EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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By and Among
Standard Management Corporation,
an Indiana corporation,
Precision Health Care Acquisition Corporation,
a Tennessee corporation,
and
Precision Healthcare, Inc.,
a Tennessee corporation,
and
Xxxxxx X. Xxxxxxxxxxxx,
Xxxxxx Xxx-Xxxxxx,
Xxxxxx X. Xxxxxxx.
and
Xxxx X. Xxxxxxxxxxxx
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Dated July 28, 2005
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION...................................1
1.1 Definitions................................................1
1.2 Construction...............................................8
ARTICLE II THE MERGER.................................................9
2.1 The Merger.................................................9
2.2 Conversion of Equity Securities............................9
2.3 Earn-Out..................................................10
2.4 Working Capital Adjustment................................12
2.4 Closing of Transfer Records...............................14
2.5 Exchange of Certificates..................................14
2.6 Shareholders' Representative..............................14
ARTICLE III THE CLOSING..............................................14
3.1 Closing...................................................14
3.2 Closing Deliveries of Parent and Merger Sub...............15
3.3 Closing Deliveries of Shareholders........................15
ARTICLE IV SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES..............17
4.1 Organization..............................................17
4.2 Authorization.............................................17
4.3 Validity; Binding Effect..................................17
4.4 Noncontravention..........................................18
4.5 Capital Structure.........................................18
4.6 Financial Statements......................................18
4.7 Title to and Sufficiency of Assets........................20
4.8 Tax Matters...............................................20
4.9 Litigation; Claims........................................21
4.10 Legal Compliance..........................................21
4.11 Environmental Laws and Regulations........................23
4.12 Permits...................................................23
4.13 Material Contracts........................................23
4.14 Labor and Employment Matters..............................25
4.15 Employee Benefits.........................................25
4.16 Intellectual Property.....................................26
4.17 Affiliate Transactions....................................26
4.18 Broker's Fees.............................................26
4.19 Warranty..................................................26
4.20 Disclosure................................................26
4.21 Knowledge.................................................27
ARTICLE V PARENT'S AND MERGER SUB'S REPRESENTATIONS AND WARRANTIES....27
5.1 Organization..............................................27
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5.2 Authorization.............................................27
5.3 Validity; Binding Effect..................................27
5.4 Noncontravention..........................................27
5.5 Broker's Fees.............................................27
5.6 Standard Management Shares................................27
5.7 Reports to Shareholders: Adverse Changes.................28
5.8 Consents..................................................28
5.9 Legal Proceedings.........................................29
ARTICLE VI INDEMNIFICATION...........................................29
6.1 Indemnification by Shareholders...........................29
6.2 Indemnification by Merger Sub.............................29
6.3 Limitations on Indemnity..................................29
6.4 Third Party Claims........................................30
ARTICLE VII ADDITIONAL COVENANTS.....................................31
7.1 General...................................................31
7.2 Noncompetition and Nonsolicitation........................31
7.3 Piggy-back Registration Rights............................32
7.4 Reports Under Securities Exchange Act of 1934.............36
7.5 Sale of Standard Management Shares........................36
7.6 Indebtedness; Affiliate Payables..........................37
ARTICLE VIII MISCELLANEOUS...........................................37
8.1 Assignment................................................37
8.2 Notices...................................................37
8.3 Expenses; Attorneys' Fees.................................39
8.4 Governing Law; Forum......................................40
8.5 Partial Invalidity........................................40
8.6 Execution in Counterparts; Facsimile Signatures...........40
8.7 Entire Agreement; Amendments and Waivers..................41
Exhibits
Exhibit A Form of Escrow Agreement
Exhibit B Form of Grant Agreements
Exhibit C Form of Release
Exhibit D Form of Employment Agreements
Exhibit E Form of Non-Competition Agreement
Exhibit F Special Indemnity Matters
Exhibit G Other Indemnity Matters
Exhibit H Non-Competition Territory
Exhibit I Registration Rights Agreements
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Schedules
Schedule 4.1(a) Foreign Qualifications
Schedule 4.1(b) Company Locations
Schedule 4.4 Noncontravention
Schedule 4.5 Capitalization
Schedule 4.6(a) Financial Statements
Schedule 4.6(b) Undisclosed Liabilities
Schedule 4.7(a) Real Property/Leaseholds
Schedule 4.7(b) Permitted Liens
Schedule 4.8 Tax Matters
Schedule 4.9 Litigation; Claims
Schedule 4.10(d) Medicare/Medicaid Reports
Schedule 4.10(f) Health Care Compliance Matters
Schedule 4.11 Environmental Matters
Schedule 4.12 Permits
Schedule 4.13 Material Contracts
Schedule 4.14 Labor and Employment Matters
Schedule 4.15 Employee Benefits
Schedule 4.16 Intellectual Property
Schedule 4.17 Affiliate Transactions
Schedule 4.18 Broker's Fees
Schedule 4.19 Warranties
Schedule 5.9 Parent/Merger Sub Litigation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of July 28, 2005 by and among
Standard Management Corporation, an
Indiana corporation ("Parent"), Precision Health Care Acquisition Corporation, a
Tennessee corporation ("Merger Sub"), Precision Healthcare, Inc., a Tennessee
corporation (the "Company"), Xxxx X. Xxxxxxxxxxxx, as Voting Trustee ("Voting
Trustee") under the Voting Trust Agreement, dated as of March 1, 2005 (the
"Voting Trust Agreement"), by and between Xxxx X. Xxxxxxxxxxxx ("Xx.
Xxxxxxxxxxxx") and Xxxxxx X. Xxxxxxxxxxxx ("Xx. Xxxxxxxxxxxx"), Xxxxxx
Xxx-Xxxxxx ("Xxxxxx"), and Xxxxxx X. Xxxxxxx ("Xxxxxxx") (Voting Trustee, Xxxxxx
and Xxxxxxx, each a "Shareholder" and collectively, the "Shareholders"), Xx.
Xxxxxxxxxxxx, individually, and Xxxx X. Xxxxxxxxxxxx, individually, for the
limited provisions set forth on the signature page hereto,
WITNESSETH THAT:
WHEREAS, Xx. Xxxxxxxxxxxx owned 700 common shares of the Company until
March 1, 2005, when he transferred all 700 common shares to Xx. Xxxxxxxxxxxx
pursuant to the divorce settlement agreement by and between Xx. Xxxxxxxxxxxx and
Xx. Xxxxxxxxxxxx, dated March 1, 2005; and
WHEREAS, in connection with the settlement of their divorce, Xx.
Xxxxxxxxxxxx and Xx. Xxxxxxxxxxxx entered into the Voting Trust Agreement,
pursuant to which title to all such 700 common shares was transferred into the
name of Xx. Xxxxxxxxxxxx, as Voting Trustee, with Xx. Xxxxxxxxxxxx retaining
such rights and benefits with respect to such 700 common shares as is set forth
in the Voting Trust Agreement; and
WHEREAS, Xxxxxx owns 200 common shares of the Company, and Xxxxxxx owns
100 common shares of the Company; and
WHEREAS, the Shareholders are the sole shareholders of the Company, and
collectively own all of the issued and outstanding common shares of the Company;
and
WHEREAS, the parties hereto desire to cause Merger Sub to be merged
with and into the Company, with the Company surviving such merger (the
"Merger"), all on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Definitions. All initially-capitalized terms used in this Agreement
shall have the meanings given to such terms in this Section 1.1 below:
"Accounts Receivable" has the meaning ascribed to it in Section 4.6(d)
of this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Aggregate Adjustment Amount" means an amount equal to the difference
between Closing Date Working Capital and Base Working Capital. If Closing Date
Working Capital exceeds Base Working Capital, the Aggregate Adjustment Amount
shall be a positive number. If Base Working Capital exceeds Closing Date Working
Capital, the Aggregate Adjustment Amount shall be a negative number.
"Agreement" means this Agreement and Plan of Merger, executed by the
parties hereto on the date set forth above.
"Average Price" has the meaning ascribed to it in Section 7.5(b) of
this Agreement.
"Base Working Capital" means an amount equal to the positive difference
between Current Assets and Current Liabilities, as of the close of business on
June 30, 2005.
"Benefit Plan" has the meaning ascribed to it in Section 4.15.
"Xxxxxxx" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Carve-Out Claims" has the meaning ascribed to it in Section 6.3(a).
"Closing" means the time at which the parties hereto consummate the
Merger.
"Closing Date" means the date on which the Closing actually occurs.
"Closing Date Balance Sheet" has the meaning ascribed to it in Section
2.4 of this Agreement.
"Closing Date Working Capital" means an amount equal to the difference
between Current Assets and Current Liabilities as of the close of business on
July 31, 2005. If Current Assets exceed Current Liabilities, Closing Date
Working Capital shall be a positive number. If Current Liabilities exceed
Current Assets, Closing Date Working Capital shall be a negative number.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Competing Business" has the meaning ascribed to it in Section 7.2(a)
of this Agreement.
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"Current Assets" means all current assets of the Company (or of the
Surviving Corporation, as applicable), other than accounts receivable aged more
than 180 days.
"Current Liabilities" means all current liabilities of the Company (or
of the Surviving Corporation, as applicable), including the accrual of all
employee vested obligations.
"Earn-Out Amount" has the meaning ascribed to it in Section 2.3(a) of
this Agreement.
"Earn-Out Dispute Notice" has the meaning ascribed to it in Section
2.3(b) of this Agreement.
"Earn-Out Dispute Period" has the meaning ascribed to it in Section
2.3(b) of this Agreement.
"Earn-Out Position Statement" has the meaning ascribed to it in Section
2.3(e) of this Agreement.
"Earn-Out Post-Closing Delivery" has the meaning ascribed to it in
Section 2.3(a) of this Agreement.
"Earn-Out Post-Closing Delivery Period" has the meaning ascribed to it
in Section 2.3(a) of this Agreement.
"Earn-Out Resolution Period" has the meaning ascribed to it in Section
2.3(d) of this Agreement.
"EBITDA" means for the 2005 calendar year the Surviving Corporation's
net income before payment of the Earn-Out Amount for such 12-month period
determined in accordance with GAAP after adding back (i) any interest expense,
(ii) any income tax expense, (iii) any depreciation expense, (iv) any
amortization expense; (v) Pre-Closing Company Transaction Expenses incurred by
the Company that would otherwise be deducted in calculating the Surviving
Corporation's net income for calendar year 2005; and (vi) those certain monthly
payments of $8,000 each made by the Company to Drugcloud, LLC during 2005 prior
to Closing; provided, however, that no amount shall be added back to or deducted
from net income more than once.
"EBITDA Target" has the meaning ascribed to it in Section 2.3(a) of
this Agreement.
"Effective Time" means the later of the effective times set forth in
the certified copies of the articles of merger issued by the Tennessee Secretary
of State with respect to the Merger.
"Environmental Laws" means all Laws concerning pollution or protection
of the environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control or cleanup of any Hazardous Material.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any member of a controlled group of
corporations under Section 414(b) of the Code of which the Company is or was a
member, and any trade or business (whether or not incorporated) who is or was
under common control with the Company under Section 414(c) of the Code, and all
other entities which together with the Company are or were prior to the date
hereof treated as a single employer under Section 414(m) or 414(o) of the Code.
"Escrow Agent" has the meaning ascribed to it in Section 2.2(a) of this
Agreement.
"Escrow Agreement" has the meaning ascribed to it in Section 2.2(a) of
this Agreement.
"Financial Statements" has the meaning ascribed to it in Section 4.6(a)
of this Agreement.
"GAAP" means Generally Accepted Accounting Principles in the United
States of America, consistently applied.
"GLB" has the meaning ascribed to it in Section 4.10(g).
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment or use of Hazardous
Material in, on, under, about or from any of the real estate owned, used or
leased by the Company or any part thereof and any other act, business, operation
or thing that violates any Environmental Law, or increases the danger, or risk
of danger, or poses an unreasonable risk of harm, to Persons or property.
"Hazardous Material" means any substance, material or waste which is or
will foreseeably be regulated by any governmental authority, including any
material, substance or waste defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," contaminant," toxic waste" or "toxic substance" under any
provision of Environmental Law, including lead paint, petroleum, petroleum
products, asbestos, presumed asbestos-containing material or asbestos-containing
material, urea formaldehyde and polychlorinated biphenyls.
"HIPAA" has the meaning ascribed to it in Section 4.10(g).
"Indebtedness" means any and all liabilities and obligations of the
Company as of the Closing but immediately prior to the Effective Time (i) for
the repayment of borrowed money (whether owed to lenders, affiliates or any
other Person), including amounts owed in respect of principal, interest, fees,
charges, premiums and prepayment penalties, or (ii) for Pre-Closing Company
Transaction Expenses; provided, however, that the term "Indebtedness" shall not
include the accounts payable or any capital leases of the Company.
"Indemnified Party" has the meaning ascribed to it in Section 7.3(g) of
this Agreement.
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"Indemnified Person" has the meaning ascribed to it in Section 6.4(a)
of this Agreement.
"Indemnifying Party" has the meaning ascribed to it in Section 7.3(g)
of this Agreement.
"Indemnifying Person" has the meaning ascribed to it in Section 6.4(a)
of this Agreement.
"Independent Accountants" has the meaning ascribed to it in Section
2.3(e) of this Agreement.
"Intellectual Property" has the meaning ascribed to it in Section 4.16.
"Interim Balance Sheet" has the meaning ascribed to it in Section
4.6(a) of this Agreement.
"IRS" means the Internal Revenue Service.
"Labor and Employment Law" means all Laws relating to employment
practices, terms and conditions of employment, equal opportunity,
nondiscrimination, immigration, wages, hours, benefits and collective
bargaining, the payment of social security and similar taxes, unemployment
compensation, workers compensation and occupational safety and health.
"Law" means all laws, statutes, rules, regulations, ordinances, codes,
bulletins, opinions, decisions, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder of federal, state, local and foreign governments
(and all agencies thereof).
"Liens" means any and all liens, security interests, mortgages,
easements, restrictions, encumbrances, pledges, conditional sales contracts, or
other similar conflicting ownership or security interest in favor of any Person.
"Losses" has the meaning ascribed to it in Section 6.1.
"Medicare Laws" means any and all Laws applicable to reimbursement by
Medicare, Medicaid or any other governmental healthcare program for services or
items rendered by the Company, including all federal and state laws relating to
the referral of patients to the Company's business.
"Merger" has the meaning ascribed to it in the second recital of this
Agreement.
"Merger Sub" has the meaning ascribed to in the introductory paragraph
of this Agreement.
"Minimum Share Value" means three dollars and twenty-eight cents
($3.28).
"Xxxxxx" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
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"Xx. Xxxxxxxxxxxx" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Xx. Xxxxxxxxxxxx" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Multiemployer Plan" means a plan as defined in ERISA Section
4001(a)(3) to which Company or any ERISA Affiliate of Company is making or
accruing an obligation to make contributions or has made or accrued an
obligation to make contributions.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Notice" has the meaning ascribed to it in Section 8.2 of this
Agreement.
"Notice Party" has the meaning ascribed to it in Section 8.2 of this
Agreement.
"Order" has the meaning ascribed to it in Section 4.9 of this
Agreement.
"Parent" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Payor" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Pension Plan" means an employee pension benefit plan, as defined in
ERISA Section 3(2), other than a Multiemployer Plan, which is covered by Title
IV of ERISA and which either (i) is maintained by the Company and/or any ERISA
Affiliate of the Company for employees of such Person, or (ii) has at any time
preceding the date hereof been maintained by the Company and/or any ERISA
Affiliate of the Company for employees of such Person.
"Per Share Value" means, with respect to the Standard Management Shares
an amount equal to the greater of (i) the average per-share closing price of a
Standard Management Share determined over the 10 trailing days immediately
preceding the date which is two days prior to the Closing Date, or (ii) the
Minimum Share Value.
"Permit" has the meaning ascribed to such term in Section 4.12 of this
Agreement.
"Person" means an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture, company or other entity or any
governmental authority.
"PHI" has the meaning ascribed to it in Section 4.10(g) of this
Agreement.
"Plan" means the
Standard Management Corporation 2002 Stock Incentive
Plan as established by Parent and amended from time to time.
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"Pre-Closing Company Transaction Expense" means all fees and expenses
incident to the transactions contemplated by this Agreement and which are
incurred by or are for the account of the Company or the Shareholders'
Representative, including without limitation, fees and expenses payable to their
representatives (including any attorneys', broker's or finder's fees), in
respect of services performed on or before the Closing Date, whether or not such
expenses have accrued or have been billed or become due prior to Closing and all
amounts payable to consultants or others arising out of or relating to the
transactions contemplated by this Agreement in respect of services performed on
or before the Closing Date.
"Pro-Rata" means with respect to a Shareholder in respect of his or her
shares of common stock of the Company, the number of shares of common stock held
by such Shareholder immediately prior to the Effective Time, in proportion to
the total number of shares of common stock of the Company issued and outstanding
immediately prior to the Effective Time, and for purposes of clarity shall mean
for each of the Shareholders, the following percentages: (i) for Voting Trustee,
70%, (ii) for Xxxxxx, 20%, and (iii) for Xxxxxxx, 10%.
"Registrable Shares" shall mean the Standard Management Shares issued
in accordance with this Agreement, except that, as to any particular Registrable
Shares, such securities, once issued, will cease to be Registrable Shares when
(i) a registration statement under the 1933 Act covering such securities has
been declared effective and such securities have been disposed of pursuant to an
effective registration statement, (ii) such securities have been sold to the
public without registration in accordance with Rule 144 (or any similar
provisions then in force) under the 1933 Act, or (iii) in the reasonable opinion
of counsel for Parent, all of the Registrable Securities may be sold without
restriction under Rule 144(k).
"Report" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Restrictions" means any and all liens, restrictions, restrictions on
transfer, options, pledges, voting agreements, rights of first refusal,
tag-along, co-sale or other rights, licenses, security interests, claims,
charges or encumbrances of any kind or nature whatsoever.
"SEC" means the United States Securities and Exchange Commission.
"Section 7.3 Indemnified Person" has the meaning ascribed to it in
Section 7.3(g) of this Agreement.
"Shareholder" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Shareholders' Representative" has the meaning ascribed to it in
Section 2.6 of this Agreement.
"Standard Management Shares" means common shares of Parent, no par
value.
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"Surviving Corporation" means the Company, immediately following the
Effective Time of the Merger.
"Tennessee Law" means the Tennessee Business Corporation Act.
"Third-Party Claim" has the meaning ascribed to it in Section 6.4(a) of
this Agreement.
"Voting Trust Agreement" has the meaning ascribed to it in the
introductory paragraph to this Agreement.
"Voting Trustee" has the meaning ascribed to it in the introductory
paragraph to this Agreement.
"Working Capital Dispute Notice" has the meaning ascribed to it in
Section 2.4(b) of this Agreement.
"Working Capital Dispute Period" has the meaning ascribed to it in
Section 2.4(b) of this Agreement.
"Working Capital Position Statement" has the meaning ascribed to it in
Section 2.4(d) of this Agreement.
"Working Capital Post-Closing Delivery" has the meaning ascribed to it
in Section 2.4(a) of this Agreement.
"Working Capital Resolution Period" has the meaning ascribed to it in
Section 2.4(c) of this Agreement.
1.2 Construction.
(a) The meanings of terms defined herein are equally
applicable to the singular and plural of such defined terms.
(b) The headings of articles and sections to this Agreement
are provided for convenience only and will not affect the construction or
interpretation hereof.
(c) This Agreement and all Exhibits and Schedules hereto are a
result of negotiations among the parties hereto. Accordingly, neither this
Agreement nor any Exhibit or Schedule hereto shall be construed against any
party hereto because of its or its counsel's involvement in its preparation.
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ARTICLE II
THE MERGER
2.1 The Merger.
(a) On the terms and subject to the conditions set forth in
this Agreement and in accordance with the Tennessee Law, concurrently herewith,
the parties hereto shall cause Merger Sub to be merged with and into the
Company. The parties shall so cause the Merger to occur by filing with the
Tennessee Secretary of State articles of merger executed in accordance with the
relevant provisions of the Tennessee Law and by making all other filings or
recordings required thereby to effect the Merger. As a result of the Merger, and
at the Effective Time, the separate corporate existence of Merger Sub will cease
and the Company will continue to survive the Merger. As a result of the Merger,
the Company will succeed to and assume all of the rights and obligations of
Merger Sub in accordance with the Tennessee Law. The Merger will also have such
other effects as are set forth and described in the Tennessee Law.
(b) The officers and directors of Merger Sub at the Effective
Time shall become the officers and directors of the Surviving Corporation and
continue as such until his or her successor shall have been elected and
qualified or until his or her earlier resignation or removal. Xxxxxx shall
initially be President, and Xxxxxxx shall initially be Vice President, of the
Surviving Corporation.
(c) The Articles of Incorporation and By-Laws of Merger Sub at
the Effective Time shall become the Articles of Incorporation and By-Laws of the
Surviving Corporation and shall continue as such until altered, amended or
repealed; provided, however, that the Articles of Incorporation of the Surviving
Corporation shall be amended to change the name of the Company, immediately
following the Effective Time, to "Precision Healthcare, Inc."
2.2 Conversion of Equity Securities. On the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub or the Company:
(a) Each common share of the Company owned by Voting Trustee
immediately prior to the Effective Time shall be cancelled and all of such
common shares, in the aggregate, shall be converted into the right to receive
(i) $350,000 in Standard Management Shares based upon the Per Share Value, (ii)
$1,390,000 in immediately available funds, which all such shares and funds
(other than $225,000 of such funds) shall be deposited at Closing into an escrow
account with Xxxx & Genauer, P.A. (the "Escrow Agent") to be held pursuant to an
Escrow Agreement, in the form attached hereto as Exhibit A (the "Escrow
Agreement"), (iii) a Pro-Rata portion of the Earn-Out Amount (if any), as set
forth in Section 2.3 below, and (iv) a Pro-Rata portion of a positive Aggregate
Adjustment Amount (if any), as set forth in Section 2.4.
(b) Each common share of the Company owned by Xxxxxx
immediately prior to the Effective Time shall be cancelled and all of such
common shares, in the aggregate, shall be converted into the right to receive
(i) $433,000 in Standard Management Shares based upon the Per Share Value, (ii)
$196,000 in immediately available funds, payable at the Closing to an
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account designated by Xxxxxx, (iii) a Pro-Rata portion of the Earn-Out Amount
(if any), as set forth in Section 2.3 below, and (iv) a Pro-Rata portion of a
positive Aggregate Adjustment Amount (if any), as set forth in Section 2.4.
(c) Each common share of the Company owned by Xxxxxxx
immediately prior to the Effective Time shall be cancelled and all of such
common shares, in the aggregate, shall be converted into the right to receive
(i) $217,000 in Standard Management Shares based upon the Per Share Value, (ii)
$108,000 in immediately available funds, payable at the Closing to an account
designated by Xxxxxxx, (iii) a Pro-Rata portion of the Earn-Out Amount (if any),
as set forth in Section 2.3 below, and (iv) a Pro-Rata portion of a positive
Aggregate Adjustment Amount (if any), as set forth in Section 2.4.
(d) Each common share of the Company held in the treasury of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment will be made with
respect thereto.
(e) Each common share of Merger Sub issued and outstanding
immediately prior to the Effective Time will be converted into one common share
of the Surviving Corporation.
Notwithstanding anything to the contrary set forth in this Agreement,
all cash amounts payable to the Shareholders under this Section 2.2 shall be
reduced on a Pro-Rata basis by the amounts to be paid by the Company prior to or
simultaneous with the Closing in accordance with Section 7.6.
2.3 Earn-Out.
(a) On or before the 75th day following the expiration of the
calendar year 2005 (the "Earn-Out Post-Closing Delivery Period"), the Surviving
Corporation shall deliver to each Shareholder copies of the Surviving
Corporation's year-end financial statements for calendar year 2005 and a
calculation of EBITDA for calendar year 2005 (the "Earn-Out Post-Closing
Delivery"). If the Surviving Corporation's EBITDA for calendar year 2005 is
$600,000 or more (the "EBITDA Target"), the Shareholders shall be entitled to
receive their respective Pro-Rata portions of $500,000 (the "Earn-Out Amount"),
as more fully set forth in this Section 2.3. If the Surviving Corporation's
EBITDA for calendar year 2005 is less than $600,000, the Shareholders shall not
be entitled to the Earn-Out Amount (or any portion thereof). If the Surviving
Corporation fails to deliver to each Shareholder the Earn-Out Post-Closing
Delivery on or before the tenth (10th) business day after the expiration of the
Earn-Out Post-Closing Delivery Period, the EBITDA Target shall be deemed to have
been met and the Shareholders shall entitled to receive their Pro-Rata portions
of the Earn-Out Amount in accordance with Section 2.3(f) hereof. In no event
shall any Shareholder be required to make a payment to the Surviving Corporation
or any other party in the event that, and solely as a result of the fact that,
the EBITDA Target has not been met.
(b) The Shareholders' Representative (for and on behalf of the
Shareholders) shall have thirty (30) days from the date the Surviving
Corporation makes the Earn-Out Post-
10
Closing Delivery (such period, the "Earn-Out Dispute Period") to notify the
Surviving Corporation, in writing, as to whether the Shareholders'
Representative agrees or disagrees with the Earn-Out Post-Closing Delivery (such
written notice, the "Earn-Out Dispute Notice"). During the Earn-Out Dispute
Period, the Shareholders' Representative and her accountants shall be permitted
to review (during regular business hours and upon reasonable prior notice) the
working papers of the Surviving Corporation and (where applicable) the Surviving
Corporation's accountants relating to the matters set forth in the Earn-Out
Post-Closing Delivery.
(c) If the Shareholders' Representative fails to deliver an
Earn-Out Dispute Notice to the Surviving Corporation during the Earn-Out Dispute
Period, the Earn-Out Post-Closing Delivery as delivered by the Surviving
Corporation shall be deemed to be final and correct and shall be binding upon
each of the parties hereto.
(d) If the Shareholders' Representative delivers an Earn-Out
Dispute Notice to the Surviving Corporation during an Earn-Out Dispute Period,
the Shareholders' Representative and the Surviving Corporation shall, for a
period of forty-five (45) days from the date the Earn-Out Dispute Notice is
delivered to the Surviving Corporation (such period, the "Earn-Out Resolution
Period"), use their respective best efforts to amicably resolve the items in
dispute. Any items so resolved by the parties shall be deemed to be final and
correct as so resolved and shall be binding upon each of the parties hereto.
(e) If the Shareholders' Representative and the Surviving
Corporation are unable to resolve all of the items in dispute during the
Earn-Out Resolution Period, then Shareholders' Representative or the Surviving
Corporation may refer the items remaining in dispute to Deloitte & Touche (the
"Independent Accountants"), which the Company and the Parent both represent is
independent of their interests. Such referral shall be made in writing to the
Independent Accountants, copies of which shall concurrently be delivered to the
non-referring party hereto. The referring party shall furnish the Independent
Accountants, at the time of such referral, with the Earn-Out Post-Closing
Delivery and the Earn-Out Dispute Notice. The parties shall also furnish the
Independent Accountants with such other information and documents as the
Independent Accountants may reasonably request in order for them to resolve the
items in dispute. The parties hereto shall also, within ten (10) days of the
date the items in dispute are referred to the Independent Accountants, provide
the Independent Accountants with a written notice (a "Earn-Out Position
Statement") describing in reasonable detail their respective positions on the
items in dispute (copies of which will concurrently be delivered to the other
party hereto). If any party fails to timely deliver its Earn-Out Position
Statement to the Independent Accountants, the Independent Accountants shall
resolve the items in dispute solely upon the basis of the information otherwise
provided to them. The Independent Accountants shall resolve all disputed items
in a written determination to be delivered to each of the parties hereto within
forty-five (45) days after such matter is referred to them; provided, however,
that any delay in delivering such determination shall not invalidate such
determination or deprive the Independent Accountants of jurisdiction to resolve
the items in dispute. The decision of the Independent Accountants as to the
items in dispute shall be final and binding upon the parties hereto and shall
not be subject to judicial review or arbitration. The fees and expenses of the
Independent Accountants incurred in the resolution of any items in dispute shall
be determined by the Independent Accountants and set forth in their report and
shall be allocated and paid by
11
the Shareholders, on one hand, and the Surviving Corporation, on the other hand,
in inverse proportion to the extent they prevailed on the items in dispute.
(f) Once there is a final determination with respect to the
Earn-Out Post-Closing Delivery, if such final determination results in the
Surviving Corporation owing the Earn-Out Amount to the Shareholders (whether
through failure of the Surviving Corporation to timely deliver the Earn-Out
Post-Closing Delivery, failure of the Shareholders' Representative to timely
deliver an Earn-Out Dispute Notice, agreement of the parties, or determination
of the Independent Accountants), the Surviving Corporation shall pay each
Shareholder within thirty (30) days of such final determination their respective
Pro-Rata portion of the Earn-Out Amount in immediately available funds and
Standard Management Shares in the same proportion of cash and stock as such
Shareholder received at the Closing; provided that Voting Trustee's Pro-Rata
portion of the Earn-Out Amount (including both cash and stock) shall be paid to
the Escrow Agent to be held in escrow pursuant to the terms of the Escrow
Agreement.
(g) During the period from the Closing through December 31,
2005, Parent shall cause the Surviving Corporation to operate its business in
the ordinary course and usual course consistent with past practices and will not
cause EBITDA to be artificially reduced by virtue of expenses that were not
consistent with past practices or accelerated expenses or delayed income.
2.4 Working Capital Adjustment.
(a) As promptly as reasonably practicable after the Closing
Date, and in any event not later than sixty (60) days after the Closing Date,
the Surviving Corporation shall prepare and deliver to the Shareholders'
Representative (such delivery, the "Working Capital Post-Closing Delivery"):
(i) a balance sheet of the Company (without giving effect to
the consummation of the transactions contemplated hereby) prepared as
of the close of business on July 31, 2005 in accordance with GAAP (the
"Closing Date Balance Sheet"); and
(ii) a calculation of the Closing Date Working Capital and
the Aggregate Adjustment Amount.
(b) The Shareholders' Representative (for and on behalf of the
Shareholders) shall have thirty (30) days from the date the Surviving
Corporation makes the Working Capital Post-Closing Delivery (such period, the
"Working Capital Dispute Period") to notify the Surviving Corporation, in
writing, as to whether the Shareholders' Representative agrees or disagrees with
the Working Capital Post-Closing Delivery (such written notice, the "Working
Capital Dispute Notice"). During the Working Capital Dispute Period, the
Shareholders' Representative and his or her accountants shall be permitted to
review (during regular business hours and upon reasonable prior notice) the
working papers of the Surviving Corporation and (where applicable) the Surviving
Corporation's accountants relating to the matters set forth in the Working
Capital Post-Closing Delivery.
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(c) If the Shareholders' Representative delivers the Working
Capital Dispute Notice to the Surviving Corporation during the Working Capital
Dispute Period, the Shareholders' Representative and the Surviving Corporation
shall, for a period of forty-five (45) days from the date the Working Capital
Dispute Notice is delivered to the Surviving Corporation (such period, the
"Working Capital Resolution Period"), use their respective best efforts to
amicably resolve the items in dispute. Any items so resolved by the parties
shall be deemed to be final and correct as so resolved and shall be binding upon
each of the parties hereto.
(d) If the Shareholders' Representative and the Surviving
Corporation are unable to resolve all of the items in dispute during the Working
Capital Resolution Period, then Shareholders' Representative or the Surviving
Corporation may refer the items remaining in dispute to the Independent
Accountants. Such referral shall be made in writing to the Independent
Accountants, copies of which shall concurrently be delivered to the
non-referring party hereto. The referring party shall furnish the Independent
Accountants, at the time of such referral, with the Working Capital Post-Closing
Delivery and the Working Capital Dispute Notice. The parties shall also furnish
the Independent Accountants with such other information and documents as the
Independent Accountants may reasonably request in order for them to resolve the
items in dispute. The parties hereto shall also, within ten (10) days of the
date the items in dispute are referred to the Independent Accountants, provide
the Independent Accountants with a written notice (a "Working Capital Position
Statement") describing in reasonable detail their respective positions on the
items in dispute (copies of which will concurrently be delivered to the other
party hereto). If any party fails to timely deliver its Working Capital Position
Statement to the Independent Accountants, the Independent Accountants shall
resolve the items in dispute solely upon the basis of the information otherwise
provided to them. The Independent Accountants shall resolve all disputed items
in a written determination to be delivered to each of the parties hereto within
forty-five (45) days after such matter is referred to them; provided, however,
that any delay in delivering such determination shall not invalidate such
determination or deprive the Independent Accountants of jurisdiction to resolve
the items in dispute. The decision of the Independent Accountants as to the
items in dispute shall be final and binding upon the parties hereto and shall
not be subject to judicial review or arbitration. The fees and expenses of the
Independent Accountants incurred in the resolution of any items in dispute shall
be determined by the Independent Accountants and set forth in their report and
shall be allocated and paid by the Shareholders, on one hand, and the Surviving
Corporation, on the other hand, in inverse proportion to the extent they
prevailed on the items in dispute.
(e) Within five (5) days following date on which the Aggregate
Adjustment Amount is finally determined pursuant to this Agreement:
(i) if the Aggregate Adjustment Amount is a positive number,
the Surviving Corporation shall pay each Shareholder, in immediately
available funds to an account designated by such Shareholder in
writing, an amount equal to the result obtained by multiplying (A) that
Shareholder's Pro-Rata portion, by (B) the amount of the Aggregate
Adjustment Amount; and
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(ii) if the Aggregate Adjustment Amount is a negative number,
each Shareholder shall pay the Surviving Corporation, in immediately
available funds to an account designated by the Surviving Corporation
in writing, an amount equal to the result obtained by multiplying (A)
that Shareholder's Pro-Rata portion, by (B) the Aggregate Adjustment
Amount; provided that any negative Aggregate Adjustment Amount shall be
net of the aggregate amount of cash and cash equivalents of the Company
as of July 31, 2005. For purposes of this calculation, Merger Sub
agrees not to withdraw cash or cash equivalents from the Surviving
Corporation until after July 31, 2005.
Notwithstanding the forgoing, if the Escrow Agreement is in full force
and effect as of the Closing Date, Voting Trustee's Pro-Rata portion of the
Aggregate Adjustment Amount, as determined by this Section 2.4(e), shall be paid
to the Escrow Agent to be held in escrow pursuant to the terms of the Escrow
Agreement.
2.5 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of any of the Company's common shares outstanding prior
to the Effective Time will not be made on the transfer books of the Surviving
Corporation.
2.6 Exchange of Certificates. Concurrently herewith, each Shareholder
shall surrender all certificates representing the common shares of the Company
held by such Shareholder (or if lost, an affidavit, indemnity and such other
security as is reasonably required by Merger Sub and its counsel).
2.7 Shareholders' Representative. Each Shareholder hereby irrevocably
constitutes and appoints Xx. Xxxxxxxxxxxx as his, her or its lawful
attorney-in-fact, as the "Shareholders' Representative" under this Agreement,
with the exclusive authority to act as such hereunder. In the event of the
death, resignation or inability of Xx. Xxxxxxxxxxxx to act as the Shareholders'
Representative hereunder, Xxxxxx Xxxx will be the successor Shareholders'
Representative with all powers of his predecessor. The Shareholders'
Representative will have full power to act on each Shareholder's behalf
according to the terms of this Agreement to give and receive notices on behalf
of Shareholders and in general to do all things and to perform all acts on each
Shareholder's behalf as may be contemplated by this Agreement, including the
resolution of indemnification claims, all in the absolute discretion of the
Shareholders' Representative. Shareholders shall be bound by all acts of the
Shareholders' Representative taken in connection with this Agreement.
ARTICLE III
THE CLOSING
3.1 Closing. The Closing shall take place, concurrently herewith, at
the offices of Merger Sub's counsel, Xxxxxx Xxxxxxx Attorneys, PC, in
Indianapolis,
Indiana, or by transmission of faxed or scanned copies of all
documents necessary to effect the Closing of the transactions described in this
Agreement (as well as wire transfer of all cash amounts due hereunder) followed,
as soon as practicable, by overnight delivery of the original executed Closing
documents.
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3.2 Closing Deliveries of Parent and Merger Sub. Concurrently herewith,
in addition to any other documents specifically required to be delivered
pursuant to this Agreement, Parent and Merger Sub shall deliver to Shareholders:
(a) The immediately available funds as required by Section 2.2
above;
(b) The Standard Management Shares, as required by Section 2.2
above;
(c) A certificate of the Secretary or Assistant Secretary of
Merger Sub, dated as of the Closing Date, certifying the resolutions duly
adopted by the Board of Directors and shareholder of Merger Sub authorizing and
approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(d) A certificate, duly executed by the President or Vice
President of Merger Sub, dated as of the Closing Date, certifying (i) that
Merger Sub has performed and complied in all material respects with all of the
terms, provisions and conditions of this Agreement to be performed and complied
with by it prior to the Closing, and (ii) that Merger Sub's representations and
warranties in this Agreement are true and correct in all material respects as of
the Closing Date;
(e) A counterpart to a Grant Agreement, in the form attached
hereto as Exhibit B, duly executed by Parent, entitling Xxxxxx the option to
purchase 40,000 shares of stock of Parent under the Plan at a price equal to the
fair market value of such shares as of the Closing Date;
(f) A counterpart to a Grant Agreement, in the form attached
hereto as Exhibit B, duly executed by Parent, entitling Xxxxxxx the option to
purchase 25,000 shares of stock of Parent under the Plan at a price equal to the
fair market value of such shares as of the Closing Date;
(g) Such other documents, instruments and agreements as the
Shareholders or their counsel may reasonably request to consummate the
transaction contemplated hereby, in form and substance reasonably acceptable to
Shareholders and their counsel; and
(h) A counterpart to the Escrow Agreement duly executed by an
authorized officer of Merger Sub.
3.3 Closing Deliveries of Shareholders. At the Closing, in addition to
any other documents specifically required to be delivered pursuant to this
Agreement, each Shareholder shall deliver to Merger Sub the following:
(a) Certificates representing all of the common shares of the
Company owned beneficially and of record by such Shareholder as of the Closing
Date;
(b) A Release, duly executed by such Shareholder, in the form
attached hereto as Exhibit C;
15
(c) A legal opinion of counsel to Shareholders, Xx.
Xxxxxxxxxxxx, and Xx. Xxxxxxxxxxxx, dated as of the Closing Date, addressed to
Parent and Merger Sub, and containing customary legal opinions, exceptions and
qualifications;
(d) Copies of the Company's Charter, as amended to date, duly
certified by the Tennessee Secretary of State dated no more than 10 days prior
to the Closing Date;
(e) A Certificate of Existence for the Company from the
Tennessee Secretary of State dated no more than 10 days prior to the Closing
Date;
(f) A Certificate, duly executed by such Shareholder, dated as
of the Closing Date, certifying that such Shareholder has performed and complied
in all material respects with all of the terms, provisions and conditions of
this Agreement to be performed and complied with by it prior to the Closing;
(g) The original minute books, stock ledgers and corporate
seal (if any) of the Company;
(h) A Guaranty Release Agreement, duly executed by all
appropriate parties (including, without limitation, all of the parties listed as
guarantors to the below-described Guaranties), providing for release of (i) that
certain Guaranty, dated January 1, 2003, guaranteeing the obligations of
Drugcloud, LLC, a Florida limited liability company, under that certain
Promissory Note dated October 15, 2003 in favor of Xxxxxx X. Xxxxxxx, III, and
(ii) that certain Guaranty, dated January 1, 2003, guaranteeing the obligations
of Drugcloud, LLC, under that certain Promissory Note dated October 15, 2003 in
favor of Xxxxxx X. Xxxxxxx, Xx.;
(i) Counterparts to the Employment Agreements, in the forms
attached hereto as Exhibit D, signed respectively by Xxxxxx and Xxxxxxx;
(j) A counterpart to a Non-Competition Agreement, in the form
attached hereto as Exhibit E, signed by Xx. Xxxxxxxxxxxx;
(k) Counterparts to the Grant Agreement, signed by Xxxxxx and
Xxxxxxx;
(l) A certificate of the Secretary or Assistant Secretary of
the Company, dated as of the Closing Date, certifying (i) the resolutions duly
adopted by the Board of Directors and shareholders of the Company authorizing
and approving the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) that such
resolutions have not been rescinded or modified and remain in full force and
effect as of the Closing Date;
(m) Such other documents, instruments and agreements as Merger
Sub or its counsel may reasonably request to consummate the transaction
contemplated hereby, in form and substance reasonably acceptable to Merger Sub
and its counsel; and
16
(n) Counterparts to the Escrow Agreement, duly executed by
Voting Trustee and Xx. Xxxxxxxxxxxx.
ARTICLE IV
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
Any exception or qualification set forth in any Schedule to this
Agreement with respect to a particular representation or warranty contained in
this Agreement shall be deemed to be an exception or qualification with respect
to all other applicable representations and warranties of the Shareholders
contained in this Agreement to the extent that such exception or qualification
is reasonably identified and it is readily apparent that such exception or
qualification relates to such other representation or warranty. Nothing in any
Schedule to this Agreement is intended to broaden the scope of any
representation or warranty of the Shareholders contained in this Agreement.
The Shareholders, jointly and severally, represent and warrant to
Merger Sub as follows:
4.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee. Schedule
4.1(a) contains a true, accurate and complete list of each jurisdiction in which
the Company is qualified to do business as a foreign corporation. The Company is
duly qualified to do business as a foreign corporation and is in good standing
under the Laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) The Company has full power and authority to own or use its
properties and assets and carry on its business activities as now conducted.
Schedule 4.1(b) lists the addresses of all locations at which the Company
conducts its business.
(c) Complete and accurate copies of the Articles of
Incorporation, by-laws, minute books and stock transfer books of the Company
have been delivered to Merger Sub. The minute books of the Company fairly and
accurately reflect all material actions of the Board of Directors and
shareholders of the Company. The stock transfer books of the Company are
correct, complete and current, and, to the extent applicable, all documentary
and stock transfer tax stamps required in connection with the issuance and
transfer of shares of the Company's stock have been duly paid, affixed or
canceled.
4.2 Authorization. The Company and each Shareholder has full power and
authority to execute and deliver this Agreement and to perform his, her or its
respective obligations hereunder. The Merger and the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Company and each Shareholder.
4.3 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by the Company and each Shareholder. This Agreement
constitutes a valid and legally
17
binding obligation of the Company each Shareholder, enforceable against the
Company and each Shareholder in accordance with its terms.
4.4 Noncontravention. The execution, delivery and performance of this
Agreement by the Company and each Shareholder, the consummation by the Company
and each Shareholder of the transactions contemplated hereby and the compliance
by the Company and each Shareholder with or fulfillment by the Company and each
Shareholder of the terms and provisions hereof or of any other agreement or
instrument contemplated hereby, do not and shall not (a) materially conflict
with or result in a material breach of any of the provisions of the constituent
documents of the Company, (b) contravene any Law or Order which affects or binds
the Company or any of its properties, (c) conflict with, contravene or
constitute a default or breach of or under any Material Contract or Permit, or
(d) except as otherwise set forth in Schedule 4.4, require any Shareholder or
the Company to obtain the approval, consent or authorization of, or to make any
declaration, filing or registration with, any governmental authority or other
third party which has not been obtained in writing prior to the date of this
Agreement.
4.5 Capital Structure.
(a) The authorized capital stock of the Company consists of
10,000 shares of no par common stock of which 1,000 shares have been duly and
validly issued, are fully-paid and non-assessable, and are owned, beneficially
and of record, by the Shareholders as described on Schedule 4.5, free and clear
of any and all Restrictions.
(b) Other than as described on Schedule 4.5, there are no
issued and/or outstanding equity securities interests of the Company, or
securities convertible into or exchangeable or exercisable for equity securities
of the Company, and there are no outstanding options, warrants, rights,
contracts, commitments, understandings or arrangements by which the Company or
any other Person is bound to issue, repurchase or otherwise acquire or retire
any equity securities of the Company. Except as set forth on Schedule 4.5, there
are no voting trusts, proxies or any other agreements or understandings with
respect to the voting of any equity securities of the Company.
(c) No equity or other securities of the Company (including
the common shares described on Schedule 4.5), were issued in violation of any
Law.
(d) The Company does not own, or have any right, option or
obligation to acquire, any equity securities of any other Person.
4.6 Financial Statements.
(a) Attached hereto as Schedule 4.6(a) are true, accurate and
complete copies of the following: (i) the unaudited balance sheet of the Company
as of December 31, 2004 and the related unaudited profit and loss statements for
the fiscal year then ended, and (ii) the unaudited balance sheet of the Company
as of June 30, 2005 ("Interim Balance Sheet") and the related unaudited profit
and loss statements for each of January, February, March, April, May and June
2005 (items (i) and (ii), collectively, the "Financial Statements").
18
(b) Except as set forth on Schedule 4.6(b), the Financial
Statements (i) fairly present in all material respects, the operating results,
the financial condition, changes in shareholder's equity and cash flow of the
Company on the dates and for the periods indicated, (ii) are correct and
complete, (iii) are consistent with the books and records of the Company (which
books and records are correct and complete), and (iv) were prepared in
accordance with GAAP. No financial statements of any entity other than the
Company are required by GAAP to be included in the Financial Statements. The
Company has no liabilities or obligations of any nature (whether absolute,
accrued, contingent or otherwise) except for (x) liabilities or obligations
reflected or reserved against in the Interim Balance Sheet, which reserves are
adequate, (y) immaterial liabilities or obligations incurred since the date of
the Interim Balance Sheet in the ordinary course of business, and (z)
liabilities or obligations set forth in Schedule 4.6(b).
(c) Since the date of the Interim Balance Sheet, (i) there has
not been any material adverse change in the business, operations, assets,
prospects, or condition of the Company, and to the knowledge of the Shareholders
no event has occurred or circumstance exists that could reasonably be expected
to result in such a change, (ii) the Company has operated only in the ordinary
course, (iii) no party has accelerated, terminated, modified or cancelled any
agreement, contract, lease or license to which the Company is a party or by
which the Company is bound, and (iv) the Company has not experienced any
material damage, destruction or loss (whether or not covered by insurance) to
any of its material assets.
(d) All accounts receivable of the Company that are (or are
required by GAAP to be) reflected on the Interim Balance Sheet or in the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent, as appropriate, valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Reserves for Accounts Receivable are reasonably
anticipated to be adequate based on past experience and practices of the
Business and have been calculated consistent with past practices. There is no
contest, claim, or right of set-off, other than returns in the ordinary course
of business, under any agreement with any obligor of an Account Receivable
relating to the amount or validity of such Account Receivable.
(e) All inventory of the Company, whether or not reflected in
the Interim Balance Sheet, consists of a quality and quantity usable and salable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Interim Balance Sheet or in the accounting records
of the Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
(f) The aggregate amount owed with respect to the capital
leases of the Company does not exceed $102,000.
19
4.7 Title to and Sufficiency of Assets.
(a) Schedule 4.7(a) contains a complete and accurate list of
all real property, leaseholds or other interests in real property owned by the
Company. The Company owns (with good and marketable title in the case of real
property, subject only to the matters permitted by Section 4.7(b) below) all the
properties and assets (whether real, personal or mixed and whether tangible or
intangible) that it purports to own, including all of the properties and assets
reflected on Schedule 4.7(a) and in the Interim Balance Sheet (except for assets
held under capitalized leases disclosed on Schedule 4.7(a) and personal property
sold since the date of the Interim Balance Sheet in the ordinary course of
business), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Interim Balance Sheet (except for personal
property acquired and sold since the date of the Interim Balance sheet in the
ordinary course of business).
(b) Except as set forth in Schedule 4.7(b), all of the
properties and assets listed on Schedule 4.7(a) or otherwise reflected in the
Interim Balance Sheet are free and clear of any and all Liens and are not, in
the case of real property, to Shareholders' knowledge, subject to any rights of
way, building use restrictions, exceptions, variances, reservations or
limitations of any nature except, (i) liens for current taxes not yet due, (ii)
minor imperfections of title, none of which is substantial in amount, materially
detracts from the value or impairs the use of the property subject thereto, or
impairs the operations of the Company, and (iii) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
(c) The building, plants, structures, equipment and other
assets of the Company are sufficient for the continued conduct of the Company's
business after the Closing in substantially the same manner as conducted prior
to the Closing.
4.8 Tax Matters. Except as set forth in Schedule 4.8, (i) the Company
has filed or caused to be filed all tax returns, and all reports with respect to
taxes, required to have been filed by or with respect to the Company prior to
the date hereof, (ii) all such tax returns or reports were true, accurate,
correct and complete in all material respects, (iii) the Company is not
currently the beneficiary of any extension of time within which to file any tax
return or report, (iv) the Company has paid or caused to be paid all taxes,
penalties and interest required to have been paid by the Company prior to the
date hereof, (v)the Company has withheld, deducted, collected and paid all taxes
required to have been withheld, deducted, collected and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party by the Company, (vi) the Company has not waived
any statute of limitations in respect of taxes or agreed to any extension of
time with respect to a tax assessment or deficiency, (vii), no claim has ever
been made by a governmental authority in a jurisdiction where tax returns by the
Company have not been filed that the Company is or may be subject to taxation by
such jurisdiction, (viii) there are no Liens on any of the Company's assets or
properties that arose in connection with any failure (or alleged failure) to pay
any tax, (ix) no tax return of the Company has been audited or is currently
under audit or examination, and (x) there is no tax sharing agreement, tax
allocation agreement, tax indemnity obligation or similar written or unwritten
agreement, arrangement, understanding or practice with respect to taxes
(including
20
any advance pricing agreement, closing agreement or other arrangement relating
to taxes) that will require any payment by the Company. The Company is and has
been at all times from its inception an S-corporation as defined in Section 1361
of the Code.
4.9 Litigation; Claims. Except as set forth in Schedule 4.9, the
Company is not (a) subject to any outstanding injunction, judgment, order,
decree, ruling or charge or any governmental authority or arbitrator
(collectively, an "Order"), nor (b) a party or, to the knowledge of the
Shareholders, threatened to be made a party to any action, suit, proceeding,
hearing, audit or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator or governmental agency or entity having regulatory
authority over the Company. Except as set forth on Schedule 4.9, the Company has
not been audited, examined or otherwise reviewed by any governmental agency or
entity, or federal, state or local authorities during the current or past three
(3) fiscal years. No matter described in Schedule 4.9 could reasonably be
expected to have a material adverse effect on the business, condition,
operations or prospects of the Company.
4.10 Legal Compliance.
(a) The Company has complied in all material respects with all
applicable Laws, including all Medicare Laws, Environmental Laws and all Labor
and Employment Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
the Company alleging any failure so to comply. To the knowledge of the
Shareholders, no event has occurred or circumstance exists that (with or without
notice or lapse of time) is reasonably likely to constitute or result in a
violation by the Company, or a failure on the part of the Company to comply
with, any Law.
(b) Neither Shareholders nor any of their Affiliates has
ordered, referred, or requested, directly or indirectly, any items or services
from the Company that are subject or entitled to reimbursement in whole or in
part by Medicare, Medicaid or any other state or federal government
reimbursement program.
(c) Without limiting the generality of the foregoing, the
Company is in material compliance with all conditions and standards for
participation in the Medicare and Medicaid programs and certified as eligible
for participation in Medicare and Medicaid programs. The Company is not
operating any aspect of its business under or subject to a plan of correction or
corporate integrity agreement with a governmental agency or entity. The Company
is currently receiving and is entitled to continue to receive Medicare and
Medicaid reimbursement payments.
(d) The Company has duly and timely filed all reports and
other items required to be filed (the "Reports") with any reimbursement program
or third party payor (including, without limitation, Medicare, Medicaid,
medically indigent assistance, Blue Cross, Blue Shield, any health maintenance,
preferred provider, independent practice or other healthcare providers or
payors) (collectively, the "Payors") and has timely paid all amounts due to such
Payors. Except as set forth in Schedule 4.10(d), (i) the Company has not
requested an extension of time in which to file any of the Reports, (ii) the
Company is not delinquent in the payment of
21
any amount due to any Payors, (iii) there are no pending or, to the knowledge of
the Shareholders, threatened audits, claims, assessments, adjustments,
challenges or notices from any governmental agency or entity or Payors with
regard to any of the Reports or any reimbursements or payments that the Company
received from the government agency or entity or Payors, (iv) the Company has
not executed any waivers or extension of the statute of limitations for the
collection or assessment of any amount due under or in connection with any
Report or to any government agency or entity or Payors, and (v) the Company is
not liable for any amounts owed to any Payor or governmental agency or entity,
nor subject to any contractual adjustments, fines or penalties.
(e) The Company has maintained in all material respects all
records required to be maintained by the Food and Drug Administration, Drug
Enforcement Agency, State Boards of Pharmacy, Social Security Administration,
Health Care Financing Administration, the Center for Medicare and Medicaid
Services, state regulatory agencies and the Medicare and Medicaid programs.
(f) Without limiting the generality of the foregoing, the
Company has not given or received in violation of any Law any payments or any
other remuneration, either directly or indirectly, overtly or covertly, in cash
or in kind, in return for receiving or making referrals for the furnishing or
arranging for the furnishing of any item or service, or in return for
purchasing, leasing, ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item in violation of 42
U.S.C. 1320a 7a and 1320a 7b, commonly known as the "Anti Kickback Statute." In
addition, the Company has not accepted any referral for the provision of any
designated health service, or submitted a claim for payment to Medicare or
Medicaid for the provision of such services, in violation of 42 U.S.C. 1395nn,
commonly known as the "Xxxxx Act" or "Xxxxx II." With respect to any compliance
concerns found to be substantiated, the Company has taken appropriate corrective
action and made all appropriate reports to all applicable governmental agencies
or entities, and each such corrective action and appropriate report is listed
and disclosed in Schedule 4.10(f).
(g) Without limiting the generality of the foregoing to the
extent applicable to the Company, the Company, in its ordinary business
operation, has complied in all material respects and is currently in material
compliance with the requirements of the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") and its implementing regulations and with
the requirements of all applicable state regulations implementing Title V of the
Xxxxx-Xxxxx-Xxxxxx Act ("GLB") that are applicable to the Company's relationship
with any Business Associate (as such term is defined in HIPAA and/or GLB). To
the extent that the Company has access to Protected Health Information (as such
term is defined in HIPAA and/or GLB, "PHI"), and except as necessary to complete
the transactions contemplated by this Agreement or for internal management and
compliance purposes, the Company has not and shall not use or further disclose
PHI other than as permitted or required by HIPAA or as required by Law. The
Company has developed, documented, implemented, maintained, and used appropriate
safeguards to prevent disclosure of PHI other than as provided for by this
Agreement. These safeguards include proper training and discipline of workforce
and restrictions on physical access. The safeguards will be designed to preserve
the integrity and confidentiality of, and to prevent intentional or
unintentional non-permitted or violating use of disclosure of PHI. The
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Company has entered into appropriate Business Associate Agreements as required
by HIPAA in which it agrees to ensure that any agent, including a subcontractor,
to whom it provides PHI, received from, or created or received by the Company
either directly or on behalf of any Business Associate, agrees to the same
restrictions and conditions that apply through this Agreement to the Company
with respect to such information.
4.11 Environmental Laws and Regulations. Except as set forth on
Schedule 4.11:
(a) There are no Hazardous Materials present on the Company's
owned, leased or used real estate or, to the knowledge of the Shareholders, any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, aboveground or underground storage tanks,
landfills, land deposits, dumps, equipment or other containers, either temporary
or permanent, and deposited or located in land, water, sumps, or any other part
of such owned, leased or used real estate or such adjoining property, or
incorporated into any structure therein or thereon, except in material
compliance with Environmental Laws. The Company has not permitted or conducted
any Hazardous Activity except in material compliance with applicable
Environmental Laws.
(b) To the knowledge of the Shareholders, there has not been a
release or threatened release of any Hazardous Materials at or from the
Company's owned, leased or used real estate (nor by any Person for whose conduct
it is or may be held responsible), except in material compliance with applicable
Environmental Laws.
(c) There has been no release, or to the knowledge of the
Shareholders any threatened release, of any Hazardous Materials at or from any
site or facility for which the Company is or may be liable under any applicable
Environmental Laws.
4.12 Permits. Schedule 4.12 contains a complete and accurate list of
each material consent, approval, ratification, waiver or other authorization,
license (including import and export licenses), registration or permit issued,
granted, given or otherwise made available by or under the authority of any
governmental authority or pursuant to any Law that is held by the Company or
that otherwise relates to its business, assets or operations (collectively, the
"Permits"). Each Permit is valid and in full force and effect. The Company is,
and at all times has been, in material compliance with all of the terms and
requirements of each Permit. Except as set forth in Schedule 4.12, consummation
of the transactions contemplated hereby (a) does not require the consent of any
third party that has issued a Permit, (b) will not result in a breach of or
default under any such Permit, and (c) will not otherwise cause any such Permit
to cease to be legal, valid, binding and in full force and effect on identical
terms following the Closing. The Permits listed in Schedule 4.12 collectively
constitute all of the Permits necessary to permit the Company to lawfully
conduct and operate its business and assets in the manner in which it currently
conducts and operates its business and assets.
4.13 Material Contracts. Schedule 4.13 lists all agreements (whether
oral or written) to which the Company is a party or by which it is bound that
are material to its business as currently conducted (collectively, the "Material
Contracts"), including:
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(a) each agreement that involves performance of services or
delivery of goods or materials by or to the Company of an amount or value in
excess of $10,000;
(b) each lease of personal property requiring payments (in the
aggregate) in excess of $10,000 and each lease of real property;
(c) each agreement with any labor union or other employee
representative of a group of employees relating to wages, hours and other
conditions of employment and each employment or consulting agreement;
(d) each agreement (however named) involving a sharing of
profits, losses, costs or liabilities by the Company with any other person or
entity;
(e) each agreement containing covenants that in any way
purport to restrict the Company's business activities or limit the freedom of
the Company to engage in any line of business or to compete with any other
person or entity;
(f) each agreement providing for payments to or by any third
parties based on sales, purchases or profits;
(g) each power of attorney of the Company that is currently
effective and outstanding;
(h) each agreement that contains or provides for an express
undertaking by the Company to indemnify or hold harmless a third party or to be
responsible for consequential damages;
(i) each agreement for capital expenditures in excess of
$10,000;
(j) each agreement not denominated in U.S. dollars;
(k) each agreement relating to any of the Intellectual
Property;
(l) each agreement with Medicare, Medicaid, any similar
governmental agency or entity, and any and all payors; and
(m) each agreement with any Affiliate of the Company.
Except as set forth in Schedule 4.13, with respect to each Material Contract,
(w) the agreement is legal, valid, binding, enforceable and in full force and
effect, (x) the agreement will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, except to the extent that a consent to
assignment is required, but not obtained, (y) the Company and each other party
thereto is, and at all times has been, in material compliance with all
applicable terms and requirements of such agreement, and (z) no party thereto
has repudiated any material provision of the agreement.
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Each Material Contract that is a Medicare or Medicaid provider/billing
agreements is not subject to any revocation or termination action by any
governmental agency or entity.
4.14 Labor and Employment Matters. Schedule 4.14 contains a complete
and accurate list of the following information for each employee of the Company,
including each employee on leave of absence or layoff status: name; job title;
date of hiring or engagement; date of commencement of employment or engagement;
current compensation paid or payable and any change in compensation since
December 31, 2004; sick and vacation leave that is accrued but unused; and
service credited for purposes of vesting and eligibility to participate under
any Benefit Plan. Except as set forth in Schedule 4.14 hereto, (a) the Company
is, and has never been, a party to any collective bargaining agreement or other
labor contract; (b) there has not been, there is not presently pending or
existing, and to the knowledge of the Shareholders there is not threatened, any
strike, slowdown, picketing, work stoppage, lock out, or employee grievance
process involving the Company; (c) to the knowledge of the Shareholders, no
event has occurred or circumstance exists that could reasonably be expected to
provide the basis for any work stoppage or other labor dispute involving the
Company, (d) there is no pending or, to the knowledge of the Shareholders
threatened, against or affecting the Company any charge or complaint filed with
any governmental authority, (e) no application or petition for an election of or
for certification of a collective bargaining agent is pending with respect to
the Company, (f) there is no grievance or arbitration proceeding against the
Company by any employee of the Company, and (g) there is no lockout of any
employees by the Company. All current employees of the Company who provide
services for the business of the Company maintain all necessary certifications,
professional qualifications and experience for the their respective positions
and job responsibilities. Except as otherwise set forth in Schedule 4.14, the
Company's current employees, officers and directors have not been charged with,
convicted of or pled guilty to crimes of theft or dishonesty, financial
misconduct, or offenses related to the delivery of health care; nor have any of
the Company's current officers, directors, or employees been excluded from
participation in Medicare, Medicaid or any other state or federal government
reimbursement program.
4.15 Employee Benefits. Schedule 4.15 sets forth a true and correct
listing of each profit sharing plan, bonus plan, incentive compensation plan,
stock ownership plan, stock purchase plan, stock option plan, stock appreciation
plan, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, employee insurance plan, severance plan, disability plan,
health care plan, sick leave plan and death benefit plan of the Company or any
other plan or program which provides retirement income, fringe benefits, welfare
benefits, or other benefits to employees or former employees of the Company and
each Pension Plan and Multiemployer Plan of the Company (collectively, the
"Benefit Plans"). Except as set forth in Schedule 4.15 hereto, neither the
Company, nor any ERISA Affiliate of the Company, has contributed to or accrued
an obligation to contribute to a Pension Plan or a Multiemployer Plan. Neither
the Company nor any ERISA Affiliate of the Company has incurred any withdrawal
liability to any Multiemployer Plan. The Company and each ERISA Affiliate of the
Company has complied in all material respects with their respective obligations
under the minimum funding standards of ERISA and the Code with respect to each
Pension Plan. Each Benefit Plan designated in Schedule 4.15 hereto as being
qualified under Section 401(a) of the Code is properly qualified and, except as
set forth in Schedule 4.15 hereto, nothing has occurred in the
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operation of the plan or the adoption or amendment of the plan documents for
which the plan could be disregarded.
4.16 Intellectual Property. Schedule 4.16 lists all of the Company's
owned and/or licensed (a) registered and unregistered copyrights in both
published works and unpublished works (whether United States or foreign), (b)
legal names, assumed fictional business names, trade names, registered and
unregistered trademarks, service marks and applications (whether United States
or foreign), and (c) patents, patent applications and inventions and discoveries
that may or may not be patentable (whether United States or foreign)
(collectively, the "Intellectual Property"). The Intellectual Property,
collectively, constitutes all of the intellectual property necessary for the
Company to operate its business as currently conducted or anticipated to be
conducted. All of the registered Intellectual Property is registered in the
Company's name, is in compliance with formal legal requirements and is valid and
enforceable. None of the registered Intellectual Property has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To the knowledge of the Shareholders, there is no intellectual property of any
Person that potentially interferes with or infringes any of the Intellectual
Property. None of the Intellectual Property or any of the products manufactured
or sold by the Company, nor any equipment, process or know-how used by the
Company infringes or to the knowledge of the Shareholders is alleged to infringe
any intellectual property right of any other Person.
4.17 Affiliate Transactions. Neither the Company, any Shareholder nor
any of their Affiliates owns or has owned, of record or as a beneficial owner,
an equity interest or any other financial or profits interest in any Person that
has (a) had business dealings with the Company other than business dealings or
transactions disclosed in Schedule 4.17, each of which has been conducted in the
ordinary course of business at substantially prevailing market prices and on
substantially prevailing market terms or (b) engaged in competition with the
Company.
4.18 Broker's Fees. Except as set forth in Schedule 4.18, neither the
Company nor Shareholders has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
4.19 Warranty. Schedule 4.19 hereto contains a correct and complete
copy of the standard written warranty and return policy of the Company. Except
as set forth on Schedule 4.19 hereto, the Company has not granted to any
customer, whether in writing or otherwise, any other warranty for products sold
by the Company. Except as set forth in Schedule 4.19 hereto, there have been no
warranty or product liability claims asserted, or to the knowledge of the
Shareholders threatened to be asserted, against the Company.
4.20 Disclosure. No representation or warranty or other statement made
by Shareholders in this Agreement, the Schedules, the certificates to be
delivered pursuant to this Agreement or otherwise in connection with the
transactions contemplated hereby contains or will contain any material untrue
statement or omits to state a material fact necessary to make any of them, in
light of the circumstances in which it was made, not materially misleading.
26
4.21 Knowledge. For purposes of this Agreement, the term "knowledge of
the Shareholders," "knowledge" or words of similar import shall be deemed to
include the knowledge of the current officers and directors of the Company.
ARTICLE V
PARENT'S AND MERGER SUB'S REPRESENTATIONS AND WARRANTIES
Parent and Merger Sub, jointly and severally, represent and warrant to
the Shareholders:
5.1 Organization. Parent is a corporation duly organized and validly
existing under the laws of the State of
Indiana. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee. Each of Parent and Merger Sub has full corporate power and
authority to own or use its properties and assets and carry on its business
activities as now conducted.
5.2 Authorization. Parent and Merger Sub each have full corporate power
and authority to (a) execute and deliver this Agreement and to perform its
obligations hereunder, and (b) own and operate its assets, properties and
business and carry on its business as presently conducted. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of Parent and Merger Sub.
5.3 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by each of Parent and Merger Sub. This Agreement
constitutes a valid and legally binding obligation of each of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms.
5.4 Noncontravention. The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub, the consummation of the transactions
contemplated hereby and the compliance with or fulfillment of the terms and
provisions hereof or of any other agreement or instrument contemplated hereby,
do not and shall not (a) conflict with or result in a breach of any of the
provisions of the Articles of Incorporation or the Bylaws of either Parent or
Merger Sub, (b) contravene any Law or Order which affects or binds Parent or
Merger Sub or any of their respective properties, or (c) require either Parent
or Merger Sub to obtain the approval, consent or authorization of, or to make
any declaration, filing or registration with, any governmental authority or
other third party which has not been obtained in writing prior to the date of
this Agreement.
5.5 Broker's Fees. Neither Parent nor Merger Sub has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
5.6 Standard Management Shares. The Standard Management Shares to be
issued by Parent hereunder shall, when issued, be duly authorized, validly
issued and outstanding, fully paid and nonassessable and will be issued in
material compliance with all applicable laws of the United States and the State
of
Indiana then in effect. The number of outstanding shares of Standard
Management Shares is listed in Parent's filings with the United States
Securities and Exchange Commission.
27
5.7 Reports to Shareholders: Adverse Changes. Parent has previously
delivered or made available to Shareholders true, accurate and complete copies
of the following documents, including the exhibits and schedules thereto and
makes the following representations and warranties with respect thereto;
(i) Annual Report on Form 10-K for the year ended December 31,
2004, which contains the audited consolidated balance sheets
of Parent as of such year end, and audited consolidated
statements of operations, cash flows and shareholders' equity
for the year then ended certified by the accountants of
Parent;
(ii) Quarterly Report on Form 10-Q for the three months ended
March 31, 2005, as filed with the SEC, which contains
unaudited consolidated balance sheets of Parent as of March
31, 2005, and unaudited consolidated statements of operations
and cash flows for the fiscal quarter ended March 31, 2005;
(iii) Proxy statement in definitive form for its 2004 annual
meeting of stockholders as filed with the SEC.
Parent has timely filed all reports and other documents required to be filed by
it under the 1933 Act, the 1934 Act, and any applicable state securities or
corporation statutes and regulations. The documents provided pursuant to this
Section did not contain at the time of filing thereof any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements included in the
above-referenced documents were prepared in accordance with United States
generally accepted accounting principles consistently applied throughout the
periods involved and fairly present, in all material respects, the financial
conditions of Parent, as of the dates indicated and the results of its operation
for the periods then ended in accordance with generally accepted accounting
principles. Except as set forth in the Company's filings under the 1934 Act,
since March 31, 2005, there has not been a material adverse change in the
condition (financial or otherwise), assets, liabilities, obligations, business
or operations or Parent.
5.8 Consents. The execution, delivery and performance by Parent and
Merger Sub of this Agreement and each of the other documents and instruments
required hereby and the consummation of the transactions contemplated hereby and
thereby do not and will not require Parent or Merger Sub to obtain or make any
authorization, consent, approval, permit, filing, registration or exemption or
other action by or notice to any court or administrative or governmental body,
except for (a) the filing of a Form 8-K with the SEC; (b) Merger Sub's obtaining
all licenses, permits and approvals necessary to own and operate the Company's
Business; (c) Parent's and Merger Sub's compliance with the terms of its debt
obligations; (d) Parent's Federal and State Securities Law filings in connection
with the issuance of Standard Management Shares to the Shareholders; and (e)
certain post-Closing notifications to Governmental Authorities and other
regulatory bodies regarding the licenses, permits and authorizations required to
conduct the Business.
28
5.9 Legal Proceedings. Schedule 5.9 lists all actions, suits,
litigation, proceedings or investigations pending or, to Parent's or Merger
Sub's knowledge, threatened against Parent or Merger Sub, none of which could
materially adversely affect Parent's or Merger Sub's ability to perform their
respective obligations under this Agreement or the consummation of the
transactions contemplated by this Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Shareholders. Subject to Section 6.3, Voting
Trustee (and/or Xx. Xxxxxxxxxxxx), Xxxxxx and Xxxxxxx, severally in accordance
with their Pro-Rata ownership of the common shares of the Company (which, in the
case of Xx. Xxxxxxxxxxxx, shall be deemed to be Voting Trustee's Pro-Rata
ownership), shall indemnify Parent, Merger Sub and the Surviving Corporation
from, against and in respect of any and all losses, liabilities, deficiencies,
penalties, fines, costs, damages and expenses whatsoever (including, without
limitation, reasonable professional fees and costs of investigation, litigation,
settlement and judgment and interest) (collectively, "Losses") that may be
suffered or incurred by Parent, Merger Sub and/or the Surviving Corporation from
or by reason of (a) any inaccuracy of a representation or warranty made by
Shareholders in this Agreement, the Schedules or any other certificate or
document delivered by Shareholders pursuant to this Agreement, (b) any material
breach of any covenant or agreement made by Shareholders in this Agreement, the
Schedules or any other certificate or document delivered by Shareholders
pursuant to this Agreement, (c) any matter described on Exhibit F hereto, and
(d) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with either any Shareholder or the Company (or any
Person acting on their behalf) in connection with the transactions contemplated
hereby. Voting Trustee, Xx. Xxxxxxxxxxxx, and Xx. Xxxxxxxxxxxx, jointly and
severally, shall indemnify Parent, Merger Sub and the Surviving Corporation
from, against and in respect of any and all Losses that may be suffered or
incurred by Parent, Merger Sub and/or the Surviving Corporation from or by
reason of the matters set forth in Exhibit G.
6.2 Indemnification by Merger Sub. Parent, Merger Sub and the Surviving
Corporation shall indemnify Shareholders (and each of them) against any and all
Losses that may be suffered or incurred by Shareholders from or by reason of (a)
any inaccuracy of a representation or warranty made by Parent or Merger Sub in
this Agreement, or any other certificate or document delivered by Parent or
Merger Sub pursuant to this Agreement, (b) any material breach of any covenant
or agreement made by Parent or Merger Sub in this Agreement, or any other
certificate or document delivered by Parent or Merger Sub pursuant to this
Agreement, and (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Parent or Merger Sub (or any
Person acting on its behalf) in connection with the transactions contemplated
hereby.
6.3 Limitations on Indemnity.
29
(a) Shareholders, Xx. Xxxxxxxxxxxx, and Xx. Xxxxxxxxxxxx shall
not have any liability or obligation to Merger Sub or the Surviving Corporation
whatsoever, and no claim shall be asserted against Shareholders, for
indemnification under Section 6.1(a) unless and until the aggregate amount of
Losses incurred by Merger Sub and/or the Surviving Corporation as a result
thereof exceeds $35,000, and then only to the extent the aggregate amount of
such Losses exceeds $35,000 and is less than $1,250,000; provided, however, that
the limitations set forth above in this Section 6.3(a) shall not apply to (i)
any breach or inaccuracy of Shareholders' representations or warranties of which
any Shareholder had knowledge at any time prior to or on the date hereof, or
(ii) claims for the breach or inaccuracy of the representations and warranties
set forth in Sections 4.1(a) (Organization), 4.2 (Authorization), 4.3 (Validity;
Binding Effect), 4.5(a) (Title to Shares), 4.6(d), (Accounts Receivable), 4.6(e)
(Inventory), 4.6(f) (Capital Leases) and 4.18 (Broker's Fees), (the matters
described in clauses (i) and (ii) above, collectively, "Carve-Out Claims"). For
the avoidance of doubt, the limitations set forth above in this Section 6.3(a)
shall not apply to claims for indemnification arising under (x) Sections 6.1(b)
through (d), or (y) the second sentence of Section 6.1.
(b) All representations and warranties in this Agreement, the
Schedules and the certificates and other documents delivered pursuant hereto
shall survive the Closing and be enforceable against the party making the same
for a period of eighteen (18) months from the Closing Date at which time they
shall expire and be of no further force or effect; provided, however, that (i)
Carve-Out Claims shall survive indefinitely, and (ii) the representations and
warranties set forth in Sections 4.8 (Taxes), 4.11 (Environmental) and 4.15
(Employee Benefits) shall survive for the period of the statute of limitations
applicable to such representations and warranties. Any claim for indemnification
with respect to any such matter which is not asserted by a notice given as
herein provided within such period of survival may not be pursued and shall be
thereafter forever barred.
6.4 Third-Party Claims.
(a) Promptly after receipt by a party hereto entitled to
indemnity under Section 6.1, or Section 6.2 (an "Indemnified Person") of notice
of the assertion of a claim for which such party hereto is entitled to indemnity
hereunder against it by a third party (a "Third-Party Claim"), such Indemnified
Person shall give notice to the party hereto obligated to indemnify under such
Section (an "Indemnifying Person") of the assertion of such Third-Party Claim,
provided that the failure to notify the Indemnifying Person will not relieve the
Indemnifying Person of any liability that it may have to any Indemnified Person,
except to the extent that the Indemnifying Person demonstrates that the defense
of such Third-Party Claim is prejudiced by the Indemnified Person's failure to
give such notice.
(b) If an Indemnified Person gives notice to the Indemnifying
Person pursuant to Section 6.4(a) of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes, to assume the defense of
such Third-Party Claim with counsel reasonably satisfactory to the Indemnified
Person. After notice from the Indemnifying Person to the Indemnified Person of
its election to assume the defense of such Third-Party Claim, the Indemnifying
Person shall not, so long as it diligently conducts such defense, be liable to
the Indemnified Person under this Article
30
VI for any fees or costs of other counsel or any other expenses with respect to
the defense of such Third-Party Claim, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Third-Party Claim. If
the Indemnifying Person assumes the defense of a Third-Party Claim no compromise
or settlement of such Third-Party Claims may be effected by the Indemnifying
Person without the Indemnified Person's consent unless (A) there is no finding
or admission of any violation of Law or any violation of the rights of any
party; and (B) the sole relief provided is monetary damages that are paid in
full by the Indemnifying Person. If notice is given to an Indemnifying Person of
the assertion of any Third-Party Claim and the Indemnifying Person does not,
within fifteen (15) days after the Indemnified Person's notice is given, give
notice to the Indemnified Person of its election as set forth above, the
Indemnifying Person will be bound by any determination made in such Third-Party
Claim or any compromise or settlement effected by the Indemnified Person, and
shall be liable to the Indemnified Person for any costs and expenses incurred in
the defense of such claim.
(c) Notwithstanding the foregoing, the Indemnified Person may,
by notice to the Indemnifying Person, assume the exclusive right to defend,
compromise or settle such Third-Party Claim, but the Indemnifying Person will
not be bound by any determination of any Third-Party Claim so defended for the
purposes of this Agreement or any compromise or settlement effected without its
consent (which may not be unreasonably conditioned, withheld or delayed).
ARTICLE VII
ADDITIONAL COVENANTS
7.1 General. If any further action is necessary or desirable to carry
out the purposes of this Agreement, each of the parties hereto will take such
further action (including, without limitation, the execution and delivery of
such further instruments and documents) as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article VI
above).
7.2 Noncompetition and Nonsolicitation.
(a) Noncompetition. For a period of two (2) years after the
Closing Date, Voting Trustee and Xx. Xxxxxxxxxxxx and her Affiliates shall not,
anywhere in the areas described in Exhibit H, directly or indirectly, invest in,
own, or operate any Person engaged in any business that is directly competitive
with the business of the Company as currently conducted (a "Competing
Business"); provided, however, that Voting Trustee and Xx. Xxxxxxxxxxxx and
their Affiliates, in the aggregate, may purchase or otherwise acquire up to (but
not more than) five percent (5%) of any class of the securities of any entity if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the 1934 Act.
(b) Nonsolicitation. For a period of two (2) years after the
Closing Date, Voting Trustee and Xx. Xxxxxxxxxxxx and their Affiliates shall
not, directly or indirectly (i) solicit the business of any Person who is as of
the Closing a customer of the Company, or (ii) cause induce any customer or
supplier of the Company on or prior to the Closing Date to cease doing business
with the Surviving Corporation after the Closing Date.
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(c) Without limiting the right of the Surviving Corporation to
pursue all other legal and equitable rights available to it for any violation of
Section 7.2(a) or (b) above, and to recover its legal fees and expenses, the
parties agree that monetary damages cannot fully compensate the Surviving
Corporation for such a violation and that the Surviving Corporation shall be
entitled to a temporary restraining order and any further injunctive relief to
prevent any violation, threatened violation or continuing violation thereof and
that no bond or other security shall be required in connection therewith. It is
the intent and understanding of each party hereto that if, in any action before
any court or agency legally empowered to enforce Section 7.2(a) or (b) above,
any term, restriction, covenant or promise set forth therein is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the minimum extent necessary to
make it enforceable by such court or agency.
7.3 Piggy-back Registration Rights.
(a) If (but without any obligation to do so) Parent proposes
to register (including for this purpose a registration effected by Parent for
shareholders other than a Shareholder) any of its common stock or other equity
securities under the 1933 Act in connection with the public offering of such
securities (other than a registration on a form inappropriate for an
underwritten public offering or relating solely to the issuance of securities in
a merger, acquisition of the stock or assets of another entity or in a similar
transaction), Parent shall, in each such case, promptly give each Shareholder
written notice of such registration. Upon the written request of any Shareholder
given within twenty (20) days after mailing of such notice by Parent in
accordance with Section 8.2, Parent shall cause to be included among the
securities which it then registers all Registrable Shares that each such
Shareholder has requested to be registered.
(b) The obligations of Parent under this Section 7.3 to effect
any such registration of Registrable Shares is subject to the following
qualifications:
(i) that if, in connection with any underwritten
offering pursuant to this Section 7.3, the managing underwriter shall
impose a limitation on the number or kind of securities which may be
included in any such registration for sale by any Person other than
Parent because, in its reasonable judgment, such limitation is
necessary to effect an orderly public distribution, then Parent shall
be obligated to include in such registration statement, or qualify
under such prospectus, as the case may be, only such limited portion of
the Registrable Shares (which may be none) as is determined in good
faith by such managing underwriter, provided that if any securities are
being offered for the account of any Person other than Parent and the
holders of the Registrable Shares, the reduction in the number of
Registrable Shares included in such registration shall not represent a
greater percentage of the amount of Registrable Shares originally
requested to be registered and sold in such registration than the
lowest such percentage reduction imposed upon any other Person; and
(ii) to the extent Parent is prohibited pursuant to
the terms of any of the registration rights agreements listed on
Exhibit I, or in connection with the financing
32
obtained for the consummation of the transactions contemplated hereby,
from including any Registrable Shares in a registration statement filed
pursuant to one or more of such agreements, Parent shall only be
obligated to include in such registration statement such of the
Registrable Shares as may be permitted under such agreements.
(c) Whenever required under this Article to effect the
registration of any Registrable Shares, Parent shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become effective, and,
upon the request of the Shareholder, keep such registration statement
effective for up to one hundred twenty (120) days.
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary to
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement.
(iii) Furnish to the Shareholder such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Shares included in the registration
statement.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Shareholder, provided that Parent shall not
be required to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement,
in usual and customary form with the managing underwriter of such
offering. Each Shareholder participating in such underwriting shall
also enter into and perform its obligations under such an agreement.
(vi) Notify Shareholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vii) In the case of an underwritten public
offering, furnish to each Shareholder whose Registrable Securities are
included in the registration statement, all undertakings, agreements,
certificates, opinions, financial statements and "comfort letters" of
the sort customarily provided to selling stockholders in secondary
distributions and to the managing underwriters.
33
(d) It shall be a condition precedent to the obligations of
Parent to take any action pursuant to this Section 7.3 with respect to the
Registrable Shares that a Shareholder shall furnish to Parent such information
regarding itself, the Registrable Shares held by it, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Registrable Shares.
(e) Parent shall pay all expenses incurred in connection with
any registration of Parent with respect to the registrations pursuant to this
Section 7.3 for a Shareholder, including, without limitation, all registration,
filing, and qualification fees, printers and accounting fees relating or
allocable thereto and the fees and disbursements of one counsel for the selling
Shareholder selected by them, but excluding underwriting discounts and
commissions relating to Registrable Shares.
(f) Shareholder shall not have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 7.3.
(g) In the event any Registrable Shares are included in a
registration statement under this Section 7.3:
(i) Parent will indemnify, defend and hold harmless
each holder of Registrable Shares included in any registration
contemplated by this Section 7.3 and each underwriter of such
securities, and each Person, if any, who controls each such holder and
underwriter within the meaning of applicable securities laws, and their
respective directors, officers, employees, agents, advisors and
Affiliates (each, a "Section 7.3 Indemnified Person"), to the fullest
extent enforceable under applicable law against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus,
supplement, amendment, offering circular or other document related to
any registration or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation (or alleged
violation) of the 1933 Act or other applicable securities laws in
connection with any such registration, and will reimburse each such
Section 7.3 Indemnified Person for any legal or any other expenses
reasonably incurred in connection with investigating and/or defending
(and/or preparing for any investigation or defense of) any such claim,
loss, damage, liability, action or violation; provided that Parent will
not be liable in any such case to any such Section 7.3 Indemnified
Person if, but only to the extent that, any such claim, loss, damage,
liability, action, violation or expense is finally determined to arise
out of or result from any untrue statement in or omission from written
information furnished to Parent by an instrument duly executed by such
Section 7.3 Indemnified Person and stated to be specifically for use
therein. Each holder of Registrable Shares will, if securities held by
such holder are included in a registration effected pursuant to this
Section 7.3, indemnify, defend and hold harmless Parent, each of its
directors and officers who signs the related registration statement,
and each Person, if any, who controls Parent within the meaning of
applicable securities laws, against all claims, losses, damages and
liabilities (or actions in respect
34
thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, supplement, amendment, offering circular or
other document or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Parent and such
directors, officers or Persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending
(and/or preparing for any investigation or defense of) any such claim,
loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) was made in (or omitted from) such
registration statement, prospectus, supplement, amendment, offering
circular or other document in reliance upon and in conformity with
written information furnished to Parent by an instrument duly executed
by such holder and stated to be specifically for use therein; provided
that the aggregate liability of any such holder under this Section 7.3
(and otherwise in connection with indemnification and/or contribution
obligations) shall be limited to the net sales proceeds actually
received by such holder as a result of the sale by it of securities in
such registration.
(ii) Each party entitled to indemnification under
this Section 7.3 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of such claim or any litigation resulting
therefrom, provided that (A) the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 7.3, except to the extent of any
claim, loss, damage, liability or expense caused solely by such
failure, (B) counsel for the Indemnifying Party, who shall conduct the
defense of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), (C) the Indemnified Party may participate in
such defense at such party's expense and (D) the Indemnified Party
shall be entitled to separate counsel at the expense of the
Indemnifying Party if, in the reasonable opinion of counsel to the
Indemnified Party, there shall exist any conflict of interest (or
potential conflict of interest) between the Indemnified Party and the
Indemnifying Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in
question as an Indemnifying Party may reasonably request in writing and
as shall be reasonably required in connection with defense of such
claim and litigation resulting therefrom.
(iii) If the indemnification provided for in this
Section 7.3 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any claim, loss,
damage, liability or expense referred to herein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such claim, loss, damage, liability or expense in such
proportion as is appropriate to reflect the relative
35
fault of the Indemnifying Party, on the one hand, or of the Indemnified
Party, on the other hand, in connection with such claim, loss, damage,
liability or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material face relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
7.4 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Shareholders the benefits of Rule 144 promulgated under
the 1933 Act and any other rule or regulation of the SEC that may at any time
permit a Shareholder to sell securities of Parent to the public without
registration or pursuant to a registration on Form S-3, Parent agrees to:
(a) file with the SEC in a timely manner all reports and other
documents required of Parent under the 1934 Act; and
(b) furnish to each of the Shareholders, so long as such
Shareholder owns any Standard Management Shares forthwith upon request, (i) a
written statement by the Parent as to its compliance with the reporting
requirements of SEC Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Parent and such other reports and
documents so filed by Parent, and (iii) such other information as may be
reasonably requested in availing Shareholder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
7.5 Sales of Standard Management Shares.
(a) In the event a Shareholder desires to sell a portion of
the Standard Management Shares issued to such Shareholder pursuant to this
Agreement in order to meet his, her or its income tax obligations as a result of
such issuance, such Shareholder shall provide Parent with notice of his, her or
its desire to sell such shares on or after January 1, 2006, but on or before
February 1, 2006. Parent shall, at its option and prior to April 1, 2006, either
provide a shelf registration for or shall purchase that number of Standard
Management Shares from such Shareholder equal to the product of (i) the federal
and state income tax liability of such Shareholder for the Standard Management
Shares issued to such Shareholder (determined by utilizing a 15% federal tax
rate and the combined state and local income tax rate, if any), divided by (ii)
the Per Share Value; provided, however, in the event the proceeds from the sale
of any Standard Management Shares sold pursuant to this Section 7.5 are less
than the Per Share Value, Parent will either purchase or provide a shelf
registration for an additional amount of Standard Management Shares so as to
enable such Shareholder to realize a sufficient amount of cash to satisfy his,
her or its income tax obligations with respect to the receipt of Standard
Management Shares.
(b) In the event that the average closing price for a Standard
Management Share during the ten-day trading period commencing on the first day
after the second anniversary of the Closing ("Average Price") is less than the
Minimum Share Value, within thirty (30) days
36
of the expiration of such ten-day period, Parent shall, at its sole option and
discretion, provide to each Shareholder additional cash or Standard Management
Shares (subject to any and all applicable shareholder approval requirements)
having an aggregate value equal to the difference between (i)(A) the number of
Standard Management Shares originally received by such Shareholder at the
Closing, multiplied by (B) the difference between the Minimum Share Value and
the Average Price, and (ii) the aggregate amount of any proceeds in excess of
the Minimum Share Value realized from such Shareholder's previous sale of any
such Standard Management Shares pursuant to Section 7.5(a) above. In the event
Parent exercises its option set forth in this Section 7.5(b) to issue additional
Standard Management Shares, Parent shall provide a shelf registration for such
shares as soon as commercially possible (but no later than 60 days) after Parent
makes such election to issue the additional Standard Management Shares.
7.6 Indebtedness; Affiliate Payables; Cash. Prior to or simultaneous
with the Closing, the Company shall have (a) satisfied in full all Indebtedness
and shall have provided Merger Sub with reasonably satisfactory evidence of the
same, (b) satisfied in full all payables owed to any Affiliate of the Company,
and shall have provided Merger Sub with reasonably satisfactory evidence of the
same, and (c) collected all receivables owed to the Company by an Affiliate of
the Company. The Shareholders acknowledge and agree that (x) Merger Sub shall be
entitled to all cash and cash equivalents of the Company as of the Closing Date,
and (y) such cash and cash equivalents shall not be distributed to the
Shareholders, but shall remain an asset of the Surviving Corporation after the
Closing.
ARTICLE VIII
MISCELLANEOUS
8.1 Assignment. No party may assign any of its rights or delegate any
of its obligations under this Agreement without the prior written consent of the
other party hereto, except that Merger Sub may, without the prior written
consent of Shareholders or the Company (a) collaterally assign its rights
hereunder to any financial institution or other lender in connection with the
financing of the transactions contemplated hereby, (b) assign its rights and/or
obligations hereunder (in whole or in part) to one or more subsidiaries or other
affiliated entities, and/or (c) after the Closing, assign to any person or
entity who acquires the Surviving Corporation or its business (regardless of the
form of such acquisition) any of its rights under this Agreement.
8.2 Notices. All notices, requests, consents and other communications
hereunder (each, a "Notice") shall be in writing and shall be deemed to have
been given (a) if mailed, two (2) business days after such Notice is sent, when
sent via first class United States registered mail, return receipt requested,
postage prepaid to the address listed below for the party to whom the Notice is
being sent (the "Notice Party"), (b) if hand delivered or delivered by courier,
upon actual delivery of such Notice to the Notice Party at the address listed
below for such Notice Party, or (c) if sent by facsimile, on the first business
day after the date of the sender's receipt of a confirmed transmission of such
Notice to the Notice Party at the facsimile number, if any, listed below for
such Notice Party provided the party giving such Notice mails a copy of such
Notice within two (2) business days after the transmission of such Notice by
facsimile to the
37
Notice Party. The addresses and facsimile numbers for each party to this
Agreement, as of the date hereof, are:
If to Parent or Merger Sub/
Standard Management Corporation
the Surviving Corporation: 00000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Facsimile No.: 000-000-0000
Attention: Xxxxxxx X. Xxxxx, Ex. VP
with a copy to:
Xxxxxx Xxxxxxx Attorneys, PC
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
Attention: Xxxxxx X. Xxxxx
If to Voting Trustee,
Shareholders Representative,
or Xx. Xxxxxxxxxxxx: Xxxx X. Xxxxxxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile No.: 000-000-0000
with copies to:
McLuskey & XxXxxxxx, P.A.
The Barrister Building
0000 X.X. 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxx X. Xxxxxx, III, Esq.
Xxxx & Genauer, P.A.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to Xx. Xxxxxxxxxxxx: Xxxxxx X. Xxxxxxxxxxxx
00000 X.X. 00xx Xxxxx
Xxxxxxxxx, XX 00000
with copies to:
38
Xxxx & Genauer, P.A.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
McLuskey & XxXxxxxx, P.A.
The Barrister Building
0000 X.X. 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxx X. Xxxxxx, III, Esq.
If to Xxxxxx: Xxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
with a copies to:
Xxxx & Xxxxxxx, P.A.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Boult Xxxxxxxx Xxxxxxx Xxxxx, PLC
0000 Xxxxxxxx #000
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
If to Xxxxxxx: Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
with a copy to: Xxxx & Xxxxxxx, P.A.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Either party may change its address or facsimile number by providing written
notice, in accordance with the foregoing provisions of this Section 8.2, to the
other party of such change.
39
8.3 Expenses; Attorneys' Fees.
(a) Each party hereto will pay all costs, fees and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements contained herein on its part to
be performed, including the fees, expenses and disbursements of its respective
counsel and accountants; provided, however, that all such costs, fees and
expenses of the Company (including, without limitation, the Pre-Closing Company
Transaction Expenses to the extent applicable) shall be paid by Shareholders at
or prior to the Closing.
(b) In any litigation between the parties regarding this
Agreement, the losing party shall pay to the prevailing party all reasonable
expenses and court costs, including, without limitation, reasonable attorneys'
fees and costs, incurred by the prevailing party. A party shall be considered
the prevailing party if (i) it initiated the litigation and obtains
substantially all of the relief or remedy it sought, either through a judgment
or the losing party's voluntary action, (ii) the other party withdraws its
action without substantially obtaining the relief or remedy it sought, or (iii)
it did not initiate the litigation and judgment is entered for either party, but
without substantially granting the relief or remedy sought by the initiating
party.
8.4 Governing Law; Forum.
(a) This Agreement shall be governed by and construed in
accordance with the Laws of the State of
Indiana, without regard to such
jurisdiction's conflict of laws principles.
(b) Any controversy, claim or dispute arising out of or
relating to this Agreement or the breach, termination, enforceability or
validity of this Agreement, shall be brought in the courts of the State of
Indiana, or, if it has or can acquire jurisdiction, any United States District
Court sitting in Xxxxxx County,
Indiana, and each of the parties irrevocably
submits to the exclusive jurisdiction of each such court in any such matter,
waives any objection it may now or hereafter have to venue or to convenience of
forum, agrees that all claims in respect of the matter shall be heard and
determined only in any such court and agrees not to bring any such matter
arising out of or relating to this Agreement in any other court. The parties
agree that any of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained agreement between the
parties irrevocably to waive any objections to venue or to convenience of forum.
Process in any matter referred to in this paragraph may be served on any party
anywhere in the world.
8.5 Partial Invalidity. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
8.6 Execution in Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall be considered an
original counterpart, and all of which shall be considered to be but one
agreement and shall become a binding agreement when each party shall have
executed one counterpart and delivered it to the other party hereto. A signature
affixed to a counterpart of this Agreement and delivered by facsimile
40
by any Person is intended to be its, his or her signature and shall be valid,
binding and enforceable against the party on whose behalf it has been affixed.
8.7 Entire Agreement; Amendments and Waivers. This Agreement contains
the entire understanding of the parties hereto with regard to the subject matter
contained in this Agreement and supersedes all prior agreements or
understandings of the parties. The parties, only by mutual agreement in writing,
may amend, modify and supplement this Agreement. The failure of any party to
this Agreement to enforce at any time any provision of this Agreement shall not
be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
[SIGNATURE PAGE FOLLOWS]
41
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
Precision Health Care Acquisition Corporation
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxxxxxxxx
----------------------------------------- -----------------------------
Xxxxxx X. Xxxxxx, Chairman of the Xxxxxx X. Xxxxxxxxxxxx
Board, President, Chief Executive Officer
/s/ Xxxxxx Xxx-Xxxxxx
-----------------------------
Xxxxxx Xxx-Xxxxxx
Precision Healthcare, Inc.
By: /s/ Xxxx X. Xxxxxxxxxxxx /s/ Xxxxxx X. Xxxxxxx
----------------------------------------- -----------------------------
Xxxx X. Xxxxxxxxxxxx, President Xxxxxx X. Xxxxxxx
Standard Management Corporation /s/ Xxxx X. Xxxxxxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxxxxxx, solely
in his capacity as Voting
Trustee (and not in his
individual capacity) under
Voting Trust Agreement dated
as of March 1, 2005
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx, Chairman of the
Board, President, Chief Executive Officer BY SIGNATURE BELOW, XXXX X.
XXXXXXXXXXXX, INDIVIDUALLY,
HEREBY AGREES ONLY AS TO THE
TERMS AND CONDITIONS
APPLICABLE TO HIM SET FORTH
IN ARTICLES VI AND VIII OF
THIS AGREEMENT.
/s/ Xxxx X. Xxxxxxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxxxxxx,
individually
S-1
EXHIBIT A
ESCROW AGREEMENT
See attached.
EXHIBIT B
GRANT AGREEMENTS
See attached.
EXHIBIT C
FORM OF RELEASE
See attached.
EXHIBIT D
FORM OF EMPLOYMENT AGREEMENTS
See attached.
EXHIBIT E
FORM OF NON-COMPETITION AGREEMENT
See attached.
EXHIBIT F
SPECIAL INDEMNITY MATTERS
Adoption, amendment, operation or termination of any Benefit Plan, Pension
Plan or Multiemployer Plan prior to Closing.
EXHIBIT G
OTHER INDEMNITY MATTERS
Indictment No. CR 405-59, filed in the U.S. District Court for the Southern
District of Georgia, Savannah Division, on March 22, 2005, naming Xx.
Xxxxxxxxxxxx, among others.
EXHIBIT H
NON-COMPETITION TERRITORY
Tennessee
Kentucky
Ohio
EXHIBIT I
REGISTRATION RIGHTS AGREEMENTS
Parent has granted certain registration rights pursuant to:
1. Indenture, dated February 25, 2004, governing the 7% Convertible Notes
in favor of Deutsch Bank Trust Company, in a principal amount of
$3,300,000, convertible into shares of common stock;
2. Indenture, dated November 30, 2004, governing the 6% Convertible Notes
in favor of U.S. Bank National Association, in a principal amount of
$2,750,000, convertible into shares of common stock;
3. Registration Rights Agreement dated March 21, 2005 between the Company
and Laurus Master Fund, Ltd. (the "Laurus Agreement");
4. Source Capital Group, Inc. received warrants with 5 3/4% warrant
coverage on the transaction contemplated by the Laurus Agreement with
piggyback registration rights; and
5. Engagement letter with Westminster Securities Corporation
("Westminster"), pursuant to which Westminster is entitled to receive
warrants equal to 9% warrant coverage on the transaction contemplated
by the Laurus Agreement, which warrants shall contain piggyback
registration rights. However, Westminster and the Company have reached
an oral agreement whereby Westminster received 50,000 warrants in
connection with such transaction and 125,000 for certain capital market
services unrelated to such transaction.
