THIS STOCK
PURCHASE AGREEMENT (the “Agreement”) is entered
into as of the 16 th day of May, 2009 (the “Effective
Date”), by and between ARCADIA PRODUCTS, INC. , a
Delaware corporation (the “Stockholder”), and
AEROCARE HOLDINGS, INC. , a Delaware corporation (the
“Buyer”) (each a “Party” or collectively
the “Parties”).
A. The
Stockholder is the record and beneficial owner of: (1) an
aggregate of one thousand (1,000) shares (“Beacon/Georgia
Shares”) of the common stock, $1.00 par value per share, of
BEACON RESPIRATORY SERVICES OF GEORGIA, INC. , a Delaware
corporation (“Beacon/Georgia”), constituting all of the
issued and outstanding shares of capital stock of Beacon/Georgia as
of the date of this Agreement; (2) an aggregate of ten
thousand (10,000) shares (the “Lovell Shares”) of the
common stock, $1.00 par value per share, of LOVELL MEDICAL
SUPPLY, INC. , a North Carolina corporation
(“Lovell”), constituting all of the issued and
outstanding shares of capital stock of Lovell as of the date of
this Agreement; and (3) an aggregate of one thousand (1,000)
shares (the “Trinity Shares”) of the common stock,
$0.01 par value per share, of TRINITY HEALTHCARE OF
WINSTON-SALEM, INC. , a Georgia corporation
(“Trinity”), constituting all of the issued and
outstanding shares of capital stock of Trinity as of the date of
this Agreement (the Beacon/Georgia Shares, Lovell Shares and
Trinity Shares are sometimes herein referred to collectively as the
“Shares”, and Beacon/Georgia, Lovell and Trinity are
sometimes herein referred to collectively as the
“Corporations” and individually as a
“Corporation”).
B. Beacon/Georgia
conducts business operations in the States of Georgia and South
Carolina, Lovell conducts business operations in the State of North
Carolina, and Trinity conducts business operations in the States of
Georgia and North Carolina, and each Corporation is engaged in the
business of durable medical equipment and respiratory therapy
(collectively, the “Business”).
C. Stockholder
desires to sell to Buyer, and Buyer desires to purchase from
Stockholder, all of the Shares, upon the terms and conditions
herein set forth.
NOW,
THEREFORE , in consideration of the mutual promises and
conditions herein contained, the Parties hereto agree as
follows:
1.
Incorporation of Recitals . The Recitals made above are
incorporated into and made part of this Agreement by this reference
thereto.
2. Sale
and Purchase of Shares . Subject to the terms and conditions of
this Agreement, Stockholder hereby sells, transfers and assigns to
Buyer, and Buyer hereby
purchases from
Stockholder, all of the Shares. Stockholder hereby delivers to
Buyer certificates evidencing the Shares duly endorsed to
Buyer.
3.
Purchase Price; Method of Payment; Contingent Cash
Consideration; Reductions to Cash Consideration; Cash of the
Corporations; Revenues and Proceeds from Payment of Receivables of
the Corporations; Accounts Payable of the Corporations; Allocation
of Purchase Price; Weekly Reconciliation; Etc.
a.
Purchase Price; Method of Payment; Wire Transfers to Certain
Creditors . The total consideration from Buyer to Stockholder
in exchange for the Shares is: (I) Four Million Two Hundred
Seventy-Five Thousand Dollars ($4,275,000) in cash (the “Cash
Consideration”), less the aggregate amounts set forth in
Section 3.c hereof (if any), plus (II) Four Hundred
Seventy-Five Thousand Dollars ($475,000) in cash, subject to
offsets and reductions as set forth in Section 3.b hereof (the
“Contingent Cash Consideration”) (the Cash
Consideration and Contingent Cash Consideration are collectively
referred to herein as the “Purchase Price”). The Cash
Consideration, less the aggregate amounts set forth in
Section 3.c hereof (if any) and less $1,173,527 (representing
the aggregate amount to be wired to certain creditors of the
Stockholder as described at the end of this Section 3.a), will
be paid by Buyer to Stockholder on the Closing Date (or on the next
banking day following the Closing Date if all documents
contemplated to be executed at Closing were fully executed after
12:01 p.m., E.D.T., on the Closing Date) by wired funds to
Stockholder’s account number as set forth on the Schedule of
Wire Instructions attached hereto as Exhibit 3-A . The
Contingent Cash Consideration shall be payable pursuant to the
terms of Section 3.b hereof. The Stockholder requests and
authorizes Buyer to redirect a portion of the Cash Consideration
due at Closing to the following creditors of Stockholder in the
following amounts: (1) $391,176 to Jana Master Fund, Ltd. pursuant
to wire transfer instructions provided by Stockholder to Buyer on
or before the Closing Date; and (2) $782,351 to Vicis Capital
Master Fund pursuant to wire transfer instructions provided by
Stockholder to Buyer on or before the Closing Date.
b.
Contingent Cash Consideration . The Contingent Cash
Consideration shall be held back by Buyer without interest, during
the period commencing on the Closing Date and ending three hundred
sixty (360) days after the Closing Date (the “Hold Back
Period”), to secure all obligations of Stockholder to Buyer
(whether such obligations are pursuant to this Agreement or
pursuant to any other agreement between Buyer and Stockholder) ,
including but not limited to all of the obligations of Stockholder
to Buyer set forth in: (A) Section 3.e hereof entitled
Revenues and Proceeds from Payment of Receivables of the
Corporations ; (B) Section 3.f hereof entitled
Accounts Payable of the Corporations ;
(C) Section 4 hereof entitled Right of Offset Against
the Contingent Cash Consideration ; and
(D) Section 13 hereof entitled Indemnification;
Remedies .
i.
Offset and Reduction of Contingent Cash Consideration in the
Event of Default . In the event Stockholder fails to meet any
of its obligations to Buyer under this Agreement, or otherwise is
in default of any provision of this Agreement (each such failure is
sometimes herein referred to as a “default” or an
“event of default”), Buyer shall give written notice of
the alleged default to Stockholder. Upon the passage of not less
than thirty (30) days from receipt of said notice of alleged
default from Buyer (unless during such thirty
(30) day
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period, Buyer
shall have received notice from Stockholder that Stockholder has
elected to defend the dispute pertaining to an event of default
involving a debt or liability), the Buyer may at any time
thereafter wholly or partially make offset against and thereby
reduce the amount of Contingent Cash Consideration payable to
Stockholder hereunder. Notwithstanding the foregoing, in the case
of a “Dispute” (as defined in Section 13 of this
Agreement), the provisions of Section 13 of this Agreement
applicable to a “Dispute” shall govern, and no offset
and reduction against the Contingent Cash Consideration shall occur
until the applicable “Dispute” is resolved in
accordance with the provisions of Section 13
hereof.
ii.
Partial Release and Final Release; Effect of Release of
Contingent Cash Consideration . One Hundred Sixty Thousand
Dollars ($160,000) of the Contingent Cash Consideration, less any
amounts previously offset and reduced by Buyer pursuant to this
Agreement, shall be released to Stockholder on or before that date
which is one hundred twenty (120) days after the Closing Date
(the “First Partial Release Date”), One Hundred Sixty
Thousand Dollars ($160,000) of the Contingent Cash Consideration,
less any amounts previously offset and reduced by Buyer pursuant to
this Agreement, shall be released to Stockholder on or before that
date which is two hundred forty (240) days after the Closing
Date (the “Second Partial Release Date”), and the
remaining Contingent Cash Consideration (not released to
Stockholder on the First Partial Release Date or Second Partial
Release Date), less any amounts previously offset and reduced by
Buyer pursuant to this Agreement, shall be released to Stockholder
on or before that date which is three hundred sixty (360) days
after the Closing Date (the “Final Release Date”),
provided, however, that notwithstanding anything contained in this
Agreement to the contrary, the right of Buyer to make offset
against and reduce the Contingent Cash Consideration shall extend
past the First Partial Release Date, Second Partial Release Date
and/or Final Release Date in the event: (i) a claim is in
dispute at the time of the First Partial Release Date, Second
Partial Release Date and/or Final Release Date and, in such
instance, the Buyer’s right to make offset against and reduce
the Contingent Cash Consideration shall not terminate until after
the settlement of such claim or claims; or (ii) the Contingent
Cash Consideration to be reduced pursuant to Section 4 of this
Agreement has not been finally determined and, in such instance,
the Buyer’s right to make offset against and reduce the
Contingent Cash Consideration shall not terminate until such time
as all calculations required by Section 4 hereof have been
finally determined and all reductions of the Contingent Cash
Consideration required by Section 4 hereof (if any) have been
made. In the event the right of offset is extended past the First
Partial Release Date, Second Partial Release Date and/or Final
Release Date because a claim is in dispute, Contingent Cash
Consideration having a value equal to that amount which is
130 percent of the amount of the claim asserted by Buyer shall
continue to be held back by Buyer past the First Partial Release
Date, Second Partial Release Date and/or Final Release Date until
such claim is resolved.
c.
Reductions to Cash Consideration . The Cash Consideration to
be delivered at Closing shall be reduced, dollar for dollar, by the
aggregate amount of ZERO DOLLARS ($-0-), which amount Stockholder
represents and warrants is sufficient to reduce the
Corporations’ “Aggregate Existing Obligations”
(as defined in Section 6.d hereof) to Zero Dollars ($-0-).
Stockholder represents and warrants to Buyer that the following
obligations, which otherwise would have reduced the amount of the
Cash Consideration to be delivered at Closing, were satisfied by
payment in full prior to the Closing Date: (A)
$71,289.83,
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representing
the amount owed by Stockholder and/or its affiliates to GMAC
through the Effective Date; (B) $25,000.00, representing the final
settlement obligation owed by Arcadia Resources, Inc. and/or its
affiliates to Dargon Smith, Jr. and Sue Smith in settlement of Case
Nos. 2008-CP-15-172 and 492 (collectively, the “Smith
Cases”), each filed in the County of Colleton, State of South
Carolina; and (C) $5,915.22, representing the final installments
owed by Arcadia Resources, Inc. and/or its affiliates to Parelsu
II, LLP under that certain letter agreement dated November 20,
2008, which letter agreement set forth the terms pertaining to the
settlement of that certain lease dispute involving leased property
having a street address of 416A Robertson Blvd., Walterboro, South
Carolina 29488. Stockholder shall provide to Buyer, on or before
the Closing Date, confirmation of the payment of such amounts
(including, in the case of the GMAC payment, copies of the
electronic receipts of such payments/payoffs to GMAC), and shall
provide to Buyer post-Closing, a copy of the signed Release and
Indemnification Agreement pertaining to the Smith Cases, promptly
after such document has been executed by Dargon Smith, Jr. and Sue
Smith.
Not later than
that date which is ten (10) days from the Closing Date,
Stockholder shall cause to be obtained from the following secured
parties, and filed with the Secretary of State of Delaware for
Beacon/Georgia, the Secretary of State of North Carolina for Lovell
and the Secretary of State of Georgia for Trinity, Form UCC-3
Termination Statements terminating the following Form UCC-1
Financing Statements:
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(1)
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Form UCC-1 Financing Statement,
filed on April 1, 2008, listing Jana Master Fund, Ltd as
Secured Party and Beacon/Georgia as Debtor;
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(2)
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Form UCC-1 Financing Statement,
filed on April 1, 2008, listing Jana Master Fund, Ltd as
Secured Party and Lovell as Debtor; and
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(3)
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Form UCC-1 Financing Statement,
filed on April 2, 2008, listing Jana Master Fund, Ltd as
Secured Party and Trinity as Debtor.
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Except for the
above referenced UCC-1 Financing Statements of Jana Master Fund,
Ltd., Stockholder is not aware of any other active UCC-1 Financing
Statements imposing a lien on or otherwise encumbering any of the
assets of the Corporations, nor has Stockholder or any of such
Corporations authorized the filing of any UCC-1 Financing
Statements from January 1, 2009 through the Closing Date which
would impose a lien on or otherwise encumber any of the assets of
the Corporations.
d.
Cash of the Corporations . Stockholder is entitled to the
cash and cash balances of each Corporation pertaining to the
operation of the Business through May 15, 2009 (the
“Excluded Cash”), and Buyer is entitled to the cash and
cash balances of each Corporation pertaining to the operation of
the Business after May 15, 2009. In the event the Excluded
Cash has not been reduced to Zero Dollars ($0) as of the Closing
Date, the Buyer agrees to remit to Stockholder the remaining
portion of the Excluded Cash. In the event the Excluded Cash is a
negative amount for any reason (e.g., overdrafts, outstanding
checks which have not cleared, etc.), the Stockholder shall
immediately make payment to Buyer in such amount as will bring the
negative balance back to Zero Dollars ($0).
4
e.
Revenues and Proceeds from Payment of Receivables of the
Corporations . Stockholder is entitled to all revenues and
proceeds actually received by each Corporation on or before May 15,
2009 as a result of the payment of accounts receivable generated by
each Corporation’s operation of its respective Business
through May 15, 2009 (collectively, the “Excluded
Accounts Receivable Proceeds”). Buyer, through each of the
Corporations, is entitled to all revenues and proceeds received on
and after May 16, 2009 as a result of the payment of accounts
receivable generated by each Corporation’s operation of its
respective Business (collectively, the “Included Accounts
Receivable Proceeds”). Notwithstanding anything contained in
this Agreement to the contrary, any Medicare refunds or recoupments
pertaining to any Excluded Accounts Receivable Proceeds shall be
the responsibility of Stockholder and its ultimate parent
corporation, Arcadia Resources, Inc., a Nevada corporation, and
their successors and assigns. Notwithstanding anything in this
Agreement to the contrary, for a five (5) year period
following the Closing Date, Stockholder indemnifies and holds each
Corporation and the Buyer harmless from and against any and all
such Medicare refunds or recoupments and from any other
liabilities, obligations or claims of any kind pertaining to the
Excluded Accounts Receivable Proceeds, and any business activity
related thereto, and authorizes Buyer to make offset against the
Contingent Cash Consideration in the event Buyer has a claim
against Stockholder pursuant to this indemnification.
f.
Accounts Payable of the Corporations . Stockholder hereby
agrees, and Arcadia Resources, Inc. and RKDA, Inc. in their
respective Guaranty Agreements shall be required to agree, that:
(A) Stockholder, Arcadia Resources, Inc. and RKDA, Inc. shall
be and hereby are jointly and severally liable for all of the
accounts payable obligations of each of the Corporations (whether
due and owing, not yet due and owing, billed or unbilled, accrued
or not accrued or contingent or not contingent), pertaining to the
operation of the Business through May 15, 2009, including but
not limited to all of the accounts payable listed on the Schedule
of Accounts Payable Data attached hereto as Exhibit 6-R
, which Stockholder represents and warrants is an accurate and
complete list of all of such accounts payable through the close of
business on April 30, 2009, with respect to the A/P schedule
through April 30, 2009 delivered by Stockholder to Buyer at
Closing (the “April 30, 2009 A/P Schedule”), and an
accurate and complete list of all of such accounts payable through
the close of business on May 15, 2009, with respect to the A/P
schedule through May 15, 2009 to be delivered by Stockholder
to Buyer post-closing (the “May 15, 2009 A/P
Schedule”) (collectively, the “Pre-Existing Accounts
Payable Obligations”) and that Exhibit 6-R
includes all of the accrued payroll of each of the Corporations
through April 30, 2009 (with respect to the April 30,
2009 A/P Schedule) and through May 15, 2009 (with respect to
the May 15, 2009 A/P Schedule), and all of the accrued
vacation obligations of each of the Corporations through
April 30, 2009 (with respect to the April 30, 2009 A/P
Schedule) and May 15, 2009 (with respect to the May 15,
2009 A/P Schedule); and (B) Stockholder, Arcadia Resources,
Inc. and RKDA, Inc. shall cause the Pre-Existing Accounts Payable
Obligations (other than those disputed in good faith without any
impact on the respective Businesses of the Corporations, which
dispute status shall in no way alter the provisions of this
Section 3.f which place sole responsibility for payment of any
Pre-Existing Accounts Payable Obligations on Stockholder, Arcadia
Resources, Inc. and RKDA, Inc., and not on Buyer) to be paid when
due and shall, in any event, pay off and satisfy in full all of
such Pre-Existing Accounts Payable Obligations no later than by
that date which is ninety (90) days from the Closing Date, as
to Pre-Existing Accounts Payable Obligations listed on
Exhibit
5
6-R ,
and by that date which is one-hundred ten (110) days from the
Closing Date, as to Pre-Existing Accounts Payable Obligations not
listed on Exhibit 6-R (that date which is one-hundred
ten (110) days from the Closing Date is herein referred to as
the “Final Date for A/P Payments”), provided, however,
that any portion of the Pre-Existing Accounts Payable Obligations
consisting of accrued payroll obligations through May 15,
2009, shall be paid in full by Stockholder or Stockholder’s
ultimate parent corporation, Arcadia Resources, Inc., on or before
June 15 2009, and any portion of the Pre-Existing Accounts
Payable Obligations consisting of accrued vacation obligations
through May 15, 2009, shall be paid in full by Stockholder or
Stockholder’s ultimate parent corporation, Arcadia Resources,
Inc. on or before June 15, 2009, such that all of the
employees of each Corporation as of May 16, 2009 will have no
accrued payroll owing to any of them by each such Corporation for
periods before such date nor will have any accrued vacation owing
to them by each such Corporation for periods before such date. In
the event Stockholder, Arcadia Resources, Inc. and/or RKDA, Inc.
fail to pay in full all Pre-Existing Accounts Payable Obligations
by the Final Date for A/P Payments, Buyer shall have the right in
the exercise of its sole discretion, but not the obligation, to pay
any of the Pre-Existing Accounts Payable Obligations on behalf of
Stockholder, Arcadia Resources, Inc. and RKDA, Inc. and make offset
against the applicable portion of any Contingent Cash Consideration
to be delivered by Buyer to Stockholder pursuant to
Section 3.b hereof. In the event of such non-payment by
Stockholder, Arcadia Resources, Inc. and/or RKDA, Inc. of all of
the Pre-Existing Accounts Payable Obligations by the Final Date of
A/P Payments, Buyer shall also have all other remedies set forth in
this Agreement or under applicable law. Notwithstanding anything in
this Agreement to the contrary, after the Final Date for A/P
Payments, the Buyer shall at all times have the right to make
written demand on the Stockholder to pay any Pre-Existing Accounts
Payable Obligations which became known or arose after the Final
Date for A/P Payments and, in such event, the Stockholder shall pay
the Pre-Existing Accounts Payable Obligations within fifteen
(15) business days from the date of receipt of such written
demand and shall provide Buyer with such proof of payment as Buyer
may reasonably request. Stockholder covenants and agrees to deliver
the May 15, 2009 A/P Schedule to Buyer on or before May 31,
2009. Stockholder represents and warrants to Buyer that Stockholder
is not aware of any accounts payable obligations incurred after
April 30, 2009 through May 15, 2009, which are outside
the ordinary course of business or which involve accounts payable
obligations of a different type or category than those accounts
payable obligations listed on the April 30, 2009 A/P Schedule.
Stockholder has disclosed to Buyer that the April 30, 2009 A/P
Schedule and the May 15, 2009 A/P Schedule may also include
accounts payable data pertaining to business entities other than
the Corporations due to the difficulty of separating out and
segregating such data.
g.
Allocation of Purchase Price . The Purchase Price shall be
allocated among the assets of each Corporation as set forth on
Exhibit 3-G , which allocation shall be jointly
prepared and agreed to by Buyer and Stockholder and attached to
this Agreement no later than by June 30, 2009. It is agreed
that the allocations under this Section will be binding on all
parties for Federal, state, local and other tax purposes in
connection with this sale, and will be consistently reflected by
each Party on its tax returns. The Parties shall execute and attach
hereto as Exhibit 3-H , not later than by June 30,
2009, any forms required by Section 338(h)(10) of the Internal
Revenue Code, as amended, on the subject of the allocation of the
Purchase Price among
6
the assets of
each of the Corporations, and Buyer shall allocate the Purchase
Price among the assets of each Corporation in accordance with such
forms.
h.
Weekly Reconciliation; Progress Updates on A/P Payoffs .
Commencing during the week of May 18, 2009, and weekly
thereafter or on such other periodic basis as the parties hereto
shall agree, and for so long as is reasonably necessary to
accomplish the objectives set forth in this subsection, a
representative of the Buyer and representative of the Stockholder
shall meet on such basis as they shall decide (whether in person,
telephonically or electronically via e-mail) in an effort to
reconcile the various obligations of the parties under this
Agreement, including without limitation, the allocation of cash in
the Corporation, the distribution of proceeds from accounts
receivable, the status of payoffs of accounts payable, the
settlement and proper allocation of pre-Closing and post-Closing
expenses (such as rent and similar expenses), including expenses
paid by one party which should properly be allocated to the other
party, adjustments for the underpayment of any liabilities which
should have been paid in full at Closing, etc. Such representatives
may establish whatever procedures and worksheets for such
reconciliation as they may reasonably determine. The Stockholder
shall prepare and submit to Buyer, on those dates which are thirty
(30), sixty (60), ninety (90) and one hundred ten
(110) days from the Closing Date, a detailed written status
update on the progress made to date in the payment of all of the
accounts payable required to be paid off pursuant to
Section 3.f hereof (each, an “A/P Status Report”).
Stockholder covenants and agrees that each A/P Status Report will
confirm to Buyer that Stockholder, Arcadia Resources, Inc. and
RKDA, Inc. have been diligent in their efforts to pay off such
accounts payable and that such obligated entities have made a
reasonable effort to cause such accounts payable to be paid off on
a timely basis.
i.
Rossville Billing Center Transition . The terms and
conditions set forth on that certain List of Agreements Pertaining
to the Rossville Billing Center Transition, attached hereto as
Exhibit 3-I , have been agreed to by Stockholder and
Buyer, and all of such terms and conditions are hereby incorporated
into this Agreement by this reference thereto and made a part
hereof. All references to “Arcadia” on
Exhibit 3-I shall refer to Stockholder and/or Arcadia
Resources, Inc. (as the context shall require or permit), and
Stockholder represents to Buyer that Stockholder is the tenant
under the current lease pertaining to the Rossville, Indiana
Billing Center location, and that Arcadia Resources, Inc. is the
current employer of the billing center personnel but has authorized
Stockholder to enter into the terms set forth on
Exhibit 3-I on its behalf.
j.
Assignment of Rights . Stockholder acknowledges that
Stockholder entered into certain material agreements with certain
employees of the Corporations rather than have the applicable
Corporation enter into such agreements. Stockholder hereby assigns
any and all rights (but not obligations) which Stockholder has
under any and all employment agreements, confidentiality
agreements, non-competition agreements, non-solicitation agreements
and any other agreements containing restrictive covenants, which
pertain to any current or former employees of any of the three
Corporations, including but not limited to that certain
Non-Competition Agreement dated as of August 25, 2006, by and
among the Stockholder and Darian Byrd a/k/a Herbert Darian Byrd,
Jerry Lovell, Donald H. Martinat III, Kathryn Martinat, Harvey
Arrington, Jean Arrington a/k/a Imogene Arrington, Randall
Strickland and Tonda Strickland (the “2006 Non-Compete
Agreement”). Stockholder represents and warrants to Buyer
that the
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2006
Non-Compete Agreement is in full force and effect based on the form
of such document as of August 25, 2006, that the 2006
Non-Compete Agreement has not been amended or previously assigned,
and that the scope of the restrictive covenants set forth in the
2006 Non-Compete Agreement have not been limited or reduced in
scope or duration.
k.
Reimbursement of Rent at Winston-Salem Location . After the
Closing, Stockholder plans to continue to use, for a short period,
a portion of the space at the Winston-Salem, North Carolina,
location of a Corporation. In exchange for such use, Stockholder
agrees to pay Buyer the sum of One Thousand Dollars ($1,000) per
month (prorated for periods which are less than a full month), with
such amount due when rent is due under the applicable Winston-Salem
lease agreement. Either party may terminate this arrangement by
providing written notice to the other party.
l.
CPAP Supply Inventory . Stockholder represents to Buyer that
one of the Corporations maintains CPAP supply inventory (segregated
by location) at its Winston-Salem, North Carolina location,
including CPAP supply inventory segregated for locations of the
Stockholder in the Midwest region of the United States (the
“Midwest CPAP Supply Inventory”). On or before the
close of business on the Closing Date, Stockholder shall notify
Buyer in writing or by e-mail whether or not it has further need
for any of the Midwest CPAP Supply Inventory after the Closing
Date. If Stockholder discloses to Buyer that it no longer has a
need for any of the Midwest CPAP Supply Inventory after the Closing
Date (or if Stockholder fails to notify Buyer in writing or by
e-mail of such need before the close of business on the Closing
Date), the Midwest CPAP Supply Inventory shall be deemed to be
owned solely by Buyer as of the Closing Date for no additional
consideration. If Stockholder discloses to Buyer before the close
of business on the Closing Date that Stockholder has a further need
for CPAP supplies, then Buyer agrees to continue to ship CPAP
supplies to Stockholder’s Midwest locations (out of the
segregated Midwest CPAP Supply Inventory) as Stockholder shall
request, at no cost to Stockholder except for related shipping
costs, until the earlier of the following dates: (A) the date
on which the segregated Midwest CPAP Supply Inventory runs out; or
(B) May 31, 2009. After May 31, 2009, Buyer may, in
the exercise of its sole discretion, continue to honor Stockholder
requests for CPAP supplies but, if Buyer agrees to ship out any
CPAP supplies for Stockholder after May 31, 2009, Stockholder
agrees to pay Buyer an amount equal to the fair cost of such CPAP
supplies plus related shipping costs.
m.
Pitney Bowes Postage Metering Equipment . Stockholder has
disclosed to Buyer that Stockholder or a Corporation may be
obligated under three (3) lease arrangements involving Pitney
Bowes postage metering equipment (the “Pitney Bowes
Equipment”) located at the Smyrna, Georgia location (lease
with fixed term), Huntersville, North Carolina location (month to
month lease), and Winston-Salem, North Carolina location (month to
month lease). Within thirty (30) days following the Closing
Date, Buyer shall evaluate its needs regarding the Pitney Bowes
Equipment and, if Buyer determines it has no need for the Pitney
Bowes Equipment at a particular location, Buyer will notify
Stockholder of that fact and Stockholder shall retrieve the
applicable Pitney Bowes Equipment and assume any related lease
obligations or, in the case of the month to month leases, shall
have Buyer return the applicable Pitney Bowes Equipment to Pitney
Bowes at Stockholder’s expense. In the event Buyer decides to
keep any
8
Pitney Bowes
Equipment, Buyer shall assume the related lease obligations and
agrees to execute any documents required to reflect such
assumption.
4. Right
of Offset Against the Contingent Cash Consideration . In
addition to any other rights of offset or reduction set forth in
this Agreement, in the event that: (i) any of the Corporations
have any debts or liabilities of any kind as of the Effective Date,
other than the debts and liabilities of each such Corporation
described on, and not in excess of the dollar amounts listed on,
the Schedule of Liabilities attached hereto as
Exhibit 6-D (the “Liabilities Deficiency”),
or (ii) any of the Corporations have, since January 31,
2009, made expenditures or incurred obligations or liabilities,
except in the ordinary course of business; discharged or satisfied
any liens or encumbrances, except in the ordinary course of
business; declared or made any payment or distribution (excluding
inter-company cash transactions in the ordinary course of business)
to Stockholder or purchased or redeemed any of its common capital
stock or agreed to do so; mortgaged, pledged or subjected to lien
or encumbrance any of its assets; sold or transferred any assets,
except in the ordinary course of business; suffered any damage or
loss (whether or not covered by insurance), materially affecting
its properties; waived any rights of substantial value; or entered
into any transaction other than in the ordinary course of business
(the “Subsequent Event Deficiency”), or (iii) any
debts, liabilities or obligations of any nature (whether absolute,
accrued, contingent or otherwise) (the “Obligations”),
other than those subject to subsections (i) and (ii) of this
Section 4, become known, are uncovered or arise after the
Effective Date, which Obligations pertain to any actions,
omissions, debts, liabilities or obligations of any of the
Corporations or Stockholder, created or arising on or before the
Effective Date (said Obligations are hereinafter referred to as the
“Contingent Liability”) (a Liabilities Deficiency,
Subsequent Event Deficiency or Contingent Liability is sometimes
herein referred to as a “Claim”); then, and in any of
such events, Buyer shall have the right, during the Hold Back
Period (or after the Hold Back Period if permitted under
Section 3.b.ii hereof), to make offset against the Contingent
Cash Consideration in accordance with the terms and conditions of
Section 3.b hereof, in amounts from time to time equal to any
Liabilities Deficiency, Subsequent Event Deficiency or Contingent
Liability which becomes known, is uncovered or arises during the
three hundred sixty (360) day period after the Closing Date
(subject, however, in the event of a “Dispute”, to the
provisions of Section 13 hereof applicable to a
“Dispute”). During the three hundred sixty
(360) day period following the Closing Date, in the event
Buyer makes written request to Stockholder hereunder for
Stockholder to pay any Liabilities Deficiency, Subsequent Event
Deficiency or Contingent Liability, and Stockholder fails to make
the requested payment within thirty (30) days from the date of
such written request (said thirty (30) day period hereinafter
referred to as the “Notice Period”), Buyer shall have
the right to make offset against and reduce the Contingent Cash
Consideration, in accordance with the terms and conditions of
Section 3.b hereof, in amounts from time to time equal to the
amount of any Liabilities Deficiency, Subsequent Event Deficiency
or Contingent Liability which becomes known, is uncovered or arises
during the three hundred sixty (360) day period following the
Closing Date (subject, however, in the case of a
“Dispute”, to the provisions of Section 13 hereof
applicable to a “Dispute”), and Stockholder agrees to
allow Buyer to make offset against and reduce the Contingent Cash
Consideration as provided in this Agreement. Except as provided in
Section 3.b.ii hereof, Buyer’s right of offset against
the Contingent Cash Consideration shall terminate on that date
which is three hundred sixty (360) days from the Closing Date;
provided, however, that notwithstanding anything contained in this
Agreement to
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the contrary,
the rights of offset shall extend past the First Partial Release
Date, Second Partial Release Date and/or Final Release Date (the
“Applicable Release Date”) in the event a Claim is in
dispute at the time of the Applicable Release Date and, in such
instance, the right of offset shall not terminate until after the
settlement of such Claim or Claims. In the event the right of
offset is extended past the Applicable Release Date because a Claim
is in dispute, that amount of Contingent Cash Consideration equal
to the amount of such claim, plus a reserve equal to 30% of the
amount of such Claim, shall continue to be held back by Buyer past
the Applicable Release Date until such Claim is resolved, with the
remaining Contingent Cash Consideration released to Buyer within
fifteen (15) days after the Applicable Release Date. Subject
to Section 13 hereof, Buyer shall be entitled to reimbursement
from Stockholder of the amount of any reasonable legal fees and
expenses (including court costs and the costs of appeal) incurred
by Buyer to enforce the collection of amounts owed Buyer by
Stockholder hereunder, provided Buyer is the prevailing party in
any such collection action; however, if Stockholder is the
prevailing party in any such collection action, Stockholder shall
be entitled to reimbursement from Buyer of the amount of any
reasonable legal fees and expenses (including court costs and the
costs of appeal) incurred by Stockholder to defend itself in such
collection action.
5.
Effective Date; Closing Date . The effective date for the
transactions contemplated under this Agreement will be
12:01 a.m. on May 16, 2009 (the “Effective
Date”); however, subject to the terms of this Agreement, the
actual closing of the transactions contemplated under this
Agreement shall take place on May 18, 2009, unless extended by
written agreement of the Parties. The date upon which such Closing
shall occur is hereinafter referred to as the “Closing”
or “Closing Date.” Closing shall take place at such
place or in such a manner as may be agreed upon by the
Parties.
6.
Representations and Warranties by Stockholder . Stockholder
represents and warrants to Buyer that each of the following
representations and warranties is true and correct as of the
Effective Date and again as of the Closing Date, and is made with
the full understanding that such representations and warranties
constitute material inducement to Buyer to enter into the
transactions contemplated hereby:
a.
Organization of the Corporations; Qualification; Power and
Authority . Beacon/Georgia is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware, Lovell is a corporation duly organized, validly
existing and in good standing under the laws of the State of North
Carolina, and Trinity is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Georgia, with each such Corporation having all requisite corporate
power and authority to carry on its business as presently
conducted. Beacon/Georgia is registered or qualified to do business
in the States of Georgia and South Carolina and in all other
jurisdictions where the nature of Beacon/Georgia’s business
requires such registration or qualification, Lovell is registered
or qualified to do business in all other jurisdictions where the
nature of Lovell’s business requires such registration or
qualification, and Trinity is registered or qualified to do
business in the States of North Carolina and South Carolina and in
all other jurisdictions where the nature of Trinity’s
business requires such registration or qualification, except where
failure of any such Corporation to be so qualified would not have a
material adverse affect on the Business or on such
Corporation’s business, assets, results of operations,
prospects or condition (financial or otherwise).
10
Stockholder
warrants and represents that Trinity is not registered to do
business in the State of South Carolina and that Trinity is not
obligated to the State of South Carolina. None of the Corporations
are in default under any provisions of their respective Articles of
Incorporation, as amended, or their respective By-laws, as amended.
None of the Corporations have subsidiaries nor has any direct or
indirect equity interest in any other firm, corporation or business
enterprise. A complete listing of the Officers and Directors of
each Corporation is attached hereto as Exhibit 6-A
.
b.
Capitalization and Long Term Indebtedness .
i. Beacon/Georgia
is authorized by its Articles of Incorporation to issue one
thousand (1,000) shares of common stock, $1.00 par value per share,
of which all one thousand (1,000) shares are duly and validly
issued and outstanding, fully paid, and nonassessable. Lovell is
authorized by its Articles of Incorporation to issue one hundred
thousand (100,000) shares of common stock, $1.00 par value per
share, of which ten thousand (10,000) shares are duly and validly
issued and outstanding, fully paid, and nonassessable. Trinity is
authorized by its Articles of Incorporation to issue one million
(1,000,000) shares of common stock, $0.01 par value per share, of
which one thousand (1,000) shares are duly and validly issued and
outstanding, fully paid, and nonassessable. As to each Corporation,
there are no shares of any other class of stock authorized, issued
or outstanding nor are any unissued shares committed to any party
by any Corporation. None of the Corporations has authorized or
established any stock appreciation, phantom stock, profit
participation or similar rights or plans with respect to any
Corporation. None of the Corporations has authorized or issued any
class of preferred stock or any other class of common capital
stock, nor has any authority to issue any other capital stock,
preferred stock or other securities.
ii. None
of the Corporations are in any default or violation of any
provision of its outstanding long term or short-term
indebtedness.
iii. There
are no outstanding options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts,
commitments or agreements of any character relating to the issuance
of capital stock or other securities of any of the
Corporations.
iv. All
FICA and Federal and state withholding tax deposits have been
timely and fully reported and paid by each Corporation.
v. Except
as set forth in Exhibit 6-B , as to each Corporation,
there are no outstanding or unpaid loans or other obligations to or
from stockholders, directors or officers or, except for
compensation paid by such Corporation to employees in the ordinary
course of business, to or from employees of such
Corporation.
vi. Except
as set forth in Exhibit 6-B , none of the Corporations
has made any payments, dividends or other distributions to
Stockholder or any other affiliate between January 31, 2009
and the Closing Date.
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c.
Financial Statements . Stockholder has furnished Buyer with
balance sheets of each Corporation (collectively, the
“Balance Sheets”) dated December 31, 2008,
January 31, 2009, February 28, 2009, and March 31,
2009 (the March 31, 2009 date is sometimes herein referred to
as the “Last Balance Sheet Date”), and the related
statements of income for each Corporation (collectively, the
“Income Statements”) for the periods ended
December 31, 2008, January 31, 2009, February 28,
2009, and March 31, 2009, copies of which are attached hereto
as Exhibit 6-C (the Balance Sheets and Income
Statements are collectively referred to herein as the
“Financial Statements”). The Financial Statements:
(i) are in accordance with the books and records of each such
Corporation; (ii) fairly represent the financial condition of
each such Corporation at such dates and the results of its
operations for the periods specified; (iii) were prepared on a
basis consistent with prior accounting periods; (iv) with
respect to all contracts and commitments of each such Corporation,
reflect adequate reserves for all reasonably anticipated losses and
costs in excess of anticipated income; and (v) with respect to
the Balance Sheets, disclose all of the debts, liabilities and
obligations of any nature (whether absolute, accrued, contingent,
or otherwise) of each such Corporation at the Last Balance Sheet
Date and include the appropriate reserves for all taxes and other
accrued liabilities, except that certain contingent liabilities, if
not disclosed on the Balance Sheets, shall be considered to be
disclosed pursuant to this subsection, if disclosed on an Exhibit
to this Agreement. The Stockholder covenants and agrees to deliver
to Buyer, post-Closing, the balance sheet of each Corporation and
the related statement of income of each Corporation for the month
ended April 30, 2009, and for the period commencing on May 1,
2009 and ending on May 15, 2009, promptly following completion
of such financial statements by Stockholder, but in no event later
than May 31, 2009 for the April 30, 2009 financial
statements and in no event later than June 15, 2009 for the
May 15, 2009 financial statements.
d.
Aggregate Existing Obligations . All of the debts,
liabilities and obligations of each of the Corporations are listed
on the Schedule of Liabilities attached hereto as
Exhibit 6-D and such schedule accurately reflects all
of such Corporations’ “Aggregate Existing
Obligations” (as hereinafter defined) as of the Effective
Date. The term “Aggregate Existing Obligations” shall
mean and refer to all of such Corporations’ debts,
liabilities and obligations of any nature (whether absolute,
accrued, contingent, or otherwise) on the Effective Date, including
but not limited to any and all accounts payable, trade payables,
lease obligations, indebtedness for borrowed money, accrued
interest, contractual obligations, etc. By way of illustration and
not limitation, Stockholder represents and warrants that those
obligations set forth in Section 3.c hereof have been paid in
full prior to the Closing Date. Except for those accounts payable
listed in Exhibit 6-R (which Stockholder, Arcadia
Resources, Inc. and RKDA, Inc. are responsible for and obligated to
pay in full pursuant to Section 3.f hereof or under the
applicable Guaranty Agreement), Stockholder warrants and represents
that the aggregate amount of the Aggregate Existing Obligations is
not in excess of Zero Dollars ($-0-) as of the Effective Date. The
Stockholder acknowledges that the purchase price for the Shares is
based on the accuracy of Stockholder’ representations and
warranties contained in this Agreement, including but not limited
to the Stockholder’ representations and warranties contained
in this subsection 6.d.
e.
Undisclosed Liabilities . None of the Corporations has any
debt, liability or obligation of any kind (and, to the knowledge of
Stockholder, there are no facts in existence as of the Closing Date
that could reasonably be expected to result in any present or
future action,
12
suit,
proceeding, hearing, investigation, charge, complaint, claim or
demand against any of the Corporations that would give rise to any
debt, liability or obligation), whether accrued, absolute,
contingent or otherwise, including without limitation, any
liability or obligation on account of taxes or any governmental
charge or penalty, interest or fine, except liabilities incurred
after May 15, 2009 in the ordinary course of business that did
not, individually or in the aggregate, have a material adverse
effect on the Business, assets, results of operations, prospects or
condition (financial or otherwise) of any Corporation as of the
Closing Date. By way of illustration and not limitation,
Stockholder and not Buyer nor any of the Corporations shall be
fully liable for any debt, liability or obligations (whether lease
obligations or otherwise) arising from or related in any way to the
closing of business locations of the Corporations on or before the
Effective Date, including but not limited to those prior business
locations (now closed) of: (1) Beacon/Georgia located in
Atlanta, Georgia; (2) Lovell located in Statesville, North
Carolina, and 496 North Main Street, Mount Airy, North Carolina;
and (3) Trinity located at 3918 West Point Boulevard,
Winston-Salem, North Carolina, 116 North Old Statesville Road,
Suite B, Huntersville, North Carolina, 1165 Allgood Road,
Marietta, Georgia, 541 Historic Highway 441, Demorest, Georgia, and
221A Pat Haralson Memorial Drive, Blairsville, Georgia.
f.
Title to the Shares . Stockholder owns good, absolute and
marketable title to, and all beneficial interest in, the Shares,
which represent all of the issued and outstanding capital stock of
each of the Corporations. Such Shares are (i) validly issued,
fully paid and nonassessable, (ii) free and clear of any
liens, claims and encumbrances, with no defects in title,
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