Exhibit 2.3
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement ("Agreement") is entered into as of the 26th
day of November, 1997, by and among The Providence Service Corporation, a
Delaware corporation ("Buyer"), Family Preservation Services, Inc., a Virginia
corporation ("FPS"), and Xxxxxxx X. Xxxxxx ("Little"), Xxxxxx Xxxxxxx ("Xx.
Xxxxxxx"), Xxxxxxx Xxxxxxx ("Xx. Xxxxxxx") and Xxxxx Xxxxx ("Xxxxx") in their
individual capacities (each of Little, Xx. Xxxxxxx, Xx. Xxxxxxx and Xxxxx,
individually a "Seller" and collectively "Sellers").
WITNESSETH:
Sellers are the record and beneficial owners of 25,000 shares of common
stock of FPS ("FPS Shares"), constituting all of the issued and outstanding
shares of stock of FPS. The FPS Shares are held as follows:
% OWNERSHIP
NAME # OF SHARES ("Sharing Ratio")
--------------- ------------ -----------------
Little 18,875 75.5%
Xx. Xxxxxxx 2,500 10%
Xx. Xxxxxxx 2,500 10%
Percy 1,125 4.5%
------------ -----------------
25,000 100%
Buyer desires to purchase, and Sellers desire to sell to Buyer, all of the
legal and beneficial right, title and interest in the FPS Shares, in exchange
for: (i) 588,000 shares of Buyer's common stock, (ii) the sum of $1,570,000
cash, (iii) convertible promissory notes in the aggregate principal amount of
$1,000,000, (iv) a deferred payment in the aggregate amount of $500,000 (the
"Deferred Payments") and (v) up to $250,000 ("Earn-Out Amount") based upon the
Net Earnings (as hereinafter defined) of FPS for the fiscal year ended December
31, 1998;
Effective as of November 26, 1997, Buyer entered into a Securities Purchase
Agreement and Stockholders Agreement ("Stockholders Agreement") with Eos
Partners SBIC, L.P. ("EOS") whereby Buyer issued shares of its Series A
Preferred Stock to EOS ("EOS Financing"). As a condition of the EOS Financing
and the Stockholders Agreement, Little is required to join in and become a party
to the Stockholders Agreement by executing a Management Joinder ("Management
Joinder").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and undertakings hereinafter made, it is agreed as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. In reliance upon the representations, warranties,
covenants and agreements of the parties set forth herein, for the consideration
set forth in Section 1.2 and upon and subject to the terms and provisions of
this Agreement, Buyer hereby purchases from Sellers, and Sellers hereby sell,
transfer, assign and deliver to Buyer the FPS Shares, free and clear of all
liens, claims, charges, limitations, agreements and restrictions whatsoever.
1.2 Purchase Price.
1.2.1 At Closing. In consideration for the sale and transfer of the
FPS Shares, at Closing, Buyer hereby agrees to provide the following
consideration to Sellers consisting of shares ("Buyer Shares") of Buyer's common
stock, $.001 par value ("Common Stock"), cash, and convertible promissory notes
(the "Promissory Notes"):
PRINCIPAL
AMOUNT
BUYER DEFERRED OF PROMISSORY
NAME SHARES CASH PAYMENTS NOTES
---------------- ------------ ------------ ------------ -------------
Little 443,940 $ 1,202,500 $ 377,500 $ 755,000
Xx. Xxxxxxx 58,800 150,000 50,000 100,000
Xx. Xxxxxxx 58,800 150,000 50,000 100,000
Percy 26,460 67,500 22,500 45,000
------------ ------------ ------------ -------------
TOTAL 588,000 $ 1,570,000 $ 500,000 $ 1,000,000
The Promissory Notes shall be in the form of Exhibit "A" attached
hereto and incorporated herein by reference. The Promissory Notes shall bear
interest at the rate of seven percent (7%) per annum and shall mature on the
third anniversary of the Closing, as defined in Section 1.4 hereof. Principal
and interest shall be payable at maturity in accordance with the terms thereof.
The aggregate principal amount of the Promissory Notes shall be convertible at
the option of the holder at any time into Common Stock at the rate of $1.70 per
share ("Conversion Rate") and shall automatically convert into Common Stock at
the Conversion Rate upon an "Initial Public Offering" (as defined below) by
Buyer. The Conversion Rate will be subject to adjustment from time to time as
specified in the Promissory Notes.
For purposes of this Agreement, "Initial Public Offering" is defined
as the offering by Buyer of Buyer's shares to the public pursuant to a
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended.
1.2.2 Deferred Payments. The Deferred Payments shall be payable on
April 15, 1999.
1.2.3 Earn-Out Payments. In addition to the consideration set forth
in paragraphs 1.2.1 and 1.2.2, Sellers (each in proportion to their Sharing
Ratios) shall be entitled to receive an amount not to exceed $250,000 ("Earn-Out
Amount"), equal to the excess, if any, of the Net Earnings of FPS for the Target
Year over $450,000. The "Target Year" shall be the fiscal year ending December
31, 1998. The Net Earnings of FPS for the Target Year shall be determined by
subtracting the expenses (before state and federal income taxes) of FPS for the
Target Year from its gross revenues and shall be conclusively determined by
reference to the audited financial statements of Buyer for the Target Year.
Buyer agrees that at least until the end of the Target Year, it will operate the
business of FPS either as a subsidiary corporation or as a separate division for
which separate financials are maintained and that it will allocate to FPS (or
the division representing FPS) no more than its pro rata share of any corporate
overhead expenses of Buyer requested by or directly benefitting FPS.
1.3 Additional Stock Issuance. The parties further acknowledge that
additional stock issuances may be made by Buyer in the future, including the
possible issuances to private investors and the possible Initial Public Offering
of as yet undetermined amounts; provided that the foregoing acknowledgment shall
not be construed in any way to obligate Buyer to issue any of its stock in any
amounts or for any purposes whatsoever (including, without limitation, the
purposes set forth above), nor shall the foregoing acknowledgment be construed
to limit Buyer's power, authority or right to issue its stock in any amounts
whatsoever for purposes other than those set forth above.
1.4 Closing. Closing of the transactions contemplated hereby (the
"Closing") shall occur upon and at the time of the execution of this Agreement.
(a) At Closing, Sellers, respectively, or a named Seller, as
applicable, shall deliver to Buyer the following:
(i) Certificates evidencing the number of FPS Shares each
Seller owns as described on page 1 of the recitals hereof, all of which have
been duly endorsed in proper form for transfer to Buyer;
(ii) Fully executed Investor Joinders in the form attached
hereto as Exhibit "B", except that Little shall execute and deliver a Management
Joinder in the form attached hereto as Exhibit "C"; by which Sellers will join
in and become parties to the Stockholder's Agreement;
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(iii) Little shall execute and deliver to Buyer that certain
Non-Competition and Non-Solicitation Agreement with Buyer in form attached
hereto as Exhibit "D";
(iv) A certificate of good standing issued by the Virginia
Secretary of State for FPS.
(v) An opinion dated as of the date hereof of Xxxxx & Xxxxx,
counsel to the Sellers, with respect to the matters set forth in the form
attached hereto as Exhibit "D" and in form and substance reasonably satisfactory
to Buyer.
(b) At Closing, Buyer shall deliver to the respective Sellers the
following:
(i) A certificate, issued in the name of such Seller,
evidencing the number of Buyer Shares that such Seller is entitled to receive in
accordance with Section 1.2;
(ii) Cash or immediately available funds in the name of such
Seller, in the dollar amount that such Seller is entitled to receive in
accordance with Section 1.2; and
(iii) The Promissory Notes, made payable to such Seller,
evidencing the principal amount that such Seller is entitled to receive in
accordance with Section 1.2.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer and FPS the
following:
2.1 Organization. FPS is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Virginia, with all requisite
power to own, lease and/or operate all of its property and assets and to carry
on its business as it is now being conducted. This Agreement and such related
agreements, documents and instruments are and will be valid and binding
obligations of Sellers enforceable against Sellers in accordance with the terms
hereof and thereof.
2.2 Conflicting Agreements and Instruments.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby in accordance with the
terms hereof by Sellers will not (a) violate any existing provision of any law
or violate any existing decree applicable to Sellers or FPS; (b) conflict with
or result in a breach of FPS's organizational documents, any of the Obligations
(as defined in Section 2.8) or any other material agreement or instrument to
which Sellers or FPS are a
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party or by which Sellers or FPS or the Assets (as defined in Section 2.7) are
bound or subject; (c) constitute a breach or default of or an acceleration
under, or an event that with the passing of time or giving of notice or both
would constitute a breach or default of or acceleration under, any of the items
described in (b) above; or (d) result in the creation or imposition of any lien,
charge, security interest, encumbrance or claim upon or in any of the Assets.
(b) Sellers do not represent or warrant that any of the parties
with whom FPS has a current contract or agreement will not exercise a right of
cancellation or termination such party may have under such contract or agreement
(other than as a result of any matter, event or circumstance which could
constitute the breach of a representation or warranty hereunder including under
Section 2.2(a) hereunder); provided, however, Sellers warrant that they are not
aware that any such party intends to exercise or would consider exercising such
right of cancellation or termination as a result of the transaction contemplated
by this Agreement or for any other reason.
2.3 Filings, Consents and Approvals. Except as set forth on Schedule
2.3, the execution, performance and delivery by Sellers of this Agreement and
the related agreements, instruments and documents referred to herein, and the
consummation of the transactions contemplated by the foregoing, do not require
the consent, approval or action of, or any filing with, or notice to, any
corporation or any person, firm or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
Sellers covenant and agree that with respect to this Section 2.3, they will use
their best efforts to secure the necessary consents and/or approvals for those
items listed on Schedule 2.3.
2.4 Financial Statements; Absence of Undisclosed Liabilities. The
unaudited balance sheet and profit and loss statement of FPS as and for the
years ended December 31, 1995 and December 31, 1996, for the period ended June
30, 1997 and the months of July, August and September, 1997 (collectively, the
"Financial Statements"), delivered to Buyer (a) have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis, (b)
are true and accurate in all material respects and (c) fairly present in all
material respects the financial position of FPS as of the respective dates
thereof and the results of operations for each such year or period.
2.5 Absence of Certain Changes. Except as set forth on Schedule 2.5,
since June 30, 1997, there has not been (a) any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting the
business or properties of FPS; (b) any material increase in the compensation
payable or to become payable by FPS to any of its employees or agents, or any
bonus payment or material arrangement made to or with any of them; (c) any
mortgage, pledge or subjection to any lien, charge, or encumbrance of any kind
of any of FPS's assets, tangible or intangible; (d) any sale or transfer of any
of the Assets; (e) any sale, assignment, license or transfer by FPS of any
patents, trademarks, trade names, copyrights, licenses, computer software
programs or other intangible assets used in the operation of its business; (f)
any amendment or termination of any
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material contract, agreement or license relating to its business to which FPS is
a party other than in the ordinary course of business; (g) any payment or
distribution made or dividend paid to any stockholder of FPS; or (h) any
commitment to do or take any of the actions contemplated by paragraphs
(b),(c),(d),(e), (f) or (g) of this Section 2.5.
2.6 Litigation. Except as set forth on Schedule 2.6, FPS and Sellers are
not bound by any order, judgment, stipulation or consent decree of any court or
other governmental authority, and there is not pending or threatened any suit,
action, employee controversy, or legal, administrative, arbitration, or other
proceeding or governmental investigation, which would affect the Assets,
operations of the business as presently conducted, or the transactions
contemplated by this Agreement, nor, to the knowledge of FPS or Sellers is there
any basis therefor.
2.7 Assets. The Asset Schedule attached hereto as Schedule 2.7 contains
a complete and correct list or description of FPS's assets as of September 30,
1997, and includes, without limitation, the following (collectively, the
"Assets"): (a) all items of tangible personal property and fixtures of whatever
kind or nature which are owned by FPS, used in the operation of its business in
the ordinary course and which have a value in excess of $1,000 (collectively,
the "Personal Property"); (b) a description of all contracts, leases, licenses,
memberships, agencies, permits and agreements to which FPS is a party or an
assignee of a party (collectively, the "Contracts"); (c) a list of all
copyrights, trademarks, trade names, patents and other similar rights, including
applications and registrations therefor, owned or used by FPS in the operation
of its business (collectively, the "Intellectual Property"); (d) the amount of
cash, stock and other securities; (e) a description of any tax claims and tax
refunds; (f) the dollar value of accounts receivable; and (g) a description of
all employee benefit programs and plans as defined in Section 2.12.
2.8 Liabilities. The Liability Schedule attached hereto as Schedule 2.8
contains the following as of September 30, 1997 (collectively, the
"Obligations"): (a) the dollar value of FPS's accounts payable; (b) a
description of any outstanding loans to FPS; and (c) a description of any other
known liabilities and obligations of FPS of any nature, past, present, future,
fixed or contingent. "Obligations" includes all liabilities and obligations of
FPS under the Contracts.
2.9 Title to and Condition of Property. Except as set forth on Schedule
2.9:
(a) Title. FPS has good, marketable and exclusive title to and
undisputed possession of all of its tangible personal property and improvements
included among the Assets, free and clear of all liens, encumbrances, mortgages,
claims, charges or demands of any nature.
(b) Condition. All of the tangible personal property and
improvements included among the Assets are in good condition, ordinary wear and
tear excepted, are not obsolete, are suitable for use in the ordinary course of
business and are otherwise in such condition and repair so that the business can
operate in compliance with all applicable federal and state laws.
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(c) Insurance. The tangible personal property and improvements
included among the Assets and any real property and improvements therein which
are leased are insured in amounts adequate to replace or repair any casualty or
other loss to any of the Assets, leased property and improvements, pursuant to a
casualty insurance policy of a type reasonable and customary in the industry.
(d) Removal of Assets. No material item of equipment or other
tangible assets used in the operation of the business at any time within the
past twelve months has been removed from the business except in the ordinary
course of business.
2.10 Contracts and Commitments. Schedule 2.10 lists complete and
accurate copies of all material written and oral contracts, leases, agreements
and other commitments relating to the business of FPS to which FPS is a party
which include the contracts, leases, agreements and commitments that constitute
or evidence the Obligations (together, the "Contracts"). The Contracts listed on
Schedule 2.10 are not subject to any oral agreements, modifications, addenda or
other understandings of any kind or nature. As of Closing, FPS will not be in
default under, and will not have committed any act that with the passing of time
or the giving of notice would constitute a default under, any of the Contracts,
and the Contracts will be in full force and effect in accordance with their
terms.
Sellers and FPS further covenant and agree that they will use their
best efforts to enter into a formal management agreement with Family
Preservation Services of S.C., Inc., a non-profit corporation.
2.11 Licenses; Permits. FPS has all licenses and permits (as the case may
be) necessary to operate its business and to conduct all related business in the
ordinary course, and such licenses and permits are in full force and effect.
Such licenses and permits are listed on Schedule 2.11. No material violations
are outstanding in respect of such licenses or permits, or any of them, and
there is pending no proceeding to revoke or limit any of them. FPS is in
compliance in all material respects with the applicable laws and regulations
governing the operation of its business and the Assets owned by it.
2.12 Employees; Employee Benefits. Schedule 2.12 identifies all employee
benefit programs and plans maintained with respect to employees of FPS,
including, but not limited to, group health and accident coverage and vacation
and sick pay policies, and all contracts and understandings with employees, and
all such programs, plans, contracts and understandings are in full force and
effect without default. There are no oral agreements with any employees relating
to term of employment, termination benefits, stock ownership, stock options, or
other employee benefits or perquisites. FPS does not currently maintain a
pension or profit sharing plan, and has
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never maintained a pension or profit sharing plan for which any remaining
liability or obligation exists.
2.13 Unions. FPS is not a party to any contract with a labor union and no
election or proceeding relating to labor relations is pending or threatened.
2.14 Taxes. Except as set forth on Schedule 2.14, all federal, state,
county and local income, gross receipts, excise, property, franchise, license,
sales, transaction privilege, withholding and other taxes have been timely paid
and appropriate returns have been timely filed. There are no tax liens on any of
the Assets and there are not pending, asserted or threatened against FPS any tax
examination or audit or tax claims.
FPS (and any predecessor of FPS) has been a validly electing S corporation
within the meaning of Code Sections 1361 and 1362 at all times during its
existence since 1992 and FPS will be an S corporation up to and including the
Closing Date.
Neither FPS nor any qualified subchapter S subsidiary of FPS has, in the
past 10 years, (a) acquired assets from another corporation in a transaction in
which FPS tax basis for the acquired assets was determined, in whole or in part,
by reference to the tax basis of the acquired assets (or any other property) in
the hands of the transferor or (b) acquired the stock of any corporation which
is a qualified subchaper S subsidiary.
FPS and Sellers will not revoke FPS's election to be taxed as an S
corporation within the meaning of Code Sections 1361 and 1362. FPS and Sellers
will not take or allow any action other than the sale of FPS stock pursuant to
this Agreement that would result in the termination of FPS's status as a validly
electing S corporation within the meaning of Code Sections 1361 and 1362.
FPS has made full and adequate provision on its September 30, 1997 balance
sheet for all material taxes payable by it for all periods prior to the date of
such balance sheet.
2.15 Copyrights, Etc. All copyrights, call signs, trademarks, trade
names, patents and other similar rights used in connection with the operation of
FPS's business are valid, in good standing and uncontested. FPS will, upon
consummation of this Agreement, possess adequate rights, licenses and other
authority to use all copyrights, trademarks, trade names, patents and other
similar rights necessary to conduct its operations as now conducted.
2.16 Capitalization. FPS has an authorized capitalization consisting
solely of 25,000 shares of common stock having par value of $4.00, of which
25,000 are issued and outstanding on the date hereof (the "FPS Shares" as
defined on page 1 hereto). The FPS Shares have been validly issued and are fully
paid and nonassessable, and no other stock or securities of FPS
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other than the FPS Shares are issued or outstanding. None of FPS's Shares are
held by it as treasury stock. FPS has not issued and no stockholder has taken
any actions that may result in the creation in any party of, any options,
warrants or other rights to purchase or subscribe for or otherwise obtain (or
any commitment or obligation of any kind to issue) any shares of FPS stock or
any other security of FPS. Little, Xx. Xxxxxxx, Xx. Xxxxxxx and Xxxxx are the
Sellers of FPS Shares.
2.17 Corporate Documents. FPS has heretofore delivered to Buyer each of
the following documents, which are, on and as of the date of execution of this
Agreement, true, correct and complete: (a) Certificate of Incorporation of FPS,
and all amendments thereto; (b) Bylaws of FPS and all amendments thereto; (c)
minutes of all meetings of the stockholders of FPS; (d) minutes of all meetings
of the Board of Directors of FPS; and (e) list of all current officers and
directors of FPS
2.18 Continuing Relationship with Buyer. Little and Percy acknowledge
that they (a) are executive level employees of FPS, (b) have been, and continue
to be, intimately involved in the business planning and operations of FPS, and
(c) have had, and continue to have, access to detailed information with respect
to the business, financial condition, results of operations and prospects of
FPS.
2.19 Review of Documents/Access to Information. Sellers acknowledge that
(a) they have received and carefully reviewed a copy of the Certificate of
Incorporation and Bylaws of Buyer; (b) they have received and carefully reviewed
a copy of the financial statements as of June 30, 1997 of Buyer; (c) they have
received all information concerning Buyer Shares that they have requested; (d)
as a result of their relationship with FPS, their review of the aforementioned
documents and their prior overall experience in financial matters and the
business of Buyer, they are properly able to evaluate the capital structure of
Buyer, the business of Buyer and the risks inherent therein; (e) they have been
given the opportunity to obtain any additional information or documents from,
and to ask questions and receive answers of, the officers and representatives of
Buyer to the extent necessary to evaluate the merits and risks related to their
investment; and (f) their acquisition of securities of Buyer is consistent, in
both nature and amount, with their overall investment program and financial
obligations.
2.20 Investment. Buyer Shares acquired by them are being acquired by them
for their account for investment, and they will not sell or otherwise dispose of
Buyer Shares except in compliance with the Securities Act of 1933, as amended
(the "1933 Act"), the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder, applicable "blue sky" laws and the
terms of this Agreement.
Prior to making any disposition of Buyer Shares, Sellers will give
written notice to Buyer describing the manner of such proposed disposition.
Sellers will not effect such proposed disposition until either (a) Buyer has
notified them that, in the opinions of Buyer counsel, no registration of Buyer
Shares under the 1933 Act or registration or qualification under the
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securities or "blue sky" laws of any state is required in connection with such
proposed disposition, or (b) a registration statement under the 1933 Act
covering such proposed disposition has been filed by Buyer with the Commission
and has become effective under the 1933 Act and compliance with applicable state
securities or "blue sky" laws has been effected.
Sellers are familiar with Rule 144, as amended, under the 1933 Act,
and they have been advised that Rule 144 is not currently and may not in the
future become available to permit resales by them of Buyer Shares. Sellers
understand that, to the extent that Rule 144 is not available, they will be
unable to sell Buyer Shares without either registration under the 1933 Act or
the existence of another exemption from such registration requirement. Sellers
acknowledge that Buyer has no obligation to Sellers to register Buyer Shares.
2.21 Authority. Sellers have full right, power and authority to enter
into this Agreement.
2.22 Related Party Transactions. Except as set forth on Schedule 2.22 and
except for compensation to regular employees of FPS, no current or former
affiliate of FPS, any of its subsidiaries or any associate thereof, is now, or
has been during the last five fiscal years, (i) a party to any transaction or
contract with FPS, (ii) indebted to FPS, or (iii) the direct or indirect owner
of an interest in any person which is a present or potential competitor,
supplier or customer of FPS (other than non-affiliated holdings in publicly held
companies), nor does any such person receive income from any source other than
FPS which should properly accrue to FPS. Except as set forth on Schedule 2.22,
no current or former affiliate of FPS, any of FPS's subsidiaries or any
associate thereof is a guarantor or otherwise liable for any liability
(including indebtedness) of FPS.
2.23 Advisors. Sellers acknowledge and warrant to Buyer that they have
received independent legal and tax advice with respect to this Agreement and the
transactions contemplated hereby and all other documents in connection herewith;
including the Stockholders Agreement. Sellers have obtained such advice to the
extent they deem it appropriate and have otherwise had a full and fair
opportunity to consult with such legal and tax advisors and obtain from Buyer
such information as they have deemed appropriate to consider the advisability of
entering into the foregoing agreements.
2.24 Disclosure. No representation or warranty of Sellers in this
Agreement contains any untrue statement of a known material fact, or fails to
state a known material fact necessary to make the statements contained herein or
therein not misleading as of the date of representation or warranty.
Neither this Agreement, any of the Schedules or Exhibits, nor any
other written material, when viewed separately or together, delivered to Buyer
or any of its respective directors, officers, partners, employees,
representatives or agents contains any untrue statement of a material fact or
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omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading
as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers the following:
3.1 Organization; Power and Authority of Buyer. Buyer is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite power to own all of its property and
assets and to carry on its business as it is now being conducted, and to
execute, perform and deliver this Agreement and related agreements, documents
and instruments referred to herein and to consummate the transactions
contemplated by the foregoing. The execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary action on the part of Buyer, all requisite
consents and approvals have been obtained by Buyer to the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
and this Agreement and such related agreements, documents and instruments are
and will be valid and binding obligations of Buyer, enforceable against Buyer in
accordance with the terms thereof.
3.2 Conflicting Agreements and Instruments. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
in accordance with the terms hereof by Buyer will not, as of the Closing (a)
violate any existing provision of any law or violate any existing decree
applicable to Buyer; (b) conflict with or result in a breach of Buyer's
organizational documents or any other material agreement or instrument to which
Buyer is a party or by which Buyer is bound or subject; (c) constitute a breach
or default of or an acceleration under, or an event that with the passing of
time or giving of notice or both would constitute a breach or default of or
acceleration under, any of the items described in (b) above; or (d) result in
the creation or imposition of any lien, charge, security interest, encumbrance
or claim upon or in any of Buyer's assets.
3.3 Filings, Consents and Approvals. Except as set forth on Schedule
3.3, the execution, performance and delivery by Buyer of this Agreement and the
related agreements, instruments and documents referred to herein, and the
consummation of the transactions contemplated by the foregoing, do not require
the consent, approval or action of, or any filing with, or notice to, any
corporation or any person, firm or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
3.4 Litigation. Except as set forth on Schedule 3.4, Buyer is not bound
by any order, judgment, stipulation or consent decree of any court or other
governmental authority, and there is not pending or threatened any suit, action,
employee controversy, or legal, administrative,
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arbitration, or other proceeding or governmental investigation, which would
affect the transactions contemplated by this Agreement, nor, to the knowledge of
Buyer is there any basis therefor.
3.5 Contracts and Commitments. Buyer has provided access to Sellers to
complete and accurate copies of all written contracts, leases, agreements and
other commitments to which Buyer is a party and all other documents it may
request to deliver. As of Closing, Buyer will not be in default under, and will
not have committed any act that with the passing of time or the giving of notice
would constitute a default under, any of such agreements and will be in full
force and effect in accordance with their terms.
3.6 Copyrights, Etc. All copyrights, trademarks, trade names, patents
and other similar rights used by Buyer are valid, in good standing and
uncontested. Buyer will, upon consummation of this Agreement, possess adequate
rights, licenses and other authority to use all the copyrights, trademarks,
trade names, patents and other similar rights necessary to conduct its
operations as now conducted.
3.7 Capitalization of the Buyer and its Subsidiaries.
(a) Immediately upon consummation of the Closing, the authorized
capital stock of the Buyer shall consist of :
(i) 4,000,000 shares of preferred stock ("Preferred Stock")
of which 3,750,000 shares will be designated Series A Preferred Stock, all of
which designated shares will be issued and outstanding, fully paid and
nonassessable, with no liability attaching to the ownership thereof; and
(ii) 12,000,000 shares of the Buyer's Common Stock, of which
(A) 5,768,000 shares will be issued and outstanding, fully paid and
nonassessable, (B) 3,750,000 shares will be reserved for issuance upon
conversion of the Preferred Shares, and (C) a total of 500,000 shares will be
reserved for issuance upon exercise of employee options.
(b) Immediately upon consummation of the Closing, the authorized
capital stock of its wholly-owned subsidiary, Parents and Children Together,
Inc., shall consist of 2,100 shares of common stock, no par value per share, of
which all of the shares that will be outstanding will be owned by the Buyer and
be fully paid and nonassessable.
(c) Except as contemplated by or disclosed in the Eos Financing
documents, there are, and immediately after consummation of the Closing there
will be, no (i) outstanding warrants, options, agreements, convertible
securities or other commitments or instruments pursuant to which the
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Buyer or any of its subsidiaries is or may become obligated to issue or sell any
shares of its capital stock or other securities or (ii) preemptive or similar
rights to purchase or otherwise acquire shares of the capital stock or other
securities of the Buyer or any of its subsidiaries.
3.8 Licenses; Permits. Buyer has all licenses and permits (as the case
may be) necessary to operate its business and to conduct all related business in
the ordinary course, and such licenses and permits are in full force and effect.
No material violations are outstanding in respect of such licenses or permits,
or any of them, and there is pending no proceeding to revoke or limit any of
them. Buyer is in compliance in all material respects with the applicable laws
and regulations governing the operation of its business and the assets owned by
it.
3.9 Unions. Buyer is not a party to any contract with a labor union and
no election or proceeding relating to labor relations is pending or threatened.
3.10 Taxes. All federal, state, county and local income, gross receipts,
excise, property, franchise, license, sales, transaction privilege, withholding
and other taxes have been timely paid and appropriate returns have been timely
filed. There are no tax liens on any of its assets and there are not pending,
asserted or threatened against Buyer any tax examination or audit or tax claims.
3.11 Accuracy of Representations. No representation or warranty of Buyer
in this Agreement contains any untrue statement of a known material fact, or
fails to state a known material fact necessary to make the statements contained
herein or therein not misleading as of the date of representation or warranty.
Neither this Agreement, any of the Schedules or Exhibits, nor
any other written material, when viewed separately or together, delivered to
Sellers contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading as of the date hereof.
ARTICLE IV
MUTUAL COVENANTS AND WARRANTIES
4.1 Broker. The parties hereto hereby represent and warrant to the other
that no person has provided services as a broker, agent or finder in this
transaction. The parties shall each indemnify and hold harmless the other from
and against any and all other claims or expenses, including attorneys' fees,
asserted by any other person purporting to act on behalf of the respective
indemnitor as a broker, agent or finder in connection with this transaction.
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4.2 Directorship. Buyer agrees to use its best efforts to cause its
Board of Directors, promptly following and effective as of the date of this
Agreement, to elect Little as a Director.
4.3 Further Assurances. The parties agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents and to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
ARTICLE V
INDEMNIFICATION AND RELATED MATTERS
5.1 Indemnification by Sellers. Sellers, in proportion to their Sharing
Ratios, jointly and severally, agree to indemnify and hold harmless Buyer and
its directors, officers and employees against and in respect of any and all
loss, liability, obligation, damage, deficiency or expense resulting from (a)
any misrepresentation, breach of any warranty or non-fulfillment of any
agreement of Sellers under the terms of this Agreement or in any agreement or
certification furnished pursuant hereto; and (b) any actions, suits,
proceedings, demands, judgments, costs and reasonable legal, investigatory and
other expenses incident to any of the foregoing (regardless of whether, in the
case of third party actions, suits or proceedings, Sellers may have a
meritorious defense). The maximum limit for the indemnification by Sellers
provided herein shall not exceed the aggregate amount of cash received by
Sellers pursuant to the provisions of paragraphs 1.2.1. (cash portion thereof),
1.2.2 and 1.2.3.
5.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Sellers against and in respect of any and all loss, liability,
obligation, damage, deficiency or expense resulting from (a) any
misrepresentation, breach of any warranty or non-fulfillment of any agreement of
Buyer under the terms of this Agreement or in any statement or certification
furnished pursuant hereto; and (b) any actions, suits, proceedings, demands,
judgments, costs and reasonable legal, investigatory and other expenses incident
to any of the foregoing (regardless of whether, in the case of third party
actions, suits or proceedings, Buyer may have a meritorious defense).
5.3 Procedure. Promptly after receipt, by any person or persons (as the
case may be) that is or are entitled to indemnification under this Article V
(each, an "Indemnified Party"), of notice of the commencement of any action in
respect of which the Indemnified Party will seek indemnification hereunder, the
Indemnified Party shall notify the person obligated to provide such
indemnification (the "Indemnifying Party") thereof in writing, but any failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability that it may have to the Indemnified Party under this Article
V, except to the extent that the Indemnifying Party is prejudiced by the failure
to give such notice. The Indemnifying Party shall be entitled to participate in
the
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defense of such action and to assume control of such defense with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in
the defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim;
(b) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement of such
claim or ceasing to defend against such claim, if pursuant to or as a result of
such settlement or cessation, injunctive or other equitable relief would be
imposed against the Indemnified Party or the Indemnified Party would be
adversely affected thereby;
(c) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to the Indemnified Party
of a release from all liability in respect of such claim; and
(d) the Indemnifying Party shall not be entitled to control the
defense of any claim unless, within 15 days after receipt of such written notice
from the Indemnified Party, the Indemnifying Party confirms in writing its
responsibility for such defense.
After written notice by the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of any such action in
accordance with the foregoing, (i) the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, and (ii) as long as
the Indemnifying Party is reasonably contesting such action in good faith, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge the claim underlying such action without the
Indemnifying Party's prior written consent. If the Indemnifying party elects to
so participate in or assume the defense of any such action, the Indemnified
Party shall cooperate with the Indemnifying Party in connection with the
defense. If the Indemnifying Party does not assume control of the defense of
such claim as provided in this Article V, the Indemnified Party shall have the
right to defend and/or settle such claim in such manner a it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Article V. The reimbursement of fees, costs and expenses
required by this Article V shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received or expenses
incurred.
5.4 Related Matters. In the event that an Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article V, an
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the claims to which such
indemnification relates. In the event that an Indemnified Party becomes
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entitled to any indemnification from an Indemnifying Party, such indemnification
shall be made in cash upon demand.
ARTICLE VI
GENERAL PROVISIONS
6.1 Headings, Construction. The headings in this Agreement are provided
for convenience only and will not affect its construction or interpretation. All
references to "Article", "Section" or "Sections" refer to the corresponding
Article, Section or Sections of this Agreement. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
6.2 Entire Agreement. This Agreement constitutes the sole and entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior arrangements or understandings with respect thereto; and
there are no express or implied restrictions, agreements, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth herein.
6.3 Schedules, Exhibits. All schedules and exhibits attached hereto are
hereby incorporated herein by this reference.
6.4 Amendment. This Agreement may be amended or modified and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed on behalf of the parties hereto
or, in the case of waiver, by the party waiving compliance.
6.5 Waiver. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner effect the
right to enforce that provision or any other provision hereof at any time
thereafter.
6.6 Expenses. The parties hereto shall bear their respective costs and
expenses incurred in connection with the negotiation, execution and performance
of this Agreement without obligation to pay or contribute to the expenses
incurred by any other party.
6.7 Notices. Except as otherwise provided herein, all notices and other
communications required under the terms and provisions of this Agreement shall
be in writing and shall be deemed to have been duly given when delivered by hand
or received by overnight courier, telex, telecopier, telegram or registered
mail, return receipt requested, addressed as follows:
If to the Buyer: The Providence Service Corporation
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000 X. Xxxxxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxxx XxXxxxxx
Fax: (000) 000-0000
With Copy to: Xxxxxxxx X. Xxxxxx, Esq.
XXXXXX, XXXXXXXX & XXXX
000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
If to Sellers: Xxxxxxx X. Xxxxxx
0000 Xxxxxx Xxxxx Xx.
Xxxxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxxx and/or Xxxxxxx Xxxxxxx
0000 Xxxxxx Xxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxx Xxxxx
00000 Xxxxx Xxxxx
Xxxxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
With Copy to: Xxxxx Xxxxx, Esq.
XXXXX & XXXXX
000 Xxxxxxxx Xxxx Xx., Xxxxx 000
Xxxxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
If to any of the foregoing parties, at such other address as such party
shall from time to time designate in writing to the other parties hereto.
In the event any notice shall be given by telex, telecopier or telegram,
the party giving such notice shall confirm such notice by writing delivered by
hand or overnight courier provided, however, that for all purposes hereunder
notice shall be deemed effective at the time given by telex, telecopier or
telegram.
6.8 Assignments, Heirs, Successors, and no Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties except that
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Buyer may assign any of its rights under this Agreement to any Subsidiary of
Buyer. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors, heirs
and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors, heirs and assigns.
6.9 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
6.10 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
6.11 Attorneys' Fees. In the event of any action arising out of this
Agreement, the prevailing party shall be entitled to recover its costs, expenses
and reasonable attorneys' fees incurred in connection with the dispute from the
other party.
6.12 Governing Law. This Agreement will be governed by the laws of the
State of Arizona without regard to its conflicts of laws principles.
6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
THE PROVIDENCE SERVICE CORPORATION
By: /s/ Xxxxxxxx XxXxxxxx
---------------------------------
Its President and Chief
Executive Officer
FAMILY PRESERVATION SERVICES, INC.
By: /s/ R. P. Little
---------------------------------
Its President
/s/ Xxxxxxx X. Xxxxxx
---------------------------------
XXXXXXX X. XXXXXX
/s/ Xxxxxx Xxxxxxx
---------------------------------
XXXXXX XXXXXXX
/s/ Xxxxxxx Xxxxxxx
---------------------------------
XXXXXXX XXXXXXX
/s/ Xxxxx Xxxxx
---------------------------------
XXXXX XXXXX
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