EXHIBIT 2.2
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AGREEMENT AND PLAN OF MERGER
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By and Among
Standard Management Corporation,
an Indiana corporation,
Long Term Rx Acquisition Company,
an Indiana corporation
Long Term Rx, Inc.,
an Indiana corporation,
The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust, dated September 7, 2000,
The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust, dated September 7, 2000,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Dated July 29, 2005
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS; CONSTRUCTION......................................................... 1
1.1 Definitions...................................................................... 1
1.2 Construction..................................................................... 7
ARTICLE II THE MERGER....................................................................... 7
2.1 The Merger....................................................................... 7
2.2 Conversion of Equity Securities.................................................. 8
2.3 Payment of Conversion Price...................................................... 8
2.4 Working Capital Adjustment....................................................... 9
2.5 Closing of Transfer Records...................................................... 11
2.6 Delivery of Certificates......................................................... 11
2.7 Shareholders' Representative..................................................... 11
ARTICLE III THE CLOSING..................................................................... 11
3.1 Closing.......................................................................... 11
3.2 Closing Deliveries of Parent and Merger Sub...................................... 12
3.3 Closing Deliveries of the Shareholders........................................... 12
ARTICLE IV SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES..................................... 13
4.1 Organization..................................................................... 13
4.2 Authorization.................................................................... 13
4.3 Validity; Binding Effect......................................................... 14
4.4 Noncontravention................................................................. 14
4.5 Capital Structure................................................................ 14
4.6 Financial Statements............................................................. 14
4.7 Title to and Sufficiency of Assets............................................... 15
4.8 Tax Matters...................................................................... 16
4.9 Litigation; Claims............................................................... 16
4.10 Legal Compliance................................................................. 17
4.11 Environmental Laws and Regulations............................................... 18
4.12 Permits.......................................................................... 19
4.13 Material Contracts............................................................... 19
4.14 Labor and Employment Matters..................................................... 20
4.15 Employee Benefits................................................................ 21
4.16 Intellectual Property............................................................ 21
4.17 Affiliate Transactions........................................................... 22
4.18 Broker's Fees.................................................................... 22
4.19 Warranty......................................................................... 22
4.20 Disclosure....................................................................... 22
ARTICLE V MERGER SUB'S AND PARENT'S REPRESENTATIONS AND WARRANTIES........................... 22
5.1 Organization of Merger Sub and Parent............................................ 22
5.2 Authorization.................................................................... 22
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5.3 Validity; Binding Effect......................................................... 23
5.4 Noncontravention................................................................. 23
5.5 Broker's Fees.................................................................... 23
ARTICLE VI COVENANTS PENDING CLOSING........................................................ 23
6.1 General.......................................................................... 23
6.2 Notices and Consents............................................................. 23
6.3 Due Diligence.................................................................... 23
6.4 The Company's Operation of Business Prior to Closing............................. 24
6.5 Notification..................................................................... 24
6.6 No Negotiation................................................................... 24
6.7 Interim Financial Statements..................................................... 24
6.8 Payment of Indebtedness.......................................................... 25
ARTICLE VII CONDITIONS PRECEDENT............................................................ 25
7.1 Merger Sub's Conditions Precedent................................................ 25
7.2 Shareholder's Conditions Precedent............................................... 26
ARTICLE VIII INDEMNIFICATION................................................................ 26
8.1 Indemnification by the Shareholders.............................................. 26
8.2 Indemnification by Merger Sub.................................................... 27
8.3 Limitations on Indemnity......................................................... 27
8.4 Third Party Claims............................................................... 27
ARTICLE IX ADDITIONAL COVENANTS............................................................. 28
9.1 General.......................................................................... 28
9.2 Noncompetition and Nonsolicitation............................................... 29
9.3 Confidentiality.................................................................. 29
9.4 Standard Management Shares....................................................... 30
ARTICLE X TERMINATION....................................................................... 30
10.1 Termination Events............................................................... 30
10.2 Effect of Termination............................................................ 31
ARTICLE XI MISCELLANEOUS.................................................................... 31
11.1 Assignment....................................................................... 31
11.2 Notices.......................................................................... 31
11.3 Expenses; Attorneys' Fees........................................................ 32
11.4 Governing Law; Forum............................................................. 32
11.5 Partial Invalidity............................................................... 33
11.6 Execution in Counterparts; Facsimile Signatures.................................. 33
11.7 Entire Agreement; Amendments and Waivers......................................... 33
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Exhibits
Exhibit A Form of Release
Exhibit B Consents
Exhibit C Special Indemnity Matters
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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 Audits
Schedule 4.9 Litigation; Claims
Schedule 4.10(d) Medicare/Medicaid Reports
Schedule 4.10(g) Health Care Compliance Matters
Schedule 4.11 Environmental Matters
Schedule 4.12 Permits
Schedule 4.13 Material Contracts
Schedule 4.14 Labor and Employment Matters
Schedule 4.15 Employee Benefits
Schedule 4.16 Intellectual Property
Schedule 4.17 Affiliate Transactions
Schedule 4.18 Broker's Fees
Schedule 4.19 Warranties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered
into as of July 29, 2005, by and among Standard Management Corporation, an
Indiana corporation ("Parent"), Long Term Rx Acquisition Company, an Indiana
corporation ("Merger Sub"), Long Term Rx, Inc., an Indiana corporation (the
"Company"), The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust, dated September 7, 2000 (the
"▇▇▇▇▇ Trust"), The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust, dated September 7, 2000
(the "▇▇▇▇▇▇▇ Trust," and together with the ▇▇▇▇▇ Trust, the "Shareholders"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"),
WITNESSETH THAT:
WHEREAS, the Shareholders are the sole shareholders of the Company, and
collectively own all of the issued and outstanding 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" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Average Price" has the meaning ascribed to it in Section 9.4(b) of this
Agreement.
"Base Working Capital" means $446,144.
"Benefit Plan" has the meaning ascribed to it in Section 4.15.
"Carve-Out Claims" has the meaning ascribed to it in Section 8.3(a).
"Cash Amount" has the meaning ascribed to it in Section 2.2(a).
"Closing" means the time at which the parties hereto consummate the
Merger.
"Closing Date" means the date on which the Closing actually occurs.
"Closing Date Balance Sheet" has the meaning ascribed to it in Section
2.4(a)(i) of this Agreement.
"Closing Date Shares" means the total number of common shares of the
Company issued and outstanding immediately prior to the Effective Time.
"Closing Date Working Capital" means an amount equal to the difference
between Current Assets and Current Liabilities. 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 9.2(a) of
this Agreement.
"▇▇▇▇▇" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
"▇▇▇▇▇ Trust" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Current Assets" means all current assets of the Company immediately prior
to the Effective Time (including, without limitation, cash and cash
equivalents), other than (i) contractual allowables with respect to accounts
receivable, and (ii) all accounts receivable aged more than 120 days.
"Current Liabilities" means all current liabilities of the Company
immediately prior to the Effective Time (including, without limitation, accruals
for amounts alleged in certain audits by the State of Indiana to be owed
regarding certain Medicaid overpayments made to the
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Company in the amounts of $41,134.55 and $6,268.75, respectively (the "Medicaid
Overpayments")), other than accrued federal income tax liability for the period
beginning January 1, 2005 and ending as of the Closing Date, all as reflected on
the Closing Date Balance Sheet (as finally determined pursuant to this
Agreement).
"Dispute Notice" has the meaning ascribed to it in Section 2.4(b) of this
Agreement.
"Dispute Period" has the meaning ascribed to it in Section 2.4(b) of this
Agreement.
"Effective Time" means the effective time set forth in the certified
copies of the articles of merger issued by the Indiana 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.
"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.
"Final Disposition" has the meaning ascribed to it in Section 2.4 (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(h).
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment or use of Hazardous
Material in, on, under about or from any of the real estate owned, used or
leased by the Company or any part thereof and any other act, business, operation
or thing that violates any Environmental Law, or increases the danger, or risk
of danger, or poses an unreasonable risk of harm, to Persons or property.
"Hazardous Material" means any substance, material or waste which is or
will foreseeably be regulated by any governmental authority, including any
material, substance or waste defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," contaminant," toxic waste" or "toxic substance"
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under any provision of Environmental Law, including lead paint, petroleum,
petroleum products, asbestos, presumed asbestos-containing material or
asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.
"HIPAA" has the meaning ascribed to it in Section 4.10(h).
"IBCL" means the Indiana Business Corporation Law, as amended.
"Indebtedness" means any and all liabilities and obligations of the
Company 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, (ii) in respect of capital leases, (iii) for
Pre-Closing Company Transaction Expenses, or (iv) Simple ▇▇▇ contribution
accruals.
"Indemnified Person" has the meaning ascribed to it in Section 8.4(a) of
this Agreement.
"Indemnifying Person" has the meaning ascribed to it in Section 8.4(a) of
this Agreement.
"Independent Accountants" has the meaning ascribed to it in Section
2.4(e).
"Intellectual Property" has the meaning ascribed to it in Section 4.16.
"Interim Balance Sheet" has the meaning ascribed to it in Section 4.6(a)
of this Agreement.
"IRS" means the Internal Revenue Service.
"Labor and Employment Law" means all Laws relating to employment
practices, terms and conditions of employment, equal opportunity,
nondiscrimination, immigration, wages, hours, benefits and collective
bargaining, the payment of social security and similar taxes, unemployment
compensation, workers compensation and occupational safety and health.
"Law" means all laws, statutes, rules, regulations, ordinances, codes,
bulletins, opinions, decisions, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder of federal, state, local and foreign governments
(and all agencies thereof).
"Liens" means any and all liens, security interests, mortgages, easements,
restrictions, encumbrances, pledges, conditional sales contracts, or other
similar conflicting ownership or security interest in favor of any Person.
"Losses" has the meaning ascribed to it in Section 8.1.
"▇▇▇▇▇▇▇" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
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"▇▇▇▇▇▇▇ Trust" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"Material Contract" has the meaning ascribed to it in Section 4.13.
"Medicaid Overpayments" has the meaning ascribed to it in the definition
of Current Liabilities.
"Medicare Laws" means any and all Laws applicable to reimbursement by
Medicare, Medicaid or any other governmental healthcare program for services or
items rendered by the Company, including all federal and state laws relating to
the referral of patients to the Company's business.
"Merger" has the meaning ascribed to it in the second recital of this
Agreement.
"Merger Sub" has the meaning ascribed to in the introductory paragraph of
this Agreement.
"Minimum Share Value" means three dollars and twenty-eight cents ($3.28).
"Multiemployer Plan" means a plan as defined in ERISA Section 4001(a)(3)
to which Company or any ERISA Affiliate of Company is making or accruing an
obligation to make contributions or has preceding the date hereof made or
accrued an obligation to make contributions.
"Notice" has the meaning ascribed to it in Section 11.2 of this Agreement.
"Notice Party" has the meaning ascribed to it in Section 11.2 of this
Agreement.
"Order" has the meaning ascribed to it in Section 4.9 of this Agreement.
"Parent" has the meaning ascribed to it in the introductory paragraph of
this Agreement.
"Payor" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Pension Plan" means an employee pension benefit plan, as defined in ERISA
Section 3(2), other than a Multiemployer Plan, which is covered by Title IV of
ERISA and which either (i) is maintained by the Company and/or any ERISA
Affiliate of the Company for employees of such Person, or (ii) has at any time
preceding the date hereof been maintained by the Company and/or any ERISA
Affiliate of the Company for employees of such Person.
"Permit" has the meaning ascribed to such term in Section 4.12 of this
Agreement.
"Per Share Adjustment Amount" has the meaning ascribed to such term in
Section 2.2(a) of this Agreement.
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"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.
"Person" means an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture, company or other entity or any
governmental authority.
"PHI" has the meaning ascribed to it in Section 4.10(h) of this Agreement.
"Position Statement" has the meaning ascribed to it in Section 2.4(e) of
this Agreement.
"Post-Closing Delivery" has the meaning ascribed to it in Section 2.4(a)
of this Agreement.
"Pre-Closing Company Transaction Expense" means, without any duplication
that might otherwise result from the working capital adjustment contemplated by
Section 2.4, 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.
"Report" has the meaning ascribed to it in Section 4.10(d) of this
Agreement.
"Resolution Period" has the meaning ascribed to it in Section 2.4(d) of
this Agreement.
"Restrictions" means any and all liens, restrictions, restrictions on
transfer, options, pledges, voting agreements, rights of first refusal,
tag-along, co-sale or other rights, licenses, security interests, claims,
charges or encumbrances of any kind or nature whatsoever.
"Share Amount" has the meaning ascribed to it in Section 2.2(a) of this
Agreement.
"Shareholder" has the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Shareholders' Representative" has the meaning ascribed to it in Section
2.7 of this Agreement.
"Shelf Registration" means a registration for sale from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended.
"Standard Management Share" means a common share of Parent.
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"Surviving Corporation" means the Company, immediately following the
Effective Time of the Merger.
"Third-Party Claim" has the meaning ascribed to it in Section 8.4(a) 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.
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 IBCL, the parties hereto shall cause Merger
Sub to be merged with and into the Company on the Closing Date. The parties
shall so cause the Merger to occur by filing with the Indiana Secretary of State
articles of merger executed in accordance with the IBCL 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 IBCL. The Merger will also have
such other effects as are set forth and described in the IBCL.
(b) The officers and directors of Merger Sub at the Effective Time
shall become the officers and directors of the Surviving Corporation and
continue as such until his or her successor shall have been elected and
qualified or until his or her earlier resignation or removal.
(c) The Articles of Incorporation and By-Laws of Merger Sub at the
Effective Time shall become the Articles of Incorporation and By-Laws of the
Surviving Corporation and shall continue as such until altered, amended or
repealed; provided, however, that the Articles of Incorporation of the Surviving
Corporation shall be amended to change the name of the Surviving Corporation,
immediately following the Effective Time, to "Long Term Rx, Inc."
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2.2 Conversion of Equity Securities. On the terms and subject to the
conditions set forth in this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub or the Company:
(a) Each common share of the Company owned by the Shareholders
immediately prior to the Effective Time shall be cancelled and converted into
the right to receive (i) an amount equal to the result obtained by dividing
$1,600,000 by the Closing Date Shares (the "Cash Amount"), (ii) the number of
Standard Management Shares equal to the result obtained by dividing (A) $600,000
divided by the Per Share Value, by (B) the Closing Date Shares (the "Share
Amount"), and (iii) an amount equal to the result obtained by dividing the
Aggregate Adjustment Amount (if a positive number) by the Closing Date Shares
(the "Per Share Adjustment Amount"). The Cash Amount, the Share Amount, and the
Per Share Adjustment Amount (if any) shall be paid as set forth in Section 2.3
below.
(b) Each common share of the Company held in the treasury of the
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment will be made with
respect thereto.
(c) Each common share of Merger Sub issued and outstanding upon the
Effective Date of the Merger will be cancelled and converted into one common
share of the Surviving Corporation immediately following the Effective Time.
2.3 Payment of Conversion Price.
(a) At the Closing, each Shareholder shall receive an amount equal
to the result obtained by multiplying the Cash Amount by the total number of
common shares of the Company owned beneficially and of record by such
Shareholder immediately prior to the Effective Time, paid by wire transfer of
immediately available funds to the account designated by such Shareholder in
writing.
(b) At the Closing, each Shareholder shall receive that number of
Standard Management Shares equal to the result obtained by multiplying the Share
Amount by the total number of common shares of the Company owned beneficially
and of record by such Shareholder immediately prior to the Effective Time.
(c) 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) the Per Share Adjustment
Amount, by (B) the total number of common shares of the Company owned
beneficially and of record by such Shareholder immediately prior to the
Effective Time; 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) the Per Share
Adjustment Amount, by (B) the total number of Shares owned beneficially
and of record by such Shareholder on the Closing Date.
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 "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 the Closing Date in accordance with GAAP (the
"Closing Date Balance Sheet"); and
(ii) calculations, in reasonable detail, of the Closing Date Working
Capital and the Aggregate Adjustment Amount.
Merger Sub and the Shareholders agree that (x) if there is a disposition
of the audits by the State of Indiana with respect to the Medicaid Overpayments
that is final and binding on all parties involved with such audits (a "Final
Disposition") prior to the final resolution of the working capital adjustment,
as set forth in this Section 2.4, which results in the State of Indiana having
no further claim (absolute, contingent or otherwise) with respect to the
Medicaid Overpayments (or any portion thereof), the Closing Date Balance Sheet
shall not reflect a liability accrual for the Medicaid Overpayments to the
extent such favorable Final Disposition resolves the State of Indiana's claims
with respect to the Medicaid Overpayments, and (y) if and to the extent there is
no such favorable Final Disposition (or if there is a Final Disposition
resulting in the Surviving Corporation becoming obligated to pay any portion of
the Medicaid Overpayments) prior to the final resolution of the working capital
adjustment, as set forth in this Section 2.4, the Closing Date Balance shall
reflect a liability accrual for all such Medicaid Overpayments, and the
Shareholders agree not to object to any such accruals. Notwithstanding the
foregoing, if there is no Final Disposition prior to the final resolution of the
working capital adjustment and, as a result of subparagraph (y) immediately
above, the final Closing Date Balance Sheet reflects a liability accrual for the
Medicaid Overpayments (or any portion thereof) and the Aggregate Adjustment
Amount has been paid (either to the Shareholders or to the Surviving
Corporation, as the case may be), the Surviving Corporation shall pay to the
Shareholders (pro-rata) any amounts successfully challenged by the Surviving
Corporation pursuant to a favorable Final Disposition which occurs after the
final resolution of the working capital adjustment (as set forth in this Section
2.4) and prior to the third anniversary of the Closing Date. If and to the
extent there has been no Final Disposition prior to the third anniversary of the
Closing Date, the Surviving Corporation shall pay the amount of the Medicaid
Overpayments remaining unresolved pursuant to the audits to the Shareholders
(pro-rata in immediately available funds and pursuant to such wire transfer
instructions provided by the
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Shareholders in writing) within five (5) business days of such third year
anniversary and, thereafter, any Losses of the Surviving Corporation with
respect to the audits and the Medicaid Overpayments shall be subject to
indemnification pursuant to Article VIII.
(b) The Shareholders' Representative (for and on behalf of the
Shareholders) shall have thirty (30) days from the date the Surviving
Corporation makes the Post-Closing Delivery (such period, the "Dispute Period")
to notify the Surviving Corporation, in writing, as to whether the Shareholders'
Representative agrees or disagrees with the Post-Closing Delivery (such written
notice, the "Dispute Notice"). During the Dispute Period, the Shareholders'
Representative and its accountants shall be permitted to review (during regular
business hours and upon reasonable prior notice) the working papers of the
Surviving Corporation and (where applicable) the Surviving Corporation's
accountants relating to the matters set forth in the Post-Closing Delivery.
(c) If the Shareholders' Representative fails to deliver a Dispute
Notice to the Surviving Corporation during the Dispute Period, (i) the Closing
Date Balance Sheet as prepared by the Surviving Corporation shall be deemed to
have been correctly prepared, and (ii) the Surviving Corporation's calculation
of Closing Date Working Capital and the Aggregate Adjustment Amount shall be
deemed to be final and correct and shall be binding upon each of the parties
hereto.
(d) If the Shareholders' Representative delivers a Dispute Notice to
the Surviving Corporation during the Dispute Period, the Shareholders'
Representative and the Surviving Corporation shall, for a period of forty-five
(45) days from the date the Dispute Notice is delivered to the Surviving
Corporation (such period, the "Resolution Period"), use their respective best
efforts to amicably resolve the items in dispute. Any items so resolved by them
shall be deemed to be final and correct as so resolved and shall be binding upon
each of the parties hereto.
(e) If the Shareholders' Representative and the Surviving
Corporation are unable to resolve all of the items in dispute during the
Resolution Period, then either the Surviving Corporation or the Shareholders'
Representative may refer the items remaining in dispute to Deloitte & Touche
(the "Independent Accountants"). Such referral shall be made in writing to the
Independent Accountants, copies of which shall concurrently be delivered to the
non-referring party hereto. The referring party shall furnish the Independent
Accountants, at the time of such referral, with the Post-Closing Delivery and
the Dispute Notice. The parties shall also furnish the Independent Accountants
with such other information and documents as the Independent Accountants may
reasonably request in order for them to resolve the items in dispute. The
parties hereto shall also, within ten (10) days of the date the items in dispute
are referred to the Independent Accountants, provide the Independent Accountants
with a written notice (a "Position Statement") describing in reasonable detail
their respective positions on the items in dispute (copies of which will
concurrently be delivered to the other party hereto). If any party fails to
timely deliver its Position Statement to the Independent Accountants, the
Independent Accountants shall resolve the items in dispute solely upon the basis
of the information otherwise provided to them. The Independent Accountants shall
resolve all disputed items in a written determination to be delivered to each of
the parties hereto within forty-five
10
(45) days after such matter is referred to them; provided, however, that any
delay in delivering such determination shall not invalidate such determination
or deprive the Independent Accountants of jurisdiction to resolve the items in
dispute. The decision of the Independent Accountants as to the items in dispute
shall be final and binding upon the parties hereto and shall not be subject to
judicial review. The fees and expenses of the Independent Accountants incurred
in the resolution of any items in dispute shall be determined by the Independent
Accounts and shall be paid by the party that did not substantially prevail in
the dispute (also to be finally determined by the Independent Accountants).
(f) The Shareholders acknowledge and agree that (i) Merger Sub shall be
entitled to all cash and cash equivalents of the Company as of the Closing Date,
and (ii) such cash and cash equivalents shall not be distributed to the
Shareholders, but shall remain an asset of the Surviving Corporation after the
Closing.
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 Delivery of Certificates. On the Closing Date, each Shareholder shall
surrender all certificates representing the common shares of the Company held by
such Shareholder (or if lost, an affidavit, indemnity and such other security as
is reasonably required by Merger Sub and its counsel).
2.7 Shareholders' Representative. Each Shareholder hereby irrevocably
constitutes and appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as 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 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to act as the Shareholders' Representative
hereunder, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 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 the 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. The Shareholders shall be bound by all acts of the
Shareholders' Representative taken in connection with this Agreement.
ARTICLE III
THE CLOSING
3.1 Closing. The Closing shall take place on July 29, 2005, at the offices
of Merger Sub's counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Attorneys, PC, in Indianapolis, Indiana,
or at such other time and place as the parties may mutually agree. Subject to
the provisions of Section 10.1 below, failure to consummate the purchase and
sale provided for in this Agreement on the date and time and at the place
determined above in this Section 3.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
11
3.2 Closing Deliveries of Parent and Merger Sub. At the Closing, in
addition to any other documents specifically required to be delivered pursuant
to this Agreement, Parent and Merger Sub shall deliver to the Shareholders:
(a) the immediately available funds as required by Section 2.3(a)
above;
(b) the Standard Management Shares, as required by Section 2.3(b)
above;
(c) a certificate of the Secretary or Assistant Secretary of Merger
Sub, dated as of the date hereof, certifying (i) the resolutions duly adopted by
the Board of Directors and shareholder of Merger Sub authorizing and approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, and (ii) that such resolutions have not
been rescinded or modified and remain in full force and effect as of the Closing
Date; and
(d) a certificate, duly executed by a duly authorized officer of
Merger Sub, dated as of the Closing Date, certifying (i) that Merger Sub has
performed and complied in all material respects with all of the terms,
provisions and conditions of this Agreement to be performed and complied with by
it prior to the Closing, and (ii) that Merger Sub's representations and
warranties in this Agreement are true and correct in all material respects as of
the Closing Date.
3.3 Closing Deliveries of the Shareholders. At the Closing, in addition to
any other documents specifically required to be delivered pursuant to this
Agreement, each Shareholder shall deliver to Merger Sub the following:
(a) certificates representing all of the common shares of the
Company owned beneficially and of record by such Shareholder as of the date
hereof;
(b) a Release, duly executed by such Shareholder, in the form
attached hereto as Exhibit A;
(c) a legal opinion of counsel to the Shareholders, dated the date
hereof, addressed to Merger Sub, and containing customary legal opinions,
exceptions and qualifications;
(d) copies of the Company's Articles of Incorporation, as amended to
date, duly certified by the Indiana Secretary of State dated no more than 10
days prior to the Closing Date;
(e) a Certificate of Existence for the Company from the Indiana
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 (i) that such Shareholder has performed and
complied in all material respects
12
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 such
Shareholder's representations and warranties in this Agreement are true and
correct in all material respects as of the Closing Date;
(g) the original minute books, stock ledgers and corporate seal (if
any) of the Company;
(h) evidence of the payment in full and satisfaction of all
Indebtedness; and
(i) such other documents, instruments and agreements as Parent or
Merger Sub or their counsel may reasonably request to consummate the
transactions contemplated hereby, in form and substance reasonably acceptable to
Parent or Merger Sub and their counsel.
ARTICLE IV
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
The Shareholders, jointly and severally, represent and warrant to Parent
and 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 Indiana. 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 the 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.
13
4.3 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by the Company and each Shareholder. This Agreement
constitutes a valid and legally binding obligation of the Company and 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) conflict with or result
in a 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 1,000
common shares with no par value, of which 100 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. 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 statements of operations and
comprehensive income for the fiscal year then ended, and (ii) the unaudited
balance sheet of the Company as of June 30, 2005 ("Interim
14
Balance Sheet") and the related unaudited statements of operations and
comprehensive income for the six months then ended (items (i) and (ii),
collectively, the "Financial Statements").
(b) The Financial Statements (i) fairly present in all material
respects, the operating results, and the financial condition of the Company on
the dates and for the periods indicated, (ii) are correct and complete, and
(iii) are consistent with the books and records of the Company (which books and
records are correct and complete). 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 against in the Interim Balance Sheet, (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 (other than, in the case of Accounts Receivable reflected on
the Interim Balance, Accounts Receivable in the amount of $47,559, which were
written off in July 2005). 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 cost. The quantities of each item of inventory
(whether raw materials, work-in-process, or finished goods) are not excessive,
but are reasonable in the present circumstances of the Company.
4.7 Title to and Sufficiency of Assets.
(a) The Company owns no real property. Schedule 4.7(a) contains a
complete and accurate list of all leaseholds or other interests in real property
owned by the Company. The
15
Company owns 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.
(c) The leased building, equipment and other assets of the Company
are sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing.
4.8 Tax Matters. The Company has filed or caused to be filed all tax
returns, and all reports with respect to taxes, required to have been filed by
or with respect to the Company prior to the date hereof. All such tax returns or
reports were true, accurate, correct and complete in all material respects. The
Company is not the beneficiary of any extension of time within which to file any
tax return or report, except with respect to its federal and state income tax
return for Tax Year 2004. The Company has paid or caused to be paid all taxes,
penalties and interest required to have been paid by the Company prior to the
date hereof. The Company has withheld, deducted, collected and paid all taxes
required to have been withheld, deducted, collected and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party by the Company. The Company has not waived any
statute of limitations in respect of taxes or agreed to any extension of time
with respect to a tax assessment or deficiency. No claim has ever been made by a
governmental authority in a jurisdiction where tax returns by the Company have
not been filed that the Company is or may be subject to taxation by such
jurisdiction. There are no Liens on any of the Company's assets or properties
that arose in connection with any failure (or alleged failure) to pay any tax.
Except as set forth in Schedule 4.8, no tax return of the Company has been
audited or is currently under audit or examination. There is no tax sharing
agreement, tax allocation agreement, tax indemnity obligation or similar written
or unwritten agreement, arrangement, understanding or practice with respect to
taxes (including any advance pricing agreement, closing agreement or other
arrangement relating to taxes) that will require any payment by the Company.
4.9 Litigation; Claims. Except as set forth in Schedule 4.9, the Company
is not (a) subject to any outstanding injunction, judgment, order, decree,
ruling or charge or any governmental authority or arbitrator (collectively, an
"Order"), nor (b) a party or, to the knowledge of 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
16
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) may constitute or result in a violation by the Company,
or a failure on the part of the Company to comply with, any Law.
(b) Neither the Shareholders nor any of their Affiliates has
ordered, referred, or requested, directly or indirectly, any items or services
from the Company that are subject or entitled to reimbursement in whole or in
part by Medicare, Medicaid or any other state or federal government
reimbursement program.
(c) Without limiting the generality of the foregoing, the Company is
in material compliance with all conditions and standards for participation in
the Medicare and Medicaid programs and certified as eligible for participation
in Medicare and Medicaid programs. The Company is not operating any aspect of
its business under or subject to a plan of correction or corporate integrity
agreement with a governmental agency or entity. The Company is currently
receiving and is entitled to continue to receive Medicare and Medicaid
reimbursement payments.
(d) The Company has duly and timely filed all reports and other
items required to be filed (the "Reports") with any reimbursement program or
third party payor (including, without limitation, Medicare, Medicaid, medically
indigent assistance, Blue Cross, Blue Shield, any health maintenance, preferred
provider, independent practice or other healthcare providers or payors)
(collectively, the "Payors") and has timely paid all amounts due to such Payors.
Except as set forth in Schedule 4.10(d), (i) the Company has not requested an
extension of time in which to file any of the Reports, (ii) the Company is not
delinquent in the payment of any amount due to any Payors, (iii) there are no
pending or threatened audits, claims, assessments, adjustments, challenges or
notices from any governmental agency or entity or Payors with regard to any of
the Reports or any reimbursements or payments that the Company received from the
government agency or entity or Payors, (iv) the Company has not executed any
waivers or extension of the statute of limitations for the collection or
assessment of any amount due under or in connection with any Report or to any
government agency or entity or Payors, and (v) the Company is not liable for any
amounts owed to any Payor or governmental agency or entity, nor subject to any
contractual adjustments, fines or penalties.
(e) Intentionally omitted.
17
(f) The Company has maintained all records required to be maintained
by the Food and Drug Administration, Drug Enforcement Agency, State Boards of
Pharmacy, Social Security Administration, Health Care Financing Administration,
the Center for Medicare and Medicaid Services, state regulatory agencies and the
Medicare and Medicaid programs.
(g) Without limiting the generality of the foregoing, the Company
has not given or received in violation of any Law any payments or any other
remuneration, either directly or indirectly, overtly or covertly, in cash or in
kind, in return for receiving or making referrals for the furnishing or
arranging for the furnishing of any item or service, or in return for
purchasing, leasing, ordering, or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service or item in violation of 42
U.S.C. Section 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. Section 1395nn, commonly known as the "▇▇▇▇▇ Act" or "▇▇▇▇▇ II." With
respect to any compliance concerns found to be substantiated, the Company has
taken appropriate corrective action and made all appropriate reports to all
applicable governmental agencies or entities, and each such corrective action
and appropriate report is listed and disclosed in Schedule 4.10(g).
(h) Without limiting the generality of the foregoing. to the extent
applicable to the Company, the Company, in its ordinary business operation, has
complied and is currently in compliance with the requirements of the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA") and its
implementing regulations and with the requirements of all applicable state
regulations implementing Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act ("GLB") that are
applicable to the Company's relationship with any Business Associate (as such
term is defined in HIPAA and/or GLB). To the extent that the Company has access
to Protected Health Information (as such term is defined in HIPAA and/or GLB,
"PHI"), and except as necessary to complete the transactions contemplated by
this Agreement or for internal management and compliance purposes, the Company
has not and shall not use or further disclose PHI other than as permitted or
required by HIPAA or as required by Law. The Company has developed, documented,
implemented, maintained, and used appropriate safeguards to prevent disclosure
of PHI other than as provided for by this Agreement. These safeguards include
proper training and discipline of workforce and restrictions on physical access.
The safeguards will be designed to preserve the integrity and confidentiality
of, and to prevent intentional or unintentional non-permitted or violating use
of disclosure of PHI. The Company has entered into appropriate Business
Associate Agreements as required by HIPAA in which it agrees to ensure that any
agent, including a subcontractor, to whom it provides PHI, received from, or
created or received by the Company either directly or on behalf of any Business
Associate, agrees to the same restrictions and conditions that apply through
this Agreement to the Company with respect to such information.
4.11 Environmental Laws and Regulations. Except as set forth on Schedule
4.11:
(a) There are no Hazardous Materials present on the Company's 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
18
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 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 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
consent, approval, ratification, waiver or other authorization, license
(including import and export licenses), registration or permit issued, granted,
given or otherwise made available by or under the authority of any governmental
authority or pursuant to any Law that is held by the Company or that otherwise
relates to its business, assets or operations (collectively, the "Permits").
Each Permit is valid and in full force and effect. The Company is, and at all
times has been, in material compliance with all of the terms and requirements of
each Permit. Except as set forth in Schedule 4.12, consummation of the
transactions contemplated hereby (a) does not require the consent of any third
party that has issued a Permit, (b) will not result in a breach of or default
under any such Permit, and (c) will not otherwise cause any such Permit to cease
to be legal, valid, binding and in full force and effect on identical terms
following the Closing. The Permits listed in Schedule 4.12 collectively
constitute all of the Permits necessary to permit the Company to lawfully
conduct and operate its business and assets in the manner in which it currently
conducts and operates its business and assets.
4.13 Material Contracts. Schedule 4.13 lists all agreements (whether oral
or written) to which the Company is a party or by which it is bound that are
material to its business as currently conducted (collectively, the "Material
Contracts"), including:
(a) each agreement that involves performance of services or delivery
of goods or materials by or to the Company of an amount or value in excess of
$5,000;
(b) each lease of personal property requiring payments (in the
aggregate) in excess of $5,000 and each lease of real property;
(c) each agreement with any labor union or other employee
representative of a group of employees relating to wages, hours and other
conditions of employment and each employment or consulting agreement;
19
(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 $5,000;
(j) each agreement not denominated in U.S. dollars;
(k) each agreement relating to any of the Intellectual Property;
(l) each agreement with Medicare, Medicaid, any similar governmental
agency or entity, and any and all payors; and
(m) each agreement with any Affiliate of the Company.
Except as set forth in Schedule 4.13, with respect to each Material Contract,
(w) the agreement is legal, valid, binding, enforceable and in full force and
effect, (x) the agreement will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby, (y) the Company and each other party
thereto is, and at all times has been, in material compliance with all
applicable terms and requirements of such agreement, and (z) no party thereto
has repudiated any material provision of the agreement. Each Material Contract
that is a Medicare or Medicaid provider/billing agreements is not subject to any
revocation or termination action by any governmental agency or entity.
4.14 Labor and Employment Matters. Schedule 4.14 contains a complete and
accurate list of the following information for each employee of the Company,
including each employee on leave of absence or layoff status: name; job title;
date of hiring or engagement; date of commencement of employment or engagement;
current compensation paid or payable and any change in compensation since
December 31, 2004; sick and vacation leave that is accrued but unused; and
service credited for purposes of vesting and eligibility to participate under
any Benefit Plan. Except as set forth in Schedule 4.14 hereto, (a) the Company
is not, and has never been, a party to any collective bargaining agreement or
other labor contract; (b) there has not
20
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. 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 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
21
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 the 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
the Shareholders in this Agreement, the Schedules, the certificates to be
delivered pursuant to this Agreement or otherwise in connection with the
transactions contemplated hereby contains or will contain any untrue statement
or omits to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not materially misleading.
ARTICLE V
MERGER SUB'S AND PARENT'S REPRESENTATIONS AND WARRANTIES
Merger Sub and Parent represent and warrant to the Shareholders as
follows:
5.1 Organization of Merger Sub and Parent. Merger Sub and Parent are each
a corporation duly organized and validly existing under the laws of the State of
Indiana.
5.2 Authorization. Merger Sub and Parent each have full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Merger Sub has full power and authority to own and
operate its assets, properties and business and carry on its business as
presently conducted. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary action on the part of Merger Sub.
22
5.3 Validity; Binding Effect. This Agreement has been duly and validly
executed and delivered by Merger Sub and Parent. This Agreement constitutes a
valid and legally binding obligation of Merger Sub and Parent, enforceable
against Merger Sub and Parent, respectively, in accordance with its terms.
5.4 Noncontravention. The execution, delivery and performance of this
Agreement by Merger Sub, the consummation of the transactions contemplated
hereby and the compliance with or fulfillment of the terms and provisions hereof
or of any other agreement or instrument contemplated hereby, do not and shall
not (a) conflict with or result in a breach of any of the provisions of the
Articles of Incorporation or the Bylaws of Merger Sub, (b) contravene any Law or
Order which affects or binds Merger Sub or any of its properties, or (c) require
Merger Sub to obtain the approval, consent or authorization of, or to make any
declaration, filing or registration with, any governmental authority or other
third party which has not been obtained in writing prior to the date of this
Agreement.
5.5 Broker's Fees. Merger Sub has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS PENDING CLOSING
The parties hereto agree as follows with respect to the period between the
execution of this Agreement and the Closing:
6.1 General. Each of the parties hereto shall use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement. Such actions shall include, without limitation, (a) satisfaction, but
not waiver, of the closing conditions described in Article VII below, (b)
preparation, execution and delivery of such further instruments or taking such
further action as any other party hereto shall reasonably request, and (c) any
additional action that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, consents and approvals
of any governmental authority that it may be required to give, make or obtain,
including, without limitation, the consents required by the Company, Parent and
Merger Sub, as applicable.
6.2 Notices and Consents. Each of the parties hereto shall give any
notices to third parties, and will use commercially reasonable efforts, to (a)
obtain any third party consents necessary to consummate the transactions
contemplated by this Agreement, and (b) obtain any authorizations, consents, and
approvals of governments and governmental agencies necessary to consummate the
transactions contemplated by this Agreement.
6.3 Due Diligence. The Shareholders shall (and shall cause the Company to)
permit Merger Sub and its representatives to have full access at all reasonable
times, and in a manner so
23
as not to interfere with the normal business operations of the Company, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to the Company. The Shareholders shall
(and shall cause the Company to) furnish to Merger Sub such financial data,
operating data, copies of all Benefit Plans, contracts or documents to which the
Company is a party, and any other information as Merger Sub shall reasonably
request.
6.4 The Company's Operation of Business Prior to Closing. The Shareholders
shall, and shall cause the Company to, (a) conduct the Company's business in a
reasonable and prudent manner in accordance with past practices and in material
compliance with all Laws and Orders; (b) engage in no transactions out of the
ordinary course of business, without the prior consent of Merger Sub; (c) use
commercially reasonable efforts to preserve the Company's existing business
organization and the relationships the Company currently maintains with its
employees, customers, and suppliers, (d) except as required by Section 6.8, not
make or declare, set aside or pay any dividend or other distribution of assets
(whether in cash, stock or property) with respect to the equity securities of
the Company, (e) not make (or agree to make) any direct or indirect redemption,
purchase or other acquisition of any equity securities of the Company or
otherwise make any payment of cash or transfer of assets to any Shareholder, (f)
not issue or sell any of the Company's equity securities or issue any warrant,
option or other right to purchase any of the Company's equity securities, or any
security convertible into capital stock of the Company, and (g) not sell,
transfer, pledge or convey any or all of the common shares or any other equity
securities or the Company (or enter into any agreement to do any of the
foregoing).
6.5 Notification. The Shareholders shall promptly notify Merger Sub in
writing (a) if the Shareholders become aware of any fact or condition that
causes or constitutes any inaccuracy in or breach of any of their
representations and warranties made as of the date of this Agreement, (b) of any
breach of any covenant of the Shareholders under this Agreement, or (c) of the
occurrence of any event that may make the satisfaction of the conditions in
Article VII impossible or unlikely. Such notice shall not limit or otherwise
affect any rights of Merger Sub under Article VIII.
6.6 No Negotiation. The Shareholders shall not (nor shall they permit the
Company to) directly or indirectly solicit, initiate, encourage or entertain any
inquiries or proposals from, discuss or negotiate with, provide any nonpublic
information to or consider the merits of any inquiries or proposals from any
third party relating to any sale or business combination transaction involving
the Company, including any sale of stock or other equity interests, the merger
or consolidation of the Company or the sale of its business or any of the
Company's assets or properties (other than in the ordinary course of business).
The Shareholders shall notify Merger Sub of any such inquiry or proposal within
twenty-four (24) hours of receipt or awareness of the same by the Shareholders.
6.7 Interim Financial Statements. The Shareholders shall (and shall cause
the Company to) deliver to Merger Sub within ten (10) days after the end of each
calendar month a copy of the balance sheet and income statement of the Company
for such calendar month prepared in a manner and containing information
consistent with current practices and certified to Merger Sub by the appropriate
officer of the Company as to compliance with Section 4.6(b).
24
6.8 Payment of Indebtedness. Immediately prior to or simultaneous with the
Closing, the Company shall, and the Shareholders shall cause the Company to, pay
or otherwise satisfy in full all of the Company's Indebtedness.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Merger Sub's Conditions Precedent. The obligation of Merger Sub to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing of each of the following conditions,
except to the extent any such condition is waived in writing by Merger Sub:
(a) Performance by the Shareholders and the Company. Each
Shareholder and the Company shall have performed and complied, in all material
respects, with all of the terms, provisions and covenants of this Agreement to
be performed and complied with by such Shareholder or the Company at or prior to
the Closing.
(b) Accuracy of Representations and Warranties. All of the
representations and warranties made by each Shareholder in this Agreement shall
be true, in all material respects, as of the date of this Agreement and as of
the Closing.
(c) No Injunction. No injunction, restraining order, judgment or
decree of any court or governmental authority shall exist against any of the
parties to this Agreement or any of their officers, directors or
representatives, which restrains, prevents or materially alters the transactions
contemplated hereby.
(d) Closing Deliveries. The Shareholders shall have delivered to
Merger Sub each of the documents or other items required of the Shareholders
under Section 3.3 above.
(e) Consents. Merger Sub shall have received all regulatory
approvals and consents listed in Exhibit B hereto.
(f) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any material adverse change in the business,
operations, assets, prospects, or condition of the Company and the Company shall
have conducted its business only in the ordinary course.
(g) Financing. Merger Sub shall have received funding of bank or
other financing, on terms and conditions acceptable to Merger Sub in its sole
and absolute discretion, in an amount sufficient for it to consummate the
transactions contemplated hereby.
(h) Customer and Supplier Visits. Merger Sub shall be satisfied, in
its sole and absolute discretion, with its meetings with the customers and
suppliers of the Company.
25
(i) Payment of Indebtedness. The Company shall have satisfied and
paid in full all Indebtedness and provided Merger Sub with reasonably
satisfactory evidence of the same.
7.2 Shareholder's Conditions Precedent. The obligation of the Shareholders
and the Company to consummate the transactions contemplated by this Agreement is
subject to the fulfillment at or prior to the Closing of each of the following
conditions, except to the extent any such condition is waived in writing by the
Shareholders' Representative:
(a) Performance by Merger Sub. Merger Sub shall have performed and
complied, in all material respects, with all of the terms, provisions and
covenants of this Agreement to be performed and complied with by Merger Sub at
or prior to the Closing.
(b) Accuracy of Representations and Warranties. All of the
representations and warranties made by Merger Sub in this Agreement shall be
true, in all material respects, as of the date of this Agreement and as of the
Closing.
(c) No Injunction. No injunction, restraining order, judgment or
decree of any court or governmental authority shall exist against any of the
parties to this Agreement or any of their officers, directors or
representatives, which restrains, prevents or materially alters the transactions
contemplated hereby.
(d) Closing Deliveries. Merger Sub and Parent shall have delivered
to the Shareholders each of the documents or other items required of Merger Sub
and Parent under Section 3.2 above.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Shareholders. Subject to Section 8.3, the
Shareholders, jointly and severally (except for any claim made for the breach of
the covenants set forth in Section 9.2, the liabilities for which shall be
several), shall indemnify 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 the
Shareholders in this Agreement, the Schedules or any other certificate or
document delivered by the Shareholders pursuant to this Agreement, (b) any
breach of any covenant or agreement made by the Shareholders in this Agreement,
the Schedules or any other certificate or document delivered by the Shareholders
pursuant to this Agreement, (c) any matter described on Exhibit C hereto, and
(d) any Indebtedness of the Company which remains unsatisfied after the Closing,
including, without limitation, 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
Shareholder or the
26
Company (or any Person acting on their behalf) in connection with the
transactions contemplated hereby.
8.2 Indemnification by Merger Sub. Merger Sub and the Surviving
Corporation shall indemnify the Shareholders against any and all Losses that may
be suffered or incurred by the Shareholders from or by reason of (a) any
inaccuracy of a representation or warranty made by Merger Sub in this Agreement,
or any other certificate or document delivered by Merger Sub pursuant to this
Agreement, (b) any breach of any covenant or agreement made by Merger Sub in
this Agreement, or any other certificate or document delivered by Merger Sub
pursuant to this Agreement, and (c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Merger Sub (or
any Person acting on its behalf) in connection with the transactions
contemplated hereby.
8.3 Limitations on Indemnity.
(a) The Shareholders shall not have any liability or obligation to
Parent, Merger Sub or the Surviving Corporation whatsoever, and no claim shall
be asserted against the Shareholders, for indemnification under Section 8.1(a)
unless and until the aggregate amount of Losses incurred by Merger Sub and/or
the Surviving Corporation as a result thereof exceeds $20,000, and then only to
the extent the aggregate amount of such Losses exceeds $20,000 and is less than
$1,100,000; provided, however, that the limitations set forth above in this
Section 8.3(a) shall not apply to (i) any breach or inaccuracy of the
Shareholders' representations or warranties of which any Shareholder had
knowledge at any time prior to or on the date hereof, or (ii) claims for
indemnification resulting from the breach or inaccuracy of the representations
and warranties set forth in Sections 4.1(a) (Organization), 4.2 (Authorization),
4.3 (Validity; Binding Effect), 4.5(a) (Title to Shares) and 4.18 (Broker's
Fees) (the matters described in clauses (i) and (ii) immediately above,
collectively, "Carve-Out Claims"). For the avoidance of doubt, the limitations
set forth above in this Section 8.3(a) shall not apply to claims for
indemnification arising under Sections 8.1(b) through (d).
(b) All representations and warranties in this Agreement, the
Schedules and the certificates and other documents delivered pursuant hereto
shall survive the Closing and be enforceable against the party making the same
for a period of two (2) years from the Closing Date at which time they shall
expire and be of no further force or effect; provided, however, that (i)
Carve-Out Claims shall survive indefinitely, and (ii) the representations and
warranties set forth in Sections 4.15 (Employee Benefits), 4.8 (Taxes) and 4.11
(Environmental) shall survive for the period of the statute of limitations
applicable to such representations and warranties. Any claim for indemnification
with respect to any such matter which is not asserted by a notice given as
herein provided within such period of survival may not be pursued and shall be
thereafter forever barred.
8.4 Third-Party Claims.
(a) Promptly after receipt by a party hereto entitled to indemnity
under Section 8.1, or Section 8.2 (an "Indemnified Person") of notice of the
assertion of a claim for
27
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 8.4(a) of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes, to assume the defense of
such Third-Party Claim with counsel satisfactory to the Indemnified Person.
After notice from the Indemnifying Person to the Indemnified Person of its
election to assume the defense of such Third-Party Claim, the Indemnifying
Person shall not, so long as it diligently conducts such defense, be liable to
the Indemnified Person under this Article VIII for any fees or costs of other
counsel or any other expenses with respect to the defense of such Third-Party
Claim, in each case subsequently incurred by the Indemnified Person in
connection with the defense of such Third-Party Claim. If the Indemnifying
Person assumes the defense of a Third-Party Claim, (i) such assumption will
establish for purposes of this Agreement that the claims made in that
Third-Party Claim are within the scope of and subject to indemnification, and
(ii) no compromise or settlement of such Third-Party Claims may be effected by
the Indemnifying Person without the Indemnified Person's consent unless (A)
there is no finding or admission of any violation of Law or any violation of the
rights of any party; and (B) the sole relief provided is monetary damages that
are paid in full by the Indemnifying Person. If notice is given to an
Indemnifying Person of the assertion of any Third-Party Claim and the
Indemnifying Person does not, within ten (10) 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 IX
ADDITIONAL COVENANTS
9.1 General. If any further action is necessary or desirable to carry out
the purposes of this Agreement, each of the parties hereto will take such
further action (including, without limitation, the execution and delivery of
such further instruments and documents) as any other
28
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VIII above).
9.2 Noncompetition and Nonsolicitation.
(a) Noncompetition. For a period of three (3) years after the
Closing Date, ▇▇▇▇▇▇▇ and the Shareholders shall not, anywhere in the State of
Indiana, 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 ▇▇▇▇▇▇▇,
and the Shareholders in the aggregate, may purchase or otherwise acquire up to
(but not more than) five percent (5%) of any class of the securities of any
entity if such securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended.
(b) Nonsolicitation. For a period of three (3) years after the
Closing Date, ▇▇▇▇▇▇▇ and the Shareholders shall not, directly or indirectly (i)
solicit the business of any Person who is as of the Closing a customer of the
Company, (ii) induce any customer or supplier of the Company on or prior to the
Closing Date to cease doing business with the Surviving Corporation after the
Closing Date, (iii) hire or engage as a consultant, independent contractor or in
a similar capacity, any person who is an employee, independent contractor or
consultant of the Company on the Closing Date, or (iv) solicit or persuade, or
attempt to solicit or persuade, any person who is an employee, independent
contractor or consultant of the Company on the Closing Date to terminate or
adversely modify his or her relationship, whether or not pursuant to a written
agreement, with the Surviving Company.
(c) Injunctive Relief. Without limiting the right of the Surviving
Corporation to pursue all other legal and equitable rights available to it for
any violation of Section 9.2(a) or (b) above, and to recover its legal fees and
expenses, the parties agree that monetary damages cannot fully compensate the
Surviving Corporation for such a violation and that the Surviving Corporation
shall be entitled to a temporary restraining order and any further injunctive
relief to prevent any violation, threatened violation or continuing violation
thereof and that no bond or other security shall be required in connection
therewith. It is the intent and understanding of each party hereto that if, in
any action before any court or agency legally empowered to enforce Section
9.2(a) or (b) above, any term, restriction, covenant or promise set forth
therein is found to be unreasonable and for that reason unenforceable, then such
term, restriction, covenant or promise shall be deemed modified to the minimum
extent necessary to make it enforceable by such court or agency.
9.3 Confidentiality. Each party hereby agrees that access to any and all
materials and documents provided by any other party, and directly or indirectly
associated with this Agreement, are proprietary to the disclosing party and
confidential. The receiving party will restrict access to this information to
essential and necessary parties. In the event the transaction fails to close or
terminates, for any reason, each party shall return to the other parties, or its
representatives, any and all such materials and documents, or certify in writing
that same has been destroyed and no copies retained. Information obtained in
connection with this transaction may not be used by the receiving party to
compete with the disclosing party.
29
9.4 Standard Management Shares.
(a) In the event a Shareholder desires to sell a portion of the
Standard Management Shares issued to such Shareholder pursuant to this Agreement
in order to meet its income tax obligations as a result of such issuance, such
Shareholder shall provide Parent with notice of its desire to sell such shares
on or after January 1, 2006, but on or before February 1, 2006. Parent shall, at
its option and prior to April 1, 2006, either provide a Shelf Registration for
or shall purchase that number of Standard Management Shares from such
Shareholder equal to the product of (i) the federal and state income tax
liability of such Shareholder for the Standard Management Shares issued to such
Shareholder (determined by utilizing a 15% federal tax rate and the combined
state and local income tax rate, if any), divided by (ii) the Per Share Value;
provided, however, in the event the proceeds from the sale of any Standard
Management Shares sold pursuant to this Section 9.4 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, Parent shall provide to each Shareholder additional cash or
Standard Management Shares having an aggregate value equal to the difference
between (i)(A) the number of Standard Management Shares originally received by
such Shareholder at the Closing, multiplied by (B) the difference between the
Minimum Share Value and the Average Price, and (ii) the aggregate amount of any
proceeds in excess of the Minimum Share Value realized from such Shareholder's
previous sale of any such Standard Management Shares pursuant to Section 9.4(a)
above.
(c) In the event the Standard Management Shares become eligible for
sale without restriction pursuant to Rule 144(k) under the Securities Act of
1933, as amended, Parent will exchange for the certificates representing the
Standard Management Shares new certificates without restrictive legends.
ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may be terminated:
(a) by either Merger Sub or the Shareholders' Representative (on
behalf of the Shareholders) if a material breach of any provision (including
representations and warranties) of this Agreement has been committed by the
other party and such breach has not been waived in writing;
(b) (i) by Merger Sub if the Closing has not occurred by August 30,
2005 for any reason other than breach of this Agreement by Merger Sub or Parent,
or (ii) by the
30
Shareholders' Representative if the Closing has not occurred by August 30, 2005
for any reason other than breach of this Agreement by the Shareholders or the
Company; or
(c) by mutual written agreement of Merger Sub and the Shareholders'
Representative.
10.2 Effect of Termination. If this Agreement is terminated under Section
10.1 above, no party hereto shall have any further obligation under this
Agreement, except in connection with any breach of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Assignment. No party may assign any of its rights or delegate any of
its obligations under this Agreement without the prior written consent of the
other party hereto, except that Merger Sub may, without the prior written
consent of the Shareholders or the Company (a) collaterally assign its rights
hereunder to any financial institution or other lender in connection with the
financing of the transactions contemplated hereby, (b) assign its rights and/or
obligations hereunder (in whole or in part) to one or more subsidiaries or other
affiliated entities, and/or (c) after the Closing, assign to any person or
entity who acquires the Surviving Corporation or its business (regardless of the
form of such acquisition) any of its rights under this Agreement.
11.2 Notices. All notices, requests, consents and other communications
hereunder (each, a "Notice") shall be in writing and shall be deemed to have
been given (a) if mailed, two (2) business days after such Notice is sent, when
sent via first class United States registered mail, return receipt requested,
postage prepaid to the address listed below for the party to whom the Notice is
being sent (the "Notice Party"), (b) if hand delivered or delivered by courier,
upon actual delivery of such Notice to the Notice Party at the address listed
below for such Notice Party, or (c) if sent by facsimile, on the first business
day after the date of the sender's receipt of a confirmed transmission of such
Notice to the Notice Party at the facsimile number, if any, listed below for
such Notice Party provided the party giving such Notice mails a copy of such
Notice within two (2) business days after the transmission of such Notice by
facsimile to the Notice Party. The addresses and facsimile numbers for each
party to this Agreement, as of the date hereof, are:
If to Parent or Merger Sub/ Standard Management Corporation
the Surviving Corporation: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Ex. VP
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Attorneys, PC
▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Shareholders or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
the Shareholders' ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇▇▇: ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: 765-529-3532
Attention: R. ▇▇▇▇▇ ▇▇▇▇▇
Either party may change its address or facsimile number by providing written
notice, in accordance with the foregoing provisions of this Section 11.2, to the
other party of such change.
11.3 Expenses; Attorneys' Fees.
(a) Each party hereto will pay all costs, fees and expenses incident
to its negotiation and preparation of this Agreement and to its performance and
compliance with all agreements contained herein on its part to be performed,
including the fees, expenses and disbursements of its respective counsel and
accountants; provided, however, that all such costs, fees and expenses of the
Company (including, without limitation, the Pre-Closing Company Transaction
Expenses to the extent applicable) shall be paid by the Shareholders at or prior
to the Closing.
(b) In any litigation between the parties regarding this Agreement,
the losing party shall pay to the prevailing party all reasonable expenses and
court costs, including, without limitation, reasonable attorneys' fees and
costs, incurred by the prevailing party. A party shall be considered the
prevailing party if (i) it initiated the litigation and obtains substantially
all of the relief or remedy it sought, either through a judgment or the losing
party's voluntary action, (ii) the other party withdraws its action without
substantially obtaining the relief or remedy it sought, or (iii) it did not
initiate the litigation and judgment is entered for either party, but without
substantially granting the relief or remedy sought by the initiating party.
11.4 Governing Law; Forum.
(a) This Agreement shall be governed by and construed in accordance
with the Laws of the State of Indiana, without regard to such jurisdiction's
conflict of laws principles.
32
(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 ▇▇▇▇▇▇
County, Indiana, and each of the parties irrevocably submits to the exclusive
jurisdiction of each such court in any such matter, waives any objection it may
now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the matter shall be heard and determined only in any such
court and agrees not to bring any such matter arising out of or relating to this
Agreement in any other court. The parties agree that either of them may file a
copy of this paragraph with any court as written evidence of the knowing,
voluntary and bargained agreement between the parties irrevocably to waive any
objections to venue or to convenience of forum. Process in any matter referred
to in this paragraph may be served on any party anywhere in the world.
11.5 Partial Invalidity. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
11.6 Execution in Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall be considered an
original counterpart, and all of which shall be considered to be but one
agreement and shall become a binding agreement when each party shall have
executed one counterpart and delivered it to the other party hereto. A signature
affixed to a counterpart of this Agreement and delivered by facsimile by any
Person is intended to be its, his or her signature and shall be valid, binding
and enforceable against the party on whose behalf it has been affixed.
11.7 Entire Agreement; Amendments and Waivers. This Agreement contains the
entire understanding of the parties hereto with regard to the subject matter
contained in this Agreement and supersedes all prior agreements or
understandings of the parties (including, without limitation, the Letter of
Intent, dated May 4, 2005, and the Mutual Confidentiality Agreement, dated March
3, 2005, as amended). The parties, only by mutual agreement in writing, may
amend, modify or 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]
224152
33
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
LONG TERM RX ACQUISITION The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust,
COMPANY dated September 7, 2000
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------- ------------------------------------
Printed: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
Title: Chairman of the Board,
President, Chief Executive
Officer
STANDARD MANAGEMENT The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust,
CORPORATION dated September 7, 2000
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------- -----------------------------------
Printed: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
Title: Chairman and Chief
Executive Officer
LONG TERM RX, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Printed: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
S-1
EXHIBIT A
FORM OF RELEASE
See attached.
EXHIBIT B
CONSENTS
None.
EXHIBIT C
SPECIAL INDEMNITY MATTERS
1. After the third anniversary of the Closing Date, as more fully set forth in
Section 2.4 above, audits by the State of Indiana regarding the Medicaid
Overpayments.
2. Audits with respect to the taxes of the Company as more fully set forth on
Schedule 4.8.