EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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By and Among
Standard Management Corporation,
an Indiana corporation,
Rainier Acquisition Corporation,
a Washington corporation
and
Rainier Home Health Care Pharmacy, Inc.,
a Washington corporation,
Xxxx Tac Xxxx Xxxx,
Xxxxxxx X. Xxxxxxx-Xxxx
and
The Xxxxxxxx Xxxx Irrevocable Trust, u/a/d 8/23/2004
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Dated July 21, 2005
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION..............................................................................1
1.1 Definitions...........................................................................................1
1.2 Construction..........................................................................................6
ARTICLE II SALE OF THE SHARES....................................................................................7
2.1 The Merger............................................................................................7
2.2 Conversion of Equity Securities.......................................................................7
2.3 Payment of Conversion Price...........................................................................8
2.4 Earn Out..............................................................................................8
2.5 Closing of Transfer Records...........................................................................9
2.6 Exchange of Certificates.............................................................................10
2.7 Shareholders' Representative.........................................................................10
ARTICLE III THE CLOSING.........................................................................................10
3.1 Closing..............................................................................................10
3.2 Closing Deliveries of Parent and Merger Sub..........................................................10
3.3 Closing Deliveries of Shareholders...................................................................11
ARTICLE IV SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES.........................................................12
4.1 Organization.........................................................................................12
4.2 Authorization........................................................................................12
4.3 Validity; Binding Effect.............................................................................12
4.4 Noncontravention.....................................................................................12
4.5 Capital Structure....................................................................................13
4.6 Financial Statements.................................................................................13
4.7 Title to and Sufficiency of Assets...................................................................14
4.8 Tax Matters..........................................................................................15
4.9 Litigation; Claims...................................................................................15
4.10 Legal Compliance.....................................................................................15
4.11 Environmental Laws and Regulations...................................................................17
4.12 Permits..............................................................................................18
4.13 Material Contracts...................................................................................18
4.14 Labor and Employment Matters.........................................................................19
4.15 Employee Benefits....................................................................................20
4.16 Intellectual Property................................................................................20
4.17 Affiliate Transactions...............................................................................20
4.18 Broker's Fees........................................................................................21
4.19 Warranty.............................................................................................21
4.20 Disclosure...........................................................................................21
ARTICLE V MERGER SUB AND PARENT'S REPRESENTATIONS AND WARRANTIES.................................................21
5.1 Organization of Merger Sub and Parent................................................................21
5.2 Authorization........................................................................................21
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5.3 Capitalization of Parent.............................................................................21
5.4 Validity; Binding Effect.............................................................................21
5.5 Noncontravention.....................................................................................21
5.6 Broker's Fees........................................................................................22
ARTICLE VI COVENANTS PENDING CLOSING............................................................................22
6.1 General..............................................................................................22
6.2 Notices and Consents.................................................................................22
6.3 Due Diligence........................................................................................22
6.4 The Company's Operation of Business Prior to Closing.................................................22
6.5 Notification.........................................................................................23
6.6 No Negotiation.......................................................................................23
6.7 Interim Financial Statements.........................................................................23
6.8 Public Announcement .................................................................................23
ARTICLE VII CONDITIONS PRECEDENT................................................................................24
7.1 Merger Sub's Conditions Precedent....................................................................24
7.2 Shareholder's Conditions Precedent...................................................................25
ARTICLE VIII INDEMNIFICATION....................................................................................25
8.1 Indemnification by Shareholders......................................................................25
8.2 Indemnification by Merger Sub........................................................................26
8.3 Limitations on Indemnity.............................................................................26
8.4 Third Party Claims...................................................................................26
8.5 Set-Off..............................................................................................27
ARTICLE IX ADDITIONAL COVENANTS.................................................................................27
9.1 General..............................................................................................27
9.2 Noncompetition and Nonsolicitation...................................................................28
9.2 Confidentiality......................................................................................28
ARTICLE X TERMINATION...........................................................................................29
10.1 Termination Events...................................................................................29
10.2 Effect of Termination................................................................................30
ARTICLE XI MISCELLANEOUS........................................................................................30
11.1 Assignment...........................................................................................30
11.2 Notices..............................................................................................30
11.3 Expenses; Attorneys' Fees............................................................................31
10.4 Governing Law; Forum.................................................................................31
11.5 Partial Invalidity...................................................................................32
11.6 Execution in Counterparts; Facsimile Signatures......................................................32
11.7 Entire Agreement; Amendments and Waivers.............................................................32
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Exhibits
Exhibit A Form of Secured Subordinated Promissory Note
Exhibit B Form of Release
Exhibit C Form of Voting Trust
Exhibit D Special Indemnity Matters
Exhibit E Non-Competition Territory
Exhibit F Consents
Exhibit G Employment Agreement
Schedules
Schedule 4.1(a) Foreign Qualifications
Schedule 4.1(b) Company Locations
Schedule 4.4 Noncontravention
Schedule 4.5 Capitalization
Schedule 4.6(a) Financial Statements
Schedule 4.6(b) Undisclosed Liabilities
Schedule 4.7(a) Real Property/Leaseholds
Schedule 4.7(b) Permitted Liens
Schedule 4.9 Litigation; Claims
Schedule 4.10(d) Medicare/Medicaid Reports
Schedule 4.10(g) Health Care Compliance Matters
Schedule 4.11 Environmental Matters
Schedule 4.12 Permits
Schedule 4.13 Material Contracts
Schedule 4.14 Labor and Employment Matters
Schedule 4.15 Employee Benefits
Schedule 4.16 Intellectual Property
Schedule 4.17 Affiliate Transactions
Schedule 4.18 Broker's Fees
Schedule 4.19 Warranties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of July 21, 2005 by and among Standard Management Corporation, an
Indiana corporation ("Parent"), Rainier Acquisition Corporation, a Washington
corporation ("Merger Sub"), Rainier Home Health Care Pharmacy, Inc., a
Washington corporation (the "Company"), and Xxxx Tac Xxxx Xxxx, Xxxxxxx X.
Xxxxxxx-Xxxx and The Xxxxxxxx Xxxx Irrevocable Trust, u/a/d (each a
"Shareholder" and collectively, "Shareholders"),
WITNESSETH THAT:
WHEREAS, Shareholders are the sole shareholders of the Company; and
WHEREAS, the parties hereto desire to cause the Merger Sub to be merged
with and into the Company, with the Company surviving such merger (the
"Merger"), all on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Definitions. All initially-capitalized terms used in this Agreement
shall have the meanings given to such terms in this Section 1.1 below:
"Accounts Receivable" has the meaning ascribed to it in Section 4.6(d)
of this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Agreement" means this Agreement and Plan of Merger, executed by the
parties hereto on the date set forth above.
"Annual Increase" has the meaning ascribed to it in Section 2.7(f).
"Benefit Plan" has the meaning ascribed to it in Section 4.15.
"Carve-Out Claims" has the meaning ascribed to it in Section 8.3(a).
"Cash Amount" has the meaning ascribed to it in Section 2.2(a).
"Closing" means the time at which the parties hereto consummate the
Merger.
"Closing Date" means the date on which the Closing actually occurs.
"Closing Date Shares" means the total number of common shares of the
Company issued and outstanding immediately prior to the Effective Time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Competing Business" has the meaning ascribed to it in Section 9.2(a)
of this Agreement.
"Dispute Notice" has the meaning ascribed to it in Section 2.4(b) of
this Agreement.
"Dispute Period" has the meaning ascribed to it in Section 2.4(b) of
this Agreement.
"Earn-Out Amount" means (i) for any calendar year in which the
Surviving Corporation's EBITDA is less than or equal to Target EBITDA for such
calendar year, an amount equal to zero, (ii) for the calendar year 2005, (A) if
the Surviving Corporation's 2005 EBITDA is greater than Target EBITDA for such
calendar year and less than or equal to $1,966,667, an amount equal to the
difference between the Surviving Corporation's 2005 EBITDA and Target EBITDA
multiplied by six, or (B) if the Surviving Corporation's 2005 EBITDA is greater
than 1,966,667, an amount equal to (1) 50% of the difference between the
Surviving Corporation's 2005 EBITDA and $1,966,667 multiplied by six, plus (2)
$1 million; and (iii) for each of the calendar years 2006 and 2007, if the
Surviving Corporation's EBITDA for such calendar year is greater than Target
EBITDA for such calendar year, an amount equal to 50% of the difference between
the Surviving Corporation's EBITDA for such calendar year and Target EBITDA for
such calendar year multiplied by six.
"Earn-Out Year" means any calendar year in which an Earn-Out Amount is
payable to the Shareholders.
"EBITDA" means, for any calendar year, the Surviving Corporation's net
income before payment of the Earn Out Amount for such calendar year determined
in accordance with GAAP after adding back (i) any interest expense, (ii) any
income tax expense (iii) any depreciation expense, and (iv) any amortization
expense; provided, however, that no amount shall be added back to or deducted
from net income more than once for any calendar year.
"Effective Time" means the later of the effective times set forth in
the certified copies of the articles of merger issued by the Indiana Secretary
of State and the Washington Secretary of State with respect to the Merger.
"Employment Agreements" means Employment Agreements substantially in
the form attached hereto as Exhibit G.
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"Environmental Laws" means all Laws concerning pollution or protection
of the environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control or cleanup of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any member of a controlled group of
corporations under Section 414(b) of the Code of which the Company is a member,
and any trade or business (whether or not incorporated) under common control
with the Company under Section 414(c) of the Code, and all other entities which
together with the Company are or were within any of three (3) years prior to the
date hereof treated as a single employer under Section 414(m) or 414(o) of the
Code.
"Financial Statements" has the meaning ascribed to it in Section 4.6(a)
of this Agreement.
"GAAP" means Generally Accepted Accounting Principles in the United
States of America, consistently applied.
"GLB" has the meaning ascribed to it in Section 4.10(h).
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment or use of Hazardous
Material in, on, under about or from any of the real estate owned, used or
leased by the Company or any part thereof and any other act, business, operation
or thing that violates any Environmental Law, or increases the danger, or risk
of danger, or poses an unreasonable risk of harm, to Persons or property.
"Hazardous Material" means any substance, material or waste which is or
will foreseeably be regulated by any governmental authority, including any
material, substance or waste defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," contaminant," toxic waste" or "toxic substance" under any
provision of Environmental Law, including lead paint, petroleum, petroleum
products, asbestos, presumed asbestos-containing material or asbestos-containing
material, urea formaldehyde and polychlorinated biphenyls.
"HIPAA" has the meaning ascribed to it in Section 4.10(h).
"Indebtedness" means bank debt, debt associated with capital leases and
other debt incurred outside of the ordinary course of business (including,
without limitation, the amount owed to Holland Healthcare Services for the
purchase of assets).
"Indemnified Person" has the meaning ascribed to it in Section 8.4(a)
of this Agreement.
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"Indemnifying Person" has the meaning ascribed to it in Section 8.4(a)
of this Agreement.
"Independent Accountants" means X'Xxxxxx Xxxxxx & Molten CPAs (n/k/a
McGladrey & Xxxxxx, LLP).
"Intellectual Property" has the meaning ascribed to it in Section 4.16.
"Interim Balance Sheet" has the meaning ascribed to it in Section
4.6(a) of this Agreement.
"IRS" means the Internal Revenue Service.
"Labor and Employment Law" means all Laws relating to employment
practices, terms and conditions of employment, equal opportunity,
nondiscrimination, immigration, wages, hours, benefits and collective
bargaining, the payment of social security and similar taxes, unemployment
compensation, workers compensation and occupational safety and health.
"Law" means all laws, statutes, rules, regulations, ordinances, codes,
bulletins, opinions, decisions, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder of federal, state, local and foreign governments
(and all agencies thereof).
"Liens" means any and all liens, security interests, mortgages,
easements, restrictions, encumbrances, pledges, conditional sales contracts, or
other similar conflicting ownership or security interest in favor of any Person.
"Losses" has the meaning ascribed to it in Section 8.1.
"Medicare Laws" means any and all Laws applicable to reimbursement by
Medicare, Medicaid or any other governmental healthcare program for services or
items rendered by the Company, including all federal and state laws relating to
the referral of patients to the Company's business.
"Merger" has the meaning ascribed to it in the second recital of this
Agreement.
"Merger Sub" has the meaning ascribed to in the introductory paragraph
of this Agreement.
"Minimum Share Value" means three dollars and twenty-eight cents
($3.28).
"Multiemployer Plan" means a plan as defined in ERISA Section
4001(a)(3) to which Company or any ERISA Affiliate of Company is making or
accruing an obligation to make contributions or has within any of the five (5)
years preceding the date hereof made or accrued an obligation to make
contributions.
"Note" means a secured subordinated promissory note issued by Merger
Sub and guaranteed by Parent, substantially in the form attached hereto as
Exhibit A.
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"Note Amount" has the meaning ascribed to it in Section 2.2(a) of this
Agreement.
"Notice" has the meaning ascribed to it in Section 11.2 of this
Agreement.
"Notice Party" has the meaning ascribed to it in Section 11.2 of this
Agreement.
"Order" has the meaning ascribed to it in Section 4.9 of this
Agreement.
"Parent" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Payor" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Pension Plan" means an employee pension benefit plan, as defined in
ERISA Section 3(2), other than a Multiemployer Plan, which is covered by Title
IV of ERISA and which either (i) is maintained by the Company and/or any ERISA
Affiliate of the Company for employees of such Person, or (ii) has at any time
within the five (5) years preceding the date hereof been maintained by the
Company and/or any ERISA Affiliate of the Company for employees of such Person.
"Permit" has the meaning ascribed to such term in Section 4.12 of this
Agreement.
"Per Share Earn-Out Amount" means, with respect to the calendar years
2005, 2006 and 2007, an amount equal to the Earn-Out Amount for such calendar
year divided by the Closing Date Shares.
"Per Share Value" means, with respect to the Standard Management
Shares, an amount equal to the greater of (i) the average per-share closing
price of a Standard Management Share determined over the 20 trailing days
immediately preceding the date which is two days prior to the Closing Date, or
(ii) the Minimum Share Value.
"Person" means an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture, company or other entity or any
governmental authority.
"PHI" has the meaning ascribed to it in Section 4.10(h) of this
Agreement.
"Position Statement" has the meaning ascribed to it in Section 2.4(e)
of this Agreement.
"Post-Closing Delivery" has the meaning ascribed to it in Section
2.4(a) of this Agreement.
"Report" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Resolution Period" has the meaning ascribed to it in Section 2.4(d) of
this Agreement.
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"Restrictions" means any and all liens, restrictions, restrictions on
transfer, options, pledges, voting agreements, rights of first refusal,
tag-along, co-sale or other rights, licenses, security interests, claims,
charges or encumbrances of any kind or nature whatsoever.
"Share Amount" has the meaning ascribed to it in Section 2.2(a) of this
Agreement.
"Shareholder" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Shareholders' Representative" has the meaning ascribed to it in
Section 2.7 of this Agreement.
"SLIC Sale" means the sale by Parent of its shares in Standard Life
Insurance Company, which sale is presently pending approval before the Indiana
Insurance Commission.
"Standard Management Share" means a common share of Parent.
"Surviving Corporation" means the Company, immediately following the
Effective Time of the Merger.
"Target EBITDA" means (i) for the calendar year 2005, an amount equal
to $1,800,000, (ii) for the calendar year 2006, an amount equal to the greater
of $2,160,000 or the Target EBITDA for 2005, and (iii) for the calendar year
2007, an amount equal to the greater of $2,592,000 or the highest Target EBITDA
for 2005 and 2006.
"Third-Party Claim" has the meaning ascribed to it in Section 8.4(a)
of this Agreement.
"Washington Law" means the Washington Business Corporation Act.
1.2 Construction.
(a) The meanings of terms defined herein are equally
applicable to the singular and plural of such defined terms.
(b) The headings of articles and sections to this Agreement
are provided for convenience only and will not affect the construction or
interpretation hereof.
(c) This Agreement and all Exhibits and Schedules hereto are a
result of negotiations among the parties hereto. Accordingly, neither this
Agreement nor any Exhibit or Schedule hereto shall be construed against any
party hereto because of its or its counsel's involvement in its preparation.
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ARTICLE II
THE MERGER
2.1 The Merger.
(a) On the terms and subject to the conditions set forth in
this Agreement and in accordance with Washington Law, the parties hereto shall
cause Merger Sub to be merged with and into the Company on the Closing Date. The
parties shall so cause the Merger to occur by filing with the Washington
Secretary of State articles of merger executed in accordance with the relevant
provisions of Washington Law and by making all other filings or recordings
required thereby to effect the Merger. As a result of the Merger, and at the
Effective Time, the separate corporate existence of the Merger Sub will cease
and the Company will continue to survive the Merger. As a result of the Merger,
the Company will succeed to and assume all of the rights and obligations of
Merger Sub in accordance with Washington Law. The Merger will also have such
other effects as are set forth and described in Washington Law.
(b) The officers and directors of Merger Sub at the Effective
Time shall become the officers and directors of the Surviving Corporation and
continue as such until his or her successor shall have been elected and
qualified or until his or her earlier resignation or removal.
(c) The Articles of Incorporation and By-Laws of Merger Sub at
the Effective Time shall become the Articles of Incorporation and By-Laws of the
Surviving Corporation and shall continue as such until altered, amended or
repealed.
2.2 Conversion of Equity Securities. On the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub or the Company:
(a) Each common share of the Company owned by the Shareholders
immediately prior to the Effective Time shall be cancelled and converted into
the right to receive (i) an amount equal to the result obtained by dividing
$7,000,000 by the Closing Date Shares (the "Cash Amount"), (ii) the number of
Standard Management Shares equal to the result obtained by dividing (A)
$2,500,000 divided by the Per Share Value by (B) the Closing Date Shares (the
"Share Amount"), (iii) an amount equal to the result obtained by dividing
$1,500,000 by the Closing Date Shares (the "Note Amount"), and (iv) the Per
Share Earn-Out Amount, if any. The Cash Amount, the Share Amount, the Note
Amount and the Per Share Earn-Out Amount, if any, shall be paid as set forth in
Sections 2.3 and 2.4 below.
(b) Each common share of the Company held in the treasury of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment will be made with
respect thereto.
(c) Each common share of Merger Sub issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive a share of the Surviving Corporation.
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2.3 Payment of Conversion Price. At the Closing, each Shareholder shall
receive (a) an amount equal to the result obtained by multiplying the Cash
Amount by the total number of common shares of the Company owned beneficially
and of record by such Shareholder on the Closing Date, paid by wire transfer of
immediately available funds to the account designated by such Shareholder in
writing, (b) the right to receive the number of Standard Management Shares equal
to the result obtained by multiplying the Share Amount by the total number of
common shares of the Company owned beneficially and of record by such
Shareholder on the Closing Date, and (c) a Note in an original principal amount
equal to the result obtained by multiplying the Note Amount by the total number
of common shares of the Company owned beneficially and of record by such
Shareholder on the Closing Date.
2.4 Earn Out.
(a) On or before the 75th day following the expiration of the
calendar years 2005, 2006 and 2007, the Surviving Corporation shall deliver to
each Shareholder copies of the Surviving Corporation's year-end financial
statements for the immediately preceding calendar year and a calculation (in
reasonable detail) of the Earn-Out Amount for such immediately preceding
calendar year (the "Post-Closing Delivery").
(b) The Shareholders' Representative (for and on behalf of the
Shareholders) shall have thirty (30) days from the date the Surviving
Corporation makes the Post-Closing Delivery (such period, the "Dispute Period")
to notify the Surviving Corporation, in writing, as to whether the Shareholders'
Representative agrees or disagrees with the Post-Closing Delivery (such written
notice, the "Dispute Notice"). During the Dispute Period, the Shareholders'
Representative and its accountants shall be permitted to review (during regular
business hours and upon reasonable prior notice) the working papers of the
Surviving Corporation and (where applicable) the Surviving Corporation's
accountants relating to the matters set forth in the Post-Closing Delivery.
(c) If the Shareholders' Representative fails to deliver a
Dispute Notice to the Surviving Corporation during a Dispute Period, the
Surviving Corporation's calculation of the applicable Earn-Out Amount shall be
deemed to be final and correct and shall be binding upon each of the parties
hereto.
(d) If the Shareholders' Representative delivers a Dispute
Notice to the Surviving Corporation during a Dispute Period, the Shareholders'
Representative and the Surviving Corporation shall, for a period of forty-five
(45) days from the date the Dispute Notice is delivered to the Surviving
Corporation (such period, the "Resolution Period"), use their respective best
efforts to amicably resolve the items in dispute. Any items so resolved by the
parties shall be deemed to be final and correct as so resolved and shall be
binding upon each of the parties hereto.
(e) If the Shareholders' Representative and the Surviving
Corporation are unable to resolve all of the items in dispute during the
Resolution Period, then either the Shareholders' Representative or the Surviving
Corporation may refer the items remaining in
8
dispute to the Independent Accountants. Such referral shall be made in writing
to the Independent Accountants, copies of which shall concurrently be delivered
to the non-referring party hereto. The referring party shall furnish the
Independent Accountants, at the time of such referral, with the Post-Closing
Delivery and the Dispute Notice. The parties shall also furnish the Independent
Accountants with such other information and documents as the Independent
Accountants may reasonably request in order for them to resolve the items in
dispute. The parties hereto shall also, within ten (10) days of the date the
items in dispute are referred to the Independent Accountants, provide the
Independent Accountants with a written notice (a "Position Statement")
describing in reasonable detail their respective positions on the items in
dispute (copies of which will concurrently be delivered to the other party
hereto). If any party fails to timely deliver its Position Statement to the
Independent Accountants, the Independent Accountants shall resolve the items in
dispute solely upon the basis of the information otherwise provided to them. The
Independent Accountants shall resolve all disputed items in a written
determination to be delivered to each of the parties hereto within forty-five
(45) days after such matter is referred to them; provided, however, that any
delay in delivering such determination shall not invalidate such determination
or deprive the Independent Accountants of jurisdiction to resolve the items in
dispute. The decision of the Independent Accountants as to the items in dispute
shall be final and binding upon the parties hereto and shall not be subject to
judicial review. The fees and expenses of the Independent Accountants incurred
in the resolution of any items in dispute shall be determined by the Independent
Accounts and set forth in their report and shall be allocated and paid by the
Shareholders, on one hand, and the Surviving Corporation, on the other hand, in
inverse proportion to the extent they prevailed on the items in dispute.
(f) Once there is a final determination of the Earn-Out Amount
for any calendar year (whether through failure of Seller to timely deliver a
Dispute Notice, agreement of the parties, or determination of the Independent
Accountants), the Surviving Corporation shall increase each Shareholder's Note
by an amount equal to the Per Share Earn-Out Amount for the immediately
preceding calendar year multiplied by the total number of common shares of the
Company owned beneficially and of record by such Shareholder on the Closing Date
(the "Annual Increase"). Interest shall accrue for each Annual Increase
beginning on the first day of the calendar year following the Earn-Out Year.
During the first three years after an Annual Increase, accrued interest with
respect to such Annual Increase shall be paid in quarterly installments on the
last day of March, June, September and December. The outstanding principal
balance under the Note attributable to an Annual Increase, shall be paid on the
last day of the calendar year that is three years after the Earn-Out Year
relating to such Annual Increase.
(g) Notwithstanding the foregoing, the Surviving Corporation
shall not be obligated to make a Post-Closing Delivery or pay the Earn-Out for
any calendar year if Xxxx Tac Xxxx Xxxx'x employment with the Surviving
Corporation terminates before or during such calendar year for any of the
reasons described in Section 7.1 of his Employment Agreement.
2.5 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of any of the Company's common shares outstanding prior
to the Effective Time will not be made on the transfer books of the Surviving
Corporation.
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2.6 Exchange of Certificates. On the Closing Date, each Shareholder
shall surrender all certificates representing the common shares of the Company
held by such Shareholder (or if lost, an affidavit, indemnity and such other
security as is reasonably required by Merger Sub and its counsel).
2.7 Shareholders' Representative. Each Shareholder hereby irrevocably
constitutes and appoints Xxxx Tac Xxxx Xxxx as his or her lawful
attorney-in-fact, as the "Shareholders' Representative" under this Agreement,
with the exclusive authority to act as such hereunder. In the event of the
death, resignation or inability of Xxxx Tac Xxxx Xxxx to act as the
Shareholders' Representative hereunder, Xxxxxxx X. Xxxxxxx-Xxxx will be the
successor Shareholders' Representative with all powers of his predecessor. The
Shareholders' Representative will have full power to act on each Shareholder's
behalf according to the terms of this Agreement to give and receive notices on
behalf of Shareholders and in general to do all things and to perform all acts
on each Shareholder's behalf as may be contemplated by this Agreement, including
the resolution of indemnification claims, all in the absolute discretion of the
Shareholders' Representative. Shareholders shall be bound by all acts of the
Shareholders' Representative taken in connection with this Agreement.
ARTICLE III
THE CLOSING
3.1 Closing. The Closing shall take place on July 21, 2005 at the
offices of Merger Sub's counsel, Xxxxxx Xxxxxxx Attorneys, PC, in Indianapolis,
Indiana, or at such other time and place as the parties may mutually agree.
Subject to the provisions of Section 10.1 below, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined above in this Section 3.1 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
3.2 Closing Deliveries of Parent and Merger Sub. At the Closing, in
addition to any other documents specifically required to be delivered pursuant
to this Agreement, Parent and Merger Sub shall deliver to Shareholders:
(a) the immediately available funds as required by Section
2.3(a) above;
(b) the Standard Management Shares, as required by Section
2.3(b) above;
(c) the Notes, as required by Section 2.3(c) above;
(d) a certificate of the Secretary or Assistant Secretary of
Merger Sub, dated as of the date hereof, certifying (i) the resolutions duly
adopted by the Board of Directors and shareholder of Merger Sub authorizing and
approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) that such
resolutions have not been rescinded or modified and remain in full force and
effect as of the Closing Date; and
10
(e) a certificate, duly executed by an officer of Merger Sub,
dated as of the Closing Date, certifying (i) that Merger Sub has performed and
complied in all material respects with all of the terms, provisions and
conditions of this Agreement to be performed and complied with by it prior to
the Closing, and (ii) that Merger Sub's representations and warranties in this
Agreement are true and correct in all material respects as of the Closing Date.
3.3 Closing Deliveries of Shareholders. At the Closing, in addition to
any other documents specifically required to be delivered pursuant to this
Agreement, each Shareholder shall deliver to Merger Sub the following:
(a) certificates representing all of the common shares of the
Company owned beneficially and of record by such Shareholder as of the date
hereof;
(b) a Release, duly executed by such Shareholder, in the form
attached hereto as Exhibit B;
(c) a Voting Trust, duly executed by each Shareholder, in the
form attached hereto as Exhibit C;
(d) legal opinion of counsel to Shareholders, dated the date
hereof, addressed to Merger Sub, and containing customary legal opinions,
exceptions and qualifications;
(e) a subordination and intercreditor agreement, as reasonably
requested by Merger Sub's lender;
(f) Employment Agreements with Xxxx Tac Xxxx Xxxx and Xxxxxxx
X. Xxxxxxx-Xxxx, duly executed by Surviving Corporation;
(g) copies of the Company's Articles of Incorporation, as
amended to date, duly certified by the Washington Secretary of State dated no
more than 10 days prior to the date hereof;
(h) a Certificate of Existence for the Company from the
Washington Secretary of State dated no more than 10 days prior to the date
hereof;
(i) a certificate, duly executed by such Shareholder, dated as
of the Closing Date, certifying (i) that such Shareholder has performed and
complied in all material respects with all of the terms, provisions and
conditions of this Agreement to be performed and complied with by him prior to
the Closing, and (ii) that such Shareholder's representations and warranties in
this Agreement are true and correct in all material respects as of the Closing
Date; and
(j) the original minute books, stock ledgers and corporate
seal (if any) of the Company.
11
ARTICLE IV
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
Shareholders, jointly and severally, represent and warrant to Merger
Sub as follows:
4.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington.
Schedule 4.1(a) contains a true, accurate and complete list of each jurisdiction
in which the Company is qualified to do business as a foreign corporation. The
Company is duly qualified to do business as a foreign corporation and is in good
standing under the Laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) The Company has full power and authority to own or use its
properties and assets and carry on its business activities as now conducted.
Schedule 4.1(b) lists the addresses of all locations at which the Company
conducts its business.
(c) Complete and accurate copies of the Articles of
Incorporation, by-laws, minute books and stock transfer books of the Company
have been delivered to Merger Sub. The minute books of the Company fairly and
accurately reflect all material actions of the Board of Directors and
shareholders of the Company. The stock transfer books of the Company are
correct, complete and current, and, to the extent applicable, all documentary
and stock transfer tax stamps required in connection with the issuance and
transfer of shares of the Company's stock have been duly paid, affixed or
canceled.
4.2 Authorization. The Company and each Shareholder has full power and
authority to execute and deliver this Agreement and to perform his, her or its
respective obligations hereunder. The Merger and the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Company and each Shareholder.
4.3 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by the Company and each Shareholder. This Agreement
constitutes a valid and legally binding obligation of the Company each
Shareholder, enforceable against the Company and each Shareholder in accordance
with its terms.
4.4 Noncontravention. The execution, delivery and performance of this
Agreement by the Company and each Shareholder, the consummation by the Company
and each Shareholder of the transactions contemplated hereby and the compliance
by the Company and each Shareholder with or fulfillment by the Company and each
Shareholder of the terms and provisions hereof or of any other agreement or
instrument contemplated hereby, do not and shall not (i) conflict with or result
in a breach of any of the provisions of the constituent documents of the
Company, (ii) contravene any Law or Order which affects or binds the Company or
any of its properties, (iii) conflict with, contravene or constitute a default
or breach of or under any Material Contract or Permit, or (iv) except as
otherwise set forth in Schedule 4.4, require any
12
Shareholder or the Company to obtain the approval, consent or authorization of,
or to make any declaration, filing or registration with, any governmental
authority or other third party which has not been obtained in writing prior to
the date of this Agreement.
4.5 Capital Structure.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of $1 par common stock of which 546,500 shares have been duly
and validly issued, are fully-paid and non-assessable, and are owned,
beneficially and of record, by Shareholders as described on Schedule 4.5, free
and clear of any and all Restrictions.
(b) Other than as described on Schedule 4.5, there are no
issued and/or outstanding equity securities interests of the Company, or
securities convertible into or exchangeable or exercisable for equity securities
of the Company, and there are no outstanding options, warrants, rights,
contracts, commitments, understandings or arrangements by which the Company or
any other Person is bound to issue, repurchase or otherwise acquire or retire
any equity securities of the Company. There are no voting trusts, proxies or any
other agreements or understandings with respect to the voting of any equity
securities of the Company.
(c) No equity or other securities of the Company (including
the common shares described on Schedule 4.5), were issued in violation of any
Law.
(d) The Company does not own, or have any right, option or
obligation to acquire, any equity securities of any other Person.
4.6 Financial Statements.
(a) Attached hereto as Schedule 4.6(a) are true, accurate and
complete copies of the following: (i) the unaudited balance sheet of the Company
as of most recent year-end and the related unaudited statement of operations for
the fiscal year then ended, and (ii) the unaudited balance sheet of the Company
as of March 31, 2005 ("Interim Balance Sheet") and the related unaudited
statement of operations for the three months then ended (items (i) and (i),
collectively, the "Financial Statements").
(b) The Financial Statements (i) fairly present in all
material respects, the operating results, the financial condition, changes in
shareholder's equity and cash flow of the Company on the dates and for the
periods indicated, (ii) are correct and complete, (iii) are consistent with the
books and records of the Company (which books and records are correct and
complete), and (iv) were prepared in accordance with GAAP. No financial
statements of any entity other than the Company are required by GAAP to be
included in the Financial Statements. The Company has no liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
except for (x) liabilities or obligations reflected or reserved against in the
Interim Balance Sheet, which reserves are adequate, (y) immaterial liabilities
or obligations incurred since the date of the Interim Balance Sheet in the
ordinary course of business, and (z) liabilities or obligations set forth in
Schedule 4.6(b).
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(c) Since the date of the Interim Balance Sheet, (i) there has
not been any material adverse change in the business, operations, assets,
prospects, or condition of the Company, and to the knowledge of Shareholders no
event has occurred or circumstance exists that could reasonably be expected to
result in such a change, (ii) the Company has operated only in the ordinary
course, (iii) no party has accelerated, terminated, modified or cancelled any
agreement, contract, lease or license to which the Company is a party or by
which the Company is bound, and (iv) the Company has not experienced any
material damage, destruction or loss (whether or not covered by insurance) to
any of its material assets.
(d) All accounts receivable of the Company that are (or are
required by GAAP to be) reflected on the Interim Balance Sheet or in the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent, as appropriate, valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Reserves for Accounts Receivable are adequate
and calculated consistent with past practices. There is no contest, claim, or
right of set-off, other than returns in the ordinary course of business, under
any agreement with any obligor of an Account Receivable relating to the amount
or validity of such Account Receivable.
(e) All inventory of the Company, whether or not reflected in
the Interim Balance Sheet, consists of a quality and quantity usable and salable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Interim Balance Sheet or in the accounting records
of the Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
4.7 Title to and Sufficiency of Assets.
(a) Schedule 4.7(a) contains a complete and accurate list of
all real property, leaseholds or other interests in real property owned by the
Company. The Company owns (with good and marketable title in the case of real
property, subject only to the matters permitted by Section 4.7(b) below) all the
properties and assets (whether real, personal or mixed and whether tangible or
intangible) that it purports to own, including all of the properties and assets
reflected on Schedule 4.7(a) and in the Interim Balance Sheet (except for assets
held under capitalized leases disclosed on Schedule 4.7(a) and personal property
sold since the date of the Interim Balance Sheet in the ordinary course of
business), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Interim Balance Sheet (except for personal
property acquired and sold since the date of the Interim Balance sheet in the
ordinary course of business).
(b) Except as set forth in Schedule 4.7(b), all of the
properties and assets listed on Schedule 4.7(a) or otherwise reflected in the
Interim Balance Sheet are free and clear of any and all Liens and are not, in
the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations or limitations of any nature
except, (i) liens for current taxes not yet due, (ii) minor imperfections of
title, none of which is substantial in amount, materially detracts from the
value or impairs the use of the property subject thereto, or
14
impairs the operations of the Company, and (iii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
(c) The building, plants, structures, equipment and other
assets of the Company are sufficient for the continued conduct of the Company's
business after the Closing in substantially the same manner as conducted prior
to the Closing.
4.8 Tax Matters. The Company has filed or caused to be filed all tax
returns, and all reports with respect to taxes, required to have been filed by
or with respect to the Company prior to the date hereof. All such tax returns or
reports were true, accurate, correct and complete in all material respects. The
Company is not the beneficiary of any extension of time within which to file any
tax return or report. The Company has paid or caused to be paid all taxes,
penalties and interest required to have been paid by the Company prior to the
date hereof. The Company has withheld, deducted, collected and paid all taxes
required to have been withheld, deducted, collected and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party by the Company. The Company has not 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 claim has ever been made by a
governmental authority in a jurisdiction where tax returns by the Company have
not been filed that the Company is or may be subject to taxation by such
jurisdiction. There are no Liens on any of the Company's assets or properties
that arose in connection with any failure (or alleged failure) to pay any tax.
No tax return of the Company has been audited or is currently under audit or
examination. There is no tax sharing agreement, tax allocation agreement, tax
indemnity obligation or similar written or unwritten agreement, arrangement,
understanding or practice with respect to taxes (including any advance pricing
agreement, closing agreement or other arrangement relating to taxes) that will
require any payment by the Company.
4.9 Litigation; Claims. Except as set forth in Schedule 4.9, the
Company is not (a) subject to any outstanding injunction, judgment, order,
decree, ruling or charge or any governmental authority or arbitrator
(collectively, an "Order"), nor (b) a party or, to the knowledge of
Shareholders, threatened to be made a party to any action, suit, proceeding,
hearing, audit or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator or governmental agency or entity having regulatory
authority over the Company. Except as set forth on Schedule 4.9, the Company has
not been audited, examined or otherwise reviewed by any governmental agency or
entity, or federal, state or local authorities during the current or past three
(3) fiscal years. No matter described in Schedule 4.9 could reasonably be
expected to have a material adverse effect on the business, condition,
operations or prospects of the Company.
4.10 Legal Compliance.
(a) The Company has complied in all material respects with all
applicable Laws, including all Medicare Laws, Environmental Laws and all Labor
and Employment Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
the Company alleging any failure so to comply. To the knowledge of Shareholders,
no event has occurred or circumstance exists that (with or
15
without notice or lapse of time) may constitute or result in a violation by the
Company, or a failure on the part of the Company to comply with, any Law.
(b) Neither Shareholders nor any of their Affiliates has
ordered, referred, or requested, directly or indirectly, any items or services
from the Company that are subject or entitled to reimbursement in whole or in
part by Medicare, Medicaid or any other state or federal government
reimbursement program.
(c) Without limiting the generality of the foregoing, the
Company is in material compliance with all conditions and standards for
participation in the Medicare and Medicaid programs and certified as eligible
for participation in Medicare and Medicaid programs. The Company is not
operating any aspect of its business under or subject to a plan of correction or
corporate integrity agreement with a governmental agency or entity. The Company
is currently receiving and is entitled to continue to receive Medicare and
Medicaid reimbursement payments.
(d) The Company has duly and timely filed all reports and
other items required to be filed (the "Reports") with any reimbursement program
or third party payor (including, without limitation, Medicare, Medicaid,
medically indigent assistance, Blue Cross, Blue Shield, any health maintenance,
preferred provider, independent practice or other healthcare providers or
payors) (collectively, the "Payors") and has timely paid all amounts due to such
Payors. Except as set forth in Schedule 4.10(d), (i) the Company has not
requested an extension of time in which to file any of the Reports, (ii) the
Company is not delinquent in the payment of any amount due to any Payors, (iii)
there are no pending or threatened audits, claims, assessments, adjustments,
challenges or notices from any governmental agency or entity or Payors with
regard to any of the Reports or any reimbursements or payments that the Company
received from the government agency or entity or Payors, (iv) the Company has
not executed any waivers or extension of the statute of limitations for the
collection or assessment of any amount due under or in connection with any
Report or to any government agency or entity or Payors, and (v) the Company is
not liable for any amounts owed to any Payor or Governmental agency or entity,
nor subject to any contractual adjustments, fines or penalties.
(e) Shareholders are not aware of any proposed or pending
change in any Law affecting the Company's business, which could reasonably be
expected to have a material adverse effect on the business, condition,
operations or prospects of the Company.
(f) The Company has maintained all records required to be
maintained by the Food and Drug Administration, Drug Enforcement Agency, State
Boards of Pharmacy, Social Security Administration, Health Care Financing
Administration, the Center for Medicare and Medicaid Services, state regulatory
agencies and the Medicare and Medicaid programs.
(g) Without limiting the generality of the foregoing, the
Company has not given or received in violation of any Law any payments or any
other remuneration, either directly or indirectly, overtly or covertly, in cash
or in kind, in return for receiving or making referrals for the furnishing or
arranging for the furnishing of any item or service, or in return for
purchasing, leasing, ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item in violation of 42
U.S.C. 1320a 7a and 1320a 7b, commonly
16
known as the "Anti Kickback Statute." In addition, the Company has not accepted
any referral for the provision of any designated health service, or submitted a
claim for payment to Medicare or Medicaid for the provision of such services, in
violation of 42 U.S.C. 1395nn, commonly known as the "Xxxxx Act" or "Xxxxx II."
With respect to any compliance concerns found to be substantiated, the Company
has taken appropriate corrective action and made all appropriate reports to all
applicable governmental agencies or entities, and each such corrective action
and appropriate report is listed and disclosed in Schedule 4.10(g).
(h) Without limiting the generality of the foregoing. to the
extent applicable to the Company, the Company, in its ordinary business
operation, has complied and is currently in compliance with the requirements of
the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and
its implementing regulations and with the requirements of all applicable state
regulations implementing Title V of the Xxxxx-Xxxxx-Xxxxxx Act ("GLB") that are
applicable to the Company's relationship with any Business Associate (as such
term is defined in HIPAA and/or GLB). To the extent that the Company has access
to Protected Health Information (as such term is defined in HIPAA and/or GLB,
"PHI"), and except as necessary to complete the transactions contemplated by
this Agreement or for internal management and compliance purposes, the Company
has not and shall not use or further disclose PHI other than as permitted or
required by HIPAA or as required by Law. The Company has developed, documented,
implemented, maintained, and used appropriate safeguards to prevent disclosure
of PHI other than as provided for by this Agreement. These safeguards include
proper training and discipline of workforce and restrictions on physical access.
The safeguards will be designed to preserve the integrity and confidentiality
of, and to prevent intentional or unintentional non-permitted or violating use
of disclosure of PHI. The Company has entered into appropriate Business
Associate Agreements as required by HIPAA in which it agrees to ensure that any
agent, including a subcontractor, to whom it provides PHI, received from, or
created or received by the Company either directly or on behalf of any Business
Associate, agrees to the same restrictions and conditions that apply through
this Agreement to the Company with respect to such information.
4.11 Environmental Laws and Regulations. Except as set forth on
Schedule 4.11:
(a) There are no Hazardous Materials present on the Company's
owned, leased or used real estate or, to the knowledge of Shareholders, any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, aboveground or underground storage tanks,
landfills, land deposits, dumps, equipment or other containers, either temporary
or permanent, and deposited or located in land, water, sumps, or any other part
of such owned, leased or used real estate or such adjoining property, or
incorporated into any structure therein or thereon, except in material
compliance with Environmental Laws. The Company has not permitted or conducted
any Hazardous Activity except in material compliance with applicable
Environmental Laws.
(b) To the knowledge of Shareholders, there has not been a
release or threatened release of any Hazardous Materials at or from the
Company's owned, leased or used real estate (nor by any Person for whose conduct
it is or may be held responsible), except in material compliance with applicable
Environmental Laws.
17
(c) There has been no release, or to the knowledge of
Shareholders any threatened release, of any Hazardous Materials at or from any
site or facility for which the Company is or may be liable under any applicable
Environmental Laws.
4.12 Permits. Schedule 4.12 contains a complete and accurate list of
each consent, approval, ratification, waiver or other authorization, license
(including import and export licenses), registration or permit issued, granted,
given or otherwise made available by or under the authority of any governmental
authority or pursuant to any Law that is held by the Company or that otherwise
relates to its business, assets or operations (collectively, the "Permits").
Each Permit is valid and in full force and effect. The Company is, and at all
times has been, in material compliance with all of the terms and requirements of
each Permit. Except as set forth in Schedule 4.12, consummation of the
transactions contemplated hereby (a) does not require the consent of any third
party that has issued a Permit, (b) will not result in a breach of or default
under any such Permit, and (c) will not otherwise cause any such Permit to cease
to be legal, valid, binding and in full force and effect on identical terms
following the Closing. The Permits listed in Schedule 4.12 collectively
constitute all of the Permits necessary to permit the Company to lawfully
conduct and operate its business and assets in the manner in which it currently
conducts and operates its business and assets.
4.13 Material Contracts. Schedule 4.13 lists all agreements (whether
oral or written) to which the Company is a party or by which it is bound that
are material to its business as currently conducted (collectively, the "Material
Contracts"), including:
(a) each agreement that involves performance of services or
delivery of goods or materials by or to the Company of an amount or value in
excess of $5,000;
(b) each lease of personal property requiring payments (in the
aggregate) in excess of $5,000 and each lease of real property;
(c) each agreement with any labor union or other employee
representative of a group of employees relating to wages, hours and other
conditions of employment and each employment or consulting agreement;
(d) each agreement (however named) involving a sharing of
profits, losses, costs or liabilities by the Company with any other person or
entity;
(e) each agreement containing covenants that in any way
purport to restrict the Company's business activities or limit the freedom of
the Company to engage in any line of business or to compete with any other
person or entity;
(f) each agreement providing for payments to or by any third
parties based on sales, purchases or profits;
(g) each power of attorney of the Company that is currently
effective and outstanding;
18
(h) each agreement that contains or provides for an express
undertaking by the Company to indemnify or hold harmless a third party or to be
responsible for consequential damages;
(i) each agreement for capital expenditures in excess of
$5,000;
(j) each agreement not denominated in U.S. dollars;
(k) each agreement relating to any of the Intellectual
Property;
(l) each agreement with Medicare, Medicaid, any similar
governmental agency or entity, and any and all payors; and
(m) each agreement with any Affiliate of the Company.
Except as set forth in Schedule 4.13, with respect to each Material Contract,
(w) the agreement is legal, valid, binding, enforceable and in full force and
effect, (x) the agreement will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, (y) the Company and each other party
thereto is, and at all times has been, in material compliance with all
applicable terms and requirements of such agreement, and (z) no party thereto
has repudiated any material provision of the agreement. Each Material Contract
that is a Medicare or Medicaid provider/billing agreements is not subject to any
revocation or termination action by any governmental agency or entity.
4.14 Labor and Employment Matters. Schedule 4.14 contains a complete
and accurate list of the following information for each employee of the Company,
including each employee on leave of absence or layoff status: name; job title;
date of hiring or engagement; date of commencement of employment or engagement;
current compensation paid or payable and any change in compensation since
December 31, 2004; sick and vacation leave that is accrued but unused; and
service credited for purposes of vesting and eligibility to participate under
any Benefit Plan. Except as set forth in Schedule 4.14 hereto, (a) the Company
is, and has never been, a party to any collective bargaining agreement or other
labor contract; (b) there has not been, there is not presently pending or
existing, and to the knowledge of Shareholders there is not threatened, any
strike, slowdown, picketing, work stoppage, lock out, or employee grievance
process involving the Company; (c) to the knowledge of Shareholders, no event
has occurred or circumstance exists that could reasonably be expected to provide
the basis for any work stoppage or other labor dispute involving the Company,
(d) there is no pending or, to the knowledge of Shareholders threatened, against
or affecting the Company any charge or complaint filed with any governmental
authority, (e) no application or petition for an election of or for
certification of a collective bargaining agent is pending with respect to the
Company, (f) there is no grievance or arbitration proceeding against the Company
by any employee of the Company, and (g) there is no lockout of any employees by
the Company. All current employees of the Company who provide services for the
business of the Company maintain all necessary certifications, professional
qualifications and experience for the their respective positions and job
19
responsibilities. The Company's current employees, officers and directors have
not been charged with, convicted of or pled guilty to crimes of theft or
dishonesty, financial misconduct, or offenses related to the delivery of health
care; nor have any of the Company's current officers, directors, or employees
been excluded from participation in Medicare, Medicaid or any other state or
federal government reimbursement program.
4.15 Employee Benefits. Schedule 4.15 sets forth a true and correct
listing of each profit sharing plan, bonus plan, incentive compensation plan,
stock ownership plan, stock purchase plan, stock option plan, stock appreciation
plan, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, employee insurance plan, severance plan, disability plan,
health care plan, sick leave plan and death benefit plan of the Company or any
other plan or program which provides retirement income, fringe benefits, welfare
benefits, or other benefits employees of the Company and each Pension Plan and
Multiemployer Plan of the Company (collectively, the "Benefit Plans"). Except as
set forth in Schedule 4.15 hereto, neither the Company, nor any ERISA Affiliate
the Company, has contributed to or accrued an obligation to contribute to a
Pension Plan or a Multiemployer Plan within the current or proceeding five (5)
years. Neither the Company nor any ERISA Affiliate of the Company has incurred
any withdrawal liability to any Multiemployer Plan. The Company and each ERISA
Affiliate of the Company has complied in all material respects with their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Pension Plan. Each Benefit Plan designated in Schedule 4.15
hereto as being qualified under Section 401(a) of the Code is properly
qualified.
4.16 Intellectual Property. Schedule 4.16 lists all of the Company's
owned and/or licensed (a) registered and unregistered copyrights in both
published works and unpublished works (whether United States or foreign), (b)
legal names, assumed fictional business names, trade names, registered and
unregistered trademarks, service marks and applications (whether United States
or foreign), and (c) patents, patent applications and inventions and discoveries
that may or may not be patentable (whether United States or foreign)
(collectively, the "Intellectual Property"). The Intellectual Property,
collectively, constitutes all of the intellectual property necessary for the
Company to operate its business as currently conducted or anticipated to be
conducted. All of the registered Intellectual Property is registered in the
Company's name, is in compliance with formal legal requirements and is valid and
enforceable. None of the registered Intellectual Property has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To the knowledge of Shareholders, there is no intellectual property of any
Person that potentially interferes with or infringes any of the Intellectual
Property. None of the Intellectual Property or any of the products manufactured
or sold by the Company, nor any equipment, process or know-how used by the
Company infringes or to the knowledge of Shareholders is alleged to infringe any
intellectual property right of any other Person.
4.17 Affiliate Transactions. Neither the Company, any Shareholder nor
any of their Affiliates owns or has owned, of record or as a beneficial owner,
an equity interest or any other financial or profits interest in any Person that
has (a) had business dealings with the Company other than business dealings or
transactions disclosed in Schedule 4.17, each of which has been conducted in the
ordinary course of business at substantially prevailing market prices and on
substantially prevailing market terms or (b) engaged in competition with the
Company.
20
4.18 Broker's Fees. Except as set forth in Schedule 4.18, neither the
Company nor Shareholders has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
4.19 Warranty. Schedule 4.19 hereto contains a correct and complete
copy of the standard written warranty and return policy of the Company. Except
as set forth on Schedule 4.19 hereto, the Company has not granted to any
customer, whether in writing or otherwise, any other warranty for products sold
by the Company. Except as set forth in Schedule 4.19 hereto, there have been no
warranty or product liability claims asserted, or to the knowledge of
Shareholders threatened to be asserted, against the Company.
4.20 Disclosure. No representation or warranty or other statement made
by Shareholders in this Agreement, the Schedules, the certificates to be
delivered pursuant to this Agreement or otherwise in connection with the
transactions contemplated hereby contains or will contain any untrue statement
or omits to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not materially misleading.
ARTICLE V
MERGER SUB AND PARENT'S REPRESENTATIONS AND WARRANTIES
Merger Sub and Parent represent and warrant to the Shareholders as
follows:
5.1 Organization of Merger Sub and Parent. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington and Parent is a corporation duly organized and validly
existing under the laws of the State of Indiana.
5.2 Authorization. Merger Sub and Parent have full power and authority
to execute and deliver this Agreement and to perform their respective
obligations hereunder. Merger Sub has full power and authority to own and
operate its assets, properties and business and carry on its business as
presently conducted. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary action on the part of Merger Sub and
Parent.
5.3 Capitalization of Parent. The authorized, issued and outstanding
shares of Parent shall be substantially as set forth in filings made by Parent
with the U.S. Securities and Exchange Commission, copies of which shall be
provided to the Company.
5.4 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by each of Merger Sub and Parent. This Agreement
constitutes a valid and legally binding obligation of Merger Sub and Parent,
enforceable against Merger Sub and Parent, respectively, in accordance with its
terms.
5.5 Noncontravention. The execution, delivery and performance of this
Agreement by Merger Sub, the consummation of the transactions contemplated
hereby and the compliance with or fulfillment of the terms and provisions hereof
or of any other agreement or instrument contemplated hereby, do not and shall
not (a) conflict with or result in a breach of any of the
21
provisions of the Articles of Incorporation or the Bylaws of Merger Sub, (b)
contravene any Law or Order which affects or binds Merger Sub or any of its
properties, or (c) require Merger Sub to obtain the approval, consent or
authorization of, or to make any declaration, filing or registration with, any
governmental authority or other third party which has not been obtained in
writing prior to the date of this Agreement.
5.6 Broker's Fees. Merger Sub has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS PENDING CLOSING
The parties hereto agree as follows with respect to the period between
the execution of this Agreement and the Closing:
6.1 General. Each of the parties hereto shall use commercially
reasonable efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement. Such actions shall include, without limitation,
(a) satisfaction, but not waiver, of the closing conditions described in Article
VII below, (b) preparation, execution and delivery of such further instruments
or taking such further action as any other party hereto shall reasonably
request, and (c) any additional action that may be necessary, proper or
advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any governmental authority that it may
be required to give, make or obtain, including, without limitation, the consents
required by the Company, Parent and Merger Sub, as applicable.
6.2 Notices and Consents. Each of the parties hereto shall give any
notices to third parties, and will use commercially reasonable efforts, to (a)
obtain any third party consents necessary to consummate the transactions
contemplated by this Agreement, and (b) obtain any authorizations, consents, and
approvals of governments and governmental agencies necessary to consummate the
transactions contemplated by this Agreement.
6.3 Due Diligence. Shareholders shall (and shall cause the Company to)
permit Merger Sub and its representatives to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
the Company. Shareholders shall (and shall cause the Company to) furnish to
Merger Sub such financial data, operating data, copies of all Benefit Plans,
contracts or documents to which the Company is a party, and any other
information as Merger Sub shall reasonably request.
6.4 The Company's Operation of Business Prior to Closing. Shareholders
shall, and shall cause the Company to, (a) conduct the Company's business in a
reasonable and prudent manner in accordance with past practices and in material
compliance with all Laws and Orders;
22
(b) engage in no transactions out of the ordinary course of business, without
the prior consent of Merger Sub; (c) use commercially reasonable efforts to
preserve the Company's existing business organization and the relationships the
Company currently maintains with its employees, customers, and suppliers, (d)
not make or declare, set aside or pay any dividend or other distribution of
assets (whether in cash, stock or property) with respect to the equity
securities of the Company, (e) not make (or agree to make) any direct or
indirect redemption, purchase or other acquisition of any equity securities of
the Company or otherwise make any payment of cash or transfer of assets to any
Shareholder, (f) not issue or sell any of the Company's equity securities or
issue any warrant, option or other right to purchase any of the Company's equity
securities, or any security convertible into capital stock of the Company, and
(g) not sell, transfer, pledge or convey any or all of the common shares or any
other equity securities or the Company (or enter into any agreement to do any of
the foregoing).
6.5 Notification. Shareholders shall promptly notify Merger Sub in
writing (a) if Shareholders become aware of any fact or condition that causes or
constitutes any inaccuracy in or breach of any of their representations and
warranties made as of the date of this Agreement, (b) of any breach of any
covenant of Shareholders under this Agreement, or (c) of the occurrence of any
event that may make the satisfaction of the conditions in Article VII impossible
or unlikely. Such notice shall not limit or otherwise affect any rights of
Merger Sub under Article VIII.
6.6 No Negotiation. Shareholders shall not (nor shall they permit the
Company to) directly or indirectly solicit, initiate, encourage or entertain any
inquiries or proposals from, discuss or negotiate with, provide any nonpublic
information to or consider the merits of any inquiries or proposals from any
third party relating to any sale or business combination transaction involving
the Company, including any sale of stock or other equity interests, the merger
or consolidation of the Company or the sale of its business or any of the
Company's assets or properties (other than in the ordinary course of business).
Shareholders shall notify Merger Sub of any such inquiry or proposal within
twenty-four (24) hours of receipt or awareness of the same by Shareholders.
6.7 Interim Financial Statements. Shareholders shall (and shall cause
the Company to) deliver to Merger Sub within ten (10) days after the end of each
calendar month a copy of the balance sheet income statement of the Company for
such calendar month prepared in a manner and containing information consistent
with current practices and certified to Merger Sub by the appropriate officer of
the Company as to compliance with Section 4.6(b).
6.8 Public Announcements. Unless otherwise required by applicable law,
at all times prior to the Closing Date or termination of this Agreement as
provided in Article X, the parties shall consult with each other before issuing
any announcement or press release with respect to the transactions contemplated
by this Agreement and shall not issue any such announcement or press release
prior to such consultation.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Merger Sub's Conditions Precedent. The obligation of Merger Sub to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing of each of the following conditions,
except to the extent any such condition is waived in writing by Merger Sub:
(a) Performance by Shareholders and the Company. Each
Shareholder and the Company shall have performed and complied, in all material
respects, with all of the terms, provisions and covenants of this Agreement to
be performed and complied with by such Shareholder or the Company at or prior to
the Closing.
(b) Accuracy of Representations and Warranties. All of the
representations and warranties made by each Shareholder in this Agreement shall
be true, in all material respects, as of the date of this Agreement and as of
the Closing.
(c) No Injunction. No injunction, restraining order, judgment
or decree of any court or governmental authority shall exist against any of the
parties to this Agreement or any of their officers, directors or
representatives, which restrains, prevents or materially alters the transactions
contemplated hereby.
(d) Closing Deliveries. Shareholders shall have delivered to
Merger Sub each of the documents or other items required of Shareholders under
Section 3.3 above.
(e) Consents. Merger Sub shall have received all consents
listed in Exhibit F hereto.
(f) No Material Adverse Change. Since the date of this
Agreement, there shall not have been any material adverse change in the
business, operations, assets, prospects, or condition of the Company and the
Company shall have conducted its business only in the ordinary course.
(g) Financial Condition of the Company. As of the Closing, the
Company shall have, as determined by Merger Sub to its reasonable satisfaction,
(i) at least $500,000 in cash and working capital of at least $2,900,000; and
(ii) no more than $1,000,000 in Indebtedness. For purposes of this section, (i)
working capital shall mean current assets excluding cash in excess of $500,000
minus current liabilities excluding Indebtedness, and (ii) to the extent the
Company has cash in excess of $500,000 as of the Closing, the Company may offset
the amount of its outstanding Indebtedness by such excess.
(h) Employment Agreements. Surviving Corporation shall have
entered into satisfactory Employment Agreements with Xxxx Tac Xxxx Xxxx and
Xxxxxxx X. Xxxxxxx-Xxxx.
(i) Financing. Merger Sub shall have obtained reasonably
satisfactory financing for the transaction contemplated hereby.
24
7.2 Shareholder's Conditions Precedent. The obligation of Shareholders
and the Company to consummate the transactions contemplated by this Agreement is
subject to the fulfillment at or prior to the Closing of each of the following
conditions, except to the extent any such condition is waived in writing by
Shareholders' Representative:
(a) Performance by Merger Sub. Merger Sub shall have performed
and complied, in all material respects, with all of the terms, provisions and
covenants of this Agreement to be performed and complied with by Merger Sub at
or prior to the Closing.
(b) Accuracy of Representations and Warranties. All of the
representations and warranties made by Merger Sub in this Agreement shall be
true, in all material respects, as of the date of this Agreement and as of the
Closing.
(c) No Injunction. No injunction, restraining order, judgment
or decree of any court or governmental authority shall exist against any of the
parties to this Agreement or any of their officers, directors or
representatives, which restrains, prevents or materially alters the transactions
contemplated hereby.
(d) Closing Deliveries. Merger Sub and Parent shall have
delivered to Shareholders each of the documents or other items required of
Merger Sub and Parent under Section 3.2 above.
(e) Employment Agreements. Surviving Corporation shall have
entered into satisfactory Employment Agreements with Xxxx Tac Xxxx Xxxx and
Xxxxxxx X. Xxxxxxx-Xxxx.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Shareholders. Subject to Section 8.3,
Shareholders, jointly and severally (except for any claim made for the breach of
the covenants set forth in Section 9.2, the liabilities for which shall be
several), shall indemnify the Merger Sub and the Surviving Corporation from,
against and in respect of any and all losses, liabilities, deficiencies,
penalties, fines, costs, damages and expenses whatsoever (including, without
limitation, reasonable professional fees and costs of investigation, litigation,
settlement and judgment and interest) (collectively, "Losses") that may be
suffered or incurred by Merger Sub and/or the Surviving Corporation from or by
reason of (a) any inaccuracy of a representation or warranty made by
Shareholders in this Agreement, the Schedules or any other certificate or
document delivered by Shareholders pursuant to this Agreement, (b) any breach of
any covenant or agreement made by Shareholders in this Agreement, the Schedules
or any other certificate or document delivered by Shareholders pursuant to this
Agreement, (c) any matter described on Exhibit D hereto, and (d) any claim by
any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such
Person with either any Shareholder or the Company (or any Person acting on their
behalf) in connection with the transactions contemplated hereby.
25
8.2 Indemnification by Merger Sub. Merger Sub and the Surviving
Corporation shall indemnify Shareholders against any and all Losses that may be
suffered or incurred by Shareholders from or by reason of (a) any inaccuracy of
a representation or warranty made by Merger Sub in this Agreement, or any other
certificate or document delivered by Merger Sub pursuant to this Agreement, (b)
any breach of any covenant or agreement made by Merger Sub in this Agreement, or
any other certificate or document delivered by Merger Sub pursuant to this
Agreement, and (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Merger Sub (or any Person
acting on its behalf) in connection with the transactions contemplated hereby.
8.3 Limitations on Indemnity.
(a) Shareholders shall not have any liability or obligation to
Merger Sub or the Surviving Corporation whatsoever, and no claim shall be
asserted against Shareholders, for indemnification under Section 8.1(a) unless
and until the aggregate amount of Losses incurred by Merger Sub and/or the
Surviving Corporation as a result thereof exceeds $50,000, and then only to the
extent the aggregate amount of such Losses exceeds $50,000 and is less THAN
$5,500,000; provided, however, that the limitations set forth above in this
Section 8.3(a) shall not apply to (i) any breach or inaccuracy of Shareholders'
representations or warranties of which any Shareholder had knowledge at any time
prior to or on the date hereof, or (ii) claims for the breach or inaccuracy of
the representations and warranties set forth in Sections 4.1(a) (Organization),
4.2 (Authorization), 4.3 (Validity; Binding Effect), 4.5(a) (Title to Shares)
and 4.18 (Broker's Fees) (the matters described in clauses (i) and (ii) above,
collectively, "Carve-Out Claims"). For the avoidance of doubt, the limitations
set forth above in this Section 8.3(a) shall not apply to claims for
indemnification arising under Sections 8.1(b) through (d).
(b) All representations and warranties in this Agreement, the
Schedules and the certificates and other documents delivered pursuant hereto
shall survive the Closing and be enforceable against the party making the same
for a period of two (2) years from the Closing Date at which time they shall
expire and be of no further force or effect; provided, however, that (i)
Carve-Out Claims shall survive indefinitely, (ii) the representations and
warranties set forth in Section 4.15 (Employee Benefits) shall survive for five
(5) years from the Closing Date, and (iii) the representations and warranties
set forth in Sections 4.8 (Taxes) and 4.11 (Environmental) shall survive for the
period of the statute of limitations applicable to such representations and
warranties. Any claim for indemnification with respect to any such matter which
is not asserted by a notice given as herein provided within such period of
survival may not be pursued and shall be thereafter forever barred.
8.4 Third-Party Claims.
(a) Promptly after receipt by a party hereto entitled to
indemnity under Section 8.1, or Section 8.2 (an "Indemnified Person") of notice
of the assertion of a claim for which such party hereto is entitled to indemnity
hereunder against it by a third party (a "Third-Party Claim"), such Indemnified
Person shall give notice to the party hereto obligated to indemnify under such
Section (an "Indemnifying Person") of the assertion of such Third-Party Claim,
provided that the failure to notify the Indemnifying Person will not relieve the
26
Indemnifying Person of any liability that it may have to any Indemnified Person,
except to the extent that the Indemnifying Person demonstrates that the defense
of such Third-Party Claim is prejudiced by the Indemnified Person's failure to
give such notice.
(b) If an Indemnified Person gives notice to the Indemnifying
Person pursuant to Section 8.4(a) of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes, to assume the defense of
such Third-Party Claim with counsel satisfactory to the Indemnified Person.
After notice from the Indemnifying Person to the Indemnified Person of its
election to assume the defense of such Third-Party Claim, the Indemnifying
Person shall not, so long as it diligently conducts such defense, be liable to
the Indemnified Person under this Article VIII for any fees or costs of other
counsel or any other expenses with respect to the defense of such Third-Party
Claim, in each case subsequently incurred by the Indemnified Person in
connection with the defense of such Third-Party Claim. If the Indemnifying
Person assumes the defense of a Third-Party Claim, (i) such assumption will
establish for purposes of this Agreement that the claims made in that
Third-Party Claim are within the scope of and subject to indemnification, and
(ii) no compromise or settlement of such Third-Party Claims may be effected by
the Indemnifying Person without the Indemnified Person's consent unless (A)
there is no finding or admission of any violation of Law or any violation of the
rights of any party; and (B) the sole relief provided is monetary damages that
are paid in full by the Indemnifying Person.
(c) Notwithstanding the foregoing, the Indemnified Person may,
by notice to the Indemnifying Person, assume the exclusive right to defend,
compromise or settle such Third-Party Claim, but the Indemnifying Person will
not be bound by any determination of any Third-Party Claim so defended for the
purposes of this Agreement or any compromise or settlement effected without its
consent (which may not be unreasonably conditioned, withheld or delayed).
8.5 Set Off. Upon notice to Shareholders' Representative specifying in
reasonable detail the basis therefor, Merger Sub may set off any amount to which
it may be entitled under this Article VIII against amounts otherwise payable
under the Notes (or any of them). The exercise of such right of setoff by Merger
Sub in good faith, whether or not ultimately determined to be justified, will
not constitute an event of default under the Notes or any instrument securing
the Notes.
ARTICLE IX
ADDITIONAL COVENANTS
9.1 General. If any further action is necessary or desirable to carry
out the purposes of this Agreement, each of the parties hereto will take such
further action (including, without limitation, the execution and delivery of
such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article VIII
above).
27
9.2 Noncompetition and Nonsolicitation.
(a) Noncompetition. For a period of three (3) years after the
Closing Date, Shareholders and their Affiliates shall not, anywhere in the areas
described in Exhibit E, directly or indirectly, invest in, own, or operate any
Person engaged in any business that is directly competitive with the business of
the Company as currently conducted (a "Competing Business"); provided, however,
that Shareholders and their Affiliates, in the aggregate, may purchase or
otherwise acquire up to (but not more than) five percent (5%) of any class of
the securities of any entity if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934.
(b) Nonsolicitation. For a period of three (3) years after the
Closing Date, Shareholders and their Affiliates shall not, directly or
indirectly (i) solicit the business of any Person who is as of the Closing a
customer of the Company; (ii) induce any customer or supplier of the Company on
or prior to the Closing Date to cease doing business with the Surviving
Corporation after the Closing Date; (iii) hire or engage as a consultant,
independent contractor or in a similar capacity, any person who is an employee,
independent contractor or consultant of the Company on the Closing Date; or (iv)
solicit or persuade, or attempt to solicit or persuade, any person who is an
employee, independent contractor or consultant of the Company on the Closing
Date to terminate or adversely modify his or her relationship, whether or not
pursuant to a written agreement, with the Surviving Company.
(c) Without limiting the right of the Surviving Corporation to
pursue all other legal and equitable rights available to it for any violation of
Section 9.2(a) or (b) above, and to recover its legal fees and expenses, the
parties agree that monetary damages cannot fully compensate the Surviving
Corporation for such a violation and that the Surviving Corporation shall be
entitled to a temporary restraining order and any further injunctive relief to
prevent any violation, threatened violation or continuing violation thereof and
that no bond or other security shall be required in connection therewith. It is
the intent and understanding of each party hereto that if, in any action before
any court or agency legally empowered to enforce Section 9.2(a) or (b) above,
any term, restriction, covenant or promise set forth therein is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the minimum extent necessary to
make it enforceable by such court or agency.
9.3 Confidentiality. Each party hereby agrees that access to any and
all materials and documents provided by any other party, and directly or
indirectly associated with this Agreement, are proprietary to the disclosing
party and confidential. The receiving party will restrict access to this
information to essential and necessary parties. In the event the transaction
fails to close or terminates, for any reason, each party shall return to the
other parties, or its representatives, any and all such materials and documents,
or certify in writing that same has been destroyed and no copies retained.
Information obtained in connection with this transaction may not be used by the
receiving party to compete with the disclosing party.
28
9.4 Standard Management Shares.
(a) In the event a Shareholder desires to sell a portion of
the Standard Management Shares issued to such Shareholder pursuant to this
Agreement in order to meet his, her or its income tax obligations as a result of
such issuance, such Shareholder shall provide Parent with notice of his, her or
its desire to sell such shares on or after January 1, 2006 but on or before
February 1, 2006. Parent shall, at its option and prior to April 1, 2006, either
provide a shelf registration for or shall purchase that number of Standard
Management Shares from such Shareholder equal to the product of (i) the federal
and state income tax liability of such shareholder for the Standard Management
Shares issued to such Shareholder (determined by utilizing a 15% federal tax
rate and the combined state and local income tax rate, if any), divided by (ii)
the Per Share Value; provided, however, in the event the proceeds from the sale
of any Standard Management Shares sold pursuant to this Section 9.4(a) are less
than the Per Share Value, Parent will either purchase or provide a shelf
registration for an additional amount of Standard Management Shares so as to
enable such Shareholder to realize a sufficient amount of cash to satisfy his,
her or its income tax obligations with respect to the receipt of Standard
Management Shares.
(b) In the event that the average closing price for a share of
Standard Management during the ten-day trading period commencing on the first
day after the second anniversary of the closing ("Average Price") is less than
the Minimum Share Value, Parent shall provide to each Shareholder additional
cash or Standard Management Shares having an aggregate value equal to the
difference between (i)(A) the number of Standard Management Shares originally
received by such Shareholder at the Closing, multiplied by (B) the difference
between the Minimum Share Value and the Average Price, and (ii) the aggregate
amount of any proceeds in excess of the Minimum Share Value realized from such
Shareholder's previous sale of any such Standard Management Shares pursuant to
Section 9.4(a) above.
9.5 Release of Guarantees. Parent and Merger Sub shall arrange for the
release of each and every guaranty made by either Xxxx Tac Xxxx Xxxx or Xxxxxxx
X. Xxxxxxx-Xxxx in connection with the indebtedness of the Company, including
the Commercial Guaranty executed by Xxxx X. Xxxx in favor of Bank of America,
N.A. dated May 2, 2003.
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may be terminated:
(a) by either Merger Sub or Shareholders' Representative (on
behalf of Shareholders) if a material breach of any provision (including
representations and warranties) of this Agreement has been committed by the
other party and such breach has not been waived in writing;
(b) (i) by Merger Sub if the Closing has not occurred by
August 31, 2005 for any reason other than breach of this Agreement by Merger Sub
or Parent, or (ii) by Shareholders'
29
Representative if the Closing has not occurred by August 31, 2005 for any reason
other than breach of this Agreement by Shareholders or the Company; or
(c) by mutual written agreement of Merger Sub and
Shareholders' Representative.
10.2 Effect of Termination. If this Agreement is terminated under
Section 10.1 above, no party hereto shall have any further obligation under this
Agreement, except in connection with any breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Assignment. No party may assign any of its rights or delegate any
of its obligations under this Agreement without the prior written consent of the
other party hereto, except that Merger Sub may, without the prior written
consent of Shareholders or the Company (a) collaterally assign its rights
hereunder to any financial institution or other lender in connection with the
financing of the transactions contemplated hereby, (b) assign its rights and/or
obligations hereunder (in whole or in part) to one or more subsidiaries or other
affiliated entities, and/or (c) after the Closing, assign to any person or
entity who acquires the Surviving Corporation or its business (regardless of the
form of such acquisition) any of its rights under this Agreement.
11.2 Notices. All notices, requests, consents and other communications
hereunder (each, a "Notice") shall be in writing and shall be deemed to have
been given (a) if mailed, two (2) business days after such Notice is sent, when
sent via first class United States registered mail, return receipt requested,
postage prepaid to the address listed below for the party to whom the Notice is
being sent (the "Notice Party"), (b) if hand delivered or delivered by courier,
upon actual delivery of such Notice to the Notice Party at the address listed
below for such Notice Party, or (c) if sent by facsimile, on the first business
day after the date of the sender's receipt of a confirmed transmission of such
Notice to the Notice Party at the facsimile number, if any, listed below for
such Notice Party provided the party giving such Notice mails a copy of such
Notice within two (2) business days after the transmission of such Notice by
facsimile to the Notice Party. The addresses and facsimile numbers for each
party to this Agreement, as of the date hereof, are:
If to Parent or Merger Sub/ Standard Management
the Surviving Corporation: 00000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Facsimile No.: 000-000-0000
Attention: Xxxxxxx X. Xxxxx, Ex. VP
30
with a copy to:
Xxxxxx Xxxxxxx Attorneys, PC
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Attention: Xxxxxx X. Xxxxx
If to Shareholders or 7716 B Xxxxxx Park Ave South,
Shareholders' Xxxxxxx, XX 00000
Representative: Facsimile No.: 206-726-1040
Attention: Xxxx Tac Xxxx Xxxx
with a copy to:
Xxxxxx Xxxxx, Attorney at Law, PLLC
00000-00xx Xxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000-0000
Facsimile No.: 000-000-0000
Attention: Xxxxxx Xxxxx
Either party may change its address or facsimile number by providing written
notice, in accordance with the foregoing provisions of this Section 11.2, to the
other party of such change.
11.3 Expenses; Attorneys' Fees.
(a) Each party hereto will pay all costs, fees and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements contained herein on its part to
be performed, including the fees, expenses and disbursements of its respective
counsel and accountants; provided, however, that all such costs, fees and
expenses of the Company shall be paid by Shareholders at or prior to the
Closing.
(b) In any litigation between the parties regarding this
Agreement, the losing party shall pay to the prevailing party all reasonable
expenses and court costs, including, without limitation, reasonable attorneys'
fees and costs, incurred by the prevailing party. A party shall be considered
the prevailing party if (i) it initiated the litigation and obtains
substantially all of the relief or remedy it sought, either through a judgment
or the losing party's voluntary action, (ii) the other party withdraws its
action without substantially obtaining the relief or remedy it sought, or (iii)
it did not initiate the litigation and judgment is entered for either party, but
without substantially granting the relief or remedy sought by the initiating
party.
11.4 Governing Law; Forum.
(a) This Agreement shall be governed by and construed in
accordance with the Laws of the State of Indiana, without regard to such
jurisdiction's conflict of laws principles.
31
(b) Any controversy, claim or dispute arising out of or
relating to this Agreement or the breach, termination, enforceability or
validity of this Agreement, shall be brought in the courts of the State of
Indiana, or, if it has or can acquire jurisdiction, any United States District
Court sitting in Xxxxxx County, Indiana, and each of the parties irrevocably
submits to the exclusive jurisdiction of each such court in any such matter,
waives any objection it may now or hereafter have to venue or to convenience of
forum, agrees that all claims in respect of the matter shall be heard and
determined only in any such court and agrees not to bring any such matter
arising out of or relating to this Agreement in any other court. The parties
agree that either of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained agreement between the
parties irrevocably to waive any objections to venue or to convenience of forum.
Process in any matter referred to in this paragraph may be served on any party
anywhere in the world.
11.5 Partial Invalidity. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
11.6 Execution in Counterparts; Facsimile Signatures. This Agreement
may be executed in one or more counterparts, each of which shall be considered
an original counterpart, and all of which shall be considered to be but one
agreement and shall become a binding agreement when each party shall have
executed one counterpart and delivered it to the other party hereto. A signature
affixed to a counterpart of this Agreement and delivered by facsimile by any
Person is intended to be its, his or her signature and shall be valid, binding
and enforceable against the party on whose behalf it has been affixed.
11.7 Entire Agreement; Amendments and Waivers. This Agreement contains
the entire understanding of the parties hereto with regard to the subject matter
contained in this Agreement and supersedes all prior agreements or
understandings of the parties. The parties, only by mutual agreement in writing,
may amend, modify and supplement this Agreement. The failure of any party to
this Agreement to enforce at any time any provision of this Agreement shall not
be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
32
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
Rainier Acquisition Corporation
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxx Tac Xxxx Xxxx
------------------------------ ----------------------------
Printed: Xxxxxx X. Xxxxxx Xxxx Tac Xxxx Xxxx
Title: Chairman of the Board, President,
Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxxx-Xxxx
----------------------------
Ranier Home Health Care Pharmacy, Inc. Xxxxxxx X. Xxxxxxx-Xxxx
By: /s/ Xxxx Xxxx /s/ Xxxx Tac Xxxx Xxxx
------------------------------ ----------------------------
Printed: Xxxx Xxxx Trustee, The Xxxxxxxx Xxxx
------------------------- Irrevocable Trust, u/a/d
Title: President 8/23/2004
------------------------- By: Xxxx T.H. Xxxx,
Attorney-in-fact
Standard Management Corporation
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Printed: Xxxxxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
S-1
