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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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By and Among
Standard Management Corporation,
an Indiana corporation,
Rainier Acquisition Corporation,
a Washington corporation
and
Rainier Home Health Care Pharmacy, Inc.,
a Washington corporation,
John Tac
Hung Tran,
Cynthia J. Wareing-Tran
and
The Jonathan Tran Irrevocable Trust, u/a/d 8/23/2004
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Dated July 21, 2005
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS;
CONSTRUCTION..............................................................................1
1.1
Definitions...........................................................................................1
1.2
Construction..........................................................................................6
ARTICLE II SALE OF THE
SHARES....................................................................................7
2.1 The
Merger............................................................................................7
2.2 Conversion
of Equity
Securities.......................................................................7
2.3 Payment of
Conversion
Price...........................................................................8
2.4 Earn
Out..............................................................................................8
2.5 Closing of Transfer
Records...........................................................................9
2.6 Exchange
of
Certificates.............................................................................10
2.7
Shareholders'
Representative.........................................................................10
ARTICLE III THE
CLOSING.........................................................................................10
3.1
Closing..............................................................................................10
3.2 Closing
Deliveries of Parent and Merger
Sub..........................................................10
3.3 Closing
Deliveries of
Shareholders...................................................................11
ARTICLE IV SHAREHOLDERS' REPRESENTATIONS AND
WARRANTIES.........................................................12
4.1
Organization.........................................................................................12
4.2
Authorization........................................................................................12
4.3 Validity;
Binding
Effect.............................................................................12
4.4
Noncontravention.....................................................................................12
4.5 Capital
Structure....................................................................................13
4.6 Financial
Statements.................................................................................13
4.7 Title to
and Sufficiency of
Assets...................................................................14
4.8 Tax
Matters..........................................................................................15
4.9
Litigation;
Claims...................................................................................15
4.10 Legal
Compliance.....................................................................................15
4.11 Environmental
Laws and
Regulations...................................................................17
4.12
Permits..............................................................................................18
4.13 Material
Contracts...................................................................................18
4.14 Labor and
Employment
Matters.........................................................................19
4.15 Employee
Benefits....................................................................................20
4.16 Intellectual
Property................................................................................20
4.17 Affiliate
Transactions...............................................................................20
4.18 Broker's
Fees........................................................................................21
4.19
Warranty.............................................................................................21
4.20
Disclosure...........................................................................................21
ARTICLE V MERGER SUB AND PARENT'S
REPRESENTATIONS AND
WARRANTIES.................................................21
5.1
Organization of Merger Sub and
Parent................................................................21
5.2
Authorization........................................................................................21
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5.3
Capitalization of
Parent.............................................................................21
5.4 Validity;
Binding
Effect.............................................................................21
5.5
Noncontravention.....................................................................................21
5.6 Broker's
Fees........................................................................................22
ARTICLE VI COVENANTS PENDING
CLOSING............................................................................22
6.1
General..............................................................................................22
6.2 Notices
and
Consents.................................................................................22
6.3 Due
Diligence........................................................................................22
6.4 The
Company's Operation of Business Prior to
Closing.................................................22
6.5
Notification.........................................................................................23
6.6 No
Negotiation.......................................................................................23
6.7 Interim
Financial
Statements.........................................................................23
6.8 Public
Announcement
.................................................................................23
ARTICLE VII CONDITIONS
PRECEDENT................................................................................24
7.1 Merger
Sub's Conditions
Precedent....................................................................24
7.2
Shareholder's Conditions
Precedent...................................................................25
ARTICLE VIII
INDEMNIFICATION....................................................................................25
8.1
Indemnification by
Shareholders......................................................................25
8.2
Indemnification by Merger
Sub........................................................................26
8.3
Limitations on
Indemnity.............................................................................26
8.4 Third
Party
Claims...................................................................................26
8.5
Set-Off..............................................................................................27
ARTICLE IX ADDITIONAL
COVENANTS.................................................................................27
9.1
General..............................................................................................27
9.2
Noncompetition and
Nonsolicitation...................................................................28
9.2
Confidentiality......................................................................................28
ARTICLE X
TERMINATION...........................................................................................29
10.1 Termination
Events...................................................................................29
10.2 Effect of
Termination................................................................................30
ARTICLE XI
MISCELLANEOUS........................................................................................30
11.1
Assignment...........................................................................................30
11.2
Notices..............................................................................................30
11.3 Expenses;
Attorneys'
Fees............................................................................31
10.4 Governing Law;
Forum.................................................................................31
11.5 Partial
Invalidity...................................................................................32
11.6 Execution in
Counterparts; Facsimile
Signatures......................................................32
11.7 Entire
Agreement; Amendments and
Waivers.............................................................32
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Exhibits
Exhibit A
Form of Secured Subordinated Promissory Note
Exhibit B
Form of Release
Exhibit C
Form of Voting Trust
Exhibit D
Special Indemnity Matters
Exhibit E
Non-Competition Territory
Exhibit F
Consents
Exhibit G
Employment Agreement
Schedules
Schedule 4.1(a)
Foreign Qualifications
Schedule 4.1(b)
Company Locations
Schedule 4.4
Noncontravention
Schedule 4.5
Capitalization
Schedule 4.6(a)
Financial Statements
Schedule 4.6(b)
Undisclosed Liabilities
Schedule 4.7(a)
Real Property/Leaseholds
Schedule 4.7(b)
Permitted Liens
Schedule 4.9
Litigation; Claims
Schedule 4.10(d)
Medicare/Medicaid Reports
Schedule 4.10(g)
Health Care Compliance Matters
Schedule 4.11
Environmental Matters
Schedule 4.12
Permits
Schedule 4.13
Material Contracts
Schedule 4.14
Labor and Employment Matters
Schedule 4.15
Employee Benefits
Schedule 4.16
Intellectual Property
Schedule 4.17
Affiliate Transactions
Schedule 4.18
Broker's Fees
Schedule 4.19
Warranties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and
entered
into as of July 21, 2005 by and among
Standard Management Corporation, an
Indiana corporation ("Parent"), Rainier
Acquisition Corporation, a Washington
corporation ("Merger Sub"), Rainier Home
Health Care Pharmacy, Inc., a
Washington corporation (the "Company"), and
John Tac Hung Tran, Cynthia J.
Wareing-Tran and The Jonathan Tran
Irrevocable Trust, u/a/d (each a
"Shareholder" and collectively,
"Shareholders"),
WITNESSETH THAT:
WHEREAS, Shareholders are the sole shareholders of the Company;
and
WHEREAS, the parties hereto desire to cause the Merger Sub to be
merged
with and into the Company, with the Company
surviving such merger (the
"Merger"), all on the terms and subject to
the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises, and for other
good
and valuable consideration, the receipt and
sufficiency of which hereby are
acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Definitions. All initially-capitalized terms used in this
Agreement
shall have the meanings given to such terms
in this Section 1.1 below:
"Accounts Receivable" has the meaning ascribed to it in Section
4.6(d)
of this Agreement.
"Affiliate" means, with respect to any Person, any other Person
that
directly, or indirectly through one or more
intermediaries, controls, is
controlled by, or is under common control
with, such Person.
"Agreement" means this Agreement and Plan of Merger, executed by
the
parties hereto on the date set forth
above.
"Annual Increase" has the meaning ascribed to it in Section
2.7(f).
"Benefit Plan" has the meaning ascribed to it in Section 4.15.
"Carve-Out Claims" has the meaning ascribed to it in Section
8.3(a).
"Cash Amount" has the meaning ascribed to it in Section 2.2(a).
<PAGE>
"Closing" means the time at which the parties hereto consummate
the
Merger.
"Closing Date" means the date on which the Closing actually
occurs.
"Closing Date Shares" means the total number of common shares of
the
Company issued and outstanding immediately
prior to the Effective Time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has
the meaning ascribed to it in the introductory paragraph
of this Agreement.
"Competing Business" has the meaning ascribed to it in Section
9.2(a)
of this Agreement.
"Dispute Notice" has the meaning ascribed to it in Section 2.4(b)
of
this Agreement.
"Dispute Period" has the meaning ascribed to it in Section 2.4(b)
of
this Agreement.
"Earn-Out Amount" means (i) for any calendar year in which the
Surviving Corporation's EBITDA is less than
or equal to Target EBITDA for such
calendar year, an amount equal to zero,
(ii) for the calendar year 2005, (A) if
the Surviving Corporation's 2005 EBITDA is
greater than Target EBITDA for such
calendar year and less than or equal to
$1,966,667, an amount equal to the
difference between the Surviving
Corporation's 2005 EBITDA and Target EBITDA
multiplied by six, or (B) if the Surviving
Corporation's 2005 EBITDA is greater
than 1,966,667, an amount equal to (1) 50%
of the difference between the
Surviving Corporation's 2005 EBITDA and
$1,966,667 multiplied by six, plus (2)
$1 million; and (iii) for each of the
calendar years 2006 and 2007, if the
Surviving Corporation's EBITDA for such
calendar year is greater than Target
EBITDA for such calendar year, an amount
equal to 50% of the difference between
the Surviving Corporation's EBITDA for such
calendar year and Target EBITDA for
such calendar year multiplied by six.
"Earn-Out Year" means any calendar year in which an Earn-Out Amount
is
payable to the Shareholders.
"EBITDA" means, for any calendar year, the Surviving Corporation's
net
income before payment of the Earn Out
Amount for such calendar year determined
in accordance with GAAP after adding back
(i) any interest expense, (ii) any
income tax expense (iii) any depreciation
expense, and (iv) any amortization
expense; provided, however, that no amount
shall be added back to or deducted
from net income more than once for any
calendar year.
"Effective Time" means the later of the effective times set forth
in
the certified copies of the articles of
merger issued by the Indiana Secretary
of State and the Washington Secretary of
State with respect to the Merger.
"Employment Agreements" means Employment Agreements substantially
in
the form attached hereto as Exhibit G.
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"Environmental Laws" means all Laws concerning pollution or
protection
of the environment, including, without
limitation, all those relating to the
presence, use, production, generation,
handling, transportation, treatment,
storage, disposal, distribution, labeling,
testing, processing, discharge,
release, threatened release, control or
cleanup of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
"ERISA Affiliate" means any member of a controlled group of
corporations under Section 414(b) of the
Code of which the Company is a member,
and any trade or business (whether or not
incorporated) under common control
with the Company under Section 414(c) of
the Code, and all other entities which
together with the Company are or were
within any of three (3) years prior to the
date hereof treated as a single employer
under Section 414(m) or 414(o) of the
Code.
"Financial Statements" has the meaning ascribed to it in Section
4.6(a)
of this Agreement.
"GAAP" means Generally Accepted Accounting Principles in the
United
States of America, consistently
applied.
"GLB" has the meaning ascribed to it in Section 4.10(h).
"Hazardous Activity" means the distribution, generation,
handling,
importing, management, manufacturing,
processing, production, refinement,
release, storage, transfer, transportation,
treatment or use of Hazardous
Material in, on, under about or from any of
the real estate owned, used or
leased by the Company or any part thereof
and any other act, business, operation
or thing that violates any Environmental
Law, or increases the danger, or risk
of danger, or poses an unreasonable risk of
harm, to Persons or property.
"Hazardous Material" means any substance, material or waste which
is or
will foreseeably be regulated by any
governmental authority, including any
material, substance or waste defined as a
"hazardous waste," "hazardous
material," "hazardous substance,"
"extremely hazardous waste," "restricted
hazardous waste," contaminant," toxic
waste" or "toxic substance" under any
provision of Environmental Law, including
lead paint, petroleum, petroleum
products, asbestos, presumed
asbestos-containing material or asbestos-containing
material, urea formaldehyde and
polychlorinated biphenyls.
"HIPAA" has the meaning ascribed to it in Section 4.10(h).
"Indebtedness" means bank debt, debt associated with capital leases
and
other debt incurred outside of the ordinary
course of business (including,
without limitation, the amount owed to
Holland Healthcare Services for the
purchase of assets).
"Indemnified Person" has the meaning ascribed to it in Section
8.4(a)
of this Agreement.
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"Indemnifying Person" has the meaning ascribed to it in Section
8.4(a)
of this Agreement.
"Independent Accountants" means O'Rourke Sacher & Molten CPAs
(n/k/a
McGladrey & Pullen, LLP).
"Intellectual Property" has the meaning ascribed to it in Section
4.16.
"Interim Balance Sheet" has the meaning ascribed to it in
Section
4.6(a) of this Agreement.
"IRS" means the Internal Revenue Service.
"Labor and Employment Law" means all Laws relating to
employment
practices, terms and conditions of
employment, equal opportunity,
nondiscrimination, immigration, wages,
hours, benefits and collective
bargaining, the payment of social security
and similar taxes, unemployment
compensation, workers compensation and
occupational safety and health.
"Law" means all laws, statutes, rules, regulations, ordinances,
codes,
bulletins, opinions, decisions, plans,
injunctions, judgments, orders, decrees,
rulings, and charges thereunder of federal,
state, local and foreign governments
(and all agencies thereof).
"Liens" means any and all liens, security interests, mortgages,
easements, restrictions, encumbrances,
pledges, conditional sales contracts, or
other similar conflicting ownership or
security interest in favor of any Person.
"Losses" has the meaning ascribed to it in Section 8.1.
"Medicare Laws" means any and all Laws applicable to reimbursement
by
Medicare, Medicaid or any other
governmental healthcare program for services or
items rendered by the Company, including
all federal and state laws relating to
the referral of patients to the Company's
business.
"Merger" has the meaning ascribed to it in the second recital of
this
Agreement.
"Merger Sub" has the meaning ascribed to in the introductory
paragraph
of this Agreement.
"Minimum Share Value" means three dollars and twenty-eight
cents
($3.28).
"Multiemployer Plan" means a plan as defined in ERISA Section
4001(a)(3) to which Company or any ERISA
Affiliate of Company is making or
accruing an obligation to make
contributions or has within any of the five (5)
years preceding the date hereof made or
accrued an obligation to make
contributions.
"Note" means a secured subordinated promissory note issued by
Merger
Sub and guaranteed by Parent, substantially
in the form attached hereto as
Exhibit A.
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"Note Amount" has the meaning ascribed to it in Section 2.2(a) of
this
Agreement.
"Notice" has the meaning ascribed to it in Section 11.2 of this
Agreement.
"Notice Party" has the meaning ascribed to it in Section 11.2 of
this
Agreement.
"Order" has the meaning ascribed to it in Section 4.9 of this
Agreement.
"Parent" has the meaning ascribed to it in the introductory
paragraph
of this Agreement.
"Payor" has the meaning ascribed to it in Section 4.10(d) of
this
Agreement.
"Pension Plan" means an employee pension benefit plan, as defined
in
ERISA Section 3(2), other than a
Multiemployer Plan, which is covered by Title
IV of ERISA and which either (i) is
maintained by the Company and/or any ERISA
Affiliate of the Company for employees of
such Person, or (ii) has at any time
within the five (5) years preceding the
date hereof been maintained by the
Company and/or any ERISA Affiliate of the
Company for employees of such Person.
"Permit" has the meaning ascribed to such term in Section 4.12 of
this
Agreement.
"Per Share Earn-Out Amount" means, with respect to the calendar
years
2005, 2006 and 2007, an amount equal to the
Earn-Out Amount for such calendar
year divided by the Closing Date
Shares.
"Per Share Value" means, with respect to the Standard
Management
Shares, an amount equal to the greater of
(i) the average per-share closing
price of a Standard Management Share
determined over the 20 trailing days
immediately preceding the date which is two
days prior to the Closing Date, or
(ii) the Minimum Share Value.
"Person" means an individual, partnership, corporation, business
trust,
limited liability company, limited
liability partnership, joint stock company,
trust, unincorporated association, joint
venture, company or other entity or any
governmental authority.
"PHI" has the meaning ascribed to it in Section 4.10(h) of this
Agreement.
"Position Statement" has the meaning ascribed to it in Section
2.4(e)
of this Agreement.
"Post-Closing Delivery" has the meaning ascribed to it in
Section
2.4(a) of this Agreement.
"Report" has the meaning ascribed to it in Section 4.10(d) of
this
Agreement.
"Resolution Period" has the meaning ascribed to it in Section
2.4(d) of
this Agreement.
5
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"Restrictions" means any and all liens, restrictions, restrictions
on
transfer, options, pledges, voting
agreements, rights of first refusal,
tag-along, co-sale or other rights,
licenses, security interests, claims,
charges or encumbrances of any kind or
nature whatsoever.
"Share Amount" has the meaning ascribed to it in Section 2.2(a) of
this
Agreement.
"Shareholder" has the meaning ascribed to it in the
introductory
paragraph of this Agreement.
"Shareholders' Representative" has the meaning ascribed to it
in
Section 2.7 of this Agreement.
"SLIC Sale" means the sale by Parent of its shares in Standard
Life
Insurance Company, which sale is presently
pending approval before the Indiana
Insurance Commission.
"Standard Management Share" means a common share of Parent.
"Surviving Corporation" means the Company, immediately following
the
Effective Time of the Merger.
"Target EBITDA" means (i) for the calendar year 2005, an amount
equal
to $1,800,000, (ii) for the calendar year
2006, an amount equal to the greater
of $2,160,000 or the Target EBITDA for
2005, and (iii) for the calendar year
2007, an amount equal to the greater of
$2,592,000 or the highest Target EBITDA
for 2005 and 2006.
"Third-Party Claim" has the meaning ascribed to it in Section
8.4(a)
of this Agreement.
"Washington Law" means the Washington Business Corporation Act.
1.2 Construction.
(a) The meanings of terms defined herein are equally
applicable to the singular and plural of
such defined terms.
(b) The headings of articles and sections to this Agreement
are provided for convenience only and will
not affect the construction or
interpretation hereof.
(c) This Agreement and all Exhibits and Schedules hereto are a
result of negotiations among the parties
hereto. Accordingly, neither this
Agreement nor any Exhibit or Schedule
hereto shall be construed against any
party hereto because of its or its
counsel's involvement in its preparation.
6
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ARTICLE II
THE MERGER
2.1 The Merger.
(a) On the terms and subject to the conditions set forth in
this Agreement and in accordance with
Washington Law, the parties hereto shall
cause Merger Sub to be merged with and into
the Company on the Closing Date. The
parties shall so cause the Merger to occur
by filing with the Washington
Secretary of State articles of merger
executed in accordance with the relevant
provisions of Washington Law and by making
all other filings or recordings
required thereby to effect the Merger. As a
result of the Merger, and at the
Effective Time, the separate corporate
existence of the Merger Sub will cease
and the Company will continue to survive
the Merger. As a result of the Merger,
the Company will succeed to and assume all
of the rights and obligations of
Merger Sub in accordance with Washington
Law. The Merger will also have such
other effects as are set forth and
described in Washington Law.
(b) The officers
and directors of Merger Sub at the Effective
Time shall become the officers and
directors of the Surviving Corporation and
continue as such until his or her successor
shall have been elected and
qualified or until his or her earlier
resignation or removal.
(c) The Articles of Incorporation and By-Laws of Merger Sub at
the Effective Time shall become the
Articles of Incorporation and By-Laws of the
Surviving Corporation and shall continue as
such until altered, amended or
repealed.
2.2 Conversion of Equity Securities. On the terms and subject to
the
conditions set forth in this Agreement, at
the Effective Time, by virtue of the
Merger and without any action on the part
of Merger Sub or the Company:
(a)
Each common share of the Company owned by the Shareholders
immediately prior to the Effective Time
shall be cancelled and converted into
the right to receive (i) an amount equal to
the result obtained by dividing
$7,000,000 by the Closing Date Shares (the
"Cash Amount"), (ii) the number of
Standard Management Shares equal to the
result obtained by dividing (A)
$2,500,000 divided by the Per Share Value
by (B) the Closing Date Shares (the
"Share Amount"), (iii) an amount equal to
the result obtained by dividing
$1,500,000 by the Closing Date Shares (the
"Note Amount"), and (iv) the Per
Share Earn-Out Amount, if any. The Cash
Amount, the Share Amount, the Note
Amount and the Per Share Earn-Out Amount,
if any, shall be paid as set forth in
Sections 2.3 and 2.4 below.
(b) Each common share of the Company held in the treasury of
the Company immediately prior to the
Effective Time shall be canceled and
extinguished without any conversion thereof
and no payment will be made with
respect thereto.
(c) Each common share of Merger Sub issued and outstanding
immediately prior to the Effective Time
will be converted into the right to
receive a share of the Surviving
Corporation.
7
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2.3 Payment of Conversion Price. At the Closing, each Shareholder
shall
receive (a) an amount equal to the result
obtained by multiplying the Cash
Amount by the total number of common shares
of the Company owned beneficially
and of record by such Shareholder on the
Closing Date, paid by wire transfer of
immediately available funds to the account
designated by such Shareholder in
writing, (b) the right to receive the
number of Standard Management Shares equal
to the result obtained by multiplying the
Share Amount by the total number of
common shares of the Company owned
beneficially and of record by such
Shareholder on the Closing Date, and (c) a
Note in an original principal amount
equal to the result obtained by multiplying
the Note Amount by the total number
of common shares of the Company owned
beneficially and of record by such
Shareholder on the Closing Date.
2.4 Earn Out.
(a) On or before the 75th day following the expiration of the
calendar years 2005, 2006 and 2007, the
Surviving Corporation shall deliver to
each Shareholder copies of the Surviving
Corporation's year-end financial
statements for the immediately preceding
calendar year and a calculation (in
reasonable detail) of the Earn-Out Amount
for such immediately preceding
calendar year (the "Post-Closing
Delivery").
(b) The Shareholders' Representative (for and on behalf of the
Shareholders) shall have thirty (30) days
from the date the Surviving
Corporation makes the Post-Closing Delivery
(such period, the "Dispute Period")
to notify the Surviving Corporation, in
writing, as to whether the Shareholders'
Representative agrees or disagrees with the
Post-Closing Delivery (such written
notice, the "Dispute Notice"). During the
Dispute Period, the Shareholders'
Representative and its accountants shall be
permitted to review (during regular
business hours and upon reasonable prior
notice) the working papers of the
Surviving Corporation and (where
applicable) the Surviving Corporation's
accountants relating to the matters set
forth in the Post-Closing Delivery.
(c) If the Shareholders' Representative fails to deliver a
Dispute Notice to the Surviving Corporation
during a Dispute Period, the
Surviving Corporation's calculation of the
applicable Earn-Out Amount shall be
deemed to be final and correct and shall be
binding upon each of the parties
hereto.
(d) If the Shareholders' Representative delivers a Dispute
Notice to the Surviving Corporation during
a Dispute Period, the Shareholders'
Representative and the Surviving
Corporation shall, for a period of forty-five
(45) days from the date the Dispute Notice
is delivered to the Surviving
Corporation (such period, the "Resolution
Period"), use their respective best
efforts to amicably resolve the items in
dispute. Any items so resolved by the
parties shall be deemed to be final and
correct as so resolved and shall be
binding upon each of the parties
hereto.
(e) If the Shareholders' Representative and the Surviving
Corporation are unable to resolve all of
the items in dispute during the
Resolution Period, then either the
Shareholders' Representative or the Surviving
Corporation may refer the items remaining
in
8
<PAGE>
dispute to the Independent Accountants.
Such referral shall be made in writing
to the Independent Accountants, copies of
which shall concurrently be delivered
to the non-referring party hereto. The
referring party shall furnish the
Independent Accountants, at the time of
such referral, with the Post-Closing
Delivery and the Dispute Notice. The
parties shall also furnish the Independent
Accountants with such other information and
documents as the Independent
Accountants may reasonably request in order
for them to resolve the items in
dispute. The parties hereto shall also,
within ten (10) days of the date the
items in dispute are referred to the
Independent Accountants, provide the
Independent Accountants with a written
notice (a "Position Statement")
describing in reasonable detail their
respective positions on the items in
dispute (copies of which will concurrently
be delivered to the other party
hereto). If any party fails to timely
deliver its Position Statement to the
Independent Accountants, the Independent
Accountants shall resolve the items in
dispute solely upon the basis of the
information otherwise provided to them. The
Independent Accountants shall resolve all
disputed items in a written
determination to be delivered to each of
the parties hereto within forty-five
(45) days after such matter is referred to
them; provided, however, that any
delay in delivering such determination
shall not invalidate such determination
or deprive the Independent Accountants of
jurisdiction to resolve the items in
dispute. The decision of the Independent
Accountants as to the items in dispute
shall be final and binding upon the parties
hereto and shall not be subject to
judicial review. The fees and expenses of
the Independent Accountants incurred
in the resolution of any items in dispute
shall be determined by the Independent
Accounts and set forth in their report and
shall be allocated and paid by the
Shareholders, on one hand, and the
Surviving Corporation, on the other hand, in
inverse proportion to the extent they
prevailed on the items in dispute.
(f) Once there is a final determination of the Earn-Out Amount
for any calendar year (whether through
failure of Seller to timely deliver a
Dispute Notice, agreement of the parties,
or determination of the Independent
Accountants), the Surviving Corporation
shall increase each Shareholder's Note
by an amount equal to the Per Share
Earn-Out Amount for the immediately
preceding calendar year multiplied by the
total number of common shares of the
Company owned beneficially and of record by
such Shareholder on the Closing Date
(the "Annual Increase"). Interest shall
accrue for each Annual Increase
beginning on the first day of the calendar
year following the Earn-Out Year.
During the first three years after an
Annual Increase, accrued interest with
respect to such Annual Increase shall be
paid in quarterly installments on the
last day of March, June, September and
December. The outstanding principal
balance under the Note attributable to an
Annual Increase, shall be paid on the
last day of the calendar year that is three
years after the Earn-Out Year
relating to such Annual Increase.
(g) Notwithstanding the foregoing, the Surviving Corporation
shall not be obligated to make a
Post-Closing Delivery or pay the Earn-Out for
any calendar year if John Tac Hung Tran's
employment with the Surviving
Corporation terminates before or during
such calendar year for any of the
reasons described in Section 7.1 of his
Employment Agreement.
2.5
Closing of Transfer Records. After the close of business on the
Closing Date, transfers of any of the
Company's common shares outstanding prior
to the Effective Time will not be made on
the transfer books of the Surviving
Corporation.
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2.6 Exchange of Certificates. On the Closing Date, each
Shareholder
shall surrender all certificates
representing the common shares of the Company
held by such Shareholder (or if lost, an
affidavit, indemnity and such other
security as is reasonably required by
Merger Sub and its counsel).
2.7 Shareholders' Representative. Each Shareholder hereby
irrevocably
constitutes and appoints John Tac Hung Tran
as his or her lawful
attorney-in-fact, as the "Shareholders'
Representative" under this Agreement,
with the exclusive authority to act as such
hereunder. In the event of the
death, resignation or inability of John Tac
Hung Tran to act as the
Shareholders' Representative hereunder,
Cynthia J. Wareing-Tran will be the
successor Shareholders' Representative with
all powers of his predecessor. The
Shareholders' Representative will have full
power to act on each Shareholder's
behalf according to the terms of this
Agreement to give and receive notices on
behalf of Shareholders and in general to do
all things and to perform all acts
on each Shareholder's behalf as may be
contemplated by this Agreement, including
the resolution of indemnification claims,
all in the absolute discretion of the
Shareholders' Representative. Shareholders
shall be bound by all acts of the
Shareholders' Representative taken in
connection with this Agreement.
ARTICLE III
THE CLOSING
3.1 Closing. The Closing shall take place on July 21, 2005 at
the
offices of Merger Sub's counsel, Sommer
Barnard Attorneys, PC, in Indianapolis,
Indiana, or at such other time and place as
the parties may mutually agree.
Subject to the provisions of Section 10.1
below, failure to consummate the
purchase and sale provided for in this
Agreement on the date and time and at the
place determined above in this Section 3.1
will not result in the termination of
this Agreement and will not relieve any
party of any obligation under this
Agreement.
3.2 Closing Deliveries of Parent and Merger Sub. At the Closing,
in
addition to any other documents
specifically required to be delivered pursuant
to this Agreement, Parent and Merger Sub
shall deliver to Shareholders:
(a) the immediately available funds as required by Section
2.3(a) above;
(b) the Standard Management Shares, as required by Section
2.3(b) above;
(c) the Notes, as required by Section 2.3(c) above;
(d) a certificate of the Secretary or Assistant Secretary of
Merger Sub, dated as of the date hereof,
certifying (i) the resolutions duly
adopted by the Board of Directors and
shareholder of Merger Sub authorizing and
approving the execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby, and (ii) that such
resolutions have not been rescinded or
modified and remain in full force and
effect as of the Closing Date; and
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(e) a certificate, duly executed by an officer of Merger Sub,
dated as of the Closing Date, certifying
(i) that Merger Sub has performed and
complied in all material respects with all
of the terms, provisions and
conditions of this Agreement to be
performed and complied with by it prior to
the Closing, and (ii) that Merger Sub's
representations and warranties in this
Agreement are true and correct in all
material respects as of the Closing Date.
3.3 Closing Deliveries of Shareholders. At the Closing, in addition
to
any other documents specifically required
to be delivered pursuant to this
Agreement, each Shareholder shall deliver
to Merger Sub the following:
(a) certificates representing all of the common shares of the
Company owned beneficially and of record by
such Shareholder as of the date
hereof;
(b) a Release, duly executed by such Shareholder, in the form
attached hereto as Exhibit B;
(c) a Voting Trust, duly executed by each Shareholder, in the
form attached hereto as Exhibit C;
(d) legal opinion of counsel to Shareholders, dated the date
hereof, addressed to Merger Sub, and
containing customary legal opinions,
exceptions and qualifications;
(e) a subordination and intercreditor agreement, as reasonably
requested by Merger Sub's lender;
(f) Employment Agreements with John Tac Hung Tran and Cynthia
J. Wareing-Tran, duly executed by Surviving
Corporation;
(g) copies of the Company's Articles of Incorporation, as
amended to date, duly certified by the
Washington Secretary of State dated no
more than 10 days prior to the date
hereof;
(h) a Certificate of Existence for the Company from the
Washington Secretary of State dated no more
than 10 days prior to the date
hereof;
(i) a certificate, duly executed by such Shareholder, dated as
of the Closing Date, certifying (i) that
such Shareholder has performed and
complied in all material respects with all
of the terms, provisions and
conditions of this Agreement to be
performed and complied with by him prior to
the Closing, and (ii) that such
Shareholder's representations and warranties in
this Agreement are true and correct in all
material respects as of the Closing
Date; and
(j) the original minute books, stock ledgers and corporate
seal (if any) of the Company.
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ARTICLE IV
SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
Shareholders, jointly and severally, represent and warrant to
Merger
Sub as follows:
4.1 Organization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the
laws of the State of Washington.
Schedule 4.1(a) contains a true, accurate
and complete list of each jurisdiction
in which the Company is qualified to do
business as a foreign corporation. The
Company is duly qualified to do business as
a foreign corporation and is in good
standing under the Laws of each state or
other jurisdiction in which either the
ownership or use of the properties owned or
used by it, or the nature of the
activities conducted by it, requires such
qualification.
(b) The Company has full power and authority to own or use its
properties and assets and carry on its
business activities as now conducted.
Schedule 4.1(b) lists the addresses of all
locations at which the Company
conducts its business.
(c) Complete and accurate copies of the Articles of
Incorporation, by-laws, minute books and
stock transfer books of the Company
have been delivered to Merger Sub. The
minute books of the Company fairly and
accurately reflect all material actions of
the Board of Directors and
shareholders of the Company. The stock
transfer books of the Company are
correct, complete and current, and, to the
extent applicable, all documentary
and stock transfer tax stamps required in
connection with the issuance and
transfer of shares of the Company's stock
have been duly paid, affixed or
canceled.
4.2 Authorization. The Company and each Shareholder has full power
and
authority to execute and deliver this
Agreement and to perform his, her or its
respective obligations hereunder. The
Merger and the execution, delivery and
performance of this Agreement have been
duly authorized by all necessary action
on the part of the Company and each
Shareholder.
4.3
Validity; Binding Effect. This Agreement has been duly and
validly
executed and delivered by the Company and
each Shareholder. This Agreement
constitutes a valid and legally binding
obligation of the Company each
Shareholder, enforceable against the
Company and each Shareholder in accordance
with its terms.
4.4 Noncontravention. The execution, delivery and performance of
this
Agreement by the Company and each
Shareholder, the consummation by the Company
and each Shareholder of the transactions
contemplated hereby and the compliance
by the Company and each Shareholder with or
fulfillment by the Company and each
Shareholder of the terms and provisions
hereof or of any other agreement or
instrument contemplated hereby, do not and
shall not (i) conflict with or result
in a breach of any of the provisions of the
constituent documents of the
Company, (ii) contravene any Law or Order
which affects or binds the Company or
any of its properties, (iii) conflict with,
contravene or constitute a default
or breach of or under any Material Contract
or Permit, or (iv) except as
otherwise set forth in Schedule 4.4,
require any
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Shareholder or the Company to obtain the
approval, consent or authorization of,
or to make any declaration, filing or
registration with, any governmental
authority or other third party which has
not been obtained in writing prior to
the date of this Agreement.
4.5 Capital Structure.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of $1 par common stock of
which 546,500 shares have been duly
and validly issued, are fully-paid and
non-assessable, and are owned,
beneficially and of record, by Shareholders
as described on Schedule 4.5, free
and cl
