinances. No notice (whether written or verbal) of the violation of any of
said laws, ordinances, regulations, codes or restrictions has been received by
any of the Target Entities or the Shareholders.
16
17
5.12 LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. Annexed hereto as
Schedule 5.12 is a list setting forth the following:
(a) a description of each lease of real property or vehicles
to which any of the Target Entities is a party, either as lessee or
lessor, including a description of the parties to each such lease, the
property to which each such lease relates, and, in the case of real
property, the rental term and monthly (or other) rents payable under
each such lease (except that the descriptions of the vehicle leases may
be provided in the Update);
(b) all employment agreements, consulting agreements,
independent contractor agreements, and employee incentive plans or
programs to which any of the Target Entities is a party which provide
for an aggregate commitment of $25,000 or are not terminable without
breach or penalty on less than sixty-one (61) days written notice;
(c) all contracts, including without limitation guarantees,
mortgages, indentures and loan agreements, to which any of the Target
Entities is a party, or to which any of the Target Entities or any of
its assets or properties is subject and which are not specifically
required to be disclosed by clauses (a) or (b) above, PROVIDED,
HOWEVER, that there need not be listed in said Schedule 5.12 pursuant
to this clause (c) any supply contracts with suppliers and other such
contracts incurred in the ordinary course of business and consistent
with past practice, other than any such contract which (i) is a
contract or group of related contracts which exceeds $25,000 in amount,
(ii) contains covenants by any of the Target Entities in excess of
those customary in its business or (iii) cannot be performed by the
respective Target Entity in the normal course within twelve (12) months
after the Closing Date without breach or penalty.
True and complete copies of all documents and adequate descriptions of all
binding oral commitments (if any) referred to in said Schedule 5.12 will be
provided to Purchaser prior to the Closing. All material provisions of the
contracts referred to in such Schedule and all of the Program Agreements are
valid and enforceable obligations of the respective Target Entity and of the
other parties thereto. Each such contract referred to in such Schedule and each
of the Program Agreements is valid and enforceable in accordance with its terms
for the periods stated therein, and there is no existing default or event of
default or event by the respective Target Entity which with notice or lapse of
time or both would constitute such a default under any such contract.
5.13 THIRD-PARTY PAYER AND CUSTOMER CONTRACTS; RESTRICTIVE COVENANTS.
None of the Target Entities have lost any Program Agreements since December 31,
1997. Except as set forth on Schedule 5.13 attached hereto, to the Knowledge of
the Shareholders, in the event of the sale and change of ownership of the Target
Entities none of the Program Agreements would be terminated or modified in any
respect nor would the respective entity lose or suffer diminution in the
contractual relationships under the Program Agreements. Except as set forth on
Schedule 5.13 attached hereto, none of the Target Entities are parties to any
covenant or agreement which prohibits, limits, restricts
17
18
or otherwise adversely affects the right of any of such Target Entities or the
direct or indirect shareholders thereof to provide services to individuals with
MR/DD or engage in any other business.
5.14 LICENSURE/CERTIFICATION. Except as provided in Schedule 5.14
hereto, all of the Target Entities have all requisite Licenses to serve the
number of persons at the locations described on Schedule 1.1(b) attached hereto,
and the Target Entities have entered into Program Agreements to currently
provide services to such clients. The Occupancy Standard is satisfied. Each such
License is in full force and effect and no default, or event which with notice
or the passage of time could constitute a default, by any Target Entity has
occurred and is continuing thereunder. The business of each of the Target
Entities is being conducted in compliance with all applicable laws, ordinances,
rules and regulations of all Agencies relating to their respective properties or
applicable to its or their respective businesses. Except as set forth on
Schedule 5.14 hereto, there are no waivers, "grandfather" provisions, or
variances under any Licenses. After the Effective Time, assuming that the
Purchaser acquires new Licenses and Program Agreements effective at the
Effective Time, each of the Target Entities will be entitled to operate and xxxx
under the Licenses and Program Agreements on a prospective basis under the
identical circumstances and conditions as applicable to the respective Target
Entity on the date hereof and as reflected in the Historical Financial
Statements and the Closing Financial Statements. No later than the Closing, (i)
the Target Entities will have made available to Purchaser true and correct
copies of the most recent surveys or related reports of the Agencies applicable
to the Target Entities and the Company Operations, and (ii) true and complete
copies of any and all plans of correction submitted in response to said surveys
and related reports will have also been made available to Purchaser. All of the
costs reported by the Target Entities on the cost reports applicable to the
Company Operations are or will be fully allowable and reimbursable. Other than
as reserved for in the Acquisition Balance Sheet, Purchaser will have no
liability to any Agency with respect to any matter relating to the Company
Operations or the Target Entities' conduct thereof prior to the Effective Time.
Each of the Target Entities have dealt with and acted as a custodian for the
Client Trust Accounts in full compliance with applicable law and all applicable
standards, rules and regulations of the Agencies. There is no shortage or
shortfall in any of the Client Trust Accounts, except for inherited shortfalls
in Irving, Texas and Ventura, California, which shortfalls are adequately
provided for in the aggregate reserves on the Closing Financial Statements.
5.15 LITIGATION, ETC. Schedule 5.15 hereto sets forth a complete list
and an accurate description of all claims, actions, suits, proceedings and
investigations pending or to the Knowledge of the Shareholders, threatened, by
or against any of the Target Entities or any of its or their respective
properties, assets, rights or businesses. There is no basis for any other such
claim, action, suit, proceeding or investigation. There are no actions, suits,
proceedings or claims pending before or by any court, arbitrator, or Agency
against or affecting any of the Shareholders, the Related Lessors or any of the
Target Entities that would enjoin or prevent the consummation of the
transactions contemplated by this Agreement. All liabilities or costs of the
Target Entities with respect to such claims, actions, suits, proceedings or
investigations (including those described on Schedule 5.15) are either fully
covered by insurance or are fully reserved for in the Closing Financial
Statements.
18
19
5.16 TAXES; TAX MATTERS. Each of the Target Entities has duly filed or
caused to be filed (or obtained valid, currently effective extensions for
filing) all federal, state, local and foreign income, provider, informational,
franchise, excise, payroll, sales and use, property, withholding and other tax
returns, reports, estimates and information and other statements or returns
(collectively "Tax Returns") required to be filed by or on behalf of it
pursuant to any applicable federal, state, local or foreign tax laws for all
years and periods for which such Tax Returns have become due (including any
consolidated or combined Tax Return). All such Tax Returns were correct in all
respects as filed and reflect in all respects the information required to be
shown thereon and the federal, state, local and foreign income, franchise,
excise, payroll, sales and use, property, withholding and other taxes, duties,
imposts and governmental charges (and charges in lieu of any thereof), together
with interest, any additions to tax and penalties (collectively "Taxes")
required to be paid or collected by (or allocable to) the Target Entities. Each
of the Target Entities has paid or caused to be paid all Taxes as shown on Tax
Returns filed by it or on any assessment received by it. Except as set forth on
Schedule 5.16 attached hereto, none of the Target Entities has received any
written notice of any audit, or any dispute or claim being threatened by any
relevant taxing authority concerning any Tax Return or liability for Taxes.
Each of the Target Entities has withheld or collected from each payment to each
of its employees (or has otherwise paid or made provision for) the amount of
all Taxes (including, but not limited to, federal income taxes, Federal
Insurance Contribution Act taxes, state and local income and wage taxes,
payroll taxes, workers' compensation and unemployment compensation taxes)
required to be withheld or collected therefrom, and each of the Target Entities
has paid (or caused to be paid) the same in respect of its employees when due.
Any and all liability or obligation for Taxes for all periods to and including
December 31, 1997 have been fully accrued on the Historical Financial
Statements and the Closing Financial Statements and/or fully reserved and
recorded as an expense on the books and records of the Target Entities.
5.17 LABOR AND EMPLOYMENT MATTERS. Except as set forth on Schedule
5.17 attached hereto, none of the employment agreements referred to in Section
3.2 hereof contain any provision obligating any of the Target Entities to make
any payment to any party as a result of the sale of the Shares or any other
transaction which would constitute a change of control of the Company. Except
as set forth on Schedule 5.17 attached hereto, no collective bargaining
agreement is applicable to any employees of any of the Target Entities, and
there are no disputes between any Target Entity and any such employees that
would reasonably be expected to adversely affect the conduct of any of the
Company Operations or any unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending or threatened, relating to
any of the Company Operations. There are no organizational efforts presently
being made or to the Knowledge of the Shareholders, threatened, involving any
of such employees. Each of the Target Entities has complied with all laws
relating to employment applicable to the respective Target Entity, including
all provisions thereof relating to wages, hours, collective bargaining, the
payment of social security and other payroll or similar taxes, equal employment
opportunity, employment discrimination or harassment and employment safety, and
none of the Target Entities has any liability for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing. There are
no proceedings pending or to the Knowledge of the Shareholders, threatened,
before the National Labor Relations Board with respect to any employees of any
Target Entity. Except as set forth on Schedule 5.17 attached hereto,
19
20
there are no discrimination or harassment charges (relating to sex, age,
religion, race, national origin, ethnicity, sexual orientation, handicap or
veteran status) pending or to the Knowledge of the Shareholders, threatened,
before any federal or state agency or authority against any Target Entity. All
liabilities or costs of the Target Entities with respect to such charges are
either fully covered by insurance or are fully reserved for in the Closing
Financial Statements. Each of the Target Entities has handled and disposed of
all medical wastes or bio-hazardous materials in compliance with all applicable
federal, state or local statutes, rules or regulations and in such a manner that
does not give rise to any claim of liability by any employee, client or
independent contractor of any Target Entity, or any other party.
5.18 INSURANCE. All policies of fire, liability, workers'
compensation, malpractice and professional liability and other forms of
insurance providing insurance coverage to or for the Target Entities are listed
in Schedule 5.18 hereto and (i) the respective Target Entity is named insured
under such policies, (ii) all premiums required to be paid with respect thereto
covering all periods up to and including the Effective Time have been paid,
(iii) all of such insurance policies have been issued on an "occurrence" basis,
(iv) except as set forth on Schedule 5.18 hereto, there has been no lapse in
insurance coverage at any time since any of the Target Entities commenced
operations, (v) there are not presently, and after the Effective Time there
will not be, any retrospective premiums due under any of such policies, and
(vi) no notice of cancellation or termination has been received with respect to
any such policy. All prepaid insurance premiums will be refundable in
accordance with the terms of the applicable policy and have been accurately
recorded as such on the Acquisition Balance Sheet and Closing Financial
Statements. Except as set forth on Schedule 5.18 of the Update, since January
1, 1997, no claims have been made on any of such policies in excess of $25,000
or which remain open as of the date hereof. There are no claims outstanding
against any of the Target Entities with respect to any period for which any
lapse in insurance coverage occurred.
5.19 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the
Historical Financial Statements and the Closing Financial Statements, and all
accounts receivable arising after December 31, 1997 arose from bona fide
transactions in the ordinary course of business with unaffiliated third parties,
and the services involved have been performed to the respective clients and/or
the account obligors, and no further services are required to entitle the Target
Entities to collect the respective accounts receivable in full. Subject to the
reserve for doubtful accounts in an aggregate amount of $200,000, the aggregate
amount of all of such accounts receivable is fully collectible.
5.20 BOOKS AND RECORDS. Except as set forth on Schedule 5.20 attached
hereto, the corporate minute book of each of the Target Entities and the stock
record book of each of the Target Entities (i) are complete and correct in all
material respects and adequately reflect actions taken at all meetings of the
stockholders and Board of Directors of the respective Target Entity, and (ii)
properly and accurately record the issuance and transfer of all shares of
capital stock of the Target Entities.
20
21
5.21 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.21 attached hereto lists each employee benefit
plan within the meaning of section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA") maintained by any of the Target
Entities or to which any of the Target Entities contributes or is
required to contribute or in which any employee of any of the Target
Entities participates (a "Plan"). Each of the Plans has been operated
and administered in all respects in accordance with applicable laws,
including but not limited to ERISA and the Code. There are no pending
or to the Knowledge of the Shareholders, threatened, claims by or on
behalf of any of the Plans, by any employee or beneficiary covered
under such Plan or otherwise involving any such Plan or any of its
fiduciaries (other than for routine claims for benefits).
(b) Except as set forth in Schedule 5.21 hereto, (i) each Plan
subject to section 401(a) of the Code qualifies thereunder and is
exempt from taxation pursuant to section 501(a) of the Code, (ii) each
trust subject to section 501(c) of the Code qualifies for exemption
from federal income tax thereunder, and (iii) each Plan subject to
sections 125 and 129 of the Code qualifies thereunder.
(c) None of the Target Entities has maintained, contributed to
or been required to contribute to, nor do any of its employees
participate in, a "multi-employer plan" (as defined in section 3(37) of
ERISA) or a "defined benefit plan" (as defined in section 3(35) of
ERISA).
(d) Notwithstanding anything else set forth herein, none of
the Target Entities has incurred any liability as of the Closing Date
with respect to any Plan under ERISA (including, without limitation,
Title I or Title IV of ERISA), the Code or other applicable law, which
is due and payable and which has not been satisfied in full, and no
event has occurred, and to the Knowledge of the Shareholders, there
exists no condition or set of circumstances which could result in the
imposition of any liability under ERISA (including, without limitation,
Title I or Title IV of ERISA), the Code or other applicable law with
respect to any of the Plans (other than the payment of routine claims
for benefits, insurance premiums or contributions required under the
terms of the Plans).
(e) No Plan, other than a Plan which is an employee pension
benefit plan (within the meaning of section 3(2)(A) of ERISA), provides
benefits, including without limitation, death, health or medical
benefits (whether or not insured), with respect to current or former
employees of any of the Target Entities beyond their retirement or
other termination of service with any of the Target Entities (other
than (i) coverage mandated by applicable law, (ii) deferred
compensation benefits fully accrued as liabilities on the books of any
of the Target Entities or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)).
21
22
(f) Except as otherwise disclosed in the Agreement, the
consummation of the transactions contemplated by this Agreement
(including but not limited to the resignation of the Shareholders and
all of the Shareholders' respective family members as employees or
directors of any of the Target Entities) will not (i) entitle any
current or former employee, officer or director of any of the Target
Entities to severance pay, unemployment compensation or any other
payment from any of the Target Entities, or (ii) except for
acceleration of vesting by reason of the termination of the Plans
described in Schedule 7.1(f) hereto, accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee,
officer or director.
(g) Except as set forth in Schedule 5.21 hereto, each of the
Target Entities has provided or made available to Purchaser, its
counsel or accountants true and complete copies of the following for
each Plan as applicable: (i) the Plan; (ii) the summary plan
description of the Plan; (iii) the trust agreement, insurance policy or
other instrument relating to the funding of the Plan; (iv) the most
recent Annual Report (Form 5500 series) and accompanying schedule filed
with the Internal Revenue Service or United States Department of Labor
with respect to the Plan; (v) the most recent audited financial
statement for the Plan; (vi) the most recent actuarial report of the
Plan; and (vii) the policy of fiduciary liability insurance (and
agreements related thereto) maintained in connection with the Plan.
(h) Except as contemplated in Section 7.1(f) hereof, none of
the Target Entities has amended or terminated any Plan after providing
Purchaser with copies of the Plans referenced in Schedule 5.21 hereto.
5.22 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
5.22 hereto, (a) there are no contracts for the provision of goods or services
(including but not limited to management services) to or from (i) any Target
Entity and (ii) any person or entity of the Controlling Group, and (b) other
than the Facilities, there are no facilities occupied in whole or in part by
any Target Entity, and no other property, assets, franchises, licenses or
rights used by any of the Target Entities, that are owned, leased by or to, or
occupied by any member of the Controlling Group.
5.23 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Section 5.23, the following terms
shall have the following meanings:
"Environmental Law" means any applicable federal, state, or
local statute, law, ordinance, rule or regulation of the United States
and any other jurisdiction within the United States now effective and
any order, to which the Target Entities are parties or are otherwise
directly bound of the United States or other jurisdiction within the
United States now effective relating to: (i) pollution or protection
of the environment, including natural resources; or (ii) exposure of
persons, including employees, to Hazardous Substances;
22
23
"Hazardous Substances" means any substance, whether liquid,
solid or gas (i) listed, identified or designated as hazardous or toxic
under any Environmental Law, (ii) which, applying criteria specified in
any Environmental Law, is hazardous or toxic, or (iii) the use or
disposal of which is regulated under Environmental Law.
(b) Neither any Target Entity, any of the Shareholders, nor
any person or entity acting at their direction, and no other person or
entity, has discharged, released or emitted, or has threatened to
discharge, release or emit Hazardous Substances into the air, water,
surface water, ground water, land surface or subsurface strata or
transported to or from the property owned, leased or used by the Target
Entities except in compliance with Environmental Law and except for
incidental releases of Hazardous Substances in amounts or
concentrations which would not reasonably be expected to give rise to
any claims or liabilities against any of the Target Entities under
Environmental Law.
(c) Neither any Target Entity, the Related Lessors nor any of
the Shareholders has received any notification (verbally or in writing)
from a governmental agency that there is any violation of any
Environmental Law with respect to the business and properties of the
Target Entities and neither any Target Entity, any Related Lessor nor
any of the Shareholders has received any notification (verbally or in
writing) from a governmental agency pursuant to Section 104, 106 or 107
of the Comprehensive Environmental Response Compensation and Liability
Act, as amended.
(d) There are no underground storage tanks or facilities on
any portion of the real property currently or previously owned or
leased by any of the Target Entities and any underground storage tank
or facility previously located thereon has been removed in compliance
with all applicable Environmental Law.
5.24 COST REPORTS. All cost reports ("Cost Reports") required to be
filed by any Target Entity under federal or state law or any other applicable
governmental or private provider regulations have been prepared and filed in
accordance with applicable laws, rules and regulations (and copies of all of the
Cost Reports for Florida and Indiana for the calendar years 1995 and 1996 have
been provided to Purchaser), and the respective Target Entity has paid or made
provision to pay, all proposed or final adjustments received from Medicaid or
other programs. There are, however, open audit periods and/or ongoing audits on
the Cost Reports filed for Florida, Indiana and Louisiana. All liabilities or
costs of the Target Entities with respect to the Cost Reports are fully reserved
for on an aggregate basis in the Closing Financial Statements.
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither any Target Entity,
any Related Lessor, any of the Shareholders, nor any stockholder, member,
partner, officer, or director of any of such entities nor any other person or
entity acting on behalf of any of such entities, acting alone or together, has
(i) received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from or on behalf of any client, governmental employee or other
person or entity with whom any of such entities have
23
24
done business directly or indirectly, or (ii) directly or indirectly, given or
agreed to give any gift or similar benefit to any client, governmental employee
or other person or entity who is or may be in a position to help or hinder the
business of any of such entities (or assist any of such entities in connection
with any actual or proposed transaction) which, in the case of either clause (i)
or clause (ii) above, would reasonably be expected to subject any of the Target
Entities or the Related Lessors to any damage or penalty in any civil, criminal
or governmental litigation or proceeding.
5.26 FRAUD AND ABUSE. Neither any Target Entity, any Related Lessor,
any of the Shareholders, nor any of their stockholders, members, partners,
officers or directors has engaged in any activities which are prohibited under
federal Medicaid statutes or the regulations promulgated pursuant to such
statutes or related state or local statutes or regulations or which are
prohibited by rules of professional conduct.
5.27 BROKERS' OR FINDERS' FEES. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried out by each
of the Shareholders directly with Purchaser, without the intervention of any
person engaged by or on behalf of any of the Shareholders in such manner as to
give rise to any valid claim by any person against Purchaser or any of the
Target Entities for a finder's fee, brokerage commission or similar payment.
5.28 SECURITIES MATTERS; INVESTMENT INTENT. It is understood that the
Debentures to be delivered to the Shareholders pursuant to this Agreement are
not being registered, for purposes of the transactions hereunder, under the
Securities Act of 1933, or under any applicable state securities laws, and the
Debentures are being delivered without registration in reliance upon exemption
from the registration requirements of the Securities Act and such state
securities laws. The Shareholders are acquiring the Debentures hereunder only
for their own respective accounts for investment and not with any intention of
making, or with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act.
In connection with the foregoing, each of the Shareholders hereby
represents and warrants that:
(a) such Shareholder has reviewed, discussed and evaluated the
information described on Schedule 5.28 (the "Purchaser Information")
and has had the opportunity to ask questions of, and receive answers
from, executive officers of the Purchaser concerning the terms and
conditions of this Agreement and to obtain any additional information
which such Shareholder considered necessary to verify the accuracy of
the Purchaser Information;
(b) such Shareholder has been advised and understands that it,
he or she must bear the economic risks of the investment in the
Debentures and any Purchaser Common Stock issuable upon conversion
thereof to be made hereunder for an indefinite period of time because
such securities have not been registered under the Securities Act and
are subject to the restrictions upon transfer contained in this
Agreement and in the form of Debentures and the Debenture Statement
and, therefore, may not be sold unless such sale is made in
24
25
compliance with the provisions of this Agreement and such Debentures or
Purchaser Common Stock issuable upon conversion thereof subsequently is
registered under the Securities Act or an exemption from registration
is available; and
(c) such Shareholder has sufficient knowledge and experience
in financial and business matters, either alone or with the assistance
of a financial adviser (such as an attorney, accountant, or executive
officer of the Company) to enable such Shareholder to be capable of
evaluating the merits and the risks of the exchange of the Debentures
for the Company Shares contemplated by this Agreement and such
Shareholder's prospective investment in the Purchaser.
5.29 LEGENDS. It is understood and agreed that, to implement the
requirements of the Securities Act and evidence the restrictions upon transfer
contained in this Agreement, the Purchaser will cause a legend to be
conspicuously noted on the Debentures and any certificates representing the
Purchaser Common Stock hereafter delivered upon conversion of the Debentures
deliverable hereunder, and that the Purchaser will issue stop transfer
instructions to its transfer agent, to the effect that the Debentures and the
Purchaser Common Stock have not been registered under the Securities Act and
that no transfer may take place except as permitted by this Agreement and after
delivery of an opinion of counsel reasonably satisfactory to the Purchaser to
the effect that registration thereof for the purpose of transfer is not required
under the Securities Act or that the Debentures or any Purchaser Common Stock
proposed to be transferred has been effectively registered for that purpose
under the Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to the Shareholders as follows:
6.1 ORGANIZATION, POWER, ETC. Purchaser is a corporation duly
organized and validly existing under the laws of the Commonwealth of Kentucky.
Purchaser has full corporate power and authority, and, subject to the approval
of the Agencies and the expiration of the applicable waiting period under the
HSR Act (or the early termination thereof), the legal right, to execute and
deliver this Agreement and the additional agreements to be executed hereunder
to which it is a party, and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby.
6.2 AUTHORIZATION OF AGREEMENTS, ETC. The execution and delivery by
Purchaser of this Agreement and the Ancillary Agreements to be executed
hereunder to which it is a party, and the performance by Purchaser of its
obligations hereunder and thereunder, have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Amended and Restated Articles of
Incorporation or Bylaws of Purchaser, any judgment, award or decree or any
indenture, agreement or other instrument to which
25
26
Purchaser is a party, or by which it or any of its properties or assets is bound
or affected, or 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 the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of Purchaser.
6.3 VALIDITY. This Agreement has been duly executed and delivered by
Purchaser and, subject to due execution by the other parties hereto,
constitutes, and the Ancillary Agreements to which Purchaser is a party
hereunder, when executed and delivered by Purchaser as contemplated hereby,
subject to due execution by the other parties thereto, will constitute, the
legal, valid and binding obligations of Purchaser, enforceable against Purchaser
in accordance with their respective terms, subject to applicable reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and general equitable remedies.
6.4 LITIGATION RELATING TO TRANSACTION. There are no actions, suits,
proceedings or claims pending or threatened, by or against Purchaser or any of
its properties, assets, rights or businesses which if adversely determined
would, individually or in the aggregate, have an adverse effect on the business,
properties or condition (financial or other) of Purchaser. There are no actions,
suits, proceedings or claims pending before any court, arbitrator or government
agency against or affecting Purchaser which might enjoin or prevent the
consummation of the transactions contemplated by this Agreement or the
additional agreements to which Purchaser is a party hereunder.
6.5 INVESTMENT. Purchaser is acquiring the Company Shares for its own
account, for investment and not with a view toward the distribution thereof
within the meaning of the Securities Act of 1933, as amended.
6.6 GOVERNMENTAL APPROVALS. Except as set forth on Schedule 6.6
hereto, to the Knowledge of the Purchaser, nothing relating to the operations
of Purchaser and its subsidiaries prior to the Closing will cause the Purchaser
not to be granted all orders, authorizations, approvals or consents from all
Agencies which are required to ensure the enforceability of this Agreement or
any of such Ancillary Agreements to which the Purchaser is a party, or is
necessary for the Company Operations to continue to be conducted by the Target
Entities immediately following the Closing substantially in the same manner and
providing for substantially the same reimbursement levels and requirements of
operation as heretofore conducted by such entities.
6.7 BROKERS' OR FINDERS' FEES. Other than X.X. Xxxxxxxx & Co., all
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Purchaser directly with the Shareholders,
without the intervention of any person on behalf of Purchaser in such manner as
to give rise to any valid claim by any person against any of the Shareholders
for a finder's fee, brokerage commission or similar payment. The Shareholders
shall have no liability to X.X. Xxxxxxxx & Co. in connection with Purchaser's
engagement of the same.
6.8 CAPITAL STOCK AND CONVERTIBLE SECURITIES. The authorized capital
stock of Purchaser consists of (i) 40,000,000 shares of Purchaser Common Stock,
of which 12,365,682
26
27
shares were issued and outstanding as of December 31, 1997, and (ii) 1,000,000
shares of preferred stock, no par value per share, none of which are issued and
outstanding as of the date hereof. All of the shares of Purchaser Common Stock
that may be issued upon the conversion of Debentures in accordance with the
terms of the Debentures and the Debenture Statement will be duly and validly
issued and outstanding and fully paid and nonassessable under the Kentucky
Business Corporation Act. None of the outstanding shares of Purchaser capital
stock has been, and none of the shares of Purchaser Common Stock that may be
issued upon the conversion of the Debentures in accordance with the terms of the
Debentures and the Debenture Statement will be, issued in violation of any
preemptive or other rights of the current or past shareholders of Purchaser.
6.9 PURCHASER FINANCIAL STATEMENTS. Each of the Purchaser Financial
Statements (including, in each case, any related notes), including any Purchaser
SEC Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by the SEC), and fairly presented in
all material respects the consolidated financial position of Purchaser and its
subsidiaries as of the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments that were not or are not expected to be material in amount
or effect.
6.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
(i) as disclosed in any of the Purchaser Information or (ii) incurred since
September 30, 1997 in the ordinary course of business, neither Purchaser nor any
of its subsidiaries has any liabilities or obligations of any nature that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Purchaser, except such liabilities or obligations that are accrued or
reserved against in the consolidated balance sheets of Purchaser as of September
30, 1997, included in the Purchaser Financial Statements made available prior to
the date of this Agreement or reflected in the notes thereto.
6.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1997,
except as disclosed in the Purchaser SEC Reports made available prior to the
date of this Agreement, there have been no events, changes or occurrences that
have had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser.
6.12 REPORTS. Since January 1, 1997, Purchaser has filed all Purchaser
SEC Reports, except failures to file that are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser. As of
its respective date (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing), each of such Purchaser SEC
Reports, including the financial statements, exhibits and schedules thereto
complied in all material respects with all applicable laws. As of its respective
date, each such Purchaser SEC Report 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 light of the circumstances
under which they were made, not misleading.
27
28
ARTICLE VII
COVENANTS
---------
7.1 CERTAIN COVENANTS OF THE SHAREHOLDERS.
(a) During the period from the date of this Agreement to the
Closing Date, each of the Target Entities will (and each of the
Shareholders will cause it to) conduct its business and operations
according to its ordinary course of business and use its reasonable
business efforts (i) to preserve its relationships with its employees
and clients and with the Agencies, (ii) to maintain its Licenses and
its contracts with third party payers and clients in full force and
effect in accordance with their terms and (iii) to continue to provide
its services to such third party payers and clients. Without limiting
the generality of the foregoing, except as otherwise expressly
contemplated by this Agreement, prior to the Closing Date, without the
prior written consent of Purchaser, which consent shall not be
unreasonably withheld, none of the Target Entities will do any of the
things listed in paragraphs (a) through (l) of Section 5.8 hereof.
(b) Between the date hereof and the Closing Date, each of the
Target Entities shall (and each of the Shareholders will cause it to)
provide, upon reasonable advance notice during normal business hours,
access by representatives of Purchaser to the financial, accounting and
legal records of all of the Target Entities, and to key employees of
each of the Target Entities designated by Purchaser and, in connection
therewith, shall permit representatives of Purchaser, upon reasonable
advance notice during normal business hours, to visit and inspect the
Facilities. Such activities shall be performed, so far as is reasonably
possible, in such a manner as to avoid disruption of normal operations.
(c) Between the date hereof and the Closing Date, except in
the ordinary course of business, consistent with past practices,
neither any of the Target Entities, any of the Related Lessors nor any
of the Shareholders nor any affiliate thereof shall enter into any
transaction, make any agreement or commitment, or take any action,
which would result in the representations, warranties or covenants of
the Shareholders contained in this Agreement not being true and correct
in all Material Respects.
(d) Between the date hereof and the Closing Date, each of the
Target Entities and the Shareholders shall cooperate in good faith with
Purchaser, including the filing and submission of all necessary and
appropriate applications and documents, in order to obtain all
applicable governmental, regulatory and third party authorizations,
consents, waivers and approvals required or necessary in order to
consummate the transactions contemplated by this Agreement (including
but not limited to any approval required under the HSR Act). The
Shareholders will use their reasonable business efforts to cause the
Company to make any necessary filing on or before February 13, 1998 to
secure approval (or early termination of the waiting period) under the
HSR Act.
(e) Between the date hereof and the Closing Date, none of the
Shareholders shall permit any of the Target Entities, except as
required by GAAP and subject to appropriate
28
29
year-end adjustments, (i) to utilize accounting principles different
from those used in the preparation of the Historical Financial
Statements and the Closing Financial Statements, (ii) change in any
manner its method of maintaining its books of account and records from
such methods as reflected in the Historical Financial Statements and
the Closing Financial Statements, or (iii) accelerate booking of
revenues or the deferral of expenses.
(f) At the election of Purchaser, Purchaser may cause the
Target Entities to terminate the Plans described on Schedule 7.1(f)
hereto or merge any of such Plans with comparable plans of Purchaser.
No family member of any Shareholder, nor any other officer or director
of the Target Entities shall make any claim for unemployment
compensation relating to their employment (if any) by the Target
Entities.
(g) Prior to the Effective Time, the Shareholders shall cause
each of the Target Entities to maintain the Supplies at levels which
are consistent with the conduct of the respective Company Operations
conducted by such Target Entity in the ordinary course of business
(which in all cases shall be in compliance with applicable federal,
state and local law and as required for the provision of services in
accordance with applicable rules of the Agencies) and shall not sell or
remove any Personal Property, modify or terminate any Facility Lease,
Program Agreement or Contract (except as expressly provided herein),
move or discharge any client, or terminate the provision of services to
any client after the date hereof except in the ordinary course of
business consistent with past practices.
(h) The Shareholders shall cause each of the Target Entities
to continue the Company Operations between the date hereof and the
Effective Time in accordance with the same standards of care and
diligence historically applied thereto (which in all events shall be in
compliance with the standards under the Program Agreements and in
material compliance with all applicable federal, state and local law
and the rules and regulations of the Agencies) and maintain the
Facilities and the Personal Property in the same condition and repair
(reasonable wear and tear excepted).
(i) Until (i) April 15, 1998, or (ii) for any time period for
which the Closing is extended, or (iii) for such shorter period if this
Agreement is mutually terminated, neither the Company, any Shareholder
nor any director, officer or affiliate thereof shall directly or
indirectly solicit, encourage or authorize any person or entity to
solicit, directly or indirectly, any inquiries or proposals from any
other person or entity relating to the sale, lease or sublease of, or
management of, any of the Company Operations, any sale of, or other
business combination relating to, the capital stock, business or assets
of any Target Entity or the relinquishment or transfer of the Licenses,
and neither the Company, any Shareholder nor any director or officer of
the Company shall engage in discussions or negotiations of any nature
with any party other than Purchaser regarding any of such matters.
(j) Prior to the Closing, the Shareholders shall cause to be
delivered to Purchaser the consolidated audited financial statements of
the Target Entities for the year ended December 31, 1997, prepared by
the Company CPA, which audited financial statements shall not reflect
any accruals, reserves or liabilities which are in excess of the
amounts reflected in the Closing Financial Statements and which shall
reflect a consolidated tangible net worth
29
30
of not materially less than the consolidated tangible net worth
reflected in the Closing Financial Statements.
7.2 CERTAIN COVENANTS OF PURCHASER.
(a) Between the date hereof and the Closing Date, Purchaser
shall use its reasonable business efforts, in cooperation with the
Target Entities, in order to obtain all governmental, regulatory and
third party authorizations, consents, waivers and approvals necessary
or desirable in order to consummate the transactions contemplated by
this Agreement (including but not limited to any approval required
under the HSR Act). The Purchaser shall use its reasonable business
efforts to make any necessary filing on or before February 13, 1998 to
secure approval (or early termination of the waiting period) under the
HSR Act.
(b) Purchaser shall use its reasonable business efforts to
coordinate with the Target Entities all inquiries to and contacts with
the Agencies regarding the transactions contemplated herein and shall
not contact any employees of any Target Entity without the prior
consent of the Target Entity employing such person.
(c) Purchaser agrees to cause all of the shares of Purchaser
Common Stock that may be issued upon the conversion of Debentures in
accordance with the terms of the Debentures and the Debenture Statement
to be listed on each securities exchange and quotation system on which
the common stock is listed at the time of such conversion.
7.3 BOOKS AND RECORDS. At or before the Closing, the Shareholders
shall deliver custody and control to Company of all books, records, files,
documents, papers, agreements, books of account and other records pertaining to
the business of the Target Entities or relating to or used in the Company
Operations to the extent the Shareholders have custody or control of the same.
After the Closing, Purchaser shall provide the Shareholders with reasonable
access to and permit the copying of such books and records (at the cost of the
Shareholders) to permit the Shareholders to comply with any covenants and/or
obligations under this Agreement and for any other valid business purpose.
7.4 PRE-CLOSING TAX RETURNS. As promptly as possible after the Closing
(and in any event within the time required by applicable law), the Shareholders
shall, at the cost and expense of the Company, cause the Company CPA to prepare
all Tax Returns applicable to the Target Entities for all periods to and
including December 31, 1997 (including but not limited to any consolidated or
combined Tax Return of which one or more of the Target Entities are a part).
All such Tax Returns shall be prepared in compliance with the rules and
regulations applicable thereto. All of the Taxes shown to be due thereon for
all periods to and including December 31, 1997 shall have been fully provided
for in the Closing Financial Statements.
30
31
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
8.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. Subject to
Section 10.1(d) hereof, the obligation of Purchaser to consummate the
transactions contemplated by this Agreement is subject to the satisfaction at or
prior to the Closing Date of each of the conditions set forth in this Section
8.1.
(a) OCCUPANCY STANDARD. The Occupancy Standard applicable to
the Target Entities shall be satisfied.
(b) OPINION OF COUNSEL FOR THE SHAREHOLDERS. Purchaser shall
have received the opinion of Xxxxx, Xxxx & Xxxxxxx, PLLC, counsel for
the Shareholders, addressed to Purchaser and dated the Closing Date
substantially to the effect set forth in Annex I hereto.
(c) CONSENTS AND APPROVALS. All authorizations, consents,
waivers and approvals required in connection with the execution,
delivery and performance of this Agreement, including but not limited
to the approval of all Agencies, shall have been duly obtained and
shall be in form and substance reasonably satisfactory to counsel for
Purchaser. The waiting period under the HSR Act shall have expired (or
the parties have been granted early termination thereof).
(d) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding shall have been instituted by any third party or threatened
by any governmental department, agency or authority, in either case
seeking to restrain, prohibit or invalidate the consummation of the
transactions contemplated hereby or which would, if adversely decided,
result in a Material Adverse Effect on the Company Operations after the
Effective Time.
(e) ANCILLARY AGREEMENTS. Each of the Ancillary Agreements to
be executed and delivered hereunder shall have been duly executed and
delivered by all parties thereto other than Purchaser or other parties
controlled by Purchaser.
(f) SUPPORTING DOCUMENTS. On or prior to the Closing Date,
Purchaser and its counsel shall have received copies of the following
supporting documents with respect to all of the Target Entities (other
than the Indiana Partnership), all of which shall be reasonably
satisfactory in form and substance to Purchaser and its counsel: the
Articles or Certificate of Incorporation of each of the Target
Entities, certified as of a recent date by the Secretary of State of
the respective state of its incorporation; and certificates of the
Secretary of State of each of the respective states shown on Schedule
5.1(b) hereof as to the due formation or incorporation, as applicable,
and, where applicable, good standing of each of such entities.
(g) REPRESENTATIONS, WARRANTIES AND COVENANTS. There shall
not have been any Material Breach of the representations and
warranties made by any of the Shareholders in this Agreement or in any
other written statement delivered by any of them hereunder, or
delivered pursuant hereto, whether as of the date hereof or at the
Closing (as though made
31
32
at that time). Each of the Shareholders shall have performed, satisfied
and complied in all material respects (which materiality standard shall
not be applicable to Section 8.1(a) hereof or any covenant, agreement
or condition which is already qualified by a materiality standard) with
all covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by any of them at or before
the Closing.
8.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS.
Subject to Section 10.1(d) hereof, the obligations of the Shareholders under
this Agreement are subject to the satisfaction at or prior to the Closing Date
of each of the conditions set forth in this Section 8.2.
(a) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding shall have been instituted by any third party or threatened
by any governmental department, agency or authority, in either case
seeking to restrain, prohibit or invalidate the consummation of the
transactions contemplated hereby.
(b) ANCILLARY AGREEMENTS. Each of the Ancillary Agreements to
be executed and delivered by Purchaser or any entity controlled by
Purchaser shall have been duly executed and delivered by Purchaser or
such entity controlled by Purchaser.
(c) OPINION OF COUNSEL FOR PURCHASER. The Shareholders shall
have received the opinion of Xxxx Xxxxxxxx Xxxxxx Xxx & Vice, counsel
for Purchaser, addressed to the Shareholders and dated the Closing Date
substantially to the effect set forth in Annex II hereto.
(d) SUPPORTING DOCUMENTS. On or prior to the Closing Date, the
Shareholders and their counsel shall have received a Certificate of the
Secretary or an Assistant Secretary of Purchaser, dated the Closing
Date and certifying (i) that attached thereto is a true and complete
copy of the resolutions adopted by the Board of Directors of Purchaser,
authorizing the execution, delivery and performance of this Agreement
and the additional agreements to be executed hereunder to which
Purchaser is a party, and that all such resolutions are still in force
and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and (ii) as to the
incumbency and specimen signature of each officer of Purchaser
executing this Agreement and the additional agreements to be executed
hereunder to which they are a party, and any certificate or instrument
furnished pursuant hereto and thereto.
(e) REPRESENTATIONS, WARRANTIES AND COVENANTS. There shall not
have been any Material Breach of the representations and warranties
made by Purchaser in this Agreement or in any other written statement
delivered by it hereunder, or delivered pursuant hereto, whether as of
the date hereof or at the Closing (as though made at that time).
Purchaser shall have performed, satisfied and complied with in all
material respects (which materiality standard shall not be applicable
to any covenant, agreement or condition which is already qualified by a
materiality standard) all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by it at
or before the Closing.
32
33
ARTICLE IX
INDEMNIFICATION
---------------
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by any party hereto in this
Agreement or pursuant hereto shall survive the Closing Date until April 30,
2000.
9.2 INDEMNITY.
(a) Subject to the other terms and conditions of this Article
IX, each of the Shareholders agrees to and will, jointly and severally,
indemnify, defend and hold Purchaser, and the Target Entities
(collectively, the "Purchaser Indemnified Parties") harmless from and
against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including without
limitation interest, penalties and reasonable attorneys' fees and
expenses (hereinafter collectively called "Damages"), asserted against,
resulting to, imposed upon or incurred by the Purchaser Indemnified
Parties by reason of, resulting from or arising out of a breach of any
representation, warranty, covenant or agreement of any of the
Shareholders contained in or made pursuant to this Agreement, or any
facts or circumstances constituting such a breach (individually, a
"Shareholder Breach" and collectively, the "Shareholder Breaches").
(b) Subject to the terms and conditions of this Article IX,
Purchaser agrees to and will indemnify, defend and hold the
Shareholders harmless from and against all Damages asserted against,
resulting to, imposed upon or incurred by them by reason of or
resulting from or arising out of a breach of any representation,
warranty, covenant or agreement of Purchaser contained in or made
pursuant to this Agreement, or any facts or circumstances constituting
such a breach.
(c) The provisions for a notice of claim for indemnification
under this Agreement ("Notice of Claim") by Purchaser to the
Shareholders and the Escrow Agent are set forth in Section 6 of the
Escrow Agreement.
9.3 SATISFACTION AND LIMITATION OF INDEMNIFICATION OBLIGATIONS OF
SHAREHOLDERS.
(a) Except for the indemnification of the Purchaser
Indemnified Parties for any withholding obligation attributable to the
payments described in Section 2.3(f) hereof, the indemnification
obligations of the Shareholders and the rights of the Purchaser
Indemnified Parties under this Article IX after the Effective Time
shall be paid from and limited in all events other than fraud to the
Escrowed Debentures as provided in paragraphs (b) and (c) of this
Section 9.3.
(b) The Escrowed A/R Debentures shall be held by the Escrow
Agent pursuant to the Escrow Agreement to satisfy the indemnification
obligations of the Shareholders with respect to any Damages
attributable to the breach or untruth of the representations and
warranties of Shareholders in Section 5.19 hereof or the failure of the
Target Entities to
33
34
collect all of the accounts receivable described therein (subject to
the reserve for doubtful accounts in the aggregate amount of $200,000)
(hereinafter, the "Receivables Matter"). Notwithstanding any other
provision of this Agreement, in no event shall the Purchaser
Indemnified Parties be entitled to seek any relief or exercise any
rights against any of the Shareholders pursuant to the terms of this
Article IX for the indemnification obligations of the Shareholders
attributable to the Receivables Matter in excess of the principal
balance of Escrowed A/R Debentures.
(c) The Escrowed General Debentures shall be held by the
Escrow Agent pursuant to the Escrow Agreement to satisfy the
indemnification obligations of the Shareholders other than those
described in the first sentence of paragraph (b) of this Section 9.3
(hereinafter, the "General Matters"). Notwithstanding any other
provision of this Agreement, in no event shall the Purchaser
Indemnified Parties be entitled to seek any relief or exercise any
rights against any of the Shareholders pursuant to the terms of this
Article IX for the indemnification obligations of the Shareholders
under this Article IX attributable to the General Matters until and
solely to the extent that Damages to be indemnified hereunder exceed an
aggregate amount of $500,000 (the "General Basket Amount"). No
individual Shareholder Breach relating to a General Matter shall be
taken into account in determining whether the General Basket Amount is
exceeded unless the Damages attributable to such individual Shareholder
Breach equal or exceed $25,000, in which case all of such Damages
attributable to such individual Shareholder Breach shall be so taken
into account. In determining the Damages of the Purchaser Indemnified
Parties which are subject to indemnification under this Section 9.3(c),
such Damages shall be reduced to the extent of (i) any insurance
proceeds received by the Purchaser Indemnified Parties with respect to
the event giving rise to such Damages, and (ii) for the aggregate
reserves established on the Acquisition Balance Sheet (excluding the
reserve for doubtful accounts described in paragraph (b) of this
Section 9.3); provided, however, that the amount of any such reserves
may not be utilized to reduce any Damages more than once and all
Damages attributable to the General Matters shall reduce such reserves
on a dollar-for-dollar basis.
(d) Neither party hereto will be liable to the other hereunder
for any punitive or exemplary damages of any nature relating to any
claim for which either such party may be entitled to recover under this
Agreement.
9.4 SHAREHOLDERS' REPRESENTATIVE. Each of the Shareholders hereby
irrevocably appoints Xxxxxx (the "Shareholders' Representative") as his or her
attorney-in-fact under this Agreement and to act on behalf of such Shareholder
wherever it is contemplated that the Shareholders may act, or the Shareholders'
Representative may act on behalf of the Shareholders, under this Agreement and
the Escrow Agreement. The Shareholders' Representative is hereby authorized to
act on behalf of the Shareholders in disputing or refraining from disputing any
claim made by the Purchaser Indemnified Parties under this Article IX, including
negotiating and compromising any such claim, engaging attorneys, accountants and
other agents and advisers, and to take such other action or refrain from taking
such other action as the Shareholders' Representative shall deem, in his sole
discretion, necessary or appropriate to further the interests of the
Shareholders under this Agreement and the Escrow Agreement. Each of the
Shareholders agrees that the Purchaser Indemnified Parties shall be entitled to
rely on any and all action taken by the
34
35
Shareholders' Representative evidenced by a document signed by the Shareholders'
Representative without any liability to, or obligation to inquire of, any
Shareholder. A notice validly delivered to the Shareholders' Representative
shall constitute sufficient notice to all Shareholders. The authority of the
Shareholders' Representative shall continue until the release of all Debentures
and amounts held by the Escrow Agent under the Escrow Agreement.
ARTICLE X
TERMINATION AND ABANDONMENT
---------------------------
10.1 TERMINATION. This Agreement may be terminated at any time prior
to the closing on the Closing Date:
(a) by the mutual consent of the Shareholders'
Representative, on the one hand, and Purchaser, on the other hand;
(b) by Purchaser, on the one hand, or the Shareholders'
Representative, on the other hand, if the Closing shall not have
occurred on or before April 15, 1998, or such later date as may be
agreed upon by the parties hereto; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this clause (b) shall not be available
to any party (a "Defaulting Party") whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in
the failure of the Closing to occur on or before such date; or
(c) if the Closing shall not have occurred, or this Agreement
shall not have been terminated in accordance with this Section 10.1, by
June 30, 1998, this Agreement shall automatically terminate on said
date; PROVIDED, HOWEVER, that such termination shall not affect the
liability hereunder of any Defaulting Party.
(d) In each case the party desiring to terminate this
Agreement (the "Terminating Party") shall give the other party written
notice of its intention to terminate the same, which notice shall set
forth in reasonable detail the conditions precedent which have not been
satisfied and the other party shall have thirty (30) days to cure by
satisfying such conditions precedent, in which case, provided the
conditions precedent applicable to the Terminating Party have been
satisfied, the parties shall proceed to consummate the transactions
contemplated herein.
10.2 SPECIFIC PERFORMANCE. At any time prior to the termination of
this Agreement pursuant to Section 10.1 hereof, either Purchaser, on the one
hand, or the Shareholders, on the other hand (provided the party seeking
remedies under this Section 10.2 is not a Defaulting Party and has fulfilled
all of its conditions precedent to Closing), may, if the other party fails or
refuses to consummate the transactions contemplated herein, elect to require
specific performance of the rights and obligations of the parties hereto. Upon
such election and in any legal proceeding to enforce the same, the other party
shall waive any and all claim that specific performance is not warranted,
including but not limited to the claim that the other party has an adequate
remedy at law.
35
36
10.3 PROCEDURE AND EFFECT OF TERMINATION. Upon termination of this
Agreement pursuant to Section 10.1 above, written notice thereof shall forthwith
be given to the other parties to this Agreement (other than in the event of an
automatic termination as provided in such Section) and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated by
reason of the failure of any of the conditions precedent described in paragraphs
(e) or (g) of Section 8.1 hereof, the Company and the Shareholders shall, within
five (5) days after the effective date of such termination, pay to Purchaser
$10,000,000 by wire transfer of immediately available federal funds to an
account designated by Purchaser. If this Agreement is terminated by reason of
the failure of the conditions precedent described in paragraphs (b) or (e) of
Section 8.2 hereof, Purchaser shall, within five (5) days after the effective
date of such termination, pay to the Company and the Shareholders an aggregate
amount of $10,000,000 by wire transfer of immediately available federal funds to
an account designated by the Company. The parties have provided for liquidated
damages in the above circumstances, recognizing that the termination and
calculation of damages to the parties as a result of such termination is
imprecise. If this Agreement is terminated as provided herein, no party shall
have any further liability or obligation to any other party to this Agreement
pursuant to this Agreement except as provided in this Article X and except for
the covenants set forth in Sections 3.5, 3.6 and 4.1 hereof, which shall survive
such termination.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 EXECUTION IN COUNTERPARTS. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
11.2 NOTICES. All notices which are required or may be given pursuant
to the terms of this Agreement shall be in writing and shall be sufficient in
all respects if (i) delivered personally, (ii) mailed by registered or certified
mail, return receipt requested and postage prepaid, (iii) sent via a nationally
recognized overnight courier service or (iv) sent via facsimile confirmed in
writing to the recipient, in each case as follows:
IF TO THE SHAREHOLDERS J. Xxxxxx Xxxxxx
OR THE SHAREHOLDERS' 0000 Xxxxxxxxx Xxxx
XXXXXXXXXXXXXX: Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH COPIES TO: Xxx Xxxxxxxxx Xxxxxx, Esq.
Xxxxx, Xxxx & Heyburn, PLLC
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
36
37
IF TO PURCHASER: Xxxxxx X. Xxxxx
President and Chief Executive Officer
Res-Care, Inc.
00000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
WITH COPIES TO: Xxxx X. Xxxxxxxx, Esq.
Xxxx Xxxxxxxx Xxxxxx Xxx & Vice
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address or addresses as the Shareholders' Representative, on the
one hand, or Purchaser, on the other hand, shall have designated by notice in
writing to the other.
11.3 WAIVERS. Either the Shareholders' Representative, on the one
hand, or Purchaser, on the other hand, may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement, (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement, (iii) waive compliance with
any of the conditions or covenants of the other contained in this Agreement, or
(iv) waive performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence or as otherwise
expressly provided elsewhere in this Agreement, no action taken pursuant to
this Agreement, including without limitation any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
11.4 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may be
amended or supplemented by such additional agreements, articles or certificates,
as may be determined by the parties hereto to be necessary, desirable or
expedient to further the purposes of this Agreement, or to clarify the intention
of the parties hereto, or to add to or modify the covenants, terms or conditions
hereof or to effect or facilitate any governmental approval or acceptance of
this Agreement or to effect or facilitate the filing or recording of this
Agreement or the consummation of any of the transactions contemplated hereby.
Any such instrument must be in writing and signed by all parties hereto.
11.5 ENTIRE AGREEMENT. This Agreement, its Exhibits, Schedules and
Annexes, and the documents executed on the Closing Date in connection herewith,
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject matter
hereof.
37
38
11.6 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky, exclusive of the
conflicts of laws provisions thereof.
11.7 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, successors and permitted assigns. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, executors, successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
11.8 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto, except that prior to the Closing,
one or more of the Shareholders may gift all or a portion of their Shares to one
or more members of their family or one or more charitable trusts, provided that
the representations and warranties in Section 5.28 shall remain true and correct
in all respects and each such donee shall agree in writing to assume the
obligations of such Shareholder under this Agreement and such Shareholder shall
remain primarily liable therefor.
11.9 EXECUTION OF AGREEMENT; RESTRUCTURING OF TRANSACTION. Provided
Shareholders owning in the aggregate at least fifty-one percent (51%) of the
Company Shares execute and deliver this Agreement, such Shareholders executing
this Agreement, the Company and Purchaser each agree that this Agreement shall
be considered duly executed and delivered by them and enforceable against them
notwithstanding the failure or refusal of other Shareholders to execute and
deliver the same. If the first sentence of this Section 11.9 shall be
applicable, the parties which have executed this Agreement shall cooperate to
restructure the acquisition of the Company Shares as a merger of the Company and
a wholly-owned subsidiary of Purchaser in a manner which would (a) cause
Purchaser to be the sole shareholder of the surviving entity, and (b) the
Purchase Price paid to be no more and no less than and having the same amounts
of cash and Debentures as set forth in Section 2.3 hereof.
38
39
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the day and year first above written.
RES-CARE, INC., a Kentucky corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
("Purchaser")
NORMAL LIFE, INC., a Kentucky corporation
By: /s/ J. Xxxxxx Xxxxxx
-------------------------------------------
J. Xxxxxx Xxxxxx
President
("Company")
/s/ J. Xxxxxx Xxxxxx
-----------------------------------------------
J. Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxxxx X. Xxxxx
("Majority Shareholders")
XXXXX PARTNERS, LTD.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Its: General Partner
-------------------------------------------
39
40
/s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxxxx X. Xxxxxxxx Xxxxxxx
-----------------------------------------------
Xxxxxxxx X. Xxxxxxxx Xxxxxxx
/s/ R. Xxxxxx Xxxxxx
-----------------------------------------------
R. Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx Xxxxxxx Xxxxxxxx
-----------------------------------------------
Xxxx Xxxxxxx Xxxxxxxx
XXXXXX FAMILY PARTNERSHIP, LTD.
By: /s/ Xxxx X. Xxxxxx
-------------------------------------------
Its: General Partner
-------------------------------------------
XXXX X. XXXXXX, XXX, F.B.O.
By: /s Xxxx Xxxxxx
-------------------------------------------
Its: Trust Officer
-------------------------------------------
/s Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
40
41
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx, as Custodian
/s/ F. Xxx Xxxxx
-----------------------------------------------
F. Xxx Xxxxx
/s/ Xxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxx Xxxx Xxxxxxxxx
-----------------------------------------------
Xxx X. Xxxxxxxxx
/s/ Xxxx X. Xxxxxxxxx
-----------------------------------------------
Xxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxxxx, as Custodian
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxxxxxxx
-----------------------------------------------
Xxxx X. Xxxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx
41
42
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxx
/s/ J. Xxxxxx Xxxxxx
-----------------------------------------------
J. Xxxxxx Xxxxxx, as Custodian
XXXXXX X. XXXXXX LIVING TRUST
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Its: Trustee
-------------------------------------------
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
XXXX X. XXXX LIVING TRUST
By: /s/ Xxxx X. Xxxx, Trustee
-------------------------------------------
Its: Xxxx Living Trust
-------------------------------------------
42
43
/s/ Xxxxxxx X. Xxxx
-----------------------------------------------
Xxxxxxx X. Xxxx
/s/ Xxxxx X. Xxxx
-----------------------------------------------
Xxxxx X. Xxxx
/s/ Xxxxxx X. Xxxx
-----------------------------------------------
Xxxxxx X. Xxxx
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxxx
("Minority Shareholders")
43
44
LIST OF EXHIBITS, SCHEDULES AND ANNEXES
EXHIBITS:
A Minority Shareholders
B Debenture Statement
C Debenture
D Escrow Agreement
E Amended Facility Leases
F-1-F-3 Majority Noncompetition Agreements
G Mutual Releases
SCHEDULES:
1.1(a) Company Subsidiaries
1.1(b) Facilities
1.1(c) intentionally omitted
1.1(d) intentionally omitted
1.1(e) Related Lessors
2.3(c) Apportionment of Debentures
3.2(a) Employees to be offered employment agreements
3.2(b) Employees to continue to be employed on same terms
3.3 Exceptions to management agreements to be terminated
5.2 Description of Target Entities' indebtedness to Bank One
5.5 Outstanding stock of Target Entities
5.7(a) Liabilities or obligations
5.7(b) Accruals or reserves for liabilities
5.8 Changes or events since December 31, 1997 (new obligations,
mortgages, transfers, purchases, compromised debts, waivers or
releases of any rights or permitted lapse in Licenses, salary
increases, losses)
5.9 Exceptions to no approvals, authorizations, consents required
5.10 Exceptions to Indefeasible Title
5.11 Descriptions of all Facilities owned by Target Entities
5.12 List of all properties, employment agreements, Contracts
5.13 Exceptions to none of Target Entities party to covenant or agreement that prohibits
or restricts providing services
5.14 Exceptions to Target Entities having all requisite Licenses; exceptions to no waivers,
grandfather provisions or variances under Licenses
5.15 List of claims, actions, suits, investigations, etc.
5.16 Exceptions to no written notice received of any audit, dispute or claim concerning
any Tax Return or liability for Taxes
5.17 Labor and employment matters
5.18 Description of all insurance policies
5.20 Exceptions to minute books and stock record books being complete
5.21 List of employee benefit plans
5.22 Exceptions to no contracts for goods or services to or from any Target Entity or
member of Controlling Group and no Facilities owned, leased or occupied by any
member of the Controlling Group
44
45
5.28 Purchaser Information
6.6 Exceptions to no approval, authorizations, consents required on behalf of Purchaser
7.1(f) Plans to be terminated
ANNEXES:
I Opinion of Shareholders' counsel
II Opinion of Purchaser's counsel
45
46
SCHEDULE 5.7(a)
---------------
None
47
SCHEDULE 5.9
------------
EXCEPTIONS TO NO APPROVALS, AUTHORIZATIONS, CONSENTS REQUIRED
None
48
SCHEDULE 5.10
-------------
See attached title insurance policies:
#120-171947
#10207-051501
#207-034912
49
SCHEDULE 5.20
-------------
See Schedule 5.5
To be updated at or prior to Closing
50
SCHEDULE 5.22
-------------
1. Management services to Related Lessors
2. Management services to subsidiaries
3. Management services for the California operations
4. Xxxxxx family member cleans office under contract
5. Management services for the Irving operations
6. Management services for the Valdosta operations
7. Management services for the Purchase of Service Agreement with Seven
Counties Services
51
SCHEDULE 6.6
------------
None
