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EXHIBIT 4.4
PREFERRED STOCK PURCHASE AGREEMENT
This is a PREFERRED STOCK PURCHASE AGREEMENT, dated as of March
10,
2004 (as the same may be amended,
supplemented or modified in accordance with
the terms hereof, this "Agreement"), by and
between Res-Care, Inc., a Kentucky
corporation (the "Company") and Onex
Partners LP, a Delaware limited liability
company, Onex American Holdings III, LLC, a
Delaware limited liability company,
Onex U.S. Principals LP, a Delaware limited
liability, Res-Care Executive
Investo LLC, a Delaware limited liability
company (collectively, the
"Purchaser").
RECITALS
A. The
Company proposes to issue and sell to the Purchaser, and
the Purchaser proposes to buy, for an
aggregate purchase price of
$50,500,000.00, an aggregate of 48,095
shares of Series A Convertible Preferred
Stock, without par value (the "Series A
Preferred Stock").
B. A
condition to the Purchaser's obligation to close the
transactions contemplated by this Agreement
is the closing of the acquisition by
the Purchaser of not less than 3,700,000
shares of Company Common Stock pursuant
to certain Shareholder Stock Purchase
Agreements (as defined below).
THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS:
ARTICLE 1
DEFINITIONS
1.1
Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following
terms shall have the meanings set
forth below:
"Acquisition Proposal" has the meaning assigned to such term in
Section
5.1.
"Actions" means actions, causes of action, suits, claims,
complaints,
demands, litigations or legal,
administrative or arbitral proceedings.
"Affiliate" of any specified Person means any other Person directly
or
indirectly controlling or controlled by or
under direct or indirect common
control with such specified Person and, for
purposes of Section 3.21 only, with
respect to any individual, the spouse,
parent, sibling, child, step-child,
grandchild, niece or nephew of such
individual or the spouse thereof and any
trust for the benefit of such Stockholder
or any of the foregoing. For the
purposes of this definition, "control" when
used with respect to any specified
Person means the power to direct the
management and policies of such Person,
whether through the ownership of Voting
Securities, by contract or otherwise;
and the terms "controlling" and
"controlled" have meanings correlative to the
foregoing.
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"Agreement" has the meaning assigned to such term in the
Preamble.
"Alternative Transaction Notice" has the meaning assigned to such
term
in Section 10.1(a)(v).
"Approved Budget" shall mean the budget approved by the Company's
Board
of Directors during a January 14 & 15,
2004 meeting.
"Articles of Amendment" means the articles of amendment setting
forth
the designation, powers and preferences of
the Series A Preferred Stock,
substantially in the form attached hereto
as Exhibit A.
"Articles of Incorporation" means the articles of incorporation of
the
Company, as the same may have been amended
and in effect as of the Closing Date.
"associate" has the meaning assigned in Rule 12b-2 promulgated by
the
Commission under the Exchange Act.
"beneficially own" with respect to any securities means having
"beneficial ownership" of such securities
as determined pursuant to Rule 13d-3
under the Exchange Act, as in effect on the
date hereof.
"Benefit Plans and Arrangements" means all employee benefit
plans
providing benefits to any current or former
employee or director of the Company
or any of its Subsidiaries or any
beneficiary or dependent thereof that are
sponsored or maintained by the Company or
any of its Subsidiaries or ERISA
Affiliates or to which the Company or any
of its Subsidiaries or ERISA
Affiliates contributes or is obligated to
contribute, including without
limitation all employee welfare benefit
plans within the meaning of Section 3(1)
of ERISA, all employee pension benefit
plans within the meaning of Section 3(2)
of ERISA, and all bonus, incentive,
deferred compensation, vacation, stock
purchase, stock option, restricted stock,
severance, termination pay and fringe
benefit plans, except for Company Options
listed in Schedule 3.6.
"Board of Directors" means either the board of directors of the
Company
or any duly authorized committee
thereof.
"Board Recommendation" has the meaning assigned to such term in
Section
6.1(b).
"Business Day" means any day other than (i) a Saturday or Sunday
or
(ii) a day on which banking institutions in
New York City are authorized or
obligated by law or executive order to
remain closed.
"Bylaws" means the bylaws of the Company, as the same may have
been
amended and in effect as of the Closing
Date.
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"Change in the Board Recommendation" has the meaning assigned to
such
term in Section 6.1(b).
"Claims" means losses, claims, damages or liabilities, joint or
several, Actions or proceedings (whether
commenced or threatened).
"Closing" has the meaning assigned to such term in Section 2.3.
"Closing Date" has the meaning assigned to such term in Section
2.3.
"Code" means the Internal Revenue Code of 1986, as amended from
time to
time, and the rules and regulations
promulgated thereunder from time to time.
"Commission" means the Securities and Exchange Commission or
any
similar agency then having jurisdiction to
enforce the Securities Act.
"Common Stock" means the Common Stock, no par value, of the
Company.
"Company" has the meaning assigned to such term in the
Preamble.
"Company Agreements" has the meaning assigned to such term in
Section
3.1.
"Company Options" has the meaning assigned to such term in Section
3.6.
"Contemplated Transactions" means the transactions contemplated by
this
Agreement and the exhibits hereto,
including without limitation the issuance,
purchase and sale of the Series A Preferred
Stock and the adoption of the
Articles of Amendment.
"Contractual Obligation" means, as to any Person, any
agreement,
undertaking, contract, indenture, mortgage,
deed of trust, credit agreement,
note, evidence of indebtedness or other
instrument, written or otherwise, to
which such Person is a party or by which it
or any of its property is bound.
"Conversion Shares" has the meaning assigned to such term in
Section
4.5(c).
"Decrees" has the meaning assigned to such term in Section
3.10(a).
"Employment Agreement" means a contract, offer letter or agreement
of
the Company or any of its Subsidiaries with
or addressed to any individual who
is rendering or has rendered services
thereto as an employee or consultant,
pursuant to which the Company or any of its
Subsidiaries has any actual or
contingent liability or obligation in
excess of $200,000 to provide compensation
and/or benefits in consideration for past,
present or future services.
"Environmental Claim" means any claim, action, cause of action,
investigation of which the Company or any
of its Subsidiaries has knowledge, or
written notice by any Person to the Company
or any of its Subsidiaries alleging
potential liability (including, without
limitation,
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potential liability for investigatory
costs, cleanup costs, governmental
response costs, natural resources damages,
property damages, personal injuries,
or penalties) arising out of, based on or
resulting from (a) the presence, or
release into the environment, of any
Material of Environmental Concern at any
location, or (b) circumstances forming the
basis of any violation or liability,
or alleged violation or liability, of any
Environmental Law.
"Environmental Laws" means all Federal, state, local, and
foreign
statute, law, regulation, ordinance, rule,
common law, judgment, order, decree
or other governmental requirement or
restriction relating to pollution or
protection of human health or the
environment (including, without limitation,
ambient air, surface water, ground water,
land surface or subsurface strata and
natural resources), including, without
limitation, laws relating to emissions,
discharges, releases or threatened releases
of Materials of Environmental
Concern, or otherwise relating to the
manufacture, processing, distribution,
use, treatment, storage, disposal,
transport or handling of Materials of
Environmental Concern; provided that
Environmental Laws does not include the
Occupational Safety and Health Act or any
other similar Requirement of Law
governing worker safety or workplace
conditions.
"Equitable Principles" means applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
transfer and other similar laws affecting
creditors' rights generally from time to
time in effect and to general
principles of equity, regardless of whether
in a proceeding at equity or at law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended from time to time, and the
regulations promulgated thereunder from time
to time.
"ERISA Affiliate" means each entity which is a member of a
"controlled
group of corporations," under "common
control" or an "affiliated service group"
with the Company or its Subsidiaries within
the meaning of Sections 414(b), (c)
or (m) of the Code, or required to be
aggregated with the Company or its
Subsidiaries under Section 414(o) of the
Code, or is under "common control" with
the Company or its Subsidiaries, within the
meaning of Section 4001(a)(14) of
ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended,
and the rules and regulations promulgated
thereunder by the Commission from time
to time.
"Existing Plans" has the meaning assigned to such term in Section
3.6.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Authority" means the government of any nation,
state,
city, locality or other political
subdivision of any thereof, and any entity
exercising executive, legislative,
judicial, regulatory or administrative
functions of or pertaining to government or
any international regulatory body or
self regulatory organization having or
asserting jurisdiction over a Person, its
business or its properties.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of
1976, as amended, and the rules and
regulations promulgated thereunder by the
Federal Trade Commission from time to
time.
"Intellectual Property" has the meaning assigned to such term
in
Section 3.20.
"KBCA" means the Kentucky Business Corporation Act, KRS Chapter
271B.
"knowledge of the Company" means the actual knowledge of the
chairman
or any executive officer of the Company or
any of its Subsidiaries.
"Leases" has the meaning assigned to such term in Section 3.15.
"Licenses" has the meaning assigned to such term in Section
3.10(b).
"Lien" means any mortgage, deed of trust, pledge,
hypothecation,
assignment, encumbrance, lien (statutory or
other), voting or other restriction,
preemptive right or other security interest
of any kind or nature whatsoever.
"Material Adverse Effect" means any material adverse change in
or
affecting (i) the business, properties,
assets, liabilities, operations, results
of operations (financial or otherwise), or
condition of the Company and its
Subsidiaries taken as a whole (ii) the
ability of the Company to substantially
accomplish its budget for 2004 (as approved
by the Board of Directors on January
14 & 15, 2004) or (iii) the ability of
the Company or any of the Company's
Subsidiaries to consummate the Contemplated
Transactions; provided, however,
that none of the following shall be deemed
in themselves, either alone or in
combination, to constitute, and none of the
following shall be taken into
account in determining whether there has
been, a Material Adverse Effect: (A)
any change in the market price or trading
volume of the capital stock of the
Company after the date hereof, (B) any
changes, events or occurrences in the
United States securities markets which are
not specific to the Company, (C) any
changes, events, developments or effects
resulting from general economic
conditions, which are not specific to the
Company or its Subsidiaries and which
do not affect the Company or its
Subsidiaries in a materially disproportionate
manner, (D) any changes resulting from the
execution or announcement of this
Agreement and the Contemplated
Transactions, or (E) any changes, events or
occurrences arising out of acts of God,
force majeure, terrorist attacks or acts
of war, other than, with respect to the
exceptions set forth in (A) through (E)
above act of God, force majeure, terrorist
attacks or acts of war which are
directed at the Company or cause the US
financial markets to close for two
consecutive trading days.
"Materials of Environmental Concern" means chemicals,
pollutants,
contaminants, industrial, toxic or
hazardous wastes, substances or constituents,
petroleum and petroleum products (or any
by-product or constituent thereof),
asbestos or asbestos-containing materials,
lead or lead-based paints or
materials, PCBs, or radon, or any other
materials that are regulated by, or may
form the basis of liability under, any
Environmental Law.
"NASD" means the National Association of Securities Dealers,
Inc.
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"NASDAQ" means The Nasdaq Stock Market Inc.'s National Market
System.
"NYSE" means the New York Stock Exchange.
"Person" means a legal person, including any individual,
corporation,
estate, partnership, joint venture,
association, joint-stock company, company,
limited liability company, trust,
unincorporated association, Governmental
Authority, or any other entity of whatever
nature.
"Preferred Stock" has the meaning assigned to such term in Section
3.6.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a
prospectus that discloses
information previously omitted from a
prospectus filed as part of an effective
registration statement in reliance upon
Rule 430A promulgated under the
Securities Act), as amended or supplemented
by any prospectus supplement, with
respect to the terms of the offering of any
portion of the Registrable
Securities covered by such Registration
Statement and all other amendments and
supplements to such prospectus, including
post-effective amendments, and all
material incorporated by reference or
deemed to be incorporated by reference in
such prospectus.
"Proxy Statement" has the meaning assigned to such term in
Section
6.1(a).
"Purchase Price" has the meaning assigned to such term in Section
2.1.
Purchaser" has the meaning assigned to such term in the
Preamble.
Qualified Acquisition Proposal" has the meaning assigned to such
term
in Section 5.2.
Registrable Securities" means the Series A Preferred Stock, the
Common
Stock and other securities, if any,
issuable upon conversion of the Series A
Preferred Stock, any securities issued
pursuant to Purchaser's rights under
Section 9.3, and any other securities
included in the term Registrable
Securities in the Registration Rights
Agreement, in each case, until any such
security is effectively registered under
the Securities Act and disposed of in
accordance with the Registration Statement
covering it, or is distributed to the
public by the holder thereof pursuant to
Rule 144.
"Registration Rights Agreement" shall have the meaning assigned to
such
term in Section 9.1.
"Registration Statement" means any registration statement of
the
Company under the Securities Act that
covers any of the Registrable Securities
pursuant to the provisions of this
Agreement, including the related Prospectus,
all amendments and supplements to such
registration statement (including
post-effective amendments), all exhibits
and all material incorporated by
reference or deemed to be incorporated by
reference in such registration
statement.
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"Required Vote" has the meaning assigned to such term in
Section
3.24(c).
"Requirement of Law" means, as to any Person, the articles of
incorporation and bylaws or other
organizational or governing documents of such
Person, and any law (including, without
limitation, laws related to Taxes and
Environmental Laws), treaty, rule,
regulation, ordinance, qualification,
standard, license or franchise or
determination of an arbitrator or a court or
other Governmental Authority, including the
NYSE or NASD or any national
securities exchange or automated quotation
system on which the Common Stock is
listed or admitted to trading, in each case
applicable to, or binding upon, such
Person or any of its property or to which
such Person or any of its property is
subject or pertaining to any or all of the
transactions contemplated hereby.
"Rule 144" means Rule 144 promulgated by the Commission under
the
Securities Act, as such Rule may be amended
from time to time, or any similar
rule or regulation hereafter adopted by the
Commission.
"Sarbanes-Oxley Act" has the meaning assigned to such term in
Section
3.7(a)
"SEC Reports" means each registration statement, report, proxy
statement or information statement (other
than preliminary materials) or other
documents filed by the Company or any of
its Subsidiaries with the Commission
pursuant to the Securities Act or the
Exchange Act or the rules and regulations
thereunder since December 31, 1998, each in
the form (including exhibits and any
amendments) filed with the Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the
rules and regulations promulgated
thereunder by the Commission from time to
time.
"Senior Credit Facility" means the Company's $135,000,000 senior
credit
facility syndicated by Bank One Capital
Markets.
"Series A Preferred Stock" has the meaning assigned to such term in
the
Recitals hereto.
"Shareholder Stock Purchase Agreements" mean the agreements
attached as
Exhibit D to this Agreement, relating to
the purchase by the Purchaser of
3,700,000 shares in the aggregate of the
Company's Common Stock.
"Stockholders
Meeting" has the meaning assigned to such term in Section
6.1(b).
"Subsidiary" of any specified Person means any other Person more
than
50% of the outstanding voting securities of
which is owned or controlled,
directly or indirectly, by such specified
Person or by one or more other
Subsidiaries of such specified Person, or
by such specified Person and one or
more other Subsidiaries of such specified
Person. For the purposes of this
definition, "voting securities" means
securities which ordinarily have voting
power for the election of directors (or
other Persons having similar functions),
whether at all times or only so long as no
senior class of securities has such
voting power by reason of any contingency,
or other ownership interests
ordinarily constituting a majority voting
interest.
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"Superior Proposal" has the meaning assigned to such term in
Section
6.1(b).
"Tax" or "Taxes" means any taxes, assessment, duties, fees,
levies,
imposts, deductions, or withholdings,
including income, gross receipts, ad
valorem, value added, excise, real or
personal property, asset, sales, use,
license, payroll, transaction, capital, net
worth and franchise taxes, estimated
taxes, withholding, employment, social
security, workers' compensation, utility,
severance, production, unemployment
compensation, occupation, premium, windfall
profits, transfer and gains taxes, or other
governmental charges of any nature
whatsoever, imposed by any taxing authority
of any government or country or
political subdivision of any country, and
any liabilities with respect thereto,
including any penalties, additions to tax,
fines or interest thereon and
includes any liability for Taxes of another
Person by contract, as a transferee
or successor, under Treasury Regulation
1.1502-6 or analogous state, local or
foreign Requirement of Law provision or
otherwise.
"Transaction Expenses" has the meaning assigned to such term in
Section
12.2(b).
"Voting
Agreement" means the agreement between the Purchaser and Ronald
G. Geary, in the form of the agreement
attached hereto as Exhibit B.
"Voting Securities" mean any class or classes of stock of the
Company
pursuant to which the holders thereof have
the general power under ordinary
circumstances to vote with respect to any
matter presented to vote by the
shareholders.
ARTICLE 2
PURCHASE AND SALE OF SERIES A PREFERRED STOCK
2.1 Purchase
and Sale of Series A Preferred Stock. Subject to the
terms set forth herein and in reliance upon
the representations set forth below,
the Company shall issue and sell to the
Purchaser and the Purchaser shall
purchase from the Company 48,095 shares of
Series A Preferred Stock, for an
aggregate purchase price of $50,500,000.00
(the "Purchase Price").
2.2 Articles
of Amendment. The Series A Preferred Stock shall have
the powers, rights and other terms set
forth in the form of Articles of
Amendment attached hereto as Exhibit A.
2.3 Closing.
The issuance, sale and purchase of the Series A
Preferred Stock shall take place at a
closing (the "Closing") to be held at the
offices of Frost Brown Todd LLC, 400 West
Market Street, 32nd Floor, Louisville,
Kentucky, at 10:00 A.M., local time, on the
Closing Date. On the first Business
Day after the conditions set forth in
Sections 7.1 and 8.1 (other than those to
be satisfied on the Closing Date, which
shall be satisfied or waived on such
date) have been satisfied or waived by the
party entitled to waive such
conditions or such later date and time as
the parties may agree in writing (the
"Closing Date"), (A) the Purchaser shall
(w) deliver to the Company by wire
transfer in immediately available funds to
an account or accounts designated in
writing by the Company to the Purchaser on
the Closing Date, funds in an amount
equal to the Purchase Price and (x) make or
cause to be made the deliveries set
forth in Section 8.1 and (B) the Company
shall (y) issue and deliver to the
Purchaser all of the shares of the
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Series A Preferred Stock registered in the
name of the Purchaser, and (z) make
or cause to be made the deliveries set
forth in Section 7.1.
2.4
Transaction Fee. At the Closing, the Company shall pay to Onex
Partners Manager LP a $500,000.00
transaction fee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as of
the
date of this Agreement as follows:
3.1 Corporate
Existence and Power. The Company (a) is a
corporation duly incorporated, validly
existing and in good standing under the
laws of the Commonwealth of Kentucky; (b)
has all requisite corporate power and
authority to own and operate its
properties, to lease the properties it operates
as lessee and to carry on its business as
currently conducted and currently
contemplated to be conducted; and (c) has
(or will have, as applicable) all
requisite corporate power and authority to
execute, deliver and perform its
obligations under this Agreement, the
Registration Rights Agreement, and the
Articles of Amendment (collectively, the
"Company Agreements"). The Company is
duly qualified to do business as a foreign
corporation in, and is in good
standing under the laws of, each
jurisdiction in which the conduct of its
business or the nature of the property
owned requires such qualification except
where the failure to be so qualified or in
good standing, individually or in the
aggregate, has not had and would not
reasonably be expected to have a Material
Adverse Effect.
3.2
Subsidiaries. Except as set forth in the SEC Reports filed
with the Commission prior to the date
hereof or as set forth on Schedule 3.2,
the Company has no Subsidiaries and no
interest or investments in any
corporation, partnership, limited liability
company, trust or other entity or
organization. Each Subsidiary listed on
Schedule 3.2 or the SEC Reports has been
duly organized, is validly existing and in
good standing under the laws of the
jurisdiction of its organization, has all
requisite corporate (or, in the case
of an entity other than a corporation,
other) power and authority to own and
operate its properties, to lease the
properties it operates as lessee and to
carry on its business as currently
conducted and currently contemplated to be
conducted, and is duly qualified to
transact business and is in good standing in
each jurisdiction in which the conduct of
its business or the nature of its
properties requires such qualification
except where the failure to be so
qualified or in good standing, individually
or in the aggregate, has not had and
would not reasonably be expected to have a
Material Adverse Effect. Except as
set forth in the SEC Reports filed with the
Commission prior to the date hereof
or as set forth on Schedule 3.2 or in
connection with the pledge of assets to
the Company's senior lender, all of the
issued and outstanding stock (or
equivalent interests) of each Subsidiary
set forth on Schedule 3.2 or the SEC
Reports has been duly authorized and
validly issued, is fully paid and
nonassessable and is owned by the Company
free and clear of any Liens and there
are no rights, options or warrants
outstanding or other agreements to acquire
shares of stock (or equivalent interests)
of such Subsidiary. Schedule 3.2 or
the SEC Reports sets forth the
capitalization of
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each of the Subsidiaries, including the
amount and kind of equity interests held
by the Company in the Subsidiary and the
percentage interest represented
thereby.
3.3 Corporate
Authorization; No Contravention. The execution,
delivery and performance by the Company of
each Company Agreement and the
consummation of the Contemplated
Transactions, (a) subject to the satisfaction
of the matters described in Section
3.24(c), have been duly authorized by all
necessary corporate action of the Company;
(b) do not contravene the terms of
the Articles of Incorporation or Bylaws or
the organizational documents of its
Subsidiaries; (c) do not entitle any Person
to exercise any statutory or
contractual preemptive rights to purchase
shares of capital stock or any equity
interest in the Company and (d) subject to
receipt or satisfaction of the
approvals, consents, exemptions,
authorizations or other actions, notices or
filings set forth on Schedule 3.4 or the
SEC Reports, and except as may result
from any facts or circumstances relating
solely to the Purchaser or its
Affiliates, do not violate or result in any
breach or contravention of, a
default under, or an acceleration of any
obligation under or the creation (with
or without notice, lapse of time or both)
of any Lien under, result in the
termination or loss of any right or the
imposition of any penalty under any
Contractual Obligation of the Company or
its Subsidiaries or by which their
respective assets or properties are bound
or any Requirement of Law applicable
to the Company or its Subsidiaries or by
which their respective assets or
properties are bound except for any of the
foregoing that, individually or in
the aggregate, have not had and would not
reasonably be expected to have a
Material Adverse Effect. Except as set
forth in the SEC Reports filed with the
Commission prior to the date hereof or as
set forth on Schedule 3.3, no event
has occurred and no condition exists which
(upon notice or the passage of time
or both) would constitute, or give rise to:
(i) any breach, violation, default,
change of control or right to cause the
Company to repurchase or redeem under,
(ii) any Lien on the assets of the Company
or any of its Subsidiaries under,
(iii) any termination right of any party,
or any loss of any right or imposition
of any penalty, under or (iv) any change or
acceleration in the rights or
obligations of any party under, any
material Contractual Obligation of the
Company or its Subsidiaries (or by which
their respective assets or properties
are bound) or the Articles of Incorporation
or Bylaws or the organizational
documents of the Company's Subsidiaries
except for any of the foregoing that,
individually or in the aggregate, would not
be material to the Company and its
Subsidiaries taken as a whole.
3.4
Governmental Authorization; Third Party Consents. Except for
approval under the HSR Act, as set forth in
the SEC Reports filed with the
Commission prior to the date hereof, the
obtaining of the required Company
shareholder approvals, or as set forth on
Schedule 3.4, no approval, consent,
qualification, order, exemption,
authorization or other action by, or notice to,
or filing with, any Governmental Authority,
or any other Person in respect of
any Requirement of Law, Contractual
Obligation or otherwise, and no lapse of a
waiting period under a Requirement of Law,
is necessary or required in
connection with the execution, delivery or
performance (including, without
limitation, the issuance, sale and delivery
of the Series A Preferred Stock) by
the Company, or enforcement against the
Company, of the Company Agreements or
the consummation of the Contemplated
Transactions except for any of the
foregoing that, if not obtained, given or
made, would not, individually or in
the aggregate, reasonably be expected to
have a Material Adverse Effect.
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3.5 Binding
Effect. Each of the Company Agreements has been (or
will, as of the Closing, be, as applicable)
duly authorized, executed and
delivered by the Company and, subject to
Equitable Principles, constitutes (or
will, as of the Closing, constitute, as
applicable) the legal, valid and binding
obligation of the Company enforceable
against the Company in accordance with its
terms.
3.6
Capitalization of the Company and its Subsidiaries. The
authorized stock of the Company consists of
(i) 40,000,000 shares of Common
Stock, no par value and (ii) 1,000,000
shares of preferred stock, no par value
(the "Preferred Stock"). Schedule 3.6 or
the SEC Reports sets forth a true and
correct list of all outstanding rights,
options or warrants to purchase shares
of any class or series of stock of the
Company (collectively, the "Company
Options"), a true and correct list of each
of the Company's stock option,
incentive, purchase or other plans pursuant
to which options or warrants to
purchase stock of the Company may be issued
(collectively, the "Existing
Plans"), and the Company's issued and
outstanding Common Stock and Common Stock
reserved or subject to issuance upon the
exercise of outstanding Company Option.
As of the date hereof, no shares of
Preferred Stock are issued or outstanding.
Except (1) as set forth in subsection (d)
in the first sentence of this Section
3.6, (2) for shares of Common Stock issued
pursuant to the exercise of
outstanding Company Options, and (3) for
shares of Common Stock issuable upon
conversion of the Series A Preferred Stock,
on the Closing Date there will be no
shares of Common Stock or any other equity
security of the Company issued or
outstanding and no shares of Common Stock
or any other equity security of the
Company or any of its Subsidiaries issuable
upon conversion or exchange of any
security of the Company or any of its
Subsidiaries nor will there be any rights,
options or warrants outstanding or other
agreements to acquire shares of stock
of the Company or any of its Subsidiaries
nor will the Company or any of its
Subsidiaries be contractually obligated to
issue any shares of stock or to
purchase, redeem or otherwise acquire any
of its outstanding shares of stock.
Neither the Company nor any of its
Subsidiaries has created any "phantom stock,"
stock appreciation rights or other similar
rights the value of which is related
to or based upon the price or value of the
Common Stock. Neither the Company nor
any of its Subsidiaries has outstanding
debt or debt instruments providing for
voting rights with respect to the Company
or such Subsidiary to the holders
thereof. No stockholder of the Company or
any of its Subsidiaries or other
Person is entitled to any preemptive or
similar rights to subscribe for shares
of stock of the Company or any of its
Subsidiaries. All of the issued and
outstanding shares of Common Stock are duly
authorized, validly issued, fully
paid, and nonassessable. Except as set
forth in the SEC Reports filed with the
Commission prior to the date hereof or as
set forth on Schedule 3.6, neither the
Company nor any of its Subsidiaries has
granted to any Person the right to
demand or request that the Company or such
Subsidiary effect a registration
under the Securities Act of any securities
held by such Person or to include any
securities of such Person in any such
registration by the Company or such
Subsidiary.
3.7 SEC
Documents; Sarbanes-Oxley Compliance.
(a) The
Company has made available to the Purchaser the
SEC Reports filed with the Commission prior
to the date hereof. The Company and
each of its Subsidiaries have timely filed
each registration statement, report,
proxy statement or information statement
(other than preliminary materials) or
other documents required to be filed by it
with the Commission
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pursuant to the Securities Act or the
Exchange Act or the rules and regulations
thereunder since December 31, 2001. As of
their respective dates, the SEC
Reports (i) were prepared in all material
respects in accordance with the
applicable requirements of the Securities
Act, the Exchange Act, and the rules
and regulations thereunder and complied in
all material respects with the then
applicable accounting requirements, (ii)
did not contain any untrue statement of
a material fact or omit to state a material
fact required to be stated therein
or necessary to make the statements made
therein, in the light of the
circumstances under which they were made,
not misleading, except for those
statements, if any, as have been modified
by subsequent filings with the
Commission prior to the date hereof, and
(iii) with respect to SEC Reports filed
after July 30, 2002, at the time filed
included or were accompanied by the
certifications required by the
Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated thereunder (the
"Sarbanes-Oxley Act") to be filed or
submitted by the Company's principal
executive officer and principal financial
officer (each of which certification was
true and correct and complied with the
Sarbanes-Oxley Act) and otherwise complied
in all material respects with the
applicable requirements of the
Sarbanes-Oxley Act. The financial statements and
other financial information included in
each of the SEC Reports fairly present,
in all material respects, the financial
condition, results of operations and
cash flows of the Company and its
Subsidiaries as of, and for the periods
presented in, the applicable SEC Reports.
Except as set forth in the SEC Reports
filed with the Commission prior to the date
hereof or as set forth on Schedule
3.7, each of the consolidated balance
sheets of the Company and its Subsidiaries
included in or incorporated by reference
into the SEC Reports (including the
related notes and schedules) present
fairly, in all material respects, the
financial position of the Company and its
Subsidiaries as of its date and each
of the consolidated statements of
operations, cash flows and shareholders'
equity of the Company and its Subsidiaries
included in or incorporated by
reference into the SEC Reports (including
any related notes and schedules)
present fairly, in all material respects,
the results of operations and cash
flows of the Company and its Subsidiaries
for the periods set forth, in each
case in conformity with GAAP consistently
applied during the periods involved,
except as may be noted (subject, in the
case of unaudited statements, to those
exceptions as may be permitted by Form 10-Q
of the Commission and to normal
year-end audit adjustments).
(b) The
management of the Company has (i) designed
disclosure controls and procedures to
ensure that material information relating
to the Company, including its consolidated
Subsidiaries, is made known to the
management of the Company by others within
those entities, and (ii) has
disclosed to the Company's outside auditors
and the audit committee of the Board
of Directors (A) any significant
deficiencies in the design or operation of
internal controls which could adversely
affect the Company's ability to record,
process, summarize and report financial
data and have identified for the
Company's outside auditors any material
weaknesses in internal controls and (B)
any fraud, whether or not material, that
involves management or other employees
who have a significant role in the
Company's internal controls. A summary of any
of those disclosures made by management to
the Company's auditors and audit
committee has been furnished to Purchaser.
The Company and each of its
Subsidiaries maintains a system of internal
accounting controls sufficient to
provide reasonable assurance that (i)
transactions are executed in accordance
with management's general or specific
authorizations, (ii) transactions are
recorded as necessary to permit preparation
of financial statements in
conformity with GAAP and to maintain asset
accountability, (iii) access to
assets is permitted only in accordance with
management's general or specific
authorization and (iv) the recorded
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accountability for assets is compared with
the existing assets at reasonable
intervals and appropriate action is taken
with respect to any differences.
(c) Since
December 31, 1998, except as described in the
SEC Reports filed with the Commission prior
to the date hereof, neither the
Company nor any of its Subsidiaries nor, to
the knowledge of the Company, any
director, officer, employee, auditor,
accountant or representative of the
Company or any of its Subsidiaries has
received or otherwise had or obtained
knowledge of any complaint, allegation,
assertion or claim, whether written or
oral, regarding the accounting or auditing
practices, procedures, methodologies
or methods of the Company or any of its
Subsidiaries or their respective
internal accounting controls, including any
complaint, allegation, assertion or
claim that the Company or any of its
Subsidiaries has engaged in questionable
accounting or auditing practices, except
for any of the foregoing that would
not, individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect. No attorney representing
the Company or any of its Subsidiaries,
whether or not employed by the Company or
any of its Subsidiaries, has reported
evidence of a material violation of
securities laws, breach of fiduciary duty or
similar violation by the Company or any of
its officers, directors, employees or
agents to the Board of Directors or any
committee thereof or to any director or
officer of the Company.
(d) Except as
described in the SEC Reports filed with the
Commission prior to the date of this
Agreement, to the knowledge of the Company,
no employee of the Company or any of its
Subsidiaries has provided or is
providing information to any law
enforcement agency regarding the commission or
possible commission of any crime or the
violation or possible violation of any
law, rule, regulation, order, decree or
injunction, except for any of the
foregoing that would not, individually or
in the aggregate, reasonably be
expected to have a Material Adverse
Effect.
3.8 Absence of
Certain Developments. Since December 31, 2003,
except as set forth on Schedule 3.8 and
except as described in the SEC Reports
filed with the Commission prior to the date
hereof (a) each of the Company and
its Subsidiaries has operated in the
ordinary course, and (b) there has occurred
no fact, event, circumstance or development
that, individually or in the
aggregate, has had or would reasonably be
expected to have a Material Adverse
Effect.
3.9 No
Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any material liabilities
or obligations of any nature, whether
or not accrued, contingent or otherwise,
except (a) liabilities or obligations
disclosed or reserved against in the SEC
Reports filed with the Commission prior
to the date hereof, (b) liabilities or
obligations which arose after the last
date of any such SEC Report, in the
ordinary course of business consistent with
past practice that, individually or in the
aggregate, have not had and would not
reasonably be expected to have a Material
Adverse Effect and (c) liabilities
incurred in connection with the
Contemplated Transactions that are not in breach
of this Agreement.
3.10
Compliance with Laws.
(a) Except as
set forth in the SEC Reports filed with the
Commission prior to the date hereof or as
set forth on Schedule 3.10, neither
the Company nor any of its Subsidiaries
13
<PAGE>
in the conduct of its business, is, or
since December 31, 1998, has been, in
violation of any Requirement of Law, or any
judgments, orders, rulings,
injunctions or decrees of a Governmental
Authority (collectively, "Decrees"),
applicable thereto or to the employees
conducting such business, except for
violations that, individually or in the
aggregate, have not had and would not
reasonably be expected to have a Material
Adverse Effect.
(b) The
Company and its Subsidiaries as applicable, have
obtained or made, as the case may be, all
permits, licenses, authorizations,
orders and approvals, and all filings,
applications and registrations with, all
Governmental Authorities ("Licenses"), that
are required to conduct the
businesses of the Company and its
Subsidiaries in the manner and to the full
extent as currently conducted or currently
contemplated to be conducted except
where such failure to obtain or make,
individually or in the aggregate, has not
had and would not reasonably be expected to
have a Material Adverse Effect. None
of such Licenses is subject to any
restriction or condition that limits or would
reasonably be expected to limit in any
material way the full operation of the
Company or its Subsidiaries as currently
conducted or currently contemplated to
be conducted. Each of the Licenses has been
duly obtained, is valid and in full
force and effect, and is not subject to any
pending or threatened proceeding to
limit, condition, suspend, cancel, suspend,
or declare such License invalid.
Neither the Company nor any of its
Subsidiaries is in default in any material
respect with respect to any of the
Licenses, and to the knowledge of the Company
no event has occurred which constitutes, or
with due notice or lapse of time or
both may constitute, a default by the
Company or any such Subsidiary under any
License.
3.11
Litigation. Except as set forth in the SEC Reports filed with
the Commission prior to the date hereof or
as set forth on Schedule 3.11, there
is no legal action, suit, arbitration,
proceeding or, to the knowledge of the
Company, other legal, administrative or
other governmental investigation or
inquiry pending or claims asserted (or, to
the knowledge of the Company, any
threat thereof) to which the Company or any
of its Subsidiaries or relating to
any of the Company Agreements or the
Contemplated Transactions or against any
officer, director or employee of the
Company in connection with such Person's
relationship with or actions taken on
behalf of the Company that, individually
or in the aggregate, has had or would
reasonably be expected to have a Material
Adverse Effect or would reasonably be
expected to prohibit or materially delay
the Closing. The Company is not subject to
any Decree that, individually or in
the aggregate, has had or would reasonably
be expected to have a Material
Adverse Effect.
3.12
Material Contracts. To the knowledge of the Company, all
Contractual Obligations of the Company are
valid, binding and in full force and
effect in all material respects and
enforceable by the Company in accordance
with their respective terms in all material
respects, subject to Equitable
Principles, excluding any Contractual
Obligations the invalidity or
unenforceability of which would not
reasonably individually or in the aggregate
be expected to have a Material Adverse
Effect. The Company is not in material
default or breach under any of its
Contractual Obligations or organizational
documents and, to the knowledge of the
Company, no other party to any of its
Contractual Obligations is in material
default or breach thereunder (and no
event has occurred which with the passage
of time or the giving of notice or
both would result in a material default or
breach by the Company or, to the
knowledge of the Company, by any other
party thereunder), excluding any
Contractual Obligations with respect to
which a
14
<PAGE>
default individually or in the aggregate
would not be reasonably expected to
have a Material Adverse Effect.
3.13
Environmental. Except as set forth in the SEC Reports filed
with the Commission prior to the date
hereof or as set forth on Schedule 3.13,
the Company and its Subsidiaries are, and
have been, in compliance with all
Environmental Laws, except where such
non-compliance, individually or in the
aggregate, has not had and would not
reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any
of its Subsidiaries has received any
written notice that alleges that the
Company or its Subsidiaries is not in
compliance with any Environmental Laws, and
to the knowledge of the Company,
there are no circumstances that could
reasonably be expected to prevent or
interfere with such compliance in the
future. There is no Environmental Claim
pending, or to the knowledge of the
Company, threatened against the Company or
any of its Subsidiaries with respect to the
operations or business of the
Company or its Subsidiaries, or against any
Person whose liability for any
Environmental Claim the Company or its
Subsidiaries has retained or assumed
either contractually or by operation of
law. Except as, individually or in the
aggregate, has not had and would not
reasonably be expected to have a Material
Adverse Effect, there has been no release
at any time of any Materials of
Environmental Concern at, on, about, under
or within any real property
currently, or to the knowledge of the
Company, formerly owned, leased, operated
or controlled by the Company or any of its
Subsidiaries or any of their
predecessors.
3.14
Taxes. Except as set forth in the SEC Reports filed with the
Commission prior to the date hereof or as
set forth on Schedule 3.14 hereto, all
Returns required to be filed by the Company
and each of its Subsidiaries have
been timely filed (after giving effect to
any valid extensions of time in which
to make such filings) and all such Returns
are true, complete, and correct in
all material respects. All Taxes that are
due or claimed to be due from the
Company and each of its Subsidiaries have
been timely paid, other than those (i)
currently payable without penalty or
interest or (ii) being contested in good
faith and by appropriate proceedings and
for which, in the case of both clauses
(i) and (ii), adequate reserves have been
established on the books and records
of the Company and its Subsidiaries in
accordance with GAAP. There are no
proposed, asserted, ongoing or to the
knowledge of the Company, threatened,
assessments, examinations, claims,
deficiencies, Liens or other litigation with
regard to any Taxes or Returns of the
Company or any of its Subsidiaries. To the
knowledge of the Company, the accruals and
reserves on the books and records of
the Company and its Subsidiaries in respect
of any Tax liability for any taxable
period not finally determined are adequate
to meet any assessments of Tax for
any such period. The Company is not a
United States real property holding
corporation as defined in Section 897(c)(2)
of the Code. All material amounts
required to be collected or withheld by the
Company or any of its Subsidiaries
have been collected or withheld and any
such amounts that are required to be
remitted to any taxing authority have been
duly and timely remitted. Neither the
Company nor any of its Subsidiaries has
waived any statute of limitations in
respect of Taxes or agreed to any extension
of time with respect to a Tax
assessment or deficiency. No taxing
authority in a jurisdiction where the
Company or its Subsidiaries do not file Tax
Returns has made a written claim or
assertion that the Company or its
Subsidiaries are or may be subject to taxation
by such jurisdiction. Except as set forth
in the SEC Reports filed with the
Commission prior to the date hereof or as
set forth on Schedule 3.14, the
Company and each of its Subsidiaries is not
a party to or bound by any Tax
sharing or Tax allocation or similar
15
<PAGE>
Contractual Obligation. True and complete
copies of all federal income Tax
Returns that have been filed by the Company
or any of its Subsidiaries for Tax
periods after December 31, 2000 have been
delivered or made available to the
Purchaser. The Company and each of its
Subsidiaries (A) has not been a member of
an affiliated group filing a consolidated
federal income Tax Return (other than
a group of which the Company was the common
parent) or (B) does not have any
liability for the Taxes of any Person
(other than the Company) under Treasury
Regulation Section 1.1502-6 (or any similar
provision of state, local, or
foreign Requirement of Law), as a
transferee or successor, by contract, or
otherwise.
3.15
Title to Property and Assets; Leases. Except as set forth in
the SEC Reports filed with the Commission
prior to the date hereof or as set
forth on Schedule 3.15, each of the Company
and its Subsidiaries has good and
marketable title, free and clear of all
Liens to all of its assets, including
all real property and interests in real
property owned in fee simple by the
Company and its Subsidiaries and all real
property leased, subleased or
otherwise occupied by the Company and its
Subsidiaries and any assets and
properties which it purports to own, except
(i) Liens for taxes not yet due and
payable and (ii) Liens that do not
interfere with the use, utility or value of
such assets in any material respect. All
leases to which the Company or any of
its Subsidiaries is a party (collectively,
the "Leases") are valid and binding
and in full force and effect in accordance
with their respective terms on the
Company and its Subsidiaries and, to the
knowledge of the Company, with respect
to each other party to any such Leases,
except, in each case, subject to
Equitable Principles, excluding any Leases
the invalidity or unenforceability of
which would not reasonably individually or
in the aggregate be expected to have
a Material Adverse Effect. No material
default (or event which, with the giving
of notice or passage of time, or both,
would constitute a material default) by
the Company or any of its Subsidiaries, or
to the knowledge of the Company by
any other party thereto, has occurred and
is continuing under the Leases,
excluding any Contractual Obligations with
respect to which a default
individually or in the aggregate would not
be reasonably expected to have a
Material Adverse Effect. The Company and
its Subsidiaries enjoy a peaceful and
undisturbed possession under all such
Leases to which any of them is a party as
lessee. As used herein, the term "Lease"
shall also include subleases or other
occupancy agreements (and any amendments
thereto) and the term "lessee" shall
also include any sublessee or other
occupant.
3.16
Compliance with ERISA. Except as set forth in the SEC Reports
filed with the Commission prior to the date
hereof or as set forth on Schedule
3.16, the Company has made available to the
Purchaser true and complete copies
of each Employment Agreement and each
material Benefit Plan and Arrangement, as
well as certain related documents,
including, but not limited to, (a) the most
recent determination letter from the IRS
(if applicable) for such Benefit Plan
and Arrangement, (b) the two most recent
annual reports (Series 5500 and related
schedules) required under ERISA (if any),
(c) the most recent summary plan
descriptions (with all material
modifications) and (d) all material
communications to any current or former
employees of the Company relating to any
material Benefit Plan and Arrangement.
Except as would not, individually or in
the aggregate, reasonably be expected to
have a Material Adverse Effect: (A)
each of the Benefit Plan and Arrangements
has been operated and administered in
all material respects in compliance with
its terms and all applicable laws; (B)
each of the Benefit Plan and Arrangements
intended to be "qualified" within the
meaning of Section 401(a) of the Code is so
qualified; and (C) there are no
pending, or to the knowledge of Company,
threatened
16
<PAGE>
claims (other than routine claims for
benefits) by, on behalf of or against any
of the Benefit Plan and Arrangements or any
trusts related thereto or pursuant
to any Employment Agreement. Except as set
forth in the SEC Reports filed with
the Commission prior to the date hereof or
as set forth on Schedule 3.16,
neither the Company nor any ERISA Affiliate
currently sponsors, maintains or
contributes to, and is not required to
contribute to, nor has it in the past
three years sponsored, maintained or
contributed to, and been required to
contribute to, or incurred any liability
with respect to any "employee benefit
plan" (within the meaning of Section 3(3)
of ERISA) that is subject to Section
302 of the Code or Title IV of ERISA.
Except as set forth in the SEC Reports
filed with the Commission prior to the date
hereof or as set forth on Schedule
3.16 neither the Company nor any ERISA
Affiliate has ever contributed to a
"Multi-employer Plan" as defined in Section
4001(a)(3) or 3(37) of ERISA. No
non-exempt "prohibited transaction," within
the meaning of Section 4975 of the
Code or Section 406 of ERISA, has occurred
with respect to any Benefit Plan and
Arrangement which could, individually or in
the aggregate, reasonably be
expected to result in a material liability
to the Company. No material liability
under any Benefit Plan and Arrangement has
been funded by nor has any such
obligation been satisfied with the purchase
of a contract from an insurance
company as to which the Company has
received notice that such insurance company
is insolvent or is in rehabilitation or any
similar proceeding. Except as would
not, individually or in the aggregate,
reasonably be expected to have a Material
Adverse Effect, no Benefit Plan and
Arrangement is under audit or, to the
knowledge of the Company, investigation by,
or is the subject of a proceeding
with respect to, the IRS, the Department of
Labor or the Pension Benefit
Guaranty Corporation, and, to the knowledge
of the Company, no such audit,
investigation or proceeding is threatened.
Except as set forth in the SEC
Reports filed with the Commission prior to
the date hereof or as set forth on
Schedule 3.16, with respect to each Benefit
Plan and Arrangement which provides
medical benefits, short-term disability
benefits or long-term disability
benefits (other than any "pension plan"
within the meaning of Section 3(2) of
ERISA), all claims incurred by the Company
under such Benefit Plan and
Arrangement are either insured pursuant to
a contract of insurance whereby the
insurance company bears any risk of loss
with respect to such claims or covered
under a contract with a health maintenance
organization pursuant to which such
health maintenance organization bears the
liability for such claims. Except as
set forth in the SEC Reports filed with the
Commission prior to the date hereof
or as set forth on Schedule 3.16 hereto or
disclosed in the SEC Reports
