Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of the
1st day of September, 2007 (the "Effective Date"), by and between ARCADIA
PRODUCTS, INC., a Delaware corporation (the "Stockholder"), and AEROCARE
HOLDINGS, INC., a Delaware corporation (the "Buyer") (each a "Party" or
collectively the "Parties").
RECITALS:
A. The Stockholder is the record and beneficial owner of an aggregate of
one thousand (1,000) shares (the "Shares") of the common stock, $1.00 par value
per share, of BEACON RESPIRATORY SERVICES, INC., a Delaware corporation (the
"Corporation"), constituting all of the issued and outstanding shares of capital
stock of the Corporation as of the date of this Agreement.
B. The Corporation is based in the State of Florida and is engaged in the
business of durable medical equipment and respiratory therapy (collectively, the
"Business").
C. Stockholder desires to sell to Buyer, and Buyer desires to purchase from
Stockholder, all of the Shares, upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual promises and conditions
herein contained, the Parties hereto agree as follows:
1. Incorporation of Recitals. The Recitals made above are incorporated into
and made part of this Agreement by this reference thereto.
2. Sale and Purchase of Shares. Subject to the terms and conditions of this
Agreement, Stockholder hereby sells, transfers and assigns to Buyer, and Buyer
hereby purchases from Stockholder, all of the Shares. Stockholder hereby
delivers to Buyer certificates evidencing the Shares duly endorsed to Buyer.
3. Purchase Price; Method of Payment; Contingent Cash Consideration;
Reductions to Cash Consideration; Cash of the Corporation; Accounts Receivable
of the Corporation; Accounts Payable of the Corporation; Clawback Obligation;
Allocation of Purchase Price; Bi-Weekly Reconciliation.
a. Purchase Price; Method of Payment. The total consideration from
Buyer to Stockholder in exchange for the Shares is: (I) Five Million Seven
Hundred Fifty Thousand Dollars ($5,750,000) in cash (the "Cash Consideration"),
less the aggregate amounts set forth in Section 3.c
hereof, plus (II) Seven Hundred Fifty Thousand Dollars ($750,000) in cash,
subject to offsets and reductions as set forth in Section 3.b hereof (the
"Contingent Cash Consideration") (the Cash Consideration and Contingent Cash
Consideration are collectively referred to herein as the "Purchase Price"). The
Cash Consideration, less the aggregate amounts set forth in Section 3.c hereof,
will be paid by Buyer to Stockholder on the Closing Date (or on the next banking
day following the Closing Date if all documents contemplated to be executed at
Closing were fully executed after 12:01 p.m., E.D.T., on the Closing Date) by
wired funds to Stockholder's account number as set forth on the Schedule of Wire
Instructions attached hereto as EXHIBIT 3-A. The Contingent Cash Consideration
shall be payable pursuant to the terms of Section 3.b hereof.
b. Contingent Cash Consideration. The Contingent Cash Consideration
shall be held back by Buyer without interest, during the period commencing on
the Closing Date and ending twelve (12) months after the Closing Date (the "Hold
Back Period"), to secure all of the obligations of Stockholder to Buyer
hereunder, including but not limited to all of the obligations of Stockholder to
Buyer set forth in: (A) Section 3.e hereof entitled Accounts Receivable of the
Corporation; (B) Section 3.f hereof entitled Accounts Payable of the
Corporation; (C) Section 3.g hereby entitled Clawback Obligation; (D) Section 4
hereof entitled Right of Offset Against the Contingent Cash Consideration; and
(E) Section 13 hereof entitled Indemnification; Remedies.
i. Offset and Reduction of Contingent Cash Consideration in the
Event of Default. In the event Stockholder fails to meet any of its obligations
to Buyer under this Agreement or otherwise is in default of any provision of
this Agreement (each such failure is sometimes herein referred to as a "default"
or an "event of default"), Buyer shall give written notice of the alleged
default to Stockholder. Upon the passage of not less than thirty (30) days from
receipt of said notice of alleged default from Buyer (unless during such thirty
(30) day period, Buyer shall have received notice from Stockholder that
Stockholder has elected to defend the dispute pertaining to an event of default
involving a debt or liability), the Buyer may at any time thereafter wholly or
partially make offset against and thereby reduce the amount of Contingent Cash
Consideration payable to Stockholder hereunder. Notwithstanding the foregoing,
in the case of a "Dispute" (as defined in Section 13 of this Agreement), the
provisions of Section 13 of this Agreement applicable to a "Dispute" shall
govern, and no offset and reduction against the Contingent Cash Consideration
shall occur until the applicable "Dispute" is resolved in accordance with the
provisions of Section 13 hereof.
ii. Partial Release and Final Release; Effect of Release of
Contingent Cash Consideration. One half (1/2) of the Contingent Cash
Consideration, less any amounts previously offset and reduced by Buyer pursuant
to this Agreement and less an amount equal to five percent (5%) of such adjusted
Contingent Cash Consideration payable by Stockholder to Xxxxxx Xxxxxxxx &
Associates, Inc. (which amount the Stockholder authorizes the Buyer to pay
directly to Xxxxxx Xxxxxxxx & Associates, Inc. by wire transfer), shall be
released to Stockholder on or before that date which is six (6) months after the
Closing Date (the "Partial Release Date"), and the remaining Contingent Cash
Consideration not released to Stockholder on the Partial Release Date, less any
amounts previously offset and reduced by Buyer pursuant to this Agreement and
less an amount equal to five percent (5%) of such adjusted Contingent Cash
Consideration payable by Stockholder to Xxxxxx Xxxxxxxx & Associates, Inc.
(which amount the Stockholder authorizes the Buyer to pay directly to Xxxxxx
Xxxxxxxx & Associates, Inc. by wire transfer), shall be released to
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Stockholder on or before that date which is twelve (12) months after the Closing
Date (the "Final Release Date"), provided, however, that notwithstanding
anything contained in this Agreement to the contrary, the right of Buyer to make
offset against and reduce the Contingent Cash Consideration shall extend past
the Partial Release Date and/or Final Release Date in the event: (i) a claim is
in dispute at the time of the Partial Release Date and/or Final Release Date
and, in such instance, the Buyer's right to make offset against and reduce the
Contingent Cash Consideration shall not terminate until after the settlement of
such claim or claims; or (ii) the Contingent Cash Consideration to be reduced
pursuant to Section 4 of this Agreement has not been finally determined and, in
such instance, the Buyer's right to make offset against and reduce the
Contingent Cash Consideration shall not terminate until such time as all
calculations required by Section 4 hereof have been finally determined and all
reductions of the Contingent Cash Consideration required by Section 4 hereof (if
any) have been made. In the event the right of offset is extended past the
Partial Release Date and/or Final Release Date because a claim is in dispute,
Contingent Cash Consideration having a value equal to that amount which is 130%
of the amount of the claim asserted by Buyer shall continue to be held back by
Buyer past the Partial Release Date and/or Final Release Date until such claim
is resolved.
c. Reductions to Cash Consideration. The Cash Consideration to be
delivered at Closing shall be reduced, dollar for dollar, by (1) Two Hundred
Eighty Seven Thousand Five Hundred Dollars ($287,500.00), representing the
amount owed by Stockholder to Xxxxxx Xxxxxxxx & Associates, Inc. on the Closing
Date (the "SRA Commission Obligation") (the SRA Commission Obligation to be paid
on the Closing Date does not include any commission payable by Stockholder to
Xxxxxx Xxxxxxxx & Associates, Inc. pursuant to Section 3.b.ii hereof upon the
payment and release of any portion of the Contingent Cash Consideration to
Stockholder, and does not include any other commission payable by Stockholder to
Xxxxxx Xxxxxxxx & Associates, Inc. after the Closing Date); and (2) the
aggregate amount of Eight Hundred Sixty Three Thousand One Hundred Sixty Seven
and 59/100 Dollars ($863,167.59), which amount Stockholder represents and
warrants is sufficient to satisfy in full the following liabilities of the
Corporation and reduce the Corporation's "Existing Obligations" (as defined in
Section 6.d hereof) to Zero Dollars ($-0-):
(A) $115,330.08, representing the amount owed by the Corporation
to Invacare through the Effective Date;
(B) $173,389.03, representing the amount owed by the Corporation
to VGM Financial Services through the Effective Date (Buyer has elected to have
the Corporation maintain this liability of the Corporation after the Closing
Date and have the Corporation continue to make any payments required);
(C) $120,316.01, representing the amount owed by the Corporation
to Banc of Amer Leasing through the Effective Date;
(D) $37,896.50, representing the amount owed by the Corporation
to Greater Bay Capital through the Effective Date;
(E) $23,705.86, representing the amount owed by the Corporation
to Key Equipment through the Effective Date;
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(F) $111,687.62, representing the amount owed by the Corporation
to US Express Leasing through the Effective Date;
(G) $135,701.12, representing the amount owed by the Corporation
to Airsep through the Effective Date; and
(H) $145,141.37, representing the amount owed by the Corporation
to GMAC through the Effective Date (Buyer has elected to have the Corporation
maintain this liability of the Corporation after the Closing Date and have the
Corporation continue to make any payments required).
The liabilities of the Corporation set forth in subsection (A) above and in
subsections (C) through (G) above shall be paid to the respective creditors set
forth above by wired funds on the Closing Date (or on the next banking day
following the Closing Date if all documents contemplated to be executed at
Closing were fully executed after 12:01 p.m., E.D.T. on the Closing Date).
Not later than that date which is ten (10) days from the Closing Date,
Stockholder shall cause to be obtained from the following secured parties, and
filed with the Secretary of State of Delaware, Form UCC-3 Termination Statements
terminating the following Form UCC-1 Financing Statements: (1) Form UCC-1
Financing Statement, filed on January 31, 2003, listing US Bank as Custodian or
Trustee as Secured Party and DVI Strategic Partner Group, a Division of DVI
Financial Services Inc. as Additional Secured Party; and (2) Form UCC-1
Financing Statement, filed on February 2, 2007, listing Greater Bay Bank, N.A.
as Secured Party.
d. Cash of the Corporation. Stockholder is entitled to the cash and
cash balances of the Corporation pertaining to the operation of the Business
through August 31, 2007 (the "Excluded Cash"), and Buyer is entitled to the cash
and cash balances of the Corporation pertaining to the operation of the Business
after August 31, 2007. In the event the Excluded Cash has not been reduced to
Zero Dollars ($-0-) as of the Closing Date, the Buyer agrees to remit to
Stockholder the remaining portion of the Excluded Cash. In the event the
Excluded Cash is a negative amount for any reason (e.g., overdrafts, outstanding
checks which have not cleared, etc.), the Stockholder shall immediately make
payment to Buyer in such amount as will bring the negative balance back to Zero
Dollars ($-0-).
e. Accounts Receivable of the Corporation. Stockholder is entitled to
all revenues and proceeds generated by accounts receivable of the Corporation
pertaining to the operation of the Business through August 16, 2007 (or through
August 31, 2007 with respect to sales of the Business) (the "Excluded Accounts
Receivable"), including all revenues and proceeds generated by accounts
receivable of the Business representing xxxxxxxx for sales up to but not after
August 31, 2007, xxxxxxxx pertaining to rental patients up to but not after
August 16, 2007, and xxxxxxxx pertaining to new rental setups up to but not
after August 16, 2007 (collectively, the "Excluded Accounts Receivable
Proceeds"). Buyer, through the Corporation, is entitled to all revenues and
proceeds generated by accounts receivable of the Corporation pertaining to the
operation of the Business after August 16, 2007 (or after August 31, 2007 with
respect to sales of the Business), including all revenues and proceeds generated
by accounts receivable of the Business
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representing xxxxxxxx for sales of the Business after August 31, 2007, xxxxxxxx
pertaining to rental patients after August 16, 2007, and xxxxxxxx pertaining to
new rental setups after August 16, 2007 (collectively, the "Included Accounts
Receivable Proceeds"). Notwithstanding anything herein to the contrary, in no
event shall any of the Included Accounts Receivable Proceeds be regarded as
Excluded Cash, regardless of when such Included Accounts Receivable Proceeds are
paid or received, and, at the Closing, Stockholder shall insure that any
Included Accounts Receivable Proceeds received through the Closing Date are
preserved and maintained in the Corporation for the Corporation's use and
benefit after the Closing Date. Buyer's sole obligation with respect to the
Excluded Accounts Receivable Proceeds shall be to remit any Excluded Accounts
Receivable Proceeds to Stockholder promptly upon receipt in the form of such
receivable with any necessary endorsement. Buyer shall have no obligation
whatsoever to collect any unpaid Excluded Accounts Receivable, nor shall the
Stockholder undertake any action in connection with any unpaid Excluded Accounts
Receivable that interferes with the conduct of Corporation's business on and
after the Closing Date or which adversely affects the relationship of the
Corporation with any patients of the Corporation on and after the Closing Date,
and Stockholder agrees to use consistent guidelines, collection approaches and
collection procedures, which are no more aggressive than the Corporation and
Stockholder have used in the past, relating to the collection of the Excluded
Accounts Receivable. Notwithstanding anything contained in this Agreement to the
contrary, any Medicare refunds or recoupments on any Excluded Accounts
Receivable generated or created prior to the Effective Date shall be the
responsibility of Stockholder and its ultimate parent corporation, Arcadia
Resources, Inc., a Nevada corporation, and their successors and assigns. For an
indefinite period following the Closing Date, Stockholder indemnifies and holds
the Corporation and Buyer harmless from and against any and all such Medicare
refunds or recoupments and from any other liabilities, obligations or claims of
any kind pertaining to the Excluded Accounts Receivable and Excluded Accounts
Receivable Proceeds, and any business activity related thereto, and authorizes
Buyer to make offset against the Contingent Cash Consideration in the event
Buyer has a claim against Stockholder pursuant to this indemnification. The
Buyer acknowledges that the Corporation was unable to xxxx some of its sales
prior to September 1, 2007, was unable to xxxx some of its rental patients prior
to August 17, 2007, and was unable to generate a xxxx pertaining to some of its
new rental setups prior to August 17, 2007, for the reason that the Corporation
had provider number applications pending on such sales and rentals and,
therefore, was unable to obtain certificates of medical necessity necessary for
billing. The Buyer agrees to reasonably assist Stockholder and Arcadia
Resources, Inc. after the Closing Date in obtaining the required certificates of
medical necessity, upon approval of the applicable provider number applications
of the Corporation, so that Stockholder and Arcadia Resources, Inc. can generate
bills on such unbilled accounts post-closing. The Buyer agrees that all such
bills shall be submitted to the payor in the name of the Corporation as the
supplier of service, using the applicable provider/supplier and tax
identification numbers.
f. Accounts Payable of the Corporation. Stockholder hereby agrees, and
Arcadia Resources, Inc. in its Guaranty Agreement shall be required to agree,
that: (A) Stockholder and Arcadia Resources, Inc. shall be and hereby are
jointly and severally liable for all of the accounts payable obligations of the
Corporation (whether due and owing, not yet due and owing, billed or unbilled,
accrued or not accrued or contingent or not contingent), pertaining to the
operation of the Business through August 31, 2007, including but not limited to
all of the accounts payable listed on the Schedule of Accounts Payable Data
attached hereto as EXHIBIT 6-R, which Stockholder represents and warrants is an
accurate and complete list of all of such accounts payable
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through the close of business on August 31, 2007 (collectively, the
"Pre-Existing Accounts Payable Obligations") and that EXHIBIT 6-R includes all
of the accrued payroll of the Corporation through August 31, 2007 and all of the
accrued vacation obligations of the Corporation through August 31, 2007; and (B)
Stockholder and Arcadia Resources, Inc. shall cause the Pre-Existing Accounts
Payable Obligations to be paid when due and shall satisfy all of such
Pre-Existing Accounts Payable Obligations no later than by that date which is
sixty (60) days from the Closing Date, as to Pre-Existing Accounts Payable
Obligations listed on EXHIBIT 6-R, and by that date which is ninety (90) days
from the Closing Date, as to Pre-Existing Accounts Payable Obligations not
listed on EXHIBIT 6-R (that date which is ninety (90) days from the Closing Date
is herein referred to as the "Final Date for A/P Payments"), provided, however,
that any portion of the Pre-Existing Accounts Payable Obligations consisting of
accrued payroll obligations through August 31, 2007, shall be paid in full by
Stockholder or Stockholder's ultimate parent corporation, Arcadia Resources,
Inc., on or before September 7, 2007, and any portion of the Pre-Existing
Accounts Payable Obligations consisting of accrued vacation obligations through
August 31, 2007, shall be paid in full by Stockholder or Stockholder's ultimate
parent corporation, Arcadia Resources, Inc. on or before September 21, 2007,
such that all of the employees of the Corporation as of September 1, 2007 will
have no accrued payroll owing to any of them by the Corporation for periods
before such date nor will have any accrued vacation owing to them by the
Corporation for periods before such date. In the event Stockholder and Arcadia
Resources, Inc. fail to pay in full all Pre-Existing Accounts Payable
Obligations by the Final Date for A/P Payments, Buyer shall have the right in
the exercise of its sole discretion, but not the obligation, to pay any of the
Pre-Existing Accounts Payable Obligations on behalf of Stockholder and Arcadia
Resources, Inc. and make offset against the applicable portion of any accounts
receivable proceeds to be delivered by Buyer to Stockholder pursuant to Section
3.e hereof and/or make offset against the applicable portion of any Contingent
Cash Consideration to be delivered by Buyer to Stockholder pursuant to Section
3.b hereof. In the event of such non-payment by Stockholder and/or Arcadia
Resources, Inc. of all of the Pre-Existing Accounts Payable Obligations by the
Final Date of A/P Payments, Buyer shall also have all other remedies set forth
in this Agreement or under applicable law.
g. Clawback Obligation. The Buyer and Stockholder agree that the
Purchase Price was established based on the assumption that no legislation, law,
or act would be made, become effective or be in effect in either calendar year
2008 or calendar year 2009 which would reduce the existing 36 month cap on
Medicare rental oxygen reimbursements to 24 months or a lower number of months.
The following provisions shall apply in the event any such legislation, law or
act reducing such reimbursements is made, becomes effective or is in effect (the
term "Effective", for the purposes of this Agreement, shall mean that any such
legislation, law or act reducing such reimbursements is made or has been made,
is effective or has become effective or is in effect at any time during the
applicable calendar year).
i. Legislation, Law or Act Effective in Calendar Year 2008. In
the event any legislation, law or act of any kind is Effective during calendar
year 2008 which reduces the 36 month cap on Medicare rental oxygen
reimbursements to 24 months or a lower number of months, the Purchase Price for
all purposes of this Agreement shall be retroactively reduced as follows and
Stockholder shall make a cash payment to Buyer in the amount of such reduction
as follows: (A) if such legislation, law or act reduces the cap on Medicare
rental oxygen reimbursements to 18 months or a lower number of months, the
applicable Purchase Price shall be retroactively reduced by
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$1,000,000, and Stockholder shall pay over to Buyer cash in the amount of
$1,000,000 within thirty (30) days after receipt of written demand from Buyer;
(B) if such legislation, law or act reduces the cap on Medicare rental oxygen
reimbursements to 24 months, the applicable Purchase Price shall be
retroactively reduced by $500,000, and Stockholder shall pay over to Buyer cash
in the amount of $500,000 within thirty (30) days after receipt of written
demand from Buyer; and (C) if such legislation, law or act reduces the cap on
Medicare rental oxygen reimbursements to a level above 18 months but below 24
months, the applicable Purchase Price shall be retroactively reduced as follows:
(i) by $583,333 if the cap is reduced to 23 months, (ii) by $666,667 if the cap
is reduced to 22 months, (iii) by $750,000 if the cap is reduced to 21 months,
(iv) by $833,333 if the cap is reduced to 20 months, and (v) by $916,667 if the
cap is reduced to 19 months, and Stockholder shall pay over to Buyer cash in the
applicable amount within thirty (30) days after receipt of written demand from
Buyer.
ii. Legislation, Law or Act Effective in Calendar Year 2009. In
the event any legislation, law or act of any kind is Effective during calendar
year 2009 which reduces the 36 month cap on Medicare rental oxygen
reimbursements to 24 months or a lower number of months, the Purchase Price for
all purposes of this Agreement shall be retroactively reduced as follows and
Stockholder shall make a cash payment to Buyer in the amount of such reduction
as follows: (A) if such legislation, law or act reduces the cap on Medicare
rental oxygen reimbursements to 18 months or a lower number of months, the
applicable Purchase Price shall be retroactively reduced by $500,000, and
Stockholder shall pay over to Buyer cash in the amount of $500,000 within thirty
(30) days after receipt of written demand from Buyer; (B) if such legislation,
law or act reduces the cap on Medicare rental oxygen reimbursements to 24
months, the applicable Purchase Price shall be retroactively reduced by
$250,000, and Stockholder shall pay over to Buyer cash in the amount of $250,000
within thirty (30) days after receipt of written demand from Buyer; and (C) if
such legislation, law or act reduces the cap on Medicare rental oxygen
reimbursements to a level above 18 months but below 24 months, the applicable
Purchase Price shall be retroactively reduced as follows: (i) by $291,667 if the
cap is reduced to 23 months, (ii) by $333,333 if the cap is reduced to 22
months, (iii) by $375,000 if the cap is reduced to 21 months, (iv) by $416,667
if the cap is reduced to 20 months, and (v) by $458,333 if the cap is reduced to
19 months, and Stockholder shall pay over to Buyer cash in the applicable amount
within thirty (30) days after receipt of written demand from Buyer. The terms of
this Section 3.g.ii shall not apply if Stockholder is obligated to make a
payment to Buyer pursuant to Section 3.g.i for the reason that legislation, law
or act was Effective during calendar year 2008 which reduced the 36 month cap on
Medicare rental oxygen reimbursements to 24 months or a lower number of months.
iii. Additional Terms Regarding Payment of the Clawback
Obligation. The obligation of Stockholder to make any payment to Buyer pursuant
to subsections (i) or (ii) of this Section 3.g is herein sometimes referred to
as the "Clawback Obligation". In the event Stockholder fails to make any payment
of a Clawback Obligation to Buyer when due, Buyer shall have the right to make
offset against any Contingent Cash Consideration which remains unpaid and still
owing at the time of such failure. Furthermore, Arcadia Resources, Inc. shall,
in its Guaranty Agreement required to be delivered at Closing, specifically
guaranty payment by Stockholder to Buyer of the Clawback Obligation. In the
event the Clawback Obligation is not paid when due, the Clawback Obligation
shall incur interest at the maximum rate permitted by the laws of the State of
Florida, and Buyer shall be entitled to recover the costs, charges and expenses
incurred by Buyer
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in any legal action or proceeding intended to collect payment of the Clawback
Obligation, including but not limited to, reasonable trial, appellate and
bankruptcy attorneys' fees.
h. Allocation of Purchase Price. The Purchase Price shall be allocated
among the assets of the Corporation as set forth on EXHIBIT 3-H, which
allocation shall be jointly prepared and agreed to by Buyer and Stockholder and
attached to this Agreement no later than by September 30, 2007. It is agreed
that the allocations under this Section will be binding on all parties for
Federal, state, local and other tax purposes in connection with this sale, and
will be consistently reflected by each Party on its tax returns. The Parties
shall execute and attach hereto as EXHIBIT 3-H, not later than by September 30,
2007, any forms required by Section 338(h)(10) of the Internal Revenue Code, as
amended, on the subject of the allocation of the Purchase Price among the assets
of the Corporation, and Buyer shall allocate the Purchase Price among the assets
of the Corporation in accordance with such forms.
i. Bi-Weekly Reconciliation. Commencing on September 21, 2007, and
bi-weekly thereafter or on such other periodic basis as the parties hereto shall
agree, and for so long as is reasonably necessary to accomplish the objectives
set forth in this subsection, a representative of the Buyer and representative
of the Stockholder shall meet on such basis as they shall decide (whether in
person, telephonically or electronically via e-mail) in an effort to reconcile
the various obligations of the parties under this Agreement, including without
limitation, the allocation of cash in the Corporation, the distribution of
proceeds from accounts receivable, the status of payoffs of accounts payable,
the settlement and proper allocation of pre-Closing and post-Closing expenses
(such as rent and similar expenses), including expenses paid by one party which
should properly be allocated to the other party, adjustments for the
underpayment of any liabilities which should have been paid in full at Closing,
etc. Such representatives may establish whatever procedures and worksheets for
such reconciliation as they may reasonably determine.
4. Right of Offset Against the Contingent Cash Consideration. In the event
that: (i) the Corporation has any debts or liabilities of any kind as of the
Effective Date, other than the debts and liabilities of the Corporation
described on, and not in excess of the dollar amounts listed on, the Schedule of
Liabilities attached hereto as EXHIBIT 6-D (the "Liabilities Deficiency"), or
(ii) the Corporation has, since June 30, 2007, made expenditures or incurred
obligations or liabilities, except in the ordinary course of business;
discharged or satisfied any liens or encumbrances, except in the ordinary course
of business; declared or made any payment or distribution to Stockholder or
purchased or redeemed any of its common capital stock or agreed to do so;
mortgaged, pledged or subjected to lien or encumbrance any of its assets; sold
or transferred any assets, except in the ordinary course of business; suffered
any damage or loss (whether or not covered by insurance), materially affecting
its properties; waived any rights of substantial value; or entered into any
transaction other than in the ordinary course of business (the "Subsequent Event
Deficiency"), or (iii) any debts, liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise) (the "Obligations"), other
than those subject to subsections (i) and (ii) of this Section 4, become known,
are uncovered or arise after the Effective Date, which Obligations pertain to
any actions, omissions, debts, liabilities or obligations of the Corporation or
Stockholder, created or arising on or before the Effective Date (said
Obligations are hereinafter referred to as the "Contingent Liability") (a
Liabilities Deficiency, Subsequent Event Deficiency or Contingent Liability is
sometimes herein referred to as a "Claim"); then, and in any of such events,
Buyer shall
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have the right, during the Hold Back Period (or after the Hold Back Period if
permitted under Section 3.b.ii hereof), to make offset against the Contingent
Cash Consideration in accordance with the terms and conditions of Section 3.b
hereof, in amounts from time to time equal to any Liabilities Deficiency,
Subsequent Event Deficiency or Contingent Liability which becomes known, is
uncovered or arises during the twelve (12) month period after the Closing Date
(subject, however, in the event of a "Dispute", to the provisions of Section 13
hereof applicable to a "Dispute"). During the twelve (12) month period following
the Closing Date, in the event Buyer makes written request to Stockholder
hereunder for Stockholder to pay any Liabilities Deficiency, Subsequent Event
Deficiency or Contingent Liability, and Stockholder fails to make the requested
payment within thirty (30) days from the date of such written request (said
thirty (30) day period hereinafter referred to as the "Notice Period"), Buyer
shall have the right to make offset against and reduce the Contingent Cash
Consideration, in accordance with the terms and conditions of Section 3.b
hereof, in amounts from time to time equal to the amount of any Liabilities
Deficiency, Subsequent Event Deficiency or Contingent Liability which becomes
known, is uncovered or arises during the twelve (12) month period following the
Closing Date (subject, however, in the case of a "Dispute", to the provisions of
Section 13 hereof applicable to a "Dispute"), and Stockholder agrees to allow
Buyer to make offset against and reduce the Contingent Cash Consideration as
provided in this Agreement. Except as provided in Section 3.b.ii hereof, Buyer's
right of offset against the Contingent Cash Consideration shall terminate on
that date which is twelve (12) months from the Closing Date; provided, however,
that notwithstanding anything contained in this Agreement to the contrary, the
rights of offset shall extend past the Partial Release Date and/or Final Release
Date (the "Applicable Release Date") in the event a Claim is in dispute at the
time of the Applicable Release Date and, in such instance, the right of offset
shall not terminate until after the settlement of such Claim or Claims. In the
event the right of offset is extended past the Applicable Release Date because a
Claim is in dispute, that amount of Contingent Cash Consideration equal to the
amount of such claim, plus a reserve equal to 30% of the amount of such Claim,
shall continue to be held back by Buyer past the Applicable Release Date until
such Claim is resolved, with the remaining Contingent Cash Consideration
released to Buyer within fifteen (15) days after the Applicable Release Date.
Subject to Section 13 hereof, Buyer shall be entitled to reimbursement from
Stockholder of the amount of any reasonable legal fees and expenses (including
court costs and the costs of appeal) incurred by Buyer to enforce the collection
of amounts owed Buyer by Stockholder hereunder, provided Buyer is the prevailing
party in any such collection action; however, if Stockholder is the prevailing
party in any such collection action, Stockholder shall be entitled to
reimbursement from Buyer of the amount of any reasonable legal fees and expenses
(including court costs and the costs of appeal) incurred by Stockholder to
defend itself in such collection action.
5. Effective Date; Closing Date. The effective date for the transactions
contemplated under this Agreement will be 12:01 a.m. on September 1, 2007 (the
"Effective Date"); however, subject to the terms of this Agreement, the actual
closing of the transactions contemplated under this Agreement shall occur no
later than September 10, 2007, unless extended by written agreement of the
Parties. The date upon which such Closing shall occur is hereinafter referred to
as the "Closing" or "Closing Date." Closing shall take place at such place or in
such a manner as may be agreed upon by the Parties.
6. Representations and Warranties by Stockholder. Stockholder represents
and warrants to Buyer that each of the following representations and warranties
is true and correct as of the
9
Effective Date and again as of the Closing Date, and is made with the full
understanding that such representations and warranties constitute material
inducement to Buyer to enter into the transactions contemplated hereby:
a. Organization of Corporation; Qualification; Power and Authority.
The Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to carry on its business as presently conducted, and the
Corporation is registered or qualified to do business in the State of Florida
and in all other jurisdictions where the nature of the Corporation's business
requires such registration or qualification, except where failure to be so
qualified would not have a material adverse affect on the Business or on the
Corporation's business, assets, results of operations, prospects or condition
(financial or otherwise). The Corporation is not in default under any provisions
of its Articles of Incorporation, as amended, or its By-laws, as amended. The
Corporation has no subsidiaries and has no direct or indirect equity interest in
any other firm, corporation or business enterprise. A complete listing of the
Officers and Directors of the Corporation is attached hereto as EXHIBIT 6-A.
b. Capitalization and Long Term Indebtedness.
i. The Corporation is authorized by its Articles of Incorporation
to issue one thousand (1,000) shares of common stock, $1.00 par value per share,
of which all one thousand (1,000) shares are duly and validly issued and
outstanding, fully paid, and nonassessable. There are no shares of any other
class of stock authorized, issued or outstanding nor are any unissued shares
committed to any party by the Corporation. The Corporation has not authorized or
established any stock appreciation, phantom stock, profit participation or
similar rights or plans with respect to the Corporation. The Corporation has not
authorized or issued any class of preferred stock or any other class of common
capital stock, and has no authority to issue any other capital stock, preferred
stock or other securities.
ii. The Corporation is not in any default or violation of any
provision of its outstanding long term or short-term indebtedness.
iii. There are no outstanding options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts,
commitments or agreements of any character relating to the issuance of the
Corporation's capital stock or other securities.
iv. All FICA and Federal and state withholding tax deposits have
been timely and fully reported and paid.
v. Except as set forth in EXHIBIT 6-B, there are no outstanding
or unpaid loans or other obligations to or from stockholders, directors or
officers or, except for compensation paid by the Corporation to employees in the
ordinary course of business, to or from employees of the Corporation.
10
vi. Except as set forth in EXHIBIT 6-B, the Corporation has not
made any payments, dividends or other distributions to Stockholder or any other
affiliate between May 31, 2007 and the Closing Date.
c. Financial Statements. Stockholder has furnished Buyer with balance
sheets of the Corporation (collectively, the "Balance Sheets") dated December
31, 2006, January 31, 2007, February 28, 2007, March 31, 2007, April 30, 2007,
May 31, 2007, June 30, 2007 and July 31, 2007 (the July 31, 2007 date is
sometimes herein referred to as the "Last Balance Sheet Date"), and the related
statements of income for the Corporation (collectively, the "Income Statements")
for the periods ended December 31, 2006, January 31, 2007, February 28, 2007,
March 31, 2007, April 30, 2007, May 31, 2007, June 30, 2007 and July 31, 2007,
copies of which are attached hereto as EXHIBIT 6-C (the Balance Sheets and
Income Statements are collectively referred to herein as the "Financial
Statements"). The Financial Statements: (i) are in accordance with the books and
records of the Corporation; (ii) fairly represent the financial condition of the
Corporation at such dates and the results of its operations for the periods
specified; (iii) were prepared on a basis consistent with prior accounting
periods; (iv) with respect to all contracts and commitments of the Corporation,
reflect adequate reserves for all reasonably anticipated losses and costs in
excess of anticipated income; and (v) with respect to the Balance Sheets,
disclose all of the debts, liabilities and obligations of any nature (whether
absolute, accrued, contingent, or otherwise) of the Corporation at the Last
Balance Sheet Date and include the appropriate reserves for all taxes and other
accrued liabilities, except that certain contingent liabilities, if not
disclosed on the Balance Sheets, shall be considered to be disclosed pursuant to
this subsection, if disclosed on an Exhibit to this Agreement. The Stockholder
covenants and agrees to deliver to Buyer, post-Closing, the balance sheet of the
Corporation and the related statement of income of the Corporation for the month
ended August 31, 2007, promptly following completion of such financial
statements by Stockholder but in no event later than September 30, 2007.
d. Existing Obligations. All of the debts, liabilities and obligations
of the Corporation are listed on the Schedule of Liabilities attached hereto as
EXHIBIT 6-D and such schedule accurately reflects all of the Corporation's
"Existing Obligations" (as hereinafter defined) as of the Effective Date. The
term "Existing Obligations" shall mean and refer to all of the Corporation's
debts, liabilities and obligations of any nature (whether absolute, accrued,
contingent, or otherwise) on the Effective Date, including but not limited to
any and all accounts payable, trade payables, lease obligations, indebtedness
for borrowed money, accrued interest, contractual obligations, etc. By way of
illustration and not limitation, Stockholder represents and warrants that that
certain Promissory Note payable to Summit Home Respiratory, Inc, in the original
principal amount of $500,000, has been paid in full. Stockholder warrants and
represents that the aggregate amount of the Existing Obligations is not in
excess of Zero Dollars ($-0-) as of the Effective Date. The Stockholder
acknowledges that the purchase price for the Shares is based on the accuracy of
Stockholder' representations and warranties contained in this Agreement,
including but not limited to the Stockholder' representations and warranties
contained in this subsection 6.d.
e. Undisclosed Liabilities. The Corporation has no debt, liability or
obligation of any kind (and, to the knowledge of Stockholder, there are no facts
in existence as of the Closing Date that could reasonably be expected to result
in any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Corporation that would give
11
rise to any debt, liability or obligation), whether accrued, absolute,
contingent or otherwise, including without limitation, any liability or
obligation on account of taxes or any governmental charge or penalty, interest
or fine, except liabilities incurred after May 31, 2007 in the ordinary course
of business that did not, individually or in the aggregate, have a material
adverse effect on the Business, assets, results of operations, prospects or
condition (financial or otherwise) of the Corporation as of the Closing Date.
f. Title to the Shares. Stockholder owns good, absolute and marketable
title to, and all beneficial interest in, the Shares, which represent all of the
issued and outstanding capital stock of the Corporation. Such Shares are (i)
validly issued, fully paid and nonassessable, (ii) free and clear of any liens,
claims and encumbrances, with no defects in title, whatsoever, and (iii) free
and clear of any restrictions on transfer (other than any restrictions under the
Securities Act of 1933, as amended (the "Securities Act") and state securities
laws), taxes, liens, encumbrances, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands. Stockholder is not a party
to any option, warrant, purchase right, preemptive right, or other contract or
commitment that would require Stockholder to sell, transfer, or otherwise
dispose of any capital stock of the Corporation (other than pursuant to this
Agreement), except as disclosed on the Schedule of Stockholder Agreements
attached hereto as EXHIBIT 6-F. Stockholder is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the Corporation, except as disclosed on the Schedule of
Stockholder Agreements attached hereto as EXHIBIT 6-F. All of the option,
warrant, purchase right, preemptive right, other contracts, other commitments,
voting trusts, proxies and any other agreement or understanding listed on
EXHIBIT 6-F shall be terminated on or before the Effective Date. Stockholder has
the complete and unrestricted right, power and authority to sell the Shares
pursuant to this Agreement.
g. Present Status. Except as disclosed on the Schedule of
Stockholders, Distributions and Exempted Transactions attached hereto as EXHIBIT
6-G, since May 31, 2007, the Corporation has not made any expenditures nor
incurred any obligations or liabilities, except in the ordinary course of
business; discharged or satisfied any liens or encumbrances, except in the
ordinary course of business; declared or made any payment or distribution to
Stockholder or purchased or redeemed any of its common capital stock or agreed
to do so; mortgaged, pledged or subjected to lien or encumbrance any of its
assets; sold or transferred any assets, except in the ordinary course of
business; suffered any damage or loss (whether or not covered by insurance),
materially affecting its properties; waived any rights of substantial value; nor
entered into any transaction other than in the ordinary course of business.
h. Tax Returns and Audits. The Corporation or Stockholder has duly
filed all Federal, state and local tax returns required to be filed by, or with
respect to, the Corporation, and have paid the taxes for all periods covered by
such returns, except for the following tax returns which Stockholder covenants
and agrees to file, not later than by September 15, 2007, and with respect to
which Stockholder covenants and agrees to pay all taxes, deficiencies, late
fees, interest, penalties and any other expense or charge related thereto: the
Quarterly Sales Tax Returns for the State of Florida, for the calendar quarter
ended June 30, 2007, pertaining to the Corporation's St. Petersburg, Florida and
Naples, Florida locations (collectively, the "Delinquent Quarterly Sales Tax
Returns"). The Corporation has not been delinquent in the payment of any tax,
assessment or governmental charge. The Corporation has not had, and, to the
knowledge of Stockholder, there are
12
no facts in existence as of the Closing Date that could reasonably be expected
to result in, any tax deficiencies proposed or assessed against it and has not
executed any waiver of the statute of limitations on the assessment or
collection of any tax. The Corporation's Federal and State tax returns have
never been audited by the Internal Revenue Service or the Department of Revenue
of the State of Delaware. Copies of the Corporation's Federal Income tax return
for the periods ending March 31, 2005 and March 31, 2006 are attached hereto as
EXHIBIT 6-H. The Corporation is not a party to any tax sharing agreements with
Stockholder or any other affiliates. Notwithstanding anything contained in this
Agreement to the contrary, the Stockholder shall be liable for and shall pay
promptly when due, any taxes of any kind which relate to the operation of the
Business prior to the Effective Date. The Stockholder covenants and agrees to
deliver to Buyer, post-Closing: (1) the Corporation's Federal Income tax return
for the twelve (12) month tax period ending March 31, 2007, promptly after the
same is filed with the Internal Revenue Service; and (2) the Delinquent
Quarterly Sales Tax Returns, promptly after the same is filed with the State of
Florida.
i. Litigation. Except as disclosed on the Schedule of Litigation and
Other Legal Proceedings attached hereto as EXHIBIT 6-I, there are no legal
actions, suits, arbitrations, or other legal, administrative, or other
governmental proceedings pending or, to the knowledge of Stockholder, threatened
against the Corporation, which, if adversely determined, could reasonably be
expected to, individually or in the aggregate, materially impair the right of
the Corporation to carry on the Business substantially as now being conducted or
would result in a material adverse effect on the business, assets, results of
operations, prospects or conditions (financial or otherwise) of the Corporation,
and Stockholder is not aware of any facts or circumstances which to the
knowledge of Stockholder may (with or without notice or lapse of time)
reasonably give rise to, serve as a basis for or result in any such action,
suit, claim, arbitration, or other proceedings against or involving the
Corporation. Notwithstanding anything in this Agreement to the contrary,
Stockholder assumes all liabilities of any kind arising from or which in any way
relate to any matters involving Xxxxx X. Xxxxxxxxx and the Corporation,
including but not limited to any matters described on EXHIBIT 6-I and described
in that certain letter dated March 19, 2007, from the Law Office of Xxxxx Xxxxx
to Xxxxx Xxxxxx, Branch Manager, Arcadia Medical Products, Inc., and any
lawsuits, legal proceedings, mediations, arbitrations, events, actions or
omissions relating thereto (collectively, the "Threatened Litigation"). By way
of illustration and not limitation, the Stockholder, and not Buyer or the
Corporation, shall be responsible for and obligated to pay any and all damages,
judgments, settlements, legal fees and costs, court costs, costs of appeal and
all other claims, damages, expenses and costs of any kind related to the
Threatened Litigation or any lawsuit or legal proceeding arising therefrom.
j. Compliance With Articles, Bylaws and Other Instruments and Laws;
Noncontravention. The Corporation is not in violation of its Articles of
Incorporation, as amended, its Bylaws, as amended, or of any indebtedness,
mortgage, contract, lease or other agreement or commitment. Performance of this
Agreement will not violate the Articles of Incorporation, as amended, or the
Bylaws, as amended, of the Corporation. The business and operation of the
Corporation have been and are being conducted in accordance with all applicable
laws, rules and regulations of all authorities, except those which do not
(either individually or in the aggregate) materially and adversely affect the
Corporation or its properties, assets, businesses or prospects. Neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) to the knowledge of Stockholder,
violate any constitution, statute,
13
regulation or rule, (ii) violate any injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Corporation is subject, or (iii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Corporation is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any lien or
encumbrance upon any of its assets). The Corporation does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, other than notices
to Medicare and Medicaid.
k. Title to Property and Assets. The Corporation has good, absolute
and record title to, or a valid leasehold interest in, all property and assets
of the Corporation used by the Corporation, located on its premises, shown on
the Last Balance Sheet or acquired through the Closing Date, free and clear of
all liens, charges, claims and encumbrances of any kind. Set forth on the
Schedule of Included Assets attached hereto as EXHIBIT 6-K1 is a true and
complete list of all assets of the Corporation used by the Corporation, located
on its premises, shown on the Last Balance Sheet and acquired through the
Closing Date. The assets of the Corporation also include the corporate name of
the business, its current telephone numbers and telefax numbers, its patient
list (as more specifically described on EXHIBIT 6-T hereof), its provider
numbers (as more specifically described on EXHIBIT 6-U hereof), any websites
used by the Corporation, and the following fictitious or assumed names: "ARCADIA
H.O.M.E. (which Stockholder represents has active status in the State of Florida
under Document Nos. G06076700055, G06072900372, G06072900381 and G060729000356),
"ENCORE RESPIRATORY" (which Stockholder represents has active status in the
State of Florida under Document Nos. G060729000364, G06114900347, G06222900044,
G06226900486, G06228900030 and G06221900067), "UNITED HEALTH CARE SERVICES"
(which Stockholder represents has active status in the State of Florida under
Document No. G05077900251), and "ALLIANCE OXYGEN & MEDICAL EQUIPMENT" (which
Stockholder represents has active status in the State of Florida under Document
Nos. G06195900305, G06195900265, G06195900272 and G06195900282). Stockholder has
not received notice from any party that use of the Corporation's corporate name,
any of the above fictitious or assumed names, or any logo used by the
Corporation is infringing on another's trade name, trademark, or service xxxx,
nor has any person or entity taken or threatened to take any legal action
against the Corporation or Stockholder as a result of the use by the Corporation
of its corporate name, such fictitious or assumed names or any logo. If
requested by Buyer, the Stockholder agrees to: (I) use reasonable efforts to
assure that Buyer can utilize such corporate and fictitious or assumed names
within the State of Florida; and (II) reasonably assist in the Corporation's
defense of any name infringement claim by providing facts known to such
Stockholder or otherwise reasonably cooperate with such defense. The assets of
the Corporation on the Effective Date shall not include any personal items set
forth on the Schedule of Excluded Assets attached hereto as EXHIBIT 6-K2 hereof.
l. Asset Condition and Quality. All of the properties and assets of
the Corporation are free of damage and defects and are not obsolete except as
disclosed on the Schedule of Included Assets attached hereto as EXHIBIT 6-K1.
All of the properties and assets of Corporation on the Closing Date shall be in
good operating condition and repair, reasonable wear and tear excepted and
except those assets which are being repaired in the ordinary course of business,
and
14
shall conform in all material respects with all applicable ordinances,
regulations, zoning and other laws.
m. Contracts. The Schedule of Contracts attached hereto as EXHIBIT 6-M
sets forth a true and complete list of all contracts, agreements and commitments
(whether written or oral) to which the Corporation is, directly or indirectly, a
party (in its own name or as a successor in interest), or by which the
Corporation or any of its properties or assets is otherwise bound, including but
not limited to any service agreements, patient agreements, supplier agreements,
agreements to lend or borrow money, stockholder agreements, employment
agreements, confidentiality agreements, non-disclosure agreements,
non-competition agreements and non-solicitation agreements (collectively, the
"Contracts"). Neither the Corporation nor, to the knowledge of Stockholder, any
other party to any of the Contracts (i) is in default under (nor does there
exist any condition that, with notice or lapse of time or both, would cause such
a default under) any of the Contracts, or (ii) has waived any right it may have
under any of the Contracts, the waiver of which would have a material adverse
effect on the business, assets, results of operations, prospects or condition
(financial or otherwise) of the Corporation. All of the Contracts (i) constitute
the legal, valid, binding and enforceable obligations of the Corporation, and,
to the knowledge of Stockholder, of the other parties thereto, enforceable
against the Corporation and, to the knowledge of Stockholder, such other parties
in accordance with their respective terms, (ii) do not require any third party
consents in anticipation of the execution this Agreement and the consummation of
the transactions contemplated hereby, and (iii) will not be terminated or
otherwise modified, solely as a result of the consummation of the transactions
contemplated hereby.
n. Leases and Insurance Policies.
i. The Schedule of Leases and Insurance Policies, attached hereto
as EXHIBIT 6-N, sets forth all leases and insurance policies executed by or
issued for the benefit of the Corporation. The Corporation has delivered to the
Buyer:
A. The original of the leases, with amendments
(collectively, the "Leases"), covering all of the leased premises that the
Corporation presently occupies (the "Leased Premises");
B. The originals of all other leases, with amendments, to
which the Corporation is a party; and
C. The originals of all fire and other casualty and
liability policies (including product liability) of the Corporation in effect at
the date of this Agreement (the "Insurance Policies").
All Insurance Policies are in full force and effect as of the Effective
Date and are in amounts and against such losses and risks as are described in
such Insurance Policies.
ii. Stockholder represents and warrants that Stockholder and the
Corporation are not in default in the performance of any of their respective
obligations under any of the Leases, that none of the Leases is encumbered by
any prior transfer, assignment, or any other
15
encumbrance by Stockholder or the Corporation, and that the purchase of the
Shares by Buyer from Stockholder does not require that the Corporation,
Stockholder or Buyer obtain the written consent of the applicable lessors or
landlords of any such Leases, except for the following Leases which Stockholder
represents are the only Leases which require the prior written consent of the
applicable lessor or landlord as a result of the change in control of the
Corporation by virtue of the sale of the Shares to Buyer (the written consents
required by such Leases are collectively referred to herein as the "Required
Landlord Consents"): (A) that certain Baytec Center Office/Warehouse Lease dated
September 27, 2006, between Xxxx Xxxx Fund VI, LP, as landlord, and the
Corporation, as tenant; and (B) that certain Commercial Lease dated March 10,
2006, between Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx, as landlord, and the
Corporation, as tenant.
o. Intellectual Property. The Corporation owns, possesses and has good
title to all trademarks, service marks, service names, patents and licenses
necessary in the conduct of the Business.
p. Records. The books of account, minute books, stock certificate
books and stock records of the Corporation are complete and correct in all
material respects, and reflect all transactions involving the Business which
properly should have been set forth in such books. The Corporation has delivered
to Buyer correct and complete copies of its Articles of Incorporation and
By-laws, both as amended to date, and will deliver to Buyer on the next business
day after the Closing, the books of account, the minutes books, the stock
certificate books, the stock records and such other books and records as are
necessary for the Buyer to operate the business of the Corporation.
q. Accounts Receivable. The Corporation has followed in all respects
and aspects at all times through the Effective Date, and Stockholder commits to
follow in all respects and aspects at all times on and after the Effective Date,
all Medicare guidelines and procedures relating to the Corporation's accounts
receivable.
r. Accounts Payable. The information contained on the Schedule of
Accounts Payable Data as of August 31, 2007, attached hereto as EXHIBIT 6-R, is
accurate and complete. Notwithstanding anything contained in this Agreement or
in any Exhibit or Schedule which is a part hereof, Stockholder and Arcadia
Resources, Inc. shall be jointly and severally liable for, and shall promptly
pay in full when due, all of the Corporation's accounts payable applicable to
the operation of the Business prior to the Effective Date, including but not
limited to the accounts payable listed on EXHIBIT 6-R.
s. Personnel; Payrates; Employment and Non-Compete Agreements; and
Employee Benefits.
i. The information contained on the Schedule of Personnel,
Payrates and Employment and Non-Compete Agreements, attached hereto as EXHIBIT
6-S1, is accurate and complete, and sets forth a list of all employees of the
Corporation, the current salary level of each, whether each such listed employee
has in place any employment agreement and whether each such listed employee has
in place any confidentiality, non-disclosure, non-compete and/or
non-solicitation agreements. There is not pending or, to the knowledge of
Stockholder, threatened, nor
16
are there any facts in existence as of the Closing Date that could reasonably be
expected to result in, any legal actions, suits, arbitrations or other legal,
administrative or other governmental proceedings by any employee against the
Corporation, which, if adversely determined, could reasonably be expected to,
individually or in the aggregate, materially impair the right of the Corporation
to carry on the Business substantially as now being conducted or would result in
a material adverse effect on the business, assets, results of operations,
prospects or conditions (financial or otherwise) of the Corporation.
ii. The information contained on the Schedule of Retirement and
Other Benefits, attached hereto as EXHIBIT 6-S2, is accurate and complete, and
sets forth a description of any plans providing pensions, profit-sharing,
insurance benefits, cafeteria plans, SIMPLE plans or any other similar type of
fringe benefits to which the Corporation is a party or committed either orally,
in writing or by law, or to which provide any benefit to the Corporation or the
Corporation's employees, including all employee benefit plans ("Employee Benefit
Plans"), as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), established by the Corporation or to which
the Corporation contributes or is or has been required to contribute. The
Corporation has never maintained any plan or arrangement for providing medical
or non-pension benefits to terminated or retired employees or their dependents.
The Employee Benefit Plans and the related trusts comply and have complied in
all material respects with the provisions of ERISA and all other applicable
laws, rules and regulations, and all necessary governmental approvals for the
Employee Benefit Plans have been obtained, including, without limitation,
qualification of the Employee Benefit Plans under the Internal Revenue Code of
1986, as amended. The Employee Benefit Plans have been administered to date in
compliance with the requirements of ERISA in all material respects. True and
complete copies of all reports or other documents filed with the Internal
Revenue Service or the Department of Labor with respect to the Employee Benefit
Plans have been delivered by the Corporation to Buyer. Since December 31, 1974,
no fiduciary of the Employee Benefit Plans has engaged in any "prohibited
transaction" (as defined in ERISA), no "reportable event" (as defined in Section
4043(b) of ERISA) has occurred with respect to the Employee Benefit Plans and
there is no unfunded vested liability with respect to the Employee Benefits
Plans, which, in each such case, would result in material liability to the
Corporation. The Corporation (and any entity within the same group of trades or
businesses under common control, within the meaning of ERISA Section 4001(b)(1),
as the Corporation) does not have and has not had a material liability under
Title IV of ERISA, which has not been paid in full.
t. Patient's List. The Patients' List of the Business attached hereto
as EXHIBIT 6-T accurately and completely lists all of the patients of the
Corporation. The Corporation shall deliver on the Closing Date: (i) all patient
documents, correspondence and charts; (ii) all information necessary to properly
invoice all services to, to collect any amounts owed from and to provide
services to, such patients; and (iii) all certificates of medical necessity
pertaining to such patients. All patients of the Corporation who have received
pharmacy products or services from the Corporation or from any entity related in
any way to Arcadia Resources, Inc., including but not limited to SSAC, LLC d/b/a
Arcadia RX, a Florida limited liability company ("Arcadia RX") with pharmacy
business operations in the State of Kentucky, are included and listed on the
Patients' List of the Business, and the Stockholder and each such entity
providing pharmacy products and services has delivered to Buyer not later than
the Closing Date, all information necessary to properly invoice all pharmacy
products and services to, to collect any amounts owed from and to provide
pharmacy
17
products and services to, such patients, including but not limited to original
prescriptions (to the extent permitted by applicable law), valid transfers of
the remaining refills of all active prescriptions for such patients, and copies
of the original physician orders and statements of medical necessity pertaining
to such patients; however, Stockholder recommends that Buyer obtain new valid
physician orders for those prescriptions filled prior to the Closing Date, and
in the event Buyer takes action to obtain such new valid physician orders, the
Stockholder and Arcadia RX (in its Non-Competition and Non-Solicitation
Agreement) agree to reasonably assist Buyer in the effort. Stockholder agrees
not to process any prescriptions for any such patients on and after the Closing
Date.
u. Provider Numbers. The List of Provider Numbers attached hereto as
EXHIBIT 6-U accurately and completely lists all of the provider numbers used by
the Corporation.
v. Real Estate. All of the premises being leased by the Corporation
pursuant to the Leases (collectively, the "Leased Premises"), and the use
thereof for the Corporation's Business, comply in all material respects with all
applicable Federal, state and local laws, ordinances and regulations, including,
without limitation, building and zoning laws (to the extent compliance with such
building and zoning laws is the responsibility of the Corporation and not the
responsibility of the landlord or owner of any of the Leased Premises) and OSHA
regulations, and neither the Corporation nor Stockholder has received any notice
from any governmental authority or any insurance rating bureau that the Leased
Premises or the use thereof for the Corporation's business do not so conform.
All rent and other charges owed by the Corporation with respect to the Leased
Premises for all periods prior to the Closing Date have been paid in full.
w. Environmental Matters. To the knowledge of Stockholder, the real
property on which each of the Leased Premises are located (including surface
water, groundwater, and any existing improvements) do not contain any asbestos,
material amounts of waste or debris, or contamination in excess of permissible
levels under applicable law, including, without limitation: (i) any 'hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976, as
amended from time to time, and regulations promulgated thereunder; (ii) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; and (iii) any substance the presence of
which is prohibited or regulated by any Federal, state or local law, ruling,
rule or regulation similar or dissimilar to those set forth in this Section 6.w,
other than such products as are used in the Corporation's Business in the
ordinary course thereof.
x. Brokers. Stockholder and Buyer agree that all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried on
directly between Buyer and Stockholder without the intervention or assistance of
any party (other than to provide accounting or legal counsel), except for Xxxxxx
Xxxxxxxx & Associates, Inc. No party to this Agreement, nor any third party, has
any right or claim to any commission, brokerage fee or other compensation
relative to this Agreement or the transactions contemplated hereby, except for
the SRA Commission Obligation due Xxxxxx Xxxxxxxx & Associates, Inc. at Closing
(which SRA Commission Obligation does not include any commission payable by
Stockholder to Xxxxxx Xxxxxxxx & Associates, Inc. upon the payment and release
of any portion of the Contingent Cash Consideration to Stockholder). Stockholder
authorizes Buyer to deliver to Xxxxxx Xxxxxxxx & Associates, Inc., via a wire
transfer
18
pursuant to wire transfer instructions delivered to Buyer by Xxxxxx Xxxxxxxx &
Associates, Inc., the amount of the SRA Commission Obligation, which payment is
to be deducted from the Cash Consideration payable pursuant to Section 3.a
hereof.
y. Absence of Certain Changes or Events. Since May 31, 2007, there has
not been any change in or any event or condition (financial or otherwise)
affecting the properties, assets, liabilities, operations or prospects of the
Corporation other than changes in the ordinary course of its business, none of
which has (either when taken by itself or when taken in conjunction with all
other such changes) been materially adverse.
z. Adverse Business Developments. Neither the Corporation nor any
Stockholder has received, either orally or in writing, any notice of pending or
threatened adverse action with respect to any Medicare, Medicaid, private
insurance or third party payer reimbursement method, practice or allowance as to
any business activity engaged by Corporation, nor has the Corporation or any
Stockholder received nor been threatened with any claim for refund in excess of
$500 by a Medicare or Medicaid carrier, except as disclosed in the Schedule of
Adverse Business Developments attached hereto as EXHIBIT 6-Z.
aa. Disclosure. No representation or warranty by Stockholder or the
Corporation in this Agreement or in any Exhibit hereto contains or will contain
as to the applicable representation and warranty any untrue statement of a
material fact, or omits or will omit to state any material fact required to make
the statements herein or therein contained, in light of the circumstances in
which it was made, not misleading.
7. Representations and Warranties by the Buyer. The Buyer represents and
warrants to the Stockholder that each of the following representations and
warranties is true and correct as of the Effective Date and again as of the
Closing Date:
a. Organization of the Buyer. Buyer is a duly organized, validly
existing corporation in good standing under the laws of the State of Delaware
and has full power and authority to consummate the transactions contemplated by
this Agreement. Buyer has all requisite corporate right, power and authority to
enter into this Agreement and consummate the transactions contemplated hereby.
b. Authorization; Consents; Valid and Binding Obligation. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Buyer have been duly and validly
authorized and approved by all necessary corporate action on behalf of the
Buyer. No approvals, authorizations or consents are necessary to permit the
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby. This Agreement constitutes the valid and legally binding obligation of
the Buyer enforceable against the Buyer in accordance with its terms, except to
the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity.
c. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) to the knowledge of the
19
Buyer violate any constitution, statute, regulation or rule, (B) violate any
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or, any
provision of the Buyer's charter or bylaws, or (C) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
d. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly between the Buyer
and Stockholder without the intervention or assistance of any party (other than
to provide accounting or legal counsel), except for Xxxxxx Xxxxxxxx &
Associates, Inc. No Party to this Agreement, nor any third party, has any right
or claim to any commission, brokerage fee, or unless specified herein, any other
compensation relative to this Agreement or the transactions contemplated hereby,
except for commissions due Xxxxxx Xxxxxxxx & Associates, Inc., which commissions
shall be paid for by the Stockholder and not by Buyer or the Corporation.
e. Disclosure. No representation or warranty by the Buyer in this
Agreement contains or will contain as to the applicable representation and
warranty any untrue statement of a material fact or omits or will omit to state
any material fact required to make the statements herein contained, in light of
the circumstances in which it was made, not misleading.
f. Characteristics of the Shares.
i. Investment. The Shares that Buyer is acquiring hereunder are
being acquired for Buyer's own account, not as a nominee or agent, and not with
a view to the sale or distribution of any part thereof for the purposes of the
Securities Act.
ii. Securities Not Registered. The Buyer understands that the
Shares have not been registered under the Securities Act on the ground that the
issuance of such securities hereunder is exempt from registration under the
Securities Act and that Stockholder's reliance on such exemption is predicated
on Buyer's representations set forth in this Section 7.f.
iii. Restricted Nature of Stock. Buyer acknowledges that the
Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available.
8. Certain Stockholder Covenants Through the Closing Date; Certifications
of Stockholder at Closing.
a. Certain Stockholder Covenants Through the Closing Date. From May
31, 2007 until the Closing Date, the Stockholder: (i) used its best efforts to
conduct the Business in a reasonable and prudent manner in accordance with past
practices; (ii) did not cause or permit the Corporation to engage in any
transactions out of the ordinary course of business; (iii) used its best efforts
to preserve the existing business organization of the Corporation and the
Corporation's relations with its employees, patients, franchisers, suppliers and
others with whom it has a business
20
relationship; (iv) used its best efforts to preserve and protect the assets of
the Corporation; (v) did not cause or permit the Corporation to sell, encumber
or dispose of any of its assets, except such as are retired or replaced in the
ordinary course of business; (vi) caused the Corporation to conduct its business
in compliance with all applicable laws and regulations; (vii) did not cause or
permit the Corporation to make any distributions to Stockholder, or make either
interest or principal payments on stockholder or related party notes or loans,
or make any other withdrawals other than in the ordinary course of business,
unless disclosed to and approved by the Buyer; (viii) did not cause or permit
the Corporation to pay any bonuses or make any salary or wage increases to
employees of the Corporation, unless disclosed to and approved by the Buyer; and
(ix) took no actions, nor caused or permitted the Corporation to take any
actions, which might be materially adverse to the interests of the Stockholder,
the Buyer, or the Business.
b. Certifications of Stockholder At Closing. Stockholder hereby
certifies that, during the period from May 31, 2007 through the Closing Date:
i. There has been no material deterioration or other material
adverse affect to the Shares being acquired nor the net worth of
the Business, and that there has been no material adverse change
in the financial affairs of the Corporation which has not been
disclosed in writing to the Buyer prior to the Closing Date and
that none is anticipated subsequent to the Closing Date.
ii. Corporation has all permits, licenses, consents, certificates and
approvals required by all Federal, state and local governmental
agencies to operate its respective businesses and to use its
respective assets for the intended purposes of such assets,
except that certain of the Corporation's applications for
provider numbers are pending as disclosed on an exhibit to this
Agreement.
iii. Except as disclosed in the exhibits hereto, there are no
management, service, supply, maintenance or other contracts or
agreements which are applicable to or affect the assets of the
Corporation or the operation of the Business.
9. Conditions Precedent to Closing by Stockholder. The obligation of the
Stockholder to sell the Shares to Buyer is subject to and conditioned upon the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
a. Compliance with Agreement. All of the terms and conditions of this
Agreement to be complied with and performed by the Buyer on or before the
Closing Date, shall have been complied with and performed; and
b. Representations and Warranties. The representations and warranties
of the Buyer in Section 7 shall be deemed to have been made again on the Closing
Date and then be true and correct, subject to any changes contemplated by this
Agreement; and
c. Payment of Cash Consideration At Closing. The Buyer has made the
payment of Cash Consideration required to be made as of the Closing Date under
Section 3.a hereof; and
21
d. Consents. Stockholder shall have received the approval of the
Stockholder's Board of Directors; and
e. Legal Opinion. The Stockholder shall have received from counsel to
Buyer, an opinion in form and substance as set forth in EXHIBIT 9-E attached
hereto, addressed to the Stockholder, and dated as of the Closing Date;
provided, however, in the event the legal opinion required by Section 10.c is
not delivered at Closing, legal counsel to Buyer may deliver such legal opinion
to Stockholder post-Closing promptly after the legal opinion required by Section
10.c is delivered to Buyer; and
f. Indemnification Agreement. Buyer shall have executed an
Indemnification Agreement substantially in the form attached hereto as EXHIBIT
9-F, and Buyer shall have caused to be delivered to Stockholder at Closing,
executed originals of such Indemnification Agreement; and
g. Other Actions and Instruments. All other actions to be taken by the
Buyer in connection with consummation of the transactions contemplated hereby
shall have been undertaken, and all certificates, instruments, and other
documents required to effect the transactions contemplated hereby, in form and
substance satisfactory to Stockholder, shall have been received.
10. Conditions Precedent to Closing by the Buyer. The obligation of the
Buyer to consummate the transactions contemplated by this Agreement on the
Closing Date is subject to and conditioned upon the satisfaction, at or prior to
the Closing Date, of each of the following conditions:
a. Compliance with Agreement. All of the terms and conditions of this
Agreement to be complied with and performed by the Stockholder and the
Corporation on or before the Closing Date, shall have been complied with and
performed; and
b. Representations and Warranties. The representations and warranties
of the Stockholder in Section 6 shall be deemed to have been made again on the
Closing Date and then be true and correct, subject to any changes contemplated
by this Agreement. There shall have been no materially adverse change in the
financial condition of the Corporation; and
c. Legal Opinion. The Buyer shall have received from counsel to
Stockholder and the Corporation, an opinion in form and substance as set forth
in EXHIBIT 10-C attached hereto, addressed to the Buyer, and dated as of the
Closing Date; provided, however, legal counsel to the Stockholder and the
Corporation may deliver such legal opinion to Buyer post-Closing but in no event
later than by September 15, 2007; and
d. Non-Competition and Non-Solicitation Agreements. Stockholder,
Arcadia Resources, Inc., a Nevada corporation, Beacon Respiratory Services of
Georgia, Inc., a Delaware corporation, Beacon Respiratory Services of Colorado,
Inc., a Delaware corporation, Beacon Respiratory Services of Alabama, Inc., a
Delaware corporation, and SSAC, LLC d/b/a Arcadia RX, a Florida limited
liability company with pharmacy business operations in the State of Kentucky
shall each have entered into a non-competition and non-solicitation agreement
substantially in the
22
applicable form attached hereto as EXHIBIT 10-D, and Stockholder shall have
caused to be delivered to Buyer at Closing, executed originals of each such
agreement; and
e. Employment Agreements and Non-Competition and Non-Solicitation
Agreements. Xxxxxxx Beach and Xxxxxx Xxxxxxxxxxx shall each have entered into an
Employment Agreement and a Non-Competition and Non-Solicitation Agreement
substantially in the applicable forms attached hereto as EXHIBIT 10-E, and
Stockholder shall have caused to be delivered to Buyer at Closing, executed
originals of each such agreement; and
f. Guaranty Agreement. Arcadia Resources, Inc. shall have executed a
guaranty agreement substantially in the form attached hereto as EXHIBIT 10-F,
and Stockholder shall have caused to be delivered to Buyer at Closing, executed
originals of such guaranty agreement; and
g. Resignations. Each of the officers and directors of the Corporation
shall have executed resignations substantially in the forms attached hereto as
EXHIBIT 10-G; and
h. Required Landlord Consents. The Buyer shall have received the
Required Landlord Consents, in form and substance satisfactory to Buyer,
executed by the applicable lessors or landlords, provided, however, that, at the
election of the Stockholder, Stockholder may deliver such executed Required
Landlord Consents to Buyer post-Closing but not later than by September 30,
2007; and
i. Consents. The Buyer has received approval of Buyer's Board of
Directors; and
j. Consummation of Asset Purchase Transaction. Allcare, Inc., a
Colorado corporation, and wholly-owned subsidiary of the Buyer, shall have
consummated and closed on its purchase of substantially all of the assets of
Beacon Respiratory Services of Colorado, Inc., a Delaware corporation; and
k. Other Actions and Instruments. All other actions to be taken by
Stockholder and Corporation in connection with consummation of the transactions
contemplated hereby have been undertaken, and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby, in form and substance satisfactory to the Buyer, have been
received.
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11. Survival.
a. Representations and Warranties. The representations and warranties
of Stockholder and the Buyer contained and made pursuant to this Agreement shall
survive the Closing of this Agreement for a period of three (3) years from the
Closing Date, except that the representations by Stockholder as to the
capitalization and long term indebtedness of the Corporation set forth in
Section 6.b hereof, the representation by Stockholder as to its title to the
Shares set forth in Section 6.f hereof, and the representations, warranties and
covenants of the Stockholder regarding accounts receivable of the Corporation
set forth in Section 6.q hereof, shall survive the execution and consummation of
this Agreement for an indefinite period, and except that the representation by
Stockholder as to taxes, as set forth in Section 6.h, shall survive the
execution and consummation of this Agreement until any statute of limitations
applicable to such representation or warranty lapses.
b. Post-Closing Covenants. The post-closing covenants of Stockholder,
the Corporation and the Buyer contained and made pursuant to Section 12 of this
Agreement shall survive the execution of this Agreement and continue in full
force and effect.
12. Post Closing Obligations.
a. Section 338(h)(10) Election.
i. Stockholder shall join with Buyer in making an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code")
(and any corresponding election under state, local or foreign tax law) with
respect to the purchase of the Shares by Buyer (the "Section 338(h)(10)
Election"). Any Tax imposed on the Corporation or Stockholder as a result of the
Section 338(h)(10) Election shall be the responsibility of and be paid by
Stockholder. Stockholder further will be responsible for preparing and filing,
and paying any tax liability relating to, all income or franchise tax returns
relating to periods ending on or before the Effective Date.
ii. Buyer, Corporation and Stockholder agree that the Purchase
Price and the liabilities of Corporation (plus other relevant items) will be
allocated to the assets of the Corporation for all purposes (including tax and
financial accounting) in accordance with the agreed upon allocation to be set
forth in EXHIBIT 3-H hereof, which allocation shall be binding upon Stockholder.
Buyer, the Corporation and Stockholder will file all tax returns (including
amended returns and claims for refund), information reports and other forms in a
manner consistent with such allocation.
b. Payment of Taxes; Preparation and Filing of Tax Returns. In the
event that a deficiency is finally determined in the amount of Federal or state
or local tax payable by the Corporation, which deficiency relates to periods
ending on or before the Effective Date, then, in that event, Stockholder agrees
to be responsible for the payment of, and shall pay, promptly upon final
determination that such payment is due, such deficiency and any interest and
penalties thereon. In the event that a tax refund is received, which tax refund
relates to periods ending on or before the Closing Date, then, in that event,
Stockholder shall be entitled to such tax refund and the Buyer
24
agrees to have the Corporation endorse and deliver such tax refund to
Stockholder promptly upon receipt thereof. Stockholder agrees that the Buyer
shall not be liable for any income taxes (and associated interest and
penalties), net of tax benefits received, of the Corporation payable or incurred
by Corporation through the Effective Date. Stockholder shall be responsible for
preparing, filing and paying taxes due on the Form 1120 to be filed for the tax
year period ended March 31, 2007, and for the short period between April 1, 2007
and the Effective Date, and the Corporation shall be responsible for preparing,
filing and paying taxes due on the Form 1120 to be filed for the short period
from the Effective Date through March 31, 2008. The Buyer and Stockholder will
cooperate fully, and to the extent reasonably requested by the other party, in
connection with the filing of tax returns, and any audit, litigation, or other
proceeding with respect to the corporate taxes. Buyer will not, without
Stockholder's prior written consent, amend any tax returns of the Corporation
for any periods prior to the Effective Date, including the Form 1120 to be filed
for the tax year ended March 31, 2007, and for the short period between April 1,
2007 and the Effective Date ("Prior Period Tax Returns"). If Buyer files any
amendments to Prior Period Tax Returns without the prior written consent of the
Stockholder, then Buyer shall be responsible for any and all costs and expenses
relating thereto, including costs of defending any audit, litigation, or other
proceedings with respect to the taxes, and the costs of paying any additional
taxes or assessments (including penalties and interest) relating to such amended
tax returns, and hereby agrees to indemnify Stockholder from and against all
liability, and attorney's fees with respect to such amended returns in
accordance with the provisions of Section 13 of this Agreement.
c. No Further Claims. Stockholder acknowledges that there remain no
amounts due and owing by the Corporation to Stockholder, whether or not accrued
as of the Closing Date, and releases any claims it may have against the
Corporation for any further payments or obligations.
d. Co-Marketing Agreement. During the ninety (90) day period
immediately following the Closing Date, the Buyer agrees to review a reasonable
co-marketing agreement proposal submitted to Buyer by Arcadia Resources, Inc.
during such period and, if the stated terms of such proposal are acceptable to
Buyer and are consistent with Buyer's business objectives, to thereafter
negotiate in good faith with Arcadia Resources, Inc. in an effort to determine
whether a mutually acceptable co-marketing agreement can be reached. Any
obligations of Buyer under this subsection shall terminate if agreement cannot
be reached by the end of such ninety (90) day period or if any such proposal
submitted by Arcadia Resources, Inc. contains unreasonable terms and conditions
or if Arcadia Resources, Inc. at any time fails to negotiate with Buyer in good
faith.
13. Indemnification; Remedies.
a. Indemnification by Stockholder. Stockholder shall and hereby agrees
to indemnify, defend and hold harmless at all times, the Buyer, the Corporation
and each of their respective successors and assigns, as to and against any
Damages (as hereinafter defined) resulting from: (i) any inaccurate
representation made by Stockholder in or under this Agreement; (ii) breach of
any representations or warranties made by Stockholder in or under this
Agreement; (iii) breach or default in the performance by Stockholder or the
Corporation of any of the covenants to be performed by Stockholder or the
Corporation hereunder; and (iv) any Pre-Closing Liabilities.
b. Indemnification by the Buyer. The Buyer shall and hereby agrees to
25
indemnify, defend and hold harmless at all times Stockholder and its successors
and assigns, as to and against any Damages resulting from: (i) any inaccurate
representation made by the Buyer in or under this Agreement; (ii) breach of any
representations or warranties made by Buyer in or under this Agreement; (iii)
breach or default in the performance by the Buyer of any of the covenants to be
performed by the Buyer hereunder; and (iv) any claim, debt, liability or
obligation of the Corporation of any kind arising on or after the Closing Date
which pertains to any actions, omissions, debts, liabilities, obligations, facts
and events, of the Corporation, created or arising after the Closing Date.
c. Definitions.
i. Damages. The term "Damages" as used herein, shall include any
demands, claims, actions, deficiencies, losses, delinquencies, defaults,
assessments, fees, costs, taxes, expenses, debts, liabilities, obligations,
penalties and damages, including reasonable counsel fees incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof, to the extent not paid by insurance. The term "Damages" shall also
include, but not be limited to, any Liabilities Deficiency, Subsequent Event
Deficiency and/or Contingent Liability, as defined in Section 4 hereof, to the
extent not paid by offsets made against the Contingent Cash Consideration
pursuant to Section 4 hereof and to the extent not paid by insurance. If any of
the Damages are covered by any insurance policies maintained by the Corporation,
either before or after Closing (including the general liability occurrence
policy currently maintained by the Corporation), Buyer shall cause the
Corporation to make a claim on such insurance in connection with any indemnity
claim but no such requirement to make such claim for insurance shall delay,
hinder, avoid or prevent Buyer from asserting or pursuing any indemnification
claim against the Stockholder pursuant to this Section 13 and to recover Damages
from the Stockholder.
ii. Pre-Closing Liabilities. The term "Pre-Closing Liabilities"
as used herein shall mean (A) any claim, debt, liability or obligation of the
Corporation of any kind (whether known or unknown, accrued, absolute, contingent
or otherwise) which becomes known, is uncovered or arises on or after the
Closing Date but which pertains to any actions, omissions, debts, liabilities,
obligations, or, to the extent occurring before the Closing Date, facts and
events, of the Corporation, created or arising before the Closing Date, and (B)
any claim against the Corporation for liability which pertains to or arises from
services provided by the Corporation prior to the Closing Date, except, as to
(A) and (B): (a) liabilities incurred after the Last Balance Sheet Date in the
ordinary course of business that did not, individually or in the aggregate, have
a material adverse effect on the Business, assets, results of operations,
prospects or condition (financial or otherwise) of the Corporation as of the
Closing Date; and (b) liabilities and obligations the responsibility for which
has been specifically addressed by the Parties in this Agreement.
d. Remedies.
i. Buyer's Remedies. In the event Buyer makes written request to
Stockholder for the payment of Damages and Stockholder fails to make the
requested payment within thirty (30) days from the date of delivery of such
written request (said thirty (30) day period hereinafter referred to as the
"Stockholder Notice Period"), Buyer shall have the right, in the exercise of its
sole discretion, to either (I) make offset against the Contingent Cash
Consideration
26
pursuant to Section 3.b hereof; or (II) require Stockholder to pay Buyer the
full amount of such Damages in cash within the twenty (20) day period following
the applicable Stockholder Notice Period (and Stockholder shall be liable for
such amount and for the payment of such amount in full during such period);
provided, however, that Stockholder shall have the option of disputing the
validity of the claim or liability giving rise to the Damages (the "Stockholder
Disputed Claim") by providing written notice to Buyer of such dispute within the
Stockholder Notice Period. The dispute between Buyer and Stockholder shall be
settled by arbitration pursuant to Section 13.e hereof. In the event Stockholder
accepts responsibility for a Stockholder Disputed Claim involving a third party
but desires to contest such Stockholder Disputed Claim and assume all
responsibility for the ultimate outcome thereof, Stockholder shall defend the
Stockholder Disputed Claim pursuant to Section 13.f hereof and shall be liable
to Buyer for any and all Damages resulting therefrom.
ii. Stockholder' Remedies. In the event Stockholder make written
request to Buyer for the payment of Damages and Buyer fails to make the
requested payment within thirty (30) days from the date of delivery of such
written request (said thirty (30) day period hereinafter referred to as the
"Buyer Notice Period"), Stockholder shall have the right to require Buyer to pay
Stockholder the full amount of such Damages in cash within the twenty (20) day
period following the applicable Buyer Notice Period (and Buyer shall be liable
for such amount and for the payment of such amount in full during such period);
provided, however, that Buyer shall have the option of disputing the validity of
the claim or liability giving rise to the Damages (the "Buyer Disputed Claim")
by providing written notice to Stockholder of such dispute within the Buyer
Notice Period. The dispute between Buyer and Stockholder shall be settled by
arbitration pursuant to Section 13.e hereof. In the event Buyer accepts
responsibility for a Buyer Disputed Claim involving a third party but desires to
contest such Buyer Disputed Claim and assume all responsibility for the ultimate
outcome thereof, the Buyer shall defend the Buyer Disputed Claim pursuant to
Section 13.f hereof and shall be liable to Stockholder for any and all Damages
resulting therefrom.
e. Arbitration. In the event settlement of a Buyer Disputed Claim or
Stockholder Disputed Claim (a "Dispute") is required to be resolved by
arbitration, such arbitration shall be commenced by written notice from the
party claiming such Dispute to the other party that such party has elected to
have such Dispute settled by arbitration. Any Dispute shall be settled by
arbitration in Orlando, Florida and judgment upon the award rendered may be
entered in any court having jurisdiction thereof, under the then current
Commercial Arbitration Rules (whereby if three arbitrators are to be selected,
each of the Parties selects one and the arbitrators so selected choose the
third) of the American Arbitration Association ("the Association"). The
arbitration shall be held at a mutually agreeable location in Orlando, Florida
and conducted by a panel of three (3) arbitrators (if the amount in dispute
exceeds $100,000) or by a single arbitrator (if the amount in dispute is equal
to or less than $100,000). Not later than ten (10) days after the delivery of a
written notice of a Dispute, the parties shall submit the matter to the
Association. Not later than ten (10) days after the arbitrator(s) are appointed,
the arbitrator(s) shall schedule the arbitration for a hearing to commence on a
mutually convenient date. The hearing shall commence no later than thirty (30)
days after the arbitrator(s) are appointed. The arbitrator(s) shall issue his,
her or their award in writing no later than twenty (20) calendar days after the
conclusion of the hearing. In the event the Dispute which is the subject of the
arbitration involves a claim by a third party, the party or parties against whom
the claim was made shall be responsible for taking sufficient legal action to
protect such party's interest
27
until such time as the arbitrator(s) shall have decided which of Buyer or
Stockholder is the responsible party. Immediately upon the responsible party
being determined by the arbitrator(s), the responsible party shall take control
of resolving the claim pursuant to Section 13.f hereof and shall reimburse the
other party for any reasonable expenses incurred by such party prior to taking
such control.
f. Right to Defend. In the event a party hereto elects to take
responsibility for defending either a Stockholder Disputed Claim or Buyer
Disputed Claim pursuant to Section 13.d hereof, such party (the "Indemnifying
Party") shall defend, contest or otherwise protect against such suit, action,
investigation, claim or proceeding at its own cost and expense, and the other
party (the "Indemnified Party") must cooperate in any such defense or other
action. The Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the defense
(but shall keep the Indemnified Party informed as to the progress of the case
and, if requested by the Indemnified Party, shall consult with the Indemnified
Party as to the defenses intended to be asserted, the litigation strategies
intended to be implemented and the settlement terms intended to be offered)
unless the Indemnified Party has relieved the Indemnifying Party from liability
with respect to the particular matter or the Indemnifying Party fails to assume
defense of the matter. In the event both the Indemnifying Party and Indemnified
Party are parties to the action, the Indemnifying Party shall take immediate
steps to attempt to have the applicable arbitor dismiss Indemnified Party from
such action. If the Indemnifying Party shall fail to defend, contest or
otherwise protect in a timely manner against any such suit, action,
investigation, claim or proceeding, the Indemnified Party shall have the right,
but not the obligation, to defend, contest or otherwise protect against the same
and make any monetary compromise or settlement thereof and recover the entire
cost thereof from the Indemnifying party including reasonable attorneys' fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof;
provided, however, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise.
14. Expenses. The Buyer and Stockholder will each be solely responsible for
and shall bear all of its own respective costs and expenses, including, without
limitation, expenses of legal counsel, accountants and other advisers, incurred
at any time in connection with pursuing or consummating this Agreement and the
transactions contemplated thereby, and no such fees of Stockholder or the
Corporation shall be borne or accrued by the Corporation.
15. Amendment and Waiver. This Agreement may be amended or modified at any
time and in all respects, or any provisions may be waived by an instrument in
writing executed by the Buyer and Stockholder, or either of them in the case of
a waiver.
16. Assignment; No Third-Party Beneficiaries. Neither this Agreement nor
any right created hereby shall be assignable by Stockholder or the Buyer without
the prior written consent of the other, except for an assignment incident to a
merger, consolidation or reorganization. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the Parties hereto
and their successors, any rights or remedies under or by reason of this
Agreement.
28
17. Headings. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same agreement. Facsimile signatures
may be deemed binding for this Agreement, or any modification or amendment
thereto, or any documents contemplated hereby.
19. Gender. All personal pronouns used in this Agreement shall include the
other genders whether used in the masculine or feminine or neuter gender, and
the singular shall include the plural whenever and as often as may be
appropriate.
20. Parties In Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
Buyer and Stockholder, and their respective successors and permitted assigns.
21. Integrated Agreement; Exhibits. This Agreement constitutes the entire
agreement between the Parties hereto, supersedes any prior understandings,
agreements or representations of the Parties and there are no agreements,
understandings, restrictions, warranties, or representations between the
Parties, written or oral, other than those set forth herein or herein provided
for. All of the Exhibits referenced in this Agreement are incorporated into this
Agreement by such reference thereto and made a part hereof.
22. Choice of Law and Venue. It is the intention of the Parties that the
laws of the State of Florida shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
Parties, without giving effect to any choice or conflict of law provision or
rule. Any action involving or relating to this Agreement shall be brought in the
state court of appropriate jurisdiction sitting in Orange County, Florida.
23. Notices. All notices, payments, demands and requests from one Party to
the another, made pursuant to this Agreement or the transactions contemplated
hereunder, shall be in written form and shall be deemed duly given if personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by Federal Express or other recognized next-day business
couriers, or by fax and followed by hard copy, at the following addresses:
As to Stockholder: Arcadia Products, Inc.
c/o Arcadia Resources, Inc.
00000 Xxxxxxx Xxxx Xxxx.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxx
Fax No.: 000-000-0000
With copy to: Xxxx X. Xxxxxx, Esq.
Xxxx Plant Xxxxx
500 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
00
Xxxxxxxxxxx, Xxxxxxxxx 00000
Fax No.: 000-000-0000
As to the Buyer: Aerocare Holdings, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Fax No.: 000-000-0000
With copy to: Xxxxxx X. Xxxxxx, Xx., Esq.
Xxxxxx X. Xxxxxx, Xx., P.L.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx 00000-0000
Fax No.: 000-000-0000
Notice shall be effective (i) if by registered or certified mail, or
overnight next-day business couriers, three (3) days after deposit in the U.S.
mail or with such courier, (ii) if by fax, upon confirmation of successful
transmission of such notice, (iii) if by personal delivery, upon such delivery,
and (iv) if by any other permitted means, upon receipt. In the event that any of
the named Parties desire to receive notice at another address, it shall be their
responsibility to notify all of the other Parties, in writing, of the new
address.
24. Further Assurances. From time to time hereafter and without further
consideration, each of the Parties shall execute and deliver such additional or
further instruments of conveyance, assignment and transfer and take such other
actions as any of the other Parties may reasonably request in order to more
effectively consummate the transactions contemplated hereunder or as shall be
reasonably necessary or appropriate in connection with the carrying out of the
Parties' respective obligations hereunder for the purposes of this Agreement.
The Parties understand that, after the Closing, Stockholder may inadvertently
receive checks, wire transfers or other deliveries of monies, which are the
property of the Corporation. Stockholder agrees to remit such monies to the
Corporation promptly after receipt.
25. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
26. Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The words "to the
knowledge of" or words of similar effect and import, shall mean and include such
knowledge of facts and circumstances as would reasonably be known to a
reasonably diligence and prudent person
30
carrying out the director, officer and/or employee duties of any such positions
held by the person making such representation or, if such representation is
being made on behalf of a corporation or other business entity, such corporation
or other business entity shall be deemed to have knowledge of such facts and
circumstances actually known by, or which should have reasonably been known by,
any member of its board of directors or any of its executive officers.
27. Limitation of Stockholder's Liability. The Parties acknowledge and
agree that notwithstanding anything contained within this Agreement to the
contrary, in no event shall the aggregate liability of the Stockholder for any
and all losses, Damages (as defined in this Agreement or otherwise), claims or
other amounts that Buyer may incur or suffer, which arises, results from, or
relates to this Agreement or any schedule, exhibit, document, agreement or
instrument furnished or to be furnished by the Stockholder in connection with
this Agreement or any of the transactions contemplated by this Agreement,
whether based in contract, tort or otherwise, exceed, in the aggregate, Six
Million Five Hundred Thousand Dollars ($6,500,000); provided that the preceding
shall not apply to any such losses, Damages, claims or other amounts arising or
resulting from fraud or intentional misrepresentation of the Stockholder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE TO FOLLOW]
31
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed the day and year first above written.
Signed, sealed and delivered ARCADIA PRODUCTS, INC., a
in the presence of: Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------- ------------------------------------
Xxxxxx X. Xxxxxxxxxx, President
------------------------------------- Date Executed: September 10, 2007
"Stockholder"
AEROCARE HOLDINGS, INC., a
Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------- ------------------------------------
Xxxxxxx X. Xxxxxx, Chairman of
the Board, President and CEO
------------------------------------- Date Executed: September 10, 2007
"Buyer"
32
INDEX TO EXHIBITS
BEACON RESPIRATORY SERVICES, INC.
EXHIBIT DESCRIPTION
------- -----------
3-A Schedule of Wire Instructions
3-H Allocation Schedule (forms required under Section 338(h)(10)) [TO BE
PREPARED AND DELIVERED POST-CLOSING]
6-A Officers and Directors of the Corporation
6-B Certain Distributions
6-C Financial Statements
6-D Schedule of Liabilities
6-F Schedule of Stockholder Agreements
6-G Schedule of Stockholders, Distributions and Exempted Transactions
6-H Tax Returns
6-I Schedule of Litigation and Other Legal Proceedings
6-K1 Schedule of Included Assets
6-K2 Schedule of Excluded Assets
6-M Schedule of Contracts
6-N Schedule of Leases and Insurance Policies
6-R Schedule of Accounts Payable Data
6-S1 Schedule of Personnel, Payrates and Employment and Non-Compete
Agreements
6-S2 Schedule of Certain Retirement and Other Benefits
6-T Patients' List of the Business
6-U List of Provider Numbers
6-Z Schedule of Adverse Business Developments
33
EXHIBIT DESCRIPTION
------- -----------
9-E Legal Opinion of Buyer's Counsel [TO BE DELIVERED POST-CLOSING
PROMPTLY AFTER DELIVERY OF THE LEGAL OPINION OF STOCKHOLDER'S AND
CORPORATION'S COUNSEL]
9-F Indemnification Agreement of Aerocare Holdings, Inc.
10-C Legal Opinion of Stockholder's and Corporation's Counsel [TO BE
DELIVERED POST-CLOSING]
10-D Forms of Non-Competition and Non-Solicitation Agreements of Arcadia
Products, Inc., Arcadia Resources, Inc., Beacon Respiratory Services
of Colorado, Inc., Beacon Respiratory Services of Georgia, Inc.,
Beacon Respiratory Services of Alabama, Inc., and SSAC, LLC d/b/a
Arcadia RX
10-E Forms of Employment Agreements and Non-Competition and Non-
Solicitation Agreements of Xxxxxxx Beach and Xxxxxx Xxxxxxxxxxx
10-F Form of Guaranty Agreement of Arcadia Resources, Inc.
10-G Forms of Resignations of All Officers and Directors of the Corporation
34
